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



FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2009oro

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

84101(Address of principal executive offices)

(Zip Code)


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

Securities registered pursuant to Section 12(b) of the Act:

Title of Class

Name of Exchange on which registeredCommon Stock, $0.01 par value per share

The New York Stock Exchange


Securities
registered pursuant to Section 12(g) of the Act:None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

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 Regulations 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. 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 the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý

Accelerated filer o

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
Act). Yes o    No ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2009,
was approximately $802 million based upon the closing price reported for such date on the New York Stock Exchange. For purposes of this disclosure, shares of common stock held by persons who
hold more than 5% of the outstanding shares of common stock and shares held by executive officers and directors of the registrant have been excluded because such persons may be deemed to be
affiliates. This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes.

As
of February 26, 2010, 88,499,706 shares of registrant's common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Sections
of Registrant's Proxy Statement to be filed with the Securities and Exchange Commission no later than April 30, 2010, namely: "Compensation Discussion and Analysis,"
"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," "Certain Relationships and Related Transactions and Director Independence" and "Principal Accounting
Fees and Services," are incorporated in this Form 10-K by reference under Part III.



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ENERGYSOLUTIONS, INC.  ANNUAL REPORT ON FORM 10-K  For Fiscal Year Ended December 31, 2009



PagePART I.Item 1.

Business

1Item 1A.

Risk Factors

30Item 1B.

Unresolved Staff Comments

50Item 2.

Properties

51Item 3.

Legal Proceedings

52Item 4.

Reserved

53PART II.Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities

54Item 6.

Selected Financial Data

54Item 7.

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

57Item 7A.

Qualitative and Quantitative Disclosures about Market
Risk

86Item 8.

Financial Statements and Supplementary
Data

87Item 9.

Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

87Item 9A.

Controls and Procedures

87Item 9B.

Other Information

88PART III.Item 10.

Directors, Executive Officers and Corporate
Governance

89Item 11.

Executive Compensation

89Item 12.

Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

89Item 13.

Certain Relationships and Related Transactions and Director
Independence

89Item 14.

Principal Accountant Fees and Services

89PART IV.Item 15.

Exhibits and Financial Statement
Schedules

90Signatures

91


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GLOSSARY OF DEFINED TERMS

The following defined terms are used throughout this Annual Report on Form 10-K.

AEA

Atomic Energy Act of 1954, as amendedARO

Asset Retirement ObligationASX

Autosampling Pneumatic Transfer SystemBNGA

BNG America LLCCERCLA

Comprehensive Environmental Response, Compensation and Liability Act of 1980D&D

Decontamination and DecommissioningDOD

U.S. Department of DefenseDOE

U.S. Department of EnergyEPA

U.S. Environmental Protection AgencyERA

Energy Reorganization Act of 1974HSE

Health and Safety ExecutiveHSWA

Hazardous and Solid Waste Amendments of 1984LANL

Los Alamos National LaboratoryLIBOR

London Interbank Offer RateLLRW

Low-Level Radioactive WasteM&O

Management and OperationMLLW

Mixed Low-Level WasteNDA

U.K. Nuclear Decommissioning AuthorityNII

HM Nuclear Installations InspectorateNORM

Naturally Occurring Radioactive MaterialNRC

Nuclear Regulatory CommissionNWPA

Nuclear Waste Policy Act of 1982NYSE

New York Stock ExchangeORNL

Oak Ridge National LaboratoryOSHA

Occupational Safety and Health AdministrationPRS

Paducah Remediation Services, LLCRCRA

Resource Conservation and Recovery Act of 1976REA

Request for Equitable AdjustmentRFP

Request for ProposalRSA 1993

Radioactive Substances Act 1993RSMC

Reactor Sites Management CompanySAFSTOR

Safe Storage (nuclear plant in retirement)SEC

U.S. Securities and Exchange CommissionSEPA

Scottish Environment Protection AgencySMUD

Sacramento Municipal Utility DistrictSRS

Savannah River SiteTN DEC

Tennessee Department of Environment and ConservationTSCA

Toxic Substances Control ActUSEC

United States Enrichment CorporationWCS

Waste Control SpecialistsWRPS

Washington River Protection Solutions LLC


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This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Many of the
forward-looking statements are located in "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements provide current expectations of future
events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as
"anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," and similar terms. Forward-looking statements are not guarantees of future performance and the Company's actual
results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the
subsection entitled "Risk Factors" under Part I, Item 1A of this Form 10-K. We undertake no obligation to revise or update any forward-looking statements for any
reason, except as required by law.

PART I

Item 1.    Business

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, in-plant support services, spent
nuclear fuel management, decontamination and decommissioning ("D&D"), operation of nuclear reactors, logistics, transportation, processing and disposal. We also own and operate strategic facilities
that complement our services and uniquely position us to provide a single-source solution to our customers.

We
derive almost 100% of our revenues from the provision of nuclear services and believe that virtually every company or organization in the United States that holds a nuclear license
uses our services or facilities, directly or indirectly. Our government customers include the United States Department of Energy ("DOE"), United States Department of Defense ("DOD") and United Kingdom
Nuclear Decommissioning Authority ("NDA"). Our commercial customers include many of the largest owners and operators of nuclear power plants in the United States, such as Constellation Energy
Group, Inc., Duke Energy Corporation, Entergy Corporation, Exelon Corporation and Florida Power & Light Company. We have entered into long-term arrangements, which we refer
to as "life-of-plant" contracts, with nuclear power and utility companies representing 84 of the 104 operating nuclear reactors in the United States. Under these
long-term arrangements, we have typically agreed to process and dispose of substantially all low-level radioactive waste ("LLRW") and mixed low-level waste ("MLLW")
generated by their nuclear power plants, and ultimately the waste materials generated from the D&D of those plants. Our commercial customers also include hospitals, pharmaceutical companies, research
laboratories, universities or research reactors, industrial facilities and other commercial facilities.

We
operate strategic facilities designed for the safe processing and disposal of radioactive materials, including a facility in Clive, Utah, four facilities in Tennessee and two
facilities in Barnwell, South Carolina. According to the U.S. General Accounting Office, our facility in Clive, Utah is the largest privately-owned LLRW disposal site in the United States and
currently handles over 95% of all commercial LLRW disposal volume in the United States. We also manage 10 sites in the United Kingdom with 22 reactors for the NDA, of which four are currently
operating and producing electricity and 18 are in various stages of decommissioning. We have a comprehensive portfolio of nuclear processing technology and know-how, supported by more than
282 patents that we own or license. As of December 31, 2009, we had more than 5,000 employees, including approximately 1,200 scientists and engineers and 400 radiation and safety professionals.
Approximately 3,000 of our employees are located

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at
the 10 sites we manage in the United Kingdom. We also manage approximately 200 site employees at various DOE sites. We have received multiple awards for our safety record.

We
provide our services through four business segments: Federal Services; Commercial Services; Logistics, Processing and Disposal ("LP&D"); and International. When a project involves the
provision of both specialized on-site nuclear services and processing and disposal services, our Federal Services or Commercial Services segment, depending on the type of customer, will
coordinate with our LP&D segment to provide integrated services.

Since
2005, we have expanded and diversified our operations through a series of strategic acquisitions, including the D&D division of Scientech, LLC in October 2005, BNG
America LLC ("BNGA") in February 2006, Duratek, Inc. ("Duratek") in June 2006, Safeguard International Solutions, Ltd. (renamed ESEU Services Limited ("ESEU")), in December 2006,
Parallax, Inc. ("Parallax") in January 2007, Reactor Sites Management Company ("RSMC") in June 2007, NUKEM Corporation ("NUKEM") in July 2007, and Monserco Limited ("Monserco") in December
2007. Our acquisition of RSMC significantly expanded our international capabilities. Beginning with the second quarter of 2007, we began reporting results from our operations outside North America in
a new International segment. For the year ended December 31, 2009, we derived 60.8% and 26.0% of our revenues and operating income, respectively, from our operations outside North America.

Our Segments

We provide specialized, technology-based nuclear services to government and commercial customers through our Federal Services,
Commercial Services, LP&D and International segments.

Federal Services

We derive revenues from U.S. government customers for the management and operation ("M&O") or clean-up of DOE facilities
that are contaminated by radioactive materials. The services that we provide to our government customers include the on-site characterization, sorting, segregation, transportation,
management and disposal of classified and unclassified solid and liquid LLRW, MLLW and other special wastes. We also manage high-level radioactive waste inventories at a number of
government sites, pending their future off-site disposition. In addition, we perform D&D and demolition of facilities, including disposal of radioactive materials. Our work includes the
development of technologies, engineering, fabrication and operation of facilities to reduce the hazards posed by high-level radioactive waste pending final disposition in a national
geological repository. In addition, we derive revenues from the provision of D&D, processing and disposal services to the DOD, including decontamination of classified equipment and retrieval or
recycling of other classified or specialty parts. In some instances, as a member of a Tier 1 project team, we also manage site operations.

Our
government work generally involves providing customized waste management, decommissioning, environmental remediation, engineering and technology-based expertise at major DOE
facilities, such as Richland, Washington, Idaho Falls, Idaho, Los Alamos, New Mexico, Oak Ridge, Tennessee, or Savannah River, South Carolina. Our contract role for government customers is either
under Tier 1 or Tier 2 contracts. Under a Tier 1 contract, we typically provide services as an integrated member of a prime contract team. Where we act as part of a Tier 1
team under a prime contract with the DOE, our employees often work alongside and manage dedicated employees at the site who are employed by the Tier 1 contractor for the duration of the prime
contract and are covered by local benefit packages but are not employees of any of the Tier 1 team members. Under a Tier 2 contract arrangement, we provide services to Tier 1
contractors on a subcontracted basis.

Government
customers have in the past and may in the future account for a significant portion of our revenues. During the fourth quarter of 2007 and the first quarter of 2008, we assumed
voting control over two joint ventures at the request of the DOE. Consolidation of these joint ventures added

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$108.8 million
and $122.8 million to our segment revenues in 2009 and 2008 respectively. Revenues from DOE contractors and subcontractors represented approximately 15.8% in 2009, 11.2%
in 2008 and 16.7% in 2007 of our total consolidated revenues.

Much
of our Federal Services work is highly customized to the specific needs of the site. The following are examples of our Federal Services work in recent years:

Hanford Site Operations

The 586-square mile Hanford site was a former plutonium production complex with nine nuclear reactors and associated
processing facilities located along the Columbia River in southeastern Washington State. In 1989, the DOE, the U.S. Environmental Protection Agency, or EPA, and the Washington State Department of
Ecology signed the Tri-Party Agreement, which established milestones for the clean-up of the Hanford site. Currently, the DOE is shifting a portion of the site from inactive
storage to waste characterization, treatment, storage and disposal operations. Massive plants are being designed and built either to vitrify Hanford's waste or to contain it in blocks of concrete
grout. About 300 contaminated buildings are slated for clean up, and a radioactive waste packaging program is expected to continue until the Hanford clean-up is complete.

On
May 29, 2008, we won the contract for the management of all high-level waste/tanks systems at Hanford as part of the Washington River Protection
Solutions LLC ("WRPS") team. WRPS has the responsibility for safely managing approximately 53 million gallons of radioactive and chemical waste until it can be prepared for disposal.
This is one of the largest and most complex environmental cleanup projects in the DOE complex. The waste, stored in 177 underground tanks near the center of the Hanford Site, will be vitrified into
glass logs in a treatment plant that is now under construction at Hanford. WRPS will also be responsible for safely storing the treated waste until permanent disposal facilities are available. Under
separate agreements, we provide management and technical services as a subcontractor to other prime contractors at the Hanford site. For example, we designed the vitrification system for the
high-level waste treatment plant, and we continue to provide engineering, research and testing services to the DOE. We also manage and support several subprojects, including the
following:



Oak Ridge National Laboratory Operations

Oak Ridge National Laboratory, or ORNL, located in Oak Ridge, Tennessee, is one of the DOE's largest science and energy laboratories.
Managed since April 2000 by a partnership of the University of Tennessee and Battelle Memorial Institute in Columbus, Ohio, ORNL was established in 1943 as a part of the Manhattan Project to pioneer a
method for producing and separating plutonium. We have provided on-going technical and management support to the ORNL since 1987. Our work at ORNL includes sampling, characterization,
abatement, segregation, packaging, transportation, D&D and disposal of hazardous materials. We are also responsible for sorting, segregating and reducing the volume of the LLRW at ORNL.

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Savannah River Site Operations

Established in 1950 by the Atomic Energy Commission, the DOE's Savannah River Site, or SRS, is a 310-square mile facility
near Aiken, South Carolina. The site was constructed during the early 1950s to produce materials, primarily tritium and plutonium-239, used in the fabrication of nuclear weapons in support
of U.S. defense programs. Due to changes in the national security strategy of the United States, many SRS facilities are no longer needed to produce or process nuclear materials. The DOE has
identified approximately 300 structures as surplus and requiring clean-up, ranging in size and complexity from large nuclear reactors to scores of small storage buildings.

The
Washington Savannah River Company has operated the SRS since 1992. As an integrated Washington Savannah River Company team member, we supported the liquids waste management contract
at the site. High-activity liquid waste is generated at SRS as by-products from the processing of nuclear materials for national defense, research and medical programs. The
waste, totaling about 36 million gallons, is currently stored in 49 underground carbon-steel waste tanks grouped into two "tank farms" at SRS. This contract was substantially completed in 2008.

Our
scope encompassed managing the high-level waste tanks and the processing of those liquids. This includes both the solidification of highly radioactive liquid wastes
stored in SRS's tank farms and the disposal of liquid low-level waste generated as a by-product of the separations process and tank farm operations. This low-level
waste is treated in the Effluent Treatment Facility.

We
are also part of a team that has been contracted by the DOE for the design, construction, commissioning and operation of a new salt waste processing facility at the SRS. The facility
will be a pre-treatment plant to remove cesium from DOE's inventory of 38 million gallons of highly radioactive waste stored in 49 tanks at the SRS. On December 8, 2008, the
DOE awarded the Savannah River Site's contract to manage liquid waste to Savannah River Remediation, LLC, under which we are a pre-selected Tier 2 contractor. Under this
contract, we will provide technology support to upgrades at the SRS vitrification facility.

Idaho National Laboratory

Established in the late 1950s, the Idaho National Laboratory comprises approximately 700 square miles and was originally established as
the National Reactor Testing Station. More than 60 nuclear reactors were designed, built and tested on the site. Spent nuclear fuel reprocessing missions were subsequently added to the site, whereby
the DOE extracted highly enriched uranium from used nuclear fuel for recycling into the weapons program. Idaho was also a disposal site for transuranic waste generated during processing operations at
Rocky Flats in Colorado.

We
built the Advanced Mixed Waste Treatment Plant at the Idaho National Laboratory to safely treat transuranic-contaminated waste for final disposal at the Waste Isolation Pilot Plant in
Carlsbad, New Mexico. The contract for continued operation of the Advanced Mixed Waste Treatment Plant is currently out for competition. We have submitted an application as part of a team with respect
to the contract and our team has been selected as a finalist for the award. We expect the contract to be awarded in early 2010.

Portsmouth Gaseous Diffusion Plant

The Portsmouth Gaseous Diffusion Plant in Piketon, Ohio occupies approximately 640 acres, situated in a 3,714 acre federal site. It is
operated by the United States Enrichment Corporation ("USEC"), a subsidiary of USEC Inc. The plant has a long history of enriching uranium for defense and commercial nuclear power needs,
beginning in the early 1940s with a U.S. defense initiative to produce fissionable material for the atomic bomb. Portsmouth ended enrichment operations in 2001.

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Through
a joint venture with Los Alamos Technical Associates, we are currently providing environmental management services at the Portsmouth Gaseous Diffusion Plant project, including
site characterization, decommissioning, waste processing and environmental restoration. The contract for continued decommissioning and decontamination activities of the Portsmouth Gaseous Diffusion
Plant is currently out for competition. We have submitted an application as the lead of a team with respect to the contract. We expect the contract to be awarded in late 2010.

The Paducah Gaseous Diffusion Plant

The Paducah Gaseous Diffusion Plant occupies approximately 750 acres of a 3,600 acre federal site located approximately 15 miles west
of Paducah, Kentucky. The Paducah site began operations in 1952 to produce low assay enriched uranium for use as commercial nuclear reactor fuel. In 1993, uranium enrichment operations were turned
over to USEC as a result of the Energy Policy Act of 1992. Under USEC, production of enriched uranium for use in the United States and abroad continues today.

Over
the past several years, we have been responsible for the waste management program at the Paducah site. A contract for the continued remediation activities at the Paducah Gaseous
Diffusion Plant is currently out for competition. We have submitted an application as part of a team with respect to the contract. We expect the contract to be awarded in the summer or fall of 2010.

Atlas Mill Tailings Cleanup

In June 2007, the DOE awarded us a contract to clean up the Atlas mill tailings that lie alongside the Colorado River near Moab, Utah.
The site encompasses approximately 435 acres, of which approximately 130 acres contain uranium mill tailings (16 million tons). This contract includes the design and construction of the
disposal cell, design and construction of the transportation system and shipment and disposal of 2.5 million tons of tailings. In 2009, this project received an additional $104 million
in American Recovery & Reinvestment Act funding to transport and dispose of an additional 2 million tons of tailings material. The contract runs through September 2011.

Los Alamos National Laboratory

Los Alamos National Laboratory (LANL), located in northern New Mexico, is a research facility of the National Nuclear Security
Administration that is managed by Los Alamos National Security LLC.

Since
its inception in 1943, the primary mission of LANL has been focused on high-level science and technology essential to national defense and global security. Many of the
activities and operations at LANL have produced solids, liquids, and gases that contain radioactive and non-radioactive hazardous materials. Such activities include conducting research and
development programs in basic and applied chemistry, biology, and physics; fabricating and testing explosives; cleaning chemically contaminated equipment; and working with radioactive materials. Since
environmental management work began in 1989, the number of legacy sites requiring further action has been reduced by approximately 60 percent through active remediation, or by confirming that
no action is needed.

In
September 2009, we were awarded task orders valued at $18 million to install and operate two transuranic waste processing lines. These lines will process over 1,000 drums of
transuranic waste to prepare them for shipment to the DOE Waste Isolation Pilot Plant for disposal.

Commercial Services

We provide a broad range of on-site services to commercial customers, including commercial power and utility companies that
operate nuclear power plants, pharmaceutical companies, research laboratories, universities, industrial facilities and other entities that generate radioactive materials or

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are
involved in the nuclear services industry. Our services include D&D, project planning, site surveys, radioactive material characterization and management, liquid waste processing, spent nuclear
fuel services, emergency response and other nuclear services.

Examples
of our on-site commercial nuclear services include:



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Logistics, Processing and Disposal

We provide a broad range of logistics, processing and disposal services and own and operate strategic facilities for the safe
processing and disposal of radioactive materials. Our processing and disposal facilities include our disposal facility in Clive, Utah, which is the largest privately-owned LLRW disposal site in the
United States, three processing facilities in Tennessee and separate processing and disposal facilities in Barnwell, South Carolina. We operate the Barnwell disposal facility pursuant to a
long-term lease with South Carolina. We also own a facility in Tennessee that we believe is the only commercial facility in the world with the ability to cast, flat-roll and
machine casks and other products from depleted uranium. We believe that virtually every company or organization that holds a nuclear license in the United States uses our facilities, directly or
indirectly.

Our
transportation and logistics services encompass all aspects of transporting radioactive materials, including obtaining all required local and federal licenses and permits, loading
and bracing

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shipments,
conducting vehicle radiation surveys and providing transportation assistance to other companies throughout the United States. Through our Hittman Transportation, Inc., or Hittman,
subsidiary, we own and operate a dedicated fleet of tractors, trailers and shipping containers for transporting radioactive materials and contaminated equipment for processing and disposal. In 2009,
we added to our existing rail infrastructure and service by acquiring the assets of a shortline railroad that serves the Eastern Tennessee Technology Park and our Bear Creak Facility in Oakridge, TN.
Through this asset acquisition we ensured future rail service from Bear Creek to Clive, UT and became the sole provider of rail service to the Oakridge Area.

Our
fleet of specialized shipping casks are specially engineered containers for the safe transport of radioactive material. We also have expertise in transporting very large,
contaminated reactor components from a commercial power plant to a processing or disposal site. These components include reactor pressure vessels, steam generators and other smaller components.
Transportation modes include barge, rail and truck transport.

We
have the capability to store, treat and dispose of several types of radioactive materials, including the following:



The
LLRW that we dispose of at our Clive facility primarily derives from the clean-up of contaminated sites (including DOE facilities, nuclear power plants, Superfund sites
and industrial sites) and from the routine operations of utilities, industrial sites and hospitals. Although we only treat and dispose of Class A LLRW, MLLW and 11e(2) materials at our Clive
facility and do not plan to seek authorization to take Class B and C wastes at that site, we are currently able to dispose of Class A, B and C waste at the state-owned Barnwell, South
Carolina facility that we operate. On July 1, 2008, the State of South Carolina closed the Barnwell disposal site to customers located outside of the Atlantic Compact States of South Carolina,
New Jersey and Connecticut.

Our
MLLW treatment facility in Clive uses several treatment technologies to reduce the toxicity of the waste materials prior to their disposal. These technologies include thermal
desorption, stabilization, amalgamation, reduction/oxidation, deactivation, chemical fixation, neutralization, debris spray washing, macro-encapsulation and micro-encapsulation.

Many
of our LP&D projects complement our services in our Federal and Commercial Services segments. The following are examples of LP&D services that we have performed in
recent years:

Life-of-Plant Contracts

Our life-of-plant contracts integrate our LP&D services into a tailored solution for our commercial
customers' needs, and we believe that these contracts will represent a significant source of future

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revenues
for our LP&D segment. Life-of-plant contracts provide our customers with LLRW and MLLW processing and disposal services for the remaining lives of their nuclear
power plants, as well as D&D waste disposal services when the plants are shut down. We have signed life-of-plant contracts with commercial customers representing 84 of the 104
operating nuclear reactors in the United States. Some of the customers with whom we have entered into life-of-plant contracts include Dominion Resources, Inc., Duke
Energy Corporation, Entergy Corporation, Exelon Corporation, Florida Power & Light Company and Progress Energy.

Large Components

An important service provided to commercial nuclear power plants is the disposition of overweight and oversized nuclear components,
such as reactor pressure vessels, steam generators, reactor heads, pressurizers, turbine rotors, reactor coolant pumps and feed water heaters. As operational nuclear power plants age, their equipment
and components are replaced either to provide increased operational capacity or as part of plant maintenance. For example, in 2004 we handled the transportation, processing and disposal of four steam
generators from American Electric Power/Indiana Michigan Power's Donald C. Cook nuclear plant located in Southwest Michigan on the shores of Lake Michigan. Our successful completion of this project
enabled us to procure a subsequent contract with this customer to package, transport and dispose of two reactor pressure vessel heads from this plant in 2006 and 2007. In late 2008 and 2009, we worked
on a contract to remove eight retired steam generators from Duke Energy's McGuire Nuclear Station in Huntersville, North Carolina. This contract was completed in 2009. The preparation of these large
components for transportation, processing and disposal is often handled through our Commercial Services segment.

Paducah Project

The Paducah Gaseous Diffusion Plant in Paducah, Kentucky was constructed in the mid-1950s as part of a U.S. government
program to produce highly enriched uranium to fuel military reactors and produce nuclear weapons and is currently the only operating uranium enrichment facility in the United States. Owned by the DOE
and operated through a lease with USEC, today the plant produces low-enriched uranium fuel for commercial nuclear power plants in the United States and around the world. In December 2005,
the DOE announced a contract award to Paducah Remediation Services, LLC ("PRS"), for environmental remediation and waste management activities at the plant. We are the major subcontractor to
PRS. Under the DOE contract, PRS's responsibilities include groundwater and soil remedial actions, removing legacy waste, D&D services, operating on-site waste storage facilities and
surveillance and maintenance activities. Revenues from these services are recognized in our Federal Services segment. We are also responsible for all on-site waste management and
off-site waste disposition activities through contract completion. We have transported and disposed of LLRW, MLLW and other contaminated materials from the Paducah site at our Clive
facility. Revenues from these services are recognized in our LP&D segment.

Separations Process Research Unit

The Separations Process Research Unit cleanup site is located within the currently operating 170-acre Naval Reactor's
Knolls Atomic Power Laboratory in Niskayuna, NewYork, near Schenectady. The facilities were a pilot plant to research the process to separate plutonium from irradiated matrices. The facilities and
process systems were flushed and drained after operations ceased in 1953. As part of the cleanup effort, we are a subcontractor responsible for the packaging, transportation, treatment, and disposal
of LLRW and MLRW waste. This work began late in 2009 and will continue into 2010.

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U.S. Navy Contracts

We are the principal service provider to the U.S. Navy for the disposition of radiological materials under the Naval Nuclear Propulsion
Program. Through a series of long-term contracts, we process and dispose of LLRW and MLLW generated by the U.S. Navy's nuclear operations worldwide.

Several
of our facilities provide services to the U.S. Navy, including our Clive, Utah, Barnwell, South Carolina and Oak Ridge and Memphis, Tennessee facilities. These services include
volume reduction, metal recycling, and specialized processing. The materials may then be disposed of at our Clive and Barnwell facilities. In addition to processing liquid and solid radioactive
materials, we also provide transportation and logistics services to the U.S. Navy, as well as on-site support at Naval bases around the United States for the removal of radioactive
materials.

International

As a result of our acquisition of RSMC in June 2007, we began reporting the results of our operations outside North America in a new
International segment in the second quarter of 2007. The revenues we receive from the NDA for the operation and management of its 10 Magnox sites currently constitute the predominant portion of our
International segment revenue. Under these contracts, we are responsible for the operation, defueling and decommissioning of 10 nuclear power sites. Two of these sites currently generate electricity
and the eight other sites are now in varying stages of decommissioning.

In
December 2008, the NDA announced that the competition to select a single parent body organization for Magnox North Limited, Magnox South Limited, and Research Sites Restoration
Limited is now expected to commence in 2011, rather than in 2009, and be completed by March 31, 2013. We intend to bid to retain this contract.

During
the contract year ending March 31, 2011, Magnox South and Magnox North expect to receive funding from the NDA of £221.0 million and
£345.9 million, respectively, or $346.1 million and $541.7 million based on the annual average sterling pound exchange rate for the year ended December 31,
2009. Notable achievements during the contract year include the removal of final spent fuel fragments from the Hinkley site, completion of the Nimonic Springs project at Dungeness, successful
completion of three planned reactor outages at the two generating sites and the final commissioning of the new ILW Store at Trawsfynydd.

In
addition, through our acquisition of ESEU we have positioned ourselves as a leading provider in the United Kingdom of turn-key services for the disposal of radioactive
sources from non-nuclear power generating facilities such as hospitals, research facilities and other manufacturing and industrial facilities. During 2009, we formed a new U.K. based
Tier 2 services business focused on four product linesintermediate level waste treatment and storage, source retrieval and treatment, nuclear waste disposal and technical services.
A number of bids have been submitted to U.K. customers for this work and we await award decisions.

We
also extended our business development into other European and Asian markets during 2009. In addition to providing waste management and technology-based services to customers in
Italy, Germany, and Spain, we have submitted proposals to a number of Chinese utilities to build and equip waste treatment facilities in support of their extensive nuclear new build program.

We
engaged in discussions with Sogin, SpA, the Italian state-owned utility company, to provide D&D and radioactive materials management services in support of the clean-up of
Sogin's nuclear facilities. Our pending license application with the NRC to import material from Italy, to process it at our facility in Tennessee and to dispose of the residual material at our Clive
facility in Utah has generated local and national expressions of opposition. We believe our license application is consistent with all applicable laws and regulations and with past practices.
Moreover, the Italian materialmetals,

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paper
and clothingis the same type of material that we handle routinely from the domestic nuclear industry. In May 2009, the U.S. District Court for the District of Utah ruled in our
favor relating to the importation of foreign waste. We continue to work with Sogin SpA in Italy to provide D&D and radioactive materials management services as we await the pending U.S. Federal
Appeals Court ruling related to the importation of foreign waste.

Customer Concentrations

Our International segment derives its revenues primarily through contracts with the NDA. For the years ended December 31, 2009,
2008 and 2007, respectively, 60.1%, 64.8% and 48.6% of our revenues were from contracts funded by the NDA. Accounts receivable relating to the NDA at December 31, 2009 and 2008 were
$181.4 million and $115.0 million, respectively.

We
have contracts with various offices within the DOE, including with the Office of Environmental Management, the Office of Civilian Radioactive Waste Management, the National Nuclear
Security Administration and the Office of Nuclear Energy. Revenues from DOE contractors and subcontractors represented approximately 15.8%, 11.2% and 16.7% of consolidated revenues for the years ended
December 31, 2009, 2008 and 2007, respectively. Accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts relating to DOE contractors and
subcontractors at December 31, 2009 were $68.4 million and $53.6 million, respectively. Accounts receivable and costs and estimated earnings in excess of billings on uncompleted
contracts relating to DOE contractors and subcontractors at December 31, 2008 were $45.6 million and $42.0 million, respectively.

Our Processing and Disposal Facilities

Clive Facility

Our Clive facility is located in Tooele County, Utah, approximately 75 miles west of Salt Lake City. The DOE and the State of Utah
investigated 29 sites to identify the safest permanent disposal location for radioactive materials before settling on what is now our Clive disposal site. The location had been originally selected and
used by the DOE as a disposal site for uranium tailings due to its remote location, low precipitation, naturally poor groundwater quality and relatively impermeable clay soils. Tooele County has
designated the area around the facility as a hazardous industrial district, which restricts the future use of land in the area to heavy industrial processes and to industries dealing with hazardous
wastes. Our Clive facility is located 35 miles away from the nearest residence.

The
State of Utah authorizes our Clive facility to dispose of Class A LLRW, NORM, 11e(2) materials and MLLW. The facility's location enables it to receive radioactive materials
year-round via bulk truck, containerized truck, enclosed truck, bulk rail, rail boxcars and rail intermodals. We are served by the Union Pacific Railroad at our private siding and maintain
more than seven miles of track and three locomotives for rail cars to be unloaded, decontaminated and released. This direct rail access and our gondola railcar rollover system provide a
cost-effective method of unloading up to 100,000 cubic feet of radioactive materials per day. We maintain a fleet of approximately 300 high capacity gondola railcars under
long-term operating leases, as well as custom-designed flat cars and other multi-model containers to facilitate the safe transport of radioactive materials to our Clive facility. We also
maintain an all-weather paved asphalt road to the site from Interstate 80 to facilitate truck shipment.

Unlike
the two other existing commercial LLRW disposal sites, which are owned by states, we own the site at Clive and also own the buildings and the processing equipment. We have made
numerous improvements to the Clive site in the past several years. We purchased a debris shredder, which significantly increases the efficiency of disposal for larger objects at the site. In addition,
we made upgrades to the railcar rollover and power system, and we added new decontamination facilities. These changes already have begun to result in significant operating cost efficiencies and
enhanced safety.

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Disposal Cells

Our Clive facility uses an above-ground, engineered disposal design, also known as a secure landfill. We use a near-surface
engineered embankment design for our disposal cells. Using standard heavy construction equipment, radioactive material is placed in 24-inch thick layers and then compacted in a continuous
"cut and cover" process that provides for long-term disposal with minimal active maintenance. The system relies on natural, durable materials to ensure performance over time. Each cell has
a 24-inch liner system designed to assist in isolating the material from the environment. A cell bottom liner of compacted low-permeability clay covers a foundation of
compacted indigenous clay and soils. The cell embankment top slopes are covered with a compacted two-foot to seven-foot thick clay cover, a rock drainage layer, and a
two-foot thick rock erosion barrier to ensure long-term protection of the environment. Cover construction begins as areas of the cell are filled to capacity. The process of
continual building, filling and capping of cells ensures long-term cell stability and minimizes work that would be required at site closure. In addition to the standard liner and cover
used in the LLRW and 11e(2) materials cells, the MLLW cell has a triple-synthetic-liner system with a synthetic cover barrier. The mixed waste liner system includes leachate collection and leak
detection systems required for containment of hazardous waste.

Disposal Capacity

We believe that we have sufficient capacity for more than 30 years of operations at our Clive facility based on our estimate of
lower future disposal volumes than experienced in recent years, our ability to optimize disposal capacity through reduction and compaction techniques, and our assumption that we will obtain a license
amendment to convert a disposal cell originally intended for 11e(2) materials to Class A LLRW. The license amendment would increase our capacity for Class A LLRW disposal by
95 million cubic feet to approximately 148 million cubic feet of available capacity. If we are unable to obtain the license amendment, our projected capacity to dispose of Class A
LLRW would be materially reduced. If future disposal volumes increase beyond our expectations or if our other assumptions prove to be incorrect, then the remaining capacity at Clive would be exhausted
more quickly than projected. See "Risk FactorsWe and our customers operate in a politically sensitive environment, and the public perception of nuclear power and
radioactive materials can affect our customers and us"and"Risk FactorsOur business depends on the continued operation of our Clive, Utah
facility."

Tennessee Processing Facilities

We operate facilities at three locations in Tennessee where we process and transfer radioactive materials generally en route to our
Clive facility. The facilities are operated in an integrated fashion to maximize the breadth of options available to us and to our customers.

Our
Bear Creek facility includes a licensed commercial LLRW processing facility, including the only commercially licensed radioactive metals recycling furnace and the largest LLRW
incinerators in the U.S. It primarily receives waste from nuclear utilities, government agencies, industrial facilities, laboratories and hospitals. Our Bear Creek facility also manages classified
nuclear waste, which is specially processed to obscure any classified information.

Our
Gallaher Road facility in Kingston, Tennessee is located adjacent to Oak Ridge, Tennessee and provides specialty waste processing and transportation logistical services. The Gallaher
Road facility also is the base for our Hittman trucking operations and maintains our fleet of tractors, trailers and shipping containers for transporting radioactive materials.

Our
Memphis facility's riverside location allows for access by barge as well as truck and rail. The facility is specifically designed to handle large components such as steam generators,
turbine rotors, heat exchangers, large tanks and similar components. From Memphis, disassembled components can be shipped to our other facilities for ultimate disposition. The facility also leases
radioactive shop space to

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various
nuclear service suppliers vendors who support commercial nuclear power generation outage activities.

In
addition to the three Tennessee processing facilities, we own a facility in Oak Ridge, Tennessee that provides metals manufacturing, processing, casting and rolling, fabrication and
other services to our customers. We believe it is the only commercial facility in the world with the ability to cast, flat-roll and machine products from depleted uranium. Material
processed at this facility can be found in a variety of products, including electronics, medical isotope shipping containers, nuclear accelerators, nuclear fuel storage casks and fighter jets.

South Carolina Facilities

We operate a LLRW disposal facility in Barnwell, South Carolina pursuant to a long-term lease and an operating agreement
with the State of South Carolina that expires on April 5, 2075. Barnwell is the only commercial facility in the United States that is permitted to accept all classes of commercially generated
LLRW. This facility provides disposal services for large components not suitable for volume reduction and for ion exchange resins and other radioactive materials that are generated by nuclear power
plants, hospitals, research laboratories and industrial facilities. On July 1, 2008, the State of South Carolina restricted our Barnwell disposal site to receive Class A, B and C LLRW
only from customers located in the three Atlantic Compact StatesSouth Carolina, New Jersey and Connecticut. We will continue to operate the Barnwell site for the Atlantic Compact States
on a cost-reimbursable basis under our long-term lease.

We
also operate a facility adjacent to the Barnwell disposal facility to support preparation of materials for disposal, including equipment decontamination and parts retrieval and
recycling. The facility also provides specialty processing services.

Engineering and Technologies

Engineering Services

We employ highly trained personnel with technical and engineering experience in critical areas of the nuclear services industry. Our
technical capabilities include engineering (chemical, process, mechanical, nuclear, civil and structural), radiological safety, chemistry, environmental, safety and other disciplines that are critical
to the provision of technology-based nuclear services.

We
provide on-site engineering services to support the deployment of radioactive, hazardous and mixed waste treatment, transportation, and disposal technologies. We design
equipment, components and integrated turn-key systems, train customer personnel and perform a broad range of engineering consultation services. We also have significant experience
designing and licensing storage and transport cask systems and can provide complete
"pool-to-pad" services to customers implementing dry cask storage systems at their facilities. Our engineering staff has successfully developed and licensed numerous storage
and transport cask systems, including specialized containers for various Type A, Type B and fissile material contents. Our FuelSolutions cask system technology, for example,
provides an integrated means for both storage and transportation of spent nuclear fuel. We have designed packages for transport (via trailer, rail and barge) and storage applications, including spent
fuel baskets, wood and polyurethane foam impact limiters, and auxiliary components such as cask tie-downs, lifting gear and personnel barriers.

As
part of the BNGA acquisition, we obtained the rights in the United States, Canada and Mexico to the full suite of spent nuclear fuel recycling technology of British Nuclear Fuels
Limited ("BNFL"), including intellectual property. We also employ many of the employees who designed, constructed, commissioned and operated the existing spent fuel recycling facilities
in the United Kingdom.

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We
believe that our vitrification technology and expertise gives us a competitive advantage. Vitrification is a technique in which waste mixes with glass-forming chemicals to form molten
glass that solidifies and immobilizes the embedded waste. It is an established means for the disposal and long-term storage of nuclear and other hazardous wastes that produces a
non-leaching, durable material that effectively traps waste and can be stored for relatively long periods without concern for air or groundwater contamination. Our patented system is the
baseline technology for the high-level waste and low-active waste vitrification processes at the DOE's Hanford Waste Treatment Plant. We designed, constructed and operated
nonradioactive, nonhazardous pilot melters to test design concepts for the full scale units that will vitrify millions of gallons of highly radioactive tank waste at the Hanford site.

Processing and Treatment Technologies

We believe that, in addition to our disposal capabilities, we offer the most diverse capabilities in the United States for handling,
treating and processing radioactive materials prior to ultimate disposal. Depending on the nature of a particular radioactive waste stream, we employ the following proprietary waste processing and
treatment technologies to optimize the disposal capacity of our facilities:



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Research and Development

We conduct research and development that is critical to the development of technologies used in the nuclear services industry,
especially those used as part of our services to manage radioactive waste from DOE facilities. Our research and development efforts are funded either directly or through partnership with government,
commercial or academic entities. We contract or subcontract with the Vitreous State Laboratory of the Catholic University of America, located in Washington, DC, to provide research and development
services for us under fixed-price and cost-reimbursable contracts. Typically, these contracts are funded by our customers and involve the stabilization or vitrification of radioactive
materials. We have an agreement with some of the Catholic University professors to exclusively license a number of patents related to vitrification and ion exchange technologies, which they own.

We
also have relationships with the University of Nevada and Washington State University to provide technology-based research capabilities in support of some of the projects and
technical initiatives that we are working on.

The
majority of our research and development costs are funded by our customers. Our non-reimbursed research and development expenses included in our results of operations are
immaterial.

Patents and Other Intellectual Property Rights

We own or license approximately 66 patents for use in North America. We own or license 98 foreign patents. We also have the right to
use in the United States, Canada and Mexico approximately 118 patents from BNFL that came with the acquisition of BNGA. These licenses
cover the fields of radioactive material management, storage, treatment, separation, spent nuclear fuel recycling and transport. Our patent portfolio also includes areas such as biotechnology, lasers,
containers and D&D. We also own non-patent intellectual property that essentially consists of research, design, safety, construction, operations and know-how. Our patents
expire between 2010 and 2027. We do not believe that our business, results of operations or financial condition will be adversely affected by any of the patent expirations over the next several years.

Project Integration

Our Engineering and Technology group manages complex Engineering, Procurement, and Construction integration projects by combining our
technologies, expertise in the implementation of NQA-1 quality programs, and engineering and project management team experience. The following are examples of Project Integration work in
recent years:

Re-tube Waste Container ProjectBruce Power Ontario, Canada

We designed, built, and delivered 188 container overpacks for the Bruce Power, Station A, Units 1 & 2 Re-tube Waste
Container Project in Ontario, Canada. This was one of the largest deliveries of fabricated stainless steel containers of this type in the nuclear industry. Our Engineering and Technology group managed
five concurrent fabricators as part of the supply chain made up of both U.S. and International suppliers. The weight of the stainless steel for this project equated to 5.2 million pounds.

Autosampling Pneumatic Transfer SystemWaste Treatment Plant, Hanford, Washington

The Autosampling Pneumatic Transfer System ("ASX") is an integrated process and control system for the Waste Treatment Plant Project in
Hanford, Washington. The ASX system collects waste and process effluent samples from vessels and equipment of the Pretreatment Facility, Low-Activity Waste

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Facility,
and High Level Waste Facility and pneumatically sends the samples to the Analytical Laboratory for testing confirmation. Our scope is to design, supply, test, and provide technical services
for installation, commissioning and training for 10 shielded autosamplers and associated equipment.

M3 Pulse Jet Mixer Mixing Stand-Waste Treatment Plant, Hanford Washington

This project is to design, build, fabricate, install, commission, operate, and report test results for the Waste Treatment and
Immobilization Plant M3 PJM Mixing Test Stand in Hanford, Washington. This test is designed to compare computational fluid dynamics analytical data for pulse jet mixing in the WTP Tanks
FEP-17 and HLP-22 with scaled results using a four foot diameter instrumented test vessel.

Additional
testing scope has also included the design, construction, and operation of a larger scale (twenty feet diameter) Flume Test at Washington State University.

Contracts

Our work is performed under cost-reimbursable contracts, time and materials contracts, unit-price contracts and
fixed-price contracts, some of which may be modified by incentive and penalty provisions.

Each
of our contracts may contain components of more than one of the contract types discussed below. The majority of our government work in our Federal Services and International
segments, on a dollar value basis, is performed on a cost-reimbursable basis awarded through a competitive proposal process and negotiation. With the relatively fluid nature of the
government work scopes, we believe this type of contract reduces our exposure to unanticipated and unrecoverable cost overruns. Fixed-price contracts, on the other hand, are generally obtained via the
proposal and negotiation process but are only accepted when the scope of the work is clearly defined. Our commercial D&D projects are generally fixed-price contracts or time and material contracts.
Almost all of the contracts entered into by our LP&D segment are unit-rate contracts.

The
following table sets forth the percentages of revenues represented by these types of contracts during the year ended December 31, 2009:

% of RevenuesCost-reimbursable


80
%Unit-rate


16
%Fixed-price


4
%


Cost-Reimbursable Contracts

Most of the government contracts in our Federal Services and International segments, on a dollar value basis, are
cost-reimbursable contracts. Under a cost-reimbursable contract, we are reimbursed for allowable or otherwise defined costs incurred plus an amount of profit. The profit
element may be in the form of a simple mark-up applied to the labor costs incurred or it may be in the form of a fee, or a combination of a mark-up and a fee. The fee element
can also take several forms. The fee may be a fixed amount as specified in the contract; it may be an amount based on the percentage of the estimated costs; or it may be an incentive fee based on
targets, milestones, cost savings or other performance factors defined in the contract.

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Our government contracts are typically awarded through competitive bidding or negotiations and may have involved several bidders or offerors. Many of these
contracts are multi-year indefinite delivery/indefinite quantity agreements. These programs provide estimates of a maximum amount the agency expects to spend. Our program management and
technical staffs work closely with the customer to define the scope and amount of work required. Although these contracts do not initially provide us with any guaranteed amount of work, as projects
are defined, the work may be awarded to us via task release without having to further compete for the work. Government contracts also typically have annual funding limitations and are subject to
public sector budgeting constraints. Government contracts may be terminated at the discretion of the government agency for convenience with payment of compensation only for work performed and
commitments made at the time of termination. In the event of termination, we would typically receive an allowance for profit or fee on the work performed.

Our
government cost-reimbursable contracts are subject to oversight audits by government representatives, to profit and cost controls and limitations and to provisions
permitting modification or termination, in whole or in part, at the government's convenience. Government contracts are subject to specific procurement regulations and a variety of socioeconomic and
other requirements. Failure to comply with such regulations and requirements could lead to suspension, termination for cause and possibly debarment from future government contracting or subcontracting
for a period of time. Among the causes for debarment are violations of various statutes, including those related to employment practices, the protection of the environment, the accuracy of records and
the recording of costs.

Unit-Price Contracts

Almost all of the contracts entered into by our LP&D segment, including our life-of-plant contracts, are
unit-price contracts. Under a unit-price contract, we are paid a specified amount for every unit of work performed. A unit-price contract is essentially a
fixed-price contract with the only variable being units of work performed. Variations in unit-price contracts include the same type of variations as fixed-price contracts. We are normally
awarded these contracts on the basis of a total estimated price that is the sum of the product of the specified units and unit prices.

Our
life-of-plant contracts provide our customers with LLRW and MLLW processing and disposal services for the remaining lives of their nuclear power plants, as
well as D&D waste disposal services when the plants are shut down. As a result, these contracts expedite individual project contract negotiations with customers through means other than the formal
bidding process. Life-of-plant contracts typically contain a standardized set of purchasing terms and pre-negotiated pricing provisions and often provide for
periodic price adjustments.

Fixed-Price Contracts

Under a fixed-price contract, the price is not subject to any adjustment by reason of our cost experience or our performance under the
contract. Under this contract type, we are the beneficiary of any cost savings but are typically unable to recover performance cost overruns on these contracts. However, these contract prices may be
adjusted for changes in scope of work, new or changing laws and regulations and other negotiated events.

Sales and Marketing Strategy

We conduct our marketing efforts principally through sales forces dedicated to servicing existing or pursuing new opportunities in each
of our segments.

The
current target market for our Federal Services segment involves site M&O and clean-up of radioactive materials in two target segments. The first is for Tier 1
contracts. These are large prime contracts for the M&O of federal facilities. The second segment is Tier 2 contracts, which are project-driven contracts. For these, we generally act as a
subcontractor to an M&O-type contractor. Each of

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these
opportunities requires a unique business development and sales approach. We have entered into and will continue to enter into joint venture or teaming arrangements with competitors with respect
to bidding on large, complex government contracts.

Federal
customers generally procure nuclear services through highly structured processes. Tier 1 opportunities involve contracts for the operation of a federal site, which is
typically a DOE site. We generally pursue these contracts as a member of a consortium. The sales cycle for these contracts begins at least one year and generally two years before the release of a RFP.
Tier 2 opportunities are discrete project-based opportunities to act as a subcontractor to Tier 1 contractors. The sales cycle for Tier 2 opportunities can be six months or less.

We
generally pursue procurements that are decided on a "best-value" basis, in which the decision-makers consider a combination of technical and cost factors, as well as
project management experience. Factors include the technical approach to managing and performing the project, key project personnel, experience performing similar projects and past performance, which
includes customer references. Cost factors are generally weighed to include cost structure as it would be applied in a specific project.

In
our Commercial Services segment, our sales team actively markets our integrated services and technical expertise to nuclear power and utility customers. For example, our commercial
sales team was instrumental in developing and marketing the concept of life-of-plant contracts with commercial power and utility customers and has also been involved in
developing our license stewardship initiative to serve the shut-down nuclear reactor D&D market.

In
our LP&D segment, we maintain dedicated sales forces at our Clive and Barnwell facilities to market to and serve customers that require logistics, transportation and disposal
of radioactive materials. Our LP&D sales team members' duties include visiting customer sites, assisting customers in completing all required paperwork and obtaining necessary licenses and
permits for the transportation of radioactive materials to one of our facilities and managing the transportation process.

Our
sales efforts in the International segment mirror our sales efforts in the United States. Our business development and technical teams approach bidding opportunities in the United
Kingdom in a similar manner as for bids for opportunities in the United States. In addition, our international business development team works closely with key nuclear power operators to pursue
commercial opportunities.

Safety

We devote significant resources to ensuring the safety of the public, our employees and the environment. In the United States, we have
built a safety record that is critical to our reputation throughout our markets, particularly DOE contractor services. Our domestic safety incident record is substantially better than standards for
other similar businesses according to the North American Industrial Classification System with total Occupational Safety and Health Administration, or OSHA, recordable and lost time incidence rates of
1.33 and 0.19, respectively, versus industry averages of 5.5 and 2.0, respectively. None of our safety incidents has involved radioactive contamination. We have received numerous safety achievement
awards in recognition of our industry leading safety record.

We
also have traditionally met or exceeded the occupational and public radiation safety requirements for the U.S. nuclear services industry. The average employee radiation dose at our
Clive site is less than 50 millirem annually, which is 1.0% of the Federal government's allowable annual guideline of 5,000 millirem.

In
2009, we passed 500 person-days of regulatory inspections by state regulators, the NRC, the DOE and the Nuclear Procurement Issues Committee. We submit routine reports to
the applicable state and federal regulatory agencies demonstrating compliance with rules and regulations set forth in our licenses and permits.

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We
also have established an extensive safety education program for our employees. Before employees are permitted to work in restricted areas, they are required to complete a
four-day training course on radiation theory, proper procedures and radiation safety. Each employee is required to participate in semi-annual refresher courses, and our
employees completed over 15,000 cumulative hours of safety training in 2009. In addition to extensive training, we employ more than 120 safety professionals and technicians who are responsible for
protecting workers, the public and the environment. We also employ a round-the-clock security staff to prevent unauthorized access to our sites. Three of our facilities in the
U.S. are recognized by OSHA as Voluntary Protection Program Star Sites.

In
addition, in the United Kingdom, every Magnox site is accredited under the ISO 14001 system, which is an internationally accepted specification for environmental management
systems, as well as
Occupational Health and Safety Management Systems 18001, which establishes standards for occupational health and safety. Magnox North and Magnox South have also won numerous awards for health and
safety.

Insurance

Like all companies in the nuclear industry, we derive a significant benefit from the provisions of the Price-Anderson Act, as amended.
The Price-Anderson Act was enacted in 1957 to indemnify the nuclear industry against liability claims arising from nuclear incidents, while still ensuring compensation coverage for the general public.
The Price-Anderson Act, as amended, establishes a no-fault insurance-type system for commercial reactors that indemnifies virtually any industry participant against third party
liability resulting from a nuclear incident or evacuation at a commercial reactor site or involving shipments to or from a commercial reactor site. Through primary layer insurance and a secondary
layer insurance pool collectively funded by the nuclear industry, each reactor has coverage for approximately $10.8 billion in claims that covers activities at the reactor site and the
transportation of radioactive materials to or from the site. Price-Anderson limits liability for an incident to $10.8 billion, unless the Federal government decides to provide additional
funding. Activities conducted under a contract with the DOE are covered by a $10 billion indemnity issued by the DOE. For activities at our facilities that are not covered by the Price-Anderson
Act, we maintain nuclear liability insurance coverage issued by American Nuclear Insurers, as follows:

Facility

LimitGeneral (All)Supplier's and Transporter's

$
100 millionBarnwell, South Carolina facility

$
100 millionOak Ridge, TennesseeBear Creek facility

$
50 millionKingston, TennesseeGallaher Road facility

$
5 millionOak Ridge, TennesseeManufacturing Sciences Corporation facility

$
5 millionMemphis, Tennessee facility

$
10 million


We
do not maintain third party nuclear liability coverage for our Clive, Utah facility, because we do not believe such coverage is warranted.

Competition

We compete with major national and regional services firms with nuclear services practices for government and commercial customers. The
following are key competitive factors in these markets:



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Our
competitors, primarily in the Federal Services and International segments, include national engineering and construction firms such as Bechtel Group, Inc., CH2M Hill, Fluor
Corporation, Jacobs Engineering Group, URS Corporation, AMEC plc and AREVA. Some of our competitors have greater financial and other resources than we do, which can give them a competitive
advantage. We also face competition from smaller local firms. Our major U.S. government customer, the DOE, has substantially increased small business set-asides for prime contracts.
Because we are not a small business, we have responded by teaming in certain circumstances as a subcontractor to small businesses responding to requests for proposals as a prime contractor on selected
procurements. We expect intense competition to continue for nuclear service contracts, challenging our ability to maintain strong growth rates and acceptable profit margins. If we are unable to meet
these competitive challenges, we could lose market share and experience an overall reduction in our profits.

In
the Commercial Services area, our major competitors include large nuclear services firms such as Bechtel Group, Inc., URS Corporation's Washington Division, AREVA, and the Shaw
Group. This competition is primarily for major projects in the nuclear utility decommissioning market. To some degree, we also face competition from nuclear utilities, since many elect to
self-perform
decommissioning of their plants using existing plant operations staff. However, our new license stewardship approach capitalizes on the unique capabilities we can offer nuclear utilities through our
ownership of low-level waste disposal facilities.

Other
competition in the Commercial Services market also includes numerous smaller companies that have the capability to provide similar services in our key business lines, which include
large component removal, facility decontamination, site remediation, radiological consulting services, staff augmentation, fuel pool services, cask services, and liquid waste processing. We typically
have a competitive advantage due to our wider range of in-house services, and larger staff resources; however, we often face stiff price competition on bids where smaller companies are
willing to accept lower margins or have lower indirect cost structures.

We
also face competition to provide radioactive material transportation, processing and disposal services to our customers. Currently, the predominant radioactive material treatment and
disposal methods include direct landfill disposal, on-site containment/processing and incineration or other thermal treatment methods. Our competitors may possess or develop alternate
technologies that compete with our radioactive material processing technologies. Competition in this area is based primarily on cost, regulatory and permit restrictions, technical performance,
dependability and environmental integrity.

Currently,
we are the only commercial disposal outlet for MLLW and operate two of the three commercial LLRW disposal sites in the United States, through our Clive, Utah and Barnwell,
South Carolina disposal facilities. The third facility is a state-owned facility located in Richland, Washington that is relatively small, does not accept radioactive materials from outside the
Northwest Interstate Compact on Low-Level Radioactive Waste Management States and may eventually stop receiving materials from outside Washington State itself. Several other companies have
tried to obtain site licensing and have failed. We are the only company to have an operating license received subsequent to the enactment of the Low-Level Radioactive Waste Policy Act.

With
respect to bulk Class A waste, we compete with processors who reduce volumes through treatment (compaction, sorting and incineration). The situation is similar for large
components with

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processors
being able to cut, scrap and partially decontaminate the components. Eventually, in both instances, most of the waste ends up at our Clive site but in reduced volumes. The other option
available for utilities and industrial sites is to store waste on-site. This is generally a temporary solution, especially if local communities become aware of such situations.

In
the future, other commercial sites could be licensed for the disposal of radioactive waste. One such site could be the Waste Control Specialists LLC ("WCS") site in Andrews
County, Texas. WCS filed a license application with the Texas Commission on Environmental Quality (the "TECQ") in August 2004
for a LLRW disposal facility and announced receipt of a Radioactive Material License on September 10, 2009. Construction may not begin until several reconstruction license conditions are
completed and approved by the executive director of the TECQ. Once approved construction is complete, additional conditions of the license must be met prior to commencement of disposal. These
conditions will require WCS to complete several major environmental studies, examples of which include groundwater, air emissions, and seismic stability studies. WCS must also demonstrate that the
leachate from the landfill will not reach the Ogallala-Antlers-Gatuna Aquifer. Should the license become active, WCS will be allowed to receive waste from the Texas Compact, which includes the states
of Texas and Vermont, and from federal facilities (i.e., DOE). WCS will not be able to receive waste via railcar or receive depleted uranium, and will be required to dispose of commercial waste
in specially designed containers in the compact portion of the facility.

Employees

As of December 31, 2009, we had more than 5,000 employees, including approximately 1,200 scientists and engineers and 400
radiation and safety professionals. Approximately 3,000 of these employees are in the United Kingdom. These employees are associated with RSMC's contract with the NDA to operate the Magnox North and
South sites. Should RSMC no longer be under contract with the NDA to operate the Magnox sites, these individuals will no longer be employed by RSMC through its subsidiaries, Magnox North Limited and
Magnox South Limited, with the exception of approximately 70 employees who would continue to be employed by RSMC. The NDA reimburses us for the salaries and benefits for the majority of the direct
RSMC employees, excluding approximately 12 employees that are not in the Magnox North or Magnox South contracts. We also employed approximately 50 employees through our subsidiary ESEU in the U.K. A
significant portion of our workforce in the United Kingdom is unionized, and we have annual agreements that cover most of the Magnox North and Magnox South employees, which are negotiated in
conjunction with the NDA. A majority of our employees are skilled professionals, including nuclear scientists and engineers, hydrogeologists, engineers, project managers, health physics technicians,
environmental engineers and field technicians. At the Hanford, Washington, Oak Ridge, Tennessee, and Paducah, Kentucky, DOE sites that we manage, approximately 180 of our employees are represented by
labor unions. In addition to our own employees, we manage approximately 200 DOE site employees through various Tier 1 arrangements at DOE sites, a portion of who belong to unions. We have four
separate collective bargaining agreements at Oak Ridge, one of which expires in April 2011, one in December 2011 and the other two in July 2013. Our collective bargaining agreement relating to the
Paducah site will expire on July 31, 2010.

Regulation

Applicable U.S. Statutes

We operate in a highly regulated industry, and are subject to extensive and changing laws and regulations administered by various
federal, state and local governmental agencies, including those governing radioactive materials and environmental and health and safety matters. Some of the laws affecting us include, but are not
limited to, the Atomic Energy Act of 1954 ("AEA"), the Resource Conservation and Recovery Act of 1976 ("RCRA"), the Energy Reorganization Act of 1974 ("ERA"),

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the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the Hazardous Materials Transportation Act, the Uranium Mill Tailings Radiation Control Act of 1978, the
Low-Level Radioactive Waste Policy Act, the Nuclear Waste Policy Act of 1982 ("NWPA"), the Utah Radiation Control Act, the Utah Air Conservation Act, the Utah Solid and Hazardous Waste
Act, the Utah Water Quality Act, the Tennessee Radiological Health Service Act, the South Carolina Atomic Energy and Radiation Control Act, the South Carolina Radioactive Waste Transportation and
Disposal Act, the Tennessee Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, as amended ("Clean Air Act"), the Toxic Substances Control Act ("TSCA"), the Federal Insecticide,
Fungicide and Rodenticide Act, the Oil Pollution Act of 1990 and the Occupational Safety and Health Act of 1970; each as from time to time amended.

The
AEA and the ERA authorize the NRC to regulate the receipt, possession, use and transfer of commercial radioactive materials, including "source material," "special nuclear material"
and "by-product material." Pursuant to its authority under the AEA, the NRC has adopted regulations that address the management, treatment, and disposal of LLRW, and that require the
licensing of LLRW disposal sites by NRC or states that have been delegated authority to regulate low-level radioactive material under Section 274 of the AEA. Nearly all of our
nuclear related licenses are overseen by Agreement States (i.e., a state to which the NRC has delegated some authority). Our primary regulators are
government agencies of the states where our processing and disposal facilities are located, namely Utah, South Carolina and Tennessee.

RCRA,
as amended by the Hazardous and Solid Waste Amendments of 1984 ("HSWA"), provides a comprehensive framework for the regulation of the generation, transportation, treatment, storage
and disposal of hazardous and solid waste. The intent of RCRA is to control hazardous and solid wastes from the time they are generated until they are properly recycled or treated and disposed. As
applicable to our operations, RCRA prohibits improper hazardous waste disposal and imposes criminal and civil liability for failure to comply with its requirements. RCRA requires that hazardous waste
generators, transporters and operators of hazardous waste treatment, storage, and disposal facilities meet strict standards set by government agencies. In certain circumstances, RCRA also requires
operators of treatment, storage and disposal facilities to obtain and comply with RCRA permits. The land disposal restrictions developed under the HSWA prohibit land disposal of specified wastes
unless these wastes meet or are treated to meet best demonstrated available technology treatment standards,
unless certain exemptions apply. In the same way that the NRC may delegate authority under the AEA, the EPA may delegate some federal authority under RCRA to the states.

TSCA
provides the EPA with the authority to regulate over 60,000 commercially produced chemical substances. The EPA may impose requirements involving manufacturing, record keeping,
reporting, importing and exporting. TSCA also established a comprehensive regulatory program, analogous to the RCRA program for hazardous waste, for the management of polychlorinated biphenyls.

The
Clean Water Act regulates the discharge of pollutants into streams and other waters of the United States (as defined in the statute) from a variety of sources. If wastewater or
runoff from our facilities or operations may be discharged into surface waters, the Clean Water Act requires us to apply for and obtain discharge permits, conduct sampling and monitoring and, under
certain circumstances, reduce the quantity of pollutants in those discharges.

The
Clean Air Act empowers the EPA and the states to establish and enforce ambient air quality standards and limits of emissions of pollutants from facilities. This has resulted in tight
control over emissions from technologies like incineration, as well as dust emissions from locations such as waste disposal sites.

The
processing, storage, and disposal of high-level radioactive waste (e.g., spent nuclear fuel) are subject to the
requirements of the NWPA, as amended by the NWPA Amendments. These statutes

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regulate
the disposal of high-level radioactive waste by establishing procedures and schedules for the DOE to site geologic repositories for such waste, and such repositories are to be
licensed by the NRC. The NRC has issued regulations that address the storage and disposal of high-level radioactive waste, including storage and transportation of such waste in dry casks
and storage at Independent Spent Fuel Storage Installations.

Applicable U.K. Statutes

Through our subsidiaries, RSMC and ESEU, we are subject to extensive and changing laws and regulations in the United Kingdom. Some of
the laws affecting us include, but are not limited to, the Nuclear Installations Act 1965, the Health and Safety at Work Act 1974, the Radioactive Substances Act 1993 ("RSA 1993"), the Environment Act
1995, the 2004 Energy Act and the Electricity Act 1989.

The
Nuclear Installations Act 1965 governs the construction and operation of nuclear installations, including fuel cycle facilities, in the United Kingdom. The Health and Safety at Work
Act 1974 governs Health Protection at those installations.

The
RSA 1993 provides a comprehensive framework for the keeping and use of radioactive materials as well as accumulation and disposal of radioactive waste.

The
Environment Act 1995 created the Environment Agency in England and Wales and the Scottish Environment Protection Agency, or SEPA. Under the Environment Act 1995, these agencies
enforce environmental protection legislation including the RSA 1993.

The
2004 Energy Act established the NDA to ensure the decommissioning and clean-up of Britain's civil public sector nuclear sites including the sites operated by RSMC.

The U.S. Regulatory Environment

The State of Utah regulates our operations at our Clive disposal facility. Our Utah licenses include our Clive facility's primary
radioactive materials license (UT2300249) and our 11e(2) material license (UT2300478), which is currently in timely renewal (which allows us to operate under the terms of our prior license until a new
license is issued). Four different divisions of the Department of Environmental Quality regulate this facility with approximately 14 employees devoted to the facility. The Division of Radiation
Control and the Division of Solid and Hazardous Waste regulate our ability to receive LLRW, NORM/NARM (naturally-occurring/accelerator-produced radioactive material), 11e(2) material and MLLW.
Additionally, the Division of Water Quality and the Division of Air Quality also regulate the facility. The site is inspected daily to ensure strict compliance with all Utah regulations. The Division
of Radiation Control also requires us to provide financial assurance for the decommissioning or "closure" of our Clive facility, including areas that are closed on an ongoing basis. The adequacy of
the funding provided is reviewed annually to assure that adequate financial resources are set aside and maintained to fund any required on-site clean-up activities. Finally, we
also maintain nine Tooele County, Utah Conditional Use Permits for the facility.

The
South Carolina Department of Health and Environmental Control, regulates our South Carolina operations through multiple groups, including the Division of Waste Management, the Bureau
of Air Quality, and the Bureau of Water. Our licensed operations in South Carolina include the Barnwell disposal facility (the license is currently in timely renewal), the Calibration Laboratory, the
Nuclear Services Support Facility, the Barnwell Environmental and Dosimetry Lab and the Chem-Nuclear Systems, Service Operations Division. The South Carolina Department of
Health and Environmental Control has staff specifically devoted to the regulation of our facilities which continually inspects us and assures that we fully comply with all regulations. We lease the
Barnwell site from the State of South Carolina and under the terms of the Atlantic Compact. As part of that lease and as part of its regulatory oversight, South Carolina requires us to contribute to a
long-term care fund for the site and maintain decommissioning or closure assurance.

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The Tennessee Department of Environment and Conservation ("TN DEC"), regulates our Tennessee operations. Multiple groups within the TN DEC regulate our operations
including the Division of Radiological Health, the Division of Solid Waste Management and the Division of Water Pollution Control. The TN DEC has staff that continually oversees our facilities and
also requires each facility to provide decommissioning assurance. Several of our Tennessee licenses are currently in timely renewal.

When
we engage in the transportation of hazardous/radioactive materials, we are subject to the requirements of the Hazardous Materials Transportation Act, as amended by the Hazardous
Materials Transportation Uniform Safety Act of 1990. Pursuant to these statutes, the United States Department of Transportation regulates the transportation of hazardous materials in commerce. Our
wholly-owned subsidiary, Hittman, is our primary shipping operation. Shippers and carriers of radioactive materials must comply with both the general requirements for hazardous materials
transportation and with specific requirements for the transportation of radioactive materials. Many states also regulate our shipping business including California, Colorado, Florida, Georgia, Idaho,
Massachusetts, New Jersey, New York, Oregon and Pennsylvania.

We
are also regulated by the federal governmentincluding by the NRC and EPA. The NRC regulates us regarding the certification of casks used to transport waste and regarding
operations in non-Agreement States. We have multiple current Certificates of Compliance, which allow us to manufacture and sell radioactive material packages for the storage and
transportation of radioactive material, including dry casks for spent nuclear fuel. These Certificates of Compliance permit the use of these packages by third parties as well as for our own
transportation needs. The NRC
requires us to maintain a Quality Assurance program associated with these Certificates of Compliance. Furthermore, the NRC regulates several nuclear materials licenses which facilitate our work at
worksites other than those located in South Carolina, Tennessee or Utah. These licenses do not have any decommissioning requirements.

To
the extent we engage in the storage, processing, or disposal of mixed waste, the radioactive components of the mixed waste are subject to NRC regulations promulgated under the AEA.
The EPA, under RCRA, regulates the hazardous components of the waste. To the extent that these regulations have been delegated to the states, the states may also regulate mixed waste.

Under
RCRA, wastes are classified as hazardous either because they are specifically listed as hazardous or because they display certain hazardous characteristics. Under current
regulations, waste residues derived from listed hazardous wastes are considered hazardous wastes unless they are delisted through a formal rulemaking process that may last a few months to several
years. For this reason, waste residue that is generated by the treatment of listed hazardous wastes, including waste treated with our vitrification technologies, may be considered a hazardous waste
without regard to the fact that this waste residue may be environmentally benign. Full RCRA regulation would apply to the subsequent management of this waste residue, including the prohibition against
land disposal without treatment in compliance with best demonstrated available technology treatment standards. In some cases, there is no current technology to treat mixed wastes, although EPA policy
places these wastes on a low enforcement priority. Our ownership and operation of treatment facilities exposes us to potential liability for clean-up of releases of hazardous wastes under
RCRA.

Operators
of hazardous waste treatment, storage and disposal facilities are required to obtain RCRA Part-B permits from the EPA or from states authorized to implement the
RCRA program. We have developed procedures to ensure compliance with RCRA permit provisions at our Bear Creek facility, including procedures for ensuring appropriate waste acceptance and scheduling,
waste tracking, manifesting and reporting and employee training.

CERCLA
effectively imposes strict, joint and several retroactive liabilities upon owners or operators of facilities where a release of hazardous substances occurred, the parties who
generated the

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hazardous
substances released at the facilities and parties who arranged for the transportation of hazardous substances to these facilities.

Because
we own and operate vitrification, storage, incineration and metal processing facilities, we are exposed to potential liability under CERCLA for releases of hazardous substances
into the environment at those sites. If we use off-site storage or disposal facilities for final disposition of the glass and other residues from our vitrification, incineration and other
treatment processes, or other hazardous substances relating to our operations, we may be subject to clean-up liability
under CERCLA, and we could incur liability as a generator of these materials or by virtue of having arranged for their transportation and disposal to such facilities. We have designed our processes to
minimize the potential for release of hazardous substances into the environment. In addition, we have developed plans to manage and minimize the risk of CERCLA or RCRA liability by training operators,
using operational controls and structuring our relationships with the entities responsible for the handling of waste materials and by-products.

Certain
of our facilities are required to maintain permits under the Clean Water Act, the Clean Air Act and corresponding state statutes. The necessity to obtain such permits depends
upon the facility's location and the expected emissions from the facility. A state may require additional state licenses or approvals. Further, many of the federal regulatory authorities described in
this section have been delegated to state agencies; accordingly, we hold the required licenses, permits and other approvals from numerous states.

We
believe that our treatment systems effectively trap particulates and prevent hazardous emissions from being released into the air, the release of which would violate the Clean Air
Act. However, our compliance with the Clean Air Act may require additional emission controls and restrictions on materials stored, used and incinerated at existing or proposed facilities in the
future.

Many
of the government agencies overseeing our operations require us to regularly monitor the impacts of our operations on the environment, and to periodically report the results of such
monitoring. The costs associated with required monitoring activities have not been, and are not expected to be, material. In complying with existing environmental regulations in past years, we have
not incurred material capital expenditures. We do not expect to incur material capital expenditures in future periods. However, we could be required to remediate any adverse environmental conditions
discovered in the future which may require material expenditures.

OSHA
provides for the establishment of standards governing workplace safety and health requirements, including setting permissible exposure levels for hazardous chemicals that may be
present in mixed wastes. We must follow OSHA standards, including the preparation of material safety data sheets, hazardous response training and process safety management, as well as various record-
keeping disclosure and procedural requirements. The NRC also has set regulatory standards for worker protection and public exposure to radioactive materials or wastes that we adhere to. See the
discussion in "Item 1. BusinessSafety" above.

The U.K. Regulatory Environment

Through our U.K. subsidiaries, we hold contracts and licenses to operate and decommission 22 reactors at 10 of the NDA sites in the
United Kingdom. Four of these reactors are operating and 18 are in various stages of decommissioning. Approximately 3,000 employees in the
United Kingdom operate these sites and are subject to the U.K. regulatory environment. We also have other operations in the United Kingdom that are also subject to this regulatory environment.

The
Health and Safety Executive ("HSE"), is responsible for licensing nuclear installations. The HM Nuclear Installations Inspectorate ("NII"), which is part of the Nuclear Directorate
of the HSE, ensures that nuclear installations comply with all statutory safety requirements. The NII staff regularly

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inspects
our facilities to confirm that the relevant licensing requirements are met throughout the life of the facility, including decommissioning.

The
Environment Agency in England and Wales and the Scottish Environmental Protection Agency ("SEPA") in Scotland have extensive powers and statutory duties to improve and protect the
environment across England, Wales and Scotland. The Environmental Protection Directorate of the Environmental Agency regularly inspects and regulates our facilities in England and Wales to confirm
compliance with regulations regarding radioactive substances, integrated pollution control, waste regulation and water quality. SEPA fulfills a similar function in Scotland. Memoranda of Understanding
between the Environment Agency/SEPA and the HSE facilitate effective coordination between the multiple agencies regarding overlapping functions.

Under
the Energy Act 2004, the NDA was given responsibility for the operation, clean-up and decommissioning of 20 civic public sector nuclear sites, including reactor
facilities used for the storage, disposal or treatment of hazardous material. We are operating or decommissioning reactors for the NDA at 10 of these sites. Accordingly, we serve as a prime contractor
for the NDA.

Financial Information About Business Segments and Foreign and Domestic Operations

For financial information relating to (a) each of our business segments and (b) our foreign and domestic sales, transfers
between geographic areas, net income and identifiable assets, see Note 15 to our consolidated financial statements included within this Report.

General Development of Our Business

The Company was initially formed as Envirocare of Utah, Inc. in 1988 to operate a disposal facility for mixed waste, uranium
mill tailings and Class A low-level radioactive waste in Clive, Utah. In January 2005, the Company converted to a limited liability company, Envirocare of Utah, LLC
("Envirocare"). Immediately thereafter, the sole member of Envirocare sold all of its member interest to ENV Holdings LLC. In 2006, we changed our name from Envirocare of Utah, LLC to
EnergySolutions, LLC. Since 2005, we have expanded and diversified our operations through a series of strategic acquisitions, including the
decontamination and decommissioning division of Scientech, LLC in October 2005, BNG America, LLC in February 2006, Duratek, Inc. in June 2006, ESEU Services Limited (formerly
Safeguard) in December 2006, Parallax, Inc. in January 2007, Reactor Sites Management Company Limited in June 2007, NUKEM Corporation in July 2007, and Monserco Limited in December 2007.

On
November 20, 2007, the date of the completion of our initial public offering, we completed our conversion to a corporate structure whereby
EnergySolutions, LLC converted to EnergySolutions, Inc.
EnergySolutions, Inc. is now organized and existing under the General Corporation Law of the State of Delaware.

On
July 30, 2008, we completed a secondary offering of 35 million shares of common stock offered by ENV Holdings, previously our majority shareholder, as selling
shareholder. The underwriters of the offering subsequently exercised their over-allotment option and purchased 5.25 million additional shares of our common stock from ENV Holdings.
Following completion of the offering, ENV Holdings owned approximately 16.7% of our outstanding shares of common stock.

On
February 13, 2009, ENV Holdings completed a distribution of all of our shares to its members on a pro rata basis for no consideration. As a result, ENV Holdings is no longer
the beneficial owner, directly or indirectly, of any shares of our common stock.

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Available Information

We file annual, quarterly and current reports and other information with the SEC. These materials can be inspected and copied at the
SEC's Public Reference Room at 100 F Street, NE., Washington, D.C. 20549. Copies of these materials may also be obtained by mail at prescribed rates from the SEC's Public Reference Room at the
above address. Information about the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that
contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC's Internet site is www.sec.gov.

We
make available, free of charge, on our Internet website, located atwww.energysolutions.com, our most recent Annual Report on
Form 10-K, our most recent Quarterly Report on Form 10-Q, any current reports on Form 8-K filed since our most recent Annual Report on
Form 10-K, and any amendments to such reports as soon as reasonably practicable following the electronic filing of such report with the SEC. Such reports can be found under "SEC
Filings" in the "Investor Relations" tab. In addition, we provide electronic or paper copies of our filings free of charge upon request.

Item 1A.    Risk Factors.

You should carefully consider the following factors and other information contained in this
Form 10-K before deciding to invest in our common stock.

We and our customers operate in a highly regulated industry that requires us and them to obtain, and to comply with, national, state and local government permits and
approvals.

We and our customers operate in a highly regulated environment. Our facilities are required to obtain, and to comply with, national,
state and local government permits and approvals. Any of these permits or approvals may be subject to denial, revocation or modification under various circumstances. Failure to obtain or comply with
the conditions of permits or approvals may adversely affect our operations by temporarily suspending our activities or curtailing our work and may subject us to penalties and other sanctions. Although
existing licenses are routinely renewed by various regulators, renewal could be denied or jeopardized by various factors, including:



In
addition, if new environmental legislation or regulations are enacted or existing laws or regulations are amended or are interpreted or enforced differently, we or our customers may
be required to obtain additional operating permits or approvals. Changes in requirements imposed by our environmental or other permits may lead us to incur additional expenses by requiring us to
change or improve our waste management technologies and services to achieve and maintain compliance. We may be unable to meet all potential regulatory changes.

We and our customers operate in a politically sensitive environment, and the public perception of nuclear power and radioactive materials can affect our customers and us.

We and our customers operate in a politically sensitive environment. The risks associated with radioactive materials and the public
perception of those risks can affect our business. Various public interest groups and political representatives frequently oppose the operation of processing and disposal

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sites
for radioactive materials such as our Barnwell, South Carolina, Oak Ridge, Tennessee and Clive, Utah facilities. For example, public interest groups and the former governor of Utah have made
public statements regarding their desire to limit the source and volume of radioactive materials that we process and dispose at our Clive facility. Representatives in Congress have introduced
legislation to ban the importation of foreign waste, and public interest groups have argued for a moratorium or imposition of other restrictions on disposal of depleted uranium at our Clive facility.
Depleted uranium is Class A waste that has been disposed at our Clive facility. The NRC has announced that it is undertaking a limited rulemaking to require the preparation of a
site-specific analysis at sites that dispose of significant quantities of depleted uranium. Although preliminary NRC analyses indicate that our Clive facility will continue to be suitable
for the disposal of depleted uranium, preparation of the site-specific analysis or other restrictions imposed in the interim could result in a delay or changes in how we dispose of
depleted uranium at our Clive facility, which could adversely affect our business. If any regulatory, environmental or legislative efforts to limit or delay our operations at our current or future
facilities were successful, then our business would be adversely affected.

Opposition
by third parties to particular projects can delay or prohibit the construction of new nuclear power plants and can limit the operation of nuclear reactors or the handling and
disposal of radioactive materials. Adverse public reaction to developments in the use of nuclear power or the disposal of radioactive materials, including any high profile incident involving the
discharge of radioactive materials, could directly affect our customers and indirectly affect our business. In the past, adverse public reaction, increased regulatory scrutiny and litigation have
contributed to extended construction periods for new nuclear reactors, sometimes extending construction schedules by decades or more, contributing to the result that no new reactor has been ordered
since the 1970s. Adverse public reaction also could lead to increased regulation or outright prohibition, limitations on the activities of our customers, more onerous operating requirements or other
conditions that could have a material adverse impact on our customers and our business.

In
addition, we may seek to address public and political opposition to our business activities through voluntary limitations on our operations. For example, as part of our response to
public statements made by public interest groups and the former governor of Utah regarding their desire to limit the source and volume of radioactive materials that we process and dispose at our Clive
facility, we voluntarily agreed with the former governor to withdraw a request for a license amendment to increase our capacity at our Clive facility. We are also experiencing both local and national
expressions of opposition to the importation of LLRW from international sources, including opposition articulated in
U.S. congressional proposals and from the Northwest Compact. The Northwest Compact, which consists of Alaska, Hawaii, Idaho, Montana, Oregon, Utah, Washington, and Wyoming, was created pursuant to a
federal statute that enables states to enter into interstate compacts for the purposes of managing LLRW. In response to this opposition, we have volunteered to limit the amount of foreign LLRW
accepted at our Clive facility to a maximum of 5% of the total remaining facility capacity. We also filed a declaratory judgment action in the U.S. District Court in Utah seeking an order that the
Northwest Compact does not have jurisdictional or regulatory authority over our Clive facility and that the Northwest Compact may not discriminate between domestic and foreign materials. See the
discussion under "Legal Proceedings" for the current status of this litigation. Our actions to diffuse public and political opposition to our business can divert time and resources away from our core
business operations and strategies, and may not have the consequences we intended. For instance, a ruling clarifying that Clive is not subject to the Northwest Compact may result in the proposal
and/or passage of additional legislation or regulations governing our operations at Clive. Failure to achieve the intended results of our actions may have a material adverse effect on our business,
financial condition and results of operations.

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Our business depends on the continued operation of, and adequate capacity at, our Clive, Utah facility.

Our disposal facility in Clive, Utah is a strategic asset and is vital to our business. This facility is the largest privately owned
commercial facility for the disposal of LLRW in the United States, and contributed 7.8% and 7.7% of our revenues for the years ended December 31, 2009 and 2008, respectively. Because of the
greater profitability of the Clive facility in comparison with the rest of our business, a loss of revenue from Clive would have a disproportionate impact on our gross profit and gross margin. The
Clive facility is subject to the normal hazards of operating any disposal facility, including accidents and natural disasters. In addition, access to the facility is limited, and any interruption in
rail or other transportation services to and from the facility will affect our ability to operate the facility. Our Clive facility is highly regulated and subject to extensive licensing and permitting
requirements and continuous air and ground water monitoring. Changes in federal, state or local regulations, including changes in the interpretation of those regulations, including regulations
addressing the disposition of depleted uranium and the importation of foreign waste, can affect our ability to operate the facility. Depleted uranium is Class A waste that has been disposed at
our Clive facility. The NRC has announced that it is undertaking a limited rulemaking to require a site-specific analysis at sites that dispose of significant quantities of depleted
uranium. Although preliminary NRC analyses indicate that our Clive facility will continue to be suitable for the disposal of depleted uranium, the site-specific analysis or restrictions
imposed in the interim could result in a delay or changes in how we dispose of depleted uranium at our Clive facility, which could adversely affect our business. The governor of Utah recently
announced he had reached an agreement with the DOE not to ship any additional depleted uranium from the Savannah River site to
the Clive facility until a site-specific assessment of the Clive facility can be completed. These and other actions by states or the federal government may affect the operation, capacity,
expansion or extension of the Clive facility. The Northwest Compact also has asserted it has authority over our Clive facility and is seeking to restrict our ability to import foreign LLRW for
disposal at the facility, and federal legislation has been introduced to prohibit the importation of foreign LLRW waste. Any of the foregoing actions may hinder, delay or stop shipments to the
facility, which could seriously impair our ability to execute disposal projects and significantly reduce future revenues.

We
believe that we have sufficient capacity for more than 30 years of operations based on our estimate of future disposal volumes, our ability to optimize disposal capacity
utilization and our assumption that we will obtain a license amendment to convert a disposal cell originally intended for 11e(2) material waste to Class A LLRW. The license amendment would
increase our capacity for Class A LLRW disposal by 95 million cubic feet to approximately 148 million cubic feet. If we are unable to obtain the license amendment, our projected
capacity to dispose of Class A LLRW would be materially reduced. If future disposal volumes increase beyond our expectations or if our other assumptions prove to be incorrect, then the
remaining capacity at Clive would be exhausted more quickly than projected. Any interruption in our operation of the Clive facility or decrease in the effective capacity of the facility would
adversely affect our business, and any prolonged disruption in the operation of the facility or reduction in the capacity or useful life of the facility would have a material adverse effect on our
business, financial condition and results of operations.

Our quarterly operating results may fluctuate significantly and may not meet our financial guidance or published analyst forecasts, which could have a negative effect on the
price of our common stock.

Our quarterly operating results may fluctuate significantly because of a number of factors, many of which are outside our control,
including:



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Fluctuations
in quarterly results, lower than anticipated revenues or our failure to meet financial guidance or published analysts' forecasts, could have a negative effect on the price
of our common stock.

Our international operations involve risks that could have a material adverse effect on our results of operations.

For the year ended December 31, 2009 we derived 60.8% and 26.0% of our revenues and segment operating income, respectively, and
for the year ended December 31, 2008, we derived 65.1% and 28.3% of our revenues and operating income, respectively, from our operations outside of North America. Our business is dependent on
the success of our international operations, and we expect that our international operations will continue to account for a significant portion of our total revenues. In addition to risks applicable
to our business generally, our international operations are subject to a variety of heightened or distinct risks, including:



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Changes in existing environmental and other laws, regulations and programs could harm our business.

A significant amount of our business of processing and disposing of radioactive materials derives directly or indirectly from existing
national and state laws, regulations and programs related to pollution and environmental protection. National, state and local environmental legislation and regulations require substantial
expenditures and impose liabilities for noncompliance. Accordingly, a real or perceived relaxation or repeal of these laws and regulations, or changes in government policies regarding the funding,
implementation or enforcement of these programs, could result in a material decline in demand for nuclear services. The ultimate impact of any changes will depend upon a number of factors, including
the overall strength of the economy and the industry's views on the cost-effectiveness of remedies available under the changed laws and regulations.

Our
operations are subject to taxation by the U.S. and U.K. governments, the State of Utah, Tooele County and other governmental entities. We currently benefit from net operating loss
carryforwards and research and development credits to reduce our overall tax rate. The expiration of the net operating loss carryfowards, our inability to qualify for future tax credits or changes in
governing rules and regulations could result in a material increase in our taxes and an increase in our effective tax rate. We may not have the ability to pass on the effect of such increase to our
customers and, as a result, our stockholders could bear the burden of any such tax increase. The risk of a material tax increase may be exacerbated by political pressure to limit our operations. See
"Risk FactorsWe and our customers operate in a politically sensitive environment, and the public perception of nuclear power and radioactive materials can affect our customers and us."

Our
facilities are also subject to political actions by government entities which can reduce or completely curtail their operations. For example, the State of South Carolina closed the
Barnwell disposal site on July 1, 2008 to customers outside of the Atlantic Compact States of South Carolina, New Jersey and
Connecticut. Although the Barnwell closure did not have a significant impact on our revenues or net income, political pressures to reduce or curtail other operations could have a material adverse
effect on our results of operations.

Our life-of-plant contracts may not remain effective through a nuclear power plant's decontamination and decommissioning.

Although our life-of-plant contracts are intended to provide us with revenue streams from the processing and
disposal of substantially all LLRW and MLLW generated over the remaining lives of nuclear power plants operated by our commercial power and utility customers, and ultimately waste disposal revenue
streams when the plants are shut down, these contracts may not actually remain effective for that entire period. A typical life-of-plant contract may terminate before D&D
because the contract may:



The
early termination or renegotiation of a life-of-plant contracts may reduce our revenues and profits. In addition, life-of-plant
contracts may expose us to liability in the event that government

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bodies
limit our ability to accept radioactive materials by capping the capacity of one or more of our disposal facilities or taking other actions that prevent us from disposing of LLRW and MLLW at
our facilities or substantially increase the cost of doing so.

We may not be successful in winning new business mandates from our government and commercial customers.

We must be successful in winning new business mandates from our government and commercial customers to replace revenues from projects
that are nearing completion and to increase our revenues. Our business and operating results can be significantly influenced by the size and timing of a single material contract.

Our
business strategy includes bidding on government contracts as a lead prime contractor or in a consortium. We expect to bid on a significant portion of the approximately
$21.3 billion of federal nuclear services contracts that we estimate will be awarded within the next five years. In the past, we have operated primarily as a subcontractor or in a minority
position on a prime contractor team. In pursuing a lead prime contractor role, we will be competing directly with a number of large national and regional nuclear services firms that may possess or
develop technologies superior to our technologies and have greater financial, management and marketing resources than we do. Many of these companies also have long-established customer
relationships and reputations. As a result, we may not be successful in being awarded the lead prime contractor role for any of these contracts.

We may fail to win re-bids in the United Kingdom for the Magnox North and Magnox South decommissioning contracts currently held by our subsidiary RSMC.

The NDA contracts held by RSMC through its subsidiaries, Magnox North Limited and Magnox South Limited, in relation to the Magnox North
sites and the Magnox South sites currently extend through March 31, 2012 and are subject to re-bid by the NDA upon contract expiration. During the contract year ended
March 31, 2009, RSMC recognized revenues of $1.1 billion from these contracts. We expect the competition for these contracts to be intense, and our failure to win the re-bid
of either or both contracts would have a material adverse effect on our results of operations. Even if we win the re-bid, the
participation of a partner could reduce our profits from these contracts. In addition, any limitations on our ability to import international waste to our Clive facility could reduce one of our
competitive advantages in competing for these contracts. See "Risk FactorsWe and our customers operate in a politically sensitive environment, and the public
perception of nuclear power and radioactive materials can affect our customers and us."

Investor lawsuits could adversely affect our business and financial position.

Two purported class-action lawsuits were filed against us in October 2009. These lawsuits name the Company, current and prior directors
of the Company, certain of our officers, the lead underwriters in our initial public offering and the July 2008 registered public offering, and ENV Holdings LLC, our former parent as
defendants. Under our organizational documents and contractual agreements, we have indemnification obligations to all of the named defendants. The lawsuits allege that the registration statements and
prospectuses for the two offerings contained inaccurate statements of material facts and omitted material information required to be disclosed therein. The lawsuits seek to certify a class consisting
of all purchasers of our stock from November 14, 2007 through October 14, 2008. Our stock price varied from approximately $27.90 to $5.64 during that period. There may be additional
similar lawsuits filed in the near future. If plaintiffs' are successful in certifying a class and establishing the allegations in the lawsuits, it could materially adversely affect our financial
condition. Even if we are successful in defending against the allegations of the lawsuits, we may incur significant costs for legal fees and our indemnification obligations to other named defendants.
We may also incur increased costs for renewal of our directors and officers' liability insurance. In addition, defense of the lawsuits will involve the commitment of significant Company resources and
may demand the time and attention of

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our
employees, officers and directors, particularly those who are personally named, to the detriment of our business operations.

The loss of one or a few customers or a particular strategic asset could have an adverse effect on us.

One or a few government and commercial customers have in the past and may in the future account for a significant portion of our
revenues in any one year or over a period of several consecutive years. For example, the NDA accounts for virtually all of our revenue in the International segment (which is our largest segment based
on 2009 revenues). For the years ended December 31, 2009 and 2008, respectively, 60.1% and 64.8% of our revenues were from contracts funded by the NDA. In addition, from time to time we
typically have contracts with various offices within the DOE, including with the Office of Environmental Management, the Office of Civilian Radioactive Waste Management, the National Nuclear Security
Administration and the Office of Nuclear Energy. For the years ended December 31, 2009 and 2008, respectively, 15.8% and 11.2% of
our revenues were from contracts funded by the DOE. Our business strategy and hence profitability and operations rely on our ownership of disposal facilities, including in particular our Clive
facility. A significant amount of our revenues are derived from large one-time projects. All of the foregoing subjects us to the risk that the loss of a significant customer, the loss of a
particular strategic asset or the lack of new job awards for any reason, could have a materially adversely effect on our business and we may be particularly sensitive to significant
short-term fluctuations in our revenues and profitability as a result. Because customers generally contract with us for specific projects, we may lose these significant customers from year
to year as their projects with us are completed. Our inability to replace this business with other projects could have an adverse effect on our business and results of operations.

We may incur substantial costs and liabilities due to our operation of nuclear power generating facilities.

Under our Magnox North and Magnox South agreements we manage 22 nuclear power generating facilities, 4 of which are currently
operating, for the NDA. The management and operation of such facilities subjects us to various risks including, among other things, the potential harmful effects on the environment and human health
resulting from the operation of nuclear reactors and related facilities and the storage, handling and disposal of radioactive materials and limitations on the amounts of types of insurance
commercially available to cover losses that might arise in connection with operating nuclear reactors and related facilities.

We
are required to meet licensing and safety-related requirements imposed by the NDA and other regulatory agencies in the U.K. In the event of non-compliance, the NDA or
other regulatory agencies may increase regulatory oversight, impose fines, and/or shut down a facility, depending upon the assessment of the severity of the situation. Revised security and safety
requirements promulgated by regulatory agencies could necessitate substantial capital and other expenditures, as well as assessments against us to cover third-party losses.

If
a serious nuclear incident were to occur at one of the nuclear facilities operated by us, such as the release of radioactive materials through a criticality event, or otherwise or the
failure to safeguard nuclear materials resulting in, among other things, a terrorist incident or theft of such materials, there could be serious environmental, health and public safety consequences.
In addition, such an incident could result in liabilities in excess of our insurance coverage or our ability to pay. Furthermore, a nuclear incident could lead to the termination of our position as
the operator of that facility and/or other nuclear facilities and potentially impact other segments of our business. Any nuclear incident due to inadequate safety measures, failure to safeguard
nuclear materials, terrorism or otherwise could have a material adverse effect on our results of operations and financial condition.

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The elimination or any modification of the Price-Anderson Act's indemnification authority could harm our business.

In the United States, the Atomic Energy Act of 1954, as amended (the "AEA"), comprehensively regulates the manufacture, use and storage
of radioactive materials. Section 170 of the AEA, which is known as the Price-Anderson Act, supports the nuclear services industry by offering broad indemnification to commercial nuclear power
plant operators and DOE contractors for liabilities arising out of nuclear incidents at power plants licensed by the NRC and at DOE nuclear facilities. That indemnification protects not only the NRC
licensee or DOE prime contractor, but also companies like us that work under contract or subcontract for a licensed power plant or under a DOE prime contract or transporting radioactive material to or
from a site. The indemnification authority of the NRC and DOE under the Price-Anderson Act was extended through 2025 by the Energy Policy Act of 2005.

The
Price-Anderson Act's indemnification provisions generally do not apply to our processing and disposal facilities, and do not apply to all liabilities that we might incur while
performing services as a contractor for the DOE and the nuclear energy industry. If an incident or evacuation is not covered under Price-Anderson Act indemnification, we could incur substantial
losses, regardless of fault, which could have an adverse effect on our results of operations and financial condition. In connection with international transportation of toxic, hazardous and
radioactive materials, it is possible for a claim to be asserted which may not fall within the indemnification provided by the Price-Anderson Act. If such indemnification authority is not applicable
in the future, we may not be able to obtain commercially adequate insurance on a cost effective basis, or at all, and our business could be adversely affected if the owners and operators of new
facilities elect not to retain our services.

Our existing and future customers may reduce or halt their spending on nuclear services from outside vendors, including us.

A variety of factors may cause our existing or future customers to reduce or halt their spending on nuclear services from outside
vendors, including us. These factors include, but are not limited to:



These
events also could adversely affect us to the extent that they result in the reduction or elimination of contractual requirements, the suspension or reduction of nuclear reactor
operations, the reduction of supplies of nuclear raw materials, lower demand for nuclear services, burdensome regulation, disruptions of shipments or production, increased operational costs or
difficulties or increased liability for actual or threatened property damage or personal injury.

Economic downturns and reductions in government funding could harm our businesses.

Demand for our services has been, and we expect that demand will continue to be, subject to significant fluctuations due to a variety
of factors beyond our control, including economic and industry conditions. The stress experienced by global capital markets that began in the second half of 2007 substantially increased during 2008
and has continued throughout 2009. Recently, concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a depressed real estate
market have contributed to increased volatility and diminished expectations for the global economy and expectations of slower global economic growth going forward. These factors, combined with
volatile oil prices, low business and consumer confidence and high unemployment, have precipitated an economic recession.

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During economic downturns, the ability of private and government entities to make expenditures on nuclear services may decline significantly. Economic or
political conditions may be unfavorable to our industry and there may be significant fluctuations adversely affecting our industry as a whole. In addition, our operations depend, in part, upon
government funding, particularly funding levels at the NDA or DOE. Significant changes in the level of government funding (for example, the annual budget of the NDA or DOE) or specifically mandated
levels for individual programs that are important to our business could have an unfavorable impact on our business, financial position, results of operations and cash flows. For example, although the
Magnox contract funding for the 2009/10 contract year increased over the 2008/09 contract year, the NDA has stated that the Magnox North and Magnox South sites, for which we are currently a prime
contractor, may receive reduced funding allocations in the future so that the NDA may address other sites that contain more hazardous materials that pose a greater degree of risk. In addition, if
Congress does not pass annual appropriations bills in a timely fashion, it may delay spending on new government contracts. Any reduction in the level of government funding, particularly at the DOE,
may result in, among other things, a reduction in the cleanup and waste handling projects put out for bid by the government or the curtailment of existing government waste disposal programs, either of
which may result in a reduction in the number of contract award opportunities available to us, a reduction of waste shipment and disposal activities from DOE sites and an increase in our costs of
obtaining a contract award or providing services under the contract.

In
addition, current market conditions have exerted downward pressure on the price of our common stock, which could limit our ability to raise capital, if necessary, through borrowings
or the issuance of additional securities. A protracted economic downturn could exacerbate these adverse conditions. Although numerous governments have taken steps to mitigate the disruption to
financial markets, there
can be no assurances that government responses will restore consumer confidence for the foreseeable future.

The
current state of the financial markets could also exert pressure on our customers and could limit their ability to secure working capital. This may impact their liquidity and their
ability to make timely payments of their invoices to us. The inability of our customers to make timely payments of our invoices may negatively impact our cash flows.

As a government contractor and recipient of American Recovery and Reinvestment Act funds, we are subject to extensive government regulation, and our failure to comply with
applicable regulations could subject us to penalties that may restrict our ability to conduct our business.

Our government contracts, which are primarily with the NDA and the DOE, are a significant part of our business. Allowable costs under
U.S. government contracts are subject to audit by the U.S. government. Similarly, some U.K. contracts are subject to audit by U.K. regulatory authorities, including the NDA. If these audits result in
determinations that costs claimed as reimbursable are not allowed costs or were not allocated in accordance with applicable regulations, we could be required to reimburse government authorities for
amounts previously received.

Government
contracts are often subject to specific procurement regulations, contract provisions and a variety of other requirements relating to the formation, administration, performance
and accounting of these contracts. Many of these contracts include express or implied certifications of compliance with applicable regulations and contractual provisions. We may be subject to qui tam
litigation brought by private individuals on behalf of the government under the Federal Civil False Claims Act, which could include claims for up to treble damages. Additionally, we may be subject to
the Truth in Negotiations Act, which requires certification and disclosure of all factual costs and pricing data in connection with contract negotiations. Some of our projects receive funding under
the federal American Recovery and Reinvestment Act or similar federal and state programs designed to provide financial assistance to create jobs, improve energy efficiency, encourage the development
of renewable energy, and meet critical infrastructure needs. The receipt of these funds subjects us to additional

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regulatory
oversight and reporting requirements, which impose additional administrative burdens and costs on our business. Failure to comply with applicable regulations, requirements or statutes could
disqualify us from receiving recovery funding, result in the termination or suspension of our existing government contracts, impose fines or other penalties on us, or result in our suspension or
disbarment from government contracting. If one or more of our government contracts are terminated for any reason, or if we are suspended or debarred from government work, we could suffer a significant
reduction in expected revenues and profits. Furthermore, as a result of our government contracting or the receipt of recovery funding, claims for civil or criminal fraud may be brought by the
government for violations of these regulations, requirements or statutes.

Our commercial customers may decide to store radioactive materials on-site rather than contract with us to transport, process and dispose of the radioactive
materials at one of our off-site facilities.

Our LP&D segment's results of operations may be affected by the decisions of our commercial customers to store radioactive
materials on-site. There has been little regulatory, political or economic pressure for commercial utilities and power companies to dispose of radioactive materials at off-site
facilities. Some of these commercial entities have the ability to store radioactive materials generated by their operations on-site, instead of contracting with an outside service
provider, such as us, to transport, process and dispose of the radioactive materials at an off-site location, such as our Clive facility. The decision to store radioactive materials
on-site rather than contracting to dispose of them at an off-site facility may be influenced by the accounting treatment for radioactive materials. Currently, the liability for
the disposal of radioactive materials stored on-site may be capitalized on the owner's balance sheet and amortized over the expected on-site storage period. In contrast,
radioactive materials shipped off-site for disposal are expensed during the period in which the materials are shipped off-site. The NRC has rejected our proposal to undertake
an amendment of current NRC rules to permit operators of nuclear reactors to access decommissioning funds for transportation and disposal of retired large components of currently operating nuclear
power plants. We will continue to work with the NRC to request, on a case-by-case basis, that operators of these nuclear reactors be permitted to access decommissioning funds
for transportation and disposal of retired large components. The NRC's refusal to grant such requests could have an adverse impact on the prospects for our Commercial Services and LP&D
segments.

We may not be successful in entering into license stewardship arrangements with owners and operators of shut-down nuclear reactors.

We are marketing our license stewardship solution to the owners and operators of shut-down nuclear reactors in SAFSTOR or
monitored storage. Although we believe that our license stewardship initiative is an attractive alternative to deferring decommissioning and related risks to the reactor owner, including future cost
increases and the future availability of disposal capacity, the following factors may adversely affect our license stewardship initiative:



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As
discussed elsewhere in this report, we have entered into an agreement with Exelon to dismantle Exelon's nuclear facility located in Zion, Illinois, which ceased operation in 1998. The
NRC has issued an order approving the license transfer of the facility operating licenses and conforming license amendments from Exelon to ZionSolutionssubject to the performance of certain conditions, including the issuing of a letter of credit required under the agreement with Exelon in the amount of
$200 million. We have formally asked the NRC to extend the May 4, 2010 expiration of this order by six months. If the NRC does not grant an extension and the transaction does not close
by May 4, 2010 we may need to obtain a new order from the NRC or seek an amendment to the current order. However, because of the recent market downturn, the nuclear decommissioning trust fund
balance for the Zion Station, a significant portion of which was invested in the stock market, declined in value. As a result, we intend to defer the completion of this transaction until we reaffirm
that there is sufficient value in the decommissioning trust funds to ensure adequate funds for the accelerated decommissioning of the plant. On August 17, 2009, we amended our agreement with
Exelon to extend the required closing date to December 11, 2011. Under the terms of the amendment Exelon has the right to terminate the agreement if it is not closed by December 11, 2010
upon 60 days notice to us. On January 14, 2010 we amended our credit facility to provide us with adequate credit support capacity to facilitate the transaction, including permitting us
to obtain the required $ 200.0 million letter of credit. However, we have not yet obtained the required letter of credit and changes in credit markets or our financial strength could prevent us
from obtaining the letter of credit on terms favorable to us, or at all. As of December 31, 2009, we have incurred costs of $14.8 million that have been deferred until the closing of the
transaction. We will continue to defer these costs until we close the transaction, at which time we will recognize the costs and related revenues. If we determine that it is not probable that we will
close this transaction, we will expense these costs in the period of such determination.

Our
inability to successfully complete the transaction with Exelon may adversely affect our ability to enter into other license stewardship arrangements, which may have an adverse effect
on our future business, financial position, results of operations and cash flows.

Our license stewardship arrangements will expose us to significant financial risks.

Under our license stewardship initiative we will assume the decontamination and decommissioning obligations of owners of
shut-down nuclear reactors or other nuclear facilities. We anticipate the costs of this process will be paid from the plant's decommissioning trust fund. The decommissioning trust fund is
intended to be sufficient to fund the process of decommissioning. However, estimates of future costs are subject to significant risks, if one or more of the assumptions used to estimate those costs,
is inaccurate. In addition, if we fail to appropriately manage the investment of the trust funds, or such funds are adversely affected by market conditions or investment returns, we may not have
sufficient funds to complete the obligations we have assumed, exposing us to significant financial risk.

We are subject to liability under environmental laws and regulations.

We are subject to a variety of environmental, health and safety laws and regulations governing, among other things, discharges to air
and water, the handling, storage and disposal of hazardous or radioactive materials and wastes, the remediation of contamination associated with releases of

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hazardous
substances and human health and safety. These laws and regulations and the risk of attendant litigation can cause significant delays to a project and add significantly to its cost. Our
projects often involve highly regulated materials, including hazardous and radioactive materials and wastes. Environmental laws and regulations generally impose limitations and standards for regulated
materials and require us to obtain permits and licenses and comply with various other requirements. Fees associated with such environmental permits and licenses can be costly. In addition, the
improper characterization, handling, testing, transportation or disposal of regulated materials or any other failure to comply with these environmental, health and safety laws, regulations, permits or
licenses have resulted in fines or penalties from time to time and could subject us and our management to civil and criminal penalties, the imposition of investigatory or remedial obligations or the
issuance of injunctions that could restrict or prevent our operations. These laws and regulations may also become more stringent, or be more stringently enforced, in the future.

Various
national, state and local environmental laws and regulations, as well as common law, may impose liability for property damage and costs of investigation and clean-up
of hazardous or toxic substances on property currently or previously owned by us or arising out of our waste management, environmental remediation or nuclear D&D activities. These laws may impose
responsibility and liability without regard to knowledge of or causation of the presence of contaminants. The liability under these laws can be joint and several, meaning liability for the entire cost
of clean-up can be imposed upon any responsible party. We have potential liabilities associated with our past radioactive materials management activities and with our current and prior
ownership of various properties. The discovery of additional contaminants or the imposition of unforeseen clean-up obligations at these or other sites could have an adverse effect on our
results of operations and financial condition.

When
we perform our services, our personnel and equipment may be exposed to radioactive and hazardous materials and conditions. We may be subject to liability claims by employees,
customers and third parties as a result of such exposures. In addition, we may be subject to fines, penalties or other liabilities arising under environmental or safety laws. Although to date we have
been able to obtain liability insurance for the operation of our business other than circumstances where insurance is not available or we have determined it is not cost effective, there can be no
assurance that our existing liability insurance is adequate or that it will be able to be maintained or that all possible claims that may be asserted against us will be covered by insurance. A
partially or completely uninsured claim at Clive or any other facility, if successful and of sufficient magnitude, could have a material adverse effect on our results of operations and financial
condition.

Our operations involve the handling, transportation and disposal of radioactive and hazardous materials and could result in liability without regard to our fault or
negligence.

Our operations involve the handling, transportation and disposal of radioactive and hazardous materials. Failure to properly handle
these materials could pose a health risk to humans or animals and could cause personal injury and property damage (including environmental contamination). If an accident were to occur, its severity
could be significantly affected by the volume of the materials and the speed of corrective action taken by emergency response personnel, as well as other factors beyond our control, such as weather
and wind conditions. Actions taken in response to an accident could result in significant costs.

In
our contracts, we seek to protect ourselves from liability associated with accidents, but there is no assurance that such contractual limitations on liability will be effective in all
cases or that our, or our customers', insurance will cover all the liabilities we have assumed under those contracts. The costs of defending against a claim arising out of a nuclear incident or
precautionary evacuation, and any damages awarded as a result of such a claim, could adversely affect our results of operations and financial condition.

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We
maintain insurance coverage as part of our overall risk management strategy and due to requirements to maintain specific coverage in our financing agreements and in many of our
contracts. These policies do not protect us against all liabilities associated with accidents or for unrelated claims. In addition, comparable insurance may not continue to be available to us in the
future at acceptable prices, or at all.

We are engaged in highly competitive businesses and typically must bid against other competitors to obtain major contracts.

We are engaged in highly competitive businesses in which most of our government contracts and some of our commercial contracts are
awarded through competitive bidding processes. We compete with national and regional firms with nuclear services practices, as well as small or local contractors. Some of our competitors have greater
financial and other resources than we do, which can give them a competitive advantage. In addition, even if we are qualified to work on a new government contract, we might not be awarded the contract
because of existing government policies designed to protect small businesses and underrepresented minority contractors. Competition also
places downward pressure on our contract prices and profit margins. Intense competition is expected to continue for nuclear service contracts, challenging our ability to maintain strong growth rates
and acceptable profit margins and likely requiring the expenditure of additional marketing costs and related expenses to retain market share. If we are unable to meet these competitive challenges, we
could lose market share and experience an overall reduction in our profits. In the event that a competitor is able to obtain the necessary permits, licenses and approvals to operate a new commercial
LLRW disposal site, our business could be adversely affected, particularly as it relates to the revenue from the operation of our Clive facility.

For
example, Waste Control Specialists LLC, or WCS, filed a license application with the Texas Commission on Environmental Quality, or TECQ, in August 2004 for a LLRW disposal
facility and announced receipt of a Radioactive Material License on September 10, 2009. Construction may not begin until several reconstruction license conditions are completed and approved by
the executive director of the TECQ. Once approved construction is complete, additional conditions of the license must be met prior to commencement of disposal. These conditions will require WCS to
complete several major environmental studies, examples of which include groundwater, air emissions, and seismic stability studies. WCS must also demonstrate that the leachate from the landfill will
not reach the Ogallala-Antlers-Gatuna Aquifer. The conditional license states that prior to accepting federal facility waste, WCS must receive an agreement signed by the U.S. Secretary of Energy that
it will assume all rights, title and interest in land and buildings for the disposal of federal facility waste. Should the conditional license become active, WCS will be allowed to receive waste from
the Texas Compact, which includes the states of Texas and Vermont, and from federal facilities (i.e., DOE). WCS will not be able to receive waste via railcar or receive depleted uranium, and
will be required to dispose of commercial waste in specially designed containers in the compact portion of the facility. We cannot predict whether WCS will successfully resolve the contingencies
related to the draft LLRW license, or whether the State of Texas will issue a final license to WCS. In addition, WCS recently received a separate license to permanently dispose of 11e(2) materials at
its facility.

Our business and operating results could be adversely affected by losses under fixed-price contracts.

Fixed-price contracts require us to perform all work under the contract for a specified lump-sum. Fixed-price contracts
expose us to a number of risks not inherent in cost-reimbursable contracts, including underestimation of costs, ambiguities in specifications, unforeseen costs or difficulties, problems
with new technologies, delays beyond our control, failures of subcontractors to perform and regulatory, economic or other changes that may occur during the contract period. If we have underestimated
the costs of our fixed-price contracts, we may experience losses on such contracts.

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If we guarantee the timely completion or performance standards of a project, we could incur additional costs to cover our guarantee obligations.

In some instances, we guarantee a customer that we will complete a project by a scheduled date. For example, in connection with our
license stewardship initiative, we guarantee that we will complete the decommissioning of a nuclear power plant that is currently shut down within both a particular time frame and budget. We also
sometimes guarantee that a project, when completed, will achieve certain performance standards. If we fail to complete the project as scheduled or if the project fails to meet guaranteed performance
standards, we may be held responsible for the impact to the customer resulting from any delay or for the cost of further work to achieve the performance standards, generally in the form of
contractually agreed-upon penalty provisions. As a result, the project costs could exceed our original estimate, leading to reduced profits or a loss for that project.

Our use of proportional performance accounting could result in a reduction or elimination of previously reported profits.

A significant portion of our revenues are recognized using the proportional performance method of accounting. Generally, the
proportional performance accounting practices we use result in recognizing contract revenues and earnings based on output measures, where estimable, or on other measures such as the proportion of
costs incurred to total estimated contract costs. For some of our long-term contracts, completion is measured on estimated physical completion or units of production. The cumulative effect
of revisions to contract revenues and estimated completion costs, including incentive awards, penalties, change orders, claims and anticipated losses, is recorded in the accounting period in which the
amounts are known or can be reasonably estimated. Due to uncertainties inherent in the estimation process, it is possible that actual completion costs may vary from estimates. A significant downward
revision to our estimates could result in a material charge to our results of operations in the period of such a revision.

Acquisitions that we pursue may present unforeseen integration obstacles and costs, increase our debt and negatively impact our performance.

Our growth strategy includes selective acquisitions of other nuclear services businesses, both domestic and international, that we
expect will enhance our existing portfolio of services and strengthen our relationships with our government and commercial customers. In 2007, we completed the acquisitions of Reactor Sites Management
Company Limited, Parallax, Inc., NUKEM Corporation and Monserco Limited. From time to time, we may consider additional acquisitions, which, if consummated, could be material. We cannot give any
assurance as to whether any such transaction could be completed or as to the price, terms or timetable on which we may do so. If we are able to consummate any such acquisition, it could result in
dilution of our earnings, an increase in indebtedness or other consequences that could be adverse.

The
expense incurred in consummating acquisitions, or our failure to integrate such businesses successfully into our existing businesses, could result in our incurring unanticipated
expenses and losses. Furthermore, we may not be able to realize anticipated benefits from acquisitions. The process of integrating acquired operations into our existing operations may result in
unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations. Some of the risks
associated with our acquisition strategy include:



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We
may not be able to identify suitable acquisition targets or negotiate attractive terms in the future. In addition, our ability to complete acquisitions is limited by covenants in our
credit facilities and our financial resources, including available cash and borrowing capacity. Given the serious decline in our stock price and tight debt markets, we may be unable to make
acquisitions. If we are unable to make
successful acquisitions, our ability to grow our business could be adversely affected. We made no significant acquisitions during 2009.

Our success depends on attracting and retaining qualified personnel in a competitive environment.

Our operations require the services of highly qualified executive, managerial, and business development personnel, skilled technology
specialists and experts in a wide range of scientific, engineering and health and safety fields. Partly because no new nuclear reactors have commenced construction since the mid-1970s,
there have been a limited number of qualified students graduating from universities with specialized nuclear engineering or nuclear science-based degrees. As a result, the nuclear services industry is
experiencing a shortage of qualified personnel. Also, two of our corporate officers have recently left the Company. They each had significant experience, expertise and personal relationships in our
industry and an in-depth knowledge of our Company and its operations. We face increasing competition and expense to attract and retain such personnel. Loss of key personnel or failure to
attract personnel to expand our operations could have an adverse effect on our ability to operate our business and execute our business strategy.

Our failure to maintain our safety record could have an adverse effect on our business.

Our safety record is critical to our reputation. In addition, many of our government and commercial customers require that we maintain
certain specified safety record guidelines to be eligible to bid for contracts with these customers. Furthermore, contract terms may provide for automatic termination in the event that our safety
record fails to adhere to agreed-upon guidelines during performance of the contract. As a result, our failure to maintain our safety record could have a material adverse effect on our
business, financial condition and results of operations.

An impairment charge could have a material adverse effect on our financial condition and results of operations.

We are required to test acquired goodwill for impairment on an annual basis based upon a fair value approach, rather than amortizing it
over time. Goodwill represents the excess of the amount we paid to acquire our subsidiaries and other businesses over the fair value of their net assets at the date of the acquisition. We have chosen
to perform our annual impairment reviews of goodwill as of the end of the first quarter of each fiscal year. We also are required to test goodwill for impairment between annual tests if events occur
or circumstances change that would more likely than not reduce our enterprise fair value below its book value. In addition, we are required to test our finite-lived intangible assets for impairment if
events occur or circumstances change that would indicate the remaining net book value of the finite-lived intangible assets might not be recoverable. These events or circumstances could include a
significant change in the business climate, including a significant sustained decline in an entity's market value, legal factors, operating performance indicators, competition, sale or disposition of
a significant portion of our business, potential government actions towards our facilities and other factors. If the fair market value of our reporting units is less than their book value, we could be
required to record an impairment charge. The valuation of reporting units requires judgment in

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estimating
future cash flows, discount rates and other factors. In making these judgments, we evaluate the financial health of our business, including such factors as industry performance, changes in
technology and operating cash flows. The amount of any impairment could be significant and could have a material adverse effect on our reported financial results for the period in which the charge is
taken.

In
June 2006, we acquired Duratek for an aggregate purchase price of $440.8 million. Goodwill recognized for this acquisition was $310.5 million. We paid a premium in
excess of the fair value of $216.9 million. We were willing to pay this premium as a result of our identification of significant synergies that we expect to realize through the acquisition.
However, if we determine that we are not able to realize these expected synergies and determine that the fair value of the assets acquired is less than the book value of those assets, then we would
have to recognize an impairment to goodwill as a current-period expense. Because of the significant amount of goodwill recognized in the Duratek acquisition, an impairment of that goodwill could
result in a material expense and could result in a decrease in the market price of our common stock.

Changes
in our forecasts or decreases in the value of our common stock could cause book values of certain operating segments to exceed their fair values, which may result in goodwill
impairment charges in future periods. We had $518.8 million of goodwill and $310.2 million of finite-lived intangible assets, which collectively represented 54.9% of our total assets of
$1.5 billion as of December 31, 2009.

We have substantial debt, which could harm our financial condition, business and growth prospects.

As of December 31, 2009 the outstanding balance under our credit facilities was $524.1 million. Our substantial debt
could have important consequences to us, including the following:



We
currently have balances of $5.0 million in outstanding borrowings and $10.8 million letters of credit both issued against our $75.0 million revolving credit
facility, which matures on June 7, 2011; a $519.1 million balance on our first-lien term loan facilities, which mature on June 7, 2013 with minimum payments of
$19.1 million in 2010 and $5.6 million in 2011 and 2012; and a $100.0 million synthetic letter of credit facility of which $100.0 million is outstanding, which expires on
June 7, 2013.

Borrowings
under our credit facilities bear interest at variable rates. As of December 31, 2009, the interest rate of our term-loan facilities was 4.01%. At this rate
and assuming an outstanding balance of $519.1 million as of December 31, 2009, our annual debt service obligations would be $23.6 million, consisting of $20.8 million of
interest and $2.8 million of scheduled principal payments. Based on the amount of debt outstanding and the interest rate at December 31, 2009, a hypothetical 1% increase in interest
rates would increase our annual interest expense by approximately $5.2 million. If interest rates were to increase significantly, our ability to borrow additional funds may be reduced, our
interest expense would significantly increase and the risks related to our substantial debt would intensify.

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The agreements governing our debt restrict our ability to engage in certain business transactions.

The agreements governing the credit facilities restrict our ability to, among other things, engage in the following actions, subject to
limited exceptions:



The agreements governing our credit facilities contain financial covenants which we may not meet with our future financial results.

Our credit facilities contain financial covenants requiring us to maintain specified maximum leverage and minimum cash interest
coverage ratios. The results of our future operations may not allow us to meet these covenants, or may require that we take action to reduce our debt or to act in a manner contrary to our business
objectives.

Our
failure to comply with obligations under our credit facilities, including satisfaction of the financial ratios, would result in an event of default under the facilities. A default,
if not cured or waived, would prohibit us from obtaining further loans under our credit facilities and permit the lenders thereunder to accelerate payment of their loans and withdraw the letters of
credit which support our bonding obligations. If we are not current in our bonding obligations, we may be in breach of our contracts with our customers, which generally require bonding. In addition,
we would be unable to bid or be awarded new contracts that required bonding. If our debt is accelerated, we currently would not have funds available to pay the accelerated debt and may not have the
ability to refinance the accelerated debt on terms favorable to us or at all particularly in light of the tightening of lending standards as a result of the ongoing financial crisis. If we could not
repay or refinance the accelerated debt, we would be insolvent and could seek to file for bankruptcy protection. Any such default, acceleration or insolvency would likely have a material adverse
effect on the market value of our common stock.

We rely on intellectual property law and confidentiality agreements to protect our intellectual property. Our failure to protect our intellectual property rights could
adversely affect our future performance and growth.

Protection of our proprietary processes, methods and other technology is important to our business. Failure to protect our existing
intellectual property rights may result in the loss of valuable technologies. We rely on patent, trade secret, trademark and copyright law as well as judicial enforcement to protect such technologies.
A majority of our patents relate to the development of new products and processes for the processing and disposal of radioactive materials. Our intellectual property could be challenged, invalidated,
circumvented or rendered unenforceable.

We
also rely upon unpatented proprietary nuclear expertise, continuing technological innovation and other trade secrets to develop and maintain our competitive position. We generally
enter into confidentiality agreements with our employees and third parties to protect our intellectual property, but

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these
agreements are limited in duration and could be breached, and therefore they may not provide meaningful protection for our trade secrets or proprietary nuclear expertise. Adequate remedies may
not be available in the event of an unauthorized use or disclosure of our trade secrets and nuclear expertise. Others may obtain knowledge of our trade secrets through independent development or other
access by legal means. The failure of our intellectual property or confidentiality agreements to protect our processes, technology, trade secrets and proprietary nuclear expertise and methods could
have an adverse effect on our business by jeopardizing our rights to use critical intellectual property.

In
addition, effective intellectual property protection may be limited or unavailable in some foreign countries where we may pursue operations.

If our partners fail to perform their contractual obligations on a project or if we fail to coordinate effectively with our partners, we could be exposed to legal liability,
loss of reputation and reduced profit on the project.

We often perform projects jointly with contractual partners. For example, we enter into contracting consortia and other contractual
arrangements to bid and perform jointly on large projects. Success on these joint projects depends in part on whether our partners fulfill their contractual obligations satisfactorily. If any of our
partners fails to perform its contractual obligations satisfactorily, we may be required to make additional investments and provide additional services in
order to compensate for that partner's failure. If we are unable to adequately address our partner's performance issues, then our customer may exercise its right to terminate a joint project, exposing
us to legal liability, loss of reputation and reduced profit.

Our
collaborative arrangements also involve risks that participating parties may disagree on business decisions and strategies. These disagreements could result in delays, additional
costs and risks of litigation. Our inability to successfully maintain existing collaborative relationships or enter into new collaborative arrangements could have a material adverse effect on our
results of operations.

We conduct a portion of our operations through joint venture entities, over which we may have limited control.

We currently have equity interests in joint ventures and may enter into additional joint ventures in the future. As with most joint
venture arrangements, differences in views among the joint venture participants may result in delayed decisions or disputes. We also cannot control the actions of our joint venture partners, and we
typically have joint and several liabilities with our joint venture partners under the applicable contracts for joint venture projects. These factors could potentially harm the business and operations
of a joint venture and, in turn, our business and operations.

Operating
through joint ventures in which we are minority holders results in us having limited control over many decisions made with respect to projects and internal controls relating to
projects. These joint ventures may not be subject to the same requirements regarding internal controls and internal control over financial reporting that we follow. As a result, internal control
problems may arise with respect to the joint ventures that could adversely affect our ability to respond to requests or contractual obligations to customers or to meet the internal control
requirements to which we are otherwise subject.

Our dependence on subcontractors and equipment manufacturers could adversely affect us.

We rely on subcontractors and equipment manufacturers to complete our projects. For example, when providing D&D services to a
government customer, we may rely on one or more subcontractors to conduct demolition work. To the extent that we cannot engage subcontractors or acquire equipment or materials to provide such
services, our ability to complete the project in a timely fashion or at a given profit margin may be impaired. Our LP&D segment also enters into contracts with various railroads for the
transportation of radioactive materials from project sites to our processing and

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disposal
facilities. In the event that the railroads fail to deliver radioactive materials to our facilities on time, we could be forced to delay recognizing LP&D revenues until the time of
delivery.

In
addition, if a subcontractor or a manufacturer is unable to deliver its services, equipment or materials according to the negotiated terms for any reason, including the deterioration
of its financial condition, we may be required to purchase those services, equipment or materials from another source at a higher price. This may reduce our profitability or result in a loss on the
project for which the services, equipment or materials were needed.

Letters of credit and adequate bonding are necessary for us to win certain types of new work.

We are required to post, from time to time, standby letters of credit and surety bonds to support contractual obligations to customers
as well as other obligations. These letters of credit and bonds indemnify the customer if we fail to perform our obligations under the contract. For example, in connection with our agreement with
Exelon Corporation regarding the decommissioning of its Zion nuclear facility located in Zion, Illinois, we are required to deliver a $200 million letter of credit to Exelon relating to our
present and future obligations. If a letter of credit or bond is required for a particular project and we are unable to obtain it due to insufficient liquidity or other reasons, we will not be able to
pursue that project. We have a bonding facility but, as is typically the case, the issuance of bonds under that facility is at the surety's sole discretion. In addition, we have limited capacity under
our credit facilities for letters of credit. Moreover, due to events that affect the insurance and bonding and credit markets generally, bonding and letters of credit may be more difficult to obtain
in the future or may only be available at significant additional cost. There can be no assurance that letters of credit or bonds will continue to be available to us on reasonable terms. Our inability
to obtain adequate letters of credit and bonding and, as a result, to bid on new work could have a material adverse effect on our business, financial condition and results of operations. As of
December 31, 2009 we had $100.0 million in letters of credit which are issued under our synthetic
letter of credit facility, $10.8 million in letters of credit which are issued under the revolving portion of our credit facility and $0.7 million in surety bonds outstanding.

If we are unable to clearly define a long-term business strategy and ensure that it is executed in each respective business unit our operations will be
inefficient and potentially conflicting, which may materially affect our financial results and operations.

As part of our growth strategy, we have completed several acquisitions over the last several years with companies complementary to our
business. Despite the strategic benefits of such acquisitions we may continue to expend time and resources addressing integration challenges inherent in getting newly acquired business to adhere to
general corporate policies, including without limitation policies or standards related to safety. Our ability to clearly define a long-term business strategy and ensure that it is executed
in each of our business segments is fundamental to our ability to realize long-term, balanced growth in each of our business segments. In the event we cannot clearly define such strategy
or fail to ensure that it is implemented in any particular business segment, the long-term objectives of our respective business segments may suffer resulting in the potential for
inefficiencies in our operations and costs of doing business. In addition, management within each business segment may define their own strategies that do not align with the long-term
objectives of the Company. Any of the foregoing may result in excessive costs and business development inefficiency, and may materially harm our financial position and operations.

We must successfully upgrade and maintain our information technology systems.

We rely on various information technology systems to manage our operations. We are currently implementing modifications and upgrades to
our systems, including making changes to legacy systems, replacing legacy systems with successor systems with new functionality and acquiring new systems.

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These
types of activities subject us to inherent costs and risks associated with replacing and changing these systems, potential disruption of our internal control structure, substantial capital
expenditures, additional administration and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time, and other risks and
costs of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems. Our system implementations may not result in productivity improvements at a
level that outweighs the costs of implementation, or at all. In addition, the implementation of new technology systems may cause disruptions in our business operations and have an adverse effect on
our business, cash flows and operations, if not anticipated and appropriately mitigated.

Our
new enterprise resource planning system implementation came on line in January 2010. In addition to the risks addressed in the preceding paragraph, specific risks associated with
this system include: 1) delays in generating certain customer invoices and the required supporting details which could negatively affect cash flows, 2) delays in processing supplier
invoices and/or payments which could potentially disrupt operations and/or result in financial penalties, 3) system performance issues due to inadequate technology infrastructure,
4) excessive delays in closing monthly financial periods which could result in delays in filings of quarterly SEC reports, 5) the ability of our users to use the system as designed and
configured to support key business processes and requirements, and 6) not being fully compliant with state, federal, Sarbanes-Oxley, and labor union requirements.

Because we publish earnings guidance for our company, our common stock may be subject to increased volatility and we may be subject to lawsuits by investors.

Because we publish earnings guidance, we are subject to a number of risks. Based on the timing of winning key contracts, regulatory
decision making and other uncertainties relating to assumptions that management makes in calculating our expected financial results, actual results may vary from the guidance we provide investors. Our
stock price may decline following an announcement of disappointing earnings or earnings guidance or if we revise our earnings guidance downward as the estimates and assumptions we make in calculating
guidance become more certain. On October 14, 2008, we announced a reduction in our earnings guidance due, among other things, to the current economic downturn. Following that announcement, our
stock price declined by 44% on October 14, 2008.

Our
earnings guidance reflects our assumptions regarding future performance, including, among other things, the likelihood of securing and performing work under new contracts. If we fail
to secure and perform work under contracts in accordance with our assumptions, we may be unable to achieve our earnings guidance. Some companies that have made downward revisions to their earnings
guidance or did not meet the guidance provided have been subject to lawsuits by investors. Such lawsuits may have merit and result in adverse settlements or judgments. Even if such lawsuits are
dismissed or have no merit, they may be costly and may divert management attention and other resources away from our business, which could harm our business and the price of our common stock.

If securities or industry analysts stop publishing research or reports about our business, if they change their recommendations regarding our stock adversely or if our
operating results do not meet their expectations, our stock price could decline.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us
or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrade our stock or if our operating results do not meet their expectations, our stock
price could decline.

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As a public company, we are subject to additional financial and other reporting and corporate governance requirements that may be difficult for us to satisfy.

In connection with our initial public offering in November 2007, we became obligated to file with the SEC annual and quarterly
information and other reports that are specified in Section 13 of the Securities Exchange Act of 1934, as amended. We are also required to ensure that we have the ability to prepare financial
statements that are fully compliant with all SEC reporting requirements on a timely basis. We are also subject to other reporting and corporate governance requirements, including the requirements of
the NYSE and certain provisions of the Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder, which impose significant compliance obligations upon us. As a public company, we are
required to, among other things:



These
requirements require a significant commitment of resources. We may not be successful in implementing and monitoring specific requirements and the failure to do so could adversely
affect our business or operating results. In addition, if we fail to satisfy the requirements with respect to our internal accounting and audit functions, our ability to report our operating results
on a timely and accurate basis could be impaired.

If we or our independent registered public accounting firm identify a material weakness in our internal controls and such material weakness is not properly remediated, it
could result in material misstatements of our financial statements in future periods.

We or our independent registered public accounting firm may, in the future, identify a material weakness in our internal control over
financial reporting. A material weakness is defined by the standards issued by the Public Company Accounting Oversight Board as a significant deficiency, or combination of significant deficiencies,
that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

If
material weaknesses in our internal control over financial reporting are identified in the future, we may be unable to provide required financial information in a timely and reliable
manner, or otherwise comply with the standards applicable to us as a public company, and our management may not be able to report that our internal control over financial reporting is effective in
accordance with Section 404 of the Sarbanes-Oxley Act. There could also be a negative reaction in the markets due to a loss of
investor confidence in us and the reliability of our financial statements and, as a result, our business may be harmed and the price of our common stock may decline.

Item 1B.    Unresolved Staff Comments.

None.

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Item 2.    Properties.

At December 31, 2009, we owned 8 properties, leased 29 properties and operated 1 property pursuant to a long-term
lease with the State of South Carolina. The following table provides summary information of our owned and leased real property, inclusive of renewal options:

Property

Segment

Use

Space

Lease
ExpirationOwnedBarnwell, South Carolina

LP&D

Materials processing and packing


1,627 acres


N/ABarnwell, South Carolina

LP&D

Materials processing and packing


71 acres


N/AClive, Utah

LP&D

Treatment and disposal facility


1,557 acres


N/AColumbia, South Carolina

Commercial Services

Maintenance facility


16 acres


N/AKingston, TennesseeGallaher Road

LP&D

Waste processing operations


79 acres


N/AMemphis, Tennessee

LP&D

Waste processing operations


13 acres


N/AOak Ridge, TennesseeManufacturing Sciences Corporation

LP&D

Metals manufacturing and fabrication


11 acres


N/AOak Ridge, TennesseeBear Creek

LP&D

Waste processing operations


45 acres


N/ALeasedAiken, South Carolina

Federal Services

General office space


3,090 sq ft.


06/30/11Albuquerque, New Mexico

Federal Services

General office space


6,000 sq ft.


10/31/14Brampton, Ontario

LP&D

General office space


14,202 sq ft.


02/28/10Brossard, Québec

LP&D

General office space


1,500 sq ft.


MonthlyCampbell, California

Federal Services and Commercial Services

General office space


5,570 sq ft.


11/15/12Columbia, South Carolina

Commercial Services

General office space


17,789 sq ft.


08/31/13Cumbria, United Kingdom

International

General office space


438 sq ft.


09/30/11Didcot Oxfordshire, United Kingdom

International

General office space


3,735 sq ft.


03/28/10Dublin, CA

Federal Services

General office space


1,090 sq ft.


03/15/11Englewood, Colorado

Federal Services

Proposal center


10,683 sq ft.


09/30/12High Point, North Carolina

LP&D

General office space


288 sq ft.


MonthlyGermantown, Maryland

Federal Services

General office space


2,375 sq ft.


12/31/13Grand Junction, CO

Federal Services

General office space


550 sq ft.


02/28/11Idaho Falls, Idaho

Federal Services

General office space


7,035 sq ft.


04/30/10Laurel, Maryland

Federal Services and Commercial Services

General office space


18,318 sq ft.


8/31/20Los Alamos, New Mexico

Federal Services

General office space


6,471 sq ft.


03/01/13Los Alamos, New Mexico

Federal Services

General office space


1,500 sq ft.


01/25/10Los Alamos, New Mexico

Federal Services

General office space


1,000 sq ft.


03/31/10Moraga, California

Corporate

General office space


300 sq ft.


MonthlyDanbury, Connecticut

Commercial Services

General office space


6,549 sq ft.


11/30/17Oak Ridge, Tennessee

Commercial Services

General office space


10,571 sq ft.


06/30/10Oak Ridge, TennesseeCommerce Park

Federal Services and Commercial Services

General office space


23,891 sq ft.


03/31/14Piketon, OH

Federal Services

General office space


1,482 sq ft.


12/31/11Richland, WashingtonStevens Drive

Commercial Services

General office space


32,300 sq ft.


09/30/13Richland, Washington

Federal Services

General office space


6,200 sq. ft.


03/30/10Salt Lake City, Utah

All

Corporate offices


36,578 sq ft.


12/31/12Swindon, U.K.

International

General office space


7,600 sq ft.


10/13/13Toronto, Ontario

LP&D

General office space


400 sq ft.


10/31/10Washington, D.C.

Federal Services and Commercial Services

General office space


5,035 sq ft.


09/30/17Operating RightsBarnwell, South Carolina

LP&D

Treatment and disposal facility


235 acres


04/05/75


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Item 3.   Legal Proceedings.

As previously reported, we have engaged in discussions with Sogin, SpA, the Italian state-owned utility company, to provide D&D and
radioactive materials management services in support of the clean-up of Sogin's nuclear facilities. Our pending license application with the Nuclear Regulatory Commission ("NRC") to import
material from Italy, to process
it at our facility in Tennessee and to dispose of the residual material at our Clive facility in Utah has generated local and national expressions of opposition. We believe our license application is
consistent with all applicable laws and regulations and with past practices. Moreover, the Italian materialmetals, paper and clothingis the same type of material that we
handle routinely from the domestic nuclear industry.

The
NRC has issued numerous licenses over the past ten years allowing the importation of low-level radioactive waste ("LLRW") to be processed and ultimately disposed at our
Clive facility. Under these licenses, our Clive Facility has received Class A LLRW originating in Germany, Canada, France, Taiwan, and the United Kingdom.

The
States of Tennessee and Utah have confirmed to the NRC that the proposed Italian project is consistent with the licenses and permits issued by those states. However, the former
Governor of the State of Utah announced on April 23, 2008 that he would send his representative to the May 8, 2008 meeting of the Northwest Interstate Compact on Low-Level
Radioactive Waste Management (the "Northwest Compact") to vote against any proposal that would allow us to receive international waste at our Clive facility.

On
May 5, 2008, we filed a declaratory judgment action in the U.S. District Court of Utah (the "Declaratory Judgment Action") asking the court to declare that (i) the
Northwest Compact does not have regulatory authority over our Clive facility, which is a private commercial facility rather than a regional facility created by the Compact, (ii) the U.S.
Constitution does not allow the Northwest Compact to discriminate between identical domestic and foreign materials handled at our Clive facility, and (iii) any effort by the Northwest Compact
to restrict our receipt of foreign LLRW is pre-empted by federal statutes and regulations. The State of Utah and the Rocky Mountain Interstate Compact on Low-level Radioactive
Waste have intervened as defendants in the Declaratory Judgment Action.

At
the Northwest Compact meeting on May 8, 2008, the representatives of the eight member States of the Northwest Compact, despite our commitment to restrict our receipt of
international waste to 5% of the remaining capacity at our Clive facility, unanimously adopted a clarifying resolution proposed by the Utah committee member, clarifying that the Northwest Compact has
never adopted a resolution permitting us to receive international waste at our Clive facility.

On
October 6, 2008, the NRC approved an order holding in abeyance its decision with respect to our pending import license application until the Company's declaratory judgment
action has been resolved by the Courts.

On
May 15, 2009, the U.S. District Court for the District of Utah issued a Memorandum Decision And Order Granting In Part And Denying In Part Motions For Partial Summary Judgment
(the "District Court Order") finding that the Northwest Compact has no authority to restrict the flow of out of region waste to our facility in Clive, Utah. The court later concluded that those
holdings obviated the
need for further proceedings, and entered final judgment in favor of EnergySolutionson June 17, 2009. The defendants in the Declaratory Judgment
Action have appealed the judgment to the United States Circuit Court of Appeals for the 10th Circuit. After issuance of the District Court Order the NRC has solicited the views of potential
parties but has not yet lifted its order holding the review of our pending import license application in abeyance.

We
intend to vigorously prosecute our declaratory judgment action, but we do not believe we will be able to process and dispose of any radioactive materials contemplated by the Italian
initiative until the appellate process is concluded.

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On
October 9, 2009 a purported class-action lawsuit captioned City of Roseville Employees' Retirement System vs. EnergySolutions,
et al., was filed in the United States District Court for the Southern District of New York, Civil Number 09 CV 8633. On October 12, 2009 a second complaint was filed in the same court
captioned Building Trades United Pension Trust Fund vs. EnergySolutionsInc., et al., Civil Number 09 CV 8648. The complaints are very
similar and name as defendants the Company, current and prior directors, certain officers of the Company, the lead underwriters in the Company's initial public offering ("IPO") in November 2007 and
the secondary offering in July 2008 (the "July 2008 Offering") and ENV Holdings, LLC, the former parent of the Company. The plaintiffs allege that the registration statements and prospectus for
the IPO and the July 2008 Offering contained inaccurate statements of material facts and omitted material information required to be disclosed therein regarding the potential size of the nuclear
services market, the Company's ability to take advantage of opportunities in that market in the near term, the status and prospects of the Company's rule making petition to the NRC to permit the use
of decommissioning funds for disposal of major components prior to the cessation of activities at nuclear facilities, the status and prospects of the Company's license stewardship initiative, and
other matters. The complaints seek to include all purchasers of the Company's stock from November 14, 2007 through October 14, 2008 as a plaintiff class and seek damages, costs and
interest, rescission of the IPO and July 2008 Offering, and such other relief as the court may find just and proper.

We
believe the facts and legal claims alleged in the complaints are without merit and intend to vigorously defend the litigation.

Item 4.    Reserved

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Price Range of Common Stock

Our common stock began trading on the NYSE under the symbol "ES" on November 15, 2007. The price range per share of common stock
presented below represents the highest and lowest sales prices for our common stock on the NYSE for each full quarterly period within the two most recent fiscal years:

Highest

Lowest2008First Quarter

$
27.85

$
16.90Second Quarter


27.42


20.68Third Quarter


23.64


8.50Fourth Quarter


10.93


3.352009First Quarter

$
8.93

$
4.25Second Quarter

$
10.80

$
7.25Third Quarter

$
9.63

$
7.20Fourth Quarter

$
9.70

$
8.08


Holders

As of February 26, 2010, there were 42 stockholders of record. We believe we have approximately 11,300 beneficial stockholders.

Dividends

During the years ended December 31, 2009 and 2008, we paid four quarterly dividends of $0.025 per share. We intend to continue
to pay such quarterly cash dividends during 2010. However, the declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will
depend on many factors, including our results of operations, financial condition, liquidity requirements, restrictions that may be imposed by applicable law and our contracts and other factors deemed
relevant by our board of directors.

Securities Authorized for Issuance under Equity Compensation Plans

See Part III, Item 12 of this report for disclosure relating to our equity compensation plans. Such information will be
included in our Proxy Statement, which is incorporated herein by reference.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 6.    Selected Financial Data.

The following table presents selected financial data for our business as of the dates and for the periods indicated. The financial data
for the one month ended January 31, 2005 were derived from the audited consolidated financial statements and the related notes of our predecessor company, Envirocare of Utah, Inc., or
Envirocare. The financial data as of December 31, 2009, 2008, 2007, 2006 and 2005 and for the years ended December 31, 2009, 2008, 2007 and 2006 and for the eleven months ended

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December 31,
2005 were derived from the audited consolidated financial statements of EnergySolutions, LLC or
EnergySolutions, Inc., subsequent to our conversion to a "C" corporation in connection with our initial public offering. The financial data as of
December 31, 2007, 2006 and 2005 and for the year ended December 31, 2006, for the eleven months ended December 31, 2005, and for the one month ended January 31, 2005 have
been derived from audited consolidated financial statements that are not included within this annual report on Form 10-K. The financial data as of December 31, 2009 and 2008
and for the years ended December 31, 2009, 2008 and 2007 have been derived from audited consolidated financial statements that are included within this annual report on
Form 10-K. This selected financial data should be read in conjunction with the consolidated financial statements and related notes included in Item 15 of this
Form 10-K.

EnergySolutions

PredecessorYear Ended
December 31,
2009

Year Ended
December 31,
2008

Year Ended
December 31,
2007(1)

Year Ended
December 31,
2006(2)

Eleven Months
Ended
December 31,
2005(3)

One Month
Ended
January 31,
2005(in thousands of dollars, except for per share data)Statement of Operations Data:Revenues

$
1,623,893

$
1,791,631

$
1,092,613

$
427,103

$
348,192

$
21,914Gross profit


214,297


247,193


196,527


191,236


213,842


14,532Income from operations(4)


97,915


120,930


75,952


89,974


166,432


13,565Net income (loss) attributable to EnergySolutions


50,832


45,181


(8,899
)

26,849


117,985


13,578Net income (loss) per share data(5):Basic

$
0.58

$
0.51

$
(0.79
)Diluted


0.57


0.51


(0.79
)Number of shares used in per share calculations (in thousands):Basic


88,318


88,304


11,274Diluted


88,436


88,311


11,274Cash dividends declared per common share

$
0.10

$
0.10

$
Pro forma net income (loss) per share data (unaudited)(6):Basic







$
0.02

$
0.20Diluted








0.02


0.20Number of shares used in per share calculations (in thousands):Basic








76,748


75,150Diluted








77,156


75,150Other Data:Amortization of intangible assets(7)

$
25,271

$
28,250

$
24,147

$
16,589

$
10,917

$
Capital expenditures(8)


24,389


26,629


13,312


23,910


33,198


393Balance Sheet Data:Working capital(9)

$
120,238

$
92,550

$
69,739

$
32,136

$
25,793Cash and cash equivalents


15,913


48,448


36,366


4,641


34,798Total assets


1,511,175


1,550,712


1,624,950


1,157,205


580,009Total debt


524,111


566,757


606,967


764,167


547,707


(1)Includes
the results of operations of Parallax, RSMC, NUKEM and Monserco from the dates of their acquisitions in January 2007, June 2007, July 2007 and
December 2007, respectively.


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(2)Includes
the results of operations of BNGA, Duratek and ESEU from the dates of their acquisitions in February 2006, June 2006 and December 2006,
respectively.(3)Includes
the results of a major contract that contributed $105.4 million in revenues to our LP&D segment during 2005, but generated no
significant revenues in subsequent years.(4)Prior
to 2009, we included equity in income of unconsolidated joint ventures in other income (expense), net. During 2009, we reclassified these amounts from
other income (expense), net, to operating income in the accompanying consolidated statements of operations. Accordingly, income from operations increased by $7.6 million, $3.2 million
and $1.4 million, respectively, for the year ended December 31, 2009, 2008 and 2007 as a result of this reclassification. The reclassifications had no impact on income from operations
for the year ended December 31, 2006, the eleven months ended January 31, 2005 and the one month ended January 31, 2005. There was no impact on net income for any of these periods
as a result of this reclassification.(5)Historical
net income (loss) per share is not presented for the year ended December 31, 2006, the eleven months ended December 31, 2005 and
the one month ended January 31, 2005 since we were structured as a limited liability company, had only one member and there were no ownership interests that were convertible into common stock
or a common stock equivalent.(6)Prior
to our initial public offering we conducted our operations as a limited liability company, and our equity structure consisted of member interests. For
the purposes of this summary, we have presented the share and net income (loss) per share information for EnergySolutionsto reflect retroactively the
impact of our reorganization from a limited liability company to a "C" corporation in connection with the completion of our initial public offering on November 20, 2007. Additionally, we have
reflected pro forma income tax expense of $1.0 million and $9.3 million for the years ended December 31, 2007 and 2006, respectively, to reflect our estimated income tax expense
had we been a fully taxable entity in those periods.(7)Represents
the non-cash amortization of intangible assets such as permits, technology, customer relationships and non-compete
agreements acquired through the acquisition of our predecessor in 2005 and our acquisitions of BNGA and Duratek in 2006 and RSMC in 2007. Portions of this non-cash amortization expense are
included in both cost of revenues and selling, general and administrative expenses. Our amortization costs related to intangible assets increased from 2005 to 2006 as a result of our acquisitions of
BNGA and Duratek and increased again in 2007 and 2008 as a result of our acquisition of RSMC. Intangible assets and goodwill related to the acquisition of RSMC are denominated in foreign currency.(8)We
completed several significant capital improvements in 2005, 2006, 2008 and 2009, including the installation of a new metal shredder, rail handling loop
and rotary dump at our Clive facility in 2005 and 2006, the purchase of equipment required for the Atlas mill tailings contract in 2008 and 2009, and purchase of software and capitalization of
implementation costs for a new enterprise resource planning system (Oracle EBS R12) in 2009. See "Management's Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital ResourcesCapital Expenditures."(9)Consists
of current assets, less current liabilities.


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Selected Quarterly Financial Data (Unaudited)

2009 Quarters EndedMarch 31

June 30

September 30

December 31(in thousands, except for per share data)Statement of Operations Data:Revenues

$
437,109

$
373,585

$
364,853

$
448,346Gross profit


50,598


46,328


43,943


73,428Income from operations(1)


20,782


18,171


21,131


37,831Net income attributable to EnergySolutions


8,127


7,330


12,856


22,519Net income per share data:Basic

$
0.09

$
0.08

$
0.15

$
0.25Diluted


0.09


0.08


0.15


0.25Number of shares used in per share calculations:Basic


88,306


88,306


88,315


88,345Diluted


88,337


88,493


88,558


88,595




2008 Quarters EndedMarch 31

June 30

September 30

December 31(in thousands, except for per share data)Statement of Operations Data:Revenues

$
501,753

$
460,345

$
419,453

$
410,080Gross profit


73,533


61,970


56,491


55,199Income from operations(1)


45,977


32,741


26,729


15,483Net income attributable to EnergySolutions


19,293


12,595


10,902


2,391Net income per share data:Basic

$
0.22

$
0.14

$
0.12

$
0.03Diluted


0.22


0.14


0.12


0.03Number of shares used in per share calculations:Basic


88,304


88,304


88,304


88,305Diluted


88,310


88,310


88,312


88,316


(1)Prior
to the fourth quarter of 2009, we included equity in income of unconsolidated joint ventures in other income (expense), net. During the fourth quarter
of 2009, we reclassified these amounts from other income (expense), net to operating income in the accompanying consolidated statements of operations. Accordingly, for the quarters ended
March 31, June 30 and September 30, 2009 income from operations was increased by $1.0 million, $2.2 million and $2.8 million, respectively, and for the
quarters ended March 31, June 30, September 30 and December 31, 2008 income from operations was increased by $0.7 million, $0.8 million, $0.9 million
and $0.7 million, respectively, as a result of the reclassification.


Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operation.

The following discussion and analysis of the financial condition and results of our operations should be read
together with the consolidated financial statements and the related notes of EnergySolutions included elsewhere in this Form 10-K. This discussion contains forward-looking
statements, based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors, including those set forth under "Risk Factors."

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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, D&D, logistics, transportation, processing and disposal. We derive almost 100% of our revenues from the provision of nuclear
services.

We
provide our services through four segments: Federal Services, Commercial Services, LP&D and International. Our Federal Services segment derives revenues from U.S. government
customers for the M&O or clean-up of facilities with radioactive materials. Our U.S. government customers are primarily individual offices, departments and administrations within the DOE
and DOD. Our Commercial Services segment provides a broad range of on-site services, including D&D, to commercial customers. Our commercial customers include power and utility companies,
pharmaceutical companies, research laboratories, universities, industrial facilities and other commercial entities with nuclear materials, as well as state agencies in the United States.
Our LP&D segment provides a broad range of logistics, transportation, processing and disposal services to government and commercial customers. This segment also operates our facilities for the
safe processing and disposal of radioactive materials, including a facility in Clive, Utah, four facilities in Tennessee and two facilities in Barnwell, South Carolina. In cases where a project
involves the provision of both specialized nuclear services and processing and disposal services, our Federal Services or Commercial Services segment, depending on the type of customer, and
our LP&D segment will coordinate to provide integrated
services. Prior to our acquisitions of RSMC in 2007 and EU Services Limited in 2006, we derived less than 1% of our revenues from our international operations. Accordingly, through the first quarter
of 2007, we reported results from our international operations in our Commercial Services segment. Beginning with the second quarter of 2007, we began reporting results from our operations outside
North America in a new International segment.

Components of Revenues and Expenses

Revenues and Costs of Revenues

Federal Services segment

We generate revenues in our Federal Services segment primarily from M&O and clean-up services on DOE and DOD sites that
have radioactive materials. Under Tier 1 contracts, we typically provide services as an integrated member of a prime contract team. Under a Tier 2 contract, we provide services to
Tier 1 contractors as a subcontractor. Tier 1 contracts often include an award fee in excess of incurred costs and may also include an incentive fee for meeting contractual targets,
milestones or performance factors. These award fees often are not associated with significant additional expenditures.

Historically,
the majority of our Federal Services segment revenues have been generated from either Tier 1 cost-reimbursable contracts with award (typically expressed
as a percentage of cost) or incentive (typically success-based) fees or Tier 2 contracts that can be cost-reimbursable, fixed-price or unit-rate contracts. When we have
provided services as an integrated member of a Tier 1 prime contract team, we have typically entered into a contract with the other members of the team pursuant to which we share the award or
incentive fees under the customer contract. The revenue characteristics of these contracts are as follows:



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Revenues
in our Federal Services segment can fluctuate significantly from period to period because of differences in the timing and size of contract awards in any given period, whether
or not we are required to consolidate revenues under a joint venture agreement, the completion or expiration of large contracts and delays in Congressional appropriations for contracts we have been
awarded.

We
typically generate revenues in our Federal Services segment pursuant to long-term contracts. The process of bidding for government contracts is extremely competitive and
time-consuming. Discussions relating to a potential government contract often begin one or two years before an official request for proposal, or RFP, is announced. An additional one or two
years may pass between the government's announcement of an RFP and its award of a contract. Third party consulting and bid preparation expenses associated with bidding for a Tier 1 contract
typically range from $0.5 million to $1.5 million and are recognized as incurred in selling, general and
administrative expenses. These are in addition to our internal expenses and corporate overhead. Once awarded a contract, an additional several months may pass before we begin to recognize revenues in
connection with that contract.

Costs
of revenues in our Federal Services segment primarily consist of compensation and benefits to employees, outsourcing costs for subcontractor services, costs of goods purchased for
use in projects and travel expenses.

Commercial Services segment

We generate revenues in our Commercial Services segment through fixed-price, unit-rate and cost-reimbursable
contracts with power and utility companies that operate nuclear power plants and, to a lesser extent, with pharmaceutical companies, research laboratories, universities, industrial facilities and
other commercial entities that have nuclear-related operations. Most of the revenues in our Commercial Services segment currently derive from contracts with a term of less than one year.

Revenues
in our Commercial Services segment can fluctuate significantly from period to period because of differences in customer requirements, which depend upon the operating schedules
of nuclear reactors, emergency response operations and other clean-up events. The operating schedules of nuclear reactors are affected by, among other things, seasonality in the demand for
electricity and reactor refueling and maintenance. Power and utility companies typically schedule refueling and maintenance to coincide with periods of reduced power demand periods in the spring and
fall. Therefore, our revenues are typically higher during these periods due to the increased demand for our on-site services, such as spent fuel services. Our revenues also fluctuate from
period to period as our

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commercial
power and utility customers commence or terminate project operations. Revenues from emergency response operations and other clean-ups may also cause fluctuations in our results
due to the unanticipated nature and, often, significant size of these projects.

Revenues
in our Commercial Services segment also depend on the decisions of our customers to incur expenditures for third party nuclear services. For example, they may choose to store
radioactive materials on site, rather than transporting materials for commercial processing and disposal at a third-party facility, such as our Clive facility. Similarly, customers may defer entering
into contracts for the D&D of nuclear plants that have been shut down until such time as they have additional dedicated funds.

Costs
of revenues in our Commercial Services segment primarily consist of compensation and benefits to employees, outsourcing costs for subcontractor services, costs of goods purchased
for use in projects and travel expenses.

Results
of our operations for services provided to our customers in Canada and Mexico currently relate to services provided to our utility customers and are included in our Commercial
Services segment with the exception of Monserco, which is included in LP&D.

LP&D segment

We generate revenues in our LP&D segment primarily through unit-rate contracts for the transportation, processing
and disposal of radioactive materials. In general, the unit-rate contracts entered into by our LP&D segment use a standardized set of purchase order-type contracts
containing standard pricing and other terms. By using standardized contracts, we are able to expedite individual project contract negotiations with customers through means other than a formal bidding
process. For example, our life-of-plant contracts provide nuclear power and utility company customers with LLRW and MLLW processing and disposal services for the remaining
lives of their nuclear power plants, as well as the D&D waste disposal services after the plants are shut down. These contracts generally provide that we will process and dispose of substantially all
of the LLRW and MLLW generated by those plants for a fixed, pre-negotiated price per cubic foot, depending on the type of radioactive material being disposed, and often provide for
periodic price adjustments. Although a life-of-plant contract may be terminated before decommissioning is complete, we typically expect the duration of these contracts to be
approximately 30 years.

Revenues
in our LP&D segment can fluctuate significantly depending on the timing of our customers' decommissioning activities. We often receive high volumes of radioactive
materials in a relatively short time period when a customer's site or facility is being decommissioned.

Costs
of revenues in our LP&D segment primarily consist of compensation and benefits to employees, outsourcing costs for subcontractor services, such as railroads transporting
radioactive materials from a customer's site to one of our facilities for processing and disposal, costs of goods purchased for use in our facilities, licenses, permits, taxes on processed radioactive
materials, maintenance of facilities, equipment costs and depreciation costs. Most of our fixed assets are in our LP&D segment. As a result, we recognize the majority of our depreciation costs
in this segment.

International segment

We generate revenues in our International segment primarily through Tier 1 contracts with the NDA. As a Tier 1
contractor, we are reimbursed for allowable incurred costs. In addition, we receive cost efficiency fees (a percentage of budgeted costs minus actual costs for work performed) and project
delivery-based incentive fees. We typically recognize as revenues the full amount of reimbursed allowable costs incurred plus the amount of fees earned, and we record as expense the amount of our
operating costs, including all labor, benefits and travel expenses and costs of our subcontractors.

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We only recognize fees as revenue when the amount to be received is fixed or determinable. Our contracts with the NDA allow for a portion of the fees to be paid
monthly on account during the year. The total amount paid on account at the year end cannot exceed a combined 60% of the total base incentive fee available and 80% of the efficiency fee earned. For
the first six months of the contract year, which ends March 31, we receive monthly on account payments of fees equivalent to 5% of the total available fees for the contract year, although the
monthly amount of the base incentive fee may be increased to reflect actual fees earned in the period if mutually agreed. The contract requires a joint review with the NDA of performance at the end of
the sixth month and the ninth month of the contract year. The purpose of the review is to establish a forecast of fees expected to be earned in the year, against which future scheduled monthly fee
payments are assessed, and potentially adjusted, to ensure that the total fees paid on account by the end of the contract year will not exceed the contractual limits. In July, following the end of the
contract year, we expect to finalize any earned but unpaid incentive and efficiency fees due from the NDA and receive a corresponding final fee payment. Given our contractual fee mechanism, a greater
portion of efficiency fees are recognized in March, which is the final month of the contract year. As a result, we expect first-quarter revenues in our International segment to exceed revenues in that
segment during any other quarter of the year.

The
NDA contracts are based on an annual funding cycle and incentive plan. Consequently, revenues can vary from year to year depending on the level of annual funding, the nature of
performance-based incentives negotiated and efficiency fee mechanisms in place.

Cost
of revenues in our International segment primarily consist of compensation and benefits to employees, travel expenses, outsourcing costs for subcontractor services and costs of
goods purchased for use in projects.

The
International segment also includes the results of ESEU project activities and other projects performed outside of North America.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses include expenses that are not directly associated with performing nuclear
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 administrative overhead.

We
segregate our SG&A expenses into two categories for reporting purposes. Segment SG&A reflects costs specifically associated with each of our business segments, such as costs for
segment leadership compensation and expenses, specific business development activities, and other costs associated with a specific segment. Corporate SG&A reflects costs associated with supporting the
entire company including executive management and administrative functions such as accounting, treasury, legal, human resources and information technology, and other costs required to support the
company. Corporate SG&A also includes the advisory fees we have paid to affiliates of Lindsay Goldberg & Bessemer L.P., Peterson Partners, Inc. and Creamer
Investments, Inc., all members of ENV Holdings LLC, under various advisory services agreements. See "Certain Relationships and Related Party Transactions." These agreements were
terminated in connection with the completion of our initial public offering on November 20, 2007.

Interest Expense

Interest expense includes both cash and accrued interest expense and amortization of deferred financing costs and fees and interest
paid on outstanding letters of credit.

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Other Income, Net

Other income, net includes interest income, mark-to-market gains and losses on our derivative contracts and
transactional foreign currency gains and losses.

Outlook

We expect the following factors to affect our results of operations in future periods. In addition to these factors, please refer to
"Risk Factors" for additional information on what could cause our actual results to differ from our expectations.





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Results of Operations

The following table shows certain items from our income statements for the years ended December 31, 2009, 2008 and 2007 (in
thousands):

Year Ended December 31,2009

2008

2007Revenues:Federal Services Segment

$
304,634

$
271,820

$
151,355Commercial Services Segment


87,305


107,198


137,378LP&D Segment


244,217


246,810


262,801International Segment


987,737


1,165,803


541,079Total revenues


1,623,893


1,791,631


1,092,613Cost of revenues:Federal Services Segment


(266,276
)

(232,623
)

(108,972
)Commercial Services Segment


(65,298
)

(73,918
)

(109,566
)LP&D Segment


(152,259
)

(149,731
)

(154,038
)International Segment


(925,763
)

(1,088,166
)

(523,510
)Total cost of revenues


(1,409,596
)

(1,544,438
)

(896,086
)Gross profit:Federal Services Segment


38,358


39,197


42,383Commercial Services Segment


22,007


33,280


27,812LP&D Segment


91,958


97,079


108,763International Segment


61,974


77,637


17,569Total gross profit


214,297


247,193


196,527Segment selling, general and administrative expenses:Federal Services Segment


(15,632
)

(9,614
)

(11,306
)Commercial Services Segment


(6,299
)

(7,455
)

(7,730
)LP&D Segment


(7,891
)

(9,186
)

(8,452
)International Segment


(18,853
)

(20,968
)

(14,639
)Total segment selling, general and administrative expenses


(48,675
)

(47,223
)

(42,127
)Segment operating income:Federal Services Segment


22,726


29,583


31,077Commercial Services Segment


15,708


25,825


20,082LP&D Segment


84,067


87,893


100,311International Segment


43,121


56,669


2,930Total segment operating income


165,622


199,970


154,400Corporate selling, general and administrative expenses


(75,280
)

(82,207
)

(79,821
)Equity in income of unconsolidated joint ventures


7,573


3,167


1,373Total income from operations


97,915


120,930


75,952Interest expense


(30,403
)

(44,595
)

(75,432
)Other income (expenses), net


(961
)

(8,723
)

1,991Income before income taxes and noncontrolling interests


66,551


67,612


2,511Income tax expense


(14,588
)

(21,098
)

(11,318
)Net income (loss)


51,963


46,514


(8,807
)Less: Net income attributable to noncontrolling interests


(1,131
)

(1,333
)

(92
)Net income attributable to EnergySolutions

$
50,832

$
45,181

$
(8,899
)


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Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Federal Services Segment

Revenues and cost of revenues from our Federal Services segment increased $32.8 million and $33.7 million, respectively,
for the year ended December 31, 2009 compared to the year ended December 31, 2008. Gross profit decreased $0.8 million while gross margin decreased to 12.6% for the year ended
December 31, 2009 from 14.4% for the year ended December 31, 2008 primarily due to decreased activity on higher margin contracts and increased activity on lower margin contracts.

Revenues
and gross profit generated by our contract with the DOE to clean up the Atlas mill tailings near Moab, Utah increased $35.3 million and $3.4 million, respectively,
for the year ended December 31, 2009 compared to the year ended December 31, 2008. This increase was primarily attributable to American Recovery and Reinvestment Act ("ARRA") funding
received to support the construction of an underpass, which was completed in December 2009, to facilitate transportation of waste from the site to the disposal cell, and increased shipments of uranium
mill tailings during the year ended December 31, 2009. As a result, cost of revenues on the Moab contract increased $31.9 million for the year ended December 31, 2009 compared to
the year ended December 31, 2008.

Revenues
related to engineering and technology projects within Federal Services increased $17.2 million, cost of revenues increased $15.2 million and gross profit increased
$2.0 million for the year ended December 31, 2009 compared to December 31, 2008 primarily due to increased operations on two projects. These projects provide critical technical
and testing support to the DOE Waste Treatment Plant in Richland, WA.

Revenues
and cost of revenues from our Isotek Systems joint venture increased $5.0 million and $4.3 million, respectively, for the year ended December 31, 2009
compared to the year ended December 31, 2008. The Isotek contract allows for the reimbursement of costs plus a fee. The cost of revenues increased due to increased design and construction
activities also resulting in increased revenues. Gross profit, representing the fee less unallowable costs, increased $0.7 million for the year ended December 31, 2009 compared to
December 31, 2008.

In
addition, revenues and cost of revenues from our subsidiary, EnergySolutionsPerformance Strategies, formerly Parallax, increased
$10.6 million and $8.7 million, respectively, for the year ended December 31, 2009 compared to the year ended December 31, 2008 primarily due to additional ARRA funding
received to support increased operations at a federal site in Portsmouth, Ohio, during the year ended December 31, 2009. As a result, gross profit increased $1.9 million for the year
ended December 31, 2009 compared to December 31, 2008.

These
increases were offset, in part, by a collective decrease of revenues, cost of revenues and gross profit of $18.6 million, $10.5 million and $8.1 million,
respectively, for the year ended December 31, 2009 compared to the year ended December 31, 2008 related to two contracts at the DOE Hanford site and our Savannah River site operations
contract due to substantial completion of the contracts at these sites in late 2008 and early 2009. However, we continue to generate income through our proportional share of income in the Washington
River Protection Solutions joint venture at the Hanford site.

In
addition, revenues and cost of revenues from our Uranium Disposition Services joint venture, decreased $19.0 million and $18.5 million, respectively, for the year ended
December 31, 2009 compared to the year ended December 31, 2008, due to substantial completion of the construction phase of the project. Gross profit decreased $0.5 million for the
year ended December 31, 2009 compared to December 31, 2008.

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Segment selling, general and administrative expenses in our Federal Services segment increased $6.0 million to $15.6 million for the year ended
December 31, 2009 from $9.6 million for the year ended December 31, 2008. The increase is primarily due to increased labor costs during the year ended December 31, 2009 of
$2.9 million and higher bid and contract proposal expenses of $2.1 million incurred for the submission of bids on two large federal proposals.

Commercial Services Segment

Revenues and cost of revenues in our Commercial Services segment decreased $19.9 million and $8.6 million, respectively,
for the year ended December 31, 2009 compared to the year ended December 31, 2008. Gross profit decreased $11.3 million while gross margin decreased to 25.2% for the year ended
December 31, 2009 from 31.0% for the year ended December 31, 2008 due primarily to the relative profitability of the major projects being performed in each period.

One
of our large commercial engineering and technology waste container design and fabrication projects was completed in December 2008. This resulted in a decrease of revenues and gross
profit of $16.1 million and $5.3 million, respectively, for the year ended December 31, 2009 compared to the year ended December 31, 2008.

Revenues
and gross profit in our spent fuel operations decreased $8.1 million and $3.1 million, respectively, for the year ended December 31, 2009 compared to the
year ended December 31, 2008. This decrease was largely attributable to the continued decrease of work due to the closure of the Barnwell disposal site to states outside the Atlantic Compact in
July 2008.

Revenues
and gross profit related to our commercial decommissioning services decreased $2.0 million and $4.4 million, respectively, for the year ended December 31,
2009 compared to the year ended December 31, 2008. The decrease in gross profit is primarily due to increased cost of revenues as a result of increased waste volumes and additional costs
incurred on the Federated Metals project which has been delayed due to wet weather conditions.

Revenues
in our large components operation increased $4.6 million for the year ended December 31, 2009 compared to the year ended December 31, 2008 primarily due to
work performed on our Duke McGuire and Fermi projects. Cost of revenues related to our large components operation increased $5.6 million due to increased subcontractor costs and project delays.
As a result, gross profit decreased $1.0 million for the year ended December 31, 2009 compared to the year ended December 31, 2008.

Revenues
and gross profit in our liquid waste processing division increased $2.7 million and $2.9 million, respectively, for the year ended December 31, 2009
compared to the year ended December 31, 2008 due to a higher demand for liners and additional work on existing projects.

Segment
selling, general and administrative expenses in our Commercial Services segment decreased $1.2 million to $6.3 million for the year ended December 31, 2009
from $7.5 million for the year ended December 31, 2008. The decrease is primarily due to decreased incentive compensation expenses based on a shortfall of 2009 performance targets, lower
business development costs and decreased travel expenses.

LP&D Segment

Revenues and gross profit in our LP&D segment decreased $2.6 million and $5.1 million, respectively, for year
ended December 31, 2009 compared to the year ended December 31, 2008. Gross margin decreased to 37.7% for the year ended December 31, 2009 from 39.3% for the year ended
December 31, 2008 primarily due to decreased revenues at our Clive, Utah facility and increased overhead costs related to our manufacturing division.

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Revenues
at our Clive, Utah facility decreased $11.4 million for the year ended December 31, 2009 compared to the year ended December 31, 2008 primarily due to a
combination of lower waste disposal volumes processed due to completion of two major decontamination and decommissioning projects during 2008, and delays in waste shipments during the year ended
December 31, 2009. As a result, cost of revenues and gross profit decreased $7.0 million and $4.4 million, respectively, for the year ended December 31, 2009 compared to
the year ended December 31, 2008.

Revenues
related to our transportation services decreased $1.7 million for the year ended December 31, 2009 compared to the year ended December 31, 2008 due to lower
shipments of casks and lower fuel surcharges. Cost of revenues related to our transportation services decreased $2.4 million due to lower fuel and subcontractor costs and additional reductions
in operating and overhead costs, resulting in a $0.7 million increase in gross profit for year ended December 31, 2009 compared to the year ended December 31, 2008.

These
decreases were offset, in part, by increased revenues of $7.1 million for the year ended December 31, 2009 compared to the year ended December 31, 2008 at our
Bear Creek, Tennessee facility due to higher volume of waste processed during the year ended December 31, 2009 and backlog of work carried over from 2008 of unprocessed receipts. The majority
of costs at our Bear Creek, Tennessee facility are fixed, resulting in an increase in gross profit of $4.9 million year ended December 31, 2009 compared to the year ended
December 31, 2008.

Revenues
and cost of revenues related to our manufacturing division increased $6.0 million and $11.0 million for the year ended December 31, 2009 compared to the
year ended December 31, 2008 primarily due to a large shipment of depleted uranium tubes in December 2009. However, gross profit decreased $5.0 million as a result of higher overhead
costs recorded during the year ended December 31, 2009 due to excess capacity.

Segment
selling, general and administrative expenses in our LP&D segment decreased $1.3 million to $7.9 million for the year ended December 31, 2009 from
$9.2 million for the year ended December 31, 2008 mostly due to decreased incentive compensation costs of $1.4 million based on a shortfall of 2009 performance targets.

International Segment

Revenues in our International segment decreased $178.1 million for the year ended December 31, 2009 compared to the year
ended December 31, 2008. Our revenues, prior to considering the effects of fluctuations in pound sterling exchange rates, increased $13.0 million. However, this increase was offset by a
$191.1 million decrease due to lower pound sterling exchange rates during year ended December 31, 2009 compared to the same period in 2008. Of the $13.0 million increase in
revenues, our revenues related to the Magnox contracts increased $10.6 million during the year ended December 31, 2009 compared to the same period in 2008. In addition, revenues related
to our other UK operations increased $2.4 million.

Cost
of revenues in our International segment decreased $162.4 million for the year ended December 31, 2009 compared to the year ended December 31, 2008. Our cost of
revenues, prior to considering the effects of fluctuations in pound sterling exchange rates, increased $15.5 million. However, this increase was offset by a $177.9 million decrease due
to lower pound sterling exchange rates during the year ended December 31, 2009 compared to the same period in 2008. Of the $15.5 million increase in cost of revenues, our cost of
revenues related to our Magnox contracts increased $17.6 million primarily due to employee termination benefits related to voluntary termination program of 200 employees at our Magnox sites
offset by decreased labor and subcontractor costs during the year ended December 31, 2009 compared to the same period in 2008. In addition, cost of revenues related to our other UK operations
decreased $2.1 million.

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Gross
profit in our International segment decreased $15.7 million for the year ended December 31, 2009 compared to the year ended December 31, 2008. Our gross
profit, prior to considering the effects of fluctuations in pound sterling exchange rates, decreased $2.5 million. In addition, gross profit decreased $13.2 million due to a decline in
pound sterling exchange rates during the year ended December 31, 2009 compared to the same period in 2008. Gross profit margin in our International segment was 6.3% for the year ended
December 31, 2009 compared to 6.7% for the year ended December 30, 2008. The decrease in gross profit margin is primarily due to employee termination benefits recorded during the year
ended December 31, 2009 compared to the same period in 2008.

Segment
selling, general and administrative expenses in our International segment decreased $2.1 million for the year ended December 31, 2009 as compared to 2008 primarily
due to a decrease in amortization expense of intangible assets for the period offset by an increase in bid and proposal expenses relating to potential contracts in the UK and other foreign locations
and other administrative expenses. During the year ended December 31, 2009, the Company determined that it had inappropriately applied authoritative guidance related to intangible assets and
goodwill denominated in
foreign currencies. As a result, amortization expense decreased $2.2 million during the year ended December 31, 2009 compared to the year ended December 31, 2008, of which
$0.6 million relates to expense recorded in periods prior to 2009.

Corporate selling, general and administrative expenses

Corporate selling, general and administrative expenses decreased $6.9 million to $75.3 million for the year ended
December 31, 2009 from $82.2 million for the year ended December 31, 2008. This decrease is primarily attributable to decreased management compensation expense of
$10.0 million from 2008 that was paid at the direction of and fully reimbursed by ENV Holdings and decreased incentive compensation expense based on a shortfall of 2009 performance targets.
These decreases are offset by increased legal fees related to our declaratory judgment action with the Northwest Compact, increased equity-based compensation expense of $4.8 million of which
$2.6 million resulted from a modification in the vesting terms of stock option and restricted stock grants of a former executive and increased expenses of $1.6 million relating to the
separation agreements of former executives.

As
a percentage of revenues, corporate selling, general and administrative expenses remained constant at 4.6% for the years ended December 31, 2009 and 2008.

Equity in income of unconsolidated joint ventures

Income from unconsolidated joint ventures increased $4.4 million, or 139.1%, to $7.6 million for the year ended
December 31, 2009 from $3.2 million for the year ended December 31, 2008. The increase is mostly attributable to an increase of $5.3 million in our proportional share of
income from our Washington River Protection Solutions joint venture at the Hanford site in which we have a non-controlling interest.

Interest expense

Interest expense decreased $14.2 million, or 31.8%, to $30.4 million for the year ended December 31, 2009 from
$44.6 million for the year ended December 31, 2008. The decrease is primarily attributable to a decline in our average borrowings outstanding as a result of repaying
$47.6 million of debt during 2009. In addition, interest rates related to our credit facilities declined during 2009 due to a decrease in LIBOR as compared to the prior year.

Other income (expense), net

Other expense, net, decreased $7.7 million, or 89.0%, to a net other expense of $1.0 million for the year ended
December 31, 2009 from a net other expense of $8.7 million for the year ended

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December 31,
2008. The decrease is mostly attributable to decreased net foreign currency losses of $7.6 million for the year ended December 31, 2009 compared to the year ended
December 31, 2008. In addition, losses derived from our interest rate swap decreased $1.0 million during the year ended December 31, 2009 compared to the year ended
December 31, 2008.

Income taxes

We recognized income tax expense of $14.6 million and $21.1 million for the years ended December 31, 2009 and
December 31, 2008, respectively, based on estimated annual effective tax rates on our consolidated operations of 22.3% and 31.8%, respectively. The decrease in income tax expense is primarily
due to the effect of research and development credits in the U.S. and the U.K., offset by certain nondeductible expenses and IRS audit settlements.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Federal Services Segment

Revenues in our Federal Services segment increased $120.4 million, or 79.6%, to $271.8 million for the year ended
December 31, 2008 from $151.4 million for the year ended December 31, 2007. This increase is primarily attributable to increased revenues earned during the year ended
December 31, 2008 compared to the year ended December 31, 2007 from the consolidation of two of our joint venture interests, Isotek, LLC and UDS, LLC, of
$113.8 million. We were also awarded a contract by the DOE to cleanup the Atlas mill tailings near Moab, Utah which contributed additional revenue of $21.4 million for the year ended
December 31, 2008. This increase was partially offset by decreased revenues of $9.1 million and $7.6 million from work we performed at the Savannah River site and as a
subcontractor on two contracts at the Hanford site, respectively, for the year ended December 31, 2008.

Cost
of revenues in our Federal Services segment increased $123.6 million, or 113.4%, to $232.6 million for the year ended December 31, 2008 from
$109.0 million for the year ended December 31, 2007. This increase is primarily attributable to increased costs recognized during the year ended December 31, 2008 compared to
December 31, 2007 as a result of the consolidation of two of our joint venture interests, Isotek, LLC and UDS, LLC, of $111.1 million and the clean up of the Atlas mill
tailings near Moab, Utah of $18.4 million. This increase was partially offset by decreased cost of revenues of $4.2 million and $3.0 million from work we performed at the Savannah
River site and as a subcontractor on two contracts at the Hanford site, respectively.

Gross
profit in our Federal Services segment decreased $3.2 million, or 7.5%, to $39.2 million for the year ended December 31, 2008 from $42.4 million for the
year ended December 31, 2007. This decrease is primarily attributable to decreased gross profit of $4.9 million and $4.6 million from work we performed at the Savannah River Site
and as a subcontractor on two contracts at the Hanford site, respectively. These decreases are partially offset by increased gross profit on the Moab project and Isotek operations of
$3.0 million and $2.3 million, respectively.

Segment
selling, general and administrative expenses in our Federal Services segment decreased $1.7 million to $9.6 million for the year ended December 31, 2008 from
$11.3 million for the year ended December 31, 2007. The decrease is primarily due to decreased bid and proposal consulting costs of $1.8 million. During the year ended
December 31, 2007, we incurred costs to bid on two large government contracts, including the contract for the management of all high level waste/tanks systems at Hanford as part of the
Washington River Protection Solutions LLC team, which we won on May 29, 2008.

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Commercial Services Segment

Revenues in our Commercial Services segment decreased $30.2 million, or 22.0%, to $107.2 million for the year ended
December 31, 2008 from $137.4 million for the year ended December 31, 2007. This is primarily the result of decreased revenues from our engineering and technology and utility
services projects of $21.5 million and $18.2 million, respectively, for the year ended December 31, 2008, due to completion of several projects. These decreases are offset by
increased revenues of our commercial decommissioning operations and liquid waste processing of $5.3 million and $3.5 million, respectively, for the year ended December 31, 2008.
Contracts in our Commercial Services segment typically have durations of 12 months or less. As a result, timing of contract awards contributes significantly to the fluctuation of revenues.

Cost
of revenues in our Commercial Services segment decreased $35.6 million, or 32.5%, to $73.9 million for the year ended December 31, 2008 from
$109.6 million for the year ended December 31, 2007. This decrease is primarily attributable to decreased costs of engineering and technology and utility services projects of
$22.0 million and $16.8 million, respectively, due to completion of several projects. This decrease is offset, in part, by increased costs in our commercial decommissioning operations of
$2.3 million due to increased volumes. Contracts in our Commercial Services segment typically have durations of 12 months or less. As a result, timing of contract awards contributes
significantly to the fluctuation of costs.

Gross
profit in our Commercial Services segment increased $5.5 million, or 19.8%, to $33.3 million for the year ended December 31, 2008 from $27.8 million for
the year ended December 31, 2007. The increase is primarily attributable to increased gross profit from our liquid waste processing, commercial decommissioning and fuel pool operations of
$3.1 million, $2.9 million and $1.1 million, respectively, mostly due to increased volumes and performance of large decontamination and decommissioning projects with higher
margins. These increases are offset, in part, by a decrease in large component projects.

Segment
selling, general and administrative expenses in our Commercial Services segment decreased $0.3 million to $7.5 million for the year ended December 31, 2008
from $7.7 million for the year ended December 31, 2007. The decrease is primarily attributable to lower business development costs of $1.3 million mostly related to our license
stewardship contract with Exelon Generation Company, LLC. This decrease is offset, in part, by increased stock based compensation and consulting costs of $0.9 million.

LP&D Segment

Revenues in our LP&D segment decreased $16.0 million, or 6.1%, to $246.8 million for the year ended
December 31, 2008 from $262.8 million for the year ended December 31, 2007. This decrease is mostly due to decreased revenues at our Clive, Utah and Bear Creek, Tennessee
facilities of $16.7 million and $3.5 million, respectively, as a result of decreased volumes of waste processed and disposed at these facilities. These decreases are partially offset by
our acquisition of Monserco in December 2007 which contributed $3.1 million to revenue during the year ended December 31, 2008 and increases in our transportation services revenues of
$2.4 million, mostly due to increased shipments and fuel surcharges.

Cost
of revenues in our LP&D segment decreased $4.3 million, or 2.8%, to $149.7 million for the year ended December 31, 2008 from $154.0 million for
the year ended December 31, 2007. This decrease is primarily attributable to decreased equipment maintenance, demurrage costs and labor expenses due to decreased volumes of waste processed and
disposed of at our Clive, Utah and Bear Creek, Tennessee facilities of $6.2 million and $0.6 million, respectively. This decrease is offset, in part, by our acquisition of Monserco in
December 2007, which contributed $2.8 million to cost of revenues during the year ended December 31, 2008.

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Gross
profit in our LP&D segment decreased $11.7 million, or 10.8%, to $97.1 million for the year ended December 31, 2008 from $108.8 million for the
year ended December 31, 2007. This decrease is primarily attributable to decreased gross profit at our Clive, Utah and Bear Creek, Tennessee facilities of $10.5 million and
$2.9 million, respectively, as a result of decreased volumes of waste processed and disposed at these facilities.

Segment
selling, general and administrative expenses in our LP&D segment increased $0.7 million to $9.2 million for the year ended December 31, 2008 from
$8.5 million for the year ended December 31, 2007 mostly due to increased labor costs related business development activities of $2.3 million offset by decreases in incentives,
insurance, consulting and other administrative costs of $1.6 million.

International Segment

Revenues in our International segment increased $624.7 million, or 115.5%, to $1.2 billion for the year ended
December 31, 2008 from $541.1 million for the year ended December 31, 2007. Our revenues, prior to considering the effects of fluctuations in pound sterling exchange rates,
increased $672.0 million. However, this increase was offset by a $47.2 million decrease due to a decline in pound sterling exchange rates during the year ended December 31, 2008
compared to the same period in 2007. During the year ended December 31, 2008, the acquisition of RSMC in June 2007 contributed a full year of revenue in 2008 increasing revenues
$630.1 million compared to the same period in 2007. This increase is offset, in part, by a decrease in our ESEU operations of $3.7 million.

Cost
of revenues in our International segment increased $564.7 million, or 107.9%, to $1.1 billion for the year ended December 31, 2008 from $523.5 million
for the year ended December 31, 2007. Our cost of revenues, prior to considering the effects of fluctuations in pound sterling exchange rates, increased $610.2 million. However, this
increase was offset by a $45.6 million decrease due to a decline in pound sterling exchange rates during the year ended December 31, 2008 compared to the same period in 2007. During the
year ended December 31, 2008, the acquisition of RSMC in June 2007 contributed a full year of operations in 2008 increasing cost of revenues $569.5 million compared to the same period in
2007. This increase is offset, in part, by a decrease in our ESEU operations of $1.6 million.

Gross
profit in our International segment increased $60.0 million, or 340.9%, to $77.6 million for the year ended December 31, 2008 from $17.6 million for the
year ended December 31, 2007. Our gross profit, prior to considering the effects of fluctuations in pound sterling exchange rates, increased $61.7 million. However, this increase was
partially offset by a $1.7 million decrease due to a decline in pound sterling exchange rates during the year ended December 31, 2008 compared to the same period in 2007. During the year
ended December 31, 2008, the acquisition of RSMC in June 2007 contributed a full year of gross profit increasing gross profit $60.6 million compared to the same period in 2007. Gross
profit margin in our International segment was 6.7% for the year ended December 31, 2008 compared to 3.3% for the year ended December 31, 2007. The increase in gross profit margin is due
to increased efficiency fees recognized during 2008 from our contract with the NDA. Most of the efficiency fees are recognized in the first calendar quarter of each year, which is the last quarter of
the contract fiscal year. During 2007, the efficiency fees were recognized prior to our acquisition of RSMC.

Segment
selling, general and administrative expenses in our International segment increased $6.4 million to $21.0 million for the year ended December 31, 2008 from
$14.6 million for the year ended December 31, 2007. The increase is primarily due to amortization expense of $4.6 million associated with intangible assets of RSMC, which we
acquired in June 2007, bid and proposal expenses relating to potential contracts in the United Kingdom and other administrative expenses of our U.K. operations of $1.8 million.

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Corporate selling, general and administrative expenses

Corporate selling, general and administrative expenses increased $2.4 million to $82.2 million for the year ended
December 31, 2008 from $79.8 million for the year ended December 31, 2007. This increase is primarily due to management compensation expense of $10.0 million that was paid
at the direction of and fully reimbursed by ENV Holdings, stock-based compensation expense of $3.7 million as a result of the options issued in connection with our initial public offering, fees
related to our secondary public offering of $1.8 million and increased professional fees of $1.2 million related to Sarbanes-Oxley compliance. These increases are offset by decreased
compensation expense of $6.9 million related to the termination of provisions in certain management employment agreements, decreased management advisory fees of $2.5 million paid to our
equity sponsors which were terminated in connection with our initial public offering, decreased information systems and technology costs of $2.1 million, and decreased consulting costs of
$2.1 million. As a percentage of revenue, corporate selling, general and administrative expenses decreased to 4.6% for the year ended December 31, 2008 from 7.3% for the same period for
2007. The decrease in expenses as a percentage of revenues is primarily due to the significant increase in revenues primarily related to our International segment as compared to the smaller increase
in corporate selling, general and administrative expenses.

Equity in income of unconsolidated joint ventures

Income from unconsolidated joint ventures increased $1.8 million, or 130.6%, to $3.2 million for the year ended
December 31, 2008 from $1.4 million for the year ended December 31, 2007. The increase is mostly attributable to an increase of $0.7 million in our proportional share of
income from our Parallax Portsmouth LLC joint venture and $0.5 million in our proportional share of income from our Washington River Protection Solutions joint venture at the Hanford
site in which we have a non-controlling interests for the year ended December 31, 2008 compared to the year ended December 31, 2007.

Interest expense

Interest expense decreased $30.8 million, or 40.8%, to $44.6 million for the year ended December 31, 2008 from
$75.4 million for the year ended December 31, 2007. The decrease is primarily attributable to a decline in our average borrowings outstanding as a result of repaying
$108.2 million of debt in connection with our initial public offering in November 2007 and repaying $40.2 million of debt during 2008. In addition, interest rates related to our credit
facilities declined in 2008 due to a decrease in LIBOR.

Other income (expense), net

Other expense, net, increased $10.7 million, or 538.1%, to a net other expense of $8.7 million for the year ended
December 31, 2008 from a net other income of $2.0 million for the year ended December 31, 2007. The increase is mostly attributable to increased remeasurement losses on our US
dollar denominated notes receivable with our U.K. subsidiary of $14.7 million, increased other foreign currency transactional losses of $2.2 million and increased losses on our interest
rate derivative contracts of $1.7 million. These losses are offset, in part, by increased gains on our foreign currency derivative contracts of $8.0 million.

Income taxes

We recognized income tax expense of $21.1 million for the year ended December 31, 2008 based on an estimated annual
effective tax rate on our consolidated operations of 31.8%, which is lower than the statutory rate of 35% mostly due to the effect of research and development credits in the U.K. Prior to our
reorganization on November 20, 2007, EnergySolutions, LLC operated as a limited liability

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company
and was treated as a disregarded entity owned by a partnership for federal income tax purposes. As such, during the year ended December 31, 2007, we recognized an income tax expense of
$11.3 million, primarily due to income tax expense recognized of approximately $9.9 million relating to our reorganization from a limited liability company to a "C" corporation and
foreign, federal and state income taxes for our taxable subsidiaries that we acquired in 2006 and 2007.

Liquidity and Capital Resources

We finance our operations primarily through cash provided by operations. As of December 31, 2009, our principal sources of
liquidity consisted of $15.9 million of cash and cash equivalents and $59.2 million of availability under the $75.0 million revolving portion of our credit facilities, which is
net of $10.8 million of outstanding letters of credit and $5.0 million of outstanding borrowings, both issued against our revolving credit facility. We also have a synthetic letter of
credit facility of $100.0 million, of which $100.0 million of letters of credit were issued as of December 31, 2009.

During
the year ended December 31, 2009, our cash and cash equivalents decreased $32.5 million, to $15.9 million. This compares to an increase in cash and cash
equivalents of $12.1 million for the year ended December 31, 2008. During the year ended December 31, 2009, we had net cash inflows from operating activities of
$52.2 million. This was offset by net cash outflows from investing activities of $25.1 million, primarily related to purchases of property, plant and equipment. Our cash outflows from
our financing activities were $64.2 million, primarily related to repayment of debt, payment of stockholder dividends, debt financing fees and realized losses on settlement of our derivative
contracts offset by borrowings under our revolving credit facility.

Our
principal need for liquidity has been, and will continue to be, for working capital, to pay down debt and for capital expenditures. We also expect to use cash flow from operations to
pay quarterly dividends. However, the declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will depend on many factors,
including our
results of operations, financial condition, liquidity requirements, restrictions that may be imposed by applicable law and our contracts and other factors deemed relevant by our board of directors. To
the extent we maintain an annual dividend of $0.10 per share, our annual cash requirements for this dividend would be approximately $8.8 million, based on the number of shares currently
outstanding. We believe that our cash flow from operations, available cash and cash equivalents and available borrowings under the revolving portion of our credit facilities will be sufficient to meet
our future liquidity needs, including the payment of such dividend, through at least the next twelve months.

We
have accumulated benefit obligations related to our pension plans of $3.0 billion. See Note 18 to our audited consolidated financial statements included elsewhere in
this Form 10-K for a more detailed discussion. Approximately 94% of the accumulated benefit 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. The plan we are required to fund related to our employees of Reactor
Sites Management Company Limited, a wholly owned subsidiary in the UK, is currently funded by regular monthly payroll contributions from us and the employees. The next triennial valuation of the plan
is expected to be completed in mid 2010. In anticipation of a deficit between the amount funded and the minimum funding requirements, we contributed an additional $3.2 million to the plan
during the year ended December 31, 2009. Depending on the result of the triennial valuation, we may be required to make incremental cash payments to the plan within the next 12 months to
maintain minimum funding requirements.

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Although
we have no specific current plans to do so, if we decide to pursue one or more significant strategic acquisitions, we may incur additional debt or sell additional equity to
finance the purchase of those businesses.

Historical Cash Flows

Cash flow from operating activities

We generated $52.2 million of cash from operating activities during the year ended December 31, 2009. Cash from operating
activities in 2009 included net income attributable to EnergySolutionsof $50.8 million and significant non-cash expenses including
depreciation and amortization expense of $46.2 million and equity-based compensation expense of $14.9 million. Cash from operating activities was also provided by a reduction in
inventories of $10.1 million due to shipment of depleted uranium tubes and a reduction in other current assets of $25.6 million primarily due to a $10.0 million contribution
received during the first quarter of 2009 from ENV Holdings and release of retention funds related to federal projects. Cash from operating activities was reduced due to increased accounts receivable
of approximately $71.4 million and increased costs and estimated earnings in excess of billings on uncompleted contracts of $19.2 million during the year ended December 31, 2009.

We
generated $103.1 million of cash from operating activities during the year ended December 31, 2008. Cash from operating activities in 2008 included net income of
$45.2 million and significant non-cash expenses including depreciation and amortization expense of $46.4 million and foreign currency transaction losses of
$16.2 million. Cash from operating activities was also provided by a reduction in accounts receivable of $101.3 million primarily due to timing of collections on work performed on our
contracts with the NDA. Cash from operating activities was used to reduce accounts payable and accrued liabilities by $76.6 million. The reduction in accounts payable and accrued liabilities
was primarily due to timing of payments to vendors of our Magnox contracts in the U.K. In addition, cash from operating activities of $12.4 million was used for costs associated with our
planned license stewardship project for Exelon's Zion nuclear facility that have been deferred until closing of the transaction.

Cash flow from investing activities

We used $25.1 million of cash for investing activities during the year ended December 31, 2009. Of this amount, we used
$24.4 million of cash for capital expenditures primarily due to software licensing costs and capitalizable implementation costs for a new enterprise resource planning system (Oracle EBS R12)
and purchase of equipment required at our various facilities.

We
used $27.3 million of cash for investing activities during the year ended December 31, 2008. Of this amount, we used $26.6 million of cash for capital
expenditures primarily to purchase equipment required for the Atlas mill tailings contract, equipment at our various facilities, computer hardware and software licenses.

Cash flow from financing activities

We used $64.2 million of cash for financing activities during the year ended December 31, 2009 primarily to repay
$47.6 million of long-term debt, to pay dividends of $8.8 million to our stockholders and to pay debt financing fees to our lenders to obtain amendments to our credit
facilities in the amount of $4.9 million. In addition, during the year ended December 31, 2009 we realized a net loss of $5.3 million on settlement of our derivative contract.

We
used $52.6 million of cash for financing activities during the year ended December 31, 2008 primarily to repay $40.2 million of long-term debt, to pay
dividends of $8.8 million to our shareholders

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and
to pay debt financing fees of $6.4 million. We received net $5.2 million as settlement of our interest rate and foreign currency derivative contracts.

Capital Expenditures

We had capital expenditures of $24.4 million, $26.6 million and $13.3 million in the years ended
December 31, 2009, 2008 and 2007, respectively. We invested in or completed several significant capital improvements in 2009 and 2008, including the implementation of a new enterprise resource
planning system (Oracle EBS R12) and the purchase of equipment required for the Atlas mill tailings contract, respectively. We expect purchases of capital expenditures for the year ending
December 31, 2010 will be approximately $25.0 million related primarily to purchases of equipment and property improvements at our facilities, which is in compliance with the debt
covenants of our credit agreement. We anticipate the sources of funds for our anticipated capital expenditures will come from cash flows provided by our operating activities.

Credit Facilities

On September 23, 2009, we entered into a Third Amended and Restated Credit Agreement, as subsequently amended on
January 14, 2010 (the "Amended ES Credit Agreement") with Citicorp North America, Inc. ("CNAI") as administrative agent and collateral agent.
Concurrently with the entry into the Amended ES Credit Agreement, Duratek, Inc., a wholly-owned subsidiary of the Company, entered into an Amended and Restated Credit Agreement, as subsequently
amended on January 14, 2010 (the "Amended Duratek Credit Agreement" and together with the Amended ES Credit Agreement, the "Amended Credit Agreements") with CNAI. The Amended Credit Agreements
amend, restate and supersede the credit agreements dated June 7, 2006 and subsequent amendments with CNAI and the lenders identified therein. The January 14, 2010 amendment increased the
maximum credit support facility for the Zion Station transaction from $50 million to $200 million.

Our
credit facilities consist of a $75.0 million revolving credit facility, which matures on June 7, 2011, term-loan facilities totaling $770.0 million,
which mature on June 7, 2013, and synthetic letter of credit facilities totaling $100.0 million, which expire on June 7, 2013. The revolving credit facility includes a sublimit of
$60.0 million for letters of credit, of which $10.8 million were issued as of December 31, 2009. The synthetic letter of credit facilities had $100.0 million issued as of
December 31, 2009.

As
amended, borrowings under the credit facilities bear interest as follows:



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We
currently have balances of $5.0 million in outstanding borrowings and $10.8 million of letters of credit issued against our $75.0 million revolving credit
facility, a $519.1 million balance on our first-lien term loan facilities with minimum payments of $19.1 million in 2010 and $5.6 million in 2011 and 2012, and a
$100.0 million synthetic letter of credit facility. Borrowings under our credit facilities bear interest at variable rates. As of December 31, 2009 and December 31, 2008, the
interest rate of borrowings under our term-loan facilities was 4.01% and 4.14% respectively.

The
obligations under the credit facilities are unconditional and irrevocably guaranteed, subject to certain exceptions, by each of our existing and subsequently acquired or organized
domestic subsidiaries. In addition, the credit facilities and such guarantees are secured on a first priority basis by security interests (subject to permitted liens as defined in the credit
agreements governing the credit facilities) in substantially all tangible and intangible assets owned by us and each of our domestic subsidiaries, subject to certain exceptions, including limiting
pledges of 65% of the equity interests of first-tier foreign subsidiaries.

According
to the terms of the credit agreements, at the end of each calendar quarter, we are required to make scheduled repayments of the term loans of approximately $1.4 million,
adjusted for optional prepayments made, provided that the final installment shall be equal to the amount outstanding of the term loan facilities.

We
are generally also required to prepay borrowings under the credit facilities with (1) 100% of the net proceeds we receive from non-ordinary course asset sales or as
a result of a casualty or condemnation, subject to reinvestment provisions, (2) 100% of the net proceeds we receive from the issuance of unsecured debt obligations other than specified debt
obligations (or if our total leverage ratio is less than 2.0 to 1.0, then 50% of net proceeds is applied) and (3) the excess, if any, of 50% (or, if our leverage ratio is less than 3.0 and
greater than 1.0, 25%) of excess cash flow (as defined in the credit agreements) reduced by the aggregate amount of term loans optionally prepaid during the applicable fiscal year. Under the credit
facilities, we are not required to prepay borrowings with excess cash flow if our leverage ratio is less than or equal to 1.0. As of December 31, 2009, we have mandatory principal repayments
based on our excess cash flow and scheduled repayments of $19.1 million due within the next 12 months.

As
of December 31, 2009, the interest rate of our term-loan facilities was 4.01%. At this rate and assuming an outstanding balance of $519.1 million as of
December 31, 2009, our annual debt service obligations would be $23.6 million, consisting of $20.8 million of interest and $2.8 million of scheduled principal payments.

As
amended, the credit facilities also require us to maintain certain financial ratios, including a maximum leverage ratio (based upon the ratio of total consolidated indebtedness to
consolidated operating cash flow), a maximum first-lien leverage ratio (based upon the ratio of first-lien indebtedness to consolidated operating cash flow) and a minimum cash
interest coverage ratio (based upon the ratio of consolidated operating cash flow to consolidated cash interest expense), which are tested quarterly. Based on the revised formulas set forth in the
Amended Credit Agreements, we are required to maintain a maximum leverage ratio of 4.0 from the quarter ending December 31, 2009 through the quarter ending December 31, 2010 and 3.5 from
the quarter ending March 31, 2011 until maturity. We are required to maintain a maximum first-lien leverage ratio of 3.75 through the quarter ending December 31, 2009, 3.5
for the quarters ending March 31, 2010 through December 31, 2010, 3.25 for the quarter ending March 31, 2011 and 3.0 for quarters ending June 30, 2011 through the maturity
date. We are required to maintain a minimum cash interest coverage ratio of 2.75 through the quarter ending December 31, 2009 and 3.0 from the quarter ending March 31, 2010 through the
maturity date. Failure to comply with these financial ratio covenants would result in a default under our credit facilities and, absent a waiver or an amendment from the lenders, preclude us from
making further borrowings under our credit facilities and permit the lenders to accelerate all outstanding

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borrowings
under the credit facilities. As of December 31, 2009, our total leverage, first-lien leverage and interest coverage ratios were 3.34, 3.34 and 6.09, respectively.

The
credit facilities also contain 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 credit facilities, we are permitted maximum annual capital expenditures of
$30 million for 2009 and $40 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 credit facilities contain 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 credit facilities. Capital expenditures for the year ended December 31, 2009 were $24.4 million. As of December 31, 2009, we were in
compliance with all of the covenants under our credit agreements.

Under
the terms of the Amended Credit Agreements, we will be permitted to obtain credit support in an aggregate amount of up to $200.0 million (increased from $50.0 million
by the January 14, 2010 amendment) in connection with our agreement with Exelon Generation Company LLC (the "Exelon Agreement") to dismantle Exelon's Zion nuclear facility located in
Zion, Illinois ("Zion Station"), which ceased operation in 1998. Such credit support may take the form of (i) incremental commitments under the Amended ES Credit Agreement with respect to a
letter of credit facility (the "Zion Letter of Credit Facility") and/or (ii) a letter of credit, performance or fidelity bond or related obligation by a third party support provider (the "Zion
Credit Support Obligation"). Each of the Zion Letter of Credit Facility and Zion Credit Support Obligation will be secured pari passu on the same collateral securing the obligations under the Credit
Agreements and shall mature up to one year after its establishment
(with two one-year auto-renewal extension provisions) but shall expire prior to the term loan maturity date.

Exelon Agreement

On December 11, 2007, we, through our subsidiary ZionSolutionsLLC,
entered into the Exelon Agreement to dismantle Exelon's Zion Station. Upon the closing of the transaction, Exelon has agreed to transfer to
ZionSolutionssubstantially all of the assets (other than land) associated with Zion Station, including assets held in nuclear decommissioning trusts.
In consideration for Exelon's transfer of those assets, ZionSolutionshas agreed to assume decommissioning and other liabilities associated with the
Zion Station. ZionSolutionsalso agreed to take possession and control of the land associated with the Zion Station pursuant to a lease agreement to be
executed at the closing. ZionSolutionswill be obligated to complete the required decommissioning work according to an established schedule and to
construct a dry cask storage facility on the land for spent nuclear fuel currently held in spent fuel pools at the Zion Station. Closing of this transaction is subject to the satisfaction of a number
of closing conditions, including approval by the NRC of the license transfer of the facility operating licenses and conforming license amendments from Exelon to
ZionSolutions(the "License Transfer").

Subsequent
to this agreement, the Zion Station decommissioning trust fund balance, a significant portion of which is invested in the stock market, declined as a result of the financial
crisis that impacted the United States and world markets. On October 14, 2008, we announced that we intend to defer the transfer of the Zion Station assets until we reaffirm that there is
sufficient value in the Zion decommissioning trust funds to ensure adequate funds for the accelerated decommissioning of the plant. On August 17, 2009 we entered into an amended agreement with
Exelon to extend the latest closing date under the agreement to December 11, 2011. Under the terms of the amendment, Exelon has the right to terminate the agreement at any time after
December 11, 2010 upon 60 days written notice to us.

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Prior
to our announcement to defer the transfer of the Zion Station assets, we had anticipated that the closing of this transaction would occur in late third quarter or during the fourth
quarter of 2008. Accordingly, we hired employees, entered into subcontracts and performed services for Exelon under a planning contract. Invoicing for some of these services provided is subject to the
closing of the transaction. As of December 31, 2009 and December 31, 2008, we have incurred costs of $14.8 million and $12.4 million, respectively, which have been deferred
until the closing of the transaction. Since we believe that it is probable that we will close or be granted an extension to close this transaction before December 11, 2010, we will continue to
defer these costs until we close the transaction, at which time
we will recognize the costs and related revenues. If we determine that it is not probable that we will close this transaction, we will expense these costs in the period of such determination. We have
taken steps to reduce the monthly project costs including the termination of certain employees, transferring employees to other projects and the termination of certain subcontracts and lease
agreements. Any costs relating to the termination of employees, subcontractors and lease or other agreements are expensed in the period terminated.

On
May 4, 2009, the NRC issued an order approving the License Transfer subject to ZionSolutionssatisfying the NRC that
(i) a $200 million letter of credit facility has been established, (ii) an irrevocable easement of disposal capacity of 7.5 million cubic feet has been established and
(iii) the appropriate amount of insurance required of a licensee under the NRC's regulations has been obtained. If the License Transfer is not completed by May 4, 2010, the order
approving the License Transfer expires; however, upon written application and for good cause shown, the expiration date may be extended by order of the NRC.

The
Amended Credit Agreements provide for an incremental facility commitment for the Zion transaction of up to $200.0 million, inclusive of any letter of credit obligations. The
completion of the Zion Station acquisition is dependent among other things, on the continued recovery and stabilization of the value of the decommissioning fund.

A
change to the Exelon Agreement may require us to seek additional regulatory approvals or amend our previous approval applications, including our application and the conditional consent
from the NRC to the License Transfer. These amendments and approvals may take significant additional time to obtain and whether they can be obtained may be dependent on the nature of the changes to
the Exelon Agreement that are ultimately negotiated with Exelon.

Contractual Obligations and Other Commitments

As of December 31, 2009, our contractual obligations and other commitments were as follows (in thousands):

Payments Due by PeriodTotal

2010

2011-2012

2013 - 2014

2015
and beyondLong-term debt obligations(1)

$
524,111

$
19,071

$
16,134

$
488,906

$
Capital lease obligations


492


465


27





Operating lease obligations


42,269


11,683


17,388


7,155


6,043Other contractual obligations


15,000


2,500


5,000


5,000


2,500Total

$
581,872

$
33,719

$
38,549

$
501,061

$
8,543


(1)Includes
only obligations to pay principal of $5.0 million outstanding borrowings against our revolving credit facility and $519.1 million
outstanding balance of our term-loan facilities. Assuming our variable interest rate of 4.01% at December 31, 2009 remains constant during these periods, our interest payment
obligations would be $20.3 million, $39.4 million and $19.6 million for 2010, 2011-2012 and 2013, respectively, for a total interest payment obligation of
$79.3 million.


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Off Balance Sheet Arrangements

We have routine operating leases, primarily related to real estate, equipment for project contracts, rail equipment, and investments in
joint ventures at December 31, 2009.

As
of December 31, 2009 we had outstanding floating-rate term loans of $519.1 million and outstanding borrowings against our revolving credit facility of
$5.0 million. Under our credit facilities, we are required to maintain one or more interest rate swap agreements for the aggregate notional amount of at least 33% of the outstanding aggregate
principal amount of the term loans. Accordingly, we entered into a swap agreement effective December 18, 2008. As of December 31, 2009, the swap agreement had a notional amount of
$200.0 million and a fair value liability of approximately $1.7 million.

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 December 31, 2009 we had $100.0 million in letters of credit issued under our synthetic letters of credit
facilities and $10.8 million in
letters of credit issued under our revolving credit facilities. As of December 31, 2009 we had $0.7 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 December 31, 2009 the closure and post-closure state regulatory
requirements for our facilities were $142.0 million, which amount is not determined on the same basis as the asset retirement obligation, or ARO.

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 accounting principles generally accepted in the United States. 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.

Critical
accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management's most difficult, complex
or subjective estimates and assumptions. Our critical accounting policies are discussed below.

Revenue Recognition

We record revenue when all of the following conditions exist:



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Federal, Commercial and International Contracts

Our services are provided under cost-reimbursable plus award or incentive fee, fixed-price and unit-rate
contracts. The following describes our policies for these contract types:



Accounting
for revenues earned under our contracts may require assessments that include an estimate of the amount that has been earned on the contract and are usually based on the
volumes that have been processed or disposed, milestones reached or the time that has elapsed under the contract. Each of our contracts is unique with regard to scope, schedule and delivery
methodology. Accordingly, each contract is reviewed to determine the most reliable measure of completion for revenue recognition purposes. Input measures such as costs incurred to total contract costs
are used only when there are no quantifiable output measures available and represent a reasonable basis for determining the relative status of the project given that, on many contracts, costs are the
basis for determining the overall contract value and timing.

Certain
of our fixed-price contracts are for services that are non-linear in nature, require complex, non-repetitive tasks or involve a
non-time-based scope of work. In these contracts, the earnings process is not fulfilled upon the achievement of milestones, but rather over the life of the contract. Evaluation
of the obligations and customer requirements on these contracts does not produce objective, quantifiable output measures that reflect the earnings process for revenue recognition. Therefore, in these
situations, we use a cost-to-cost approach to determine revenues.

A
cost-to-cost approach accurately reflects our obligations and performance on these contracts, as well as meeting the customers' expectations of service being
performed. Therefore, we believe that input measures used to measure progress toward completion on certain fixed-price projects provide a reasonable surrogate as compared to using output measures.

For
the years ended December 31, 2009, 2008 and 2007, revenues calculated using a cost-to-cost approach were $59.5 million, $75.4 million and
$68.6 million, respectively.

Revisions
to revenues, cost and profit estimates, or measurements of the extent of progress toward completion are changes in accounting estimates accounted for in the period of change
(cumulative catch-up method). Contracts typically provide for periodic billings on a monthly basis or based on contract milestones. Costs and estimated earnings in excess of billings on
uncompleted contracts represents amounts recognized as revenue that have not been billed. Unearned revenues represent amounts billed and collected for which revenues have not been recognized.

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We
record contract claims and pending change orders, including requests for equitable adjustments, or REAs, when collection of revenues is reasonably assured, which generally is when
accepted in writing by the customer. The cost to perform the work related to these claims and pending change orders, including REAs, is included in our financial statements in the period that they are
incurred and are included in our estimates of contract profitability.

A
provision for estimated losses on individual contracts is recognized in the period in which the losses are identified and includes all estimated direct costs to complete such contracts
(excluding future general and administrative costs expected to be allocated to the contracts). Monthly assessments are performed on our estimates and changes are made based on the latest information
available.

LP&D Contracts

Our LP&D services are provided primarily under unit-rate contracts. Revenues are recognized as units of materials
are processed or disposed based on the unit prices provided in the contracts.

D&D Liabilities

We have responsibility for the cost to decontaminate and decommission our facilities and related equipment, as well as the equipment
used at customer sites in the Commercial Services segment. Such costs will generally be paid upon closure of such facilities or disposal of such equipment. We are also responsible for the cost of
monitoring our Clive, Utah facility, over the post-closure period.

Accounting
guidance for asset retirement obligations requires us to record the fair value of an ARO as a liability in the period in which we incur a legal obligation associated with the
retirement of tangible long-lived assets that result from the acquisition, construction, development or normal use of the asset. We are also required to record a corresponding asset that
we depreciate over the life of the asset. After the initial measurement of the ARO, 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 obligation.

The
cost basis for our landfill assets and related obligation include landfill liner material and installation, excavation for airspace, landfill leachate collection systems,
environmental groundwater and air monitoring equipment, directly related engineering and design costs and other capital infrastructure costs. Also included in the cost basis of our landfill assets and
related obligation are estimates of future costs associated with final landfill capping, closure and post-closure monitoring activities. These costs are described
below:



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The
cost basis for our D&D assets and related obligation include costs to decontaminate, disassemble and dispose of equipment and facilities. We develop our estimates of these
obligations using input from our operations personnel, engineers and accountants. Our estimates are based on our interpretation of current requirements and proposed regulatory changes and are intended
to approximate fair value. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar work to determine the fair value of these obligations. We
recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves.

Costs
for the D&D of our facilities and equipment will generally be paid upon the closure of these facilities or the disposal of this equipment. We are obligated under our license
granted by the State of South Carolina and the Atlantic Interstate Low-Level Radioactive Waste Compact Implementation Act for costs associated with the ultimate closure of the Barnwell
Low-Level Radioactive Waste Disposal Facility in South Carolina and our buildings and equipment located at the Barnwell site (Barnwell closure). Under the terms of the Atlantic Waste
Compact Act and our license with the State of South Carolina, we are required to maintain a trust fund to cover the Barnwell closure obligation, which limits our obligation to the amount of the trust
fund.

We
are required to make significant estimates in the determination of our AROs and the related assets. Our cost estimates for final capping, closure and post-closure
activities and other D&D activities are intended to approximate fair value and are based on our interpretation of the current regulatory requirements and proposed or anticipated regulatory changes.
Where applicable, these cost estimates are based on the amount a third party would charge to perform such activities even when we expect to perform these activities internally. Because final landfill
capping, closure and post-closure obligations and decontamination and decommissioning obligations are measured using present value techniques, changes in the estimated timing of the
related activities would have an effect on these liabilities, related assets and resulting operations.

Changes
in inflation rates or the estimated costs, timing or extent of the required future capping, closure, post-closure and other D&D activities typically result in both:
(i) a current adjustment to the recorded liability and asset and (ii) a change in the liability and asset amounts to be recorded prospectively over the remaining life of the asset in
accordance with our depreciation policy. A hypothetical 1% increase in the inflation rate would have increased our D&D obligation by $2.2 million. A hypothetical 10% increase in our cost
estimate would have increased our D&D obligation by $2.6 million.

We
update our D&D and closure and post-closure cost estimates either annually or more frequently if changes in the underlying conditions occur. These estimates are based on
current
technology, regulations and burial rates. Changes in these factors could have a material impact on our estimates.

Recoverability of Long-Lived Assets, Including Goodwill

Goodwill represents the excess of costs over the fair value of net assets of businesses acquired. Goodwill is tested at the reporting
unit level at least annually for impairment and is reviewed for impairment more frequently if events and circumstances indicate that the asset might be impaired. Guidance for accounting of Goodwill
and Other Intangible Assets, requires a two-step impairment test. In the first step, we determine the fair value of the reporting unit using a discounted cash flow

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valuation
model and compare the fair value to the reporting unit's carrying value. If the fair value of the reporting unit exceeds its carrying value, including goodwill, no further testing is
required. If the fair value does not exceed the carrying value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. In the second step of the
goodwill impairment test, the implied fair value of the reporting unit's goodwill is compared to the carrying value. The implied fair value of the reporting unit's goodwill is determined as if the
reporting unit had been acquired in a business combination. If the carrying value of the reporting unit's goodwill exceeds the implied value, an impairment loss is recognized in an amount equal to the
excess.

We
estimate future cash flows at the reporting unit level using a discounted cash flow methodology by assessing each major existing contract and projecting the earnings that will be
recognized in future periods. Estimates are also made for earnings from new contracts that are anticipated based on our evaluation of future business prospects. The valuation of goodwill could be
affected if actual results differ substantially from our estimates. Circumstances that could affect the valuation of goodwill include a significant change in our business climate, decisions by our
customers to terminate our existing contracts and decisions by our customers to award to our competitors new contracts that we anticipated would be awarded to us.

Intangible
assets acquired in a business combination are measured at fair value at the date of acquisition. We assess the useful lives of other intangible assets to determine whether
events or circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset's remaining useful life is changed, the remaining carrying amount of the
intangible asset is amortized prospectively over the revised remaining useful life. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives and
reviewed for impairment whenever events or circumstances indicate that the carrying value of such assets may not be recoverable.

Since
our annual impairment test, which was completed in the second quarter of 2009, we have updated our forecasts to reflect the continued impacts of the global economic down turn and
have determined that goodwill is not impaired as of December 31, 2009. However, further changes in our forecasts or decreases in the value of our common stock could cause book values of certain
operating segments to exceed their fair values, which may result in goodwill impairment charges in future periods. As of December 31, 2009 and 2008, respectively, we had $518.8 million
and $528.3 million of goodwill and $310.2 million and $357.1 million of intangible assets with estimable useful lives on our consolidated balance sheets. We do not have any
intangible assets with indefinite useful lives.

Intangible
assets subject to amortization consist of customer relationships, licenses and permits, technology and non-compete agreements. Customer relationships, which
include the fair value of acquired customer contracts, were evaluated for each operating segment using a discounted cash flow methodology and are amortized on a straight-line basis over a
term of 2 to 12 years. Estimated future cash flows for each operating segment were derived based on detailed budgets and projections prepared by management. Licenses and permits were evaluated
for each licensed facility using a replacement cost methodology. Also, due to the unique characteristics of the Envirocare permits we also included an opportunity cost reflecting an estimate of
earnings that would be lost if we had to replace the licenses and permits as opposed to having acquired them. Licenses and permits are either amortized over the definite terms of the related
agreements or over the remaining useful lives of the related intangible asset, typically 20 to 25 years. Estimates of replacement cost were determined by management taking into consideration
the cost of labor and other costs needed to meet regulatory requirements to obtain and maintain the license or permit. Estimates of opportunity cost were determined by management after considering
estimated cash flows for the business generated with the licenses and permits offset by contribution asset charges for other assets of the business that also contribute to cash flow generation.
Technology and non-compete agreements were evaluated using a discounted cash flow methodology. Intangible technology assets are amortized on a straight-line basis over a term
of 9 to 10 years and non-compete agreements are amortized over the terms of the

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contracts.
Estimated future cash flows for each technology and non-compete agreement were derived based on detailed budgets and projections prepared by management.

Long-lived
assets such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount of excess carrying value over fair value.

Equity-Based Compensation Expense

We account for equity-based compensation payments, including grants of employee stock options, based on the fair values of the equity
instruments issued. Fair value of equity instruments issued in connection with our initial public offering were determined based on an option pricing model which takes into account various assumptions
that are subjective. Key assumptions used in the valuation included the expected term of the equity award taking into account both the contractual term of the award, the effects of employees' expected
exercise and post-vesting termination behavior, expected volatility, expected dividends and the risk-free interest rate for the expected term of the award.

In
2006 and 2005, certain members of senior management were granted profit interest units in ENV Holdings LLC, in consideration for services rendered to us. These units entitle
the holders to distributions from ENV Holdings. Certain units vested immediately upon grant and others vest over periods up to three years. These profit interest units are not convertible into common
stock of EnergySolutions, Inc. or any other equity security of EnergySolutions, Inc.
However, because these grants of profit interest units were made for services rendered to us, we recorded compensation expenses in connection with these grants.

The
grant date fair value of these units was determined using both a market approach and an income or discounted cash flow approach. As part of the market approach, we used both
comparable public companies (market multiples approach) and comparable transactions in order to estimate enterprise value. The income or discounted cash flow approach used management's assumptions for
growth in our revenues and expenses to estimate enterprise value. The resulting enterprise values as calculated under each approach were then averaged using an equal weighting to arrive at the final
enterprise value. This value was then allocated to each class of profit interest units based on each class's priority of distributions.

We
recorded compensation expense of $0.3 million, $0.6 million and $2.7 million for the years ended December 31, 2009, 2008 and 2007, respectively, which
represents the portion of the fair value of these units that vested in those periods. At December 31, 2009 there is no remaining unrecognized compensation expense associated with these units.
In addition, we have options outstanding to purchase an aggregate of 6,694,346 shares and unvested restricted shares of 545,906 as of December 31, 2009. We estimate that we will recognize
compensation expense related to the issuance of these awards of $9.2 million, $8.2 million and $1.0 million in 2010, 2011 and 2012, respectively. Our estimate of fair value for
the stock options was made using the Black-Scholes model based upon the closing stock price on the date of grant, volatility of 38.4% to 41.6%, risk-free interest rate of 1.9% to 2.7% per
year, expected life of 3.75 years to 6.25 years, and a dividend yield of 1.13% to 1.80%. We determined the volatility rate by reference to volatility rates used by certain of our public
industry peers since we do not have an established trading history of our common stock. We are currently using the simplified method to calculate expected holding periods, which is based on the
average term of the options and the weighted-average graded vesting period.

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Income Taxes

Our effective tax rate in 2009 was 22.3%, which is lower than the blended statutory rate primarily due to the effect of research and
development credits in the U.K and the U.S, offset by certain nondeductible expenses and IRS audit settlements. We anticipate that our effective tax rate in 2010, exclusive of any unusual items, will
be approximately 33% to 36%. We account for income taxes in accordance with applicable authoritative guidance for income taxes. Judgment is required in determining our provision for income taxes. In
the normal course of business, we may engage in numerous transactions every day for which the ultimate tax outcome (including the period in which the transaction will ultimately be included in taxable
income or deducted as an expense) is uncertain. Additionally, the tax returns we file are subject to audit and investigation by the Internal Revenue Service, most states in the United States and by
various government agencies representing jurisdictions outside the United States.

During
the year ended December 31, 2009, we recognized discrete income tax benefits, including adjustments to unrecognized tax benefits, of $1.1 million, primarily related
to research and development activities in the U.K. and in the U.S. During the years ended December 30, 2009, 2008 and 2007, we made income tax payments of $15.5 million,
$22.7 million, and $3.9 million respectively. Also, in 2009, the IRS settled examinations for multiple periods and entities that resulted in a combined settlement amount of
$3.5 million, most of which was a reduction to the net operating loss carryforward amounts
for those entities. We have also been notified that the Internal Revenue Service will begin an examination of the consolidated U.S. tax return for the short tax period from November 16, 2007
through December 31, 2007. That examination is scheduled to begin in early 2010.

As
of December 31, 2009 and December 31, 2008, we had $2.0 million and $0.9 million, respectively, of gross unrecognized tax benefits, which may impact our
annual effective tax rate in future years. These tax benefits were accounted for under guidance for accounting for uncertainty in income taxes. The Company and its U.S. subsidiaries are subject to
U.S. federal and state income tax. The Company is currently in various stages of multiple year examinations by Federal taxing authorities. The Company does not anticipate a significant impact to the
unrecognized tax benefits balance with respect to current tax examinations in the next 12 months, although the timing of the resolution and/or the closure on audits is highly uncertain.

Disclosure of Impact of Recently Issued Accounting Standards

Noncontrolling Interest in Consolidated Financial Statements

In December 2007, the FASB issued guidance on noncontrolling interests which establishes accounting and reporting guidance for the
noncontrolling interest in a subsidiary (formerly known as minority interest) and for the deconsolidation of a subsidiary. This guidance clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This guidance also requires presentation on the face of the consolidated
statement of income of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest, resulting in an increase to consolidated Net income. Historically, net
income attributable to noncontrolling interests was presented as minority interest expense. Under this new guidance, amounts reported as Net income attributable to noncontrolling interests are now
reported net of any applicable taxes. This guidance requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent's
owners and the interests of the noncontrolling owners of a subsidiary. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. We adopted the statement on January 1, 2009 via retrospective application of the presentation and disclosure requirements.

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Fair Value Measurements

In April 2009, the FASB issued guidance on fair value measurements and disclosures. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants under current market conditions. The new guidance requires an evaluation of whether
there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. If there has been a significant
decrease in activity, transactions or quoted prices may not be indicative of fair value and a significant adjustment may need to be made to those prices to estimate fair value. Additionally, an entity
must consider whether the observed transaction was orderly (that is, not distressed or forced). If the transaction was orderly, the obtained price can be considered a relevant, observable input for
determining fair value. If the transaction is not orderly, other valuation techniques must be used when estimating fair value. This guidance, which was adopted by the Company effective April 1,
2009, did not impact the Company's financial position, results of operations or cash flows during the year ended December 31, 2009.

In
January 2010, the FASB issued accounting guidance improving disclosures about fair value measurements, which requires reporting entities to make new disclosures about recurring or
nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases,
sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair- value measurements. This guidance is effective for annual reporting periods beginning after
December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010 and we expect its adoption to have no
impact on our consolidated financial statements.

Revenue Recognition

In October 2009, the 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 beginning
in fiscal years on or after June 15, 2010. Early adoption is permitted. We are currently evaluating the potential impact of the adoption of
this guidance but we do not expect it to have a material impact on the Company's results of operations, financial position or cash flows.

Subsequent Events

In May 2009, the FASB issued guidance on subsequent events which establishes general guidance for accounting for and disclosing
subsequent events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The guidance requires an entity to disclose the date through which
subsequent events were evaluated by management. We adopted this guidance as of April 1, 2009 and the required disclosures are presented in Note 2 to the accompanying financial
statements. This guidance does not impact the Company's financial position or results of operation as it is disclosure-only in nature.

Item 7A.    Qualitative and Quantitative Disclosures about Market Risk

Our primary market risk relates to changing interest rates. As of December 31, 2009, we had outstanding
floating-rate term loan debt of $519.1 million of which $19.1 million is currently due within the next year and outstanding borrowings against our revolving credit facility
of $5.0 million. Under our credit facilities, we are required to maintain one or more interest rate swap agreements for the aggregate notional amount of at least 33% of the outstanding
aggregate principal amount of the term loans. As of December 31, 2009, our swap agreement had a notional amount of $200.0 million and a

86

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fair
value liability of approximately $1.7 million. For further information on the swap agreement, see Note 10 to our audited consolidated financial statements included elsewhere in this
Form 10-K.

A
hypothetical interest rate change of 1% on our credit facilities would have changed interest expense for the year ended December 31, 2009 by approximately $5.2 million.
In addition, a hypothetical interest rate change of 1% on our swap agreement would have changed the fair value of the interest swap at December 31, 2009 by approximately $1.1 million.
Changes in market interest rates would impact the fair value of our long-term obligations. As of December 31, 2009 we had outstanding borrowings under our credit facilities of
$519.1 million with an approximate fair value of $516.5 million.

Prior
to our acquisition of RSMC, our exposure to foreign currency fluctuations was immaterial. Through RSMC, we earn fee income denominated in British pounds sterling.

We
have foreign currency exposure related to our operations in the United Kingdom as well as other foreign locations. This foreign currency exposure arises primarily from the translation
or 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 December 31, 2009, would cause a change in consolidated net assets of approximately $11.8 million and a change in gross profit of
approximately $6.6 million, primarily due to pound sterling-denominated exposures.

Item 8.    Financial Statements and Supplementary Data.

See pages F-1 through F-45 following the Exhibits List.

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of December 31, 2009, which is the end of the period covered by this Annual Report on
Form 10-K, 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.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting and for the
assessment of the effectiveness of internal control over financial reporting. The company's internal control over financial reporting is a process designed, as defined in
Rule 13a-15(f) under the Exchange Act, to provide reasonable assurance regarding the reliability of

87

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financial
reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles in the U.S.

In
connection with the preparation of the company's annual consolidated financial statements, management of the company has undertaken an assessment of the effectiveness of the company's
internal control over financial reporting based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("the COSO Framework"). Management's assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation,
accounting practices, and our overall control environment. Based on this assessment, management has concluded that the company's internal control over financial reporting was effective as
of December 31, 2009. We reviewed the results of management's assessment with the Audit Committee of our Board of Directors.

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 fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our
independent registered public accounting firm, Ernst & Young LLP, independently assessed the effectiveness of our internal control over financial reporting and has
issued an attestation report on our internal control over financial reporting.

Item 9B.    Other Information.

None.

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PART III

Item 10.    Directors, Executive Officers and Corporate Governance.

Information about our directors and executive officers required by this item is included in "Directors, Executive Officers and
Corporate Governance" in the Proxy Statement, which is incorporated herein by reference. A definitive Proxy Statement for our 2010 annual meeting will be filed with the Securities and Exchange
Commission on or about April 23, 2010.

Code of Ethics

Our board of directors has adopted a code of ethics that establishes the standards of ethical conduct applicable to all of our
directors, officers, employees, consultants and contractors. The code of ethics addresses, among other things, competition and fair dealing, conflicts of interest, financial matters and external
reporting, company funds and assets, confidentiality and corporate opportunity requirements and the process for reporting violations of the code of ethics, employee misconduct, conflicts of interest
or other violations. Our code of ethics is publicly available on our website atwww.energysolutions.com. Any waiver of our code of ethics with respect
to our chief executive officer, chief financial officer, controller or persons performing similar functions may only be authorized by our audit committee and will be disclosed as required by
applicable law.

Compliance with Section 16(a) of the Exchange Act

Information required by this item is included in "Additional Information" in the Proxy Statement, which is incorporated herein by
reference.

Item 11.    Executive Compensation.

Information required by this item is included in "Compensation Discussion and Analysis and Executive Compensation" in the Proxy
Statement, which is incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information required by this item is included in "Security Ownership of Certain Beneficial Owners and Equity Compensation Plan
Information" in the Proxy Statement, which is incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions and Director Independence.

Information required by this item is included in "Certain Relationships and Related Person Transactions, and Corporate Governance" in
the Proxy Statement, which is incorporated herein by reference.

Item 14.    Principal Accountant Fees and Services.

Information required by this item is included in "Pre-Approval of Audit and Non-Audit Services" in the Proxy Statement, which is
incorporated herein by reference.

89

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PART IV

Item 15.    Exhibits and Financial Statement Schedules.

Documents filed as part of this report include:



90

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 1st day of March, 2010.

ENERGYSOLUTIONS, INC.By:

/s/ MARK C. MCBRIDE Mark C. McBride Executive Vice President and
Chief Financial Officer


Power of Attorney

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Val J. Christensen and Mark
C. McBride, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual
Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated:

Name

Title

Date/s/ STEVEN R. ROGEL STEVEN R. ROGEL

Chairman of the Board of Directors

February 26, 2010/s/ VAL J. CHRISTENSEN VAL J. CHRISTENSEN

President, Chief Executive Officer and Director (Principal Executive Officer)

February 26, 2010/s/ MARK C. MCBRIDE MARK C. MCBRIDE

Executive Vice President and Chief Financial Officer (Principal Financial and Principal Accounting Officer)

February 26, 2010/s/ J. BARNIE BEASLEY, JR J. BARNIE BEASLEY, JR

Director

February 26, 2010/s/ JORDAN W. CLEMENTS JORDAN W. CLEMENTS

Director

February 26, 2010/s/ PASCAL COLOMBANI PASCAL COLOMBANI

Director

February 26, 2010


91

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Table of Contents

Name

Title

Date/s/ E. GAIL DE PLANQUE E. GAIL de PLANQUE

Director

February 26, 2010/s/ JEAN I. EVEREST, II JEAN I. EVEREST, II

Director

February 26, 2010/s/ CLARE SPOTTISWOODE CLARE SPOTTISWOODE

Director

February 26, 2010/s/ ROBERT A. WHITMAN ROBERT A. WHITMAN

Director

February 26, 2010/s/ DAVID B. WINDER DAVID B. WINDER

Director

February 26, 2010


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Table of Contents

EXHIBIT INDEX

Incorporated by ReferenceExhibit
Number

Exhibit Description

Form

Filing Date/ Period End Date2.1

Agreement and Plan of Merger, dated as of February 6, 2006, by and among EnergySolutions, LLC, Dragon Merger Corporation and Duratek, Inc.

S-1/A

5/14/20072.2

Agreement for the Sale and Purchase of the Whole of the Issued Share Capital of Reactor Sites Management Company Limited, dated as of June 6, 2007, by and among British Nuclear Fuels plc, EnergySolutionsEU Limited and EnergySolutions, LLC.

S-1/A

9/11/20073.1

Certificate of Incorporation of EnergySolutions, Inc.

S-1/A

10/30/20073.2

Bylaws of EnergySolutions, Inc.

S-1/A

10/30/20074.1

Specimen Common Stock certificate.

S-1/A

10/30/20074.2

Form of Deposit Agreement, among EnergySolutions, Inc., Computershare Trust Company, N.A., as the depositary, Computershare Shareholder Services, Inc., as the
depositary's service company, and the holders from time to time of the depositary receipts evidencing the depositary shares.

S-1/A

11/13/200710.1

Asset Sale Agreement dated as of December 11, 2009, by and between Exelon Generation Company, LLC, ZionSolutions, LLC, and EnergySolutions, LLC; Amendment to Asset Sale Agreement, dated August 17, 2009, by and between Exelon Generation Company, LLC, ZionSolutions, LLC, and
EnergySolutions, LLC**10.2

Third Amended and Restated Credit Agreement, dated as of September 23, 2009, among EnergySolutions, LLC, as borrower, EnergySolutions, Inc., as parent, the lenders from time to time party thereto and Citicorp North America, Inc.

8-K

9/25/200910.2.1

Amendment No. 1 to Third Amended and Restated Credit Agreement, dated January 14, 2010, among EnergySolutions, LLC, EnergySolutions, Inc., Citicorp North America, Inc., and the other agents and lenders party thereto

8-K

1/19/201010.3

Amended and Restated Credit Agreement, dated as of September 23, 2009, among Duratek, Inc., the lenders party thereto, Citigroup Global Markets Inc., and Citicorp North America, Inc.

8-K

9/25/200910.3.1

Amendment No. 1 to Amended and Restated Credit Agreement, dated as of January 14, 2010, among Duratek, Inc., Citicorp North America, Inc., the other loan parties thereto, and the other agents and
lenders party thereto

8-K

1/19/201010.4*

Amended and Restated Executive Employment and Non-Competition Agreement, dated as of January 9, 2007, between EnergySolutions, LLC and R Steve Creamer

S-1/A

10/30/200710.4.1*

First Amendment to Amended and Restated Executive Employment and Non-Competition Agreement, effective as of March 3, 2008, by and between EnergySolutions, LLC, ENV
Holdings LLC, and R Steve Creamer.

10-K/A

4/29/2008


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Table of Contents

Incorporated by ReferenceExhibit
Number

Exhibit Description

Form

Filing Date/ Period End Date10.5*

Executive Employment and Non-Competition Agreement, dated as of October 9, 2006, between EnergySolutions, LLC and Raul Deju

S-1/A

10/30/200710.5.1*

First Amendment to Executive Employment and Non-Competition Agreement, dated as of November 12, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Raul
Deju

S-1/A

11/13/200710.5.2*

Second Amendment to Executive Employment and Non-Competition Agreement, dated as of March 3, 2008, by and between EnergySolutions, LLC, ENV Holdings LLC and
Raul Deju

10-K/A

4/29/200810.6*

Executive Employment and Non-Competition Agreement, dated as of June 26, 2006, between EnergySolutions, LLC and Val John Christensen

S-1/A

10/30/200710.6.1*

First Amendment to Executive Employment and Non-Competition Agreement, dated as of March 19, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Val John
Christensen

S-1/A

10/30/200710.6.2*

Second Amendment to Executive Employment and Non-Competition Agreement, dated as of October 30, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Val
John Christensen

S-1/A

10/31/200710.6.3*

Third Amendment to Executive Employment and Non-Competition Agreement, dated as of March 3, 2008, by and between EnergySolutions, LLC, ENV Holdings LLC and Val
John Christensen

10-K/A

4/29/200810.7*

Executive Employment and Non-Competition Agreement, dated as of November 14, 2006, between EnergySolutions, LLC, ENV Holdings LLC and Alan Parker

S-1/A

10/30/200710.7.1*

First Amendment to Executive Employment and Non-Competition Agreement, dated as of October 30, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Alan
Parker

S-1/A

10/31/200710.7.2*

Second Amendment to Executive Employment and Non-Competition Agreement, dated as of March 3, 2008, by and between EnergySolutions, LLC, ENV Holdings LLC and
Alan Parker

10-K/A

4/29/200810.8*

Executive Employment and Non-Competition Agreement, dated as of March 23, 2006, between EnergySolutions, LLC and Philip Strawbridge

S-1/A

10/30/200710.8.1*

First Amendment to Executive Employment and Non-Competition Agreement, dated as of October 17, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Philip
Strawbridge

S-1/A

10/30/200710.8.2*

Second Amendment to Executive Employment and Non-Competition Agreement, dated as of October 30, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Philip
O. Strawbridge

S-1/A

10/31/2007


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Table of Contents

Incorporated by ReferenceExhibit
Number

Exhibit Description

Form

Filing Date/ Period End Date10.8.3*

Third Amendment to Executive Employment and Non-Competition Agreement, dated as of March 3, 2008, by and between EnergySolutions, LLC, ENV Holdings LLC and
Philip O. Strawbridge

10-K/A

4/29/200810.8.4

Letter of Separation, dated November 18, 2009, by and between EnergySolutions, LLC and Philip Strawbridge**10.9*

Form of EnergySolutions, Inc. 2007 Equity Incentive Plan

S-1/A

10/30/200710.9.1*

Form of EnergySolutions, Inc. Restricted Stock Award Agreement

S-1/A

11/13/200710.9.2*

Form of EnergySolutions, Inc. Non-Qualified Stock Option Award Agreement

S-1/A

11/13/200710.9.3*

Form of Non-Qualified Stock Option Award Agreement between EnergySolutions, Inc. and Philip Strawbridge

S-1/A

11/13/200710.10

Form of Director Indemnification Agreement

S-1/A

10/30/200710.11*

Executive Bonus Plan

S-1

7/7/200810.12

Form of Director Compensation Term Sheet

10-Q

09/30/200910.13

Letter of Appointment, dated December 18, 2009, by and between EnergySolutionsEU Limited and Clare Spottiswoode**10.14

Amended, Restated and Consolidated Site Management and Operations contract dated as of April 1, 2007, by and between The Nuclear Decommissioning Authority, Magnox Electric Limited, and Energy Sales and Trading
Limited**21.1

Subsidiaries of the registrant**23.1

Consent of Independent Registered Public Accounting Firm**24.1

Power of Attorney (Included on the Signature Page of this Annual Report on Form 10-K)31.1

Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer**31.2

Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer**32.1

Section 1350 Certifications of Chief Executive Officer And Chief Financial Officer***


*Indicates
management contract or compensatory plan or arrangement.**Filed
herewith.***Furnished
herewith.


The
registrant has omitted certain schedules in accordance with Item 601(b)(2) of Regulation S-K. The registrant will furnish the omitted schedules to the
Commission upon request.

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Table of Contents

EnergySolutions, Inc.        Index to Consolidated Financial Statements        Contents



Reports of Ernst & Young, LLP, Independent Registered Public Accounting Firm

F-2Consolidated Financial StatementsConsolidated Balance Sheets

F-4Consolidated Statements of Operations and Comprehensive Income (Loss)

F-5Consolidated Statements of Changes in Stockholders'/Member's Equity
(Deficit)

F-6Consolidated Statements of Cash Flows

F-7Notes to Consolidated Financial Statements

F-8


F-1

---





Table of Contents

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm  On Internal Control Over Financial Reporting

The
Board of Directors and Stockholders of
EnergySolutions, Inc.

We
have audited EnergySolutions, Inc.'s internal control over financial reporting as of December 31, 2009, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO criteria").
EnergySolutions, Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, EnergySolutions, Inc. maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2009, based on the COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of
EnergySolutions, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations and comprehensive income
(loss), changes in stockholders'/member's equity, and cash flows for each of the three years in the period ended December 31, 2009 and our report dated March 1, 2010 expressed an
unqualified opinion thereon.

/s/ Ernst & Young LLP


Salt
Lake City, Utah
March 1, 2010

F-2

---



Table of Contents

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders of
EnergySolutions, Inc.

We
have audited the accompanying consolidated balance sheets of EnergySolutions, Inc. as of December 31, 2009 and 2008, and
the related consolidated statements of operations and comprehensive income (loss), changes in stockholders'/member's equity, and cash flows for each of the three years in the period ended
December 31, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
EnergySolutions, Inc. at December 31, 2009 and 2008, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

As
discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for noncontrolling interests in consolidated financial statements
with the adoption of the guidance originally issued in FASB Statement No. 160,Noncontrolling Interests in Consolidated Financial Statements(codified in FASB ASC Topic 810,Consolidation)effective January 1, 2009.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
EnergySolutions, Inc.'s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP


Salt
Lake City, Utah
March 1, 2010

F-3

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Table of Contents

EnergySolutions, Inc.        Consolidated Balance Sheets        December 31, 2009 and 2008
    (in thousands of dollars, except per share information)

December 31,
2009

December 31,
2008AssetsCurrent assets:Cash and cash equivalents

$
15,913

$
48,448Accounts receivable, net of allowance for doubtful accounts


297,133


213,037Costs and estimated earnings in excess of billings on uncompleted contracts


78,898


59,545Income tax receivable


3,658


5,537Inventories


1,126


11,218Prepaid expenses


9,135


19,109Deferred income taxes


2,701


Other current assets


20,942


34,363Total current assets


429,506


391,257Property, plant and equipment, net


120,775


114,021Goodwill


518,770


528,254Other intangible assets, net


310,203


357,100Restricted cash and decontamination and decommissioning deposits


24,273


31,712Other noncurrent assets


107,648


128,368Total assets

$
1,511,175

$
1,550,712Liabilities and Stockholders' EquityCurrent liabilities:Current portion of long-term debt

$
19,071

$
2,954Accounts payable


110,247


89,513Accrued expenses and other current liabilities


167,503


177,439Deferred income taxes





2,067Unearned revenues


12,447


26,734Total current liabilities


309,268


298,707Long-term debt, less current portion


505,040


563,803Pension liability


80,306


104,897Facility and equipment decontamination and decommissioning liabilities


63,488


65,904Deferred income taxes


47,743


41,385Other noncurrent liabilities


5,168


7,197Total liabilities


1,011,013


1,081,893Commitments 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; 88,361,604 and 88,305,674 shares issued and outstanding in 2009 and 2008,
respectively


884


883Additional paid-in capital


492,541


482,042Accumulated other comprehensive income (loss)


(20,761
)

4,895Retained earnings (capital deficiency)


26,381


(20,034
)Total EnergySolutionsstockholders' equity


499,045


467,786Noncontrolling interests


1,117


1,033Total stockholders' equity


500,162


468,819Total liabilities and stockholders' equity

$
1,511,175

$
1,550,712


See accompanying notes to consolidated financial statements.

F-4

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Table of Contents

EnergySolutions, Inc.        Consolidated Statements of Operations and Comprehensive Income (Loss)        Years Ended December 31, 2009, 2008 and 2007        (in thousands of dollars, except per share information)

Year Ended December 31,2009

2008

2007Revenues

$
1,623,893

$
1,791,631

$
1,092,613Cost of revenues


(1,409,596
)

(1,544,438
)

(896,086
)Gross profit


214,297


247,193


196,527Selling, general and administrative expenses


(123,955
)

(129,430
)

(121,948
)Equity in income of unconsolidated joint ventures


7,573


3,167


1,373Income from operations


97,915


120,930


75,952Interest expense


(30,403
)

(44,595
)

(75,432
)Other income (expenses), net


(961
)

(8,723
)

1,991Income before income taxes and noncontrolling interests


66,551


67,612


2,511Income tax expense


(14,588
)

(21,098
)

(11,318
)Net income (loss)


51,963


46,514


(8,807
)Less: Net income attributable to noncontrolling interests


(1,131
)

(1,333
)

(92
)Net income (loss) attributable to EnergySolutions

$
50,832

$
45,181

$
(8,899
)Net income (loss) attributable to EnergySolutionsper share:Basic

$
0.58

$
0.51

$
(0.79
)Diluted

$
0.57

$
0.51

$
(0.79
)Shares used to calculate net income (loss) attributable to EnergySolutionsper share:Basic


88,318,024


88,303,779


11,274,422Diluted


88,436,385


88,311,231


11,274,422Pro forma net income per sharesee note 12:Basic







$
0.02Diluted







$
0.02Shares used to calculate pro forma net income per share:Basic








76,747,573Diluted








77,155,949Cash dividends declared per common share

$
0.10

$
0.10

$
Comprehensive income (loss):Net income (loss)

$
51,963

$
46,514

$
(8,807
)Foreign currency translation adjustment


(25,906
)

7,447


(182
)Change in unrecognized actuarial loss


250


(1,123
)

(1,198
)Comprehensive income (loss)


26,307


52,838


(10,187
)Comprehensive income attributable to noncontrolling interests


(1,131
)

(1,333
)

(92
)Comprehensive income (loss) attributable to EnergySolutions

$
25,176

$
51,505

$
(10,279
)


See
accompanying notes to consolidated financial statements.

F-5

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Table of Contents

EnergySolutions, Inc.        Consolidated Statements of Changes in Stockholders'/Member's Equity    
  Years Ended December 31, 2009, 2008 and 2007        (in thousands of dollars, except per share information)

Common Stock

Stockholders'
Additional
Paid-in
Capital



Accumulated
Other
Comprehensive
Income (Loss)

Retained
Earnings
(Capital
Deficiency)



Total
Stockholders'
Members
EquityMember's
Paid-in
Capital

Noncontrolling
InterestShares

AmountBalance at December 31, 2006




$


$


$
196,419

$
(49
)
$
(47,390
)
$


$
148,980Net loss

















(8,899
)

92


(8,807
)Equity-based compensation








1,839


2,512











4,351Distributions to member

















(8,917
)




(8,917
)Issuance of common stock:




















Shares issued for redemption of member's equity


75,150,000


752


198,179


(198,931
)










Shares issued for cash, net of issuance costs


13,153,500


131


271,011














271,142Shares issued to charitable organizations


2,000





46














46Distributions to noncontrolling interests




















(24
)

(24
)Change in unrecognized actuarial loss














(1,198
)







(1,198
)Foreign currency translation














(182
)







(182
)Balance at December 31, 2007


88,305,500


883


471,075





(1,429
)

(65,206
)

68


405,391Net income

















45,181


1,333


46,514Capital contribution








10,000














10,000Equity-based compensation








9,844














9,844Dividend distributions








(8,831
)







(9
)




(8,840
)Reversal of shares issued to charitable organization


(2,000
)




(46
)













(46
)Vesting of restricted stock


2,174




















Distributions to noncontrolling interests




















(850
)

(850
)Impact of consolidation of joint venture




















482


482Change in unrecognized actuarial loss














(1,123
)







(1,123
)Foreign currency translation














7,447








7,447Balance at December 31, 2008


88,305,674


883


482,042





4,895


(20,034
)

1,033


468,819Net income

















50,832


1,131


51,963Equity-based compensation








14,915














14,915Dividend distributions








(4,415
)







(4,417
)

9


(8,823
)Vesting of restricted stock


55,930


1


(1
)













Distributions to noncontrolling interests




















(1,056
)

(1,056
)Change in unrecognized actuarial loss














250








250Foreign currency translation














(25,906
)







(25,906
)Balance at December 31, 2009


88,361,604

$
884

$
492,541

$


$
(20,761
)
$
26,381

$
1,117

$
500,162


See accompanying notes to consolidated financial statements.

F-6

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Table of Contents

EnergySolutions, Inc.        Consolidated Statements of Cash Flows        Years Ended
December 31, 2009, 2008 and 2007        (in thousands of dollars)

Year Ended December 31,2009

2008

2007Cash flows from operating activitiesNet income (loss) attributable to EnergySolutions

$
50,832

$
45,181

$
(8,899
)Adjustments to reconcile net income (loss) attributable to EnergySolutionsto net cash provided by operating
activities:Net income attributable to noncontrolling interests


1,131


1,333


92Depreciation and amortization


46,188


46,424


43,230Equity-based compensation expense


14,915


9,844


4,351Foreign currency transaction (gain) loss


(661
)

16,234


Deferred income taxes


4,130


(8,739
)

8,657Write-off of debt financing fees and debt discount








4,242Amortization of debt financing fees and debt discount


4,456


3,552


3,472Loss on disposal of property, plant and equipment


12


1,262


832Unrealized loss on derivative contracts


1,465


782


600Changes in operating assets and liabilities:Accounts receivable


(71,424
)

101,327


19,907Costs and estimated earnings in excess of billings on uncompleted contracts


(19,240
)

(18,198
)

18,231Income tax receivable


1,878


20,626


(13,145
)Inventories


10,092


(649
)

556Prepaid expenses and other current assets


25,648


(32,102
)

15,769Accounts payable


13,895


(38,727
)

28,202Accrued expenses and other current liabilities


(12,621
)

(37,894
)

(12,289
)Unearned revenues


(14,313
)

(10,492
)

(6,191
)Facility and equipment decontamination and decommissioning liabilities


1,589


1,608


1,366Restricted cash and decontamination and decommissioning deposits


1,377


2,110


38,099Other noncurrent assets


26,842


(88,116
)

(1,819
)Other noncurrent liabilities


(34,008
)

87,743


7,533Net cash provided by operating activities


52,183


103,109


152,796Cash flows from investing activitiesPurchases of businesses, net of cash acquired








(199,105
)Purchases of property, plant and equipment


(24,389
)

(26,629
)

(13,312
)Purchases of intangible assets


(703
)

(680
)

Proceeds from disposition of property, plant and equipment


13


33


579Net cash used in investing activities


(25,079
)

(27,276
)

(211,838
)Cash flows from financing activitiesRepayments of long-term debt


(47,646
)

(40,210
)

(354,200
)Borrowings of long-term debt








200,000Net borrowings (repayments) under revolving credit facility


5,000





(3,000
)Dividends/distributions to stockholders


(8,823
)

(8,831
)

(8,917
)Distributions to noncontrolling interests partners


(1,056
)

(850
)

Proceeds from issuance of common stock, net of issuance costs








271,142Settlement of derivative contracts


(5,321
)

5,232


Repayments of capital lease obligations


(1,451
)

(1,533
)

(1,327
)Debt financing fees


(4,860
)

(6,434
)

(11,764
)Net cash (used in) provided by financing activities


(64,157
)

(52,626
)

91,934Effect of exchange rate on cash


4,518


(11,125
)

(1,167
)Net increase (decrease) increase in cash and cash equivalents


(32,535
)

12,082


31,725Cash and cash equivalents, beginning of period


48,448


36,366


4,641Cash and cash equivalents, end of period

$
15,913

$
48,448

$
36,366


See accompanying notes to consolidated financial statements.

F-7

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Table of Contents

EnergySolutions, Inc.        Notes Consolidated Financial Statements

(1) Description of Business

Envirocare of Utah, Inc. (predecessor) was formed in 1988 to operate a disposal facility for mixed waste, uranium mill tailings and Class A low-level
radioactive waste in Clive, Utah. In January 2005, the predecessor converted to a limited liability company, Envirocare of Utah, LLC ("Envirocare"). Immediately thereafter, the sole member of
Envirocare sold all of its member interest to ENV Holdings LLC ("ENV Holdings"). In 2006, we changed our name from Envirocare of Utah, LLC to
EnergySolutions, LLC ("we," "our," "EnergySolutions" or the "Company"). Since 2005, we have
expanded and diversified our operations through a series of strategic acquisitions, including the Decontamination and Decommissioning ("D&D") division of Scientech, LLC ("Scientech") in October
2005, BNG America, LLC ("BNGA") in February 2006, Duratek, Inc. ("Duratek") in June 2006, Safeguard International Solutions, Ltd. (renamed ESEU Services Limited ("ESEU")) in
December 2006, Parallax, Inc. (renamed EnergySolutionsPerformance Strategies) in January 2007, Reactor Sites Management Company Limited ("RSMC")
in June 2007, NUKEM Corporation ("NUKEM") in July 2007, and Monserco Limited ("Monserco") in December 2007. The operations of such acquisitions are included in our results of operations from the date
of acquisition.

We
provide our services through four segments: Federal Services ("FS"); Commercial Services ("CS"); Logistics, Processing and Disposal ("LP&D"), and International. Our Federal Services
segment derives revenues from 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 segment provides a broad range of
on-site services, including D&D, to commercial customers. Our commercial customers include power and utility companies, pharmaceutical companies, research laboratories, universities,
industrial facilities and other commercial entities with nuclear materials, as well as state agencies in the United States. Our LP&D segment provides a broad range of logistics, transportation,
processing and disposal services to government and commercial customers. This segment also operates our facilities for the safe processing and disposal of radioactive materials, including a facility
in Clive, Utah, four facilities in Tennessee and two facilities in Barnwell, South Carolina. Our acquisition of RSMC in June 2007, significantly expanded our international capabilities. Prior to our
acquisitions of RSMC in 2007 and Safeguard in 2006, we derived less than 1% of our revenues from
our international operations. Accordingly, through the first quarter of 2007, we reported results from our international operations in our Commercial Services segment. Beginning with the second
quarter of 2007, we began reporting results from our operations outside North America in a new International segment in connection with our acquisition of RSMC. Our International segment derives
revenues primarily through contracts with the Nuclear Decommissioning Authority ("NDA") in the U.K.

On
November 20, 2007, the date of the completion of our initial public offering, we completed our conversion to a corporate structure whereby
EnergySolutions, LLC converted to EnergySolutions, Inc. As a result, the member of
EnergySolutions, LLC contributed its membership equity interest for 75.2 million shares of $0.01 par value common stock of
EnergySolutions, Inc. EnergySolutions, Inc. is now organized and existing under the
General Corporation Law of the State of Delaware.

On
July 30, 2008, we completed a secondary public offering of 35 million shares of common stock offered by ENV Holdings, as selling stockholder. The underwriters of the
offering subsequently exercised their over-allotment option and purchased 5.25 million additional shares of our common stock from ENV Holdings. Following completion of these
transactions, ENV Holdings owned approximately 16.7% of our outstanding shares of common stock. We did not receive any proceeds

F-8

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(1) Description of Business (Continued)

from
the sale of shares by ENV Holdings and recognized expenses of $1.8 million for the year ended December 31, 2008.

On
February 13, 2009, ENV Holdings LLC completed a distribution of all of our shares to its members on a pro rata basis for no consideration. As a result, ENV Holdings is
no longer the beneficial owner, directly or indirectly, of any shares of our common stock.

(2) Summary of Significant Accounting Policies

(a)   Basis of Presentation and Principles of Consolidation

The accompanying Consolidated Financial Statements contain the accounts of EnergySolutions, Inc., a Delaware corporation, and its wholly wholly-owned
subsidiaries and joint ventures after eliminating all intercompany balances and transactions in consolidation. In the opinion of management, all adjustments, consisting only of normal recurring
activities, considered necessary for a fair presentation have been included. We evaluated all subsequent events through the date that we filed these financial statements in our
Form 10-K Report with the Securities and Exchange Commission. The consolidated financial statements are presented in conformity with United Stated generally accepted accounting
principles ("U.S. GAAP").

We
have majority voting rights for two of our minority-owned joint ventures. Accordingly, we have included their operations in our consolidated financial statements. We recorded the
portion of the earnings from operations which is applicable to the noncontrolling partners as net income and comprehensive income attributable to noncontrolling interests.

(b)   Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the
reported amounts of assets and liabilities and disclosures of contingencies at the date of the financial statements and revenues and expenses recognized during the reporting period. Significant
estimates and judgments made by management include: (i) proportion of completion on long-term contracts, (ii) the costs to close and monitor our landfill and D&D facilities
and equipment, (iii) recovery of long-lived assets,
including goodwill, (iv) costs for unpaid claims and associated expenses related to employee health insurance, (v) the determination of rate reserve provisions, (vi) provision for
a valuation allowance on deferred tax assets, (vii) contingencies and litigation and (viii) stock price volatility and expected forfeiture rates for stock option valuation. We base our
estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ significantly from those estimates.

(c)   Cash and Cash Equivalents

We consider all cash on deposit, money market accounts, and highly liquid debt instruments purchased with original maturities of three months or less to be cash
and cash equivalents. We maintain cash and cash equivalents in bank deposit and other investment accounts which, at times, may exceed federally insured limits.

F-9

---



Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

(d)   Accounts Receivable

Accounts receivable are recorded at the invoiced amount and generally do not bear interest. The carrying amount of accounts receivable, net of the allowance for
doubtful accounts, represents estimated net realizable value. The allowance for doubtful accounts is a valuation allowance that reflects management's best estimate of the amounts that will not be
collected. The allowance for doubtful accounts is estimated based on historical collection trends, type of customer, the age of outstanding receivables and existing economic conditions. We generally
do not require collateral for accounts receivable; however, we regularly review all accounts receivable balances and assess the collectibility of those balances. If events or changes in circumstances
indicate that specific receivable balances may be impaired, further consideration is given to the collectibility of those balances and the allowance is adjusted accordingly. Account balances are
written off against the allowance after all reasonable means of collection have been exhausted and recovery is considered remote. We have an allowance for doubtful accounts of $1.2 million and
$1.4 million as of December 31, 2009 and 2008, respectively.

(e)   Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts and Unearned Revenues

Costs and estimated earnings in excess of billings on uncompleted contracts represent amounts recognized as revenues that have not been billed. Unearned revenues
represent amounts billed and collected for which revenues have not been recognized. Contracts typically provide for the billing of costs incurred and estimated earnings on a monthly basis or based on
contract milestones. We recognize a rate reserve for an anticipated liability resulting from the difference between estimated billing rates and actual rates on certain contracts with the federal
government. This liability will be settled based upon the completion of audits of the actual rates by the applicable federal government audit agency. As of December 31, 2009 and 2008,
respectively, we have total net rate reserves of $1.9 million and $4.1 million.

Retainage
represents amounts that are billed or billable to our customers, but are retained by the customer until completion of the project or as otherwise specified in the contract. As
of December 31, 2009 and 2008, respectively, we have retainage balances of $4.4 million and $10.3 million, of which $3.8 million and $7.4 million are current and are
included in other current assets in the consolidated balance sheets. As of December 31, 2009 and 2008, respectively, $0.6 million and $2.9 million of retainage balances that are
considered long term and are included in other noncurrent assets in our consolidated balance sheets.

(f)    Inventories

Inventories are stated at the lower of cost or market using the first-in, first-out method. Market is determined on the basis of estimated
realizable values.

(g)   Property, Plant and Equipment

Property, plant and equipment are stated at cost. Equipment under capital leases is stated at the present value of minimum lease payments. Property, plant and
equipment acquired through the acquisition of a business are recorded at their estimated fair value at the date of acquisition.

F-10

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

Depreciation
on property, plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Estimated useful lives of the assets are as follows:

YearsBuildings, building improvements and land improvements


5 to 31Computer hardware and software


1 to 7Furniture and fixtures


5 to 7Machinery and equipment


5 to 10Trucks and vehicles


5 to 15


We
capitalize costs associated with the construction of disposal cells such as excavation, liner construction and drainage systems construction, as well as the asset retirement
obligation in accordance with accounting guidance for asset retirement obligations. These costs are depreciated over the capacity of the individual cells based on a per unit basis as landfill airspace
is consumed.

Equipment
held under capital leases and leasehold improvements are amortized on the straight-line method over the shorter of the lease term or estimated useful life of the
asset. Total depreciation and amortization of property, plant and equipment is $20.9 million, $18.1 million and $19.1 million for the years ended December 31, 2009, 2008
and 2007, respectively. Maintenance and repairs that do not extend the lives of the assets are expensed as incurred. We have capitalized $7.4 million and $3.3 million of software costs
during the years ended December 31, 2009 and 2008, respectively, relating to an enterprise resource planning software implementation in accordance with the accounting guidance for
capitalization of costs of computer software developed or obtained for internal use. We will continue to capitalize costs as incurred related to the software implementation and will begin depreciation
upon completion of the project in 2010.

(h)   Impairment of Long-Lived Assets

Long-lived assets such as property, plant and equipment and purchased intangibles assets subject to amortization are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount
of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is
recognized for the excess of carrying amount over the fair value of the asset, primarily determined based on future discounted cash flows.

(i)    Goodwill and Other Intangible Assets

Goodwill represents the excess of cost over the fair value of net assets of businesses acquired. Goodwill acquired in a purchase business combination and
determined to have an indefinite useful life is not amortized, but instead is tested for impairment annually or when indicators of impairment exist. Intangible assets with estimable useful lives are
amortized over their respective estimated useful lives and reviewed for impairment whenever events or circumstances indicate that the carrying value of such assets may not be recoverable.

We
evaluate goodwill at the reporting unit level at least annually for impairment and more frequently if an event occurs or circumstances change that indicate that the asset might be
impaired.

F-11

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

We
test goodwill for impairment by first comparing the carrying book value of net assets to the fair value of the reporting units. If the fair value of the reporting unit exceeds its carrying value,
including goodwill, no further testing is required. 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 sales and operating expenses,
based primarily on estimated category expansion, pricing, market segment penetration and general economic conditions. We conduct our annual impairment test as of March 31 of each year, and have
determined there to be no impairment for any of the periods presented since out last annual assessment was performed. There were no events or circumstances from the date of our assessment through
December 31, 2009 that would impact this conclusion.

(j)    Facility and Equipment Decontamination and Decommissioning Liabilities

We are responsible for the costs relating to the final capping, closure, and post-closure monitoring activities of our Clive, Utah landfill, our final
capping and closure activities of our South Carolina landfill and the costs related to the decontamination and decommissioning of our facilities and equipment in Tennessee and at certain customer
sites which qualify as asset retirement obligations ("ARO"). We capitalized the fair value of our ARO as part of the carrying amount of the long-lived asset when the obligation arises
(typically when the asset is either placed in service or when the asset first becomes contaminated by radioactive materials). The recorded asset retirement obligation represents an estimate of the
present value of the future obligation to be incurred associated with these activities.

The
cost basis for our landfill assets and related obligation include landfill liner material and installation, excavation for airspace, landfill leachate collection systems,
environmental groundwater and air monitoring equipment, directly related engineering and design costs and other capital infrastructure costs. Also included in the cost basis of our landfill assets and
related obligation are estimates of future costs associated with final landfill capping, closure and post-closure monitoring activities. These costs are described
below:



F-12

---



Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)



The
cost basis for our decontamination and decommissioning assets and related obligation include costs to decontaminate, disassemble and dispose of equipment and facilities. We develop
our estimates of these obligations using input from our operations personnel, engineers and accountants. Our estimates are based on our interpretation of current requirements and proposed regulatory
changes and are intended to approximate fair value. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar work to determine the fair value of
these obligations. We recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves.

Costs
for the decontamination and decommissioning of our facilities and equipment will generally be paid upon the closure of these facilities or the disposal of this equipment. We are
obligated under our license granted by the State of South Carolina and the Atlantic Interstate Low-Level Radioactive Waste Compact Implementation Act (the "Atlantic Waste Compact Act") for
costs associated with the ultimate closure of the Barnwell Low-Level Radioactive Waste Disposal Facility in South Carolina and our buildings and equipment located at the Barnwell site
(Barnwell Closure). Under the terms of the Atlantic Waste Compact Act and our license with the State of South Carolina, we are required to maintain a trust fund to cover the Barnwell Closure
obligation, which limits our obligation to the amount of the trust fund.

Our
cost estimates for final capping, closure and post-closure activities and other decontamination and decommissioning activities are intended to approximate fair value and
are based on our interpretation of the current regulatory requirements and proposed or anticipated regulatory changes. Where applicable, these cost estimates are based on the amount a third party
would charge to perform such activities even when we expect to perform these activities internally. Because final landfill capping, closure and post-closure obligations and decontamination
and decommissioning obligations are measured using present value techniques, changes in the estimated timing of the related activities would have an effect on these liabilities, related assets and
resulting operations.

Changes
in inflation rates or the estimated costs, timing or extent of the required future capping, closure, post-closure and other decontamination and decommissioning
activities typically result in both: (i) a current adjustment to the recorded liability and asset; and (ii) a change in the liability and asset amounts to be recorded prospectively over
the remaining life of the asset in accordance with our depreciation policy.

F-13

---



Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

(k)   Self-Insurance and Recoveries

We have retained a portion of the financial risk related to our employee health insurance plan. The exposure for unpaid claims and associated expenses, including
incurred but not reported losses,
generally is estimated by considering pending claims and historical trends and data. The estimated liability associated with settling unpaid claims is $1.8 million and $1.3 million as of
December 31, 2009 and 2008, respectively, and is included in accrued expenses and other current liabilities. Estimated insurance recoveries related to recorded liabilities are reflected as
other current assets or other long-term assets when management believes that the receipt of such amounts is probable. As of December 31, 2009 and 2008, we did not have any expected
insurance recoveries.

(l)    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 and in foreign currency
rates in relation to our US dollar denominated intercompany loan with our United Kingdom subsidiary. See Note 10 for further discussion of derivative financial instruments. We record all
derivatives at fair value on the consolidated balance sheets as either an asset or a liability. We do not meet the hedge criteria for our existing derivatives; therefore, changes in the fair value of
our derivatives are included in other income (expense), net.

(m)  Share-Based Payment

We recognized shared based compensation costs in the income statement over the instruments' vesting periods based on the instruments' fair values on the
measurement date, which is generally the date of the grant. In our share-based compensation strategy we utilize a combination of stock options and restricted stock that vest over time based on
service. For time-based stock options and restricted stock, compensation expense is recognized over the vesting period from the vesting commencement date using the
straight-line method.

We
use the Black-Scholes valuation model to estimate the fair value of stock options. Option valuation methods, including Black-Scholes, require the input of assumptions including the
risk-free interest rate, dividend rate, expected term and volatility rate. See Note 13 for further discussion regarding the assumptions used in our valuation model.

(n)   Revenues and Cost of Revenues

Revenue Recognition

We record revenues when all of the following conditions exist: (i) evidence of an agreement with our customer; (ii) work
has actually been performed; (iii) the amount of revenues is fixed or determinable and (iv) collection from our customer is reasonably assured. Provision for estimated contract losses is
recognized in full in the period in which the losses are identifiable and include all estimated direct costs to complete the contract (excludes future selling, general and administrative costs
expected to be allocated to the contract). Contract claims and change orders are included in total estimated contract revenues when it is probable that the change order will result in a bona fide
addition to contract value and can be reliably estimated. Costs incurred for bidding and obtaining contracts are expensed as incurred.

F-14

---



Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

Federal and Commercial Contracts for Services

We have contracts to provide engineering and technical support services to the United States federal government and its agencies, the
United Kingdom Nuclear Decommissioning Authority and to commercial companies. Our services are provided under cost-reimbursable award or incentive-fee, fixed-price and
unit-rate contracts. The following describes our policies for these contract types:

Cost-reimbursable award or incentive-fee contractsWe are reimbursed for allowable costs in accordance with Cost Accounting
Standards ("CAS") or contractual provisions. If our costs exceed the contract ceiling or are not allowable under the provisions of the contract or CAS, we may not be able to obtain reimbursement for
such costs. We earn award and incentive fees in addition to cost reimbursements if we meet certain contract provisions, including schedule, budget, and safety milestones. Monthly assessments are made
to measure the amount of revenues earned in accordance with established contract provisions. We receive award and incentive fees on certain contracts, which are accrued when estimable and collection
is reasonably assured.

Fixed-price and unit-rate contractsWe receive a fixed amount of revenues irrespective of the actual costs we incur. For fixed-price
contracts, our revenues are recognized using the proportional performance method of accounting using appropriate output measures, where estimable, or other measures such as proportion of costs
incurred to total estimated contract costs. For unit-rate contracts, our revenues are recognized as units are completed based on contractual unit rates.

Accounting
for revenues earned under our contracts may require assessments that include an estimate of the amount that has been earned on the contract and are usually based on the
volumes that have been processed or disposed, milestones reached or the time that has elapsed under the contract. Each of our contracts is unique with regard to scope, schedule and delivery
methodology. Accordingly, each contract is reviewed to determine the most reliable measure of completion for revenue recognition purposes. Input measures such as costs incurred to total contract costs
are used only when there are no quantifiable output measures available.

Certain
of our fixed price contracts are for services that are non-linear in nature, require complex, non-repetitive tasks or involve a
non-time-based scope of work. In these contracts, the earnings process is not fulfilled upon the achievement of milestones, but rather over the life of the contract. Evaluation
of the obligations and customer requirements on these contracts does not produce objective, quantifiable output measures that reflect the earnings process for revenue recognition. Therefore, in these
situations, we use a cost-to-cost approach to determine revenues. A cost-to-cost approach accurately reflects our obligations and performance on these
contracts, as well as meeting the customers' expectations of services being performed. Therefore, we believe that input measures used to measure progress toward completion on certain fixed price
projects provide a reasonable surrogate as compared to using output measures.

For
the years ended December 31, 2009, 2008 and 2007, revenues calculated using a cost-to-cost approach were $59.5 million, $75.4 million and
$68.6 million, respectively.

Revisions
to revenues, costs and profit estimates or measurements of the extent of progress toward completion are changes in accounting estimates accounted for in the period of change
(cumulative catch-up method). Contracts typically provide for billings on a monthly basis or based on contract milestones. Costs and estimated earnings in excess of billings on uncompleted
contracts represent

F-15

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

amounts
recognized as revenues that have not yet been billed. Unearned revenues represent amounts billed and collected for which revenues have not yet been recognized.

Change Orders and Requests for Equitable Adjustment ("REAs")

We record contract claims and pending change orders, including REAs, when the work has been performed and collection of revenues is
reasonably assured, which generally is when they are accepted in writing by the customer. The costs to perform the work related to these claims and pending change orders, including REAs, are included
in the financial statements in the period that they are incurred and are included in our estimates of contract profitability.

LP&D Contracts

We generate revenues in our LP&D segment primarily through unit-rate contracts for the shipping, processing and
disposal of radioactive materials. A unit-rate contract is essentially a fixed-price contract with the only variable being units of work performed. These contracts generally provide that
we will process and dispose of substantially all of the low-level radioactive waste generated by our customers for a fixed, pre-negotiated price per cubic foot, depending on
the type of radioactive material being disposed.

(o)   Advertising Costs

We expense advertising costs as incurred. Advertising costs are included in selling, general and administrative expenses. We incurred $4.2 million in
advertising expenses for each of the years ended December 31, 2009, 2008, and 2007.

(p)   Income Taxes

Prior to our reorganization on November 20, 2007, EnergySolutions, LLC operated as a limited
liability company and was treated as a disregarded entity owned by a partnership for federal income tax purposes. Under applicable regulations, members of a limited liability company treated as a
partnership are responsible for their individual income tax liabilities related to the limited liability company's results of operations. Accordingly, prior to that time we had not previously provided
for federal income taxes related to our results of operations, except to the extent of operations in our subsidiaries that are corporations. Because we previously generated taxable income, we included
in distributions to our member amounts sufficient to facilitate the payment of tax liabilities arising from
EnergySolutions, LLC's income. EnergySolutions, Inc. is a "C" corporation and, as such, we
are subject to federal and state corporate income taxes.

We
account for income taxes in accordance with authoritative accounting guidance. Judgment is required in determining our provision for income taxes. In the normal course of business, we
may engage in numerous transactions every day for which the ultimate tax outcome (including the period in which the transaction will ultimately be included in taxable income or deducted as an expense)
is uncertain. Additionally, the tax returns we file are subject to audit and investigation by the Internal Revenue Service, most states in the United States and by various government agencies
representing jurisdictions outside the United States.

F-16

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

We
account for unrecognized tax benefits in accordance with authoritative guidance for uncertainty in income taxes which requires us to recognize in our financial statements the impact
of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position.

Our
income tax expense and our effective tax rate are determined from earnings before income taxes less net income attributable to the noncontrolling interest as a result of our adoption
of new authoritative guidance related to consolidations.

(q)   New Accounting Pronouncements

Noncontrolling Interest in Consolidated Financial Statements

In December 2007, the FASB issued guidance on noncontrolling interests which establishes accounting and reporting guidance for the
noncontrolling interest in a subsidiary (formerly known as minority interest) and for the deconsolidation of a subsidiary. This guidance clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This guidance also requires
presentation on the face of the consolidated statement of income of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest, resulting in an increase to
consolidated net income. Historically, net income attributable to noncontrolling interests was presented as minority interest expense. Under this new guidance, amounts reported as net income
attributable to noncontrolling interests are now reported net of any applicable taxes. This guidance requires expanded disclosures in the consolidated financial statements that clearly identify and
distinguish between the interests of the parent's owners and the interests of the noncontrolling owners of a subsidiary. This guidance is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. We adopted the statement on January 1, 2009 via retrospective application of the presentation and disclosure requirements.

Fair Value Measurements

In April 2009, the FASB issued guidance on fair value measurements and disclosures. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants under current market conditions. The new guidance requires an evaluation of whether
there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. If there has been a significant
decrease in activity, transactions or quoted prices may not be indicative of fair value and a significant adjustment may need to be made to those prices to estimate fair value. Additionally, an entity
must consider whether the observed transaction was orderly (that is, not distressed or forced). If the transaction was orderly, the obtained price can be considered a relevant, observable input for
determining fair value. If the transaction is not orderly, other valuation techniques must be used when estimating fair value. This guidance, which was adopted by the Company effective April 1,
2009, did not impact the Company's financial position, results of operations or cash flows during the year ended December 31, 2009.

F-17

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

Revenue Recognition

In October 2009, the 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 beginning
in fiscal years on or after June 15, 2010. Early adoption is permitted. We are currently evaluating the potential impact of the adoption of
this guidance but we do not expect it to have a material impact on the Company's results of operations, financial position or cash flows.

Subsequent Events

In May 2009, the FASB issued guidance on subsequent events which establishes general guidance for accounting for and disclosing
subsequent events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The guidance requires an entity to disclose the date through which
subsequent events were evaluated by management. We adopted this guidance as of April 1, 2009 and the required disclosures are presented in Note 2 to the accompanying financial
statements. This guidance does not impact the Company's financial position or results of operation as it is disclosure-only in nature.

(r)   Commitments and Contingencies

Liabilities for loss contingencies including environmental remediation costs arising from claims not within the scope of authoritative accounting guidance for
asset retirement obligations, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or
remediation can be reasonably estimated. Recoveries for environmental remediation costs from third parties are recorded when agreed upon with a third party.

(s)   Income (Loss) Per Share

Following our corporate reorganization, which occurred in connection with the completion of our initial public offering on November 20, 2007, we began
conducting our business through EnergySolutions, Inc., a newly formed corporation and holding company. Basic net income (loss) per share is
computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income by the
weighted-average number of common shares outstanding during the period and potentially dilutive common stock equivalents. Potential common stock equivalents that have been issued by us relate to
outstanding stock option awards and unvested restricted stock awards and are determined using the treasury stock method.

(t)    Unaudited Pro Forma Income (Loss) Per Share

The unaudited pro forma net income (loss) per share reflects the effects related to our reorganization from a limited liability company to a "C" corporation, the
issuance of our common stock in connection with our initial public offering and an assumed effective tax rate of 38%.

F-18

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

(u)   Reclassifications

Certain amounts for prior periods have been reclassified to conform to the current year presentation. Prior to the fourth quarter of 2009, we included equity in
income of unconsolidated joint ventures in other income (expense), net. During the fourth quarter of 2009, we reclassified these amounts from other income (expense), net, to operating income in the
accompanying consolidated statements of operations. Accordingly, for the years ended December 31, 2009, 2008 and 2007, income from operations was increased by $7.6 million,
$3.2 million and $1.4 million, respectively, as a result of the reclassification. Income from unconsolidated joint ventures is included in our Federal Services segment operations.

We
also reclassified $6.4 million from unearned revenues to accrued expenses and other current liabilities as of December 31, 2008 to conform to the current year
presentation.

(3) Inventories

Inventories consist of the following as of December 31, 2009 and 2008 (in thousands):

December 31,
2009

December 31,
2008Parts and supplies

$
676

$
517Work in process


450


3,050Finished goods





7,651$
1,126

$
11,218


(4) Property, Plant and Equipment

Property, plant and equipment consist of the following as of December 31, 2009 and 2008 (in thousands):

December 31,
2009

December 31,
2008Land and land improvements

$
26,540

$
25,319Buildings and improvements


32,137


31,293Computer hardware and software


8,155


9,672Landfill


30,279


28,261Furniture and fixtures


4,088


3,960Machinery and equipment


71,235


61,942Trucks and vehicles


12,955


7,452Leasehold improvements


4,564


4,230Capital leases


4,904


4,913Construction in progress


20,635


10,520215,492


187,562Less accumulated depreciation and amortization


94,717


73,541$
120,775

$
114,021


F-19

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(5) Goodwill and Other Intangible Assets

As of December 31, 2009 and 2008, we had recorded $518.8 million and $528.3 million of goodwill
related to the acquisitions of Envirocare, Scientech, Duratek, BNGA, ESEU, Parallax, RSMC, Nukem and Monserco. During 2008, we recorded additional goodwill of $2.3 million related to certain
income tax uncertainties in connection with the purchased entities.

In
connection with our acquisition of ESEU in December 2006 and RSMC in June 2007 in the U.K., we recognized Goodwill for £4.7 million and
£27.9 million, respectively. These amounts are translated into U.S. dollars at the exchange rate in affect at the balance sheet date. The related translation gains and losses are
included as a separate component of stockholders' equity as comprehensive income in the consolidated balance sheets. For the year ended December 31, 2009 we recorded $9.5 million
translation losses related to goodwill denominated in foreign currencies.

We
completed our annual goodwill impairment test as of March 31, 2009 and we concluded that no impairment has occurred and the fair value of each reporting unit exceeded its
carrying value; thus no impairment was recognized. As of December 31, 2009, there were no events or circumstances that would indicate that our assets might be impaired.

Other
intangible assets subject to amortization consist principally of amounts assigned to permits, customer relationships, non-compete agreements and technology. We do not
have intangible assets that are not subject to amortization. Other intangible assets as of December 31, 2009 and 2008 consist of the following (in thousands):

As of December 31, 2009

As of December 31, 2008Gross
Carrying
Amount

Accumulated
Amortization

Weighted
Average
Remaining
Useful Life

Gross
Carrying
Amount

Accumulated
Amortization

Weighted
Average
Remaining
Useful LifePermits

$
239,059

$
(46,845
)
19.8 years

$
239,059

$
(36,995
)
20.6 yearsCustomer relationships


160,106


(51,830
)
8.2 years


182,436


(38,157
)
9.1 yearsTechnology and other


15,183


(5,492
)
6.0 years


14,479


(3,930
)
6.7 yearsNon competition


1,030


(1,008
)
0.4 years


1,030


(822
)
0.9 yearsTotal amortizable intangibles

$
415,378

$
(105,175
)
15.3 years

$
437,004

$
(79,904
)
15.5 years


Amortization
expense was $25.3 million, $28.3 million and $24.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. During the year
ended December 31, 2009, the Company determined that it had inappropriately applied authoritative guidance related to intangible assets and goodwill denominated in foreign currencies. As such,
during the year ended December 30, 2009, the Company recorded $0.6 million to reduce amortization expense recorded in previous periods prior to 2009. In addition, during the year ended
December 31, 2009 we recorded $22.3 million translation losses related to intangible assets denominated in foreign currencies.

Estimated
annual amortization expense for each of the next five years is as follows (in thousands):

2010

2011

2012

2013

2014Estimated annual amortization expense

$
27,712

$
25,692

$
25,631

$
25,556

$
24,728


F-20

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(6) Senior Credit Facilities

On September 23, 2009, we entered into a Third Amended and Restated Credit Agreement, as subsequently amended on January 14, 2010 (the "Amended ES Credit Agreement") with
Citicorp North America, Inc. ("CNAI") as administrative agent and collateral agent. Concurrently with the entry into the Amended ES Credit Agreement, Duratek, Inc., a wholly-owned
subsidiary of the Company, entered into an Amended and Restated Credit Agreement, as subsequently amended on January 14, 2010 (the "Amended Duratek Credit Agreement" and together with the
Amended ES Credit Agreement, the "Amended Credit Agreements") with CNAI. The Amended Credit Agreements amend, restate and supersede the credit agreements dated June 7, 2006 and subsequent
amendments with CNAI and the
lenders identified therein. The January 14, 2010 amendment increased the maximum credit support facility for the Zion Station transaction from $50 million to $200 million.

Our
credit facilities consist of a $75.0 million revolving credit facility, of which $5.0 million was outstanding as of December 31, 2009, and which matures on
June 7, 2011, term-loan facilities totaling $770.0 million, which mature on June 7, 2013, and synthetic letter of credit facilities totaling $100.0 million,
which expire on June 7, 2013. The revolving credit facility includes a sublimit of $60.0 million for letters of credit of which $10.8 million in letters of credit were issued as
of December 31, 2009. The synthetic letter of credit facilities had a $100.0 million issued as of December 31, 2009.

As
amended, borrowings under the credit facilities bear interest as follows:



Borrowings
under our credit facilities bear interest at variable rates. As of December 31, 2009 and December 31, 2008, the interest rate of borrowings under our
term-loan facilities was 4.01% and 4.14% respectively.

The
obligations under the credit facilities are unconditional and irrevocably guaranteed, subject to certain exceptions, by each of our existing and subsequently acquired or organized
domestic subsidiaries. In addition, the credit facilities and such guarantees are secured on a first priority basis by security interests (subject to permitted liens as defined in the credit
agreements governing the credit facilities) in substantially all tangible and intangible assets owned by us and each of our domestic

F-21

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(6) Senior Credit Facilities (Continued)

subsidiaries,
subject to certain exceptions, including limiting pledges of 65% of the equity interests of first-tier foreign subsidiaries.

According
to the terms of the credit agreements, at the end of each calendar quarter, we are required to make scheduled repayments of the term loans of approximately $1.4 million,
adjusted for optional prepayments made, provided that the final installment shall be equal to the amount outstanding of the term loan facilities.

We
are generally also required to prepay borrowings under the credit facilities with (1) 100% of the net proceeds we receive from non-ordinary course asset sales or as
a result of a casualty or condemnation, subject to reinvestment provisions, (2) 100% of the net proceeds we receive from the issuance of unsecured debt obligations other than specified debt
obligations (or if our total leverage ratio is less than 2.0 to 1.0, then 50% of net proceeds is applied) and (3) the excess, if any, of 50% (or, if our leverage ratio is less than 3.0 and
greater than 1.0, 25%) of excess cash flow (as defined in the credit agreements) reduced by the aggregate amount of term loans optionally prepaid during the applicable fiscal year. Under the credit
facilities, we are not required to prepay borrowings with excess cash flow if our leverage ratio is less than or equal to 1.0. As of December 31, 2009, we have mandatory principal repayments
based on our excess cash flow and scheduled repayments of $19.1 million due within the next 12 months.

As
amended, the credit facilities also require us to maintain certain financial ratios, including a maximum leverage ratio (based upon the ratio of total consolidated indebtedness to
consolidated operating cash flow), a maximum first-lien leverage ratio (based upon the ratio of first-lien indebtedness to consolidated operating cash flow) and a minimum cash
interest coverage ratio (based upon the ratio of consolidated operating cash flow to consolidated cash interest expense), which are tested quarterly. Based on the revised formulas set forth in the
Amended Credit Agreements, we are required to maintain a maximum leverage ratio of 4.0 from the quarter ending December 31, 2009 through the quarter ending December 31, 2010 and 3.5 from
the quarter ending March 31, 2011 until maturity. We are required to maintain a maximum first-lien leverage ratio of 3.75 through the quarter ending December 31, 2009, 3.5
for the quarters ending March 31, 2010 through December 31, 2010, 3.25 for the quarter ending March 31, 2011 and 3.0 for quarters ending June 30, 2011 through the maturity
date. We are required to maintain a minimum cash interest coverage ratio of 2.75 through the quarter ending December 31, 2009 and 3.0 from the quarter ending March 31, 2010 through the
maturity date. Failure to comply with these financial ratio covenants would result in a default under our credit facilities and, absent a waiver or an amendment from the lenders, preclude us from
making further borrowings under our credit facilities and permit the lenders to accelerate all outstanding borrowings under the credit facilities. As of December 31, 2009, our total
leverage, first-lien leverage and interest coverage ratios were 3.34, 3.34 and 6.09, respectively.

The
credit facilities also contain 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 credit facilities, we are permitted maximum annual capital expenditures of
$30.0 million for 2009 and $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 credit facilities contain events of default for non-payment of principal
and interest when due, a cross-default provision with respect to other

F-22

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(6) Senior Credit Facilities (Continued)

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 credit facilities. Capital
expenditures for the year ended December 31, 2009 and 2008 were $24.4 million and $26.6 million respectively. As of December 31, 2009, we were in compliance with all of the
covenants under our credit agreements.

On
January 14, 2010 we amended our credit facility to provide us with adequate credit support capacity to facilitate the Exelon transaction, including permitting us to obtain
credit support in an aggregate amount of up to $200.0 million in connection with our agreement with Exelon Generation Company LLC (the "Exelon Agreement") to dismantle Exelon's Zion
nuclear facility located in Zion, Illinois ("Zion Station"), which ceased operation in 1998. Such credit support may take the form of (i) incremental commitments under the Amended ES Credit
Agreement with respect to a letter of credit facility (the "Zion Letter of Credit Facility") and/or (ii) a letter of credit, performance or fidelity bond or related obligation by a third party
support provider (the "Zion Credit Support Obligation"). Each of the Zion Letter of Credit Facility and Zion Credit Support Obligation will be secured pari passu on the same collateral securing the
obligations under the Credit Agreements and shall mature up to one year after its establishment (with two one-year auto-renewal extension provisions) but shall expire prior to
the term loan maturity date. The Credit Agreements also include additional loan covenants and exceptions related to the Zion Acquisition.

Our
obligations under the credit facilities continue to be guaranteed by the Company and, subject to certain exceptions, each of the Company's direct or indirect domestic subsidiaries
and are secured by a lien on substantially all of the assets of the Company and each direct or indirect domestic subsidiary. In the event of default, the lenders have standard creditor remedies,
including the right to foreclose on pledged assets.

During
the years ended December 31, 2009 and 2008, we made principal repayments totaling $47.6 million and $40.2 million, respectively, on the outstanding term loan
facilities. During the years ended December 31, 2009, 2008 and 2007, we made cash interest payments of $25.8 million, $41.3 million, $68.9 million, respectively

The
following table summarizes the aggregate maturities of our long-term debt as of December 31, 2009 (in thousands):

Year ending December 31,2010

$
19,0712011


10,5672012


5,5672013


488,906$
524,111


The
Amended Credit Agreement includes provisions for additional credit facilities and other changes in order to facilitate the completion of the Zion Station transaction and replaces the
earlier June 2008 Amendment Agreements in this respect. It also provides for an incremental facility commitment for the Zion transaction of up to $200.0 million, inclusive of any letter of
credit obligations. Accordingly, the completion of the Zion Station acquisition is dependent among other things, on the continued recovery and stabilization of the value of the decommissioning fund.

F-23

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(6) Senior Credit Facilities (Continued)

During
the years ended December 31, 2009, 2008 and 2007, we have paid fees of approximately $4.9 million, $6.4 million and $11.8 million to the lenders to
obtain amendments of our credit facilities, which are being amortized over the remaining term of the credit facilities.

(7) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

December 31,
2009

December 31,
2008Accrued project costs

$
98,791

$
95,746Salaries and related expenses


38,208


44,918VAT and other sales taxes payable


1,185


1,219Vendor payables not yet invoiced


4,390


6,284Due to State of South Carolina


5,320


7,951Waste taxes and fees payable


4,798


4,378Transportation and demurrage


4,960


4,409Other accrued expenses


9,851


12,534$
167,503

$
177,439


(8) Facility and Equipment Decontamination and Decommissioning

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

December 31,
2009

December 31,
2008Facilities and equipment AROClive, UT

$
26,039

$
24,134Facilities and equipment AROother


25,497


22,716Total facilities and equipment ARO


51,536


46,850Barnwell Closure


11,952


19,054$
63,488

$
65,904


Our
ARO obligation is based on a cost estimate for a third-party to perform the D&D work. This estimate is inflated, using an inflation rate, to the expected time at which the D&D
activity will occur, and then discounted back, using a discount rate, to the present value. The inflation rate and credit-adjusted risk-free discount rate used to calculate the ARO
estimate is as follows:

Inflation
Rate

Credit-Adjusted
Risk-Free
Discount RateDecember 31, 2009


0.24
%
2.66%6.77%December 31, 2008


4.26
%
4.57%8.82%


Subsequent
to the initial measurement of the ARO, 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

F-24

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

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

obligations.
The following is a reconciliation of our facility and equipment ARO for 2009 and 2008 (in thousands):

2009

2008Beginning balance

$
46,850

$
48,225Accretion expense


1,589


1,608Liabilities incurred during the year


609


299Liabilities settled during the year


(110
)

(155
)ARO estimate adjustments


2,598


(3,127
)Balance at December 31

$
51,536

$
46,850


The
$2.6 million increase in the 2009 ARO estimate is primarily due to increased RS Means rates for labor and equipment. The $3.1 million decrease in the 2008 ARO estimate
is primarily due to an update of industry specific labor rates.

We
are required to deposit cash relating to our D&D obligation in the form of a restricted cash account, a deposit in escrow or in a trust fund. 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 relating to our Clive, Utah facility. Accordingly, we have noncurrent restricted cash of $0.5 million and
$2.1 million as of December 31, 2009 and 2008, respectively, included in restricted cash and decontamination and decommissioning deposits in the accompanying balance sheets. In addition,
we have purchased insurance policies to fund our obligation to clean and remediate our Tennessee facilities and equipment. One of these policies requires us to place a cash deposit in escrow. The cash
deposit in escrow was $11.7 million and $10.6 million as of
December 31, 2009 and 2008, respectively. 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
December 31, 2009 and 2008 was $12.0 million and $19.1 million, respectively, included in restricted cash and decontamination and decommissioning deposits in the accompanying
consolidated balance sheets.

Although
we are required to provide assurance to satisfy some of our D&D obligations in the form of insurance policies, restricted cash accounts, escrows or trust funds, these assurance
mechanisms do not affect the amount of our D&D liabilities as calculated under accounting guidance for asset retirement obligations because they do not extinguish our D&D liabilities.

(9) Noncontrolling Interests

Effective November 1, 2007, we obtained majority voting rights for one of our minority owned joint ventures. Accordingly, we have reported its operations in our consolidated
financial statements from November 1, 2007. Additionally, effective March 14, 2008, we obtained majority voting rights for another one of our minority-owned joint ventures. Accordingly,
we have reported its operations in our consolidated financial statements from March 14, 2008. 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 years ended December 31, 2009, 2008 and 2007 was $1.1 million, $1.3 million and $0.1 million,

F-25

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(9) Noncontrolling Interests (Continued)

respectively.
Distributions to noncontrolling interest shareholders were $1.1 million and $0.9 million for the years ended December 31, 2009 and 2008.

(10) Derivative Financial Instruments

We have entered into derivative contracts to help offset our exposure to movements in interest rates in relation to our variable rate debt. These contracts are not designated as
accounting hedges. We do not use interest rate derivatives for trading or speculative purposes. On July 1, 2005, we entered into an interest rate swap agreement with a notional amount of
$588.0 million at inception and declined each quarter over the life of the contract in proportion to our reduction in the outstanding balance of the related long-term debt under the
original credit agreement and, subsequently, the existing senior credit facilities. The contract terminated on October 1, 2008.

On
December 18, 2008, we entered into a new interest rate swap agreement with a notional amount of $200.0 million. As of December 31, 2009 and 2008, the fair value
liability of the interest rate swap contract was $1.7 million and $0.3 million, respectively. We realized losses related to the expired contract in the amount of $2.8 million
during the year ended December 31, 2008. Realized and unrealized gains and losses resulting from adjustments to the fair value of the contracts are included in other income (expenses), net, and
resulted in a net loss of $1.5 million, $2.5 million and $0.7 million for the years ended December 31, 2009, 2008 and 2007 respectively.

In
addition, we have foreign currency exposure related to our operations in the U.K. as well as other foreign locations. Exchange gains and losses resulting from this exposure are
included in other income (expenses), net, in the accompanying consolidated statements of operations. During the three years ended December 31, 2009, 2008 and 2007, we recognized a net gain of
$0.7 million and net loss of $16.1 million and $0.8 million, respectively.

We
have entered into derivative contracts to help offset our exposure to movements in foreign currency rates in relation to our U.S. dollar denominated intercompany loan with our U.K.
subsidiary. This foreign currency derivative contract was not designated as an accounting hedge. The contract terminated on December 23, 2009. For the years ended December 31, 2009 and
2008, we realized a net loss of $5.3 million and a net gain of $8.1 million, respectively, related to our foreign currency derivative contracts.

Realized
and unrealized gains and losses resulting from adjustments to the fair value of the contracts are included in other income (expense), net and resulted in a net gain of
$7.5 million and a net loss of $0.4 million for the years ended December 31, 2008 and 2007, respectively. We had no unrealized gains or losses on foreign currency derivative
contracts for the year ended December 31, 2009.

(11) Fair Value Measurements

In 2008, the Company implemented the accounting requirements for financial assets and financial liabilities reported at fair value and related disclosures. Effective January 1,
2009, the Company prospectively implemented the accounting requirements for non-financial assets and non-financial liabilities reported or disclosed at fair value. The
requirement defines fair value, establishes a three level hierarchy for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.
Level 1 inputs are quoted prices (unadjusted) in active

F-26

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(11) Fair Value Measurements (Continued)

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. As of December 31, 2009 and
December 31, 2008, we had no assets or liabilities considered to be Level 1 or Level 3.

The
carrying value of accounts receivable, inventories, prepaid assets, accounts payable, accrued expenses and unearned revenues approximate their fair value principally because of the
short-term nature of these assets and liabilities.

The
fair market value of our debt is based on quoted market prices from the over-the-counter restricted market. As of December 31, 2009 and
December 31, 2008, we had outstanding term loans with carrying amounts of $519.1 million and $566.8 million and with fair values of approximately $516.5 million and
$430.7 million, respectively.

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 foreign currency derivative and interest rate swap approximates fair value. These instruments are included in accrued expenses and other current
liabilities and other noncurrent liabilities in the accompanying balance sheets and are classified as Level 2 under the fair value hierarchy. As of December 31, 2009 and 2008 the fair
values of our interest rate and foreign currency derivative contracts outstanding were (in thousands):

December 31,
2009

December 31,
2008LiabilitiesFair value of derivative contractsshort term

$


$
521Fair value of derivative contractslong term


1,726


261


(12) Income (Loss) Per Share

Basic net income per share is computed by dividing net income attributable to EnergySolutionsby the weighted-average number of common
shares outstanding during the period. Diluted net income per share is computed by dividing net income attributable to EnergySolutionsby the
weighted-average number of common shares outstanding during the period and potentially dilutive common stock equivalents. Potentially dilutive 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.

F-27

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

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

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

2009
Historical

2008
Historical

2007
Historical

2007
Unaudited
Pro forma(1)Weighted average common sharesbasic


88,318,024


88,303,779


11,274,422


76,747,573Dilutive effect of restricted stock and stock options


118,361


7,452





408,376Weighted average common sharesdiluted


88,436,385


88,311,231


11,274,422


77,155,949Anti-dilutive securities not included above


5,777,084


5,698,378


5,614,982





(1)Unaudited
pro forma adjusted to reflect common stock outstanding assuming our reorganization from a limited liability company to a "C" corporation occurred
on the first day of the year.


(13) Equity-Based Compensation

Profit Interests

In prior years, certain members of our management were granted profit interest units in ENV Holdings in consideration for services
rendered during the vesting period. These units do not represent ownership in ENV Holdings but rather these units entitle the holders to distributions from ENV Holdings if a distribution is paid.
There were several classes of units granted
and each successive class carries a lower priority on distributions. Certain units vest immediately upon grant and others vest over periods up to three years. We estimated the fair value at grant date
of the units issued using both a market and an income approach and recorded compensation expense of $0.3 million, $0.6 million and $2.7 million for the years ended
December 31, 2009, 2008 and 2007, respectively, which represents the portion of the fair value of these units that vested in those periods. At December 31, 2009 there is no remaining
unrecognized compensation expense associated with these units.

Stock Options and Restricted Stock Grants

In connection with our initial public offering, we adopted the
EnergySolutions, Inc. 2007 Equity Incentive Plan (the "Plan"). The Plan authorizes our Board of Directors to grant stock options and restricted
stock 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. Compensation costs
related to options and restricted stock granted under the Plan are included in both cost of revenues and selling, general and administrative expenses in the consolidated statement of operations. We
recorded non-cash compensation expense related to our stock option and restricted stock plan of $14.6 million, $9.1 million and $1.6 million for the years ended
December 31, 2009, 2008 and 2007, respectively. At December 31, 2009, there were 3,141,644 shares available for future issuance under the Plan.

F-28

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(13) Equity-Based Compensation (Continued)

The
fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The key assumptions used in the Black-Scholes model for options
granted during 2009, 2008 and 2007 were as follows:

2009

2008

2007Expected life of option (years)

3.75 to 6.25


3.75


2.5 to 3.75Risk-free interest rate

1.9% to 2.7%


2.0% to 3.1%


3.8% to 3.9%Expected volatility

38.4% to 41.6%


35%


35%Expected dividend yield

1.13% to 1.80%


0.40% to 1.00%


0.43%


The
expected life of the options represents the period of time that the options granted are expected to be outstanding. We are currently using the simplified method to calculate expected
holding periods, which is based on the average term of the options and the weighted-average graded vesting period. The risk-free rate is based on the U.S. Treasury rate for the expected
life at the time of grant. Expected volatility is based on the average long-term implied volatilities of peer companies as we have limited trading history beginning November 15,
2007 to present. Our expected forfeiture rate is based on rates experienced by us since the date of our IPO as well as our expectations of future forfeiture rates and represents management's best
estimate of forfeiture rates that we expect to occur.

A
summary of stock option activity for the years ended December 31, 2009 and 2008 is presented below:

Options

Weighted
average
exercise price

Weighted
average
remaining
life (years)

Aggregate
intrinsic value(in thousands)Outstanding, December 31, 2007


5,727,560

$
23.00


4.9

$
Granted


191,300


22.21


4.3


Exercised











Forfeited or expired


(293,430
)

22.78


3.9


Outstanding, December 31, 2008


5,625,430


22.34


3.9


Granted


1,525,000


5.76


5.4


4,187Exercised











Forfeited or expired


(456,084
)

20.58





Outstanding, December 31, 2009


6,694,346


19.44


4.2


4,187Options vested and expected to vest, December 31, 2009


6,003,204


19.39


4.2


3,652Options exercisable, December 31, 2009


2,641,689


22.99


2.9





As
of December 31, 2009, we had $16.4 million of unrecognized compensation expense related to outstanding stock options, which will be recognized over a weighted-average
period of 2.0 years. The weighted average grant date fair value of options granted during 2009, 2008 and 2007 was $1.98, $6.42 and $7.09, respectively. No options were exercised during 2009 or
2008.

F-29

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(13) Equity-Based Compensation (Continued)

A
summary of restricted stock activity for the years ended December 31, 2009 and 2008 is presented below:

Shares

Weighted average
grant-date
fair valueNon-vested shares, December 31, 2007


6,522

$
23.00Granted


33,637


6.47Vested


(2,174
)

23.00Forfeited





Non-vested shares, December 31, 2008


37,985


9.15Granted


583,851


5.90Vested


(55,930
)

8.77Forfeited


(20,000
)

5.55Non-vested shares, December 31, 2009


545,906


5.79


As
of December 31, 2009, there was $2.0 million of unrecognized compensation cost related to non-vested restricted stock which is expected to be recognized over
a weighted-average period of 2.4 years.

In
December 2009, the Board of Directors modified the terms of the stock option and restricted stock awards granted to a former executive allowing his options to continue to vest after
his termination date. Accordingly, the Company recognized $2.6 million in compensation expense during the year ended December 31, 2009.

(14) Income Taxes

Prior to the completion of our initial public offering on November 20, 2007, our operations consisted of both a limited liability company, which is not taxed as a separate entity,
and corporate subsidiaries, that are subject to taxation under the provisions of the Internal Revenue Code. Concurrent with the completion of our initial public offering, we began doing business as

F-30

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(14) Income Taxes (Continued)

EnergySolutions, Inc., a taxable corporate entity. Income taxes for the years ended December 31, 2009, 2008 and 2007 consist of the
following (in thousands):

For the Year Ended December 31,2009

2008

2007Current:Federal

$
6,744

$
11,499

$
(1,110
)State


1,326


2,748


(163
)Foreign


2,388


15,590


3,93410,458


29,837


2,661DeferredFederal


3,311


1,310


8,826State


(1,178
)

(933
)

1,114Foreign


1,997


(9,116
)

(1,283
)4,130


(8,739
)

8,657$
14,588

$
21,098

$
11,318


Income
taxes are reconciled to the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes as follows (in thousands):

2009

2008

2007Federal income taxes at statutory rate

$
22,897

$
23,198

$
847Non-taxable entities








(289
)State income taxes, net of federal tax benefit


96


1,180


618U.K. research and development


(11,369
)

(4,987
)

U.S. research and development


(1,422
)




Change in taxable status of LLC








9,942Foreign tax rate differential


(1,096
)

(892
)

Disallowed and excess compensation


1,000


2,334


35Change in valuation allowance


(577
)

196


768IRS settlements


3,507





Change in contingency reserve


1,101





Other


451


69


(603
)$
14,588

$
21,098

$
11,318


F-31

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(14) Income Taxes (Continued)

The
significant components of our deferred tax assets and liabilities as of December 31, 2009 and 2008 consist of the following (in thousands):

December 31,
2009

December 31,
2008Deferred tax assetscurrent:Accrued compensation

$
3,703

$
3,600Inventory capitalized costs


9


220Accrued expenses


7,553


8,224Allowance for bad debt


475


536Net operating loss carryforwards


38


226Other


827


287Deferred tax assetscurrent


12,605


13,093Valuation allowance


(398
)

(464
)Deferred tax assetscurrent, net of valuation allowance


12,207


12,629Deferred tax liabilitiescurrent:Prepaid expenses


(1,323
)

(4,549
)Deferred revenue


(8,183
)

(10,147
)Net deferred tax liabilitiescurrent

$
2,701

$
(2,067
)Deferred tax assetsnoncurrent:Asset retirement obligations

$
12,328

$
11,746Accrued rate and contract reserves


547


1,646Operating rights


1,065


1,261Stock compensation


7,070


3,465AMT credit carryover


444


444Net operating loss carryforwards


12,734


17,825Other


391


2,763Deferred tax assetsnon current


34,579


39,150Valuation allowance


(1,233
)

(1,743
)Deferred tax assetsnoncurrent, net of valuation allowance


33,346


37,407Deferred tax liabilitiesnoncurrent:Plant, equipment and intangible assets principally due to differences in depreciation and amortization


(73,685
)

(76,028
)Partnership investments


(343
)

(1,008
)Reclamation


(6,724
)

(1,707
)Other


(337
)

(49
)Net deferred tax liabilitiesnoncurrent

$
(47,743
)
$
(41,385
)Total deferred tax assets

$
45,553

$
50,036Total deferred tax liabilities

$
90,595

$
93,488


F-32

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(14) Income Taxes (Continued)

For
the years ended December 31, 2009 and December 31, 2008 net operating loss carryforwards were $28.0 million and $46.2 million, respectively. Included in
these amounts are $7.1 million and $17.8 million related to our operations in the U.K. and $0.6 million related to our Canadian operations for both years. The net operating loss
carryforwards expire at various dates from 2021 through 2027.

Further,
as a result of our various affiliated companies becoming part of a single consolidated filing group for federal income tax purposes, net operating loss carryforwards of
$19.4 million will be subject to separate return loss year limitation rules. The realization of these losses in future years will be dependent on the taxable income of the subsidiary that
generated the net operating loss carryforward.

In
assessing the realizability of deferred tax assets, we considered whether it was more likely than not that some portion or all of the deferred tax assets will be realized. The
ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during periods in which temporary differences become deductible. We considered income taxes
paid during the previous two years, projected future taxable income, the types of temporary differences, and the timing of the reversal of such differences in making this assessment. Based upon the
level of historical taxable income and projections for future taxable income over the periods in which the temporary differences are deductible, we have determined a valuation allowance is necessary
of $1.6 million and $2.2 million as of December 31, 2009 and 2008, respectively. The net change in the valuation allowance for the years ended December 31, 2009, 2008 and
2007 was a decrease of $0.6 million and increases of $0.2 million and $0.8 million, respectively.

As
of December 31, 2009, the Company's foreign subsidiaries have accumulated undistributed earnings that are intended to be permanently reinvested outside the U.S., upon which the
deferred tax liability cannot be practically determined as of year end.

As
of December 31, 2009 and December 31, 2008, we had $2.0 million and $0.9 million, respectively, of gross unrecognized tax benefits, which a majority may
impact our annual effective tax rate in future years. These tax benefits were accounted for under authoritative guidance for accounting for uncertainty in income taxes. A reconciliation of the
beginning and ending balances of the total amounts of gross unrecognized tax benefits are as follows (in thousands):

Gross unrecognized tax benefits at December 31, 2008

$
906Gross additions based on tax positions related to the current year


485Gross additions based on tax positions related to a prior year


616Gross subtractions related to prior year returns filed


(30
)Gross unrecognized tax benefits at December 31, 2009

$
1,977


The
Company and its U.S. subsidiaries are subject to U.S. federal and state income tax. The Company is currently in various states of multiple year examinations by federal taxing
authorities. We have also been notified that the Internal Revenue Service will begin an examination of the consolidated U.S. tax return for the short tax period from November 16, 2007 through
December 31, 2007. That examination is scheduled to begin in early 2010. The Company does not anticipate a significant impact to the unrecognized tax benefits balance with respect to current
tax examinations in the next 12 months, although the timing of the resolution and closure on audits is highly uncertain. In 2009, the IRS settled examinations for multiple periods and entities
that resulted in a combined settlement

F-33

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(14) Income Taxes (Continued)

amount
of $3.5 million, most of which was a reduction to the net operating loss carryforward amounts for certain acquired entities. We recognized interest and penalties related to unrecognized
tax benefits as a component of the provision for income taxes.

We
paid income taxes of $15.5 million, $22.7 million and $3.9 million during the years ended December 31, 2009, 2008 and 2007, respectively.

(15) Segment Reporting and Business Concentrations

We provide our services through four segments: Federal Services ("FS"), Commercial Services ("CS"), Logistics, Processing and Disposal ("LP&D"), and International. Prior to our
acquisitions of RSMC in 2007 and ESEU in 2006, we derived less than 1% of our revenues from our international operations. Accordingly, through the first quarter of 2007, we reported results from our
international operations in our Commercial Services segment. Beginning with the second quarter of 2007, we began reporting results from our operations outside North America in a new International
segment. Goodwill and long-lived assets that were previously reported in other segments were reclassified to this new segment as appropriate. We evaluate the segments' operating results to
measure performance.

The
following table presents segment information as of and for the years ended December 31, 2009, 2008 and 2007 (in thousands):

As of and for the Year Ended December 31, 2009FS

CS

LP&D

International

Corporate
Unallocated
Items

ConsolidatedRevenues from external customers(1)(5)

$
304,634

$
87,305

$
244,217

$
987,737

$


$
1,623,893Income (loss) from operations(2)


30,299


15,708


84,067


43,121


(75,280
)

97,915Depreciation and amortization expense


1,930


1,623


22,629


6,946


13,060


46,188Goodwill


143,514


90,129


233,193


51,934





518,770Other long-lived assets(3)


33,192


16,489


214,699


68,054


98,544


430,978Purchases of property, plant and equipment


4,226


2,134


7,990


206


9,833


24,389Total assets(4)


290,525


148,023


538,387


379,743


154,497


1,511,175




F-34

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(15) Segment Reporting and Business Concentrations (Continued)

As of and for the Year Ended December 31, 2008FS

CS

LP&D

International

Corporate
Unallocated
Items

ConsolidatedRevenues from external customers(1)(5)

$
271,820

$
107,198

$
246,810

$
1,165,803

$


$
1,791,631Income (loss) from operations(2)


32,750


25,825


87,893


56,669


(82,207
)

120,930Depreciation and amortization expense


406


1,941


21,511


9,460


13,106


46,424Goodwill


143,514


90,129


233,193


61,418





528,254Other long-lived assets(3)


34,104


22,455


232,433


97,074


85,055


471,121Purchases of property, plant and equipment


4,543


735


9,905


660


10,786


26,629Total assets(4)


281,263


149,804


568,734


340,003


210,908


1,550,712




As of and for the Year Ended December 31, 2007FS

CS

LP&D

International

Corporate
Unallocated
Items

ConsolidatedRevenues from external customers(1)(5)

$
151,355

$
137,378

$
262,801

$
541,079

$


$
1,092,613Income (loss) from operations (2)


32,450


20,082


100,311


2,930


(79,821
)

75,952Depreciation and amortization expense


376


789


23,892


4,713


13,460


43,230Goodwill


143,138


90,994


232,745


59,163





526,040Other long-lived assets(3)


32,960


28,982


253,321


105,942


73,295


494,500Purchases of property, plant and equipment





1,560


4,296


498


6,958


13,312Total assets(4)


202,756


164,721


592,968


490,081


174,424


1,624,950


(1)Intersegment
revenues have been eliminated for the years ended December 31, 2009, 2008 and 2007. Intersegment revenues were $20.3 million and
$5.2 million for the years ended December 31, 2009 and 2008 respectively, and were immaterial for the year ended December 31, 2007. Revenues by segment represent revenues earned
based on third-party billing to customers.(2)Prior
to the fourth quarter of 2009, we included equity in income of unconsolidated joint ventures in other income (expense), net. During the fourth quarter
of 2009, we reclassified these amounts from other income (expense), net to operating income in the accompanying consolidated statements of operations. Accordingly, for the years ended
December 31, 2009, 2008 and 2007, income from operations was increased by $7.6 million, $3.2 million and $1.4 million, respectively, as a result of the reclassification.
Income from unconsolidated joint ventures is included in our Federal Services segment operations.(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, property, plant
and equipment that benefit the entire company and cash.


F-35

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(15) Segment Reporting and Business Concentrations (Continued)

(5)Results
of our operations for services provided to our customers in Canada and Mexico are included in our Commercial Services or LP&D segments.


Our
revenues and long-lived assets by geographic region as of and for the year ended December 31, 2009, 2008 and 2007 are as follows (in thousands):

As of and for the Year Ended December 31,

United
States

United
Kingdom

Other

Total2009Revenues from external customers

$
629,441

$
987,737

$
6,715

$
1,623,893Property, plant and equipment, net


119,929


769


77


120,7752008Revenues from external customers


600,273


1,165,803


25,555


1,791,631Property, plant and equipment, net


112,982


882


157


114,0212007Revenues from external customers


529,550


541,079


21,984


1,092,613Property, plant and equipment, net


109,897


591


200


110,688


(16) Customer Concentrations

Our International segment derives its revenues primarily through contracts with the NDA. For the years ended December 31, 2009, 2008 and 2007, respectively, 60.1%, 64.8% and 48.6%
of our revenues were from contracts funded by the NDA. Accounts receivable relating to the NDA at December 31, 2009 and 2008 were $181.4 million and $115.0 million, respectively.

We
have contracts with various offices within the DOE, including with the Office of Environmental Management, the Office of Civilian Radioactive Waste Management, the National Nuclear
Security Administration and the Office of Nuclear Energy. Revenues from DOE contractors and subcontractors represented approximately 15.8%, 11.2% and 16.7% of consolidated revenues for the years ended
December 31, 2009, 2008 and 2007, respectively. Accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts relating to DOE contractors and
subcontractors at December 31, 2009 were $68.4 million and $53.6 million, respectively. Accounts receivable and costs and estimated earnings in excess of billings on uncompleted
contracts relating to DOE contractors and subcontractors at December 31, 2008 were $45.6 million and $42.0 million, respectively.

(17) Commitments and Contingencies

(a)   Leases and Other Contractual Obligations

We have several noncancellable leases that cover real property and machinery and equipment. Such leases expire at various dates with, in some cases, options to
extend their terms. Several of the leases contain provisions for rent escalation based primarily on increases in real estate taxes and operating costs incurred by the lessor. Rent expense on
noncancellable leases was $13.9 million, $12.2 million and $14.7 million for the years ended December 31, 2009, 2008 and 2007, respectively.

We
are obligated under capital leases covering computer equipment and certain machinery and equipment that expire at various dates during the next three years. As of December 31,
2009 and 2008,

F-36

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(17) Commitments and Contingencies (Continued)

the
gross amount of property, plant and equipment and related accumulated amortization recorded under capital leases were as follows (in thousands):

December 31,
2009

December 31,
2008Computer equipment

$
3,904

$
3,913Machinery and equipment


668


668Trucks and vehicles


332


3324,904


4,913Less accumulated amortization


(2,542
)

(1,783
)$
2,362

$
3,130


Amortization
of assets held under capital leases is included with depreciation and amortization expense.

The
following is a schedule of future minimum annual lease payments for all operating and capital leases and annual payments for other contractual obligations with initial or remaining
lease terms greater than one year as of December 31, 2009 (in thousands):

Year ending December 31,

Operating

Capital

Other
Contractual
Obligations2010

$
11,683

$
479

$
2,5002011


9,606


27


2,5002012


7,782





2,5002013


4,005





2,5002014


3,150





2,500Thereafter


6,043





2,500Future minimum lease payments

$
42,269


506

$
15,000Less portion representing interest





14Less current portion of capital lease obligations





465Long-term portion of capital lease obligations




$
27


The
current portion of the capital lease obligations is included in accrued expenses and other current liabilities. The long-term portion of the capital lease obligations is
included in other noncurrent liabilities in our consolidated balance sheets.

During
the years ended December 31, 2009 and 2008, respectively, we entered into $14,647 and $0.2 million of capital leases.

(b)   Letters of Credit/Insurance Surety

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. We had $100.0 million of letters of credit issued under our senior credit facilities as of
December 31, 2009 and 2008, respectively; $10.8 million and $19.7 million of

F-37

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(17) Commitments and Contingencies (Continued)

letters
of credit issued against the revolver facility as of December 31, 2009 and December 31, 2008, respectively and $0.7 million and $2.6 million in surety bonds
outstanding as of December 31, 2009 and 2008, respectively. 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 failed 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 December 31, 2009 and 2008, the closure and post-closure state
regulatory requirements for our facilities were $142.0 million and $150.8 million, respectively.

(c)   Legal Proceedings

As previously reported, we have engaged in discussions with Sogin, SpA, the Italian state-owned utility company, to provide D&D and radioactive materials
management services in support of the clean-up of Sogin's nuclear facilities. Our pending license application with the Nuclear Regulatory Commission ("NRC") to import material from Italy,
to process it at our facility in Tennessee and to dispose of the residual material at our Clive facility in Utah has generated local and national expressions of opposition. We believe our license
application is consistent with all applicable laws and regulations and with past practices. Moreover, the Italian materialmetals, paper and clothingis the same type of
material that we handle routinely from the domestic nuclear industry.

The
NRC has issued numerous licenses over the past ten years allowing the importation of low-level radioactive waste ("LLRW") to be processed and ultimately disposed at our
Clive facility. Under these licenses, our Clive Facility has received Class A LLRW originating in Germany, Canada, France, Taiwan, and the United Kingdom.

The
States of Tennessee and Utah have confirmed to the NRC that the proposed Italian project is consistent with the licenses and permits issued by those states. However, the former
Governor of the State of Utah announced on April 23, 2008 that he would send his representative to the May 8, 2008 meeting of the Northwest Interstate Compact on Low-Level
Radioactive Waste Management (the "Northwest Compact") to vote against any proposal that would allow us to receive international waste at our Clive facility.

On
May 5, 2008, we filed a declaratory judgment action in the U.S. District Court of Utah (the "Declaratory Judgment Action") asking the court to declare that (i) the
Northwest Compact does not have regulatory authority over our Clive facility, which is a private commercial facility rather than a regional facility created by the Compact, (ii) the U.S.
Constitution does not allow the Northwest Compact to discriminate between identical domestic and foreign materials handled at our Clive facility, and (iii) any effort by the Northwest Compact
to restrict our receipt of foreign LLRW is pre-empted by federal statutes and regulations. The State of Utah and the Rocky Mountain Interstate Compact on Low-level Radioactive
Waste have intervened as defendants in the Declaratory Judgment Action.

At
the Northwest Compact meeting on May 8, 2008, the representatives of the eight member States of the Northwest Compact, despite our commitment to restrict our receipt of
international waste to 5% of the remaining capacity at our Clive facility, unanimously adopted a clarifying resolution

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(17) Commitments and Contingencies (Continued)

proposed
by the Utah committee member, clarifying that the Northwest Compact has never adopted a resolution permitting us to receive international waste at our Clive facility. We continue to believe
that the Northwest Compact does not have regulatory authority over our Clive facility, and that neither the U.S. Constitution nor Federal law permits the Northwest Compact to prohibit us from
receiving international waste at our Clive facility.

On
October 6, 2008, the NRC approved an order holding in abeyance its decision with respect to our pending import license application until the Company's declaratory judgment
action has been resolved by the Courts.

On
May 15, 2009, the U.S. District Court for the District of Utah issued a Memorandum Decision And Order Granting In Part And Denying In Part Motions For Partial Summary Judgment
(the "District Court Order") finding that the Northwest Compact has no authority to restrict the flow of out of region waste to EnergySolutions' facility in Clive, Utah. The court later concluded that
those holdings obviated the need for further proceedings, and entered final judgment in favor of EnergySolutions on June 17, 2009. The defendants in the Declaratory Judgment Action have
appealed the judgment to the United States Circuit Court of Appeals for the 10th Circuit. After issuance of the District Court Order the NRC has solicited the views of potential parties but has
not yet lifted its order holding the review of our pending import license application in abeyance.

We
intend to vigorously prosecute our declaratory judgment action, but we do not believe we will be able to process and dispose of any radioactive materials contemplated by the Italian
initiative until the appellate process is concluded.

On
October 9, 2009 a purported class-action lawsuit captioned City of Roseville Employees' Retirement System vs. EnergySolutions, et al., was filed in the United States District
Court for the Southern District of New York, Civil Number 09 CV 8633. On October 12, 2009 a second complaint was filed in the same court captioned Building Trades United Pension Trust
Fund vs. EnergySolutions Inc., et al., Civil Number 09 CV 8648. The complaints are very similar and name as defendants the Company, current and prior directors, certain officers of the
Company, the lead underwriters in the Company's initial public offering ("IPO") in November 2007 and the secondary offering in July 2008 (the "July 2008 Offering") and ENV Holdings, LLC, the
former parent of the Company. The plaintiffs allege that the registration statements and prospectus for the IPO and the July 2008 Offering contained inaccurate statements of material facts and omitted
material information required to be disclosed therein regarding the potential size of the nuclear services market, the Company's ability to take advantage of opportunities in that market in the near
term, the status and prospects of the Company's rule making petition to the NRC to permit the use of decommissioning funds for disposal of major components prior to the cessation of activities at
nuclear facilities, the status and prospects of the Company's
license stewardship initiative, and other matters. The complaints seek to include all purchasers of the Company's stock from November 14, 2007 through October 14, 2008 as a plaintiff
class and seek damages, costs and interest, rescission of the IPO and July 2008 Offering, and such other relief as the court may find just and proper.

We
believe the facts and legal claims alleged in the complaints are without merit and intend to vigorously defend the litigation.

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(17) Commitments and Contingencies (Continued)

In addition, we are subject to various claims and legal proceedings covering matters that arise in the ordinary course of its business activities. Management believes any liability that
may ultimately result from the resolution of these matters will not have a material adverse effect on our consolidated financial position, operating results and cash flows.

(18) Employee Benefit Plans

During 2006, we participated in various defined contribution 401(k) plans that covered substantially all full-time employees. The plans were subject to the provisions of the
Employee Retirement Income Security Act of 1974. We provided for a match under the applicable plans. Participants vested in our contributions ratably over 4 years. As of January 1, 2007,
we combined all previous plans into a new plan. Under the new plan, employees become eligible to participate immediately upon employment but are not eligible for a company match until one year of
employment is completed. We match 50% of the first 6% of a participant's deferred contribution. In addition, we may at our discretion contribute an additional 1% of a participant's deferred
contribution. Employee contributions are fully vested immediately. Our contributions vest ratably over 4 years. We contributed $3.0 million, $2.3 million and $2.3 million
for the years ended December 31, 2009, 2008 and 2007, respectively.

On
March 14, 2008, we obtained majority voting rights for another one of our minority-owned joint ventures. Accordingly, we have reported its operations in our consolidated
financial statements from March 14, 2008. The joint venture sponsors a defined contribution plan for its eligible employees. The plan provides for matching employer contributions of 100% up to
4% of employee compensation. Additionally, the plan provides for an additional employer contribution for employees who are not eligible to participate in the joint venture's defined benefit pension
plan ranging from 2.5% to 5.8% of employee compensation. Contributions to the plan totaled approximately $0.9 million for the year ended December 31, 2009 and $0.5 million for the
period from March 14, 2008 to December 31, 2008.

The Electricity Supply Pension Scheme ("ESPS")

In connection with our acquisition of RSMC on June 26, 2007, we began providing a pension plan for the benefit of approximately
60 RSMC employees in the United Kingdom (the "RSMC Plan"). The RSMC Plan is funded by contributions from the employees and EnergySolutions. In addition,
under the terms of our contract with the NDA, EnergySolutions, through RSMC, took over the management of the Magnox North and Magnox South pension plans
(the
"Magnox Plan"), which provides pension benefits to a majority of the 3,000 employees under management in the United Kingdom. The Magnox Plan is funded by contributions from the employees and the NDA.
The two plans are separate sections of an overall industry scheme, the Electricity Supply Pension Scheme ("ESPS").

As
part of the reorganization of the U.K. nuclear industry by the U.K. Government, the NDA assumed responsibility to fund all employer pension contributions, including any deficit (and
obtained the benefit of any surplus), to the Magnox Plan. In order to reflect these arrangements, these financial statements include an amount recoverable from the NDA, included within other
noncurrent assets in an amount equal to the recorded Magnox section liability, net of tax, with a corresponding credit to revenue since the charges are allowable costs under our cost-plus
contract with the NDA, offsetting a portion of the after-tax pension charges. The amount of the credit for the years ended December 31, 2009 and 2008, respectively, was
$46.5 million and $95.4 million. The amount recoverable from the

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(18) Employee Benefit Plans (Continued)

NDA,
due to our underfunded status, was $64.5 million at December 31, 2009 and is included in other noncurrent assets. The amount payable to the NDA, due to our overfunded status, was
$93.5 million at December 31, 2008 and is included in pension liabilities.

The
following table sets forth a reconciliation of the pension plans' beginning and ending balances of the benefit obligation for the years ended December 31, 2009 and 2008 (in
thousands):

2009

2008Changes in projected benefit obligation:Projected benefit obligation at beginning of period

$
2,366,304

$
3,449,737Service cost


45,412


48,606Interest cost


150,173


181,251Member contributions


626


13,914Termination benefits


10,179


7,235Benefits paid


(137,489
)

(146,374
)Actuarial gain (loss)


347,323


(275,865
)Currency translation


243,951


(912,200
)Projected benefit obligation at end of year

$
3,026,479

$
2,366,304


The
termination costs relate to early retirement benefits provided to employees who have left service involuntarily before normal retirement age and have been granted an unreduced early
retirement pension. These are contractual termination benefits required under the plans' rules.

The
following table sets forth a reconciliation of the plans' beginning and ending balances of the fair value of plan assets for the years ended December 31, 2009 and 2008 (in
thousands):

2009

2008Changes in plan assets:Fair value at beginning of period

$
2,459,837

$
3,405,197Actual return on plan assets


301,911


9,461Company contributions


76,574


104,632Employee contributions


626


13,914Termination benefits


10,179


7,235Benefits paid


(137,645
)

(146,374
)Currency translation


250,489


(934,228
)Fair value of plan assets at end of year

$
2,961,971

$
2,459,837Overfunded (underfunded) status at end of year

$
(64,508
)
$
93,533


Related
amounts included in the consolidated balance sheets as of December 31, 2009 and 2008 consist of noncurrent pension liabilities of $64.5 million, and noncurrent
pension assets of $93.5 million, which is included in other noncurrent assets, respectively.

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(18) Employee Benefit Plans (Continued)

Net
periodic benefit costs for the years ended December 31, 2009 and 2008 consisted of the following (in thousands):

2009

2008Service cost

$
45,412

$
48,606Interest cost


150,173


181,251Expected return on plan assets


(126,997
)

(189,599
)Actuarial loss


312


Termination benefits


10,179


7,235$
79,079

$
47,493


Weighted
average assumptions used to determine benefit obligations as of December 31, 2009 and 2008 were as follows:

2009

2008Discount rate

5.7%

6.0%Expected rates of return on plan assets

5.6%6.8%

4.8%6.6%Rate of compensation increase

3.0%3.5%

4.0%4.5%


Our
overall expected long-term rate of return on assets is 5.6% to 6.8%. The overall expected long-term rate of return is based on our view of the expected
long-term rates of return of each major asset category taking into account the proportions of assets held in each category at the relevant reporting date. The expected rate of return for
equities was determined by adding a long-term equity risk premium to a risk-free rate. The equity risk premium reflects our view of expected long-term returns on
equities in excess of the risk-free rate, taking into account historic returns and current market conditions. The expected return on debt securities is based upon an analysis of current
yields on portfolios of similar quality and duration.

At
December 31, 2009 and 2008, the pension assets were invested as follows:

December 31,
2009

December 31,
2008Asset category:Equities


18.6
%

16.7
%Bonds


76.0
%

76.9
%Real Estate


4.6
%

5.4
%Other


0.8
%

1.0
%100.0
%

100.0
%


Our
investment policy is set by the Trustees of the pension plans, after consultation with the employer. The investment policy and appointed investment managers are reviewed regularly by
a subset of the trustees who form an Investment Committee, reporting to the full trustee body. Independent investment advice is obtained by the Investment Committee. The investment policy considers
the timing and nature of future cash flows, as well as the risk characteristics of both the liabilities and the assets

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(18) Employee Benefit Plans (Continued)

held.
The investment objective is to maximize returns subject to there being sufficient assets and cash flow available to pay members' benefits as and when they are due.

The
Trustees have a policy of cash management to ensure that sufficient liquid funds are available when divestments are required to meet benefit payment obligations as they become
payable.

We
expect $55.1 million to be contributed to our defined benefit pension plans in 2010, most of which will be reimbursed by the NDA. Actuarial losses expected to be recognized as
a component of net periodic pension costs in 2010 are not material. Estimated benefit plan payments for the five years following 2009 and the subsequent five years aggregated, excluding amounts
recoverable from the NDA, are as follows (in thousands):

Year ending December 31,2010

$
144,3082011


148,6082012


153,2272013


157,8462014


162,7842015 - 2019


891,809$
1,658,582


The
preceding information does not include amounts related to benefit plans applicable to employees associated with certain contracts with the DOE held by a consolidated joint venture
because we are not responsible for the current or future funded status of these plans.

(19) Employee Termination Benefits

An organizational review of our Magnox sites identified an opportunity to reduce the existing workforce, primarily at three sites that are in the process of defueling, which involves
removing fuel from the reactor, loading it into flasks and transporting it for processing with a third party and a site at which decommissioning is relatively close to completion with only a few
projects remaining.

As
a result of the overstaffing at the four Magnox sites, we presented a termination plan to the NDA to terminate approximately 200 employees on a voluntary basis at these sites in the
quarter ended March 31, 2009. The termination plan and employee termination benefits to be paid for the voluntary termination of these employees is in accordance with the existing employee and
the trade union agreements and were pre-approved by the NDA during the first quarter of 2009. All employee termination benefits are treated as part of the normal Magnox cost base and will
be reimbursed by the NDA.

We
recognized $35.7 million of expected employee termination benefits during the year ended December 31, 2009, which are included in cost of revenues in the accompanying
condensed consolidated statements of operations for our International Segment. We have recognized a corresponding liability, which is included in accrued expenses and other current liabilities. In
addition, we have recognized revenues and a receivable from the NDA for the reimbursement of the employee termination benefits. Benefits are expected to be paid over the next 12 months.

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(19) Employee Termination Benefits (Continued)

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

Beginning liability, December 31, 2008

$
Employee termination benefits


35,703Payments


(16,015
)Effect of exchange rate


4,572Ending liability, December 31, 2009

$
24,260


(20) License Stewardship Program

On December 11, 2007, we, through our subsidiary ZionSolutionsLLC, entered into the Exelon agreement to dismantle Exelon's
Zion nuclear facility located in Zion, Illinois ("Zion Station"), which ceased operation in 1998. Upon the closing of the transaction, Exelon has agreed to transfer to
ZionSolutionssubstantially all of the assets (other than land) associated with Zion Station, including assets held in nuclear decommissioning trusts.
In consideration for Exelon's transfer of those assets, ZionSolutionshas agreed to assume decommissioning and other liabilities associated with the
Zion Station. ZionSolutionsalso agreed to take possession and control of the land associated with the Zion
Station pursuant to a lease agreement to be executed at the closing. ZionSolutionswill be obligated to complete the required decommissioning work
according to an established schedule and to construct a dry cask storage facility on the land for spent nuclear fuel currently held in spent fuel pools at the Zion Station. Under the Zion agreement,
Exelon will retain ownership of the spent nuclear fuel and associated operational responsibilities following completion of the Zion D&D project. Closing of this transaction is subject to the
satisfaction of a number of closing conditions, including approval by the NRC of the license transfer of the facility operating licenses and conforming license amendments from Exelon to
ZionSolutions(the "License Transfer").

Subsequent
to these agreements, the Zion Station decommissioning trust fund balance, a significant portion of which is invested in the stock market, declined as a result of the financial
crisis that impacted the United States and world markets. On October 14, 2008, we announced that we intend to defer the transfer of the Zion Station assets until we reaffirm that there is
sufficient value in the Zion decommissioning trust funds to ensure adequate funds for the accelerated decommissioning of the plant. On August 17, 2009 we entered into an amended agreement with
Exelon to extend the latest closing date under the agreement to December 11, 2011. Under the terms of the amendment, Exelon has the right to terminate the agreement at any time after
December 11, 2010 upon 60 days written notice to us.

Prior
to our announcement to defer the transfer of the Zion Station assets, we had anticipated that the closing of this transaction would occur in late third quarter or during the fourth
quarter of 2008. Accordingly, we hired employees, entered into subcontracts and performed services for Exelon under a planning contract. Invoicing for some of these services provided is subject to the
closing of the transaction. As of December 31, 2009 and December 31, 2008, we have incurred costs of $14.8 million and $12.4 million, respectively, which have been deferred
until the closing of the transaction. Since we believe that it is probable that we will close or be granted an extension to close this transaction before December 11, 2010, we will continue to
defer these costs until we close the transaction, at which time we will recognize the costs and related revenues. If we determine that it is not probable that we will close this transaction, we will
expense these costs in the period of such determination. We have taken

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Table of Contents

EnergySolutions, Inc.

Notes Consolidated Financial Statements (Continued)

(20) License Stewardship Program (Continued)

steps
to reduce the monthly project costs including the termination of certain employees, transferring employees to other projects and the termination of certain subcontracts and lease agreements. Any
costs relating to the termination of employees, subcontractors and lease or other agreements are expensed in the period terminated.

On
May 4, 2009, the NRC issued an order approving the License Transfer subject to ZionSolutionssatisfying the NRC that
(i) a $200 million letter of credit facility has been established, (ii) an irrevocable easement of disposal capacity of 7.5 million cubic feet has been established and
(iii) the appropriate amount of insurance required of a licensee under the NRC's regulations has been obtained. If the License Transfer is not completed by May 4, 2010, the order
approving the License Transfer expires; however, upon written application and for good cause shown, the expiration date may be extended by order of the NRC.

(21) Related Party Transactions

LLC Agreement

Prior to our initial public offering, ENV Holdings entered into a limited liability company operating agreement (the "LLC Agreement"),
which governed our operations. Under the LLC Agreement, ENV Holdings was our sole member and owned all of the outstanding membership interests. ENV Holdings created a board of managers of six
persons to manage our company and our business affairs, and ENV Holdings had sole authority to designate each of the members of the board of managers. These agreements were terminated in connection
with the completion of our initial public offering on November 20, 2007.

During
the year ended December 31, 2008, ENV Holdings committed to contribute $10.0 million to us for the sole purpose of compensating certain of our employees, as
specified by ENV Holdings, for their contributions to our growth since ENV Holdings' initial investment us in January 2005. As a result, we recorded compensation expense and additional
paid-in capital of $10.0 million during the year ended December 31, 2008. The $10.0 million contribution was received during the first quarter of 2009.

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