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EnergySolutions banked a sharply lower quarterly profit and posted a big annual loss as income fell in three of four business units and the company wrote down the value of its brand and other assets.
The report released before U.S. stock markets opened Thursday rattled investors, who sent EnergySolutions' stock reeling. At one point, the nuclear-services company's stock fell more than 18 percent before recovering to close at $5.99 a share, off 12 percent.
Net income for the fourth quarter fell to $6.3 million, or 7 cents a share. A year earlier, EnergySolutions earned $22.5 million, or 25 cents a share. The lower-than-expected earnings were the result of an accounting change at one of the company's projects, CEO Val Christensen said.
For the year, the Salt Lake City-based company lost $22 million, or 25 cents a share. In contrast, it earned $50.8 million, or 57 cents per share, in 2009.
The quarterly loss was larger than Wall Street expected. On the other hand, the analysts had calculated a bigger 2010 loss.
The weak quarter seemed surprising because EnergySolutions pulled in more revenue than it did a year earlier. Revenue totaled $450.2 million, but net income fell 72 percent. A year earlier, revenue added up to $448.3 million, but profits had jumped almost 417 percent from 2008.
EnergySolutions' annual loss stems from a $35 million goodwill impairment charge in the second quarter tied to the company's federal-services business. The company also wrote down almost $27 million in other so-called intangible assets.
At least one analyst was unruffled by the company's quarterly performance.
"They did as I had expected, overall. The numbers are a little lighter, but not bad, given everything that's going on in terms of public opinion in the marketplace" concerning nuclear power and waste disposal, said Al Kaschalk of Wedbush Securities Inc. in Los Angeles.
Income from operations was down almost 47 percent in the company's federal-services unit. The commercial-services unit reported a $4.3 million loss, compared with a $4 million profit last year.
Income from the EnergySolutions unit responsible for nuclear-waste processing and disposal was essentially unchanged from last year, while income from the company's international unit dropped 23 percent.
Kaschalk was more troubled by the company's explanation for its lower-than-expected quarterly profit. In a conference call with analysts, EnergySolutions executives said accounting changes at its Zions Station power plant decommissioning project were responsible for lowering its fourth-quarter net income, although it also had the effect of raising its third-quarter profit.
"The overall level of business activity was generally in line with our expectations for the fourth quarter," Christensen said.
"However, because the accounting methodology actually applied to our Zion decommissioning activities differed from the methodology we had proposed to the [U.S. Securities and Exchange Commission] originally, our fourth-quarter results are lower than expected."
The accounting change will cause EnergySolutions, which employs 5,000 people in the United States and abroad, to have to restate its third-quarter earnings.
At one point in the conference call, Kaschalk pushed William Benz, interim chief financial officer at EnergySolutions, to provide more information that would make it clear how profitable the Zions project is likely to be during its 10-year life.
"I know you said it's profitable, but there [are] no metrics around that for us to gauge ... how you are doing," Kaschalk said.
Benz replied that going into the details of the accounting methods for Zions would be "an extremely complex" exercise. He offered to set up another conference call that would be devoted to the new method.