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EnergySolutions, Inc. (NYSE:ES)

Q1 2008 Earnings Call

May 13, 2008 10:00 am ET

Executives

Tim Barney - Executive Vice President for Investor Relations

R. Steve Creamer - Chairman and Chief Executive Officer

Philip O. Strawbridge - Chief Financial Officer and Executive Vice President

Mark McBride – Chief Accounting Officer and Senior Vice President

Analysts

Jamie Cook – Credit Suisse

Scott Levine – JP Morgan

Sanjay Sakhrani – Keefe Bruyette & Woods, Inc.

Al Kutchoff

Charles Fishman – Piper Jaffray

Rudy Tolentino – Morgan Stanley

Alex Riegel

Operator

Good day ladies and gentlemen and welcome to the First Quarter 2008 EnergySolutions, Inc. Conference Call. (Operator Instructions)

I would now like to turn the presentation over to your host for today’s call, Tim Barney, Executive Vice President for Investor Relations.

Tim Barney

Good morning everyone and welcome to EnergySolutions, Inc.’s First Quarter 2008 Conference Call. With us today are EnergySolutions’ Chairman and Chief Executive Officer, R. Steve Creamer, and EnergySolutions’ Executive Vice President and Chief Financial Officer, Philip Strawbridge. Also joining us and available for the question and answer session will be Mark McBride, Senior Vice President and Chief Accounting Officer.

Before I turn the call over to Steve, I would like to remind listeners that during today’s call management’s remarks may contain forward-looking statements within the meaning of federal securities law, including statements concerning plans, objectives, goals, strategies, projections of future events or performance, and underlying assumptions, many of which are based, in turn, on further assumptions. Also, forward-looking statements involve risk and uncertainties. Although EnergySolutions believes that its plans, intentions, and expectations are reasonable, it may not achieve those plans, intentions, or expectations. There are important risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made in this conference call. Such risks and uncertainties are discussed in the company’s Form 10-K for the year ended December 31, 2007, and in other documents filed by the company with the Securities and Exchange Commission. These and other risks could cause actual results to differ materially from those expressed in any forward-looking statements. Any projections as to the company’s future financial performance represent management’s estimates as of today, May 13, 2008, and EnergySolutions assumes no obligation to update these projections in the future due to changing market conditions or otherwise.

It is now my pleasure to turn the call over to EnergySolutions’ Chairman and Chief Executive Officer, Steve Creamer.

R. Steve Creamer

We are off to a solid start for the year. Philip will go through the results with more detail for you in a moment, but we had a strong first quarter and we are reaffirming our guidance for the full year.

Our business unit segments continue to perform well. Just picking out a few highlights for the quarter, in our Federal Services segment, in March we assumed control of a very important project for the U.S. Department of Energy. We have submitted a new base-line cost and schedule and we are working with the department to complete construction of two DUF6 conversion facilities.

Additionally, the Department of Energy is in its final stages of reviewing the bids for the Hanford Plateau Remediation contract and the Hanford Tank Farm contract. We expect the department to award these contracts toward the end of Q2 or in Q3.

In our Commercial Services segment, license stewardship is generally gathering momentum. The latest on Zion is that we have significant engineering and planning activities going on in anticipation of transfer of the license. Community reaction and the strong support from the State of Illinois government are helping to keep the project on pace. The transfer of the license is on schedule for Q4.

Apart from Zion, we continue to make significant inroads on the second license stewardship project with others coming along behind those two. The rest of the segment turned in good results, some ahead of schedule, for this quarter.

In March we completed a $24 million, 21-month resin liner repackaging project for Ontario Power Generation in Canada. Despite many unusual and unexpected conditions our engineered equipment and systems, operating procedures, management team, project crew, and project implementation experience resulted in a successful and on-schedule retrieval of 400 liners over two phases of the project. This was done without compromise to safety of the project, safety of the site personnel, equipment, environmental, and financial objectives. Completion of this project demonstrates our commitment to the Canadian nuclear industry.

We have also substantially completed our work on the decommissioning project for the Sacramento Municipal Utility District. Here we demolished, removed, packaged, and transported over 30 million pounds of concrete and steel. The completion of this work will add to our substantial experience of reactor decommissioning projects.

In our LP&D segment, our Clive facility received final approval from the EPA to shred PCB-contaminated radioactive waste. This greatly improves our efficiency when disposing of this type of waste. Following this approval we undertook the shredding of a decommissioned Navy barge. This was a first-of-the-kind project that again adds to our portfolio of complex work. Although we are still determining how large of an opportunity this might be, this new capability may open up a new avenue of business for us.

In our International segment our Magnox group has continued to manage this very important contract in a very safe and proficient manner. In fact, tomorrow I will be in Birmingham, England, to accept a prestigious award from the Royal Society for the Prevention of Accidents.

We are also pursuing various opportunities in the UK. The UK government has said that all new reactors will be constructed on existing sites. As you know, we currently manage large work forces at every one of these sites.

I am sure that all of you are aware that our pending license application with the Nuclear Regulatory Commission to import material from Italy and process it at our facility in Tennessee and dispose of a small amount of material in Utah has generated some negative publicity. Our application is consistent with all applicable laws and regulations, consistent with past practices, and consistent with utilizing our world-class facilities to solve complex challenges. The Italian material, metals, paper, clothing, is exactly the same type of material that we handle every day from the domestic nuclear industry.

It might interest you to know that the NRC has issued over a dozen licenses over the past 10 years allowing for the importation of low-level radioactive waste to be processed and ultimately disposed of at our Clive facility. Under these licenses the Clive facility has received class-A, low-level waste originating in Germany, Canada, France, Taiwan, and the UK.

EnergySolutions is a world leader in recycling, processing, transporting, and disposal of nuclear material. We manage nuclear material in a safe and responsible manner, whether it comes from Texas, Illinois, or Italy.

Much of the Italian material is metal and would be recycled and only 8% of the material would be disposed of at Clive. As you know, we filed a declaratory judgment motion in the U.S. District Court of Utah asking a judge to declare that the Northwest Compact does not have regulatory authority over Clive and that discriminating between domestic and foreign material would violate the U.S. Constitution. We are confident about the prospect of prevailing in this action.

However, obviously, with this action being filed, we don’t anticipate any revenues from the Italian project in 2008.

One final thing I would like to mention. We received additional funding from the DOE to continue work under the cooperative agreement to perform global nuclear energy partnership, our GNAP deployment studies. This brings the total DOE funding for GNAP to EnergySolutions to $13.2 million, which is more than any other team has been given.

We are working with some key players in the industries to develop the conceptual design, the business plan, establish the scope, schedule and priorities for the advance processing for long-term recycling of spent nuclear fuel. We think this is a good indication of the DOE’s continuing interest in the country’s nuclear energy future.

GNAP was founded in 2006 as part of the President’s advanced energy initiative. It aims to expand the use of nuclear energy to address the growing demand for energy. GNAP proposes private/public international partnerships to develop advanced technologies to recycle used nuclear fuel, reduce waste, and avoid misuse of nuclear materials.

In all we had a very good quarter for the business in Q1 of 2008. And as usual, it’s a great credit to our over 5,000-strong EnergySolutions’ team, including more than 1,100 scientists, 400 radiation and safety professionals, and of course our great 3,000 people at our 10 sites that we manage in the UK.

I will now turn you over to our CFO, Philip Strawbridge, to review our operations in detail.

Philip O. Strawbridge

The numbers I am going to discuss are GAAP numbers for Q1 for both this year and last. Of course, with the acquisition in last June of RSMC the numbers are not strictly comparable, especially in our International segment. I am also going to talk about EBITDA and EPS before non-cash intangible amortization, which are both non-GAAP numbers. As required by Regulation G, we have in our earnings release provided reconciliation to the closest GAAP-equivalent results.

Revenues for the quarter ending March 31, 2008, were $502 million compared to $114 million last year. The increase in revenues was primarily due, as I mentioned before, the inclusion of the results of RSMC following the acquisition. And also the consolidation of certain of our JV interests that we previously accounted for under the equity method.

Gross profit was $73 million compared to $30.8 million for the first quarter of last year. Again, the gross margins, 14% in Q1 this year versus 27% last year, are not strictly comparable, primarily because RSMC’s gross margins are just 9% because of the substantial amount of project costs that are fronted by the UK government and simply passed through on a cost-reimbursable basis through their business.

SG&A was $28.6 million, against $28.3 million in Q1 last year. SG&A increased primarily due to amortization of intangible assets due to the acquisition of RSMC and increased business development and other administrative expenses related to our international segment. These increases were partially offset by a lower due diligence cost in our Commercial Services segment and lower labor expenses in our Federal Services segment.

After an income tax expense of $11.2 million, calculated using an annual effective tax rate of 36.6%, we reported net income for the quarter of $19.3 million compared to a loss of $10.3 million last year. Fully diluted EPS was $0.22 share. EBITDA for the quarter was $54 million and net income before the non-cash impact of amortization of intangible assets was $23.8 million, or $0.27 per fully diluted share.

We generated cash flows from operations this quarter of $25.7 million and used some of it to pay down approximately $20 million of long-term debt. Our total long-term debt, which stood at $877 million in September 30, 2007, was reduced substantially with proceeds of our IPO, down to $607 million at December 31, 2007, and now stands at $587 million at the end of the first quarter.

Accordingly, our interest expense for the first quarter was $11.7 million compared to $15.4 million in the same quarter last year.

Now I’m going to turn to each of the segments. First up, I’ll talk about Federal Services. The revenues in the first quarter were $44.6 million, up from $34.9 million in the same quarter in the prior year. Segment income from operations was $6.3 million compared to $6.2 million in the same quarter last year. Operating margin was 14% compared to 18% in the same quarter as well.

As Steve touched on earlier, during the fourth quarter of 2007 and in the first quarter of 2008, we gained voting control over two joint ventures at the request of our customer, the Department of Energy, and as a result we consolidated their results this quarter, adding approximately $13 million to our revenues and an approximate 3% operating margin. Partially offsetting this lower margin business was our overall lower SG&A expenses compared to last year when we incurred higher labor expenses. As for the remainder of the year, as Steve said, we will have a better sense of the outlook for the additional contracts in June or July.

Now I want to turn to Commercial Services. Commercial Services revenues were $30.6 million, up from $25.3 million in the same quarter of the prior year. Income from operations was $9.6 million, up from $100,000 in the same quarter last year. Operating margin was 32% compared to just 0.2% in the same quarter of last year.

This improvement of the division’s performance is largely accounted for by earlier substantial completion of two large high-margin projects together with lower due diligence costs in license stewardship opportunities than in the same quarter last year. As Steve mentioned, momentum continues to gather in the license stewardship area and we will report to you when we have some material news on further progress.

Now for our Logistics Processing & Disposal. Revenues were $54.1 million compared to $53.9 million in the same quarter of the prior year. Income from operations was $16.3 million, up from operating income of $15.1 million in the same quarter of last year. Operating margin was 30% compared to 28% in the first quarter of fiscal 2007, and we saw some margin expansion really due to lower equipment maintenance demerged in labor costs.

This segment is where most of our fixed assets reside so as we ramp up activity throughout the year, we should be able to leverage these assets and increase margins just as we did last year.

International Operations. We generated revenues of $372 million. Remember a large part of this is just pass-through revenues that we talked about before. Last year we did not report International Operations, which were immaterial as a separate segment. This year, as a result of our acquisition of RSMC, our International Operations are reported separately. Income from operations was $30.1 million and operating margin was 8%.

The operating margin for this business in Q1 is typically higher than we expect it to be in the other quarters of the year due to the recognition of efficiency fees in the first quarter on our RSMC contracts. Remember, the first calendar quarter is the last fiscal quarter for the UK government’s fiscal year, therefore, we are able to estimate and determine the amount of efficiency fees to be recognized for that contract year.

Now turning to the balance sheet. As of March 31, 2008, we had a cash balance of $38.1 million in debt, including the current portion, of $587 million. As I mentioned, this compares with $607 million at December 31, 2007.

Stockholders equity increased from $423 million at the end of the first quarter compared to $405 million at December 31, 2007.

Now turning to our outlook. Results of the first quarter, as Steve and I have said, benefited from early completion of certain projects in our Commercial Services business and the expected strength of our International segment. We see this as largely a timing shift, the effect of which has been to move some of the contribution of what we projected in the commercial services segment, into Q1.

At this point in time we do not expect a change in our guidance for the year. Accordingly, we affirm the guidance that we gave on the last call. And as you recall, what that was was full year revenues in the range of $1.8 billion-$1.9 billion; earnings per share in the range of $0.69-$0.74; earnings per share before non-cash impact of amortization of intangible assets, which is calculated as earnings per share plus the per share non-cash impact of amortization expense of intangible assets, net of the related income tax expense, is in the range of $0.89-$0.94; EBITDA for the year is expected to be $195 million-$205 million; non-cash amortization expense of intangible assets, net of the related income tax expense I mentioned, is expected to be $17.8 million; and compensation expense related to stock option grants is expected to be $9.1 million for 2008. These results assume a weighted average per fully diluted share count for the year of 89 million shares.

CapEx for the year is expected to be approximately $37 million, which is above what we consider to be our maintenance CapEx level and we have mentioned before, that’s about $20 million a year. And the one-time issue from $20 million to $37 million is primarily related to the one-time purchases of equipment at our Atlas Mill Tailings contract, the Moab contract as we call it, as well as general maintenance of the company’s facilities.

So, results for the year and the spread of the results between the quarters, will still be significantly affected by the timing of key initiatives such as: first, design and license stewardship contract whereas Steve mentioned we still expect the NRC to approve the license transfer in the fourth quarter; second, the rulings for the decommission of major components where we’ve indicated we expect the NRC to change their rule on the use of the commission funds to allow their use for the disposal of major components. We expect these rulings, or the exemptions to this ruling, to be approved before the fourth quarter of this year, or around the fourth quarter, and that should enable us to take advantage of the high margin work in the latter part of this year; and then of course the third key initiative is the award of one or more of the large DOE contracts in Hanford.

Taking all those initiatives into account and that current view, we still think the revenues and earnings for 2008 will be weighted towards the second half of the year. And as I mentioned before, it particularly depends on which of those DOE contracts we win.

With that, I am going to turn it back over to Steve for concluding remarks.

R. Steve Creamer

In conclusion, we have started 2008 well. It’s always nice to have a few more percentage points in the bag at the end of the first quarter. Our year will still be made largely in the second half and Q2 will simply be a bridge to get us there. We are still in good shape and look forward to reporting to you again after Q2.

With that we are ready to take any questions that you might have.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Jamie Cook with Credit Suisse.

Jamie Cook – Credit Suisse

My first question, on the commercial side. Can you just quantify, on an operating income basis, how much the timing of the early completion of the projects helped the first quarter, and how we should think about that impacting the second and third quarter, which quarter it impacts more, just a little granularity there for modeling purposes?

Philip O. Strawbridge

Jamie, as we’ve mentioned before we don’t really comment specifically on contracts, but between those two contracts, it’s about $3 million-$4 million.

Jamie Cook – Credit Suisse

And it’s more second quarter versus third quarter?

Philip O. Strawbridge

As we’ve said before, most of it’s in second quarter, but a little bit in third.

Jamie Cook – Credit Suisse

And then just last, I guess if you could comment, there were a number of large-component jobs that you guys were bidding on. Has there been any change in the timing or size of those awards?

R. Steve Creamer

No. We’re still just working through them right now, still waiting on the NRC and everything seems to be moving along just as we expected it would be.

Operator

Your next question comes from Scott Levine with JP Morgan.

Scott Levine – JP Morgan

I was hoping you might be able to talk a little about the DOE contracts, including the two Hanford ones. Could you remind us, on the timing you were saying June or July. Could you give us a little more granularity what gives you the confidence with regard to the timing and how you expect the DOE to behave with regard to letting some of these larger contracts over the next year, year and a half.

R. Steve Creamer

They sent us a letter about a month ago asking us to extend our bids. The timing on our bids was running out, they asked us to extend until June 17, us and the other bidders. Whether or not they will ask us again or not we don’t know, but everything that we are hearing, and of course it’s all mumbles from around the Forestall Building, is that the decisions have been made and they’re going through and dotting the i’s and dotting the t’s and making sure that everything is in proper place so that on the Savannah River Bed, URS protested that one and of course it was upheld by the government and they just want to make sure that everything is properly right.

We understand that they are on schedule and that’s what has been indicated publicly by them and so we anticipate that we will see both of those coming out in the June/July time frame still.

Scott Levine – JP Morgan

And with regard to new builds in the U.S. specifically, we’ve been hearing a lot about escalating costs on new plant builds. We know this isn’t really the bread and butter of your business, but could you provide some updated thoughts with regard to the continued build and how that might impact your business over the next couple of years?

R. Steve Creamer

Like you say, it’s not our bread and butter. We’re certainly involved with the utilities in helping them in their siting and things like that. But they are moving ahead. The loan guarantee program is finally going to get kicked off from DOE, which will accelerate the use of some of them. The DOE is moving on schedule and made strong commitments that they will make the licensing dates that they’ve got.

So I anticipate that you’re going to see the South Texas plant now moving ahead. It’s actually using an older technology reactor than the brand new ones and so its approval process with the NRC is a little shorter. So they’re moving ahead on that one. And Dominion has got one. I was in a conference last week and everyone is still pretty bullish on it. But the cost is escalating and they are looking for the loan guarantees to make sure, just from a regulatory standpoint and stuff, they have the confidence that it will be a positive experience for their shareholders.

Scott Levine – JP Morgan

Last quick one for Philip. Your other expense item was about $2+ million in the quarter. Can you tell us what that was?

Philip O. Strawbridge

It’s our interest swap.

Operator

Your next question comes from Sanjay Sakhrani with KBW.

Sanjay Sakhrani – Keefe Bruyette & Woods, Inc.

Granted it’s a timing issue on the commercial segment of your business with your two jobs finishing early, high-margin. But can you give us sense, how is that going to end up helping the overall growth opportunity for you guys as your track record of project completions start to get even better and you start to get better appreciation, better respect, above even what you already have right now. It means more and more business coming your way and even some of these pending jobs, whether it’s decommissioning or the license stewardship, end up accelerating. Is that something that can happen, that could end up sort of accelerating the growth of that toward clearly by the latter part of this year, into 2009 and beyond.

R. Steve Creamer

I think, Sanjay, there’s a couple of questions there, obviously, that first of all I think, hopefully, gives people more confidence in our numbers. What we did there is that we completed, as we mentioned before, a couple of those jobs early, which helped us so we could recognize them in this particular quarter.

And the reason I say it helped us is we did some things that accelerated some things from the scheduling perspective at the request of our customers. And both of those jobs were fairly high-profile. One was in Canada so it helped us from our international perspective and the other one was in California and a reactor decommissioning, which again, demonstrates our capability.

So, yes, I think it helps us from a credibility perspective. Does that answer your question?

Sanjay Sakhrani – Keefe Bruyette & Woods, Inc.

Yes. So all the pending opportunities that you guys have, so your chance of winning them potentially could accelerate as you continue to execute on projects like this. That’s what I’m trying to get at.

R. Steve Creamer

I think you are right. The one down in Sacramento was an extremely difficult project with really some very unique things that were done, first-of-a-kind, and really showed some of the expertise of our people and how well they can think through things and execute projects safely.

Sanjay Sakhrani – Keefe Bruyette & Woods, Inc.

Based on the visibility you have with the base business, is there still an applicable project like these that can be completed ahead of schedule then which would allow you to sort of say, “Okay, we’re going to come in at the high end of the range, even if the DOE or the license stewardship or the decommissioning stuff just happens on time and not ahead of schedule,” or we’re not quite ready to make that comment yet?

Philip O. Strawbridge

I think it’s too early in the year for us to make that commitment right now. There are other projects out there like that, particularly in the Sacramento that Steve mentioned, but it’s too early. We still have the issue, we need some regulatory relief for those major components and until we start to get some of those things we wouldn’t want to make any commitment like that.

Operator

Your next question comes from Al Kutchoff.

Al Kutchoff

I just wanted to ask on the international revenue side, particularly given that the efficiency fee was recognized in the quarter. How much of the revenue growth, particularly for 2008, is base business versus maybe some new work that could be forthcoming? In other words, what is the run rate for the revenue in the segment?

Philip O. Strawbridge

It’s a little bit higher in this quarter because of the recognition of the fees. But when we look out, it’s probably something like $300 million a quarter or so. And again, for the future, simply because this first quarter is always one of the highest and always what we anticipate.

Al Kutchoff

The business in inherently lumpy and we appreciate that. But as we look at both the federal, even with the consolidation of the two new joint ventures, and the commercial segments, with these difficult jobs completed, tremendous job on the operating margin but I’ve got to believe those are a little bit higher than average run rates, right?

R. Steve Creamer

Commercial services, as we mentioned, that is a lot higher than what we would expect throughout the year.

Al Kutchoff

But what about the [inaudible] because I think it was around 14% or 15%?

R. Steve Creamer

I don’t expect Federal to change significantly. And the only exception to that, as I mentioned before, is it depends in Q4 which of those two contracts we win.

And I will give the example again for those that would be new on the call. If we win the Plateau Remediation contract we have what we call a control position so we have to run all that all that revenue through our books. So it would appear that our margins would go down. And I will tell you that they are all cost-reversible contracts.

If, however, we were to win the Tank Operating contract, it’s quite the opposite. Essentially our profit would be what our revenue is and so you would see a dramatic improvement in the margin.

So at the time that we get those contracts, what we plan on doing, as we said before, would be to explain some of that impact.

Mark McBride

One of the things to be careful about here is the impact of the consolidation of the joint venture that we took over control of in March, we took over in mid-March. Therefore, the revenues in the first quarter are pretty small compared to future quarters. So revenue is going to go up in future quarters for the consolidation of UDS. However, the gross profit won’t go up very much because it’s a very low margin project. So it will impact gross margins, but it will not impact significantly our gross profits.

Al Kutchoff

It just seems like the Federal side had a pretty strong operating and as well, gross margin quarter.

Mark McBride

Compared to future quarters, yes. But compared to prior quarters I think it was pretty much on par.

Operator

Your next question comes from Charles Fishman with Piper Jaffray.

Charles Fishman – Piper Jaffray

Has your attorney representing you on the Italian waste case given you any range of when you might expect this decision on the declaratory judgment?

R. Steve Creamer

No. As you know, these things just work through, a declaratory judgment is the friendliest of friendly type of court actions. And so we file, they respond, there’s no argument or anything like that, it’s just the time that the judge takes to review the case. It shouldn’t be a long period of time, but certainly we would anticipate toward the end of the year, probably, at the best.

Charles Fishman – Piper Jaffray

Does that impact your activity there or are you proceeding as schedule?

R. Steve Creamer

We are doing work for them, doing cleaning fuel pools and stuff out over there. That work continues to go on. But as far as bringing stuff over here, basically we could bring pure recycling type materials but right now we’re probably on hold until we get that done.

Operator

Your next question comes from Rudy Tolentino with Morgan Stanley.

Rudy Tolentino – Morgan Stanley

You mentioned that you were pursuing a number of license stewardship opportunities. Is that all here in the States or are you also looking at some of that in Europe?

R. Steve Creamer

Certainly we’re trying to work out options. Every country has a different type of funding. Here in the U.S. we have the decommissioning funds that are all set aside to do it. For example, in the UK it’s a 3-year appropriation cycle that you go through. But we think there are opportunities around the country where we could step into these types of things if the funding is proper and we’re sure the money is there. The industry really likes the idea of turning these plants over to someone whose job it is and whose livelihood it is to do these types of activities. So, if we can find the places, certainly we are looking at opportunities internationally, but right now the main ones are here in the U.S.

Rudy Tolentino – Morgan Stanley

As far as you talked about new nuclear builds. Does that represent any business opportunities for you or do you just not play in that arena?

R. Steve Creamer

It’s not a significant thing to us right now. We certainly are hoping to position the company in a way that we are positioned into that. That’s part of the future growth that we would look at through acquisitions and stuff, but right now really our business plan is based strictly on the back-end of the fuel cycle, which, you know, every plant that comes on gives us more business, but we think that we’ll be involved in water treatment and things like that because we do have the best technologies of anyone in the world for those types of things and so we’re working with reactor suppliers and stuff on those types of technologies.

Operator

Your last question comes from Alex Riegel.

Alex Riegel

Could we get an update on Fort Smith, the likely timing of that award and also an update on Magnox South and the status of that competition?

R. Steve Creamer

We are looking at, unfortunate, had a meeting on it yesterday, and they’re now anticipating that the RFP will be out sometime in September and will be awarded a year from that September, so September 2009. We will lead a team on bidding that particular one.

On the Magnox Roadbed there has been nothing publicly said. We know that they are accelerating the award, or they have indicated that they are going to accelerate the award of Sellafield until sometime this summer. We’ve had no indication at all from the NDA as to what their thoughts are. There’s been nothing publicly put out. We are taking, trying to figure out what their plan is going forward, but as you remember, once they announce it’s about an 18-month period they have to go through on the bid. Of course, we think we’re doing a pretty good job and they may want to rest for a day or two. But we’ll wait and see what they come out with.

Alex Riegel

And as it relates to Sellafield, understanding you’re not bidding as a tier one, when do you anticipate your opportunities as a tier two to develop?

R. Steve Creamer

We’ve just actually run a couple of task orders at Sellafield in the last little while, small ones that we’re working on. And the big ones are going to be about a year away. It’s a year transition for the new contractor to come in and take over and so it’s going to be a fairly lengthy transition and there won’t be a lot accomplished as far as subcontracts. Of course, we have a full team there working on trying to shape how those things will be and show the ways we can help best and be the most competitive, working with the existing staff and talking with the bidders on it right now. So we hope that we will have some good opportunities. But they are probably a year away.

Operator

At this time you have no questions.

R. Steve Creamer

Thank you very much. We appreciate y’all joining us today and we appreciate your support and we’ll head on in to the second quarter.

Operator

Thank you for participating in today’s conference call. You may now disconnect.

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