Duratek's stock price sinks 53%

Columbia company delays quarterly and yearly reports

`Unexpected ... costs' cited

Commercial waste processing unit will be reviewed

March 15, 2001|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Shares of Duratek Inc. plummeted 53 percent yesterday after the company postponed the release of its fourth-quarter and year-end financial results because of "unexpected and unprecedented costs" incurred by its commercial waste-processing division in Tennessee.

The Columbia-based company had planned to release its financial results yesterday, but instead is undertaking a review of the division because it incurred significantly higher-than-expected transportation and burial costs.

Shares of Duratek, which trade on the Nasdaq stock market, lost $3.38 yesterday to close at a 52-week low of $3.03. Last March, Duratek's shares traded as high as $10.38.

"Until we tie all this out, we don't know what the financial effect is going to be on the earnings of 2000, and it's going to go over into the first quarter," said Robert E. Prince, Duratek's president and chief executive officer.

Duratek said in a statement that the higher costs will hurt earnings for the final quarter of 2000 and the first quarter of 2001. The company has until March 31 to release its results, after which it would have to request an extension until April 15 from the U.S. Securities and Exchange Commission, Prince said.

Duratek's problems with its commercial waste-processing division is not related to the operations of Waste Management Nuclear Services, which the company bought last year for $65 million, Prince said.

Duratek, which processes and disposes of radioactive and hazardous wastes, reported a profit of $3.4 million on revenue of $73.9 million in the third quarter of last year.

Costs in the Tennessee division began to mount, Prince said, when Duratek's commercial waste-processing plants in Oak Ridge and Memphis accepted more low-level radioactive waste for processing from its commercial clients than it could dispose of in a cost-effective way. Prince declined to release any financial or budgetary figures related to the charges.

"If you have lots of stuff coming in the front door, you've got to ship some out the back door," said Prince, who said the waste processing business is cyclical.

Since the company's Tennessee operations process only radioactive and hazardous wastes - and are not licensed for long-term storage - Duratek had to pay significantly more in burial and transportation costs to dispose of the processed waste in a timely manner, Prince said.

"You bury by the cubic foot, but you process by the pound," Prince explained. "So what you're trying to do as a business is get the most pounds into the least amount of cubic feet, and that's what we failed to do intelligently.

"And we shipped them at a time when it was inordinately expensive, and also we shipped them by truck instead of by rail."

Debra Shults, assistant director of Tennessee's Division of Radiological Health, said that Duratek was forced to pay more in burial and transportation costs late last year because it probably had neared the waste storage limits specified in its license. Duratek pays tens of millions of dollars in financial assurances to Tennessee to obtain licenses for a specific amount of storage and processing facilities.

"They comply with our regulation and licensing procedure," Shults said. "These limits have been on their license for a long time. All of the licensees in Tennessee have the same conditions."

Prince declined to talk about specific plans for its commercial waste operation until after the review is completed, but he did state that the company will impose better forecasting and control over its process in that division.

Duratek's other two divisions - Federal Services Group and Commercial Services Group - performed on or above expectations, Prince said.

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