10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

x	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
	For the fiscal year ended December 31, 2005
OR
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
	For the transition period from               to

Commission File Number: 0-14292

DURATEK, INC.

(Exact name of Registrant as specified in its charter)

Delaware	22-2427618
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
10100 Old Columbia Road, Columbia, Maryland	21046
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (410) 312-5100

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 Per Share

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 x

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 x

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 x   No o

Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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.   Yes x   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) (Check one):

Large accelerated filer oAccelerated filer xNon-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes o   No x

As of June 30, 2005, the aggregate market value of the outstanding shares of the Registrant’s Common Stock, par value $0.01 per share, held by non-affiliates was approximately 342,712,777 based on the closing price of the Common Stock as reported by the NASDAQ National Market on June 30, 2005. Determination of affiliate status for this purpose is not a determination of affiliate status for any other purpose.

Indicate the number of shares outstanding of each of the registrant’s classes of Common Stock, as of the most recent practicable date.

Class	Outstanding on February 17, 2006
Common stock, par value $0.01 per share	14,862,295 shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for its 2006 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.

Form 10-K Cross-Reference Sheet

		Page
Part I
Item 1.	Business	1
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	24
Item 2.	Properties.	24
Item 3.	Legal Proceedings	25
Item 4.	Submission of Matters to a Vote of Security Holders	25
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchase of Equity Securities	26
Item 6.	Selected Financial Data	26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	51
Item 8.	Financial Statements and Supplementary Data	52
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	85
Item 9A.	Controls and Procedures	85
Item 9B.	Other Information	87
Part III
Item 10.	Directors and Executive Officers of the Registrant*	88
Item 11.	Executive Compensation*	88
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters*	88
Item 13.	Certain Relationships and Related Transactions*	88
Item 14.	Principal Accountant Fees and Services*	88
Part IV
Item 15.	Exhibits and Financial Statement Schedules	89
Signatures		90

*Incorporated by reference from registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to our Annual Meeting of Stockholders to be held in 2006.

Forward-Looking Information

In response to “safe harbor” provisions contained in the Private Securities Litigation Reform Act of 1995, we discuss in this Annual Report on Form 10-K many important factors that have affected and in the future could affect our actual results. These factors could cause our future financial results to differ from those expressed in any forward-looking statements made by us. Many of these factors have been discussed in our prior filings with the Securities and Exchange Commission and are included in the “Risk Factors” and other disclosure contained in our Annual Report on Form 10-K.

Forward-looking statements may include words such as “will,” “should,” “could,” “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” and other similar expressions. The list of factors contained in this Annual Report on Form 10-K does not constitute all factors which you should consider prior to making an investment decision in our securities. You should also not assume that the information contained in our forward-looking statements is complete or accurate in all respects after the date of this filing. We disclaim any duty to update the forward-looking statements contained herein.

Part I

Item 1.Business

Overview

Duratek, Inc., together with our wholly owned subsidiaries (“we”, “our”, “Duratek”, or the “Company”), provide services to commercial and government customers primarily in the United States that ensure safe and secure radioactive materials disposition and nuclear facility operations. We possess a breadth of capabilities, technologies, assets, facilities, and qualified technical personnel. Our services include decommissioning services, nuclear facility operations, radioactive material characterization, processing, transportation, accident containment and restoration services, and disposal facility operations. Our strength lies in our vertical integration of the following:

·on-site waste management and processing work at customer sites;

·transportation logistics and engineering services;

·processing of customer waste at our facilities; and

·operation of waste disposal facilities.

We own a number of patents and related trademarks pertaining to the detection, storage, decontamination, processing and handling of radioactive and hazardous waste materials. Our revenues are derived almost equally from government and commercial customers. Our government work comes largely from the United States Department of Energy (“DOE”) through prime contractors. The majority of our commercial clients are commercial nuclear utilities. We also provide services to non-utilities, including pharmaceutical companies, research laboratories, universities, and industrial facilities. We have three business segments: (i) Federal Services, (ii) Commercial Services, and (iii) Commercial Processing and Disposal.

Our Federal Services segment is focused on providing the following services to support major programs in the DOE:

·on-site waste disposition services;

·site closure services;

·nuclear facility operations and commissioning services;

·engineering design and technology research; and

·safety, health, and quality assurance services.

Our Commercial Services segment provides a broad range of technologies and services to nuclear power plants, government and industrial facilities, universities, and research/pharmaceutical laboratories in the following areas:

·on-site liquid and solid waste processing;

·transportation logistics;

·transportation services;

·license stewardship;

·decontamination and decommissioning;

·project services; and

·radiological engineering services.

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We also provide technical support services to our commercial clients including project management, engineering, radiation protection support, and environmental consulting.

Our Commercial Processing and Disposal segment operates two facilities in Tennessee and two facilities in South Carolina. At the Tennessee facilities, we use multiple technologies to volume reduce and package customer waste for final disposition such as:

·incineration;

·compaction;

·metal melting and decontamination; and

·treatment under our bulk waste assay program (“GARDIAN”).

At the South Carolina facilities, we perform the following services:

·operate a low-level radioactive waste disposal facility in Barnwell, South Carolina on behalf of the State of  South Carolina;

·process and package materials for disposal; and

·specialty waste processing for nuclear power plants.

Recent Developments

On February 6, 2006, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with EnergySolutions, LLC (formerly known as Envirocare of Utah, LLC), a Utah limited liability company (“EnergySolutions”), and Dragon Merger Corporation, a Delaware corporation and a wholly owned subsidiary of EnergySolutions. Pursuant to the terms of the Merger Agreement, EnergySolutions will acquire all of our outstanding shares of Common Stock for an aggregate consideration of approximately $327 million in cash. Upon the effectiveness of this merger, each issued and outstanding share of our Common Stock will be converted into the right to receive $22.00 in cash, without interest, and each outstanding stock option, whether or not vested, will convert into the right to receive the excess, if any, of the $22.00 per share merger consideration over the per share exercise price of the option, less any tax withholding.

In addition, we have agreed, among other things and subject to certain exceptions as described in the Merger Agreement, (i) to conduct our business in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and consummation of this merger, (ii) not to engage in certain transactions during such period, (iii) to cause a stockholder meeting to be held to consider approval of this merger and the other transactions contemplated by the Merger Agreement, (iv) subject to certain limited exceptions to permit the board of directors to comply with their fiduciary duties, for our board of directors to recommend that the stockholders adopt the Merger Agreement and thereby approve this merger, and (v) subject to certain limited exceptions to permit the board of directors to comply with their fiduciary duties, not to solicit proposals relating to alternative business combination transactions, or to enter into discussions concerning, or to provide information in connection with, alternative business combination transactions.

Consummation of the merger is subject to a number of conditions, including stockholder approval, absence of any law or order prohibiting the consummation of this merger, expiration, or termination of the applicable Hart-Scott-Rodino Antitrust Improvements Act waiting period, and certain other customary conditions.

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We expect to submit the Merger Agreement and the merger described above to stockholders for their consideration during the second quarter of 2006 and to close this merger promptly following receipt of stockholder and regulatory approval.

Pursuant to the terms of the Merger Agreement, EnergySolutions and Duratek each have certain termination rights. Upon termination of the Merger Agreement under specified circumstances, we may be required to pay EnergySolutions a termination fee of approximately $8.6 million. In addition, if this merger cannot be closed or is delayed for longer than twelve months due to certain regulatory or legal restrictions, EnergySolutions has agreed to pay to us a “reverse break-up fee” of $5 million in cash and to provide a prepayment credit of $12 million to one of our subsidiaries for waste disposal services performed by EnergySolutions under an existing commercial contract between the parties.

Information about Our Operating Segments

We operate our business through three distinct business units, each of which comprises a separate and reportable business segment. The reportable segments are separately managed; serve different customers; and differ in their expertise, technology, and resources necessary to perform their services. You will find financial information about our operating segments in Note 19, Segment Reporting and Business Concentrations, which you will find in Part II, Item 8 of this annual report.

The percent of total revenues that each of our operating segments’ revenues accounted for in 2005, 2004, and 2003 are as follows:

	2005			2004			2003
Federal Services		41	%		40	%		44	%
Commercial Services		28	%		30	%		27	%
Commercial Processing and Disposal		31	%		30	%		29	%

Federal Services

Our principal source of revenue in the Federal Services segment is from subcontracts with a number of DOE prime contractors either as intergraded member of prime contract teams or as subcontractor for specific work scopes. The Federal Services work that we performed for customers that represented greater than 10% of our consolidated revenues in fiscal year 2005 were with prime contractors Bechtel Corporation and Fluor Corporation.

Our Federal Services segment is focused on providing services to support the following major programs in the DOE:

·Environmental Management;

·Nuclear Energy;

·Science and Technology;

·Radioactive Waste Management; and

·National Nuclear Security.

We provide a broad range of services supporting these programs to help the DOE achieve its mission to advance the national, economic, and energy security of the United States.

On-site Waste Disposition ServicesThe Federal Services segment supports the efforts of DOE in working towards the desired “end state” with the cleanup of nuclear weapons manufacturing and testing sites across the country. These services specifically includeexcavation, handling, stabilization, packaging, and transportation activities to deliver materials to permanent disposal locations or to ensure

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environmentally acceptable onsite disposition, waste processing and treatment, and waste characterization and certification. The types of waste addressed includes low level, low-level mixed, transuranic, spent nuclear fuel, and high level wastes. We hold multiple contracts through prime contractors where we perform these services. For the last five years, we have managed and operated the Environmental Management Waste Management Facility, the handling and disposition of all liquid and gaseous waste, and the operations of the Y-12 sanitary/classified landfill in Oak Ridge, Tennessee. We have operated the Environmental Restoration Disposal Facility along the Hanford River Corridor in Hanford, Washington since 1996. We hold significant contracts for efforts on the Hanford Environmental Management project in Hanford, Washington. Additionally, Duratek is part of a team to support the award in 2005 of a multi-year contract for Paducah Environmental Remediation activities in Paducah, Kentucky.

Site Closure Services   We support efforts for the DOE’s environmental cleanup and restorative programs through partnership arrangements and various prime contractors. These efforts include design and construction of facilities to process, stabilize, and dispose of nuclear material and waste as well as decontamination and decommissioning of buildings and structures at major DOE sites. The Federal Services segment currently is a fee-sharing member of the prime team for the Fernald Environmental Management Closure Project in Ohio, and provides subcontract support to other closure sites including the Idaho Closure Project.

Facility Operations and Commissioning ServicesAs a nuclear operations company, the Federal Services segment’s experience is well suited for providing support to the DOE on initiatives to build, operate, and process high-level radioactive waste for stabilization, re-use or environmentally safe disposition. We are currently performing a significant contract supporting a multi-year effort to commission and operate a facility for pre-treatment and removal of cesium from high-level waste tanks at the Savannah River Site near Aiken, South Carolina. Additionally, through two separate joint venture efforts, Duratek is supporting efforts to design, build, and operate facilities in Portsmouth, Ohio and Paducah, Kentucky to convert depleted uranium hexafluoride (“DUF6”) for disposal and another contract at the Oak Ridge National Laboratory in Tennessee to blend uranium, extracting certain isotopes for medical purposes. We also operate and maintain more than 80 radiological facilities throughout DOE’s complex.

Engineering Design and Technology Research   The Federal Services segment is a technology-oriented operation. We have a long history of providing innovative engineering, research, and development solutions that eliminate significant environmental, health, and safety risks associated with the DOE’s cleanup initiatives and ensure the most environmentally safe long-term solutions. We successfully completed the vitrification system design for the $9 billion Hanford River Protection Project’s Waste Treatment Plant (“WTP”) and continue to provide engineering, research, and testing services to the DOE for the high-level waste and low-level waste vitrification system enhancements for waste loading and throughput.

Safety, Health, and Quality Assurance Services   Inherent in our Federal Services segment is the need for expert knowledge in the environmental safety and health arena. We have certified professional staff offering consulting services in these highly specialized areas to ensure proper regulatory compliance and safe handling of highly sensitive materials.

Some of the challenges facing our DOE customers are among the most scientifically complex issues and required specialized solutions. As a result, our Federal Services segment will occasionally team with other companies to pool resources, develop specialized solutions, and then execute these projects on behalf of our customers. In 2002, we formed a joint venture, Uranium Disposition Services, LLC (“UDS”), for a significant long-term prime project for the DOE in Tennessee to design, build, and operate facilities in Paducah, Kentucky and Portsmouth, Ohio to convert the government inventory of DUF6 for disposal. We own 26 percent of this joint venture and share proportionally in its profits and losses. In 2003, we

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formed a second joint venture, Isotek Systems, LLC (“Isotek”), for another DOE long-term prime project in Tennessee to design and operate a facility at Oak Ridge National Laboratory for blending highly enriched uranium with low enriched uranium and extracting certain isotopes for medical purposes. We own 45 percent of Isotek and share proportionally in the profits and losses of the LLC. We account for our investments in these LLCs using the equity method. In 2005, we recognized joint venture income, net of tax, of $0.2 million for our share of UDS and Isotek income.

Commercial Services

Our Commercial Services segment provides a broad range of proven technologies and services to nuclear power plants, government and industrial facilities, universities, and research/pharmaceutical laboratories. We also provide technical support services to clients including site characterization, project management, engineering, and radiation protection support. We have summarized some of our services here:

Liquid Waste Processing ServicesWe provide on-site liquid waste processing services to over 20 nuclear power stations throughout the United States using a number of patented technologies, including technically advanced ion exchange and membrane-based systems. These services reduce liquid waste generation, reduce Curies discharged, improve water chemistry, and allow the recycling of wastewater.

Transportation LogisticsWe provide turnkey transportation of very large radiologically contaminated reactor components from the plant site to disposal. These components include reactor pressure vessels, steam generators, and other smaller components. Transportation modes include barge, rail, and truck transport. Services provided include engineering, licensing, packaging, fabrication, and project management.

Transportation Services   We maintain a fleet of tractors, trailers, and shipping containers for transporting radioactive waste and radioactive contaminated equipment for processing and disposal. We also own and maintain a fleet of 52 shipping casks that are specifically engineered containers that allow safe transport of radioactive material. Seven of our casks are U.S. Nuclear Regulatory Commission (“NRC”) licensed type “B” shipping casks. One of our type “B” shipping casks, the 10-160B, is licensed by the NRC to ship transuranic waste (having an atomic number greater than 92) for the DOE, including byproduct material, source material.

Licenses StewardshipDuratek offers owner/licensees turnkey radioactive license operational management services as well as license termination services.

Decontamination and Decommissioning (“D&D”)We have performed over 100 decommissioning projects over the past 20 years including:

·commercial nuclear power reactors, university, and test reactors; and

·DOE, Department of Defense (“DoD”), fuel cycle, industrial, medical, and radiopharmaceutical facilities.

Since 1992, we have provided D&D services at the following commercial nuclear power plants, two of which were completely decommissioned in accordance with NRC requirements:

·Fort St. Vrain Nuclear Generating Station;

·Humboldt Bay Power Plant Unit 3;

·Shoreham Nuclear Power Station;

·Rancho Seco Nuclear Station; and

·Trojan Nuclear Power Plant.

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More recently we have provided services for the following commercial nuclear power plants:

·Maine Yankee Atomic Power Company;

·Connecticut Yankee Haddam Neck Nuclear Power Station;

·Consumers Energy Big Rock Point Nuclear Power Plant; and

·Yankee Rowe Nuclear Power Plant.

We provide a full range of decommissioning services, including site surveys, instrumentation, waste characterization, project planning, remediation, health physics support, waste processing, and final site surveys.

Project ServicesWe provide project  services, focused primarily on the following radiological issues:

·site remediation;

·facility decommissioning;

·site characterization; and

·licensing and permitting.

We supply professionals and technical personnel to assume responsibility for the entire project or to assist the client’s staff. Our available personnel include engineers (mechanical, chemical, civil, and environmental), certified health physicists, chemists, toxicologists, safety and health experts, regulatory compliance specialists, remediation experts, radiological control technicians, hazardous material technicians, and decontamination experts.

Radiological Engineering ServicesOur technical personnel provide commercial and government customers with a variety of radiological engineering services including:

·development of health physics (protection from the effects of radiation on the human body and the environment) and emergency preparedness programs; and

·licensing, procurement, and training in radiological protection and radioactive waste transportation.

Most of our senior technical personnel providing radiological engineering services are fully certified by applicable organizations or institutions and have extensive experience at operating nuclear power plants regulated by the NRC.

Commercial Processing and Disposal

We conduct our waste processing and disposal operations at two locations in Tennessee and two locations in South Carolina.

The Bear Creek Operations Facility in Tennessee is a licensed commercial low-level radioactive waste processing facility. We primarily receive waste from nuclear utilities, government agencies, industrial facilities, laboratories, hospitals, and others. We confirm the presence of radioactive contamination, releasing “clean” material to industrial landfills, and volume reduce contaminated material for cost-effective disposal of customer waste at a low-level radioactive waste disposal site. The technologies used at our processing facility include incineration, compaction, metal decontamination, and metal melting for beneficial reuse.

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The Gallaher Operations Facility, also in Tennessee, provides our GARDIAN and some specialty waste processing services for our customers. The Gallaher Operations Facility is also equipped to maintain our fleet of shipping containers.

The Duratek Consolidation & Services Facility in South Carolina was originally chartered to support the DoD in preparation of materials for disposal, including military equipment decontamination and parts retrieval/recycling. This facility continues to provide flexible, rapid-response capabilities to national as well as international DoD projects, conflicts, and missions. We also provide specialty waste processing services for our nuclear power plant customers at this facility.

Duratek operates the Barnwell low-level radioactive waste disposal facility (“Barnwell Disposal Facility”). The facility property is owned by the State of South Carolina. We lease the site from the State of South Carolina under a long-term lease and operate the site under a license granted by the State of South Carolina through an operating agreement. The Barnwell Disposal Facility is one of the few facilities in the United States currently permitted to accept all classes of commercially generated low-level radioactive waste. Through this facility we provide disposal services for large components not suitable for volume reduction and for ion exchange resins and wastes that are generated by nuclear power plants, hospitals, research laboratories, and industrial facilities.

Effective July 1, 2000, the State of South Carolina’s General Assembly passed the Atlantic Interstate Low-Level Radioactive Waste Compact Implementation Act (the “Atlantic Waste Compact Act”). The Atlantic Waste Compact Act governs the relationship between the State of South Carolina and operators of facilities for the disposal of low-level radioactive waste in a comprehensive economic regulatory program. Under the Atlantic Waste Compact Act the State of South Carolina has established a schedule of declining annual maximum volumes of low-level radioactive waste from generators within and outside of the Atlantic Compact (i.e., the state of Connecticut, New Jersey, and South Carolina)  to be disposed of at the Barnwell Disposal Facility. The State of South Carolina also approves disposal agreements, determines the type and amounts of waste to be accepted, and specifies the technical conditions under which the site may operate. After this eight-year period, the facility will remain open for waste from the three Atlantic Compact states only. Under the Atlantic Waste Compact Act, we are reimbursed for allowable costs incurred in operating the facility that are identified by the South Carolina Public Service Commission and incurred by us plus an operating margin of 29% on certain of those allowable costs. In addition, costs incurred for decommissioning activities at the facility are reimbursed by the State of South Carolina from a trust fund established to cover the Barnwell closure obligation. We receive a 14% operating margin on these costs.

The State of South Carolina has indicated that all remaining disposal capacity at Barnwell allowed under South Carolina law prior to July 1, 2008, for Classes A, B, and C waste from all generators of Low-Level Radioactive Waste has already been sold. On July 1, 2008, as contemplated under South Carolina law, the State of South Carolina will close the Barnwell disposal site to customers outside of the Atlantic Compact States.

We have developed or acquired several waste treatment technologies for use on a variety of radioactive and other waste streams. We briefly summarize below the waste treatment technologies that we utilize in our Commercial Processing and Disposal segment.

Incineration:Incineration, which offers volume reduction exceeding 200:1, is the most cost-effective treatment for most dry active waste. It is also a preferred treatment technology for non-hazardous solid waste, waste oils, and other waste liquids.

Compaction:   Our UltraCompactor™ at our Bear Creek Operations Facility is available for compacting low-level radioactive waste with the force of 10 million pounds. The average volume reduction using our compaction technology is approximately six times for dry active waste and eight times for

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asbestos.  Typically, the waste processed utilizing this technology is dry active waste and includes paper, plastic, asbestos, metals, woods, and filters.

Metal Melting and Decontamination:Our metals processing program at our Bear Creek Operations Facility provides a cost-effective solution for radioactively contaminated metals by utilizing its full-service capabilities of decontamination, melting, and survey. To achieve the most cost-effective process for final disposition, we examine the metal and sort it for processing based on its contamination level. If it is cost-effective, we will volume reduce the metal and send it to an appropriate low-level radioactive disposal site. After applying our decontamination technologies (e.g., chemical, abrasive grit/shot, sponge, and CO2), we survey the metal to verify it is no longer radioactively contaminated and then release it for burial to an industrial landfill, reducing disposal cost for the customer. If we cannot decontaminate the metals, we may utilize our metal melting technology. Our 20-ton, 7,200-kilowatt electric induction furnace operates exclusively to produce shield blocks that we provide for various high-energy physics projects, allowing the beneficial reuse of radioactive metal within the nuclear industry. The beneficial reuse of radioactive metal eliminates the liability for the original waste generator and protects new metal from becoming contaminated.

Bulk Waste Assay Program (“GARDIAN”):   GARDIAN, which stands for “GAmma Radiation Detection In-container ANalysis,” is a large container bulk waste assay system that allows large containers of waste to be assayed quickly and thoroughly, improving processing efficiency and reducing costs relative to more labor intensive methods (e.g., avoids size reducing and processing of many smaller packages). GARDIAN was designed for use in processing large amounts of debris thought to be radiation-free from the many nuclear facilities that are being decommissioned around the country, the GARDIAN system’s two tractor-trailers use qualitative and quantitative surveying equipment to search for radiation in the debris stored in a shipping container. Three total detectors are associated with each tractor-trailer that allows the entire area of the container to be surveyed at the same time. GARDIAN has been used on-site at a customer’s facility on a decommissioning project in 2004 and 2005, a second GARDIAN system, located at our Gallaher Operations Facility in Tennessee, was installed and is being utilized for customer waste shipped to this facility.

Sales and Marketing Strategy

We provide cost-effective waste disposition solutions for commercial low-level radioactive waste generators and DOE low-level, mixed, transuranic, and high-level radioactive waste generators. We have a centralized marketing and business development organization while our direct sales are decentralized to more closely align these activities with our specific operating segments.

Environmental Matters

Environmental Laws and Regulations Creating a Demand for Our Waste Treatment Technologies

Various environmental protection laws have been enacted and amended during recent decades in response to public concern over the environment. Our customers are subject to these evolving laws and implementing regulations. We believe that a company’s obligations to comply with the requirements of the following laws contribute to the demand for our services.

The Atomic Energy Act of 1954 (“AEA”) and the Energy Reorganization Act of 1974 authorize the NRC to regulate the receipt, possession, use, and transfer of radioactive materials, including “source material,” “special nuclear material,” and “byproduct material.”  Pursuant to its authority under the AEA, the NRC has adopted regulations that address the management, treatment, and disposal of low-level radioactive waste, and that require the licensing of low-level radioactive waste disposal sites by NRC or states that have been delegated authority to regulate low-level radioactive material pursuant to NRC regulations.

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The processing, storage, and disposal of high-level radioactive waste (e.g., spent nuclear fuel) are subject to the requirements of the Nuclear Waste Policy Act, as amended by the Nuclear Waste Policy Act Amendments. These statutes regulate the disposal of high-level radioactive waste by establishing procedures and schedules for siting geologic repositories for such waste. The NRC has issued regulations that address the storage and disposal of high-level radioactive waste.

The Low-Level Radioactive Waste Policy Act of 1980 (“LLRWPA”) and the Low-Level Radioactive Waste Policy Amendments Act of 1985 address the siting of new low-level radioactive waste disposal facilities. Each state is responsible for providing capacity for commercial low-level radioactive waste generated within its borders. The LLRWPA also encourages groups of states to enter into compacts providing for the development and operation of low-level radioactive waste disposal facilities. At the present time, state compacts have opened no new radioactive waste disposal facilities.

The Resource Conservation and Recovery Act of 1976 (“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 waste. The intent of RCRA is to control hazardous wastes from the time they are generated until they are properly recycled or treated and disposed. 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 (“BDAT”) treatment standards, unless certain exemptions apply.

The Toxic Substances Control Act (“TSCA”) provides the U.S. Environmental Protection Agency (“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. The 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, as amended, establishes standards, permits, and procedures for controlling the discharge of pollutants from wastewater sources.

The Clean Air Act of 1970, as amended (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.

The Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA” or “Superfund”), and subsequent amendments under the Superfund Amendments and Reauthorization Act, as implemented by the National Contingency Plan, provide for the investigation and remediation of sites containing hazardous substances. The Superfund program’s regulations require that any remediation of hazardous substances meet applicable and relevant and/or appropriate regulatory requirements. Superfund also establishes strict and retroactive liability for parties who generated or transported hazardous substances, or owned and/or operated the sites containing them. This creates a strong incentive for proper management and disposal of hazardous waste.

The Emergency Planning and Community Right to Know Act of 1986 (“EPCRA”) requires companies to submit emergency and hazardous inventory forms to state and local agencies for all materials requiring a material safety data sheet under Occupational Safety and Health Administration (“OSHA”). EPCRA requires full disclosure of environmental releases to the public and contributes to public

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awareness and activism regarding corporate environmental management issues. To the extent a generator’s waste can be reported as being recycled, public pressure may be eliminated or significantly reduced.

The Pollution Prevention Act (“PPA”) of 1990 establishes pollution prevention as a national objective, naming it a primary goal wherever feasible. The PPA states that if pollution cannot be prevented, materials should be recycled in an environmentally safe manner.

Under the mandate of the Federal Facility Compliance Act (“FFCA”), the DOE is currently engaged in a program to treat and dispose of the mixed waste currently stored at its facilities. The FFCA required DOE to develop and comply with treatment and disposal plans for each of its facilities and charges the DOE with developing treatment and disposal capacity for these wastes where it does not currently exist. These plans must also address the need to treat and dispose of mixed wastes generated from the remediation of contaminated DOE sites.

Environmental Laws and Regulations Affecting the Use of Our Waste Treatment Technologies

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.

Pursuant to the mandate of the AEA, NRC regulations and guidance address the classification and management of low-level radioactive waste. The NRC regulations also govern the technical, monitoring, and safety-related aspects of developing and operating low-level radioactive waste disposal facilities. Pursuant to its authority under the AEA, the NRC also has established the following licensing requirements and operating procedures for these facilities:

·siting criteria;

·site stability;

·the development and implementation of institutional controls for the facility (e.g., access restrictions, environmental monitoring, and site maintenance);

·facility operation;

·financial assurance;

·site remediation; and

·site closure.

Our facilities implement NRC requirements through Agreement States’ regulations and facility radioactive material licenses. The NRC has delegated licensing authority in the Agreement States to numerous state agencies, including agencies in those states where we have facilities and operations.

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 BDAT. In some cases, there is no current technology to treat mixed wastes, although EPA

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policy places these wastes on a low enforcement priority. Our ownership and operation of treatment facilities also exposes us to potential liability for cleanup 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 Operations Facility, including procedures for ensuring appropriate waste acceptance and scheduling, waste tracking, manifesting and reporting, and employee training.

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. Pursuant to these statutes, the United States Department of Transportation (“DOT”) regulates the transportation of hazardous materials in commerce. 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.

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 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, we may be subject to cleanup 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 designed our processes to minimize the potential for release of hazardous substances into the environment. In addition, we developed plans to manage and minimize the risk of CERCLA or RCRA liability by taking the following measures:

·training of operators;

·use of operational controls; and

·structuring of our relationships with the entities responsible for the handling of waste materials and by-products.

Our facilities may have to obtain 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.

The Clean Air Act imposes stringent requirements upon owners and operators of facilities that emit pollutants into the air. 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. The Clean Air Act may require permits prior to the construction and operation of our facilities, and may require additional emission controls and restrictions on materials stored, used, and incinerated at existing or proposed facilities.

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The Clean Water Act establishes standards, permits, and procedures for controlling the discharge of pollutants from wastewater sources and this Act’s standard permits and procedures are potentially applicable to all other water discharged from, or reused at, facilities owned or operated by us.

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. The NRC also has set regulatory standards for worker protection and public exposure to radioactive materials or wastes that we adhere to.

Competition

Our Federal Services and Commercial Services segments compete with major national and regional environmental service and consulting firms with established environmental remediation staffs. These segments also compete with a similar universe of firms to provide waste disposition services. The following are key competitive factors in these markets:

·skilled technical personnel;

·quality of performance;

·safety;

·diversity of services; and

·price.

Many of the major national and regional environmental service and consulting firms that compete with us have greater financial, management, and marketing resources. We also face competition from smaller local firms. In the Federal segment, our major customer, the DOE, has substantially increased small business set-asides for prime contracts. Since we are not a small business, we have responded by teaming as a subcontractor to small businesses responding to requests for proposals for prime contract on selected procurements.

Our Commercial Processing and Disposal segment faces competition in packaging, transportation, treatment, stabilization, and facilitation of disposal of certain radioactive, hazardous, and mixed wastes at various facilities. The predominant waste 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 superior to our waste processing technologies. Competition is based primarily on the following factors:

·cost;

·regulatory and permit restrictions;

·technical performance;

·dependability; and

·environmental integrity.

We believe that we can compete favorably on the basis of these factors. We also believe that we possess several competitive advantages over our competitors:

·proprietary waste treatment technologies;

·our extensive vertical integration of services from customer site to disposal;

·the demonstrated commercial success of our technologies; and

·reputation for providing quality service to our customers.

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Backlog

We regularly monitor backlog with respect to contracts on hand as an input measure for internal forecasting and budgeting. Our backlog represents work yet to be performed on contracts that have been awarded. Our contracts routinely cover long-term projects with multiple fiscal years of funding from our customers that are issued on a task basis with multiple change orders. Estimating backlog requires an assessment of our customers’ future funding availability, which requires a great deal of estimation. Therefore, we generally do not provide guidance on backlog since backlog reporting is not a reliable measure of our financial results.

Research and Development Activities

We perform a minimal amount of research and development activity. We contract or subcontract with the Vitreous State Laboratory to provide research and development for us under fixed price and cost reimbursable contracts. Dr. Pedro Macedo and Dr. Theodore Litovitz lead the Vitreous State Laboratory of The Catholic University of America in Washington, D.C. (“Vitreous State Laboratory”) and are the inventors of the vitrification and ion-exchange technologies that are used in our processes. Under these contracts, Drs. Macedo and Litovitz supervise the research and retain ownership of all inventions and discoveries. Drs. Macedo and Litovitz license these inventions and discoveries to us under an exclusive license agreement, which we discuss in detail in the next section.

If we utilize the Vitreous State Laboratory in waste cleanup projects, we include the estimated cost for their services in our formal bid proposal and, after contract awards, we reimburse the Vitreous State Laboratory on a time and expense basis through subcontracts. The Vitreous State Laboratory is a not-for-profit institution; therefore, it does not include fees or percentage profits in its cost estimates.

Patents and Other Intellectual Property Rights

We own rights in 54 U.S. patents, 66 foreign patents, and 5 pending foreign patent applications covering our waste processing technologies as a result of internal technology development and various acquisitions. These patents expire at various dates through 2020. Specifically, we own issued and active patents for steam reforming, vitrification, grouting, waste water treatment, metal decontamination, nuclear waste packaging and storage modules, ion-exchange materials and processes, heat exchangers, decontamination of materials and equipment, and assaying of materials. We use these proprietary technologies in our commercial waste processing operations. Pursuant to an agreement with Westinghouse Electric Corporation (“Westinghouse”), now Viacom, Inc., we granted Westinghouse a non-exclusive royalty-free license to practice the technologies covered by certain of the patents that we acquired from Westinghouse.

To complement our existing waste processing technologies, we acquire or license technologies from third parties. We have an exclusive license agreement with Drs. Macedo and Litovitz, the inventors, for the patents and intellectual property rights to their proprietary vitrification and ion-exchange technologies. The exclusive license agreement expires upon the expiration of the last patent covered by the license agreement, which is currently in the year 2019. The license agreement, which currently encompasses 9 U.S. patents, and 14 foreign patents, also includes any process patents or technology rights related to the licensed field which is subsequently developed by the Vitreous State Laboratory or Drs. Macedo and Litovitz.

We have procedures in place to keep our proprietary information confidential. For example, we require each employee to agree to keep confidential all of our proprietary information and to assign to us all rights in any proprietary information or technology developed by him or her during his or her employment or made thereafter as a result of any inventions conceived or work done during his or her employment with us. Despite our precautions, a third party may copy or otherwise obtain and use our technology without our permission or develop similar technology independently. In addition, certain foreign countries have limited or no effective patent and trade secret protection.

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DURATEK®, ALPS®, CNSI®, and Chem-Nuclear® are some of the 10 registered trademarks held by us. DuraMelter is a common law trademark.

Employees

As of December 31, 2005, we employed approximately 1,185 employees and approximately 55 temporary field-assigned employees. These temporary employees are hired on an as-needed basis for specific durations. Staffing levels in all segments remained relatively constant throughout 2005.

The success of our business requires us to hire and retain qualified technical personnel. We have been successful in attracting and retaining qualified technical personnel. We believe that we have good relations with our employees.

Executive Officers

The following table sets forth the names of our executive officers, their positions, and their principal business experience:

Name	Age	Position	Principal Business Experience
Robert E. Prince	58	President, Chief Executive Officer and Director	President and Chief Executive Officer of the Company since November 1990 and director since 1991; Founder of General Technical Services, Inc. (“GTS”) in October 1984; President and Chief Executive Officer of GTS from 1987 to 1992.
Robert F. Shawver	49	Executive Vice President and Chief Financial Officer	Executive Vice President of the Company since May 1993; Chief Financial Officer and Chief Administrative Officer since 1987; Vice President from 1987 to 1993.
Admiral Joseph G. Henry	57	Executive Vice President and Chief Operating Officer	Executive Vice President and Chief Operating Officer of the Company since December 2005; Vice President and Chief Operating Officer of the Federal Services segment since March 2004; Prior to this, Admiral Henry served for 33 years in the U.S. Navy and retired as a two-star admiral.
William M. Bambarger, Jr.	41	Vice President, Corporate Controller and Chief Accounting Officer	Corporate Controller of the Company since April 2001; Director of Corporate Accounting of McCormick & Co., Inc. from 2000 to 2001; Controller and Chief Financial Officer of RWD Technologies, Inc. from 1992 to 2000.
Craig T. Bartlett	43	Vice President, Finance and Treasurer	Vice President, Finance of the Company since December 2000; Treasurer since February 1996; Controller from February 1993 to 1998; Director, Financial Operations from 1991 to 1993; Assistant Controller from 1988 to 1991.

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C. Paul Deltete	57	Senior Vice President, Commercial Services	Senior Vice President of Commercial Services Group of the Company since January 1996; President of Analytical Resources, Inc. (an environmental consulting firm acquired by the Company in 1996) from 1984 to January 1996.
William R. Van Dyke	58	Senior Vice President, Federal Services	Senior Vice President, Federal Services Group of the Company since September 2002; Senior Vice President, Business Development of Federal Services Group from 1995 to September 2002.
Michael F. Johnson	54	Senior Vice President, Commercial Processing	Senior Vice President of Commercial Processing Group of the Company since February 2002; General Manager Divesture Activities of Viacom/CBS from 2000 to 2002; General Manager of Resource Energy System Division of Westinghouse Electric Corp. from 1992 to 2000.
Diane L. Leviski	45	Senior Vice President, Human Resources	Senior Vice President of Human Resources of the Company since February 1996; Director of Human Resources from 1988 to 1996; Manager of Human Resources from 1985 to 1988.
Regan E. Voit	56	Senior Vice President, Disposal	Senior Vice President, International Sales & Disposal since June 2000; President of Chem-Nuclear Systems, L.L.C. since 1995.
Willis W. Bixby, Jr.	59	Senior Vice President, Environmental Health & Quality Assurance and Control	Senior Vice President of the Company since October 1999. Vice President of Scientech, Inc. from 1997 to 1999. Dr. Bixby held several senior management positions with the DOE from 1978 to 1997.

Financial Information About Geographic Areas

We receive substantially all of our revenues from our domestic operations and do not have significant overseas revenues.

Available Information

We incorporated in Delaware in 1982. Our principal executive offices are located at 10100 Old Columbia Road, Columbia, Maryland 21046. Our telephone number is (410) 312-5100 and our web site address is www.duratekinc.com. We file annual, quarterly, special reports, proxy statements, and other information with the SEC. We make these documents available on our web site, free of charge, as soon as practicable, after we file these documents with the SEC.

Item 1A.Risk Factors

Investing in our securities involves a material degree of risk. Before making an investment decision, you should carefully consider the risk factors set forth below as well as other information we include or incorporate by reference in this annual report and the additional information in the other reports we file with the U.S. Securities and Exchange Commission (“SEC”).

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Risks Relating to the Pending Merger with EnergySolutions

We are subject to business uncertainties and contractual restrictions while the merger with EnergySolutions is pending.

Uncertainty about the effect of the pending merger with EnergySolutions on our employees and our current and prospective customers may have an adverse effect on us. These uncertainties may impair our ability to retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with us to defer decisions regarding business relationships with us or  other decisions concerning us, or to seek to change existing business relationships with us. If key employees depart because of uncertainty about their future roles with EnergySolutions, our ability to continue to execute our business and strategic plans could be adversely affected. In addition, the Merger Agreement generally restricts us, until the merger occurs, from taking actions outside of the ordinary course of business, including making acquisitions, without the consent of EnergySolutions. These restrictions could adversely affect our ability to pursue key aspects of our growth plans prior to the completion of the merger.

Failure to complete the merger with EnergySolutions could negatively affect our stock price and our future business and financial prospects.

There is no assurance that EnergySolutions and Duratek will receive the necessary regulatory approvals or satisfy the other conditions to the completion of the merger. If the merger is not completed for any reason, we will be subject to several risks, including the following:

·The current market price of our Common Stock may reflect a market assumption that the merger is likely to occur, and a failure to complete the merger would likely result in a decline in the market price of our Common Stock;

·Many costs relating to the merger (such as legal, accounting, and a portion of our financial advisory fees) are payable by us whether or not the merger is completed;

·Efforts required under the Merger Agreement and other preclosing activities and obligations require substantial commitments of time and resources by our management and employees, which could limit the time and effort available to pursue other business activities that may be important to our operations; and

·We would continue to face the risks that we currently face as an independent company in executing our growth and strategic plans, as further described herein.

If the merger is not completed, the risks described above may occur and materially adversely affect our business, financial results, financial condition, and stock price.

The Merger Agreement limits our ability to pursue alternatives to this merger.

Under the Merger Agreement, we are generally precluded from encouraging or participating in any discussions that could lead to an alternative transaction to this merger. Similarly, our Board of Directors is restricted in its ability to withdraw or modify its recommendation that our stockholders approve the Merger Agreement. In certain circumstances, our Board of Directors may be permitted to terminate the Merger Agreement and pursue a proposal that it deems to be superior.  In those circumstances, we would be required to pay EnergySolutions a termination fee of approximately $8.6 million.

If our stockholders approve the Merger Agreement at a stockholders’ meeting currently expected to be held in the second quarter of 2006, we no longer have a right to terminate the Merger Agreement to accept an alternative transaction.

The effect of these provisions could be to discourage or prevent a party interested in a possible acquisition of our company from pursuing an offer to acquire us.

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Credit and Business Risks

The documents governing our indebtedness restrict our ability and the ability of our subsidiaries to engage in some business transactions.

We have entered into a secured credit facility (the “Credit Facility”) providing for an aggregate commitment of $145 million which consists of a five-year $30 million revolving line of credit to fund working capital and general corporate requirements and a six-year $115 million term loan. As of December 31, 2005, the outstanding balance was $69 million. The credit agreement governing the Credit Facility restricts our ability and the ability of our subsidiaries to, among other things, engage in the following actions:

·incur or guarantee additional indebtedness;

·declare or pay dividends on and redeem or repurchase capital stock;

·transfer assets or make loans between us and some of our subsidiaries;

·make investments;

·incur or permit to exist liens;

·enter into transactions with affiliates;

·make material changes in the nature or conduct of our business;

·complete the merger with EnergySolutions, although we received a consent from the lender to exclude the Merger Agreement;

·merge or consolidate with, acquire substantially all of the stock or assets of any other companies;

·make capital expenditures; and

·transfer or sell assets.

The Credit Facility also contains other covenants that are typical for credit facilities of this size, type and tenor, such as requirements that we meet specified financial ratios and financial condition tests. Our ability to make additional borrowings under the Credit Facility depends upon satisfaction of these covenants. Our ability to meet these covenants and requirements may be affected by events beyond our control.

Our failure to comply with obligations under the Credit Facility could result in an event of default under the facility. A default, if not cured or waived, could permit acceleration of our indebtedness. We cannot be certain that we will be able to remedy any default. If our indebtedness is accelerated, we cannot be certain that we will have funds available to pay the accelerated indebtedness or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all.

Our business and operating results could result in a reduction of elimination of previously reported profits by our inability to accurately estimate the overall risks, revenue, or costs on a contract.

We generally enter into four principal types of contracts with our clients: firm fixed-price, fixed-unit-rate, time-and-materials, and cost-plus award or incentive fee. Under our firm fixed-price and fixed-unit-rate contracts, we receive a fixed price regardless of the actual costs we incur and, consequently, we are exposed to a number of risks. These risks include underestimation of costs, problems with new technologies, unforeseen costs or difficulties, delays beyond our control and economic and other changes that may occur during the contract period. Under our time-and-materials contracts, we are paid for labor and costs incurred at negotiated contractual rates. Profitability on these contracts is driven by the extent of utilization of our billable personnel and cost control. Under our cost-plus award or incentive fee contracts, some of which are subject to contract ceiling amounts, we are reimbursed for allowable costs and fees,

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which may be fixed or performance-based. If our costs exceed the contract ceiling or are not allowable under the provisions of the contract or any applicable regulations, we may not be able to obtain reimbursement for all such costs. Under our incentive fee contracts, we are awarded fees assuming that certain contract commitments are met, including schedule, budget, and safety. If any of these commitments are not met, we could have a reduction in expected revenues.

Accounting for a contract requires judgment relative to assessing the contract’s estimated risks, revenue, and costs, and on making judgments on other technical issues. Due to the size and nature of many of our contracts, the estimation of overall risks, revenue and costs at completion is complicated and subject to many variables. Changes in underlying assumptions, circumstances, or estimates may also adversely affect future period financial performance.

A portion of our revenues is recognized using a proportional performance method. Generally, the proportional performance method that we utilize result in the recognition of contract revenues and earnings ratably, based on the proportion of completion to total estimated contract completion, or on estimated physical completion or units of production. We believe that our estimates are reasonably dependable but estimates are by their nature uncertain.

Revisions in revenues, costs, and profit estimates, or measurements in the extent of progress toward completion are changes in accounting estimates accounted for in the period of change (cumulative catch-up method). Such revisions could occur at any time and the effects could be material. A change order is included in total estimated contract revenue when revenue is probable, which generally occurs upon acceptance in writing by the customer. Until then, no revenue or profit is recognized.

Due to uncertainties inherent in the estimation process, it is possible that actual completion calculations may vary from estimates, and it is possible that such variances could be material to our operating results.

Our quarterly operating results may fluctuate significantly, which could have a negative effect on the price of our Common Stock.

Our quarterly revenue, expenses, and operating results may fluctuate significantly because of a number of factors, including:

·the impact that the timing of nuclear power plant outages have on the shipments of waste (outages typically occur in the spring and fall);

·unanticipated changes in contract performance that may affect profitability, particularly with contracts that have funding limits;

·the timing of resolutions on change orders, requests for equitable adjustments (“REAs”), and other contract adjustments;

·the seasonality of the spending cycle of our public sector clients, notably the Federal government, and the spending patterns of our commercial sector clients;

·employee staff levels and utilization rates;

·the number and significance of client engagements commenced and completed during a quarter;

·the ability of our clients to terminate engagements without penalties;

·delays incurred in connection with an engagement;

·the size and scope of engagements;

·the timing of expenses incurred in connection with the Merger Agreement or for other corporate initiatives;

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·changes in the prices of services offered by our competitors;

·changes in accounting rules; and

·general economic or political conditions.

Variations in any of these factors could cause significant fluctuations in our operating results from quarter to quarter and could result in net losses.

If we have to write-off a significant amount of intangible assets, our earnings will be negatively impacted.

Goodwill is included on our balance sheet and is a significant asset, comprising $72.1 million at December 31, 2005. If our goodwill were to be significantly impaired, a write-down or write-off would be required. The write-off would negatively impact our earnings; however, it would not impact our cash flows.

We may encounter difficulties in pursuing our growth objectives.

In order to increase our revenues and to replace revenues from projects that will be completed, such as the decommissioning of the Big Rock Point Nuclear Power Plant in 2006, the Fernald Environmental Management Closure Project contract set to be completed in 2007, and the few current U.S. commercial nuclear power plant decommissioning projects that are nearing completion, we must be successful in winning and performing new business mandates in our federal business and commercial sectors. It is often difficult to predict the timing and magnitude of, and success in being awarded, any new contracts. Additionally, the trend within the domestic nuclear power industry for plant life extension and license renewal affects the demand for services to commercial customers. Due to these risks, period-to-period comparisons have been adversely affected in the past and may continue to be affected in the future.

Although the Department of Energy has indicated that a number of new contracts will be awarded in 2006 and 2007, governmental awards are frequently delayed. Additionally, we cannot predict whether we will be successful in obtaining new federal services business awards. In some instances, we may choose to bid as the lead of a prime contractor team. In the past, we have operated mainly as a subcontractor or in a minority position on the prime contractor team. We expect to be bidding against organizations that have substantially greater resources and experience in being the leading prime contractor for these kinds of projects. In addition, our success in being awarded prime and subcontracts is subject to competitive pressures, including pressures from new entrants into these markets and from enterprises who benefit from various recent DOE preferences for small business enterprises as prime contractors and sub-contractors.

In light of these uncertainties for new business awards in our commercial and federal services business units, our growth plan anticipates pursuing new opportunities for providing services with respect to low-level radioactive waste and high-level wastes at DOE sites in the United States and foreign sites and, potentially further in the future, spent nuclear fuel and uranium mill tailings. In many of these potential opportunities, we may not have experience comparable to our current and past experience in our federal and commercial businesses. Thus, we may be subject to a range of risks in obtaining and performing these types of businesses, including the risks associated with conducting business overseas, the adequacy and experience of management, and the adequacy of operational resources and technical capabilities needed to perform these mandates successfully. We cannot predict whether we will be successful in obtaining or performing any new business initiatives in these new business areas.

Government Contracting Risks

The U.S. government can audit and disallow claims for compensation under our government contracts, and can terminate those contracts without cause.

Our government contracts, which are primarily with the DOE and DoD, are, and are expected to continue to be, a significant part of our business. We derived approximately 47% of our consolidated

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revenues in 2005 and 43% of our consolidated revenues in 2004 from contracts funded by the DOE. The Federal Services work that we performed for customers that represented greater than 10% of the Federal Services segment’s revenues were with prime contractors Bechtel Corporation and Fluor Corporation. Allowable costs under government contracts are subject to audit by the U.S. government. To the extent that these audits result in determinations that costs claimed as reimbursable are not allowable costs or were not allocated in accordance with Federal government regulations, we could be required to reimburse the U.S. government for amounts previously received. In addition, if we were to lose and not replace our revenues generated by one or more of the U.S. government contracts, our businesses, financial condition, results of operations, and cash flows could be adversely affected.

We have a number of contracts and subcontracts with agencies of the U.S. government, principally for environmental remediation, restoration, and operations work, that extend beyond one year and for which additional government funding has not yet been appropriated. We cannot be certain that the U.S. government will appropriate such funds.

All contracts with agencies of the U.S. government and some commercial contracts are subject to unilateral termination at the option of the customer. In the event of a termination, we would not receive projected revenues or profits associated with the terminated portion of those contracts; however, all costs incurred prior to termination are recoverable in accordance with Federal Acquisition Regulations.

In addition, government contracts are subject to specific procurement regulations, contract provisions, and a variety of other socioeconomic 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 laws and contract provisions. As a result of our government contracting, claims for civil or criminal fraud may be brought by the government for violations of these regulations, requirements, or statutes. We may also 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. Further, if we fail to comply with any of these regulations, requirements, or statutes, our existing government contracts could be terminated, we could be suspended from government contracting or subcontracting, including federally funded projects at the state level, and our ability to participate in foreign projects funded by the United States could be adversely affected. If one or more of our government contracts are terminated for any reason, or if we are suspended from government work, we could suffer a significant reduction in expected revenues.

Most of our government contracts are awarded through a regulated competitive bidding process. The inability to complete existing government contracts or win new government contracts over an extended period could harm our operations and adversely affect our future revenues.

Most of our government contracts are awarded through a regulated competitive bidding process. Some government contracts are awarded to multiple competitors, which increases overall competition and pricing pressure and may require us to make sustained post-award efforts to realize revenues under these government contracts. In addition, government clients can generally terminate or modify their contracts at their convenience. Moreover, 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. The inability to complete existing government contracts or win new government contracts over an extended period could harm our operations and adversely affect our future revenues.

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

We perform projects jointly with outside partners, entering into subcontracts, joint ventures, and other contractual arrangements so that we can jointly bid and perform on particular projects. Success on

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these joint projects depends in large part on whether our partners fulfill their contractual obligations satisfactorily. If any of our partners fail to satisfactorily perform their contractual obligations as a result of financial or other difficulties, we may be required to make additional investments and provide additional services in order to make up for our partner’s shortfall. If we are unable to adequately address our partner’s performance issues, then our client could terminate the joint project, exposing us to legal liability, loss of reputation, and reduced profit or loss on the project.

Our future success will likely depend, in part, on the success of our existing collaborative relationships. Collaborative arrangements involve risks that the participating parties may disagree on business decisions and strategies resulting in potential 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.

Regulatory Risks

Our services expose us to significant risks of liability and our insurance policies may not provide adequate coverage.

When we perform our services, our personnel and equipment may be exposed to radioactive and hazardous materials and conditions. Although we are committed to a policy of operating safely and prudently, 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. To date, we have been able to obtain liability insurance for the operation of our business. However, 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, if successful and of sufficient magnitude, could have a material adverse effect on our results of operations and financial condition.

Expiration of the Price-Anderson Act’s indemnification authority could have adverse consequences on our Federal and Commercial business units.

Our Federal and Commercial units provide services to the nuclear industry. The Price-Anderson Act promotes the nuclear 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 others like us who may be doing work under contract or subcontract for a licensed power plant or under a DOE prime contract. While the Price-Anderson Act’s indemnification provisions are broad and generally assumed to be comprehensive, there has been no occasion for a determination whether they apply to all nuclear liabilities that might be incurred by a radioactive materials cleanup contractor. It was recently extended to December 31, 2025 for DOE contractors.

We operate in a highly regulated industry requiring our customers and us to have and comply with federal, state, and local government permits and approvals.

We and our customers operate in a highly regulated environment. Facilities utilizing our technologies are required to have federal, 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 or with environmental and safety laws may adversely affect our operations and may subject us to penalties and other sanctions.

In addition to regulatory requirements, environmental laws impose joint and several liabilities for the cleanup of contamination upon the current and former owners and operators of contaminated property and on any party who arranges for the disposal or treatment of hazardous substances at a facility that is or becomes contaminated. Such liability is imposed without regard to fault and regardless of knowledge or

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compliance with environmental requirements. There can be no assurance that we will not face such liability in the future.

In addition, if new environmental legislation or regulations are enacted or existing legislation 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 environmental requirements also may require us to change or improve our waste management technologies and services and incur additional expenses. There can be no assurance that we will be able to meet all of the applicable regulatory requirements.

Changes in existing environmental laws, regulations, and programs could reduce demand for our environmental services, which could cause our revenues to decline.

A significant amount of our waste management business is generated either directly or indirectly as a result of existing Federal and state laws, regulations, and programs related to pollution and environmental protection. Federal, state, and local environmental legislation and regulations require substantial expenditures and impose liabilities for noncompliance. Accordingly, a relaxation or repeal of these laws and regulations, or changes in governmental policies regarding the funding, implementation, or enforcement of these programs, could result in a decline in demand for environmental services that may have a material adverse effect on our revenue.

Adequate bonding is necessary for us to successfully win new work awards on some types of contracts.

In line with industry practice, we are often required to provide performance and surety bonds to customers under fixed-price contracts. These bonds indemnify the customer should we fail to perform our obligations under the contract. If a bond is required for a particular project and we are unable to obtain an appropriate bond, we cannot 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. Moreover, due to events that affect the insurance and bonding markets generally, bonding may be more difficult to obtain in the future or may only be available at significant additional cost. There can be no assurance that bonds will continue to be available to us on reasonable terms. Our inability to obtain adequate bonding and, as a result, to bid on new work could have a material adverse effect on our businesses, financial condition, results of operations, and cash flows.

Competition Risks

We face increasing competition in the provision of waste treatment technologies and services.

The waste management technologies and services industry is characterized by several large companies and numerous small companies. Any of these companies may possess or develop technologies superior to our technologies. In addition, we compete with companies offering waste management technologies, storage, and disposal management alternatives. In our services business, our competitors range from major national and regional environmental service and consulting firms with large environmental remediation staffs to small local firms. To the extent that our competitors offer more cost-effective management technology alternatives or offer comparable services at lower prices, our ability to compete effectively could be adversely affected.

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

We are dependent upon our ability to attract and retain highly qualified managerial and business development personnel, skilled technical specialists, and experts in a wide range of scientific, engineering, and health and safety fields. Competition for key personnel is intense. We cannot be certain that we will retain our key managerial, business development, and technical personnel or that we will attract or assimilate key personnel in the future. Failure to retain or attract such personnel could materially adversely affect our businesses, financial position, results of operations, and cash flows.

We are also highly dependent upon the technical expertise and management experience of our senior management. The loss of the services of any of these individuals could have a material adverse effect on our results of operations and financial condition. Certain members of our senior management are subject to employment agreements, which end in June 2006 and November 2006, with automatic one-year extensions unless terminated with proper notice before the end date. There have been no notices of termination and there are no “key man” life insurance policies on any members of senior management or any other personnel.

Other Risks

Our Stockholder Rights Plan and provisions of Delaware law could inhibit a change in control.

We are subject to various restrictions and other requirements that may have the effect of delaying, deterring, or preventing a change in control of us, such as:

·our Stockholder Rights Plan; and

·Section 203 of the Delaware General Corporation Law.

On December 16, 2003, our board of directors approved a Stockholder Rights Plan. Under this plan, each share of our Common Stock is accompanied by a right that entitles the holder of that share, upon the occurrence of specified events that may be intended to effect a change in control, to purchase one one-thousandth of a share of Series B Junior Participating Preferred Stock at an exercise price of $58.00. In the event the rights become exercisable, the rights plan allows for our stockholders to acquire our stock or the stock of the surviving corporation, whether or not we are the surviving corporation, having a value twice that of the exercise price of the rights.  On February 6, 2006, our board of directors approved an amendment to the Stockholder Rights Plan that exempted the proposed EnergySolutions merger as a transaction that would trigger the exercise of the rights accompanying our Common Stock.

We are also subject to Section 203 of the Delaware General Corporation Law, which generally limits the ability of major stockholders to engage in specified transactions with us that may be intended to effect a change in control.

The value of our Common Stock could continue to be volatile.

Our Common Stock has experienced substantial price volatility. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market price of many companies and that have often been unrelated to the operating performance of these companies. The overall market and the price of our Common Stock may continue to fluctuate greatly. The trading price of our Common Stock may be significantly affected by various factors, including:

·quarter-to-quarter variations in our financial results, including revenue, profits, and other measures of financial performance or financial condition;

·announcements of new contracts or technological development;

·announcements by us or our competitors of significant acquisitions;

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·resolution of threatened or pending litigation;

·status of our collaborative arrangements or those of competitors;

·changes in investors’ and analysts’ perceptions of our business or any of our competitors’ businesses;

·investors’ and analysts’ assessments of reports prepared or conclusions reached by third parties;

·changes in environmental legislation;

·patent or proprietary rights developments;

·broader market fluctuations;

·status of the Merger Agreement for the acquisition of Duratek by EnergySolutions and transactions related thereto; and

·general economic or political conditions.

Additionally, volatility or a lack of positive performance in our stock price may adversely affect our ability to retain key employees, many of whom are granted stock options, the value of which are dependent on the performance of our stock price.

Item 1B.Unresolved Staff Comments

None.

Item 2.Properties

We lease approximately 35,000 square feet of office space in Columbia, Maryland, which we use as our general corporate office. This lease ends on December 31, 2006. On November 11, 2005, we entered into a new lease for approximately 40,000 square feet at a new facility in Maple Lawn, Maryland to be used as our new general corporate office. The lease runs from September 1, 2006 to December 31, 2016. In addition, we lease the following office space primarily for these business segments:

·Federal Services segment: approximately 20,000 square feet of office space in Richland, Washington, and this lease ends on September 30, 2006; approximately 3,000 square feet of office space in Lakewood, Colorado, and this lease ends on June 30, 2007;

·Commercial Services segment: approximately 18,000 square feet of office space in Columbia, South Carolina, and this lease ends on August 30, 2008. In addition, an office suite is leased in Cumbria, UK. This lease ends on November 30, 2008.

In addition, we lease approximately 18,000 square feet of office space in Oak Ridge, Tennessee for our Federal Services and Commercial Services segments, and this lease ends on July 31, 2008.

Our primary waste processing operations in the Commercial Processing and Disposal segment are located on 50 acres of land that we own in Oak Ridge, Tennessee. We operate additional waste processing operations on another 50-acre parcel that we own in Kingston, Tennessee. We perform a portion of the disposition of large component projects on our 13.5-acre site in Memphis, Tennessee.

We maintain the operating rights to a commercial low-level radioactive waste disposal landfill site that is owned by the State of South Carolina. The disposal landfill site is called the Barnwell Disposal Facility, which is part of our Commercial Processing and Disposal segment, and is located in Barnwell, South Carolina. Our lease with the State of South Carolina to operate this site ends on April 5, 2075.

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Item 3.Legal Proceedings

On September 21, 2004, Washington State Department of Ecology (“Ecology”) issued a Notice of Penalty Incurred and Due No. 1672 with a fine of $0.3 million jointly and severally assessed against the U.S. Department of Energy-Richland Operations, the U.S. Department of Energy-Office of River Protection, Fluor Hanford Incorporated, and Duratek Federal Services of Hanford, Inc. Ecology issued the Notice of Penalty listing four types of violations: Facility Reporting, Personnel Training, Facility Record Keeping, and General Waste Analysis. The four issues are positions that Ecology has taken relating to how certain drums of material sent off site for treatability studies were handled. All the named parties disagree with the finding and are working as a joint defense team. The DOE is leading the appeal effort, and the named parties filed an appeal with Ecology in Hanford, Washington on October 20, 2004. The Department of Justice has joined the appeal in support of the DOE, Fluor Hanford, and Duratek. Discovery has been completed and summary judgment motions were filed during the first week of February 2006.

In December 2003, we received a REA from a subcontractor, Performance Abatement Services, Inc. (“PAS”), that seeks a price adjustment of approximately $6.7 million to an ongoing, fixed-price subcontract between PAS and Duratek Federal Services, Inc. for asbestos-abatement services. The subcontract at issue arises under a fixed-price contract that we are performing for Bechtel Jacobs Company, LLC (“Bechtel Jacobs”). PAS has claimed amounts based on an extrapolation of their total anticipated cost through completion of this project over a substantially extended performance period, not just based on costs incurred to date. It assumes ongoing project inefficiencies resulting from nine alleged causes.

We received REAs totaling $0.3 million for two of the nine sub-claims during 2004 and some of the other claims have been settled or dropped. In 2005, there were no REAs received related to the sub-claims. We are still evaluating the remaining REAs.  PAS continues to pursue REAs totaling $2.9 million, most of which we believe are unsupported. We are negotiating with both Bechtel Jacobs and PAS to resolve the outstanding REAs. We believe that we have valid defenses to most if not all of the claims, however, it is possible that some payment to PAS that is not passed on to Bechtel Jacobs may be required to resolve these claims.

In February of 2003, we filed multiple claims, including misappropriation of trade secrets, unfair trade practices, and patent infringement against AVANTech, Inc. in the Federal Court of South Carolina. AVANTech, Inc. then filed numerous counterclaims against us. All counterclaims brought against us by AVANTech, Inc. were dismissed by summary judgment. In October 2005, a South Carolina jury found against us on all of our claims. AVANTech, Inc has stated that they would petition the court for an award of attorneys’ fees in an amount that has not been determined. To date, no petition for attorneys’ fees has been made; however, we cannot provide any assurance that a claim for a material amount of attorneys’ fees will not be asserted. We intend to appeal this decision.

In addition, from time to time, we are a party to litigation or administrative proceedings relating to claims arising from our operations in the normal course of our business. Our management believes that the ultimate resolution of matters in litigation, administrative proceedings, or other matters, including those described above, currently pending against us is unlikely, either individually or in the aggregate, to have a material adverse effect on our results of operations or financial condition.

Item 4.Submission of Matters to a Vote of Security Holders

We did not submit any matters for approval to our stockholders during the last quarter of our 2005 fiscal year.

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Part II

Item 5.Market for Registrant’s Common Equity and Related Stockholder Matters

Our Common Stock is quoted on the NASDAQ National Market under the symbol “DRTK”. The table below sets forth the quarterly high and low sale prices of our Common Stock during the past two fiscal years. The last reported sale price of our Common Stock on the NASDAQ National Market on February 17, 2006 was $22.07.

	Price Range of  Common Stock
	High		Low
Year ended December 31, 2005:
4th quarter	$	18.82	$	10.40
3rd quarter	25.48		16.11
2nd quarter	24.75		18.50
1st quarter	28.50		17.94
Year ended December 31, 2004:
4th quarter	$	25.46	$	15.77
3rd quarter	16.40		13.19
2nd quarter	16.48		12.39
1st quarter	16.48		12.10

As of February 17, 2006, there were 1,289 holders of record of our Common Stock and we estimate that there were approximately 4,500 beneficial holders.

We have never declared or paid a cash dividend on our Common Stock and we are prohibited from paying dividends on any of our Common Stock under our bank credit facility. Because we intend to retain earnings primarily to fund working capital, to invest in capital expenditures, and to meet our debt service requirements, we do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.”

Item 6.Selected Financial Data (in thousands of dollars and shares, except earnings per share dollars)

The selected financial data set forth below should be read together with the information under Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included in this Form 10-K.

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Our statements of operations for the years ended December 31, 2005, 2004, and 2003 and balance sheet data as of December 31, 2005 and 2004 set forth below are derived from our audited consolidated financial statements included elsewhere in this Form 10-K. The statements of operations data for the years ended December 31, 2002 and 2001 and balance sheet data as of December 31, 2003, 2002, and 2001 are derived from our audited consolidated financial statements which are not included in this Form 10-K.

	Years Ended December 31,
	2005			2004			2003			2002(1)			2001
Statement of Operations Data:
Revenues	$	281,212		$	286,213		$	285,901		$	291,536		$	279,173
Cost of revenues	211,299			211,315			217,493			229,134			237,454
Gross profit	69,913			74,898			68,408			62,402			41,719
Selling, general and administrative expenses	34,516			34,306			33,462			33,583			34,991
Income from operations	35,397			40,592			34,946			28,819			6,728
Interest expense	(6,539		)	(6,970		)	(6,903		)	(5,518		)	(10,606		)
Other income (expense), net	31			398			76			285			191
Income (loss) before income taxes (benefit), equity in income (loss) of joint ventures, and cumulative effect of a change in accounting principle	28,889			34,020			28,119			23,586			(3,687		)
Income taxes (benefit)	10,651			13,098			11,671			9,673			(729		)
Income (loss) before equity in income (loss) of joint ventures and cumulative effect of a change in accounting principle	18,238			20,922			16,448			13,913			(2,958		)
Equity in income (loss) of joint ventures	185			124			202			(148		)	(148		)
Income (loss) before cumulative effect of a change in accounting principle	18,423			21,046			16,650			13,765			(3,106		)
Cumulative effect of a change in accounting principle, net of taxes	—			—			(2,414		)	—			—
Net income (loss)	18,423			21,046			14,236			13,765			(3,106		)
Preferred stock repurchase premium, dividends, and charges for accretion	—			(63		)	(36,154		)	(1,279		)	(1,495		)
Net income (loss) attributable to common stockholders	$	18,423		$	20,983		$	(21,918	)	$	12,486		$	(4,601	)

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	Years Ended December 31,
	2005		2004		2003			2002(1)		2001
Statement of Operations Data (continued):
Income (loss) per share:
Basic:
Before cumulative effect of a change in accounting principle	$	1.25	$	1.48	$	(1.44	)	$	0.92	$	(0.34	)
Cumulative effect of a change in accounting principle	—		—		(0.18		)	—		—
	$	1.25	$	1.48	$	(1.62	)	$	0.92	$	(0.34	)
Diluted:
Before cumulative effect of a change in accounting principle	$	1.21	$	1.42	$	(1.44	)	$	0.72	$	(0.34	)
Cumulative effect of a change in accounting principle	—		—		(0.18		)	—		—
	$	1.21	$	1.42	$	(1.62	)	$	0.72	$	(0.34	)
Basic weighted average common stock outstanding	14,776		14,191		13,561			13,504		13,449
Diluted weighted average common stock outstanding	15,286		14,760		13,561			19,110		13,449

	As of December 31,
	2005		2004		2003		2002			2001
Balance Sheet Data:
Working capital (deficiency)	$	15,843	$	15,822	$	14,212	$	(17,076	)	$	(16,573	)
Total assets	263,914		268,537		283,144		254,132			272,649
Long-term debt and capital lease obligations	70,585		85,479		116,562		61,780			85,386
Redeemable convertible preferred stock	—		—		300		15,752			15,734
Stockholders’ equity	89,859		68,326		37,866		59,862			46,884

(1)Effective January 1, 2002, we adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142, we no longer amortize goodwill but rather test such assets for impairment on an annual basis. If we had been required to adopt the provisions of the pronouncement effective as of January 1, 2001, the net loss and diluted net loss per share would have been $(2.9) million and $(0.21) in 2001.

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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements concerning our business and operations. Forward-looking statements include those statements containing words such as the following: “will,” “should,” “could,” “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” and other similar expressions. All of these forward-looking statements involve risks and uncertainties. They are all made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We wish to caution you that our actual results may differ significantly from the results we discuss in our forward-looking statements. We discuss the risks that could cause such differences in Item 1A to this report under the caption “Risk Factors”, and in our various other filings with the Securities and Exchange Commission. Our forward-looking statements speak only as of the date of this document, and we do not intend to update these statements to reflect events or circumstances that occur after that date. Hereinafter, the terms “Duratek”, “we”, “our” or the “Company” and similar terms refer to Duratek, Inc. and its subsidiaries, unless the context indicates otherwise.

Recent Developments

On February 6, 2006, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with EnergySolutions, LLC (formerly known as Envirocare of Utah, LLC), a Utah limited liability company (“EnergySolutions”), and Dragon Merger Corporation, a Delaware corporation and a wholly owned subsidiary of EnergySolutions. Pursuant to the terms of the Merger Agreement, EnergySolutions will acquire all of our outstanding shares of Common Stock for an aggregate consideration of approximately $327 million in cash. Upon the effectiveness of this merger, each issued and outstanding share of our Common Stock will be converted into the right to receive $22.00 in cash, without interest, and each outstanding stock option, whether or not vested, will convert into the right to receive the excess, if any, of the $22.00 per share merger consideration over the per share exercise price of the option, less any tax withholding.

In addition, we have agreed, among other things and subject to certain exceptions as described in the Merger Agreement, (i) to conduct our business in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and consummation of this merger, (ii) not to engage in certain transactions during such period, (iii) to cause a stockholder meeting to be held to consider approval of this merger and the other transactions contemplated by the Merger Agreement, (iv) subject to certain limited exceptions to permit the board of directors to comply with their fiduciary duties, for our board of directors to recommend that the stockholders adopt the Merger Agreement and thereby approve this merger, and (v) subject to certain limited exceptions to permit the board of directors to comply with their fiduciary duties, not to solicit proposals relating to alternative business combination transactions, or to enter into discussions concerning, or to provide information in connection with, alternative business combination transactions.

Consummation of the merger is subject to a number of conditions, including stockholder approval, absence of any law or order prohibiting the consummation of this merger, expiration, or termination of the applicable Hart-Scott-Rodino Antitrust Improvements Act waiting period, and certain other customary conditions.

We expect to submit the Merger Agreement and the merger described above to stockholders for their consideration during the second quarter of 2006 and to close the merger promptly following receipt of stockholder and regulatory approval.

Pursuant to the terms of the Merger Agreement, EnergySolutions and Duratek each have certain termination rights. Upon termination of the Merger Agreement under specified circumstances, we may be required to pay EnergySolutions a termination fee of approximately $8.6 million. In addition, if this merger

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cannot be closed or is delayed for longer than twelve months due to certain regulatory or legal restrictions, EnergySolutions has agreed to pay to us a “reverse break-up fee” of $5 million in cash and to provide a prepayment credit of $12 million to one of our subsidiaries for waste disposal services performed by EnergySolutions under an existing commercial contract between the parties.

Overview

We operate in a complex environment due to the nature of our customers and our projects. These factors are described throughout this Annual Report on Form 10-K, including under “Risk Factors.” Due to the size and nature of many of our contracts, the estimation of overall risk, revenue and cost at completion is complicated and subject to many variables. Depending on the contract, this poses challenges to our executive management team in overseeing contract performance and in evaluating the timing of the recognition of revenues and project costs, both initially and when there is a change in project status. Thus, our executive management team spends considerable time on evaluating and structuring key contracts, on monitoring project performance, and in assessing the financial impact of our contracts. Due to the complexity in the revenue recognition for our projects, executive financial management is particularly attentive to developments in individual contracts that may affect the timing of revenues and related costs.

We continue to actively manage our projects to minimize these significant events and the financial impact on us. More information on risks and our efforts to manage risks are available in Items 1 and 1A of this annual report.

The following is a summary of significant events in 2005 that had an impact on our financial results and thus received considerable financial management attention and scrutiny:

·Acceleration of the estimated closure date on the Fernald closure contract from May 2007 to December 2006 and elimination of the schedule contingency that resulted in $5.7 million of additional incentive fees recognized in 2005.

·Recovery of incentive fees reserved on the Project Hanford Management Contract relating to uncontrollable prime contractor safety and performance shortfalls in 2004 for which $1.1 million was recovered in 2005.

·A $1.4 million reduction of employee incentive costs as a result of lower revenue and cash flow performance than estimated.

·Lower future decontamination and decommissioning (“D&D”) cost estimates as a result of applying new technologies to achieve efficiencies in processing and disposal costs that resulted in a reduction in costs of $1.1 million in 2005.

·Recovery of Commercial Processing revenue in 2005 of $1.1 million relating to work performed on waste processed in 2004 as a result of reconciling preliminary estimates of waste composition to actual waste processed.

·Legal costs incurred in 2005 relating to the Avantech lawsuit of $3.5 million.

·Losses incurred on four Federal Services contracts of $4.6 million due to out of scope and project closeout costs incurred while awaiting resolution of requests for equitable adjustments to offset a portion of these costs.

We provide services to commercial and government customers in the United States that ensures safe and secure radioactive materials disposition and nuclear facility operations. We possess a breadth of capabilities, technologies, assets, facilities, and qualified technical personnel. Our services include decommissioning services, nuclear facility operations, radioactive material characterization, processing, transportation, accident containment and restoration services, and final disposal. Our operations are

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organized into three primary segments: (i) Federal Services, (ii) Commercial Services, and (iii) Commercial Processing and Disposal. Our revenues are derived almost equally from government and commercial customers. More detailed information on our segments are available in Item 1 of this annual report.

We measure financial performance for each operating segment based on income from operations, which consists of revenues less direct expenses and selling, general and administrative (“SG&A”) expenses. SG&A expenses for each segment includes specific expenses for the management, support, and business development functions of the segment as well as an allocation of our corporate SG&A expense. Our corporate SG&A expenses include company-wide management, support, and business development functions and are allocated to each segment based on their pro-rata share of direct expenses incurred. We have included in this item a comparative period-to-period analysis of SG&A expenses incurred by each segment and the impact of corporate SG&A expense that has been allocated to each segment, and an analysis of corporate SG&A expense.

Critical Accounting Policies

Management’s discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to completion of long-term contracts, the cost to decontaminate and decommission (“D&D”) facilities and equipment, the recoverability of long-lived assets, including goodwill, contingencies, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates.

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 judgments. Our most critical accounting policies, which relate to revenue recognition, D&D liabilities, and recoverability of long-lived assets including goodwill, are discussed below.

Revenue Recognition

Federal and Commercial Contracts for Services

We have contracts to provide engineering and technical support services to the Federal government and its agencies and to commercial companies. Our Federal government contracts are subject to periodic funding by the respective contracting agency. Funding for a contract may be provided in full at inception of the contract or periodically throughout the term of the contract as the services are provided. From time to time, we may proceed with work based on customer direction pending a Request for Equitable Adjustment (“REA”) or finalization and signing of formal funding documents. We have an internal process for approving such work. Contract acquisition costs are expensed as incurred.

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

·Time-and-materials contracts-We are paid for labor and costs incurred at negotiated contractual rates. Profitability on these contracts is driven by the extent of utilization of our billable personnel and the rates that are applied based on contractual terms.

·Cost-plus award or incentive fee contracts-We are reimbursed for allowable costs in accordance with Federal Acquisitions Regulations (“FAR”) or contractual provisions. If our costs exceed the

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contract ceiling or are not allowable under the provisions of the contract or FAR, we may not be able to obtain reimbursement for all such costs. We earn award and incentive fees in addition to cost reimbursements if we meet certain contract provisions, including schedule, budget, and safety. If any of these provisions are not satisfied in accordance with management’s estimates, we could have a reduction in expected revenues. Monthly assessments are made to measure our compliance with established contract provisions. We receive award and incentive fees on certain Federal government contracts, which are accrued when estimable, and collection is reasonably assured. Included in the incentive fees recognized is an incentive fee on a Federal government subcontract for the Fernald Closure Project that is not billable until the project is complete, which is currently estimated to be in the second half of 2006.

·Firm-fixed-price and fixed-unit-rate contracts-We receive a fixed price irrespective of the actual costs we incur and, consequently, we are exposed to a number of risks. These risks include underestimation of costs, problems with new technologies, unforeseen costs or difficulties, delays beyond our control, and economic and other changes that may occur during the contract period. For firm-fixed-price contracts, our revenues are recognized under the proportional performance method using proportional output measures, where estimable, or based on other measures such as the proportion of costs incurred to total estimated contract costs or units of production. For fixed-unit-rate contracts, our revenues are recognized as units are completed based on the contractual unit rates.

Revisions in revenues, costs, and profit estimates, or measurements in the extent of progress toward completion are changes in accounting estimates accounted for in the period of change (cumulative catch-up method). Such revisions could occur at any time and the effects could be material. Although we have a history of making reasonably dependable estimates of the extent of progress towards completion of contract revenue and of contract completion costs on our long-term engineering and construction contracts, due to uncertainties inherent in the estimation process, it is possible that actual completion costs may vary from estimates, and it is possible that such variances could be material to our operating results.

Contracts typically provide for periodic billings on a monthly basis or based on contract milestones. Cost and estimated earnings in excess of billings on uncompleted contracts represents amounts recognized as revenue that have not been billed. Unearned revenue represents amounts billed and collected for which revenue has not been recognized. Retainage represents amounts recognized as revenue that have been retained by the customer until certain conditions are met in accordance with contract provisions.

Change Orders and Requests for Equitable Adjustment (“REAs”)

We record contract claims and pending change orders, including REAs, when revenue is probable, 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 the financial statements in the period that they are incurred and are included in our estimates of contract profitability.

Subcontractors have requested contract change orders related to scope changes requested by our customers where we have made corresponding claims to the customers. Based on agreement with our customers and the provisions of the contracts, recovery by these subcontractors is contingent upon our recovery from our customers. These amounts, including subcontractor costs and our corresponding revenue, have not been included in the results of our operations and are generally recognized when accepted in writing by the customer.

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Provision for Estimated Losses

Provision for estimated losses on individual contracts are recognized in the period in which the losses are identified and include all estimated direct costs to complete the contract (excludes future general and administrative costs expected to be allocated to the contract). Monthly assessments are made to measure our estimates and changes are made based on the latest information available.

Commercial Waste Processing

The commercial waste processing operations have contracts with commercial companies and governmental agencies. These contracts are primarily fixed-unit-price and usually require us to ship the processed waste for burial on behalf of the customer. Revenue is recognized as units of waste are processed based on the unit prices provided in the contracts. Our fixed unit price contracts provide for additional customer billings if the characterization or volume of waste received is different from contract specifications or for certain increases in burial and transportation costs. These variances are identified when the waste is sorted and during the processing cycle and can have either a positive or negative impact on revenue, depending on the provisions of the contract. When these variances are identified, rates are adjusted to the correct weight or classification and revenue is adjusted in the period that the variance is identified.

Disposal

Revenues from the operation of a low-level radioactive waste disposal facility in Barnwell, South Carolina (“Barnwell Disposal Facility”) are recognized in accordance with the Atlantic Interstate Low-Level Radioactive Waste Compact Implementation Act (the “Atlantic Waste Compact Act”). Under the Atlantic Waste Compact Act, we are reimbursed for allowable costs incurred in operating the Barnwell Disposal Facility that are identified by the South Carolina Public Service Commission and incurred by us plus an operating margin of 29% on certain of those allowable costs. In addition, costs incurred for decommissioning activities at the Barnwell Disposal Facility are reimbursed by the State of South Carolina from a trust fund established to cover the Barnwell closure obligation plus an operating margin of 14% on these costs. Our results from July 1, 2000 forward are based on the economic regulations imposed by the Atlantic Waste Compact Act. Allowable costs are subject to audit annually by the Office of Regulatory Staff (“ORS”) of the State of South Carolina to ensure compliance with the Atlantic Waste Compact Act. Recommended audit adjustments to allowable costs are thoroughly reviewed by management and resolved with ORS. Adjustments to revenues have historically been minor and are made in the period that management deems them probable and reasonably estimable.

D&D Liabilities

We have responsibility related to the cost to D&D the facilities and equipment in Tennessee and South Carolina and 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.

Similarly, under our license granted by the State of South Carolina and the Atlantic Interstate Low-Level Radioactive Waste Compact Implementation Act, we will be obligated for costs associated with the ultimate closure of the Barnwell Low-Level Radioactive Waste Disposal Facility in South Carolina and the buildings and equipment located at the Barnwell site. We have recorded accruals related to these D&D liabilities.

On January 1, 2003, we adopted Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (“SFAS No. 143”). SFAS No. 143 requires us to record the fair value of an asset retirement obligation (“ARO”) as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction,

33

development, and/or normal use of the asset. We are also required to record a corresponding asset that is depreciated over the life of the asset. Subsequent to the initial measurement of the ARO, the ARO will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation.

In March 2005, Financial Accounting Standard Board (“FASB”) issued FASB Interpretation No. 47 (“FIN 47”), Accounting for Conditional Asset Retirement Obligations-An Interpretation of FASB Statement No. 143. FIN 47 clarifies that the term conditional asset retirement obligation, as used in SFAS No. 143 refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The Company has concluded that FIN 47 did not have a material effect on our consolidated financial position, results of operations, or cash flows for the year ended December 31, 2005.

We are obligated, under our license granted by the State of South Carolina and the Atlantic Interstate Low-Level Radioactive Waste Compact Implementation Act (“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. We recognized our Barnwell closure obligation, which is effectively limited to the amount in the trust fund, for an amount equal to the balance in the trust fund.

We update our closure and remediation cost estimates for D&D on an annual basis. These estimates are based on current technology, regulations, and burial rates. We are unable to reasonably estimate the impact that changes in technology, regulations, and burial rates will have on the ultimate costs. Changes in these factors could have a material impact on these estimates.

Recoverability of Long-Lived Assets, Including Goodwill

As of December 31, 2005, we had $72.1 million of goodwill and $2.7 million of intangible assets with estimable useful lives on our consolidated balance sheet. We do not have any other intangible assets with indefinite useful lives.

Goodwill is not amortized, but rather is tested annually for impairment, or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. We tested our goodwill at the end of the first quarter of 2005, 2004, and 2003 in accordance with the standard and concluded that no impairment charge was required.

Intangible assets with estimable useful lives are amortized over their respective estimated useful lives, and reviewed for impairment whenever events or circumstances indicate the carrying value of such assets may not be recoverable. During 2005, patents with a net book value of $61 thousand were considered to be impaired.

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 a comparison of the carrying amount of the asset to 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. During 2005, 2004, and 2003, we concluded that no impairment charge was required.

34

Results of Operations

Year to Date 2005 Compared to Year to Date 2004.

   The table below sets forth certain consolidated statement of operations information for the years ended December 31, 2005 and 2004.

(in thousands of dollars)							Increase (decrease)
	2005			2004			Dollar			Percent
Revenues:
Federal Services	$	115,607		$	115,565		$	42		0.0	%
Commercial Services	79,557			84,942			(5,385		)	-6.3	%
Commercial Processing and Disposal	86,048			85,706			342			0.4	%
Total revenues	281,212			286,213			(5,001		)	-1.7	%
Cost of revenues:
Federal Services	87,102			85,496			1,606			1.9	%
Commercial Services	59,318			60,349			(1,031		)	-1.7	%
Commercial Processing and Disposal	64,879			65,470			(591		)	-0.9	%
Total cost of revenues	211,299			211,315			(16		)	0.0	%
Gross profit:
Federal Services	28,505			30,069			(1,564		)	-5.2	%
Percent of revenues	24.7%			26.0%
Commercial Services	20,239			24,593			(4,354		)	-17.7	%
Percent of revenues	25.4%			29.0%
Commercial Processing and Disposal	21,169			20,236			933			4.6	%
Percent of revenues	24.6%			23.6%
Total gross profit	69,913			74,898			(4,985		)	-6.7	%
Percent of revenues	24.9%			26.2%
SG&A:
Federal Services	13,922			13,658			264			1.9	%
Commercial Services	10,247			10,242			5			0.0	%
Commercial Processing and Disposal	10,347			10,406			(59		)	-0.6	%
Total SG&A	34,516			34,306			210			0.6	%
Percent of revenues	12.3%			12.0%
Income from operations:
Federal Services	14,583			16,411			(1,828		)	-11.1	%
Percent of revenues	12.6%			14.2%
Commercial Services	9,992			14,351			(4,359		)	-30.4	%
Percent of revenues	12.6%			16.9%
Commercial Processing and Disposal	10,822			9,830			992			10.1	%
Percent of revenues	12.6%			11.5%
Total income from operations	35,397			40,592			(5,195		)	-12.8	%
Percent of Sales	12.6%			14.2%
Interest expense	(6,539		)	(6,970		)	(431		)
Other income, net	31			398			(367		)
Income taxes	10,651			13,098			(2,447		)
Equity in income of joint ventures	185			124			61
Net income	$	18,423		$	21,046		$	(2,623	)

35

Revenues

Revenues decreased by $5.0 million in 2005 compared to 2004. The following items had a significant impact on revenues (in millions):

Description:	Increase (decrease)
Federal Services:
· A decrease in revenues relating to work performed for the K-25 site at the Oak Ridge Reservation in Tennessee due to the early termination of this contract in July 2005, offset by $1.2 million in requests for equitable adjustments received in 2005.		$	(4.5	)
· A decrease in work performed on the Hanford RPP-WTP projects due to a reduction in work scope in 2005 compared to 2004.		(2.3		)
· A decrease in revenues relating to the processing of liquid and gaseous wastes at the Oak Ridge Reservation in Tennessee primarily due to a reduction in the scope of work performed under this contract as a result of notification received from the customer in the third quarter of 2005. The operation portion of the project has been renegotiated in the fourth quarter of 2005. The operation portion of the contract has been extended for a two-year period.		(2.0		)
· A decrease in revenues relating to subcontract work performed for the Uranium Disposition Services, LLC (“UDS, LLC”) joint venture primarily due to the planned transition from a subcontractor status as a result of the transfer of employees to the joint venture during the third quarter of 2005. A significant portion of our revenues and expenses related to this contract has been replaced by joint venture income.		(1.5		)
· Revenues in 2004 relating to work performed to sort low-level legacy waste for a DOE prime contractor that was completed in 2004.		(1.2		)
· An increase in waste disposition volume for a disposal cell at the Hanford Site in 2005 compared to 2004.		3.9
· An increase in revenues relating to the Fernald Closure Project in 2005 compared to 2004 primarily relating to an increase in the incentive fee revenues recognized as a result of the effect of a revised estimate to complete the project earlier than previously scheduled based on progress to date, with the project completion date currently estimated to be December 2006.		3.5
· The recovery of incentive fees in 2005 relating to incentive fees reserved in 2004 due to uncontrollable prime contractor safety and performance shortfalls on the Project Hanford Management Contract. The recovery related to the timing of several milestones that were achieved. The increase was also attributable to incentive fees earned on a major milestone completed in December 2005.		2.0
· An increase in revenue on a Federal government subcontract at the Savannah River Site in 2005 compared to 2004 due to the project commencing in late 2004.		1.8
Commercial Services:
· A decrease in revenues due to a large transportation logistics contract that was performed and completed in 2004.		(7.6		)
· A decrease in revenues relating to D&Dproject work primarily due to the following:
· the favorable revenue effect of the termination for convenience of a D&D contract during 2004;		(4.8		)

36

· a decrease in revenues relating to emergency response work performed and completed in 2004; and	$	(2.6	)
· a high volume D&D project of a commercial nuclear power reactor and the recognition of a portion of a risk pool associated with this contract during 2004. This risk pool represents funds set aside by the customer as incentive to its contractors for successful project performance with regards to its fixed-price projects.	(2.2		)
· A decrease in revenues relating to the fabrication of liners for transportation containers and engineered equipment in 2005 compared to 2004.	(1.0		)
· Partially offsetting were increases in revenues relating to the following:
· an increase in revenues from our transportation operation relating to an increase in volume of activity in 2005 compared to 2004, primarily related to the transportation of D&D waste material and an increase in revenues from fuel surcharges due to higher fuel costs incurred;	4.6
· a net increase in D&D volume of work performed in 2005 compared to 2004 at nuclear power reactors;	3.5
· transportation logistics contracts that were completed in 2005 and three transportation logistics contracts that commenced during 2005;	3.0
· an increase in liquid waste processing services provided at several nuclear power reactors in 2005 compared to 2004; and	1.6
· an increase in revenues relating to work performed as part of several projects in the Federal Services segment.	1.0
Commercial Processing and Disposal:
· An increase in revenues relating to the fixed based processing facility in 2005 compared to 2004 due to the following:
· an increase in activity relating to waste received from customers that does not require processing and can be directly sent for burial, from transportation, and from container rentals;
· an increase in processing of specialty waste, primarily for the DOE; and
· partially offset by lower revenues from the processing of lower priced but higher volume waste for a commercial utility in 2005.	1.9
· A decrease in revenues from the Barnwell low-level radioactive waste disposal site due to a lower volume of waste buried in 2005 compared to 2004 as well as a decrease in decommissioning activities (capping of disposal trenches) at the Barnwell low-level radioactive waste disposal site in 2005 compared to 2004. Offsetting was an increase in revenues in 2005 compared to 2004 due to the successful resolution of the reimbursement of operating costs as a result of the annual audit by the State of South Carolina.	(0.9		)
· A decrease in revenues from the Duratek Consolidation & Services Facility due to a decrease in volume of work performed in 2005 compared to 2004.	(0.7		)
	$	(4.5	)

37

Gross Profit

Gross profit decreased by $5.0 million in 2005 compared to 2004. The following items had a significant impact on gross profit (in millions):

Description:	Increase (decrease)
Federal Services:
· A decrease in gross profit relating to work performed at the DOE’s Idaho site primarily due to costs incurred for delays and costs incurred for disputed scope, including characterization of waste. These additional costs have required an increase to the estimate at completion, which resulted in the recognition of a projected contract loss. We are seeking contract adjustments for a portion of the additional costs incurred.		$	(2.6	)
· A decrease in gross profit relating to the processing of liquid and gaseous wastes at the Oak Ridge Reservation in Tennessee primarily due to a reduction in work scope in the third quarter of 2005. The reduction in work scope resulted in unresolved contract adjustments and cost escalations. We are seeking contract adjustments to offset a portion of the cost escalations. The decrease in gross profit is also attributable to higher labor expense incurred in 2005 compared to 2004 and lower margin on the Operations portion of the project, which has been renegotiated in the fourth quarter of 2005. The contract has been extended for a two-year period.		(2.6		)
· A decrease in gross profit on the Hanford RPP-WTP projects due to reduced work scope.		(1.4		)
· A decrease relating to work performed for the K-25 site at the Oak Ridge Reservation in Tennessee due to the early termination of this contract in July 2005, offset by the receipt of a request for equitable adjustment in 2005, which resulted in a $0.6 million gross profit increase after subcontractor reimbursement.		(1.2		)
· Lower margin work performed relating to the Engineering Design and Technical Research services in 2005 compared to 2004.		(1.0		)
· A decrease in gross profit relating to the EMWMF project in 2005 compared to 2004 primarily due to the approval of requests for equitable adjustments totaling $1.2 million during 2004. Offsetting were increases in gross profit in 2005 compared to 2004 due to the reduction in estimated project completion costs, resulting in a revision of the estimate at completion.		(1.0		)
· Partially offsetting were increases in gross profit relating to the following:
· an increase in gross profit relating to the Fernald Closure Project in 2005 compared to 2004 primarily due to the incentive fee earned on the Fernald Closure Project during 2005 and due to higher costs incurred in 2004 compared to 2005 at zero margin on our cost recovery contract.		4.6
· an increase in gross profit relating to incentive fees received in 2005 relating to the Project Hanford Management Contract due to the timing of several milestones that were achieved during 2005. In addition, in 2005, there was a recovery of expenses incurred in prior fiscal years on a legal issue and lower non-reimbursable expenses incurred in 2004 compared to 2005.		2.8
Commercial Services:
· A decrease in gross profit relating to D&D projects primarily relating to:

38

· revenue earned from a D&D contract that was terminated for convenience and resulted in a favorable settlement in 2004; and	$	(3.3	)
· a high volume D&D project at a commercial nuclear power reactor and the recognition of a portion of a risk pool association with this contract in 2004. This risk pool represents funds set aside by the customer as incentive to its contractors for successful project performance with regards to its fixed-price projects;	(1.3		)
· A decrease in gross profit due to a large transportation logistics contract that was performed and completed in 2004.	(2.6		)
· Partially offsetting was an increase in gross profit relating to the following:
· a net increase in D&D volume of work performed at nuclear power reactors in 2005 compared to 2004;	2.2
· an increase in volume of activity in our transportation operation in 2005 compared to 2004;	1.9
Commercial Processing and Disposal:
· An increase in gross profit from the fixed-based processing facility in Tennessee primarily due to the lowering of the facility decommissioning estimate, partially offset by a refund received in 2004 of sales and use tax from the State of Tennessee and lower margin waste processing revenues in 2005 compared to 2004.	0.6
· An increase in gross profit from the Barnwell low-level radioactive disposal site due to the successful resolution regarding the reimbursement of operating costs as a result of a favorable result from the annual audit by the State of South Carolina.	0.6
	$	(4.3	)

Income from Operations

Income from operations decreased by $5.2 million in 2005 compared to 2004 due to lower gross profit and slightly higher SG&A. The decrease is primarily attributable to the following:

Federal Services:

Income from operations decreased by $1.8 million in 2005 compared to 2004 due to lower gross profit and slightly higher SG&A expense. The allocation of corporate SG&A expense increased by $0.5 million in 2005 compared to 2004 due to an increase in corporate SG&A expense. SG&A expense incurred by this segment decreased by $0.3 million in 2005 compared to 2004 primarily due to lower business development expense, professional fees, and facilities related expense, partially offset by higher salary and related expense.

Commercial Services:

Income from operations decreased by $4.4 million in 2005 compared to 2004 due to a decrease in gross profit. The allocation of corporate SG&A expense increased by $0.5 million in 2005 compared to 2004 primarily due to an increase in corporate SG&A. SG&A expense incurred by this segment decreased by $0.5 million primarily due business development expense, partially offset by higher salary and related expense.

39

Commercial Processing and Disposal:

Income from operations increased by $1.0 million in 2005 compared to 2004 primarily due to higher gross profit. The allocation of corporate SG&A expense increased by $0.2 million in 2005 compared to 2004 due to the an increase in corporate SG&A expense, partially offset by a decrease in the pro-rata share of direct expenses incurred. SG&A expense incurred by this segment decreased by $0.2 million primarily due to professional fees.

Corporate SG&A Expense and Other Non-operating Items:

Corporate incurred SG&A expense increased $1.2 million in 2005 compared to 2004 primarily due to higher legal fees relating to the AVANTech, Inc. litigation, professional fees, a resolution of subcontractor expense with our customer, system support expense, operational tax expense, and a recovery of accounts receivable previously considered uncollectible in the third quarter of 2004, partially offset by lower salary and related expense, business development expense, and directors’ fees.

Interest expense decreased $0.4 million in 2005 compared to 2004 primarily as a result of lower outstanding borrowings under the credit facility, partially offset by higher interest rates during 2005.

Income taxes decreased $2.4 million in 2005 compared to 2004 primarily due to lower pre-tax income and a decrease in the effective tax rate. Our effective tax rate for 2005 is 36.9% compared to 38.5% for 2004. The decrease in the effective tax rate is primarily attributable to a reduction in our tax contingency reserve and deferred tax asset and liabilities true-ups relating to actual amounts reflected in the Federal income tax return, partially offset by higher state income tax expense. The effective tax rate is higher than the Federal statutory rate of 35% primarily due to state income taxes and expenses that are not deductible for Federal income tax purposes.

40

Year to Date 2004 Compared to Year to Date 2003.

The table below sets forth certain consolidated statement of operations information for the years ended December 31, 2004 and 2003.

							Increase (decrease)
	2004			2003			Dollar			Percent
	(in thousands of dollars)
Revenues:
Federal Services	$	115,565		$	125,224		$	(9,659	)	-7.7	%
Commercial Services	84,942			78,349			6,593			8.4	%
Commercial Processing and Disposal	85,706			82,328			3,378			4.1	%
Total revenues	286,213			285,901			312			0.1	%
Cost of revenues:
Federal Services	85,496			99,233			(13,737		)	-13.8	%
Commercial Services	60,349			53,854			6,495			12.1	%
Commercial Processing and Disposal	65,470			64,406			1,064			1.7	%
Total cost of revenues	211,315			217,493			(6,178		)	-2.8	%
Gross profit:
Federal Services	30,069			25,991			4,078			15.7	%
Percent of revenues	26.0		%	20.8		%
Commercial Services	24,593			24,495			98			0.4	%
Percent of revenues	29.0		%	31.3		%
Commercial Processing and Disposal	20,236			17,922			2,314			12.9	%
Percent of revenues	23.6		%	21.8		%
Total gross profit	74,898			68,408			6,490			9.5	%
Percent of revenues	26.2		%	23.9		%
SG&A:
Federal Services	13,658			14,144			(486		)	-3.4	%
Commercial Services	10,242			9,743			499			5.1	%
Commercial Processing and Disposal	10,406			9,575			831			8.7	%
Total SG&A	34,306			33,462			844			2.5	%
Percent of revenues	12.0		%	11.7		%
Income from operations:
Federal Services	16,411			11,847			4,564			38.5	%
Percent of revenues	14.2		%	9.5		%
Commercial Services	14,351			14,752			(401		)	-2.7	%
Percent of revenues	16.9		%	18.8		%
Commercial Processing and Disposal	9,830			8,347			1,483			17.8	%
Percent of revenues	11.5		%	10.1		%
Total income from operations	40,592			34,946			5,646			16.2	%
Percent of Sales	14.2		%	12.2		%
Interest expense	(6,970		)	(6,903		)	67
Other income, net	398			76			322
Income taxes	13,098			11,671			1,427
Equity in income of joint ventures	124			202			(78		)
Income before cumulative effect of a change in accounting principle	21,046			16,650			4,396
Cumulative effect of a change in accounting principle, net of taxes	—			(2,414		)	2,414
Preferred stock repurchase premium, dividends and charges for accretion	(63		)	(36,154		)	36,091
Net income attributable to common stockholders	$	20,983		$	(21,918	)	$	42,901

41

Revenues

Revenues increased by $0.3 million in 2004 compared to 2003. The following items had a significant impact on revenues (in millions):

Description:	Increase (decrease)
Federal Services:
· A net increase in work scope on existing contracts relating to the following:		$	6.0
· our subcontract work performed for the Isotek Systems, LLC joint venture, which is a prime contractor with the DOE, in which we are a member;
· waste disposition and large component removal and transportation work performed for the Idaho Clean Up Project for a DOE prime contractor;
· the sorting of low-level legacy waste for a DOE prime contractor; and
· the site closure project of the Idaho National Engineering and Environmental Laboratory.
· A contract loss was recognized on the EMWMF contract in the third quarter of 2003, and resulted in an adjustment to reduce revenues relating to the secondary phase on this contract by approximately $1.8 million. The adjustment resulted from a reassessment of the project’s status, which was required primarily due to an increase in cost estimates to operate the facility due to excessive weather related conditions at the EMWMF site. During 2004, we received approvals of 8 requests for equitable adjustments totaling $1.2 million and there has been less than anticipated rain fall, resulting in a revised lower estimate of cost to complete this project.		3.5
· An increase in incremental work awarded in 2004 relating to the technology and engineering expertise operation.		1.6
· Incremental revenues from the Project Hanford Management Contract.		1.0
· Incentive fees received during 2004 for meeting milestones on two Federal government subcontracts.		0.8
· Partially offsetting were decreases in revenues relating to the following:
· the Hanford RPP-WTP projects due to a decrease in contract costs incurred as a result of the engineering and technology development phase of the project winding down, offset by an increase in revenues relating to the approval of an indirect cost rate adjustment by the Defense Contract Auditing Agency;		(13.8		)
· the favorable impact from the Fernald Closure Project primarily relating to the effect of a revised estimate to increase our portion of the project team’s incentive fee that was recognized in the third quarter of 2003 based upon correspondence with the project’s prime contractor, our analysis, and the prime contractor’s discussions and correspondence with the customer. This incentive fee is being accrued based upon the project completion target date utilized by the prime contractor. In addition, there was a decrease in revenues during 2004 compared to 2003 due to a reduction in volume of work for which we were responsible. Partially offsetting was an increase in revenues in 2004 relating to an increase in the total estimated incentive fee due to a reduction in total estimated project costs, which was based upon correspondence from the prime contractor and our analysis;		(3.8		)
· an environmental consulting services contract in 2003 that did not recur in 2004;		(2.2		)

42

· a higher number of change orders issued in 2003 for work performed to process liquid and gas waste at the Oak Ridge Reservation in Tennessee;	$	(1.5	)
· a decrease relating to work performed to clean up and close an environmental technology site in Colorado; and	(1.2		)
· a decrease primarily relating to a nuclear facility decommission contract.	(0.8		)
Commercial Services:
· Incremental revenues relating to D&D projects of commercial nuclear power reactors and revenues earned from a D&D contract that was terminated for convenience and resulted in a favorable settlement.	4.2
· A new contract and incremental transportation logistics revenues in 2004, offset by the completion of a large transportation logistics contract in 2003.	4.0
· Transportation services operation primarily due to an increase in volume of activity during 2004 as compared to 2003.	2.7
· Emergency response work performed during 2004.	2.7
· Revenues earned from a D&D contract that was terminated for convenience and resulted in a favorable settlement.	1.5
· Partially offsetting were decreases in revenues relating to the following:
· a D&D project that had a high volume of activity in 2003, offset by requests for equitable adjustments that were awarded;	(4.6		)
· a decrease in revenues of $2.2 million relating to an environmental consulting services contract; and	(2.2		)
· a decrease in revenues from the liquid waste procession operation.	(1.3		)
Commercial Processing and Disposal:
· Our fixed-based processing facility in Tennessee had higher revenues relating to the processing of waste on a low-level legacy waste project, contract close out adjustments relating to the characterization of waste, coordinated waste processing projects as part of projects in the Federal Services and Commercial Services segments, resin waste, and recycling of material for the United States Navy, partially offset by decreases relating to a change in the processed waste mix, primarily due to the processing of lower priced waste.	2.4
· An increase in revenues from the Barnwell low-level radioactive waste disposal site.	1.3
	$	0.3

43

Gross Profit

Gross profit increased by $6.5 million in 2004 compared to 2003. The following items had a significant impact on gross profit (in millions):

Description:	Increase (decrease)
Federal Services:
· The EMWMF project due to a contract loss recognized, including a loss provision, during the third quarter of 2003, and an increase in operating expenses incurred in 2003 primarily due to the abnormal amount of rainwater at the EMWMF site. During 2004, we received approvals of 8 requests of equitable adjustments totaling $1.2 million and we are continuing to evaluate the case for obtaining additional equitable adjustments for these higher operating expenses from the customer. Any increase in contract value will be included in revenues when approved by the customer. In addition, an accrual for loss was decreased by $0.5 million due to a revised lower estimate of cost to complete this project.		$	7.1
· The renegotiation of performance based incentives on the Project Hanford Management Contract and incremental milestones achieved during 2004.		1.8
· Increases in work scope and incremental work on an existing contract.		1.8
· An increase in incentive fees recognized during 2004.		0.8
· Partially offsetting were decreases in gross profit relating to the following:
· the Hanford RPP-WTP projects;		(1.7		)
· the completion of work performed to clean up and close an environmental technology site in Colorado in 2003 and a $0.2 million reduction in gross profit in 2004 relating to a negotiated contract closeout adjustment;		(1.5		)
· the Fernald Closure Project due to a decrease in revenues;		(1.3		)
· a site wide stop work mandate on a nuclear facility decommission contract issued by the DOE relating to safety issues at the facility; and		(1.3		)
· work performed at the Los Alamos National Laboratory.		(0.9		)
Commercial Services:
· D&D work which had higher volume in 2004.		2.7
· A contract that was terminated for convenience and resulted in a favorable settlement.		1.5
· An increase from the transportation services operation.		0.9
· Emergency response work performed during 2004.		0.5
· The reduction in warranty liabilities on transportation containers due to favorable warranty claims experience.		0.4
· Partially offsetting were decreases in gross profit relating to the following:
· a D&D project that had a high volume of activity in 2003, offset by requests for equitable adjustments that were awarded;		(3.1		)
· the completion of a large transportation logistics contract in 2003, offset by a new transportation logistics contract and incremental transportation logistics revenues in 2004;		(1.5		)

44

· an environmental consulting services contract; and	$	(1.0	)
· the liquid waste processing operation.	(0.9		)
Commercial Processing and Disposal:
· The Barnwell Low-Level Radioactive Waste Disposal Facility relating to decommissioning activity, partially offset by a decrease in gross profit relating to disposal work performed on a transportation logistics contract during 2003.	1.1
· An increase in revenues from the fixed-based processing facility in Tennessee and a refund of sales and use tax from the State of Tennessee relating to prior years, which were partially offset by higher burial, transportation, and labor expenses. Burial expense was higher primarily due to an increase in the burial rate.	0.7
	$	6.1

Income from Operations

Income from operations increased by $5.6 million in 2004 compared to 2003 due to higher gross profit and slightly higher SG&A. The increase is primarily attributable to the following:

Federal Services:

Income from operations increased by $4.6 million in 2004 compared to 2003 due to higher gross profit and a decrease in SG&A expense. SG&A expense incurred by this segment decreased by $0.8 million primarily due to lower professional services fees, facility related expenses, information system support expense, and the recovery of accounts receivable previously considered uncollectible, partially offset by higher business development expense resulting from a larger than normal number of bid opportunities in 2004 and higher salary and related expenses. The allocation of corporate SG&A expense increased by $0.3 million in 2004 from 2003.

Commercial Services:

Income from operations decreased by $0.4 million in 2004 compared to 2003 due to higher SG&A expense. The allocation of corporate SG&A expense was higher by $0.4 million over prior year period primarily due to an increase in SG&A expense incurred by corporate, offset by slightly lower SG&A expense incurred by this segment.

Commercial Processing and Disposal:

Income from operations increased by $1.5 million in 2004 compared to 2003 primarily due to higher gross profit, offset by higher SG&A expense. The allocation of corporate SG&A expense was higher by $0.8 million over the comparative prior year period due to an increase in the pro-rata share of direct expenses incurred and slightly higher SG&A expense incurred by this segment.

Corporate SG&A Expense and Other Non-Operating Items:

Corporate SG&A expense increased by $1.5 million in 2004 compared to 2003 primarily due to business development expense, professional fees, salary related expense, and directors’ fees, partially offset by a reduction in support systems cost.

Interest expense increased slightly in 2004 compared to 2003. In 2003, interest expense included $2.5 million of unamortized deferred financing costs there were expensed due to the establishment of the new

45

credit facility in December 2003. In 2004, higher borrowings under the credit facility increased interest expense.

Income taxes increased $1.4 million primarily due to higher pre-tax income. Our effective tax rate for 2004 is 38.5%, compared to 41.5% for 2003, and is higher than the Federal statutory rate of 35% primarily due to state income taxes and expenses that are not deductible for Federal income tax purposes.

We recognized a cumulative effect of a change in accounting principle of $2.4 million, net of tax, relating to the adoption of SFAS No. 143 in 2003.

Liquidity and Capital Resources

Fiscal Year 2005:

We generated $14.7 million in cash flow from operating activities during 2005. Significant components are attributable to the following:

·Net income and adjustments to reconcile net income to net cash provided by operating activities and a decrease in retainage primarily due to amounts that we were able to bill and collect in 2005 based on contract terms.

·Partially offsetting were the following:

·An increase in costs and estimated earning in excess of billings on uncompleted contracts primarily relating to:

·The timing of the receipt of an incentive fee on a Federal government subcontract on the Fernald Closure Project. This project is a cost-plus incentive fee contract that includes schedule and cost driven performance incentives over an estimated seven-year period. A large portion of the incentive fee is not billable until the project is complete, which is currently projected to be December 2006. We recognize this incentive fee based on the estimated target completion date utilized by the prime contractor and believe that collection of these amounts is reasonably assured. Based on communications with the prime contractor during the second quarter of 2005, the estimated completion date was revised from April 2007 to December 2006. As of December 31, 2005, we had unbilled amounts that will not be collected within the next 12 months of $19.9 million related to the difference between costs incurred and fee earned on the project as compared to the agreed upon billing schedule. The risks associated with this contract relate to the timely receipt by our customer of their funding and the estimated completion target date, which is the basis for the recognition of the incentive fee.

·A net decrease in costs and estimated earnings in excess of billings on uncompleted contracts primarily relating to the billing of several Commercial Services and Federal Services projects in 2005 relating to 2004 costs and estimated earnings in excess of billings on uncompleted contracts, partially offset by the billing of several Federal Services projects that are milestone based.

·A decrease in accounts payable and accrued expenses and other current liabilities primarily due to a significant decrease in accounts payable from December 31, 2004 and a decrease in accrued salary and related expenses.

·An increase in accounts receivable primarily due to billings exceeding cash receipts during 2005.

We used $4.7 million in cash for investing activities during 2005 primarily for the purchase of property, plant and equipment.

46

We used $14.8 million in cash from financing activities during 2005 primarily relating to the repayment of $15.6 million of long-term debt, partially offset by proceeds of $1.6 million from the issuance of Common Stock from the exercise of employee stock options. During 2005, we borrowed and repaid $1.8 million under our revolving line of credit.

Fiscal Year 2004:

We generated $20.5 million in cash flow from operating activities during 2004. Significant components are attributable to the following:

·An increase in costs and estimated earnings in excess of billings on uncompleted contracts primarily relating to:

·The timing of the receipt of the incentive fee on a Federal government subcontract on the Fernald Closure Project. This project is a cost-plus incentive fee contract that includes schedule and cost driven performance incentives over approximately a seven-year period. A large portion of the incentive fee is not billable until the project is complete, which is currently estimated to be May 2007. As of December 31, 2004, we have unbilled amounts that will not be collected within the next 12 months of $11.1 million related to the difference between costs incurred and fee earned on the project as compared to the agreed upon billing schedule. The risks associated with this contract relate to the timely receipt by our customer of their funding and the estimated completion target date, which is the basis for the recognition of the incentive fee. We are recognizing this incentive fee at the estimated target completion date utilized by the prime contractor and believe that collection of these amounts are reasonably assured.

·Requests of equitable adjustments of $1.1 million approved in June 2004 on a Commercial Services segment contract that cannot be billed until the contract modification has been received, amounts that are billable relating to emergency response work performed by the Commercial Services segment, amounts billable on Federal government contracts, and an increase in amounts billable on fixed-unit-rate contracts due to an increase in units processed.

·Some of the customers of our fixed-based processing operation revised the timing of payment from paying in advance of waste processing to payment upon shipment of waste for burial.

·Partially offsetting was a decrease in costs and estimated earnings is excess of billings on uncompleted contracts relating to the Barnwell Low-Level Radioactive Waste Disposal Facility.

·Cash used for payment of the liability to the State of South Carolina relating to the operations of the Barnwell Low-Level Radioactive Waste Disposal Facility. Under South Carolina law, we are required to bill customers based on the disposal rates agreed upon by the State. On an annual basis, following the State’s fiscal year-end on June 30, we remit amounts billed to and paid by customers of the waste disposal site less our fee for operating the site during such fiscal year. In July 2004, we remitted $24.8 million to the State of South Carolina. At December 31, 2004, we owed net amounts of approximately $3.8 million to the State of South Carolina relating to the operations of the Barnwell Low-Level Radioactive Waste Disposal Facility.

·Cash used for estimated income tax payments and accrued project costs, partially offset by an increase in accounts payable and accrued operating expenses.

·A decrease in unearned revenues primarily due to the timing of receipts of advance payments from customers of our fixed-based processing facility in Tennessee and the processing of the waste from these customers, a decrease in the indirect cost rates due to the release of contract based reserves relating to billable rates, and a decrease in the amount of advance payments received in the CS operation.

·A decrease in accounts receivable primarily due to cash receipts efforts that resulted in a lower days sales outstanding.

47

·A decrease in retainage primarily due to efforts to collect retainage through negotiations with the customer sooner than the contract stipulates due to favorable performance on the contract.

We used $6.3 million in cash for investing activities during 2004 primarily for the purchase of property, plant and equipment.

We used $26.0 million in cash from financing activities during 2004 primarily relating to the repayment of $30.0 million of long-term debt, the repurchase of 3,003 shares of the outstanding Cumulative Convertible Redeemable Preferred Stock for $1.0 million, partially offset by proceeds of $5.4 million from the issuance of Common Stock from the exercise of employee stock options. During 2004, we did not have any borrowings under our revolving line of credit.

Fiscal Year 2003:

We generated $40.7 million in cash from operating activities for the year ended December 31, 2003, which is primarily attributable to the following:

·Improvement in our collection process of accounts receivable.

·An increase in unearned revenues of $4.9 million due to a higher volume of advance payments for services in the Commercial Processing and Disposal and Commercial Services segments.

·Partially offsetting was an increase in costs and estimated earnings in excess of billings on uncompleted contracts of $6.8 million, which was primarily attributable to the timing of the receipt of an incentive fee on a Federal government subcontract.

The cash balance as of December 31, 2003 includes approximately $9.0 million in net amounts owed to the State of South Carolina relating to the operations of the Barnwell Low-Level Radioactive Waste Disposal Facility.

During 2003, we used $5.2 million in cash for investing activities consisting primarily of $4.8 million for the purchase of property, plant and equipment.

During 2003, we used $2.6 million in cash for financing activities, principally related to the repurchase transaction of our Cumulative Convertible Redeemable Preferred Stock. On December 16, 2003, we repurchased 151,467 shares of our Cumulative Convertible Redeemable Preferred Stock from the investment partnerships controlled by The Carlyle Group for $49.2 million in cash plus accrued and unpaid dividends of $2.5 million. The repurchase transaction improved our near-term cash flow by reducing the dividends on the Cumulative Convertible Redeemable Preferred Stock and replacing them with lower cost debt capital. Additionally, the repurchase transaction simplified our capital structure, enhanced our ability to attract additional capital, and eliminated the market uncertainty over the timing of a future conversion of the Cumulative Convertible Redeemable Preferred Stock and the sale of the underlying Common Stock by The Carlyle Group.

Bank Credit Facility

In December 2003, in connection with the 8% Cumulative Convertible Redeemable Preferred Stock $.01 par value (the “Cumulative Convertible Redeemable Preferred Stock”) repurchase transaction (note 11), we entered into a new bank credit facility. This bank credit facility consists of a $30.0 million revolving line of credit, which includes a $15.0 million sub limit for the issuance of standby letters of credit, and a six-year $115.0 million term loan. Proceeds of the term loan were used to repay $53.9 million of existing term debt and accrued interest under our prior credit facility and to repurchase 151 shares of the Cumulative Convertible Redeemable Preferred Stock for $49.3 million in cash plus accrued and unpaid dividends of $2.5 million, net of transaction costs and related expenses. Borrowings under the credit facility bear interest at the prime rate plus an applicable margin or, at our option, London Interbank Offered Rates (“LIBOR”) plus an applicable margin. Effective February 23, 2005, the bank credit facility was

48

amended to lower the applicable margin on borrowings under the bank credit facility. For term loans, the applicable margin is 2.00% for prime rate loans and 3.25% for LIBOR loans. For revolving loans, the applicable margin is determined based on our leverage ratio and can range from 2.00% to 2.50% for prime rate loans and from 3.25% to 3.75% for LIBOR loans. The term loan must be prepaid to the extent of any excess cash flows, as defined. The bank credit facility requires us to maintain certain financial ratios and contains restrictions on our ability to pay cash dividends and limitations on our ability to make acquisitions. As of December 31, 2005, we were in compliance with the provisions of the bank credit facility, including all financial covenant requirements. The bank credit facility is secured by substantially all of the assets of the company and its direct and indirect subsidiaries.

As of December 31, 2005, there were no borrowings outstanding under the revolving line of credit, $8.2 million in outstanding letters of credit, and a $69.4 million six-year term loan bearing interest at LIBOR plus 3.25% (6.58%). As of December 31, 2005, the $30.0 million in total available borrowings under the revolving line of credit were reduced by the $8.2 million in outstanding letters of credit, for a net borrowing availability of $21.8 million under the revolving line of credit.

We are required to post, from time to time, standby letters of credit and surety bonds to meet certain customer contract requirements. We do not directly post financial assurance instruments or other guarantees for our subcontractors. As of December 31, 2005, we had outstanding assurance instruments of $16.9 million, consisting of $8.2 million in letters of credit and $8.7 million in surety bonds, which expire at various contract completion dates. We have entered into certain indemnification agreements with the providers of the surety bonds, which would require funding 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. The letters of credit are issued under our bank credit agreement up to $15.0 million as a sublimit to the $30.0 million revolving line of credit. In addition, the credit facility provides for the ability to obtain supplemental letters of credit, as defined in the credit facility. Effective July 22, 2005, the credit facility was amended to increase the ability to obtain supplemental letters of credit from $10.0 million to $20.0 million. The bank credit agreement limits the amount of outstanding surety bonds to $35.0 million.

The following table summarizes our contractual cash obligations as of December 31, 2005 (in 000’s):

	Less than 1 Year			1-3 Years		3-5 Years		More than 5 Years			Total
Long-term debt(A)		$	708	$	1,416	$	67,232		$	—	$	69,356
Capital leases(B)		621		714		—			—		1,335
Operating leases(B)		2,960		4,101		1,541			8,637		17,239
Liability to the State of South Carolina(C)		—		—		—			—		—
Purchase obligations(D)		—		—		—			—		—

(A)See note 6 to Consolidated Financial Statements.

(B)See note 20 to Consolidated Financial Statements.

(C)The liability to the State of South Carolina is based on amounts billed and paid by customers of the waste disposal site less our fee for operating this site. The amount collected and the fee are based on volume of waste disposed, therefore it cannot be accurately estimated.

(D)We generally do not make unconditional, noncancellable purchase commitments. We enter into purchase orders that have a duration of less than one year in the normal course of business. Certain members of our senior management are subject to employment agreements with one-year automatic extensions unless terminated with proper notice before the end date. As of December 31, 2005, there were no contractual obligations associated with these employment agreements.

49

Historically, our primary liquidity requirements have been for debt service under our bank credit facilities, for working capital requirements, and for acquisitions. We have funded these requirements primarily through internally generated operating cash flows and funds borrowed under our bank credit facilities, and we expect this to continue in 2006.

We believe that cash flows from operations, cash resources at December 31, 2005 and, if necessary, borrowings under our credit facility will be sufficient to fund our operating cash, capital expenditure, and debt service requirements for at least the next twelve months. Over the longer term, our ability to make scheduled payments on our debt obligations will depend on our future financial performance, which will be affected by a range of economic, competitive, and business factors. Depending upon market conditions, we may seek to supplement our capital resources with debt or equity financing.

The Merger Agreement imposes certain restrictions on us while the Merger is pending, including, among others, restrictions on the payment of dividends and the issuance of additional debt obligations.

Off-Balance Sheet Arrangements

We have routine operating leases and two investments in joint ventures at December 31, 2005. The two joint ventures are UDS, LLC and Isotek Systems, LLC.

Joint Venture Financing

On June 29, 2005, we entered into an agreement with UDS, LLC, one of our joint ventures, to loan up to $1.6 million to UDS, LLC for working capital requirements. The loan is subject to interest at the higher of 5% or the prime rate plus 1.0%. Interest is payable monthly, and the entire loan balance must be repaid within one year from the date of the loan. As of December 31, 2005, there were outstanding borrowings to UDS, LLC of $0.6 million. We own 26 percent of UDS, LLC and share proportionally in its profits and losses. The other partners and their proportionate shares include Framatome AMP (48%) and Burns & Roe Enterprises (26%).

Disclosure of Impact of Recently Issued Accounting Standards

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123—revised 2004 (“SFAS No. 123R”), Share-Based Payment, which replaces SFAS No. 123, supersedes APB Opinion No. 25, and amends FASB Statement No. 95, Statement of Cash Flows. SFAS No. 123R requires the measurement of all share-based payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of expense in our consolidated statements of income.

We are required to adopt SFAS No. 123R beginning in our first quarter of fiscal year 2006. SFAS No. 123R permits the adoption using one of two methods:

A “modified prospective” method in which compensation cost is recognized based on the requirements of SFAS No. 123R for all share-based payments granted after the effective date and based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123R that remain unvested on the effective date.

A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits the restatement, based on amounts previously recognized under SFAS No. 123 for purposes of pro forma disclosures, either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

We plan to adopt SFAS No. 123R using the modified prospective method.

The pro forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition, and thus our financial results will be negatively affected by the adoption

50

of this standard beginning next year, although it will have no impact on our overall financial position. The impact of adoption of SFAS No. 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123R in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the pro forma net income and earnings per share per above. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as currently required under accounting principles generally accepted in the United States of America. This requirement will reduce net operating cash flows and increase net financing cash flows upon adoptions of SFAS No. 123R. While we cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of cash flows recognized in prior periods for such excess tax deductions were $1.5 million in 2005, $2.6 million in 2004, and $0.2 million in 2003.

Item 7A.Quantitative and Qualitative Disclosure about Market Risk

Our major market risk relates to changing interest rates. At December 31, 2005, we have floating rate long-term debt of $69.4 million, of which the current portion is $0.7 million. We entered into an interest rate swap agreement effective on July 22, 2003 partially to mitigate our exposure to fluctuations in interest rates relating to our outstanding variable rate debt. This interest rate swap agreement is not designated as a hedge. The contract’s aggregate notional amount was $55.9 million at inception and declines each quarter over the life of the contract in proportion to our estimated outstanding balance of the related long-term debt under the prior credit facility. At the inception of the current credit facility, we were required to have in place an interest rate protection arrangement for the aggregate notional amount of at least 40% of the aggregate outstanding principle amount of the term loans, at which date the contract’s notional amount was $50.7 million. The current credit facility requires us to maintain this interest rate swap agreement until June 30, 2006. The contract’s notional amount is $8.7 million at December 31, 2005. Under the terms of the contract, we pay a fixed rate of 1.895% and receive LIBOR, which resets every 90 days. The contract matures on June 30, 2006. The fair value of the contract at December 31, 2005 is approximately $0.1 million.

This derivative financial instrument helps us manage our exposure to movements in interest rates by converting our variable-rate debt to fixed-rate debt. This contract locks in a fixed rate of interest with a pay-fixed, receive-variable interest rate swap, thereby hedging exposure to the variability in market interest rate fluctuations. We have implemented policies that restrict the usage of derivatives to non-trading purposes. In addition, we do not have any material foreign currency or commodity risk.

We had $1.8 million in outstanding borrowings under the revolving credit portion of the credit facility as of September 30, 2005. These outstanding borrowings were repaid in October 2005.

A hypothetical interest rate change of 1% on our bank credit facility would have changed interest expense for the year ended December 31, 2005 by approximately $0.9 million and the interest rate swap agreement would have changed interest expense by $0.2 million in the opposite direction. In addition, a hypothetical interest rate change of 1% on our interest rate swap agreement would have changed the fair value of the interest swap at December 31, 2005 by approximately $30 thousand. Additionally, changes in market interest rates would impact the fair value of our long-term obligations. The carrying amount of our indebtedness under our bank credit facility approximates its fair value as of December 31, 2005, as the facility bears interest rates that approximate the market.

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Item 8.Financial Statements and Supplementary Data

DURATEK, INC. AND SUBSIDIARIES

Table of Contents

	Page
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm		53
Report of KPMG LLP, Independent Registered Public Accounting Firm		54
Consolidated Balance Sheets as of December 31, 2005 and 2004		55
Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003		56
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2005, 2004 and 2003		57
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003		58
Notes to Consolidated Financial Statements		59

52

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

Board of Directors and Shareholders of Duratek, Inc.:

We have audited the accompanying consolidated balance sheet of Duratek, Inc. and subsidiaries as of December 31, 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended. Our audit also included the 2005 financial statement schedule listed in the accompanying index in Item 15(a)(2). These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule 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 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 audit provides 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 Duratek, Inc. and subsidiaries at December 31, 2005, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related 2005 financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Duratek, Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2006, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia
February 17, 2006

53

Report of KPMG LLP,
Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Duratek, Inc.:

We have audited the accompanying consolidated balance sheets of Duratek, Inc. and subsidiaries as of December 31, 2004, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2004. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule listed under item 15(a)(2) for each of the years in the two-year period ended December 31, 2004. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Duratek, Inc. and subsidiaries as of December 31, 2004, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2, the Company adopted Statement of Financial Accounting Standard No. 143, Accounting for Asset Retirement Obligations, as of January 1, 2003.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the internal control over financial reporting of Duratek, Inc. as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 8, 2005, not included herein, expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

Baltimore, Maryland

March 8, 2005

54

DURATEK, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2005 and 2004
(in thousands of dollars, except share amounts)

	2005			2004
Assets
Current assets:
Cash and cash equivalents	$	18,440		$	23,296
Accounts receivable, net of allowance for doubtful accounts of $18 in 2005 and $158 in 2004	36,247			30,997
Cost and estimated earnings in excess of billings on uncompleted contracts	14,417			16,715
Prepaid expenses and other current assets	5,694			13,708
Total current assets	74,798			84,716
Retainage	1,039			1,257
Property, plant and equipment, net	61,802			66,151
Goodwill	72,129			72,129
Other intangible assets	2,708			3,747
Decontamination and decommissioning trust fund	19,295			19,050
Other assets	32,143			21,487
Total assets	$	263,914		$	268,537
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	708		$	858
Accounts payable	11,894			15,643
Due to the State of South Carolina	6,911			6,073
Accrued expenses and other current liabilities	21,783			24,646
Unearned revenues	13,359			14,694
Waste processing and disposal liabilities	4,300			6,980
Total current liabilities	58,955			68,894
Long-term debt, less current portion	68,648			84,142
Facility and equipment decontamination and decommissioning liabilities	38,927			40,419
Other noncurrent liabilities	7,525			6,756
Total liabilities	174,055			200,211
Commitments and contingencies
Stockholders’ equity:
Preferred stock—$0.01 par value; authorized 4,740,000 shares; none issued	—			—
Series B junior participating preferred stock, $0.01 par value; 100,000 shares authorized; none issued	—			—
Common stock—$0.01 par value; authorized 35,000,000 shares; issued 16,470,624 shares in 2005 and 16,236,781 shares in 2004	165			162
Capital in excess of par value	89,891			86,784
Deferred compensation employee stock trust	1,323			1,323
Retained earnings (accumulated deficit)	9,380			(9,043		)
Treasury stock at cost, 1,771,306 shares in 2005 and 2004	(10,900		)	(10,900		)
Total stockholders’ equity	89,859			68,326
Total liabilities and stockholders’ equity	$	263,914		$	268,537

See accompanying notes to consolidated financial statements.

55

DURATEK, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 2005, 2004, and 2003
(in thousands of dollars, except per share amounts)

	2005			2004			2003
Revenues	$	281,212		$	286,213		$	285,901
Cost of revenues	211,299			211,315			217,493
Gross profit	69,913			74,898			68,408
Selling, general and administrative expenses	34,516			34,306			33,462
Income from operations	35,397			40,592			34,946
Interest expense	(6,539		)	(6,970		)	(6,903		)
Other income, net	31			398			76
Income before income taxes, equity in income of joint ventures, and cumulative effect of a change in accounting principle	28,889			34,020			28,119
Income taxes	10,651			13,098			11,671
Income before equity in income of joint ventures and cumulative effect of a change in accounting principle	18,238			20,922			16,448
Equity in income of joint ventures	185			124			202
Income before cumulative effect of a change in accounting principle	18,423			21,046			16,650
Cumulative effect of a change in accounting principle, net of taxes	—			—			(2,414		)
Net income	18,423			21,046			14,236
Preferred stock repurchase premium, dividends and charges for accretion	—			(63		)	(36,154		)
Net income (loss) attributable to common stockholders	$	18,423		$	20,983		$	(21,918	)
Income (loss) per share:
Basic:
Before cumulative effect of a change in accounting principle	$	1.25		$	1.48		$	(1.44	)
Cumulative effect of a change in accounting principle	—			—			(0.18		)
	$	1.25		$	1.48		$	(1.62	)
Diluted:
Before cumulative effect of a change in accounting principle	$	1.21		$	1.42		$	(1.44	)
Cumulative effect of a change in accounting principle	—			—			(0.18		)
	$	1.21		$	1.42		$	(1.62	)

See accompanying notes to consolidated financial statements.

56

DURATEK, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Years ended December 31, 2005, 2004, and 2003
(in thousands of dollars, except share amounts)

	Common stock				Capital in excess of			Deferred compensation employee			Retained earnings (accumulated				Treasury			Deferred stock				Total stockholders’
	Shares	Amount			par value			stock trust			deficit)				stock			compensation				equity
Balance, December 31, 2002	15,142,419		$	151		$	77,715		$	—		$	(8,108	)	$	(9,577	)		$	(319	)		$	59,862
Net income	—		—			—			—			14,236			—				—				14,236
Amortization of deferred stock compensation	—		—			—			—			—			—				319				319
Exercise of stock options	78,662		1			419			—			—			—				—				420
Other issuances of common stock	8,019		—			45			—			—			—				—				45
Income tax benefit from exercise of non-qualified stock options	—		—			196			—			—			—				—				196
Treasury stock transactions	—		—			—			—			—			(1,058		)		—				(1,058		)
Preferred stock repurchase premium, dividend and charges for accretion	—		—			—			—			(36,154		)	—				—				(36,154		)
Balance, December 31, 2003	15,229,100		152			78,375			—			(30,026		)	(10,635		)		—				37,866
Net income	—		—			—			—			21,046			—				—				21,046
Exercise of stock options	743,050		7			5,352			—			—			—				—				5,359
Other issuances of common stock	6,634		—			117			—			—			—				—				117
Conversion of restricted stock units	157,930		2			—			1,323			—			—				—				1,325
Income tax benefit from exercise of non-qualified stock options	—		—			2,641			—			—			—				—				2,641
Treasury stock transactions	—		—			—			—			—			(265		)		—				(265		)
Preferred stock conversion	100,067		1			299			—			—			—				—				300
Preferred stock dividend	—		—			—			—			(63		)	—				—				(63		)
Balance, December 31, 2004	16,236,781		162			86,784			1,323			(9,043		)	(10,900		)		—				68,326
Net income	—		—			—			—			18,423			—				—				18,423
Exercise of stock options	233,036		2			1,557			—			—			—				—				1,559
Other issuances of common stock	807		1			97			—			—			—				—				98
Income tax benefit from exercise of non-qualified stock options	—		—			1,453			—			—			—				—				1,453
Balance, December 31, 2005	16,470,624		$	165		$	89,891		$	1,323		$	9,380		$	(10,900	)		$	—			$	89,859

See accompanying notes to consolidated financial statements.

57

DURATEK, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2005, 2004, and 2003
(in thousands of dollars)

	2005			2004			2003
Cash flows from operating activities:
Net income	$	18,423		$	21,046		$	14,236
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,847			10,639			15,279
Deferred income taxes	(239		)	(83		)	4,445
Cumulative effect of a change in accounting principle, net of taxes	—			—			2,414
Stock compensation expense	98			246			517
Income tax benefit from exercise of non-qualified stock options	1,453			2,641			196
(Recoveries) provision for doubtful accounts	(106		)	(558		)	46
Equity in (income) loss of joint ventures, net of distributions	(418		)	109			(46		)
Loss on disposal of assets	301			213			701
Other non-cash changes	(52		)	597			(482		)
Changes in operating assets and liabilities:
Accounts receivable	(5,144		)	7,939			10,151
Costs and estimated earnings in excess of billings on uncompleted contracts	(6,532		)	(8,191		)	(6,830		)
Prepaid expenses and other current assets	2,717			1,486			871
Accounts payable and accrued expenses and other current liabilities	(6,058		)	(8,856		)	(2,386		)
Unearned revenues	(1,335		)	(6,716		)	4,934
Waste processing and disposal liabilities	(2,680		)	(1,021		)	(1,935		)
Facility and equipment decontamination and decommissioning liabilities	327			956			959
Retainage	5,030			1,781			(1,582		)
Other	(980		)	(1,701		)	(817		)
Net cash provided by operating activities	14,652			20,527			40,671
Cash flows from investing activities:
Additions to property, plant and equipment	(4,720		)	(6,242		)	(4,839		)
Other	(29		)	(115		)	(378		)
Net cash used in investing activities	(4,749		)	(6,357		)	(5,217		)
Cash flows from financing activities:
Repayments of long-term debt	(15,644		)	(30,975		)	(61,149		)
Proceeds from long-term debt	—			—			115,000
Proceeds from issuance of common stock	1,559			5,359			420
Repayments of capital lease obligations	(546		)	(282		)	(388		)
Deferred financing costs paid	(128		)	(27		)	(4,209		)
Preferred stock dividends paid	—			(123		)	(3,101		)
Preferred stock repurchase	—			—			(49,176		)
Net cash used in financing activities	(14,759		)	(26,048		)	(2,603		)
Net (decrease) increase in cash and cash equivalents	(4,856		)	(11,878		)	32,851
Cash and cash equivalents, beginning of year	23,296			35,174			2,323
Cash and cash equivalents, end of year	$	18,440		$	23,296		$	35,174

See accompanying notes to consolidated financial statements.

58

DURATEK, INC
Notes to Consolidated Financial Statements
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

(1)   Description of Business

Duratek, Inc., together with our wholly owned subsidiaries (“we”, “our”, “Duratek”, or the “company”), provide services to commercial and government customers primarily in the United States that ensure safe and secure radioactive materials disposition and nuclear facility operations. We possess a breadth of capabilities, technologies, assets, facilities, and qualified technical personnel. Our services include decommissioning services, nuclear facility operations, radioactive material characterization, processing, transportation, accident containment and restoration services, and final disposal. Our strength lies in our vertical integration of the following:

·on-site waste management and processing work at customer sites;

·transportation logistics and engineering services;

·processing of customer waste at our facilities; and

·operation of waste disposal facilities.

We own a number of patents and related trademarks pertaining to the detection, storage, decontamination, processing and handling of radioactive and hazardous waste materials. Our revenues are derived almost equally from government and commercial customers. Our government work comes largely from the United States Department of Energy (“DOE”). The majority of our commercial clients are commercial nuclear utilities. We also provide services to non-utilities, including pharmaceutical companies, research laboratories, universities, and industrial facilities. We have three business segments: (i) Federal Services, (ii) Commercial Services, and (iii) Commercial Processing and Disposal.

(2)   Summary of Significant Accounting Policies

(a)Principles of Consolidation

The consolidated financial statements include the accounts of the company and its wholly owned subsidiaries. Investments in joint ventures in which we do not have control or majority ownership are accounted for under the equity method. All significant intercompany balances and transactions have been eliminated in consolidation.

(b)Accounts Receivable

Accounts receivable are recorded at the invoiced amount and generally do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses from the existing accounts receivable. We determine the allowance based on historical experience, review of specific accounts, and past due balances over 90 days and over a specific amount. Account balances are written off against the allowance after all reasonable means of collection have been exhausted and recovery is considered remote.

(c)Cost and Estimated Earnings in Excess of Billings on Uncompleted Contracts, Unearned Revenues, and Retainage

Cost and estimated earnings in excess of billings on uncompleted contracts represents amounts recognized as revenue that have not been billed. Unearned revenue represents amounts billed and

59

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

collected for which revenue has 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 have cost and estimated earnings in excess of billings on uncompleted contracts of $34,381 as of December 31, 2005, of which $14,417 is expected to be collected in the next 12 months. As of December 31, 2005, cost and estimated earnings in excess of billings on uncompleted contracts that will not be collected within the next twelve months of $19,964 is included in other assets in our consolidated balance sheets. As of December 31, 2004, cost and estimated earnings in excess of billings on uncompleted contracts was $27,849, of which $16,715 was classified as a current asset and $11,134 is included in other assets in our consolidated balance sheets. We have unearned revenue of $13,359 as of December 31, 2005 and $14,694 as of December 31, 2004.

Retainage represents amounts billable but withheld, due to contract provisions, until the contract provisions are satisfied. As of December 31, 2005, we have retainage balances of $1,939, of which $900 is expected to be collected within the next 12 months and is included in prepaid expense and other current assets in the consolidated balance sheets. As of December 31, 2004, we had retainage balances of $6,969, of which $5,712 was included in prepaid expense and other current assets in the consolidated balance sheets.

(d)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.

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:

Land improvements	5 to 10 years
Buildings	20 to 35 years
Computer hardware and software	3 years
Furniture and fixtures	5 to 7 years
Machinery and equipment	5 to 12 years
Trucks and vehicles	5 to 15 years

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 $8,101 for 2005, $8,886 for 2004, and $10,518 for 2003. Maintenance and repairs that do not extend the lives of the assets are expensed as incurred.

(e)Impairment of Long-lived Assets

Long-lived assets such as property, plant, and equipment and purchased intangibles 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 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.

60

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

Assets to be disposed of would be separately presented in our consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.

Goodwill is tested annually for impairment, and is reviewed for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.

We reviewed our goodwill as of January 1 of 2005, 2004, and 2003 and concluded that no impairment charge was required.

(f)Goodwill and Other Intangible Assets

Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead are tested for impairment annually. 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 (note 5).

(g)Facility and Equipment Decontamination and Decommissioning (“D&D”) Liabilities

Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, (“SFAS 143”), requires us to record the fair value of an asset retirement obligation (“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 and/or normal use of the asset. We are also required to record a corresponding asset that is depreciated over the life of the asset. 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 obligations.

In March 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 47 (“FIN 47”), Accounting for Conditional Asset Retirement Obligations—An Interpretation of FASB Statement No. 143. FIN 47 clarifies that the term conditional asset retirement obligation, as used in SFAS No. 143, refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 has no material effect on our consolidated financial position or results of operations for the year ended December 31, 2005.

We are obligated, under our license granted by the State of South Carolina and the Atlantic Interstate Low-Level Radioactive Waste Compact Implementation Act (“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. We recognized our Barnwell closure obligation, which is effectively limited to the amount in the trust fund, for an amount equal to the balance in the trust fund.

61

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

(h)Derivative Financial Instruments

All derivative instruments are recognized as assets or liabilities in the balance sheet at fair value. Fair value adjustments are included in the determination of net income.

We use derivative financial instruments to help us to manage our exposure to movements in interest rates by converting our variable rate debt to fixed rate debt. At December 31, 2005, we had one contract that locks in a fixed rate of interest with a pay-fixed, receive-variable interest rate swap, thereby hedging exposure to the variability in market interest rate fluctuations. We have implemented policies which restrict the usage of derivatives to non-trading purposes.

(i)Deferred Compensation

We have contributed shares of our Common Stock to the Duratek Inc. Deferred Compensation Plan. In accordance with Emerging Issues Task Force Issue No. 97-14, Accounting for Deferred Compensation Arrangements Where Amounts are Held in a Rabbi Trust and Invested, assets of rabbi trusts are to be consolidated with those of the employer, and the value of the employer’s stock held in rabbi trust is classified in stockholder’s equity and generally accounted for in the manner of treasury stock.

(j)Revenue Recognition

Contract Revenue and Cost Recognition

Federal and Commercial Contracts for Services

We have contracts to provide engineering and technical support services to the Federal government and its agencies and to commercial companies. Our Federal government contracts are subject to periodic funding by the respective contracting agency. Funding for a contract may be provided in full at inception of the contract or periodically throughout the term of the contract as the services are provided. From time to time, we may proceed with work based on customer direction pending a Request for Equitable Adjustment (“REA”) or finalization and signing of formal funding documents. We have an internal process for approving such work. Contract acquisition costs are expensed as incurred.

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

Time-and-materials contracts—we are paid for labor and costs incurred at negotiated contractual rates. Profitability on these contracts is driven by the extent of utilization of our billable personnel and the rates that are applied based on contractual terms.

Cost-plus award or incentive fee contracts—we are reimbursed for allowable costs in accordance with Federal Acquisitions Regulations (“FAR”) or contractual provisions. If our costs exceed the contract ceiling or are not allowable under the provisions of the contract or FAR, we may not be able to obtain reimbursement for all such costs. We earn award and incentive fees in addition to cost reimbursements if we meet certain contract provisions, including schedule, budget, and safety. If any of these provisions are not satisfied in accordance with management’s estimates, we could have a reduction in expected revenues. Monthly assessments are made to measure our compliance with established contract provisions. We receive award and incentive fees on certain Federal government contracts, which are accrued when estimable, and collection is reasonably assured. Included in the incentive fees recognized is an incentive fee on a Federal government subcontract for the Fernald Closure Project that is not billable until the project is complete, which is currently estimated to be in the second half of 2006.

62

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

Firm-fixed-price and fixed-unit-rate contracts—we receive a fixed price irrespective of the actual costs we incur and, consequently, we are exposed to a number of risks. These risks include underestimation of costs, problems with new technologies, unforeseen costs or difficulties, delays beyond our control, and economic and other changes that may occur during the contract period. For firm-fixed-price contracts, our revenues are recognized on a proportional performance method using proportional output measures, where estimable, or based on other measures, such as the proportion of costs incurred to total estimated contract costs or units of production. For fixed-unit-rate contracts, our revenues are recognized as units are completed based on the contractual unit rates.

Revisions in revenues, costs, and profit estimates, or measurements in the extent of progress toward completion are changes in accounting estimates accounted for in the period of change (cumulative catch-up method). Such revisions could occur at any time and the effects could be material. Although we have a history of making reasonably dependable estimates of the extent of progress towards completion of contract revenue and of contract completion costs on our long-term engineering and construction contracts, due to uncertainties inherent in the estimation process, it is possible that actual completion costs may vary from estimates, and it is possible that such variances could be material to our operating results.

Contracts typically provide for periodic billings on a monthly basis or based on contract milestones. Cost and estimated earnings in excess of billings on uncompleted contracts represents amounts recognized as revenue that have not been billed. Unearned revenue represents amounts billed and collected for which revenue has not been recognized. Retainage represents amounts recognized as revenue that have been retained by the customer until certain conditions are met in accordance with contract provisions.

Change Orders and Requests for Equitable Adjustment (“REAs”)

We record contract claims and pending change orders, including REAs, when revenue is probable, 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 the financial statements in the period that they are incurred and are included in our estimates of contract profitability. As of December 31, 2005, there are approximately $5,652 outstanding requests for equitable adjustments in Federal Services, and no amount of these claims have been included in the contract value. As of December 31, 2005, there are no outstanding REAs in Commercial Services.

Subcontractors have requested contract change orders related to scope changes requested by our customers. Based on agreement with our customers and the provisions of the contracts, recovery by these subcontractors is contingent upon our recovery from our customers. As of December 31, 2005, subcontractors have requested contract change orders totaling approximately $2,900 related to scope changes requested by our customers. These amounts, including subcontractor costs and our corresponding revenue, have not been included in the results of our operations and are generally recognized when accepted in writing by the customer.

Provision for Estimated Losses

Provision for estimated losses on individual contracts are recognized in the period in which the losses are identified and include all estimated direct costs to complete the contract (excludes future selling,

63

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

general, and administrative costs expected to be allocated to the contract). Monthly assessments are made to measure our estimates and changes are made based on the latest information available. As of December 31, 2005, there were loss provisions of approximately $486 on two Federal Services contracts.

Commercial Waste Processing

The commercial waste processing operations have contracts with commercial companies and governmental agencies to provide fixed-based waste processing services. Our services are provided primarily under fixed-unit-price contracts and usually require us to ship the processed waste for burial on behalf of the customer. Revenue is recognized as units of waste are processed based on the unit prices provided in the contracts. Our fixed unit price contracts provide for additional customer billings if the characterization or volume of waste received is different from contract specifications or for certain increases in burial and transportation costs. These variances are identified when the waste is sorted and during the processing cycle and can have either a positive or negative impact on revenue, depending on the provisions of the contract. When these variances are identified, rates are adjusted to the correct weight or classification and revenue is adjusted in the period that the variance is identified.

Disposal

Revenues from the operation of a low-level radioactive waste disposal facility in Barnwell, South Carolina (“Barnwell Disposal Facility”) are recognized in accordance with the Atlantic Waste Compact Act. Under the Atlantic Waste Compact Act, we are reimbursed for allowable costs incurred in operating the Barnwell Disposal Facility that are identified by the South Carolina Public Service Commission and incurred by us plus an operating margin of 29% on certain of those allowable costs. In addition, costs incurred for decommissioning activities at the Barnwell Disposal Facility are reimbursed by the State of South Carolina from a trust fund established to cover the Barnwell closure obligation plus an operating margin of 14% on those costs. Our results from July 1, 2000 forward are based on the economic regulations imposed by the Atlantic Waste Compact Act. Allowable costs are subject to audit annually by the Office of Regulatory Staff (“ORS”) of the State of South Carolina to ensure compliance with the Atlantic Waste Compact Act. Recommended audit adjustments to allowable costs are thoroughly reviewed by management and resolved with ORS. As of December 31, 2005, favorable adjustments to revenues totaling $160 are included in the results of our operations for the audit of costs related to the State fiscal year ended June 30, 2005.

(k)Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We establish a valuation allowance if we determine that it is more likely than not that a deferred tax asset will not be realized.

64

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

(l)Stock Option Plan

We apply the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation, to account for our fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. SFAS No. 123, Accounting for Stock-Based Compensation (as amended by SFAS No. 148, Accounting for Stock Based Compensation -Transition and Disclosure), established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, we have elected to continue to apply the intrinsic-value-based method of accounting described above, and have adopted only the disclosure requirements of SFAS No. 123. The following table illustrates the effect on net income (loss) attributable to common shareholders if the fair-value-based method had been applied to all outstanding and unvested awards in each year:

	2005		2004		2003
Net income	$	18,423	$	21,046	$	14,236
Add: stock-based employee compensation expenseincluded in reported net income, net of taxes	—		151		147
Deduct: total stock-based employee compensation expense determined under fair-value-based method for all awards, net of taxes	1,399		1,002		1,002
Pro forma net income	17,024		20,195		13,381
Deduct: preferred stock repurchase premium, dividends, and charges for accretion	—		63		36,154
Pro forma net income (loss) attributable to common stockholders	$	17,024	$	20,132	$	(22,773	)
Income (loss) per share:
Basic-as reported	$	1.25	$	1.48	$	(1.62	)
Basic-pro forma	$	1.15	$	1.42	$	(1.68	)
Diluted-as reported	$	1.21	$	1.42	$	(1.62	)
Diluted-pro forma	$	1.11	$	1.36	$	(1.68	)

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2005, 2004, and 2003:

	2005	2004	2003
Risk free interest rate	4.4%	4.2%	4.3%
Expected volatility	59%	61%	64%
Expected life	8 years	4 years	4 years
Contractual life	10 years	10 years	10 years
Expected dividend yield	0%	0%	0%
Fair value of options granted	$16.06	$9.71	$6.06

65

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123—revised 2004 (“SFAS No. 123R”), Share-Based Payment, which replaces SFAS No. 123, supersedes APB Opinion No. 25, and amends FASB Statement No. 95, Statement of Cash Flows. SFAS No. 123R requires the measurement of all share-based payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of expense in our consolidated statements of income.

We are required to adopt SFAS No. 123R beginning in our first quarter of fiscal year 2006. SFAS No. 123R permits the adoption using one of two methods:

A “modified prospective” method in which compensation cost is recognized based on the requirements of SFAS No. 123R for all share-based payments granted after the effective date and based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123R that remain unvested on the effective date.

A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits the restatement, based on amounts previously recognized under SFAS No. 123 for purposes of pro forma disclosures, either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

We plan to adopt SFAS No. 123R using the modified prospective method.

The pro forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition, and thus our financial results will be negatively affected by the adoption of this standard beginning next year, although it will have no impact on our overall financial position. The impact of adoption of SFAS No. 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123R in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the pro forma net income and earnings per share per above. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as currently required under accounting principles generally accepted in the United States of America. This requirement will reduce net operating cash flows and increase net financing cash flows upon adoptions of SFAS No. 123R. While we cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of cash flows recognized in prior periods for such excess tax deductions were $1,453 in 2005, $2,641 in 2004, and $196 in 2003.

(m)Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires our 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 our management include: (i) proportion of completion on long-term contracts, (ii) the cost to D&D facilities and equipment, (iii) recovery of long-lived assets, including goodwill, and (iv) contingencies and litigation. 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.

66

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

(n)Commitments and Contingencies

Liabilities for loss contingencies, including environmental remediation costs not within the scope of SFAS Statement No. 143 arising from claims, 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 would be recorded when agreed upon with a third party.

(o)Reclassifications

Certain amounts for 2004 and 2003 have been reclassified to conform to the presentation for 2005.

(3)Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is calculated by dividing net income (loss) by the diluted weighted average common shares, which reflect the potential dilution of stock options, restricted stock, and convertible redeemable preferred stock that could share in our income. The reconciliation of amounts used in the computation of basic and diluted net income (loss) per share for the years ended December 31, 2005, 2004, and 2003 consist of the following:

	2005		2004		2003
Numerator:
Net income (loss) attributable to common stockholders	$	18,423	$	20,983	$	(21,918	)
Add: Income impact of assumed conversions—preferred stock dividends and charges for accretion(1)	—		63		—
Net income (loss)	18,423		21,046		(21,918		)
Add: cumulative effect of a change in accounting principle, net of taxes	—		—		2,414
Net income (loss) before cumulative effect of a change in accounting principle	$	18,423	$	21,046	$	(19,504	)
Denominator:
Weighted-average shares outstanding	14,776		14,191		13,561
Effect of dilutive securities:
Incremental shares from assumed conversion of:
Employee stock options	510		569		—
Diluted weighted average common shares outstanding	15,286		14,760		13,561
Income (loss) per common share:
Basic:
Before cumulative effect of a change in accounting principle	$	1.25	$	1.48	$	(1.44	)
Cumulative effect of a change in accounting principle	—		—		(0.18		)
	$	1.25	$	1.48	$	(1.62	)
Diluted:
Before cumulative effect of a change in accounting principle	$	1.21	$	1.42	$	(1.44	)
Cumulative effect of a change in accounting principle	—		—		(0.18		)
	$	1.21	$	1.42	$	(1.62	)

(1)In 2003, we had a net loss attributable to common stockholders. Accordingly, there is no dilutive impact on earnings per share.

67

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

The effects on weighted average shares outstanding of options to purchase Common Stock and other potentially dilutive securities of ours that were not included in the computation of diluted net income (loss) per share because the effect would have been anti-dilutive were 143 shares as of December 31, 2005 and 2,362 shares as of December 31, 2003. There were no anti-dilutive shares as of December 31, 2004.

(4)   Property, Plant and Equipment

Property, plant and equipment as of December 31, 2005 and 2004 consist of the following:

	2005		2004
Land and land improvements	$	4,499	$	3,871
Buildings	42,357		43,297
Computer hardware and software	6,014		5,388
Furniture and fixtures	2,659		2,584
Machinery and equipment	63,701		62,797
Trucks and vehicles	3,563		1,818
Leasehold improvements	235		182
Capital leases	3,012		2,556
Construction in progress	1,747		1,964
	127,787		124,457
Less accumulated depreciation and amortization	65,985		58,306
	$	61,802	$	66,151

(5)   Goodwill and Other Intangible Assets

Other intangible assets subject to amortization consist principally of amounts assigned to operating rights related to the Barnwell, South Carolina low-level radioactive waste disposal facility, covenants not-to-compete, and costs incurred to obtain patents. We do not have any other intangible assets that are not subject to amortization. Other intangible assets as of December 31, 2005 and 2004 consist of the following:

			As of December 31, 2005							As of December 31, 2004
	Amortization period		Gross carrying amount			Accumulated amortization				Gross carrying amount			Accumulated amortization
Barnwell operating rights		8 yrs		$	7,340		$	(5,046	)		$	7,340		$	(4,129	)
Patents		20 yrs		1,469			(1,077		)		1,553			(1,045		)
Covenants-not-to-compete		17 yrs		102			(80		)		102			(74		)
Total				$	8,911		$	(6,203	)		$	8,995		$	(5,248	)

Aggregate amortization expense for amortizing intangible assets was $980 for the year ended December 31, 2005, $979 for the year ended December 31, 2004, and $978 for the year ended December 31, 2003. Estimated annual amortization expense for the next five years beginning January 1, 2006 is $976 for fiscal year ended December 31, 2006, $963 for fiscal year ended December 31, 2007, $500 for fiscal year ended December 31, 2008, $38 for fiscal year ended December 31, 2009, and $33 for fiscal year ended December 31, 2010.

68

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

In 2004, the goodwill and deferred tax liability balances were increased by $1,332 for certain deferred tax liabilities related to prior year acquisitions.

(6)   Long-Term Debt

Long-term debt as of December 31, 2005 and 2004 consisted of the following:

	2005		2004
Bank Credit Facility:
Term loan, interest payable quarterly, due December 16, 2009	$	69,356	$	85,000
Less: current portion of long-term debt	708		858
	$	68,648	$	84,142

In December 2003, in connection with the 8% Cumulative Convertible Redeemable Preferred Stock $.01 par value (the “Cumulative Convertible Redeemable Preferred Stock”) repurchase transaction (note 11), we entered into a new bank credit facility. This bank credit facility consists of a $30,000 revolving line of credit, which includes a $15,000 sub limit for the issuance of standby letters of credit, and a six-year $115,000 term loan. Proceeds of the term loan were used to repay $53,918 of existing term debt and accrued interest under our prior credit facility and to repurchase 151 shares of the Cumulative Convertible Redeemable Preferred Stock for $49,176 in cash plus accrued and unpaid dividends of $2,472, net of transaction costs and related expenses. Borrowings under the credit facility bear interest at the prime rate plus an applicable margin or, at our option, London Interbank Offered Rates (“LIBOR”) plus an applicable margin.

Effective February 23, 2005, the bank credit facility was amended to lower the applicable margin on borrowings under the bank credit facility. For term loans, the applicable margin is 2.00% for prime rate loans and 3.25% for LIBOR loans. For revolving loans, the applicable margin is determined based on our leverage ratio and can range from 2.00% to 2.50% for prime rate loans and from 3.25% to 3.75% for LIBOR loans. The term loan must be prepaid to the extent of any excess cash flows, as defined. The bank credit facility requires us to maintain certain financial ratios and contains restrictions on our ability to pay cash dividends and limitations on our ability to make acquisitions. As of December 31, 2005, we were in compliance with the provisions of the bank credit facility, including all financial covenant requirements. The bank credit facility is secured by substantially all of the assets of the company and its direct and indirect subsidiaries. As of December 31, 2005, the $30,000 in total available borrowings under the revolving line of credit was reduced by $8,163 in outstanding letters of credit, for a net borrowing availability of $21,837 under the revolving line of credit. As of December 31, 2005, $69,356 of the six-year term loans remains outstanding from the $115,000 term loans issued in December 2003. During 2005, we made $15,644 in payments on the term loans of which $859 was scheduled repayments and $14,785 was voluntary prepayments.

69

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

Aggregate maturities of long-term debt as of December 31, 2005 are as follows:

2006	$	708
2007	708
2008	708
2009	67,232
	$	69,356

We paid interest of $5,664 in 2005, $6,134 in 2004, and $2,705 in 2003.

(7)   Due to the State of South Carolina

On an annual basis, following the State of South Carolina’s fiscal year end on June 30, we remit the net of the amounts billed and paid by customers of the State of South Carolina less our fee for operating the site during such fiscal year, pursuant to the provisions of the Atlantic Waste Compact Act (note 2(j)). For the fiscal year ended June 30, 2005, we remitted $13,819 and for the fiscal year ended June 30, 2004, we remitted $25,553. As of December 31, 2005, we had a balance due to the State of South Carolina of $6,911, of which $2,580 is billed to customer of the State of South Carolina but uncollected. As of December 31, 2004, we had a balance Due to the State of South Carolina of $6,073, of which $2,364 was billed to customers of the State of South Carolina but uncollected.

(8)Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of December 31, 2005 and 2004 consisted of the following:

	2005		2004
Salaries and related expenses	$	10,548	$	13,625
Contract costs—subcontractors	3,766		4,512
Other accrued expenses	7,469		6,509
	$	21,783	$	24,646

(9)Waste Processing and Disposal Liabilities

Our waste processing technologies create waste by-products (“secondary waste”), which generally requires transportation and disposal costs to be incurred. We accrue the estimated costs of transportation and disposal based on the characterization of the waste and contractual disposal rates currently in effect at the disposal sites. The ultimate cost of disposal will depend on the actual contamination of the waste, volume reduction, activity, and disposal density. We had an accrual for the expected cost of secondary waste of $2,092 as of December 31, 2005 and $3,603 as of December 31, 2004.

In addition, we had accrued for customer waste that has been completely processed and is awaiting shipment for burial of $2,208 as of December 31, 2005, and $3,377 as of December 31, 2004, based on contractual rates, which are negotiated annually.

(10)Facility and Equipment Decontamination and Decommissioning (“D&D”)

We are responsible for the cost to D&D our facilities and equipment in Tennessee and South Carolina and certain equipment used at customer sites. These costs will generally be paid upon the closure of these facilities or the disposal of this equipment. We are also obligated, under our license granted by the State of South Carolina and the Atlantic Waste Compact Act, for the Barnwell closure and we are required

70

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

to maintain a trust fund to cover the Barnwell closure obligation, which limits our obligation to the amount of the trust fund. During 2005, $760 was used to fund decommissioning activity at the Barnwell Low-Level Radioactive Waste Disposal Facility, therefore decreasing the trust fund balance.

Our D&D liabilities consist of the following as of December 31, 2005 and 2004:

	2005		2004
Facilities & equipment ARO	$	19,632	$	21,369
Barnwell closure	19,295		19,050
	$	38,927	$	40,419

The following is a reconciliation of our facility & equipment ARO for 2005 and 2004:

	2005			2004
Balance at January 1	$	21,369		$	20,413
Accretion expense	664			978
Liabilities incurred during the year	36			60
ARO estimate adjustments	(2,437		)	(82		)
Balance at December 31	$	19,632		$	21,369

Upon the adoption of SFAS No. 143 on January 1, 2003, we recognized the following changes to our consolidated financial statements: increased property, plant and equipment by $5,926; increased D&D liabilities by $9,949; and a cumulative effect of a change in accounting principle, net of tax of $2,414 ($4,018 pre-tax).

We have purchased insurance to fund our obligation to clean and remediate our Tennessee facilities and equipment upon closure. We are accounting for these insurance policies using deposit accounting, whereby a portion of the premiums paid are viewed as funding to cover our obligation and is capitalized as a deposit asset. This asset has no impact on the asset retirement obligation. The remainder of the premium is being charged to earnings in the period in which the premiums are paid. The deposit asset is included in other assets in our consolidated balance sheets and is $2,274 as of December 31, 2005 and $2,043 as of December 31, 2004. Related insurance expense was $597 in 2005 and $629 in 2004. In addition, we were required to place cash deposits in escrow relating to the insurance policy for the Bear Creek Operations Facility. The cash deposits in escrow are included in other assets in our consolidated balance sheets and were $5,179 as of December 31, 2005 and $3,564 as of December 31, 2004.

(11)8% Cumulative Convertible Redeemable Preferred Stock

In January 1995, we issued 160 shares of Cumulative Convertible Redeemable Preferred Stock and an option (the “Carlyle Option”) to purchase up to an additional 1,250 shares of our Common Stock. The Cumulative Convertible Redeemable Preferred Stock was initially convertible into our Common Stock at a conversion price of $3.00 per share and, if not previously converted, we were required to redeem the outstanding Cumulative Convertible Redeemable Preferred Stock on September 30, 2005 for $100 per share plus accrued and unpaid dividends, unless such date was extended with the approval of the holders of the Cumulative Convertible Redeemable Preferred Stock.

On December 16, 2003, we repurchased 151 shares of our Cumulative Convertible Redeemable Preferred Stock from investment partnerships controlled by The Carlyle Group for $49,176 in cash plus accrued and unpaid dividends of $2,472. The purchase was based on a price of $9.74 per share of our Common Stock. Each share of Cumulative Convertible Redeemable Preferred Stock was convertible into

71

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

33.333 shares of our Common Stock. As of December 31, 2003, there were 3 shares of Cumulative Convertible Redeemable Preferred Stock outstanding that were held by The Carlyle Group. Prior to this repurchase transaction, there were 157 shares of Cumulative Convertible Redeemable Preferred Stock outstanding.

In connection with the repurchase transaction, we entered into a stockholder agreement with The Carlyle Group. The stockholders agreement provided that we were obligated to purchase the outstanding 3 shares of Cumulative Convertible Redeemable Preferred Stock from The Carlyle Group on or before September 29, 2005 at a minimum purchase price of $324.67 per share. Pursuant to these terms, we purchased the remaining 3 shares from The Carlyle Group during the fourth quarter of 2004 for approximately $975.

Following the Cumulative Convertible Redeemable Preferred Stock repurchase transaction in December 2003, we had 3 shares of Cumulative Convertible Redeemable Preferred Stock that remained outstanding with parties other than The Carlyle Group. During 2004, all these shares were converted into Common Stock at the option of the holder.

(12)Derivative Financial Instrument

We entered into an interest rate swap agreement effective on July 22, 2003, to partially mitigate our exposure to fluctuations in interest rates relating to our outstanding variable rate debt. The contract’s notional amount was $55,949 at inception and declines 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 prior credit facility. At the inception of the current credit facility, we were required to have in place an interest rate protection agreement for the aggregate notional amount of at least 40% of the aggregate outstanding principal amount of the term loans, at which date the contract’s notional amount was $50,748. The current credit facility requires us to maintain the interest rate swap agreement until June 30, 2006. This interest rate swap agreement is not designated as an accounting hedge. The contract’s notional amount is $8,690 at December 31, 2005. Under the terms of the contract, we pay a fixed rate of 1.895% and receive LIBOR, which resets every 90 days. The contract matures on June 30, 2006. The fair value of the contract, which was based upon the fair value estimate by a financial institution, is approximately $85 as of December 31, 2005 and approximately $272 as of December 31, 2004, which is included in prepaid expenses and other current assets in the consolidated balance sheets.

Adjustments to the fair value of the contract are included in other income, net and was a gain of $163 in 2005 and a gain of $265 in 2004.

(13)Fair Value of Financial Instruments

The fair value of cash, accounts receivable, other receivables, accounts payable, and accrued expenses approximates the carrying amount due to the short maturities of these instruments. Under our bank credit facility, we have outstanding $69,356 in long-term debt, which approximates the fair value as of December 31, 2005.

(14)Stock Compensation and Stockholders’ Rights

(a)Stock Option Plan

In May 2000, our stockholders approved the 1999 Stock Option and Incentive Plan which authorizes a committee of the Board of Directors to grant various types of incentive awards (including incentive stock options, non-qualified options, stock appreciation rights, restricted shares, and performance units on

72

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

shares) to our directors, officers, and employees for issuance of up to 5,000 shares of Common Stock in the aggregate. As of December 31, 2005, we had 1,427 outstanding options.

Changes in options outstanding are as follows:

	Weighted average exercise price			Number of shares
December 31, 2002		$	6.19		1,983
Granted		8.11			309
Exercised		5.39			(82	)
Terminated and expired		7.60			(207	)
December 31, 2003		6.38			2,004
Granted		13.30			338
Exercised		6.62			(743	)
Terminated and expired		7.72			(62	)
December 31, 2004		7.75			1,537
Granted		22.33			143
Exercised		6.69			(233	)
Terminated and expired		8.11			(20	)
December 31, 2005		$	7.15		1,427

The following table summarizes information about outstanding and exercisable options at December 31, 2005:

	Outstanding						Exercisable
Range of exercise price	Number outstanding		Weighted average remaining contractual life	Weighted average exercise price			Number exercisable		Weighted average exercise price
$ 3.92 – $ 5.75		569	5.45 years		$	4.61		422		$	4.71
$  8.11 – $ 8.75		346	6.33 years		$	8.14		203		$	8.16
$10.50 – $13.54		369	7.12 years		$	12.84		118		$	12.01
$22.33		143	9.14 years		$	22.33		—		$	22.33
		1,427						743

Certain stock options issued in 2000, granted to our executive officers, have exercise prices that were less than the fair value of our Common Stock on the date of grant. The difference of $269 was recorded as deferred compensation and was being recognized over the vesting period. These options fully vested by December 31, 2003. We recognized compensation expense of $54 during year ended December 31, 2003. In addition, during 2003, the vesting term of certain stock options were accelerated. As a result, we recognized compensation expense of $246 in 2004 and $198 in 2003.

73

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

(b)Restricted Stock Units

Upon approval of the Plan by the stockholders in May 2000, two of our senior executives were granted 158 restricted stock units. The units vested over a four-year period. Upon vesting, the executives had the right to receive Common Stock in exchange for such units. We accounted for this plan as a compensatory fixed plan under APB Opinion No. 25, which resulted in a compensation charge of approximately $1,323 of which $264 was recognized during 2003. In January 2004, all restricted stock units were vested and these restricted stock units were exchanged for our Common Stock and transferred to the Duratek Deferred Compensation Plan (note 17).

(c)Stockholder Rights

On December 16, 2003, our Board of Directors approved a stockholder rights plan. Under this plan, each share of our Common Stock and each share of our Cumulative Convertible Redeemable Preferred Stock is accompanied by a right that entitles the holder of that share, upon the occurrence of specified events that may be intended to affect a change in control, to purchase one one-thousandth of a share of Series B Junior Participating Preferred Stock at an exercise price of $58.00. In the event the rights become exercisable, the rights plan allows for our stockholders to acquire our stock or the stock of the surviving corporation, whether or not we are the surviving corporation, at a value that is twice that of the exercise price of the rights.  On February 6, 2006, our Board of Directors approved an amendment to the Stockholder Rights Plan that exempted the proposed EnergySolutions merger as a transaction that would trigger the exercise of the rights accompany the Common Stock.

(15)Income Taxes

Income taxes for the years ended December 31 2005, 2004, and 2003 consist of the following:

	2005			2004			2003
Current:
State	$	953		$	984		$	933
Federal	9,937			12,197			6,293
	10,890			13,181			7,226
Deferred:
State	269			69			1,019
Federal	(508		)	(152		)	3,426
	(239		)	(83		)	4,445
	$	10,651		$	13,098		$	11,671

74

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

Income taxes is reconciled to the amount computed by applying the statutory Federal income tax rate of 35% to income before income taxes, equity in income of joint ventures, and cumulative effect of a change in accounting principle as follows:

	2005			2004		2003
Federal income taxes at statutory rate	$	10,111		$	11,907	$	9,842
State income taxes, net of Federal tax benefit	794			685		1,269
Other	(254		)	506		560
	$	10,651		$	13,098	$	11,671

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2005 and 2004 are presented below:

	2005			2004
Deferred tax assets:
Accounts receivable principally due to allowance for doubtful accounts	$	7		$	61
Decontamination and decommissioning liabilities	6,513			6,611
Net operating loss carryforwards	538			944
Accrued compensation	1,844			1,469
Other	427			943
	9,329			10,028
Less: valuation allowance	578			503
Net deferred tax assets	8,751			9,525
Deferred tax liabilities:
Prepaid expense	(1,376		)	(1,363		)
Plant, equipment, and intangibles principally due to
differences in depreciation and amortization	(11,871		)	(12,733		)
Net deferred tax liabilities	$	(4,496	)	$	(4,571	)

In 2004, deferred tax liabilities were increased by $1,332 to correct the recording of certain deferred tax liabilities related to prior year acquisitions.

At December 31, 2005, we had state net operating loss carry forwards, net of valuation allowances, of $33 that expire at various dates up to 2022.

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 deemed a valuation allowance of $578 as necessary at December 31, 2005, and $503 at December 31, 2004.  

75

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

The net change in the valuation allowance for the year ended December 31, 2005 was an increase of $75. During 2004, we decreased our valuation allowance by $147. During 2003, we increased our valuation allowance by $178, primarily for certain capital loss carry forwards that may not be realized.

We paid income taxes of $5,942 in 2005, $16,209 in 2004, and $3,532 in 2003. The amount paid in for 2004 includes $4,649 relating to 2003.

(16)Profit Investment Plan

We maintain a Profit Investment Plan for employees. The Profit Investment Plan permits pre-tax contributions to the Profit Investment Plan by participants pursuant to Section 401(k) of the Internal Revenue Code of 1% to 60% of base compensation. We match 25% of a participant’s eligible contributions based on a formula set forth in the Profit Investment Plan and may make additional matching contributions up to 25% of a participant’s eligible contributions. Our contributions vest at a rate of 20% per year of service. Our matching contributions, which includes the 25% of a participant’s eligible contributions for the current fiscal year plus the approved additional matching contribution from the prior fiscal year, were $1,523 for the year ended December 31, 2005, $1,445 for the year ended December 31, 2004, and $1,381 for the year ended December 31, 2003.

(17)Deferred Compensation Plan

In 2003, we established the Duratek, Inc. Deferred Compensation Plan (“the Plan”) to allow certain eligible key employees to defer a portion of their compensation. The participant’s contributions earn income based on the performance of the investment funds they select. As of December 31, 2005, we had deferred compensation of $1,186. As of December 31, 2004, we had deferred compensation of $861. We are invested in four life insurance products in 2005 and three insurance products in 2004 that are designed to approximate the performance of the investment funds that the participants select. These investments, which are recorded at their fair market value, are included in other assets in our consolidated balance sheets. As of December 31, 2005, the insurance products had a cash surrender value of $1,157. As of December 31, 2004, the insurance products had a cash surrender value of $793.

In December 2003, the vested portion of the restricted stock units issued to two of our senior executives were contributed to the Plan and in January 2004, the remaining portion of restricted stock units vested and were contributed to the Plan (note 14). These restricted stock units are being held in trust, and in January 2004, all of the restricted stock units were exchanged for our Common Stock. Our shares have been contributed to the rabbi trust and the corresponding liability related to the deferred compensation plan is presented as a component of stockholders’ equity as deferred compensation employee stock trust in the amount of $1,323.

(18)Related Party Transactions

Two of our executive officers held loans in the amount of  $431 at December 31, 2003. During 2004, the outstanding balance was repaid.

76

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

Joint Venture Financing

On June 29, 2005, we entered into an agreement with UDS, LLC, one of our joint ventures, to loan up to $1.6 million to UDS, LLC for working capital requirements. The loan is subject to interest at the higher of 5% or the prime rate plus 1.0%. Interest is payable monthly, and the entire loan balance must be repaid within one year from the date of the loan. As of December 31, 2005, there were outstanding borrowings to UDS, LLC of $0.6 million. We own 26 percent of UDS, LLC and share proportionally in its profits and losses. The other partners and their proportionate share include Framatome AMP (48%) and Burns & Roe Enterprises (26%).

(19)Segment Reporting and Business Concentrations

We have three primary segments: (i) Federal Services (“FS”), (ii) Commercial Services (“CS”), and (iii) Commercial Processing and Disposal (“CPD”). We realigned our reporting segments for the following:

·In 2003, we realigned our reporting segments to include the results of our Memphis operations in the CS segment from the CPD segment. The related revenues were $3,634 in 2003.

·In 2004, we realigned the following:

·certain projects from our CS segment to our CPD segment. The related revenues were $1,586 in 2004 and $1,629 in 2003.

·the transportation services provided for customers of the CPD segment in the CS segment from the CPD segment. The related revenues were $2,547 in 2004 and $4,418 in 2003.

·the subcontract services provided by our CS segment to our FS segments in the CS segment from the FS segment. The related revenues were $614 in 2004 and $615 in 2003.

·In 2005, we realigned certain projects from our CPD segment to our CS segment. The related revenues were $486 in 2005 and $1,159 in 2004.

The consolidated statement of operations for the years 2005, 2004, and 2003 do not change.

We evaluate the segments’ operating income results to measure performance. The following is a brief description of each of the segments:

(a)FS Segment

Our FS segment is focused on providing the following services to support major programs in the DOE:

·on-site waste disposition services;

·site closure services;

·nuclear facility operations and commissioning services;

·engineering design and technology research; and

77

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

·safety, health, and quality assurance services.

(b)CS Segment

Our CS segment provides a broad range of technologies and services to nuclear power plants, government and industrial facilities, universities, and research/pharmaceutical laboratories in the following areas:

·on-site liquid and solid waste processing;

·transportation logistics;

·transportation services;

·license stewardship;

·decontamination and decommissioning;

·project services; and

·radiological engineering services.

We also provide technical support services to our commercial clients including project management, engineering, radiation protection support, and environmental consulting.

(c)CPD Segment

Our CPD segment operates two facilities in Tennessee and two facilities in South Carolina. At the Tennessee facilities, we use multiple technologies to volume reduce and package customer waste for final disposition such as:

·incineration;

·compaction;

·metal melting and decontamination; and

·treatment under our bulk waste assay program (“GARDIAN”).

At the South Carolina facilities, we perform the following services:

·operate a low-level radioactive waste disposal facility in Barnwell, South Carolina on behalf of the State of South Carolina;

·process and package materials for disposal; and

·specialty waste processing for nuclear power plants.

78

DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

	As of and for the Year Ended December 31, 2005
	FS		CS		CPD		Unallocated Items				Consolidated
Revenues from external customers (1)	$	115,607	$	79,557	$	86,048		$	—			$	281,212
Income from operations	14,583		9,992		10,822			—				35,397
Interest expense	—		—		—			(6,539		)		(6,539		)
Other income, net	—		—		—			31				31
Income taxes	—		—		—			10,651				10,651
Equity in income of joint ventures	245		—		—			(60		)		185
Net income	14,828		9,992		10,822			(17,219		)		18,423
Depreciation and amortization expense	619		2,272		5,793			1,163				9,847
Goodwill	32,671		31,316		8,142			—				72,129
Other long-lived assets (2)	1,053		22,730		38,203			2,524				64,510
Capital expenditures for additions to property, plant and equipment	589		1,596		2,015			520				4,720
Total assets	73,257		70,614		92,085			27,958				263,914

	As of and for the Year Ended December 31, 2004
	FS		CS		CPD		Unallocated Items				Consolidated
Revenues from external customers (1)	$	115,565	$	84,942	$	85,706		$	—			$	286,213
Income from operations	16,411		14,351		9,830			—				40,592
Interest expense	—		—		—			(6,970		)		(6,970		)
Other income, net	—		—		—			398				398
Income taxes	—		—		—			13,098				13,098
Equity in income of joint ventures	204		—		—			(80		)		124
Net income	16,615		14,351		9,830			(19,750		)		21,046
Depreciation and amortization expense	443		2,440		6,540			1,216				10,639
Goodwill	32,671		31,316		8,142			—				72,129
Other long-lived assets (2)	1,240		23,372		43,673			1,613				69,898
Capital expenditures for additions to property, plant and equipment	186		2,669		2,129			1,258				6,242
Total assets	70,736		69,740		92,735			35,326				268,537

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DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

	As of and for the Year Ended December 31, 2003
	FS		CS		CPD		Unallocated Items				Consolidated
Revenues from external customers (1)	$	125,224	$	78,349	$	82,328		$	—			$	285,901
Income from operations	11,847		14,752		8,347			—				34,946
Interest expense	—		—		—			(6,903		)		(6,903		)
Other income, net	—		—		—			76				76
Income taxes	—		—		—			11,671				11,671
Equity in income of joint venture	250		—		—			(48		)		202
Cumulative effect of a change in accounting principle, net of tax	—		—		—			(2,414		)		(2,414		)
Net income	12,097		14,752		8,347			(20,960		)		14,236
Depreciation and amortization expense	1,093		2,400		6,754			5,032				15,279
Goodwill	32,244		30,411		8,142			—				70,797
Other long-lived assets (2)	1,352		24,249		47,300			1,233				74,134
Capital expenditures for additions to property, plant and equipment	180		2,565		1,823			271				4,839
Total assets	70,678		68,446		99,883			44,137				283,144

(1)Intercompany revenues have been eliminated and are not material for the years ended December 31, 2005, 2004 and 2003. Revenues by segment represent revenues earned based on third party billing to customers.

(2) Other long-lived assets include property, plan and equipment and other intangible assts.

(d)Business Concentrations

Our revenues are derived primarily from contracts with utility companies and from subcontracts with a number of DOE prime contractors. Our revenues are derived almost equally from government and commercial customers. Revenues from DOE contractors and subcontractors represented approximately 47% of consolidated revenues in 2005, 43% in 2004, and 45% in 2003. The Federal Services work that we performed for customers that represent greater than 10% of our consolidated revenues were with prime contractors Bechtel Corporation and Fluor Corporation. No commercial customer represented more than 10% of consolidated revenues for the years ended December 31, 2005, 2004, and 2003.

Accounts receivable and costs and estimated earnings in excess of billing on uncompleted contracts relating to DOE contractors and subcontractors amounted to $12,838 and $28,429 respectively, at December 31, 2005, and $12,750 and $18,837, respectively, at December 31, 2004.

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DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

The CPD segment is primarily reliant upon a single provider for its burial services for both customer and secondary waste disposal. We have an agreement in place at set rates through December 31, 2007.

(20)Commitments and Contingencies

(a)Leases

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 $3,364 for the year ended December 31, 2005, $3,937 for the year ended December 31, 2004, and $3,531 for the years ended December 31, 2003.

We are obligated under capital leases covering computer equipment and certain machinery and equipment that expire at various dates during the next four years. At December 31, 2005 and 2004, the gross amount of plant and equipment and related accumulated amortization recorded under capital leases were as follows:

	2005		2004
Computer equipment	$	1,742	$	530
Machinery and equipment	1,270		1,197
Trucks and vehicles	829		829
	3,841		2,556
Less accumulated amortization	2,570		1,971
	$	1,271	$	585

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 with initial or remaining lease terms greater than one year at December 31, 2005:

	Operating			Capital
2006		$	2,960	$	621
2007		2,242		520
2008		1,859		194
2009		1,541		—
2010 and beyond		8,637		—
Future minimum lease payments		$	17,239	1,335
Less: portion representing interest				106
Less: current portion of capital lease obligation				554
Long-term portion of capital lease obligation				$	675

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DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

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

(b)Financial Assurance Instruments

We are required to post, from time to time, standby letters of credit and surety bonds to meet certain customer contract requirements. We do not directly post financial assurance instruments or other guarantees for our subcontractors. As of December 31, 2005, we had outstanding assurance instruments of $16,834, including $8,163 in letters of credit and $8,671 in surety bonds, which expire at various contract completion dates. We have entered into certain indemnification agreements with the providers of the surety bonds, which would require funding 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. The letters of credit are issued under our bank credit facility up to $15,000 as a sublimit to the $30,000 revolving line of credit. In addition, the credit facility provides for the ability to obtain supplemental letters of credit, as defined in the credit facility. As of December 31, 2005, we had no outstanding supplemental letters of credit. Effective July 22, 2005, the credit facility was amended to increase the supplemental letters of credit from $10,000 to $20,000. The credit facility limits the total amount of outstanding supplemental letters of credits and surety bonds to $35,000. Therefore, we are able to issue up to $50,000 in financial assurance instruments under our credit facility.

(c)Legal Proceedings

On September 21, 2004, Washington State Department of Ecology (“Ecology”) issued a Notice of Penalty Incurred and Due No. 1672 with a fine of $270 jointly and severally assessed against the U.S. Department of Energy—Richland Operations, the U.S. Department of Energy—Office of River Protection, Fluor Hanford Incorporated, and Duratek Federal Services of Hanford, Inc. Ecology issued the Notice of Penalty listing four types of violations: Facility Reporting, Personnel Training, Facility Record Keeping, and General Waste Analysis. The four issues are positions that Ecology has taken relating to how certain drums of material sent off site for treatability studies were handled. All the named parties disagree with the finding and are working as a joint defense team. The DOE is leading the appeal effort, and the named parties filed an appeal with Ecology in Hanford, Washington on October 20, 2004. The Department of Justice has joined the appeal in support of the DOE, Fluor Hanford, and Duratek. Discovery has been completed and summary judgment motions were filed during the first week of February 2006.

In December 2003, we received a Request for Equitable Adjustment (“REA”) from a subcontractor, Performance Abatement Services, Inc. (“PAS”), that seeks a price adjustment of approximately $6,700 to an ongoing, fixed-price subcontract between PAS and Duratek Federal Services, Inc. for asbestos-abatement services. The subcontract at issue arises under a fixed-price contract that we are performing for Bechtel Jacobs Company, LLC (“Bechtel Jacobs”). PAS has claimed amounts based on an extrapolation of their total anticipated cost through completion of this project over a substantially extended performance period, not just based on costs incurred to date. It assumes ongoing project inefficiencies resulting from nine alleged causes.

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DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

We received REAs totaling $300 for two of the nine sub-claims during 2004 and some of the other claims have been settled or dropped. In 2005, there were no REAs received relating to the sub-claims. We are still evaluating the remaining REAs.  PAS continues to pursue REAs totaling $2,900, most of which we believe are unsupported. We are negotiating with both Bechtel Jacobs and PAS to resolve the outstanding REAs. We believe that we have valid defenses to most if not all of the claims, however, it is possible that some payment to PAS that is not passed on to Bechtel Jacobs may be required to resolve these claims.

In February of 2003, we filed multiple claims, including misappropriation of trade secrets, unfair trade practices, and patent infringement against AVANTech, Inc. in the Federal Court of South Carolina. AVANTech, Inc. then filed numerous counterclaims against us. All counterclaims brought against us by AVANTech, Inc. were dismissed by summary judgment. In October 2005, a South Carolina jury found against us on all of our claims. AVANTech, Inc has stated that they would petition the court for an award of attorneys’ fees in an amount that has not been determined. To date, no petition for attorneys’ fees has been made; however, we cannot provide any assurance that a claim for a material amount of attorneys’ fees will not be asserted. We intend to appeal this decision.

In addition, from time to time, we are a party to litigation or administrative proceedings relating to claims arising from our operations in the normal course of our business. Our management believes that the ultimate resolution of matters in litigation, administrative proceedings, or other matters, including those described above, currently pending against us is unlikely, either individually or in the aggregate, to have a material adverse effect on our results of operations or financial condition.

(21)Subsequent Events

On February 6, 2006, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with EnergySolutions, LLC (formerly known as Envirocare of Utah, LLC), a Utah limited liability company (“EnergySolutions”), and Dragon Merger Corporation, a Delaware corporation and a wholly owned subsidiary of EnergySolutions. Pursuant to the terms of the Merger Agreement, EnergySolutions will acquire all of our outstanding shares of Common Stock for an aggregate consideration of approximately $327 million in cash. Upon the effectiveness of this merger, each issued and outstanding share of our Common Stock will be converted into the right to receive $22.00 in cash, without interest, and each outstanding stock option, whether or not vested, will convert into the right to receive the excess, if any, of the $22.00 per share merger consideration over the per share exercise price of the option, less any tax withholding.

In addition, we have agreed, among other things and subject to certain exceptions as described in the Merger Agreement, (i) to conduct our business in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and consummation of this merger, (ii) not to engage in certain transactions during such period, (iii) to cause a stockholder meeting to be held to consider approval of this merger and the other transactions contemplated by the Merger Agreement, (iv) subject to certain limited exceptions to permit the board of directors to comply with their fiduciary duties, for our board of directors to recommend that the stockholders adopt the Merger Agreement and thereby approve this merger, and (v) subject to certain limited exceptions to permit the board of directors to comply with their fiduciary duties, not to solicit proposals relating to alternative business combination

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DURATEK, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2005, 2004, and 2003
(in thousands of dollars and shares, except per share dollars)

transactions, or to enter into discussions concerning, or to provide information in connection with, alternative business combination transactions.

Consummation of the merger is subject to a number of conditions, including stockholder approval, absence of any law or order prohibiting the consummation of this merger, expiration, or termination of the applicable Hart-Scott-Rodino Antitrust Improvements Act waiting period, and certain other customary conditions.

We expect to submit the Merger Agreement and the merger described above to stockholders for their consideration during the second quarter of 2006 and to close this merger promptly following receipt of stockholder and regulatory approval.

Pursuant to the terms of the Merger Agreement, EnergySolutions and Duratek each have certain termination rights. Upon termination of the Merger Agreement under specified circumstances, we may be required to pay EnergySolutions a termination fee of approximately $8.6 million. In addition, if this merger cannot be closed or is delayed for longer than twelve months due to certain regulatory or legal restrictions, EnergySolutions has agreed to pay to us a “reverse break-up fee” of $5 million in cash and to provide a prepayment credit of $12 million to one of our subsidiaries for waste disposal services performed by EnergySolutions under an existing commercial contract between the parties.

(22) Quarterly Financial Data (Unaudited)

	Year Ended December 31, 2005
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
Revenues	$	70,612	$	74,958	$	67,113	$	68,529	$	281,212
Gross profit	17,732		18,102		14,407		19,672		69,913
Income from operations	9,319		10,218		6,002		9,858		35,397
Net income	4,860		5,294		2,820		5,449		18,423
Income per common share:
Basic	$	0.33	$	0.36	$	0.19	$	0.37	$	1.25
Diluted	$	0.32	$	0.35	$	0.18	$	0.36	$	1.21

	Year Ended December 31, 2004
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
Revenues	$	64,182	$	73,555	$	77,403	$	71,073	$	286,213
Gross profit	15,932		17,707		24,842		16,417		74,898
Income from operations	7,285		10,315		16,836		6,156		40,592
Net income	3,085		5,638		9,318		3,005		21,046
Net income attributable to common stockholders	3,073		5,598		9,310		3,002		20,983
Income per common share:
Basic	$	0.22	$	0.40	$	0.65	$	0.21	$	1.48
Diluted	$	0.21	$	0.38	$	0.63	$	0.20	$	1.42

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

None

Item 9A.Controls and Procedures

a) Evaluation of Disclosure Controls and Procedures.

The Chief Executive Officer and the Chief Financial Officer of Duratek, Inc. have evaluated the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act, and have concluded as of the end of the period covered by this report that the disclosure controls and procedures were effective.

b) Changes in Internal Controls Over Financial Reporting.

There have been no significant changes in our internal controls over financial reporting in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during Duratek’s last fiscal quarter that materially affected or is reasonably likely to materially affect the internal controls over financial reporting.

c) Duratek’s Control Environment

The Company’s management is responsible for the preparation and integrity of the consolidated financial statements appearing in our Form 10-K and Annual Report. The consolidated financial statements were prepared in conformity with United States generally accepted accounting principles and include amounts based on management’s estimates and judgments.

The Company’s management is also responsible for establishing and maintaining adequate internal controls over financial reporting. We maintain a system of internal controls that is designed to provide reasonable assurance as to the fair and reliable preparation and presentation of the consolidated financial statements, as well as to safeguard assets from unauthorized use or disposition.

Our control environment is the foundation for our system of internal controls over financial reporting and is embodied in our Code of Conduct. It sets the tone of our organization and includes factors such as integrity and ethical values. Our internal controls over financial reporting are supported by formal policies and procedures that are reviewed, modified and improved as changes occur in business conditions and operations.

The Audit Committee, composed of directors who are not members of management, reviews the adequacy of the Company’s policies, procedures and controls, the scope of auditing and other services performed by the independent auditors, and the scope of the internal audit function. The Committee holds meeting with the Company’s independent auditors, with and without management present, to discuss the findings of their audits, the overall quality of the Company’s financial reporting and their evaluation of the Company’s internal controls.

d) Management’s Annual Report on Internal Control Over Financial Reporting.

The Company’s management conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Although there are inherent limitations in the

85

effectiveness of any system of internal controls over financial reporting, based on our evaluation, we have concluded that our internal controls over financial reporting were effective as of December 31, 2005.

Ernst & Young LLP, an independent registered public accounting firm, has issued an attestation report on management’s assessment of internal control over financial reporting and which is included below.

e) Auditor’s Report on Internal Control over Financial Reporting.

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

Board of Directors and Shareholders of Duratek, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Duratek, Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Duratek’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. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of 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, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, 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, management’s assessment that Duratek, Inc. maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Duratek maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

86

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2005 consolidated financial statements of Duratek, Inc. and subsidiaries and our report dated February 17, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia
February 17, 2006

Item 9B.Other Information

None

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Part III

Item 10.Directors and Executive Officers of the Registrant

Information regarding our Executive Officers is set forth in Part I of this annual report under the caption Item 1-“Business-Executive Officers”.

Information regarding our Board of Directors is incorporated by reference from the text and tables under “Election of Directors” in our definitive proxy statement to be filed with the Securities and Exhange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to our Annual Meeting of Shareholders to be held in 2006 (the “2006 Proxy Statement”).

As part of our system of corporate governance, we have adopted a code of ethics that is specifically applicable to our chief executive officer and president, chief financial officer and controller. This code of ethics is available on our website at www.duratekinc.com under the Investor Relations / Corporate Governance Section.

Item 11.Executive Compensation

The text and tables under “Executive Officer Compensation” in our 2006 Proxy Statement are incorporated herein by reference.

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

The stock ownership information contained in the text and tables under “Security Ownership of Certain Beneficial Owners and Management” in our 2006 Proxy Statement is incorporated herein by reference.

On February 6, 2006, Duratek executed a definitive merger agreement providing for the acquisition of Duratek Inc. by EnergySolutions. EnergySolutions will acquire in the proposed merger all of the outstanding shares of Duratek Inc. for $22 per share in cash.

The text and table under “Equity Compensation Plan Information” in our 2006 Proxy Statement are incorporated herein by reference.

Item 13.Certain Relationships and Related Transactions

The text under “Executive Officer Compensation” and “Certain Transactions” in our 2006 Proxy Statement is incorporated herein by reference.

Item 14.Principal Accountant Fees and Services

The text and table under the proposal with respect to the selection of Ernst & Young LLP as Auditor in our 2006 Proxy Statement is incorporated herein by reference.

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Part IV

Item 15.Exhibits and Financial Statement Schedules

(a) (1)	The following consolidated financial statements of Duratek, Inc. and its subsidiaries are included in Item 8:
	Reports of Independent Registered Public Accounting Firms
	Consolidated Balance Sheets at December 31, 2005 and December 31, 2004
	Consolidated Statements of Operations for the years ended December 31, 2005, 2004, and 2003
	Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2005, 2004, and 2003
	Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004, and 2003
	Notes to Consolidated Financial Statements
(a) (2)	The following is a list of all financial statement schedules for the years ended December 31, 2005, 2004, and 2003 filed as part of this Report:
	Schedule II—Valuation and Qualifying Accounts
Schedules other than those listed above have been omitted because they are not required or are not applicable, or the required information has been included in the Consolidated Financial Statements or the Notes thereto.
(a) (3)	See accompanying Index to Exhibits
(b)	Exhibits
	See accompanying Index to Exhibits.
(c)	Financial Statement schedules and other Financial Statements.
	Not Applicable

89

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.

	DURATEK, INC.
Dated: February 27, 2006	By: /s/ ROBERT E. PRINCE
	Robert E. Prince
	President and Chief Executive Officer

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 capacity and on the dates indicated.

	Principal Executive Officer:
February 27, 2006	By: /s/ ROBERT E. PRINCE
	Robert E. Prince
	President and Chief Executive Officer
	Principal Financial Officer:
February 27, 2006	/s/ ROBERT F. SHAWVER
	Robert F. Shawver
	Executive Vice President and Chief Financial Officer
	Principal Accounting Officer:
February 27, 2006	/s/ WILLIAM M. BAMBARGER, JR.
	William M. Bambarger, Jr.
	Vice President, Corporate Controller and Chief Accounting Officer
	The Board of Directors:
February 27, 2006	/s/ ADMIRAL BRUCE DEMARS
	Admiral Bruce DeMars
February 27, 2006	/s/ ADMIRAL JAMES D. WATKINS
	Admiral James D. Watkins
February 27, 2006	/s/ GEORGE V. MCGOWAN
	George V. McGowan
February 27, 2006	/s/ MICHAEL J. BAYER
	Michael J. Bayer
February 27, 2006	/s/ ALAN J. FOHRER
	Alan J. Fohrer

90

DURATEK, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 2005, 2004, and 2003
Schedule II
(in thousands)

	Balance at beginning of year			Charges to costs and expenses				Deductions (a)				Balance at end of year
Allowance for doubtful accounts:
Year ended December 31, 2005		$	158		$	(118	)		$	(22	)		$	18
Year ended December 31, 2004		842			92				(776		)		158
Year ended December 31, 2003		2,694			46				(1,898		)		842

(a)Deductions in 2005 and 2004 represent the write-off of specifically identified accounts and the collection of a previously reserved customer account.  Deductions in 2003 represent the collection of a previously reserved customer account, the write-off of amounts relating to a company that dissolved, and write-off of specifically identified accounts.

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EXHIBITS INDEX

Exhibit No.
2.1	Agreement and Plan of Merger dated as of February 6, 2006, by and amongEnergySolutions LLC, Dragon Merger Corporation, and Duratek, Inc. Incorporated herein by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on February 7, 2006. (File No. 0-14292)
2.2	Amendment to Disposal Agreement dated as of February 6, 2006, between Duratek Services, Inc andEnergySolutions, LLC. Incorporated herein by reference to Exhibit 2.2 of the Registrant’s Form 8-K filed on February 7, 2006. (File No. 0-14292)
3.1	Amended and Restated Certificate of Incorporation of the Registrant. Incorporated herein by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. (File No. 0-14292)
3.2	By-Laws of the Registrant. Incorporated herein by reference to Exhibit 3.3 of the Registrant’s Form S-1 Registration Statement No. 33-2062. (File No. 0-14292)
4.1	Certificate of Designations of the 8% Cumulative Convertible Redeemable Preferred Stock dated January 23, 1995. Incorporated herein by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on February 1, 1995. (File No. 0-14292)
4.2	Certificate of Amendment of the Certificate of Incorporation of Duratek, Inc. dated May 15, 2003. Incorporated herein by reference to Exhibit 4.5 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2003. (File No. 0-14292)
4.3	Rights Agreement, dated as of December 16, 2003, between Duratek, Inc. and Computershare Investor Services, LLC, as Rights Agent (which includes the Form of Certificate of Designation of the Series B Junior Participating Preferred Stock as Exhibit A, the Summary of Rights to Purchase Series B Junior Participating Preferred Stock as Exhibit B and the Form of Rights Certificate as Exhibit C. Incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K on December 17, 2003. (File No. 0-14292)
4.4	Amendment No. 1 to Rights Agreement dated as of February 6, 2006, between Duratek, Inc. and Computershare Investor Services, LLC. Incorporated herein by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on February 7, 2006. (File No. 0-14292)
10.1	Share Repurchase Agreement, dated as of December 16, 2003, by and between Duratek, Inc., and the several holders of the Company’s 8% Cumulative Convertible Redeemable Preferred Stock named in the Schedule I thereto. Incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K on December 17, 2003. (File No. 0-14292)
10.2	Stockholders’ Agreement, dated as of December 16, 2003, by and between Duratek, Inc. and the several holders of the Company’s 8% Cumulative Convertible Redeemable Preferred Stock named in the Schedule I thereto. Incorporated herein by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K on December 17, 2003. (File No. 0-14292)
10.3	1984 Duratek Corporation Stock Option Plan, as amended. Incorporated herein by reference to Exhibit 10.9 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990. (File No. 0-14292)

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10.4	License Agreement dated as of August 17, 1992 between GTS Duratek, Inc. and Dr. Theodore Aaron Litovitz and Dr. Pedro Buarque de Macedo Incorporated herein by reference to Exhibit 10.9 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992. (File No. 0-14292)
10.5	Purchase Agreement by and among Chemical Waste Management Inc., Rust International, Inc., CNS Holdings, Inc. and GTS Duratek, Inc. dated March 29, 2000. Incorporated herein by reference to Exhibit 99.2 of the Registrant’s Current Report on Form 8-K filed on June 22, 2000. (File No. 0-14292)
10.6	Amendment No. 1 to Purchase Agreement and Disclosure Letter by and among Chemical Waste Management Inc., Rust International, Inc., CNS Holdings, Inc. and GTS Duratek, Inc. dated June 8, 2000. Incorporated herein by reference to Exhibit 99.3 of the Registrant’s Current Report on Form 8-K filed on June 22, 2000. (File No. 0-14292)
10.7	1999 GTS Duratek, Inc. Stock Option and Incentive Plan. Incorporated herein by reference to Exhibit A of the Registrant’s 2000 Proxy Statement. (File No. 0-14292)
10.8	Amended and Restated Executive Employment Agreement dated as of February 6, 2006, between Duratek, Inc. and Robert E. Prince. Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on February 10, 2006. (File No. 0-14292)
10.9	Amended and Restated Executive Employment Agreement dated as of February 6, 2006, between Duratek, Inc. and Robert F. Shawver. Incorporated herein by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed on February 10, 2006. (File No. 0-14292)
10.10	Executive Employment Agreement dated June 1, 2002 by and between Duratek, Inc. and C. Paul Deltete. Incorporated herein by reference to Exhibit 10.17 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. (File No. 0-14292)
10.11	Amendment to Employment Agreement dated February 6, 2006 between Duratek, Inc. and C. Paul Deltete. Filed herewith.
10.12	Executive Employment Agreement dated June 1, 2002 by and between Duratek, Inc. and Regan E. Voit. Incorporated herein by reference to Exhibit 10.18 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. (File No. 0-14292)
10.13	Amendment to Employment Agreement dated February 6, 2006 between Duratek, Inc. and Regan E. Voit. Filed herewith.
10.14	Employment Agreement dated June 8, 2000 by and between Waste Management Federal Services, Inc. and Thomas E. Dabrowski. Incorporated herein by reference to Exhibit 10.19 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. (File No. 0-14292)
10.15	Amendment to Employment Agreement dated June 1, 2002 by and between Duratek Federal Services, Inc. and Thomas E. Dabrowski. Incorporated herein by reference to Exhibit 10.20 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. (File No. 0-14292)
10.16	Executive Employment Agreement dated June 1, 2002 by and between Duratek, Inc. and Michael F. Johnson. Incorporated herein by reference to Exhibit 10.21 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. (File No. 0-14292)

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10.17	Amendment to Employment Agreement dated February 6, 2006 between Duratek, Inc. and Michael F. Johnson. Filed herewith.
10.18	Executive Employment Agreement dated November 1, 2002 by and between Duratek, Inc. and William R. Van Dyke. Incorporated herein by reference to Exhibit 10.18 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002. (File No. 0-14292)
10.19	Amendment to Employment Agreement dated February 6, 2006 between Duratek, Inc. and William R. Van Dyke. Filed herewith.
10.20	Duratek Inc. 2002 Executive Compensation Plan. Incorporated herein by reference to Exhibit 10.19 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002. (File No. 0-14292)
10.21	Duratek, Inc. Deferred Compensation Plan. Incorporated herein by reference to Exhibit 10.18 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2003. (File No. 0-14292)
10.22	Credit Agreement, dated as of December 16, 2003, among Duratek, Inc., various lenders and Credit Lyonnais New York Branch, as Administrative Agent, Book Manager and Lead Arranger. Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K on December 17, 2003. (File No. 0-14292)
10.23	Security Agreement, dated as of December 16, 2003, among Duratek, Inc., certain subsidiaries thereof and Credit Lyonnais New York Branch, as Collateral Agent. Incorporated herein by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K on December 17, 2003. (File No. 0-14292)
10.24	Form of Stock Option Award Agreement under Duratek, Inc.’s 1999 Stock Option and Incentive Plan. Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K on February 22, 2005. (File No. 0-14292)
10.25	Form of Stock Option Award Agreement for certain executive officers under Duratek Inc.’s 1999 Stock Option and Incentive Plan. Incorporated herein by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K on February 22, 2005. (File No. 0-14292)
10.26	Amendment to Duratek, Inc. Deferred Compensation Plan dated May 15, 2003. Incorporated herein by reference to Exhibit 10.23 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004. (File No. 0-14292)
10.27	Executive Employment Agreement dated as of February 6, 2006, between Duratek, Inc. and Joseph G. Henry. Incorporated herein by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K on February 10, 2006. (File No. 0-14292)
10.28	Letter Agreement dated as of February 6, 2006, between Duratek, Inc. and Joseph G. Henry. Incorporated herein by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K on February 10, 2006. (File No. 0-14292)
10.29	Severance Agreement dated as of February 6, 2006, between Duratek, Inc. and William M. Bambarger, Jr. Incorporated herein by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K on February 10, 2006. (File No. 0-14292)

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10.30	Severance Agreement dated as of February 6, 2006, between Duratek, Inc. and Craig T. Bartlett. Incorporated herein by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K on February 10, 2006. (File No. 0-14292)
10.31	Severance Agreement dated as of February 6, 2006, between Duratek, Inc. and Diane L. Leviski. Incorporated herein by reference to Exhibit 10.7 of the Registrant’s Current Report on Form 8-K on February 10, 2006. (File No. 0-14292)
10.32	Executive Employment Agreement dated June 1, 2002 by and between Duratek, Inc. and Willis W. Bixby. Filed herewith.
10.33	Amendment to Employment Agreement dated February 6, 2006 between Duratek, Inc. and Willis W. Bixby. Filed herewith.
21.1	Subsidiaries of the Registrant. Filed herewith.
23.1	Consent of Ernst & Young LLP. Filed herewith.
23.2	Consent of KPMG LLP. Filed herewith.
31.01	Certification of Chief Executive Officer Pursuant to Rule 13a-14a/15d-14a. Filed herewith.
31.02	Certification of Chief Financial Officer Pursuant to Rule 13a-14a/15d-14a. Filed herewith.
32.01	Written Statement of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
32.02	Written Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

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EX-10.11

Exhibit 10.11

AMENDMENT TO EMPLOYMENT AGREEMENT

                THIS AMENDMENT TO THE EMPLOYMENT AGREEMENT is made effective as of February 6, 2006, by and between Duratek, Inc., a Delaware corporation (the “Company”) and the undersigned (“Employee”).

Recitals:

A.            Employee and the Company entered into an employment agreement effective as of June 3, 2002 (the “Employment Agreement”); and

B.            Employee and the Company wish to amend the terms of the Employment Agreement in this Agreement.

Agreement:

NOW, THEREFORE, in consideration of the agreements contained herein and of such other good and valuable consideration, the sufficiency of which Employee acknowledges, the Company and the Employee, intending to be legally bound, hereby agree that the Employment Agreement is hereby amended in the following respects:

1.             A new sentence is added to the end of section 8(e) to read as follows:

                                “Notwithstanding anything in this Section 8(e) to the contrary, this Section 8(e) shall not apply to a termination of the Employee’s employment that occurs within twelve (12) months after a Change of Control.”

2.             Amendment and Waiver.  The provisions of this Amendment may be amended and waived only with the prior written consent of the parties hereto.

3.             Complete Agreement.  The Employment Agreement, as amended by this Amendment, contains the entire agreement and understanding between the Company and Employee with respect to Employee’s employment and supersedes all employment agreements, whether written or oral, relating to Employee’s employment with the Company.

4.             Effect of the Amendment on Employment Relationship.  Nothing in this Amendment shall be construed as conferring upon the Employee any right to continue in the employ of (or otherwise provide services to) the Company, or to limit in any respect the right of the Company to terminate the Employee’s employment or other relationship with the Company at any time.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above.

		DURATEK, INC.
By:			/s/ Robert E. Prince
		Robert E. Prince
		President/CEO
Agreed and Accepted:
By:	/s/ C. Paul Deltete
NAME: C. Paul Deltete

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EX-10.13

Exhibit 10.13

AMENDMENT TO EMPLOYMENT AGREEMENT

                THIS AMENDMENT TO THE EMPLOYMENT AGREEMENT is made effective as of February 6, 2006, by and between Duratek, Inc., a Delaware corporation (the “Company”) and the undersigned (“Employee”).

Recitals:

A.            Employee and the Company entered into an employment agreement effective as of June 3, 2002 (the “Employment Agreement”); and

B.            Employee and the Company wish to amend the terms of the Employment Agreement in this Agreement.

Agreement:

NOW, THEREFORE, in consideration of the agreements contained herein and of such other good and valuable consideration, the sufficiency of which Employee acknowledges, the Company and the Employee, intending to be legally bound, hereby agree that the Employment Agreement is hereby amended in the following respects:

1.             The first sentence of section 2 entitled “Duties” is hereby amended and restated in its entirety to read as follows:

                                “During the Term, Employee shall serve as Senior Vice President (hereinafter, “Senior Vice President”) of the Company and shall report to, and have those duties, responsibilities, and authority assigned to him from time to time by, the Chief Executive Officer of the Company (hereinafter, the “CEO”) or the CEO’s designee; provided, further, that all determinations that may be made by the CEO under this Agreement may also be made by the CEO’s designee.”

2.             A new sentence is added to the end of section 8(e) to read as follows:

                                “Notwithstanding anything in this Section 8(e) to the contrary, this Section 8(e) shall not apply to a termination of the Employee’s employment that occurs within twelve (12) months after a Change of Control.”

3.             Amendment and Waiver.  The provisions of this Amendment may be amended and waived only with the prior written consent of the parties hereto.

4.             Complete Agreement.  The Employment Agreement, as amended by this Amendment, contains the entire agreement and understanding between the Company and Employee with respect to Employee’s employment and supersedes all employment agreements, whether written or oral, relating to Employee’s employment with the Company.

5.             Effect of the Amendment on Employment Relationship.  Nothing in this Amendment shall be construed as conferring upon the Employee any right to continue in the employ of (or otherwise provide services to) the Company, or to limit in any respect the right of the Company to terminate the Employee’s employment or other relationship with the Company at any time.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above.

		DURATEK, INC.
By:			/s/ Robert E. Prince
		Robert E. Prince
		President/CEO
Agreed and Accepted:
By:	/s/ Regan E. Voit
NAME: Regan E. Voit

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EX-10.17

Exhibit 10.17

AMENDMENT TO EMPLOYMENT AGREEMENT

                THIS AMENDMENT TO THE EMPLOYMENT AGREEMENT is made effective as of February 6, 2006, by and between Duratek, Inc., a Delaware corporation (the “Company”) and the undersigned (“Employee”).

Recitals:

A.            Employee and the Company entered into an employment agreement effective as of June 3, 2002 (the “Employment Agreement”); and

B.            Employee and the Company wish to amend the terms of the Employment Agreement in this Agreement.

Agreement:

NOW, THEREFORE, in consideration of the agreements contained herein and of such other good and valuable consideration, the sufficiency of which Employee acknowledges, the Company and the Employee, intending to be legally bound, hereby agree that the Employment Agreement is hereby amended in the following respects:

1.             The first sentence of section 2 entitled “Duties” is hereby amended and restated in its entirety to read as follows:

                                “During the Term, Employee shall serve as Senior Vice President (hereinafter, “Senior Vice President”) of the Company and shall report to, and have those duties, responsibilities, and authority assigned to him from time to time by, the Chief Executive Officer of the Company (hereinafter, the “CEO”) or the CEO’s designee; provided, further, that all determinations that may be made by the CEO under this Agreement may also be made by the CEO’s designee.”

2.             A new sentence is added to the end of section 8(e) to read as follows:

                                “Notwithstanding anything in this Section 8(e) to the contrary, this Section 8(e) shall not apply to a termination of the Employee’s employment that occurs within twelve (12) months after a Change of Control.”

3.             Amendment and Waiver.  The provisions of this Amendment may be amended and waived only with the prior written consent of the parties hereto.

4.             Complete Agreement.  The Employment Agreement, as amended by this Amendment, contains the entire agreement and understanding between the Company and Employee with respect to Employee’s employment and supersedes all employment agreements, whether written or oral, relating to Employee’s employment with the Company.

5.             Effect of the Amendment on Employment Relationship.  Nothing in this Amendment shall be construed as conferring upon the Employee any right to continue in the employ of (or otherwise provide services to) the Company, or to limit in any respect the right of the Company to terminate the Employee’s employment or other relationship with the Company at any time.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above.

		DURATEK, INC.
By:			/s/ Robert E. Prince
		Robert E. Prince
		President/CEO
Agreed and Accepted:
By:	/s/ Michael F. Johnson
NAME: Michael F. Johnson

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EX-10.19

Exhibit 10.19

AMENDMENT TO EMPLOYMENT AGREEMENT

                THIS AMENDMENT TO THE EMPLOYMENT AGREEMENT is made effective as of February 6, 2006, by and between Duratek, Inc., a Delaware corporation (the “Company”) and the undersigned (“Employee”).

Recitals:

A.            Employee and the Company entered into an employment agreement effective as of November 1, 2002 (the “Employment Agreement”); and

B.            Employee and the Company wish to amend the terms of the Employment Agreement in this Agreement.

Agreement:

NOW, THEREFORE, in consideration of the agreements contained herein and of such other good and valuable consideration, the sufficiency of which Employee acknowledges, the Company and the Employee, intending to be legally bound, hereby agree that the Employment Agreement is hereby amended in the following respects:

1.             Section 2 entitled “Duties” is hereby amended and restated in its entirety to read as follows:

                                “During the Term, Employee shall serve as Senior Vice President (hereinafter, “Senior Vice President”) of the Company and President, Duratek Federal Services and shall report to, and have those duties, responsibilities, and authority assigned to him from time to time by, the Chief Executive Officer of the Company (hereinafter, the “CEO”) or the CEO’s designee; provided, further, that all determinations that may be made by the CEO under this Agreement may also be made by the CEO’s designee.  Employee shall have the powers and authority consistent with such responsibilities, duties, and authority.  Employee shall devote substantially all his working time, attention, knowledge, and skills faithfully, diligently, and to the best of his ability, in furtherance of the business and activities of Company.  During the Term, Employee shall refrain from engaging in any activity which is or may be contrary to the welfare, interests, or benefits of Company and from engaging in any activity which is or may be competitive with the activities of Company.  The principal place of performance by Employee of his duties hereunder shall be Company’s principal offices in Columbia, Maryland or such other location as agreed to by Employee and Company, although Employee may be required to travel outside of the area where Company’s principal executive offices are located in connection with the business of Company, to an extent substantially consistent with Employee’s present business travel obligations. Nothing in this

Section shall preclude Employee from engaging in charitable, professional, and community activities, in each case as long as such activities do not interfere, conflict, or give the appearance of conflicting in any way with Employee’s performance under this Agreement.”

2.             A new sentence is added to the end of section 8(e) to read as follows:

                                “Notwithstanding anything in this Section 8(e) to the contrary, this Section 8(e) shall not apply to a termination of the Employee’s employment that occurs within twelve (12) months after a Change of Control.”

3.             Amendment and Waiver.  The provisions of this Amendment may be amended and waived only with the prior written consent of the parties hereto.

4.             Complete Agreement.  The Employment Agreement, as amended by this Amendment, contains the entire agreement and understanding between the Company and Employee with respect to Employee’s employment and supersedes all employment agreements, whether written or oral, relating to Employee’s employment with the Company.

5.             Effect of the Amendment on Employment Relationship.  Nothing in this Amendment shall be construed as conferring upon the Employee any right to continue in the employ of (or otherwise provide services to) the Company, or to limit in any respect the right of the Company to terminate the Employee’s employment or other relationship with the Company at any time.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above.

		DURATEK, INC.
By:			/s/ Robert E. Prince
		Robert E. Prince
		President/CEO
Agreed and Accepted:
By:	/s/ William R. Van Dyke
NAME: William R. Van Dyke

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EX-10.32

Exhibit 10.32

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (this “Agreement”) is made effective June 6, 2002, by and between Duratek, Inc., a Delaware corporation having its principal place of business at 10100 Old Columbia Road, Columbia, Maryland 21046 (hereinafter, “Company”), and Willis W. Bixby (hereinafter, “Employee”).

RECITALS

WHEREFORE, Company desires to employ Employee as Vice President, subject to the terms and provisions of this Agreement, and Employee desires such employment with Company, subject to the terms and provisions of this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:

1.             Term.  Unless earlier terminated as provided herein, Company hereby agrees to employ Employee and Employee hereby accepts such employment for a two year period commencing June 6, 2002 and ending on June 6, 2004, upon the terms and conditions hereinafter set forth.  Commencing on June 6, 2004 and each June 6 thereafter, the Term shall automatically be extended for one additional year, unless this Agreement has been previously terminated pursuant to Section 8 of this Agreement or, not later than the December 1st immediately preceding such June 6 anniversary, Company or Employee shall have given written notice to the other that it does not wish to extend this Agreement.  For the purposes of this Agreement, the term as defined in this Section, including any extension thereof, shall be the “Term.”

2.             Duties.  During the Term, Employee shall serve as Vice President (hereinafter, “Vice President”) of Company and shall report to, and have those duties, responsibilities, and authority assigned him from time to time by, the Chief Executive Officer of Company (hereinafter, the “CEO”).  Employee shall have the powers and authority consistent with such responsibilities, duties, and authority.  Employee shall devote substantially all his working time, attention, knowledge, and skills faithfully, diligently, and to the best of his ability, in furtherance of the business and activities of Company.  During the Term, Employee shall refrain from engaging in any activity which is or may be contrary to the welfare, interests, or benefits of Company and from engaging in any activity which is or may be competitive with the activities of Company.  The principal place of performance by Employee of his duties hereunder shall be Company’s principal executive offices in Columbia, Maryland or such other location as agreed to by Employee and Company, although Employee may be required to travel outside of the area where Company’s principal executive offices are located in connection with the business of Company, to an extent substantially consistent with Employee’s present business travel

obligations.  Nothing in this Section shall preclude Employee from engaging in charitable, professional, and community activities, in each case as long as such activities do not interfere, conflict, or give the appearance of conflicting in any way with Employee’s performance under this Agreement.

3.             Salary.  In consideration for the services to be rendered by Employee hereunder and for all rights and covenants granted herein, Company shall pay to Employee a gross salary in the amount of $145,600.00 per year (hereinafter, the “Salary”) commencing July 8, 2002.  This Salary shall be paid in equal monthly or bi-weekly installments, in accordance with the customary payroll practices of Company and subject to such deductions as are required by law and applicable regulations.  This salary may be increased from time to time at the discretion of the Compensation Committee of the Board of Directors of the Company.  From the date hereof until July 8, 2002, Employee shall continue to be paid at this current salary.

4.             Cash Bonus.  Employee will continue to be eligible to receive cash bonuses pursuant to the Company’s Key Leader Compensation Plan (the “Key Leader Compensation Plan”); provided, however, that Company may not reduce Employee’s target bonus amount (represented as a percentage of base salary) from that in effect as of the date hereof or as may be increased from time to time.  In the event that Company amends or terminates the Key Leader Compensation Plan, Company shall provide Employee with an annual cash bonus program that will provide him with an opportunity to realize an annual cash bonus which is not less than the target bonus amount (represented as a percentage of base salary) that exists under the Key Leader Compensation Plan at the time it is amended or terminated, which opportunity shall be reasonably comparable to Employee’s opportunity under the Key Leader Compensation Plan as of the date hereof.

5.             Equity Incentive Plan.  Employee will continue to be eligible to receive equity incentives pursuant to the Executive Compensation Plan.  All awards pursuant to the Executive Compensation Plan shall be subject to the terms and provisions of the 1999 Stock Option and Incentive Plan, or any similar plan, and any award agreement with respect to such award.  The vesting, exercisability and termination provisions regarding such awards shall be subject to the terms and provisions of the 1999 Stock Option and Incentive Plan, or other similar plan pursuant to which the award was made, and the corresponding award agreement.

6.             Employee Benefits.   Employee shall be entitled to participate in or receive benefits under any employee benefit plan, arrangement or perquisite made available by Company to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans, arrangements and perquisites.  Nothing paid to Employee under any plan, arrangement or perquisite presently in effect or made available in the future shall be deemed to be in lieu of the salary and bonus payable to Employee pursuant to Sections 3, 4, and 5 hereof.  Any payments or benefits payable to Employee hereunder in respect of any year during which Employee is employed by Company for less than the entire such year shall, unless otherwise provided in the applicable plan or arrangement be prorated in accordance with the number of days in such year during which he is so employed.

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7.             Vacations.  Employee shall be entitled to three weeks’ vacation (personal time benefit) in each calendar year, or such greater amount of vacation as may be determined in accordance with Company’s vacation policy as in effect on the date hereof.  Employee shall also be entitled to all paid holidays and personal days given by Company to its executives.

8.             Termination.  Notwithstanding the provisions of Section 1 hereof, Employee’s employment with Company may be earlier terminated by either party at any time, subject to the following restrictions (except that termination due to death or disability of Employee shall be governed by Section 9 below):

                (a) at any time during the Term, Company may terminate this Agreement for Cause upon written notice to Employee.  For purposes hereof, “Cause” shall be defined as: (i) Employee’s willful material misconduct or neglect in the performance of his duties as determined by the CEO; (ii) Employee’s conviction by a court of competent jurisdiction of any felony, offense punishable by imprisonment in a state or federal penitentiary, or any offense, civil or criminal, involving fraud, moral turpitude or immoral conduct; (iii) Employee’s use of illegal drugs or abusive use of prescription drugs as determined by a licensed physician or physicians designated by Company to examine Employee; or (iv) Employee’s willful material breach of this Agreement as determined by the CEO, which breach is not cured within thirty (30) days after Employee’s receipt of written notice from Company specifying such breach and demanding a cure thereof;

                (b) at any time during the Term and upon six (6) months prior written notice to Company, Employee may terminate this Agreement for “Good Reason.”  For the purposes of this Agreement, “Good Reason” shall mean (i) Company’s failure to perform or observe any of the material terms or provisions of this Agreement and continued failure of Company to cure such default within thirty (30) days after written demand for performance has been given to Company by Employee, which demand shall describe specifically the nature of such alleged failure to perform or observe such material terms or provisions, (ii) a material reduction in the scope of Employee’s duties, authority, responsibilities or title as in effect immediately prior to such reduction; (iii) Company’s assignment to Employee of duties which are inconsistent with Employee’s position as Vice President; (iv) a reduction by Company in Employee’s base salary or in any other benefits made available to other senior executives of Company; or (v) Employee’s relocation to a facility or a location more than fifty (50) miles from the then present location without Employee’s prior written consent, and in each case the failure of Company to cure the same within thirty (30) days after receipt of written notice thereof from Employee;

                (c)  at any time during the Term and upon six (6) months prior written notice to Employee, Company may terminate this Agreement for any reason other than Cause, and at any time during the Term and upon six (6) months prior written notice to Company, Employee may terminate this Agreement for any reason other than Good Reason;

                (d) upon termination of this Agreement by Company for Cause or by Employee for any reason other than Good Reason, Employee shall be entitled only to his Salary up to the date of the termination of this Agreement, and Company shall have no

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further obligation or duties to Employee, and Employee shall have no further obligation or duties to Company except as provided in Sections 10, 11, and 12;

                                                (e) upon termination of this Agreement by Company for any reason other than Cause or by Employee for Good Reason, Company shall continue to pay Employee’s Salary and provide Employee with benefits comparable to those Employee received pursuant to Sections 6 and 7, immediately prior to the effective date of termination through the twelfth full month following the effective date of termination (hereinafter, the “Severance Period”), and Employee shall have no further obligations or duties to Company, except as provided in Sections 10, 11, and 12.  Company shall have no further obligation or duties to Employee other than as set forth in this Section 8(e).  Employee’s entitlement to amounts owing pursuant to this Agreement shall not be dependent upon Employee’s efforts to “mitigate” loss or to find other employment, nor shall the amounts owing pursuant to this Agreement be subject to offset by compensation earned from a subsequent employer.

                                9.             Disability and Death.  (a) If during the Term Employee shall become unable to perform his duties or carry out his responsibilities by reason of illness or injury, Company shall continue to pay or provide to Employee Salary continuation under the terms of the disability insurance coverage for officers of Company.  If, however, the disability continues for an uninterrupted period exceeding six calendar months, Company, at its election, may terminate this Agreement with no further obligations by Company.  Employee shall be entitled to any benefit for which Employee qualifies under any long-term disability plan of Company.  The inability of Employee to perform his duties and carry out his responsibility because of illness or injury shall be determined by a qualified physician or physicians designated by Company to examine Employee. To the extent physically and mentally capable, Employee shall furnish information and assistance to Company and shall be available to Company to undertake reasonable assignments consistent with the dignity, importance, and scope of Employee’s prior position and current physical and mental health.

(b) If during the Term Employee shall die, this Agreement shall terminate automatically.  In this event, Company shall pay to Employee’s estate or to his beneficiaries, Employee’s Salary up to the date of death.  Company shall have no further obligation or duties to Employee’s estate or to his beneficiaries.

10.          Restrictive Covenants.

(a)           Confidentiality.  During the Term and continuing subsequent to any termination or expiration of this Agreement, Employee shall maintain Information, as defined in Section 10(a)(i) below, as secret and confidential unless Employee is required to disclose Information pursuant to the terms of a valid and effective order issued by a court of competent jurisdiction or a governmental authority.  Employee shall use Information solely for the purpose of carrying out those duties assigned him as an employee of Company and not otherwise.  The disclosure of Information to Employee shall not be construed as granting to Employee any license under any copyright, trade secret or any right of ownership or right to use the information whatsoever.

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                (i)            For the purposes of this Section 10, “Information” shall mean information related to Company’s business.  Such information shall include, but shall not be limited to: (w) any financial, business, planning, operations, services, potential services, products, potential products, technical information, intellectual property, trade secrets and/or know-how, formulas, production, purchasing, marketing, sales, personnel, customer, supplier, or other information of Company; (x) any papers, data, records, processes, methods, techniques, systems, models, samples, devices, equipment, compilations, invoices, customer lists, or documents of Company; (y) any confidential information or trade secrets of any third party provided to Company in confidence or subject to other use or disclosure restrictions or limitations; and (z) any other information, written, oral or electronic, whether existing now or at some time in the future, whether pertaining to current or future developments, and whether accessed prior to Employee’s tenure with Company or to be accessed during his future employment or association with Company, which pertains to Company’s affairs or interests or with whom or how Company does business.  Company acknowledges and agrees that Confidential Information shall not include information which is or becomes publicly available other than as a result of a disclosure by Employee.

                (ii)           Employee shall promptly notify Company if he has reason to believe that the unauthorized use, possession, or disclosure of any Information has occurred or may occur.

                (iii)          All physical items containing Information, including, without limitation, the business plan, know-how, collection methods and procedures, advertising techniques, marketing plans and methods, sales techniques, documentation, contracts, reports, letters, notes, any computer media, customer lists and all other information and materials of Company’s business and operations, shall remain the exclusive and confidential property of Company and shall be returned, along with any copies or notes of Employee made thereof or therefrom, to Company when Employee ceases his employment with Company.

                (b)           Non-Competition.  Employee hereby covenants and agrees that at no time during Employee’s employment with Company and for a period of one year immediately following termination of Employee’s employment with Company, whether voluntary or involuntary, shall Employee (i) develop, own, manage, operate, or otherwise engage in, participate in, represent in any way or be connected with, as officer, director, partner, owner, employee, agent, independent contractor, consultant, proprietor, stockholder (except for the ownership of a less than 5% stock interest in a publicly traded company), or otherwise, any business or activity competing with Company or its affiliates within the United States; (ii) act in any way, directly or indirectly, with the purpose or effect of soliciting, diverting or taking away any business, customer, client or any supplier of Company; or (iii) otherwise compete with Company in the sale or licensing, directly or indirectly, as principal, agent or otherwise, of any products competitive with the products, or services competitive with the services, developed or marketed by Company within the United States.  Employee acknowledges that he will provide unique services to Company and that this covenant has unique, substantial, and immeasurable value to Company.

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(c)           Non-solicitation or hiring of employees.  Employee hereby covenants and agrees that at no time during Employee’s employment with Company and for a period of one year immediately following termination of Employee’s employment with Company, whether voluntary or involuntary, will Employee act in any way with the purpose or effect of (i) hiring any of the employees of Company, its divisions or subsidiaries or (ii) soliciting, recruiting or encouraging, directly or indirectly, any of Company’s employees to leave the employ of Company, its divisions or its subsidiaries.

11.          Discoveries, Inventions, Trade Secrets, Trade Names, Copyrights, and Patents.  As part of the rights granted herein to Company, Employee agrees that all right, title and interest of any kind and nature whatsoever in and to any inventions, product, know-how, trade secrets, patents, trademarks, methods, procedures, copyrights, seminars, discoveries, improvements, ideas, creations, and other technical properties, whether or not patentable or subject to rights of copyright and/or trademark, which are conceived or made by Employee during the Term, and which are related to any of the business and/or activities of Companyand any other lines of business which Company subsequently pursues in any form to include but not be limited to a strategic plan, research, feasibility studies, development, manufacturing, and customer contact (including but not limited to intellectual property, know-how, trade secrets, and patents in process or granted) or the performance by Employee of his services hereunder, shall be and become the sole and exclusive property of Company for all purposes.  Employee shall promptly disclose to Company any such conception or other work product of the type as is generally described in the immediately preceding sentence.  Employee agrees to execute any and all applications, assignments and other written instruments that Company may deem necessary and appropriate to confirm the title and interest of Company therein and thereto.  The obligations of Employee under this Section 11 shall be binding upon his assignees, employers, other corporate or research affiliates, executors, administrators and heirs.  The grant, transfer and assignment to Company by Employee of rights to intellectual properties shall remain effective for such periods of time as applicable law may permit with respect to the ownership of any such intellectual property or materials.

12.          Enforcement. Employee understands and agrees that he will provide unique services to Company and that the restrictions contained in Sections 10 and 11 of this Agreement are reasonable, fair, and equitable in scope, terms, and duration, are necessary to protect the legitimate business interests, trade secrets, and good will of Company, and are a material inducement to Company to enter into this Agreement, and that any breach or threatened breach of the restrictions stated in Sections 10 and 11 would cause Company substantial and irreparable harm for which there is no adequate remedy at law.  Therefore, Employee agrees and consents to the issuance of injunctive relief in favor of Company by any court of competent jurisdiction, where, in Company’s sole discretion, Company has acted upon reasonable information concerning a breach or potential breach of this Agreement, to enjoin the breach of any of the covenants of Employee contained in Sections 10 and 11 of this Agreement.  Nothing contained in this Section shall invalidate or waive any other rights or remedies which Company may have at law or in equity.

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13.          Indemnification; Directors’ and Officers’ Insurance.

(a)While Employee is employed by Company pursuant to this Agreement, Company covenants that it will not repeal or modify any right to indemnification or limitation of liability under Company’s Amended and Restated Certificate of Incorporation, By-Laws, or otherwise so as to adversely affect any right or protection of a director or officer of Company existing at the time of such repeal or modification.

(b)           Company agrees to provide to Employee and keep current at all times during Employee’s employment, at its expense, director’s and officer’s liability insurance, with Employee named as the beneficiary, with such coverage limits as are determined in the reasonable discretion of the Board of Directors of the Company.

14.          Change in Control.  Notwithstanding any other provisions of this Agreement, Company agrees that in the event a Change of Control (as hereinafter defined) occurs and Employee leaves the employment of Company and the combined entity for whatever reason (other than (i) termination for Cause, (ii) death, (iii) permanent disability as described in Section 9 hereof or (iv) by Employee for any reason other than Good Reason):

(a)           If the termination occurs within twelve months after a Change of Control, Company shall continue to pay Employee’s Salary through the twelfth (12^th) full month following the effective date of termination.  The six (6) month notice requirement  prior to the effective date of termination pursuant to Sections 8(b) and 8(c) shall continue to be applicable following a Change in Control.

(b)           To the extent eligible, Employee shall continue to be covered by all noncash benefit plans of Company, except for the retirement plans or retirement programs in which Employee participates or any successor plans or programs in effect on the date of a Change in Control, for 12 months thereafter; provided, however, that if during such time period Employee should enter into the employment of a competitor of Company, participation in such noncash benefit plans would cease.  In the event Employee is ineligible under the terms of such plans to continue to be so covered, Company shall use its best efforts to provide substantially equivalent coverage through other sources.  If Company is unable to provide substantially equivalent coverage through other sources, then Company shall pay in cash to Employee the amount Company would have had to expend to provide such coverage assuming standard risk.

(c)           Employee’s payments received hereunder shall be considered severance pay in consideration of past service, and pay in consideration of continued service from the date hereof and entitlement thereto shall not be governed by any duty to mitigate damages by seeking further employment nor offset by any compensation which may be received from future employment.

(d)           The specific arrangements referred to above are not intended to exclude Employee’s participation in other benefits available to executive personnel generally or to preclude other compensation or benefits as may be authorized by the Board of Directors of the Company from time to time, or as a result of the Change of Control.

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(e)This Section shall be binding upon and shall inure to the benefit of the respective successors, assigns, legal representatives and heirs to the parties hereto.

(f)For the purpose of this Agreement, a “Change of Control” shall mean: a merger, consolidation, or reorganization of Company with one or more other entities in which Company is not the surviving entity, a sale of substantially all of the assets of Company to another entity, or any transaction (including, without limitation, a merger or reorganization in which Company is the surviving entity) that results in any person or entity (or persons or entities acting as a group or otherwise in concert) other than The Carlyle Group and/or its affiliates, becoming the beneficial owner of fifty percent (50%) or more of the combined voting power of all classes of securities of Company or obtaining (through stock ownership, proxies, or otherwise) the right to elect a majority of the Board of Directors of the Company.

15.          Gross Up Payments  If the payment provided under this Agreement (the “Contract Payment”) is subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (“Code”), Company shall pay Employee on or before the fifth day following the date of termination, an additional amount (the “Gross-Up Payment”) such that the net amount retained by Employee, after deduction of any Excise Tax on the Contract Payment and such other Total Payments (as defined below) and any federal and state and local income tax and Excise Tax upon the payment provided for by this Section, shall be equal to the Contract Payment and such other Total Payments.  For purposes of determining whether any of the payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any other payments or benefits received or to be received by Employee in connection with a Change of Control of Company or Employee’s termination of employment, whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with Company, its successors, any person whose actions result in a Change of Control of Company or any corporation affiliated (or which, as a result of the completion of a transaction causing a Change of Control, will become affiliated) with Company within the meaning of Section 1504 of the Code (together with the Contract Payment, the “Total Payments”) shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by Company and acceptable to Employee, whose acceptance shall not be unreasonably withheld, the Total Payments (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code either in their entirety or in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments that shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the Total Payments or (B) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (i), above), and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by Company’s independent auditors in accordance with the principles of Sections 280G(b)(3) and (4) of the Code.  For purposes of determining the amount of the Gross-Up Payment, Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income 

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taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Employee’s residence on the date of termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.  In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of Employee’s employment, Employee shall repay to Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by Employee if such repayment results in a reduction in Excise Tax and/or a federal state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(d) of the Code.  In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of Employee’s employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined.

16.          Survivability.  The provisions of Sections 10, 11 and 12 of this Agreement shall survive its termination.

17.          Section Titles.  The titles of the Sections of this Agreement are for convenience only and shall not affect the interpretation of any Section hereof.

18.Waiver.A waiver by either party hereto of any of the terms or conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach thereof.All remedies, rights, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either party hereto.

19.          Severability. The rights and restrictions in this Agreement may be exercised and are applicable only to the extent that they do not violate applicable laws, and are intended to be limited to the extent necessary so that they will not render this Agreement illegal, invalid, or unenforceable. If any provision of this Agreement shall be deemed to be invalid or unenforceable, then that provision shall be modified to make it enforceable to the maximum extent possible, and the remaining provisions of this Agreement shall not be affected thereby and shall remain in full force and effect.

20.          Assignment.  This Agreement requires the personal services of Employee only, and Employee shall not be entitled to assign any portion of his duties or obligations hereunder.

21.          Notices.  For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall

9

be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

If to Employee:	Willis W. Bixby
	1514 Pearl Avenue
	Crofton, MD 21114
If to Company:	Duratek, Inc.
	10100 Old Columbia Road
	Columbia, Maryland 21046

22.          Governing Law.  This Agreement has been made and executed in the State of Maryland and shall be governed by the laws of Maryland applicable to contracts fully to be performed therein.

23.          Waiver of Jury Trial.  THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT.  EACH OF THE PARTIES HERETO REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.

24.          Entire Agreement.  This Agreement constitutes the entire agreement of the parties and supersedes any and all previous agreements between the Parties, including the Employment Agreement between Company and Employee dated October 1, 1999 (the “Prior Agreement”).  Upon the execution by the parties of this Agreement, the Prior Agreement shall be terminated and of no further force and effect.  This Agreement may not be modified orally, but only by an agreement in writing supplied by the party against whom enforcement of any waiver, change, modification, extension, or discharge is sought.

25.          Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall deemed to be an original but all of which together will constitute one and the same instrument.

26.          Miscellaneous.  The parties agree to execute all other such documents as may be required to effectuate or more readily carry out the provisions hereof.

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		IN WITNESS WHEREOF, Employee and Company have executed this Agreement.
COMPANY: DURATEK, INC.			EMPLOYEE: /s/ Willis W. Bixby  Willis W. Bixby
By: /s/ Robert E. Prince
Name: Robert E. Prince
			Date: June 7, 2002
Title:	President and CEO
Date: June 6, 2002

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EX-10.33

Exhibit 10.33

AMENDMENT TO EMPLOYMENT AGREEMENT

THIS AMENDMENT TO THE EMPLOYMENT AGREEMENT is made effective as of February 6, 2006, by and between Duratek, Inc., a Delaware corporation (the “Company”) and the undersigned (“Employee”).

Recitals:

A.Employee and the Company entered into an employment agreement effective as of June 6, 2002 (the “Employment Agreement”); and

B.Employee and the Company wish to amend the terms of the Employment Agreement in this Agreement.

Agreement:

NOW, THEREFORE, in consideration of the agreements contained herein and of such other good and valuable consideration, the sufficiency of which Employee acknowledges, the Company and the Employee, intending to be legally bound, hereby agree that the Employment Agreement is hereby amended in the following respects:

1.The first sentence of section 2 entitled “Duties” is hereby amended and restated in its entirety to read as follows:

“During the Term, Employee shall serve as Senior Vice President (hereinafter, “Senior Vice President”) of the Company and shall report to, and have those duties, responsibilities, and authority assigned to him from time to time by, the Chief Executive Officer of the Company (hereinafter, the “CEO”) or the CEO’s designee; provided, further, that all determinations that may be made by the CEO under this Agreement may also be made by the CEO’s designee.”

2.A new sentence is added to the end of section 8(e) to read as follows:

“Notwithstanding anything in this Section 8(e) to the contrary, this Section 8(e) shall not apply to a termination of the Employee’s employment that occurs within twelve (12) months after a Change of Control.”

3.Amendment and Waiver.  The provisions of this Amendment may be amended and waived only with the prior written consent of the parties hereto.

4.All references in the Employment Agreement that refer to Vice President shall be deemed to refer to Senior Vice President.

5.Complete Agreement.  The Employment Agreement, as amended by this Amendment, contains the entire agreement and understanding between the Company and Employee with respect to Employee’s employment and supersedes all employment agreements, whether written or oral, relating to Employee’s employment with the Company.

6.Effect of the Amendment on Employment Relationship.  Nothing in this Amendment shall be construed as conferring upon the Employee any right to continue in the employ of (or otherwise provide services to) the Company, or to limit in any respect the right of the Company to terminate the Employee’s employment or other relationship with the Company at any time.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above.

		DURATEK, INC.
		By:	/s/ Robert E. Prince
		Robert E. Prince
		President/CEO
Agreed and Accepted:
By:	/s/ Willis W. Bixby
NAME: Willis W. Bixby

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EX-21.1

Exhibit 21.1

SUBSIDIARIES OF DURATEK, INC.

GTSD Sub, Inc.	(Maryland)
GTSD Sub III, Inc.	(Delaware)
Duratek Services, Inc.	(Tennessee)
Hittman Transport Services, Inc.	(Delaware)
GTSD Sub IV, Inc.	(Delaware)
GTSD Sub V, Inc.	(Delaware)
Duratek Federal Services of Hanford, Inc.	(Delaware)
Duratek Federal Services, Inc.	(Delaware)
Chem-Nuclear Systems, L.L.C.	(Delaware)
Infotek, Inc.	(Delaware)
Duratek of Canada, Inc.	(Ontario, Canada)
Vitritek Environmental, Inc.	(Delaware)
Duratek EU Limited	(United Kingdom)
Duratek Environmental Technology (Beijing) Co. LTD	(Beijing, China)

EX-23.1

Exhibit 23.1

Consent of Ernst & Young LLP,

Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

Form S-3 (No. 333-113701),

Form S-8 (No. 33-60075),

Form S-8 (No. 333-40612), and

Form S-8 (No. 333-74848);

and in the related Prospectuses of our reports dated February 17, 2006, with respect to the 2005 consolidated financial statements and schedule of Duratek, Inc. and subsidiaries (Duratek), Duratek management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Duratek, all included in this Annual Report (Form 10-K) for the year ended December 31, 2005.

/s/ Ernst & Young LLP

McLean, Virginia

February 27, 2006

EX-23.2

Exhibit 23.2

Consent of KPMG LLP,

Independent Registered Public Accounting Firm

The Board of Directors

Duratek, Inc.:

We consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-113701) and Form S-8 (File Nos. 33-60075, 333-40612, and 333-74848) of Duratek, Inc. of our report dated March 8, 2005, with respect to the consolidated balance sheet of Duratek Inc., as of December 31, 2004 and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2004, and the related financial statement schedule, which report appears in the December 31, 2005 annual report on Form 10-K of Duratek, Inc.

Our report refers to the Company’s adoption of Statement of Financial Accounting Standards No.143, Accounting for Asset Retirement Obligations, as of January 1, 2003.

/s/ KPMG LLP

Baltimore, Maryland

February 27, 2006

EX-31.01

Exhibit 31.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert E. Prince, certify that:

1.I have reviewed this annual report on Form 10-K of Duratek, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:February 27, 2006	By:	/s/ Robert E. Prince
		Robert E. Prince
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.02

Exhibit 31.02

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert F. Shawver, certify that:

1.I have reviewed this annual report on Form 10-K of Duratek, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:February 27, 2006	By:	/s/ Robert F. Shawver
		Robert F. Shawver
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.01

Exhibit 32.01

Written Statement of Chief Executive Officer
Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

(18 U.S.C. Section 1350)

The undersigned, the Chief Executive Officer of Duratek, Inc. (the “Company”), hereby certifies that, to his knowledge on the date hereof:

(a)the Annual Report on Form 10-K of the Company for the year ended December 31, 2005 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b)information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Robert E. Prince
	Robert E. Prince
	Chief Executive Officer
	February 27, 2006

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.02

Exhibit 32.02

Written Statement of Chief Financial Officer
Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

(18 U.S.C. Section 1350)

The undersigned, the Chief Financial Officer of Duratek, Inc. (the “Company”), hereby certifies that, to his knowledge on the date hereof:

(a)the Annual Report on Form 10-K of the Company for the year ended December 31, 2005 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b)information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Robert F. Shawver
	Robert F. Shawver
	Chief Financial Officer
	February 27, 2006

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.