DURATEK INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
ý		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

		For the quarterly period ended June 29, 2003

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý No o

Number of shares outstanding of each of the issuer’s classes of common stock as of August 7, 2003:

Class of stock		Number of shares
Common stock, par value $0.01 per share		13,564,855

DURATEK, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Part I	Financial Information

Item 1.	Financial Statements

	Consolidated Balance Sheets as of June 29, 2003 and December 31, 2002

	Consolidated Statements of Operations for the Three and Six Months Ended June 29, 2003 and June 30, 2002

	Consolidated Statements of Cash Flows for the Six Months Ended June 29, 2003 and June 30, 2002

	Notes to Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Item 4.	Controls and Procedures

Part II	Other Information

Item 1.	Legal Proceedings

Item 2.	Changes in Securities and Use of Proceeds

Item 3.	Defaults Upon Senior Securities

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

Item 6.	Exhibits and Reports on Form 8-K

	Signatures

Forward-Looking Information

In response to the “safe harbor” provisions contained in the Private Securities Litigation Reform Act of 1995, Duratek, Inc. (the “Company”) is including in this Quarterly Report on Form 10-Q the following cautionary statements which are intended to identify certain important factors that could cause the Company’s actual results to differ materially from those projected in forward-looking statements of the Company made by or on behalf of the Company. Many of these factors have been discussed in prior filings with the Securities and Exchange Commission.

The Company’s future operating results are largely dependent upon the Company’s ability to manage its commercial waste processing operations, including obtaining commercial waste processing contracts and processing the waste under such contracts in a timely and cost-effective manner. In addition, the Company’s future operating results are dependent upon the timing and awarding of contracts by the United States Department of Energy (“DOE”) for the cleanup of other waste sites administered by the DOE. The timing and award of such contracts by the DOE is directly related to the response of governmental authorities to public concerns over the treatment and disposal of radioactive, hazardous, mixed, and other wastes. The lessening of public concern in this area or other changes in the political environment could adversely affect the availability and timing of government funding for the cleanup of DOE and other sites containing radioactive and mixed wastes. Additionally, revenues from technical support services have in the past and continue to account for a substantial portion of the Company’s revenues. The loss of one or more technical support service contracts could adversely affect the Company’s future operating results. Finally, a significant component of the Company’s direct costs include the cost of disposal of materials in licensed landfills. The ability to reflect increased costs in pricing to customers, the availability of these licensed facilities, and any changes in the rate structures of such licensed facilities have the potential to affect the operating results of the Company.

The Company’s future operating results may fluctuate due to factors such as: the timing of new commercial waste processing contracts and duration of and amount of waste to be processed pursuant to those contracts; the acceptance and implementation of the Company’s waste treatment technologies in the government and commercial sectors; the evaluation by the DOE and commercial customers of the Company’s technologies versus other competing technologies as well as conventional storage and disposal alternatives; the timing of new government waste processing projects, including those pursued jointly with others; the duration of such projects; and the timing of commercial nuclear power plant outages and other large technical support services projects at its customers’ facilities.

An element of the Company’s growth strategy is to continue to pursue strategic acquisitions that expand and complement the Company’s business, technologies, and service offerings. Under the Company’s amended credit facility, which was completed in February 2003, the Company is permitted to enter into certain acquisitions, as defined in the credit agreement, subject to certain conditions. If the Company does complete an acquisition, the Company’s future operating results may be affected by the costs and timing of completion and integration of such an acquisition.

Part I Financial Information

Item 1. Financial Statements

DURATEK, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands of dollars, except per share amounts)

	June 29, 2003			December 31, 2002
	(unaudited)			*
Assets
Current assets:
Cash	$	16,285		$	2,323
Accounts receivable, net	54,257			48,420
Income taxes receivable	1,140			1,140
Cost and estimated earnings in excess of billings on uncompleted contracts	16,889			12,828
Prepaid expenses and other current assets	4,973			7,915
Deferred income taxes	2,168			2,168
Total current assets	95,712			74,794

Property, plant and equipment, net	72,404			69,287
Goodwill	70,797			70,797
Other intangible assets	5,197			5,675
Decontamination and decommissioning trust fund	19,783			19,693
Retainage	7,782			4,969
Other assets	7,234			8,917
Total assets	$	278,909		$	254,132

Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	10,400		$	10,400
Accounts payable	10,172			13,911
Accrued expenses and other current liabilities	59,473			41,147
Unearned revenues	18,363			16,476
Waste processing and disposal liabilities	9,523			9,936
Total current liabilities	107,931			91,870

Long-term debt, less current portion	48,149			50,749
Facility and equipment decontamination and decommissioning liabilities	38,790			28,778
Other noncurrent liabilities	961			4,472
Deferred income taxes	1,040			2,649
Total liabilities	196,871			178,518

Redeemable preferred stock (liquidation value $18,588)	15,752			15,752

Stockholders’ equity:
Preferred stock – $0.01 par value; authorized 4,840,000 shares; none issued	—			—
Common stock – $0.01 par value; authorized 35,000,000 shares; issued 15,169,260 shares in 2003 and 15,142,419 shares in 2002	152			151
Capital in excess of par value	77,847			77,715
Accumulated deficit	(1,977		)	(8,108		)
Treasury stock at cost, 1,612,376 shares in 2003 and 2002	(9,577		)	(9,577		)
Deferred compensation	(159		)	(319		)
Total stockholders’ equity	66,286			59,862

Total liabilities and stockholders’ equity	$	278,909		$	254,132

* The Consolidated Balance Sheet as of December 31, 2002 has been derived from the Company’s audited Consolidated Balance Sheet included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

See accompanying notes to consolidated financial statements.

DURATEK, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

(in thousands, except for per share amounts)

	Three Months Ended						Six Months Ended
	June 29, 2003			June 30, 2002			June 29, 2003			June 30, 2002

Revenues	$	76,790		$	72,100		$	140,620		$	141,524
Cost of revenues	57,535			56,427			108,096			112,667

Gross profit	19,255			15,673			32,524			28,857

Selling, general and administrative expenses	7,240			7,431			15,273			14,751

Income from operations	12,015			8,242			17,251			14,106

Interest expense, net	(1,098		)	(1,439		)	(2,163		)	(3,106		)
Other income (expense)	66			201			(45		)	201

Income before income taxes, proportionate share of income (loss) of joint ventures and cumulative effect of a change in accounting principle	10,983			7,004			15,043			11,201

Income taxes	4,393			2,836			6,017			4,536

Income before proportionate share of income (loss) of joint ventures and cumulative effect of a change in accounting principle	6,590			4,168			9,026			6,665

Proportionate share of income (loss) of joint ventures	(7		)	(37		)	149			(74		)

Net income before cumulative effect of a change in accounting principle	6,583			4,131			9,175			6,591

Cumulative effect of a change in accounting principle, net of tax	—			—			(2,414		)	—

Net income	6,583			4,131			6,761			6,591

Preferred stock dividends and charge for accretion	(315		)	(315		)	(630		)	(649		)

Net income attributable to common stockholders	$	6,268		$	3,816		$	6,131		$	5,942

Weighed average common stock outstanding:
Basic	13,552			13,500			13,542			13,498
Diluted	19,375			19,013			19,322			19,096

Net income (loss) per share:
Basic
Before cumulative effect of a change in accounting principle	$	0.46		$	0.28		$	0.63		$	0.44
Cumulative effect of a change in accounting principle	—			—			(0.18		)	—
	$	0.46		$	0.28		$	0.45		$	0.44

Diluted
Before cumulative effect of a change in accounting principle	$	0.34		$	0.22		$	0.47		$	0.35
Cumulative effect of a change in accounting principle	—			—			(0.12		)	—
	$	0.34		$	0.22		$	0.35		$	0.35

See accompanying notes to consolidated financial statements.

DURATEK, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands of dollars)

	Six months ended
	June 29, 2003			June 30, 2002

Cash flows from operating activities:
Net income	$	6,761		$	6,591
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,097			5,887
Cumulative effect of a change in accounting principle	2,414			—
Stock compensation expense	159			159
Proportionate share of (income) loss of joint ventures, net of distributions	(88		)	74
Changes in operating assets and liabilities:
Accounts receivable, net	(5,224		)	(7,213		)
Costs and estimated earnings in excess of billings on uncompleted contracts	(4,061		)	(1,530		)
Prepaid expenses and other current assets	2,592			535
Accounts payable, and accrued expenses and other current liabilities	12,173			7,402
Unearned revenues	1,887			4,778
Waste processing and disposal liabilities	(413		)	55
Facility and equipment decontamination and decommissioning liabilities	407			722
Retainage	(2,812		)	(1,404		)
Other	153			402
Net cash provided by operating activities	20,045			16,458

Cash flows from investing activities:
Additions to property, plant and equipment	(2,491		)	(1,165		)
Other	(179		)	(55		)
Net cash used in investing activities	(2,670		)	(1,220		)

Cash flows from financing activities:
Proceeds from short-term borrowings	—			4,048
Net repayments of borrowings under revolving credit facility	—			(12,500		)
Repayments of long-term debt	(2,600		)	(5,451		)
Repayments of capital lease obligations	(217		)	(190		)
Preferred stock dividends paid	(315		)	—
Deferred financing costs	(413		)	(1,098		)
Proceeds from issuance of common stock	132			—
Net cash used in financing activities	(3,413		)	(15,191		)
Net increase in cash	13,962			47

Cash, beginning of period	2,323			441

Cash, end of period	$	16,285		$	488

See accompanying notes to consolidated financial statements.

DURATEK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(in thousands, except per share amounts)

1. Principles of Consolidation and Basis of Presentation

(a) Principles of Consolidation

The accompanying unaudited consolidated financial statements of Duratek, Inc. and its wholly owned subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in subsidiaries and joint ventures in which the Company does not have control or majority ownership are accounted for under the equity method.

All adjustments (consisting of normal recurring accruals) that, in the opinion of management, are necessary for the fair presentation of this interim financial information have been included. Results of interim periods are not necessarily indicative of results to be expected for the year as a whole. The effect of seasonal business fluctuations and the occurrence of many costs and expenses in annual cycles require certain estimations in the determination of interim results. The information contained in these interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission.

(b) Fiscal Quarters

The Company’s year ends on December 31, while the first three fiscal quarters of each year ends on the Sunday nearest to the last day of each such calendar quarter. The financial results presented herein are as of June 29, 2003 and for the three and six months ended June 29, 2003 and June 30, 2002.

(c) Reclassifications

Certain amounts for 2002 have been reclassified to conform to the presentation for 2003. The Company reclassified costs associated with the support of direct operations, which were previously included as selling, general and administrative expenses, to cost of revenues. Amounts for all periods presented have been reclassified to conform to this presentation. Certain amounts relating to accrued expenses and other current liabilities, unearned revenues, and facility and equipment decontamination and decommissioning liabilities pertaining to the December 31, 2002 balance sheet have been reclassified to conform to the presentation for 2003.

2. Goodwill and Other Intangible Assets

Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill is not amortized, but 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. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives, and reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company tested its goodwill as of January 1, 2003 and 2002 in accordance with the standard and concluded that no impairment charge was required.

Other intangibles 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. The Barnwell operating rights are being amortized on a straight-line basis over the remainder of the eight-year life of the facility. Covenants not to compete and patent amounts are being amortized over 10 and 17 years, respectively, on a straight-line basis. Other intangible assets, net of accumulated amortization as of June 29, 2003 and December 31, 2002 were $5,197 and $5,675, respectively. Aggregate amortization expense was $245 and $489 for the three and six months ended June 29, 2003 and $528 and $836 for the three and six months ended June 30, 2002, respectively. Anticipated annual amortization expense for the five years beginning January 1, 2003 is $984.

3. Retainage

Retainage represents amounts billable but withheld due to a contract provision. Until the satisfaction of this provision, these amounts are classified as retainage. As of June 29, 2003 and December 31, 2002, the Company had retainage balances of $8,272 and $7,168, respectively, of which $490 and $2,199, respectively, are expected to be collected in the next 12 months and are included in prepaid expense and other current assets in the consolidated balance sheets.

4. Decontamination and Decommissioning Liabilities

The Company is responsible for the cost to decontaminate and decommission (“D&D”) its facilities and equipment in Tennessee and South Carolina and certain equipment used at customer sites. Such cost will generally be paid upon the closure of such facilities or the disposal of such equipment. The Company is also obligated, under its license granted by the State of South Carolina and the Atlantic Interstate Low-Level Radioactive Waste Compact Implementation Act (the “Act”), for costs associated with the ultimate closure of the Barnwell Low-Level Radioactive Waste Disposal Facility in South Carolina and its buildings and equipment located at the Barnwell site (“Barnwell closure”). Under the terms of the Act and its license with the State of South Carolina, the Company was required to establish a trust fund to cover the Barnwell closure obligation, which limits the Company’s obligation.

Prior to the adoption of SFAS No. 143, the Company had estimated the total cost to D&D its facilities and equipment in Tennessee and South Carolina and had been accruing such costs over 25 years, which was the facilities’ estimated useful life. Additionally, the Company recognized its 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.

Upon the adoption of SFAS No. 143 on January 1, 2003, the Company recognized the following changes to the Company’s consolidated financial statements: increased property, plant and equipment by $5,492; increased D&D liabilities by $9,515; and recognized a cumulative effect of a change in accounting principle, net of tax of $2,414 ($4,023 pre-tax).

The Company’s D&D liabilities consist of the following as of June 29, 2003 and December 31, 2002:

	June 29, 2003		December 31, 2002
Facilities & equipment ARO	$	19,007	$	—
Facilities & equipment D&D	—		9,085
Barnwell closure	19,783		19,693
	$	38,790	$	28,778

The Company recognized D&D expense of $198 and $406 during the three and six months ended June 29, 2003 and $205 and $456 for the three and six months ended June 30, 2002, respectively. Had the Company adopted SFAS No. 143 on January 1, 2002, the Company’s net income before cumulative effect of a change in accounting principle and the per diluted share net income before cumulative effect of a change in accounting principle would have been $3,929 and $0.21 for the three months ended June 30, 2002 and $6,205 and $0.33 for the six months ended June 30, 2002, respectively.

The following is a reconciliation of the Company’s facility & equipment ARO from January 1, 2003 to June 29, 2003:

Balance at January 1, 2003	$	18,601
Accretion expense, included in cost of revenues	406
Balance at June 29, 2003	$	19,007

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

5. 8% Cumulative Convertible Redeemable Preferred Stock

The Company has issued and outstanding 157,472 shares of Convertible Preferred Stock that is initially convertible into the Company’s common stock at a conversion price of $3.00 per share and, if not previously converted, the Company is required to redeem the outstanding Convertible Preferred Stock on September 30, 2005 for $100 per share plus accrued and unpaid dividends, unless such date is extended with the approval of the holders of the Convertible Preferred Stock. Accrued and unpaid dividends as of June 29, 2003 and December 31, 2002 were $2,862 and $2,520, respectively.

6. Commitments and Contingencies

The Company is required to post, from time to time, standby letters of credit and surety bonds to meet certain customer contract requirements. The Company does not directly post a financial assurance instrument for its subcontractors. As of June 29, 2003, the Company had outstanding assurance instruments of $18,252, including $5,588 letters of credit and $12,664 surety bonds, which expire at various contract completion dates. The Company has entered into certain indemnification agreements with the providers of the surety bonds, which would require funding only if the Company 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 the Company’s bank credit agreement up to $15,000 as a sublimit to the $40,000 revolving line of credit. The Company’s bank credit agreement limits the amount of outstanding surety bonds to $25,000. Since the filing of the Company’s December 31, 2002 annual report on Form 10-K, no material changes to financial or performance assurances to clients have occurred.

7. Pro forma Disclosures of Stock Based Compensation

The Company applies 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 Financial Accounting Standards Board (“FASB”) Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation, issued in March 2000, to account for its 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 and 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, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS Nos. 123 and 148. The following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding and unvested awards for the three and six months ended June 29, 2003 and June 30, 2002:

	Three months ended				Six months ended
	June 29, 2003		June 30, 2002		June 29, 2003			June 30, 2002

Net income attributable to common stockholders	$	6,268	$	3,816	$	6,131		$	5,942

Income impact of assumed conversions - preferred stock dividends and charges for accretion	315		315		630			649

Net income attributable to common stockholders assuming conversion	6,583		4,131		6,761			6,591

Add stock-based employee compensation expense included in reported net income, net of tax	8		8		16			16

Deduct total stock-based employee compensation expense determined under fair-value-based method for all awards, net of tax	260		262		520			524

Pro forma net income attributable to common stockholders assuming conversion	6,331		3,877		6,257			6,083

Plus: Cumulative effect of a change in accounting principle, net of tax	—		—		2,414			—

Pro forma net income before cumulative effect of a change in accounting principle	$	6,331	$	3,877	$	8,671		$	6,083

Pro forma net income per diluted share:
Before cumulative effect of a change in accounting principle	$	0.33	$	0.20	$	0.45		$	0.32
Cumulative effect of a change in accounting principle	—		—		(0.12		)	—
	$	0.33	$	0.20	$	0.33		$	0.32

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 during the six months ended June 29, 2003 and June 30, 2002:

	Six months ended
	June 29, 2003			June 30, 2002

Risk free interest rate	3.86		%	3.83		%
Expected volatility	65		%	63		%
Expected life	4 years			4 years
Contractual life	10 years			10 years
Expected dividend yield	0		%	0		%
Fair value of options granted	$	3.31		$	3.25

8. Net Income Per Share

Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution of stock options, restricted stock, and convertible redeemable preferred stock that could share in the earnings of the Company. The reconciliation of amounts used in the computation of basic and diluted net income per share for the three and six months ended June 29, 2003 and June 30, 2002 consist of the following:

	Three months ended				Six months ended
	June 29, 2003		June 30, 2002		June 29, 2003			June 30, 2002

Numerator:
Net income attributable to common stockholders	$	6,268	$	3,816	$	6,131		$	5,942

Plus: Income impact of assumed conversions - preferred stock dividends and charges for accretion	315		315		630			649

Net income attributable to common stockholders assuming conversion	6,583		4,131		6,761			6,591

Plus: Cumulative effect of a change in accounting principle, net of tax	—		—		2,414			—

Net income before cumulative effect of a change in accounting principle	$	6,583	$	4,131	$	9,175		$	6,591

Denominator:
Weighted-average shares outstanding	13,552		13,500		13,542			13,498

Effect of dilutive securities:
Incremental shares from assumed convertion of:
Employee stock options	428		168		390			271
Restricted stock	144		94		139			76
Convertible redeemable preferred stock	5,251		5,251		5,251			5,251
	5,823		5,513		5,780			5,598

Diluted-weighted average common shares outstanding	19,375		19,013		19,322			19,096

Net income (loss) per share:

Basic
Before cumulative effect of a change in accounting principle	$	0.46	$	0.28	$	0.63		$	0.44
Cumulative effect of a change in accounting principle	—		—		(0.18		)	—
	$	0.46	$	0.28	$	0.45		$	0.44
Diluted
Before cumulative effect of a change in accounting principle	$	0.34	$	0.22	$	0.47		$	0.35
Cumulative effect of a change in accounting principle	—		—		(0.12		)	—
	$	0.34	$	0.22	$	0.35		$	0.35

The effects on weighted average shares outstanding of options to purchase common stock and other potentially dilutive securities of the Company that were not included in the computation of diluted net income per share because the effect would have been anti-dilutive were 211 for the three and six months ended June 29, 2003 and 711 for the three and six months ended June 30, 2002.

9. Segment Reporting

The Company has three primary segments: (i) Federal Services, (ii) Commercial Services, and (iii) Commercial Processing and Disposal. During the first quarter of 2003, the Company realigned its reporting segments to include the results of its Memphis operations to Commercial Services operations from its Commercial Processing and Disposal operations. The impact of this change was not significant and all amounts presented have been revised to be consistent for all periods presented. The following is a brief description of each of the segments:

(a) Federal Services (“FS”)

FS provides on-site waste processing and disposal services, off-site waste disposition, on-site management of nuclear facility operations, and on-site clean up (remedial action) services on large government projects for the United States Department of Energy (“DOE”) and other governmental entities. The Company’s services include program development, project management, nuclear facility operation, waste characterization, packaging and shipping of waste, selected technical services, and site cleanup.

(b) Commercial Services (“CS”)

CS provides waste treatment and disposition services to a diverse group of commercial clients, including nuclear power utilities. These services include water processing, nuclear waste handling and treatment, transportation, licensing, packaging, heavy hauling, disposal, and nuclear facility D&D.

(c) Commercial Processing and Disposal (“CPD”)

The Company conducts its CPD operations at its two Tennessee locations: the Bear Creek Operations Facility in Oak Ridge and the Gallaher Road Operations Facility in Kingston. The Company also operates two facilities in Barnwell, South Carolina: the Duratek Consolidation & Services Facility (“DCSF”) and the Barnwell Low-Level Radioactive Waste Management Disposal Facility. CPD uses a combination of technologies to process waste to achieve volume and mass reduction. CPD customers primarily include nuclear utilities and government agencies.

	For the Three Months Ended June 29, 2003
	FS			CS		CPD		Unallocated Items			Consolidated
Revenues from external customers (1)	$	32,845		$	20,526	$	23,419	$	—		$	76,790

Income from operations	2,282			5,960		3,773		—			12,015

Interest expense, net	—			—		—		(1,098		)	(1,098		)

Income taxes	—			—		—		4,393			4,393

Proportionate share of loss of joint ventures	(7		)	—		—		—			(7		)

Depreciation and amortization expense	144			608		1,650		676			3,078

Capital expenditures for additions to property, plant and equipment	37			912		308		61			1,318

	For the Three Months Ended June 30, 2002
	FS			CS		CPD		Unallocated Items			Consolidated
Revenues from external customers (1)	$	31,139		$	16,668	$	24,293	$	—		$	72,100

Income from operations	3,304			1,718		3,220		—			8,242

Interest expense, net	—			—		—		(1,439		)	(1,439		)

Income taxes	—			—		—		2,836			2,836

Proportionate share of loss of joint ventures	—			—		—		(37		)	(37		)

Depreciation and amortization expense	107			495		1,531		829			2,962

Capital expenditures for additions to property, plant and equipment	365			99		79		272			815

	As of and for the Six Months Ended June 29, 2003
	FS		CS		CPD		Unallocated Items			Consolidated
Revenues from external customers (1)	$	62,103	$	35,755	$	42,762	$	—		$	140,620

Income from operations	5,203		7,419		4,629		—			17,251

Interest expense, net	—		—		—		(2,163		)	(2,163		)

Income taxes	—		—		—		6,017			6,017

Proportionate share of income of joint ventures	149		—		—		—			149

Cumulative effect of a change in accounting principle, net of tax	—		—		—		(2,414		)	(2,414		)

Depreciation and amortization expense	298		1,204		3,317		1,278			6,097

Long-lived assets (2)	33,634		54,420		58,028		2,316			148,398

Capital expenditures for additions to property, plant and equipment	71		1,400		866		154			2,491

Total assets	70,007		72,636		108,421		27,845			278,909

	As of and for the Six Months Ended June 30, 2002
	FS		CS		CPD		Unallocated Items			Consolidated
Revenues from external customers (1)	$	66,377	$	30,184	$	44,963	$	—		$	141,524

Income from operations	6,279		2,940		4,887		—			14,106

Interest expense, net	—		—		—		(3,106		)	(3,106		)

Income taxes	—		—		—		4,536			4,536

Proportionate share of loss of joint ventures	—		—		—		(74		)	(74		)

Depreciation and amortization expense	267		919		3,240		1,461			5,887

Long-lived assets (2)	35,914		49,960		60,622		3,957			150,453

Capital expenditures for additions to property, plant and equipment	392		211		244		318			1,165

Total assets	80,814		69,439		106,063		22,057			278,373

(1) Intercompany revenues have been eliminated. Revenues by segment represents revenues earned based on third party billings to customers.

(2) Long-lived assets include property, plant and equipment, goodwill, and other intangible assets.

10. New accounting pronouncements

In November 2002, the Emerging Issues Task Force reached a consensus on Issue No. 00-21 Revenue Arrangements with Multiple Deliverables (“EITF 00-21”). EITF 00-21 addresses the accounting for contractual arrangements in which multiple revenue-generating activities are performed. In some situations, the different revenue-generating activities (deliverables) are sufficiently separable and there exists sufficient evidence of fair values to account separately for the different deliverables (that is, there are separate units of accounting). In other situations, some or all of the different deliverables are closely interrelated or there is not sufficient evidence of fair value to account separately for the different deliverables. EITF 00-21 addresses when and, if so, how an arrangement involving multiple deliverables should be divided into separate units of accounting. EITF 00-21 is effective for the Company for contracts executed after June 30, 2003. The Company does not believe the impact of EITF 00-21 will be material to its consolidated financial statements.

Financial Accounting Standard Board (“FASB”) Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The provisions of this Statement are effective for financial instruments entered into or modified after May 31, 2003, and otherwise are effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. The Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Upon adoption, the redeemable preferred stock will be classified as a liability and this balance will include the accrued and unpaid dividends relating to the redeemable preferred stock. As of June 29, 2003, the accrued and unpaid dividends relating to the redeemable preferred stock was $2,862.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company’s consolidated financial statements and the notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. In the fourth quarter of 2002, the Company reclassified costs associated with the support of direct operations, which were previously included as selling, general and administrative expenses, to cost of revenues. The corresponding amounts for all periods presented have been reclassified to conform to this presentation.

Overview

Duratek, Inc., together with its wholly owned subsidiaries (the “Company” or “Duratek”), provides safe, secure radioactive materials disposition and nuclear facility operations for commercial and government customers. The Company’s operations are organized into three primary segments: (i) Federal Services, (ii) Commercial Services, and (iii) Commercial Processing and Disposal.

The Company’s Federal Services (“FS”) operations primarily provide on-site waste processing and disposal services, off-site waste disposition, on-site management of nuclear facility operations, and on-site clean up (remedial action) services on large government projects for the United States Department of Energy (“DOE”) and other governmental entities. The Company’s services include program development, project management, nuclear facility operation, waste characterization, packaging and shipping of waste, selected technical services, and site cleanup.

The Company’s Commercial Services (“CS”) operations provide waste treatment and disposition services to a diverse group of commercial clients, including nuclear power utilities. These services include water processing, nuclear waste handling and treatment, transportation, licensing, packaging, heavy hauling, disposal, and nuclear facility decontamination and decommissioning (“D&D”).

The Company conducts its Commercial Processing and Disposal (“CPD”) operations at its two Tennessee locations: the Bear Creek Operations Facility in Oak Ridge and the Gallaher Road Operations Facility in Kingston. The Company also operates two facilities in Barnwell, South Carolina: the Duratek Consolidation & Services Facility (“DCSF”) and the Barnwell Low-Level Radioactive Waste Management Disposal Facility. The technologies used at the Tennessee based processing operations include incineration, compaction, metal decontamination and recycling, and Green is Clean. CPD customers primarily include nuclear utilities and government agencies.

The Company’s future operating results will be affected by, among other things, the duration of commercial waste processing contracts and amount of waste to be processed by the Company’s commercial waste processing operations pursuant to these contracts and the timing and scope of DOE waste treatment projects.

Critical Accounting Policies

Critical accounting policies are those that are both important to the presentation of the Company’s financial condition and results of operations and require management’s most difficult, complex, or subjective judgments. The Company’s 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

Commercial Waste Processing

The commercial waste processing operations have short-term and long-term contracts with commercial companies to provide waste processing services. The Company’s services are primarily provided under fixed-unit price contracts. Under the fixed-unit price contracts, revenue is recognized as waste is processed. The Company records the associated costs with out-bound transportation, burial, and secondary waste processing as the related waste is processed. The Company’s fixed-unit price contracts provide for additional customer billings if the characterization of the waste received is different from contract specifications or for certain increases in burial costs, both of which are estimated at the time of waste processing.

Contract Revenue and Cost Recognition

The FS and CS operations have long-term contracts to provide engineering and technical support services to the Federal government and its agencies and to commercial companies. The Company’s services are provided under time-and-materials, fixed unit rate, cost-plus-fixed-fee, and fixed-price contracts. Under time-and-materials contracts the Company records revenues based on costs incurred at agreed upon contractual rates. For fixed unit rate contracts, the Company recognizes revenues as units are processed in accordance with the contract. For cost-plus-fixed-fee contracts, the Company records revenue based upon costs incurred and a proportionate amount of the fixed-fee or percentage stipulated in the contract. For fixed-price contracts, the Company recognizes revenue based upon applying the ratio of current cumulative costs incurred to total estimated cost at completion. The Company considers the nature of the work involved in determining whether such measures are appropriate. Cumulative revenues recognized may be less or greater than cumulative costs and profits billed at any point in time during a contract’s term. The resulting difference is recognized as costs and estimated earnings in excess of billings on uncompleted contracts, a current asset, or unearned revenues, a current liability. Contracts typically provide for billing of costs incurred and estimated earnings on a monthly or quarterly basis. The estimates of revenues and expenses on client contracts change periodically in the normal course of business and due to contract modifications. The Company receives award fees on certain Federal government contracts which are accrued when estimable and collection is reasonably assured. Provisions for estimated losses on individual contracts are made in the period in which the loss was identified. Contract acquisition costs are expensed as incurred.

Any estimation process, including that used in preparing contract estimates, involves inherent risk. The Company reduces the inherent risk relating to revenue and cost estimates through corporate policy, approval and monitoring processes, which includes a detailed monthly review and status report to management of all significant contracts with such risk.

D&D Liabilities

The Company has responsibility related to the cost to D&D the facilities and equipment in Tennessee and South Carolina and equipment used at customer sites in the CS operations. Such costs will generally be paid upon closure of such facilities or disposal of such equipment.

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

On January 1, 2003, the Company adopted SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 requires the Company 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, development and/or normal use of the asset. The Company is 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. Upon adoption of SFAS No. 143, the Company recognized the following changes to the Company’s consolidated financial statements: increase property, plant and equipment by $5.5 million and increase facility and equipment D&D liabilities by $9.5 million. The Company recognized a $2.4 million cumulative effect of a change in accounting principle, net of tax ($4.0 million pre-tax).

The Company’s D&D liabilities as of June 29, 2003 consists of facility and equipment ARO of $19.0 million and Barnwell closure of $19.8 million.

Management updates its closure and remediation cost estimates for D&D on an annual basis. These estimates are based on current technology, regulations, and burial rates. Management is 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

The Company has made significant business acquisitions for which it has recorded the fair value of long-lived assets acquired and related goodwill and other intangible assets. The Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or circumstances indicate the carrying value of such assets may not be recoverable.

The Company adopted the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, and SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, on January 1, 2002. As of June 29, 2003, the Company had $70.8 million of goodwill and $5.2 million of intangible assets with estimable useful lives on its consolidated balance sheet. The Company does not have any other intangible assets with indefinite useful lives.

Goodwill is not amortized, but 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. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives, and reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company tested its

goodwill as of January 1, 2003 and 2002 in accordance with the standard and concluded that no impairment charge was required.

In accordance with SFAS No. 144, long-lived assets, such as property, plant and equipment and purchased intangible assets subject to amortization, 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.

Results of Operations

The table below sets forth certain consolidated statement of operations information for the three and six months ended June 29, 2003 and June 30, 2002. Certain amounts for 2002 have been reclassified to conform to the presentation for 2003. In the fourth quarter of 2002, the Company reclassified costs associated with the support of direct operations, which were previously included as selling, general and administrative expenses, to cost of revenues. The corresponding amounts for all periods presented have been reclassified to conform to this presentation.

The Company’s year ends on December 31, while the first three fiscal quarters of each year ends on the Sunday nearest to the last day of each such calendar quarter. The quarterly financial results presented herein are for the three and six months ended June 29, 2003 and June 30, 2002.

	Three months ended						Six months ended
(in thousands)	June 29, 2003			June 30, 2002			June 29, 2003			June 30, 2002
	(unaudited)						(unaudited)
Revenues	$	76,790		$	72,100		$	140,620		$	141,524
Cost of revenues	57,535			56,427			108,096			112,667
Gross profit	19,255			15,673			32,524			28,857
Percent of revenues	25.1		%	21.7		%	23.1		%	20.4		%

Selling, general and administrative expenses	7,240			7,431			15,273			14,751
Percent of revenues	9.4		%	10.3		%	10.9		%	10.4		%
Income from operations	12,015			8,242			17,251			14,106
Percent of revenues	15.6		%	11.4		%	12.3		%	10.0		%

Interest expense, net	(1,098		)	(1,439		)	(2,163		)	(3,106		)
Other income (expense)	66			201			(45		)	201
Income taxes	4,393			2,836			6,017			4,536
Proportionate share of income (loss) of joint ventures	(7		)	(37		)	149			(74		)
Net income before cumulative effect of a change in accounting principle	6,583			4,131			9,175			6,591

Cumulative effect of a change in accounting principle, net of tax	—			—			(2,414		)	—
Net income	6,583			4,131			6,761			6,591

Preferred stock dividends and charges for accretion	(315		)	(315		)	(630		)	(649		)

Net income attributable to common stockholders	$	6,268		$	3,816		$	6,131		$	5,942

Second Quarter of 2003 As Compared To Second Quarter of 2002

Duratek, Inc.

Revenues for the Company increased by $4.7 million, or 6.5%, from $72.1 million in the second quarter of 2002 to $76.8 million in the second quarter of 2003. This increase was the result of increases in the revenues from the CS operations and the FS operations, slightly offset by a decrease in revenues in the CPD operations. Gross profit for the Company increased by $3.6 million, or 22.9%, from $15.7 million in the second quarter of 2002 to $19.3 million in the second quarter of 2003. The increase in gross profit was the result of an increase in gross profit from the CS operations, partially offset by decreases in gross profit from the FS and CPD operations. As a percentage of revenues, gross profit increased from 21.7% in the second quarter of 2002 to 25.1% in the second quarter of 2003. The increase in gross profit as a percentage of revenues was primarily a result of the successful completion of a transportation and logistics contract and high margins earned on certain non-recurring contract work during the second quarter of 2003. Selling, general and administrative expenses decreased by $0.2 million, or 2.6%, from $7.4 million in the second quarter of 2002 to $7.2 million in the second quarter of 2003. As a percentage of revenues, selling, general and administrative expenses decreased from 10.3% in the second quarter of 2002 to 9.4% in the second quarter of 2003. The decrease in selling, general and administrative expense was primarily attributable to lower employee benefit and personnel expenses, primarily relating to a reduction in work force in 2002, and lower bank related fees, which was offset by higher professional services fees, bid and proposal expense, and information systems related expenses.

The following table summarizes revenues, gross profit, and income from operations by business segments for the periods presented:

	Three months ended
(in thousands)	June 29, 2003		June 30, 2002
	(unaudited)

Federal Services
Revenues	$	32,845	$	31,139
Gross profit	5,205		6,048
Income from operations	2,282		3,304

Commercial Services
Revenues	$	20,526	$	16,668
Gross profit	8,258		3,502
Income from operations	5,960		1,718

Commercial Processing and Disposal
Revenues	$	23,419	$	24,293
Gross profit	5,792		6,123
Income from operations	3,773		3,220

Federal Services (“FS”):

FS revenues increased by $1.7 million, or 5.5%, from $31.1 million in the second quarter of 2002 to $32.8 million in the second quarter of 2003. The increase in revenues was primarily due to new work, changes in work scope, and the renegotiation of an award fee contract. The increase in revenues was also attributable to a loss provision recognized in the second quarter of 2002. Incremental revenues of $2.6 million in the second quarter of 2003 related primarily to the award of new work on the West Remediation Operations along the Hanford River Corridor and the Depleted Uranium Hexflouride (“DUF₆”) project. Revenues increased $1.5 million on the K-27/K-27 Gaseous Diffusion Plant project due to the transition from the site mobilization phase to the asbestos abatement phase. Revenues increased by $1.0 million relating to a contract with the Federal government that has an award fee. This award fee was renegotiated in the first quarter of 2003. These increases were offset by decreases in revenues of approximately $5.1 million. Revenues decreased $2.2 million due to a reduction in labor expense on the Hanford Management Project, which is a cost-plus-fixed-fee contract. Revenues relating to the Environmental Management Waste Management Facility (“EMWMF”) contract decreased by $1.9 million. During the second quarter of 2002, revenues of $2.5 million were recognized relating to costs incurred during the construction phase of this contract. During the second quarter of 2003, the Company recognized $0.6 million in revenues on this contract related to the operation and maintenance of this facility, which will be ongoing. In addition, revenues decreased by $1.0 million relating to the River Protection Project (“RPP”) Vitrification projects due to a decrease in contract costs incurred.

Gross profit from FS decreased by $0.8 million, or 13.9%, from $6.0 million in the second quarter of 2002 to $5.2 million in the second quarter of 2003. As a percentage of revenues, gross profit decreased from 19.4% in the second quarter of 2002 to 15.8% in the second quarter of 2003. The decrease in gross profit was primarily related to losses realized on the EMWMF contract and the West Remediation Operations along the Hanford River Corridor. The losses on the EMWMF contract were primarily attributable to costs incurred due to weather related conditions at the disposal site. These decreases were partially offset by the renegotiated Federal government award fee contract, work performed at Los Alamos National Laboratory in the second quarter of 2003 that provided high margins, and revenues from the settlement with the Federal government on a previously unallowable expense.

FS income from operations decreased by $1.0 million from $3.3 million in the second quarter of 2002 to $2.3 million in the second quarter of 2003. This decrease was primarily attributable to the decrease in gross profit and higher selling, general and administrative expenses in the second quarter of 2003 due to expenses incurred related to bid and proposal work.

Commercial Services (“CS”):

CS revenues increased by $3.8 million, or 23.1%, from $16.7 million in the second quarter of 2002 to $20.5 million in the second quarter of 2003. The increase in revenues was primarily due to $2.6 million in revenues from the successful completion of a transportation and logistics contract, $0.9 million relating to a site decontamination and decommissioning project, and $0.7 million from the transportation services operations relating to a change in the competitive environment that includes the loss of a competitor.

Gross profit from CS increased by $4.8 million, or 135.8%, from $3.5 million in the second quarter of 2002 to $8.3 million in the second quarter of 2003. As a percentage of revenues, gross profit increased from 21.0% in the second quarter of 2002 to 40.2% in the second quarter of 2003. The increase in gross profit was primarily due to the successful completion of a transportation and logistics contract and high margins earned on certain non-recurring contract work.

CS income from operations increased $4.2 million from $1.7 million in the second quarter of 2002 to $5.9 million in the second quarter of 2003. This increase was primarily attributable to increases in gross profit.

Commercial Processing and Disposal (“CPD”):

CPD revenues decreased by $0.9 million, or 3.6%, from $24.3 million in the second quarter of 2002 to $23.4 million in the second quarter of 2003. In the second quarter of 2002, revenues of $1.3 million were recognized relating to a large component project in Memphis and revenues of $1.3 million were recognized by the Barnwell low-level radioactive waste disposal operation relating to a decision by the South Carolina Public Service Commission to allow a portion of the amortization expense of the Barnwell Operating Rights as a reimbursable allowable cost. The Barnwell Operating Rights revenue related to the amortization expense since July 1, 2000. In the second quarter of 2003, increases in revenues of $1.0 million were realized from the Barnwell operation, primarily relating to disposal work performed on a transportation and logistics contract at the Barnwell low-level radioactive waste disposal site, and a $0.5 million increase in revenues by the fixed-based processing facility in Tennessee.

Gross profit from CPD decreased by $0.3 million, or 5.4%, from $6.1 million in the second quarter of 2002 to $5.8 million in the second quarter of 2003. As a percentage of revenues, gross profit decreased from 25.2% in the second quarter of 2002 to 24.7% in the second quarter of 2003. The decrease in gross profit was primarily attributable to the revenues recognized by the Barnwell operation in the second quarter of 2002 relating to the amortization expense of the Barnwell Operating Rights. Gross profit relating to the fixed-based processing facility in Tennessee increased by $0.6 million due to lower burial expense as a result of a decrease in burial volumes and due to lower production related expenses. In the second quarter of 2002, approximately $0.8 million in production related expenses were incurred relating to a large component project.

CPD income from operations increased $0.6 million from $3.2 million in the second quarter of 2002 to $3.8 million in the second quarter of 2003. This increase was primarily attributable to lower selling, general and administrative expenses as a result of a work force reduction in 2002.

Selling, General and Administrative Expense and Other Non-operating Items:

Selling, general and administrative expense decreased $0.2 million, or 2.6%, from $7.4 million in the second quarter of 2002 to $7.2 million in the second quarter of 2003. The decrease in selling, general and administrative expense was primarily attributable to lower employee benefit and personnel expenses, primarily relating to a reduction in work force in 2002, and lower bank related fees, which was offset by higher professional services fees, bid and proposal expense, and information systems related expenses.

Interest expense, net of interest income, decreased by $0.3 million from $1.4 million in the second quarter of 2002 to $1.1 million in the second quarter of 2003. The decrease was the result of the lower average borrowings and lower interest rates.

Income taxes increased from $2.8 million in the second quarter of 2002 to $4.4 million in the second quarter of 2003. The Company’s effective tax rate was 40.0% and 40.5% in the second quarter of 2003 and 2002, respectively.

Six Months Ended June 29, 2003 As Compared To Six Months Ended June 30, 2002

Duratek, Inc.

Revenues for the Company decreased by $0.9 million, or 0.6%, from $141.5 million during the six months ended June 30, 2002 to $140.6 million during the six months ended June 29, 2003. This decrease was the result of decreases in revenues from the FS and CPD operations, partially offset by an increase in revenues from the CS operations. Gross profit for the Company increased $3.6 million, or 12.7%, from $28.9 million during the six months ended June 30, 2002 to $32.5 million during the six months ended June 29, 2003. The increase in gross profit was the result of an increase in gross profit from the CS operations, partially offset by a decrease in gross profit from the CPD operations and, to a lesser extent, the FS operations. As a percentage of revenues, gross profit increased from 20.4% during the six months ended June 30, 2002 to 23.1% during the six months ended June 29, 2003. The increase in gross profit as a percentage of revenues was primarily a result of the successful completion of a transportation and logistic contract and high margins earned on certain non-recurring contract work. Selling, general and administrative expenses increased by $0.5 million, or 3.5%, from $14.8 million during the six months ended June 30, 2002 to $15.3 million during the six months ended June 29, 2003. As a percentage of revenues, selling, general and administrative expenses increased from 10.4% during the six months ended June 30, 2002 to 10.9% during the six months ended June 29, 2003. The increase in selling, general and administrative expense was primarily attributable to higher professional services fees, bid and proposal expense, and information systems related expenses, which was offset by lower employee benefit and personnel related expenses, primarily relating to a reduction in work force in 2002, and lower bank related fees.

The following table summarizes revenues, gross profit, and income from operations by business segments for the periods presented:

	Six months ended
(in thousands)	June 29, 2003		June 30, 2002
	(unaudited)

Federal Services
Revenues	$	62,103	$	66,377
Gross profit	11,299		11,646
Income from operations	5,203		6,279

Commercial Services
Revenues	$	35,755	$	30,184
Gross profit	12,067		6,254
Income from operations	7,419		2,940

Commercial Processing and Disposal
Revenues	$	42,762	$	44,963
Gross profit	9,158		10,957
Income from operations	4,629		4,887

Federal Services (“FS”):

FS revenues decreased by $4.3 million, or 6.4%, from $66.4 million during the six months ended June 30, 2002 to $62.1 million during the six months ended June 29, 2003. The decrease was primarily due to $9.4 million in non-recurring revenues recognized during the six months ended June 30, 2002 relating to the EMWMF contract. These revenues related to costs incurred during the construction phase of this contract. During the six months ended June 29, 2003, the Company recognized $1.3 million in revenues on this contract related to the operation and maintenance of this facility, which will be ongoing. In addition, revenues decreased by $2.3 million relating to staff augmentation work performed in 2002 that did not occur in 2003 and $2.7 million relating to the RPP Vitrification projects due to a decrease in contract costs incurred. These decreases were partially offset by incremental revenues of $4.8 million recognized during the six months ended June 29, 2003 relating to the award of new work. In addition, revenues increased by $2.3 million relating to a contract with the Federal government that has an award fee. This award fee was renegotiated in the first quarter of 2003.

Gross profit from FS decreased by $0.3 million, or 3.0%, from $11.6 million during the six months ended June 30, 2002 to $11.3 million during the six months ended June 29, 2003. The decrease in gross profit was primarily due to the EMWMF contract and the RPP Vitrification projects, offset by gross profit increases from a contract with the Federal government that has an award fee, the award of new work or additional work scope with higher gross margins, and the settlement with the Federal government on a previously unallowable expense. The losses on the EMWMF contract were primarily attributable to costs incurred due to weather related conditions at the disposal site. In addition, during the six months ended June 30, 2002, a loss reserve was recognized relating to work performed to clean up and close a DOE environmental technology site in Colorado. As a percentage of revenues, gross profit increased from 17.5% during the six months ended June 30, 2002 to 18.2% during the six months ended June 29, 2003 primarily due to the Federal government award fee estimate.

FS income from operations decreased by $1.1 million from $6.3 million during the six months ended June 30, 2002 to $5.2 million during the six months ended June 29, 2003. The decrease was primarily attributable to the decrease in gross profit and an increase in selling, general and administrative expenses related to bid and proposal work.

Commercial Services (“CS”):

CS revenues increased by $5.6 million, or 18.5%, from $30.2 million during the six months ended June 30, 2002 to $35.8 million during the six months ended June 29, 2003. The increase in revenues was primarily due to $2.6 million in revenues relating to the successful completion of a transportation and logistics contract, $2.0 million from the transportation services operations relating to higher sales from the rental of casks and an increase in business due to a change in the competitive environment that includes the loss a competitor, $1.2 million relating to a site decontamination and decommissioning project, and $0.6 million due to the award of new work. Offsetting these increases was a $1.3 million decrease in revenues from the radiological engineering services business relating to low margin work that is not being pursued in 2003.

Gross profit from CS increased by $5.8 million, or 93.0%, from $6.3 million during the six months ended June 30, 2002 to $12.1 million during the six months ended June 29, 2003. As a percentage of revenues, gross profit increased from 20.7% during the six months ended June 30, 2002 to 33.7% during the six months ended June 29, 2003. The increase in gross profit was primarily due to the successful completion of a transportation and logistics contract and high margins earned on certain non-recurring contract work.

CS income from operations increased $4.5 million from $2.9 million during the six months ended June 30, 2002 to $7.4 million during the six months ended June 29, 2003. This increase was primarily attributable to increases in gross profit.

Commercial Processing and Disposal (“CPD”):

CPD revenues decreased by $2.2 million, or 4.9%, from $45.0 million during the six months ended June 30, 2002 to $42.8 million during the six months ended June 29, 2003. In 2002, revenues of $1.9 million were recognized relating to a large component project in Memphis and revenues of $1.3 million were recognized by the Barnwell low-level radioactive waste disposal operation relating to a decision by the South Carolina Public Service Commission to allow a portion of the amortization expense of the Barnwell Operating Rights as a reimbursable allowable cost. The Barnwell Operating Rights revenue related to the amortization expense since July 1, 2000. In 2003, revenues from the Barnwell operation increased by $1.2 million, net of revenues from the operating rights. This was primarily related to disposal work performed on a transportation and logistics contract at the Barnwell low-level radioactive waste disposal site.

Gross profit from CPD decreased by $1.8 million, or 16.4%, from $11.0 million during the six months ended June 30, 2002 to $9.2 million during the six months ended June 29, 2003. As a percentage of revenues, gross profit decreased from 24.4% during the six months ended June 30, 2002 to 21.4% during the six months ended June 29, 2003. The decrease in gross profit was primarily attributable to revenues recognized in 2002 by the Barnwell operation relating to the amortization expense of the Barnwell Operating Rights, which represented the revenue on the amortization expense since July 1, 2000. In addition, the fixed based processing facility in Tennessee had higher utility expense and expenses relating to production supplies. Partially offsetting these expenses were lower secondary waste and transportation expenses.

CPD income from operations decreased $0.3 million from $4.9 million during the six months ended June 30, 2002 to $4.6 million during the six months ended June 29, 2003. This decrease was primarily attributable to lower gross profit. Selling, general and administrative expenses were lower due to lower personnel related expenses due to a work force reduction in 2002.

Selling, General and Administrative Expense and Other Non-operating Items:

Selling, general and administrative expense increased $0.5 million, or 3.5%, from $14.8 million during the six months ended June 30, 2002 to $15.3 million during the six months ended June 29, 2003. The increase in selling, general and administrative expense was primarily attributable higher professional services fees, bid and proposal expense, and information systems related expenses, which was offset by lower personnel related expenses, primarily relating to a reduction in work force in 2002, lower employee benefit expenses included in selling, general and administrative expense, and lower bank related fees.

Interest expense, net of interest income, decreased by $0.9 million from $3.1 million during the six months ended June 30, 2002 to $2.2 million during the six months ended June 29, 2003. The decrease was the result of the lower average borrowings and lower interest rates.

Income taxes increased from $4.5 million during the six months ended June 30, 2002 to $6.0 million during the six months ended June 29, 2003. The Company’s effective tax rate was 40.0% and 40.5% during the six months ended June 29, 2003 and 2002, respectively.

The Company 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 during the six months ended June 29, 2003. (See note 4 in the Notes to Consolidated Financial Statements.)

Liquidity and Capital Resources

The Company generated $20.0 million in cash flows from operating activities in the first six months of 2003, primarily from $15.3 million in income from operations before depreciation and amortization of $6.1 million, the cumulative effect of a change in accounting principle of $2.4 million, and a decrease in the investment in working capital of $8.1 million. Cash flow from operating activities includes activities relating to the operations of the Barnwell low-level radioactive waste disposal facility in South Carolina. Under South Carolina law, the Company is required to bill customers based on the amounts agreed upon with the State. On an annual basis, following the State’s fiscal year-end on June 30, the Company will remit amounts billed to customers of the waste disposal site less its fee for operating the site during such fiscal year. During the six months ended June 29, 2003, the Company had collected approximately $12.8 million, net, from customers of the waste disposal facility that will be remitted to the State in July 2003. In July 2003, the Company remitted $29.4 million to South Carolina.

The Company used $2.7 million in cash flows for investing activities, primarily for purchases of property and equipment in the first six months of 2003.

The Company used $3.4 million in cash flows for financing activities, primarily for the repayment of long-term debt under the Company’s bank credit facility. On June 30, 2003, subsequent to the quarter end, the Company repaid approximately $3.4 million of long-term debt and accrued interest.

The Company’s amended credit facility consists of a five-year $40.0 million revolving line of credit (which included temporary limits from $15.0 million to $35.0 million to meet certain working capital requirements of the Company), a five-year $50.0 million term loan, and a six and one-half year $40.0 million term loan. The term loans must be repaid in an amount equal to 50% of excess cash flows, as defined in the credit agreement. Borrowings under the credit facility bear interest at LIBOR plus an applicable margin or, at the Company’s option, the prime rate plus an applicable margin. The applicable margin is determined based on the Company’s performance and can range from 2.75% to 5.0% for LIBOR based borrowings and 1.75% to 4.0% for prime based borrowings. The facility required the Company to maintain certain financial ratios and restricted the payment of dividends on the Company’s common stock and preferred stock and the Company’s ability to make acquisitions. At June 29, 2003 the Company had accrued dividends of $2.9 million on its outstanding convertible redeemable preferred stock, which are included in accrued expenses and other current liabilities in the consolidated balance sheets.

On February 28, 2003, the bank credit agreement was amended to reset the amount of available borrowings under the revolving line of credit as well as to adjust certain covenants. Such covenants included several financial ratios and financial and operational requirements, which are measured on a monthly, quarterly, or annual basis. The amendment required a fee of approximately $0.1 million and the

payment of certain other fees and expenses. Under the amendment, the Company has no temporary limits under the $40.0 million revolving line of credit. In addition, the amended facility permits the Company to restart the payment of dividends on the Company’s 8% Cumulative Convertible Redeemable Preferred Stock in 2003, pay accrued dividends on the Convertible Redeemable Preferred Stock in 2004, and make permitted acquisitions, subject to the satisfaction of certain conditions set forth in the amended credit agreement. As of June 29, 2003, the Company had no outstanding borrowings under its revolving line of credit facility, $19.9 million of five year term loans bearing interest at LIBOR plus 3.00% (4.27%) and $38.6 million of six and one-half year term loans bearing interest at LIBOR plus 3.50% (4.77%).

The Company is required to post, from time to time, standby letters of credit and surety bonds to meet certain customer contract requirements. The Company does not directly post a financial assurance instrument for its subcontractors. As of June 29, 2003, the Company had outstanding assurance instruments of $18.3 million, including $5.6 million letters of credit and $12.7 million surety bonds, which expire at various contract completion dates. The Company has entered into certain indemnification agreements with the providers of the surety bonds, which would require funding only if the Company 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 the Company’s bank credit agreement up to $15.0 million as a sublimit to the $40.0 million revolving line of credit. The Company’s bank credit agreement limits the amount of outstanding surety bonds to $25.0 million. Since the filing of the Company’s December 31, 2002 annual report on Form 10-K, no material changes to financial or performance assurances to clients have occurred.

The following table summarizes the Company’s contractual cash obligations as of June 29, 2003 (in 000’s):

	Less than 1 Year		1-3 Years		4-5 Years		After 5 Years	Total
Long-term debt	$	10,400	$	38,741	$	9,408	—	$	58,549
Capital leases	173		242		—		—	415
Operating leases	3,164		3,601		858		—	7,623
Convertible preferred stock dividends	2,862		—		—		—	2,862

In addition, the Company is required to make additional repayments of the term loans under certain conditions as defined in the Company’s bank credit agreement.

The Company believes that cash flows from operations, cash resources at June 29, 2003 and, if necessary, borrowings available under its credit facility will be sufficient to meet its operating needs, including the quarterly preferred dividend payments of approximately $0.3 million, for at least the next twelve months.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s major market risk relates to changing interest rates. At June 29, 2003, the Company had floating rate long-term debt of $58.5 million, of which the current portion was $10.4 million. Average outstanding borrowings under the revolving credit portion of the credit facility were $0.20 million during the six months ended June 29, 2003. In addition, the Company does not have any material foreign currency or commodity risk.

Item 4. Controls and Procedures

(a) The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are adequate and effective.

(b) During the quarterly period covered by this report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II Other Information

Item 1. Legal Proceedings

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 for a discussion of legal proceedings.

On July 11, 2003, the Company announced that the United States District Court for the Eastern District of Washington granted the Company’s and co-defendant BNFL, Inc.’s motion for summary judgment against Toxgon Corporation (“Toxgon”), and dismissed all claims with prejudice. Toxgon’s claim filed in May 2000 alleged that the Company and BNFL, Inc. infringed upon a Toxgon patent that involved the vitrification of toxic waste.

On June 16, 2003, the Company announced that the United States Court of Appeals for the Fourth Circuit affirmed the decision of the United States District Court for the District of Maryland to dismiss with prejudice the securities class action litigation filed in June 2001 against the Company and two of its executive officers. The litigation alleged that certain statements and information contained in the Company’s press releases and in the periodic reports filed by it with the Securities and Exchange Commission contained materially false and misleading information in violation of the federal securities laws. Both the District Court and the Court of Appeals rejected this contention.

Item 2. Changes in Securities and Use of Proceeds

The Certificate of Designations of the 8% Cumulative Convertible Redeemable Preferred Stock, par value $.01 per share, was amended to extend the mandatory redemption date from February 5, 2004 to September 30, 2005.

Item 3. Defaults Upon Senior Securities

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

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

At the Company’s Annual Meeting of Stockholders held on May 14, 2003, the following matters were voted upon:

a. Daniel A. D’Aniello was elected to serve as director of the Company by the convertible preferred stockholders for a one-year term. Admiral James D. Watkins, George V. McGowan, Earle C. Williams, Dr. Francis J. Harvey, and Robert E. Prince were elected to serve as directors for a one-year term by the common stockholders and convertible preferred stockholders, voting together as a single class.

For the directors elected by the preferred and common stockholders, voting together as a single class, the votes are shown below:

	Votes For	Votes Against
Admiral James D. Watkins	17,501,224	—
George V. McGowan	17,321,479	—
Earle C. Williams	17,319,939	—
Dr. Francis J. Harvey	17,323,655	—
Robert E. Prince	17,313,416	—

b. The proposal to approve an amendment to the Certificate of Designations of the 8% Cumulative Convertible Redeemable Preferred Stock, par value $.01 per share, to extend the mandatory redemption date from February 5, 2004 to September 30, 2005 was approved by the common stockholders and convertible preferred stockholders, voting together as a single class, by a vote of 14,570,336 votes for, 531,551 votes against, 21,483 votes abstained, and no broker non-votes with respect to this proposal. The matter was approved by the unanimous vote of the convertible preferred stockholders voting as a separate class.

c. The proposal to reappoint KPMG LLP as the Company’s independent auditors for the year ending December 31, 2003 was approved by the common stockholders and convertible preferred stockholders, voting together as a single class, by a vote of 17,730,913 votes for, 234,925 votes against, 7,615 votes abstained, and no broker non-votes with respect to this proposal.

Item 6. Exhibits and Reports on Form 8-K

a.		Exhibits

		See accompanying Index to Exhibits.

b.		Reports

		Current report on Form 8-K filed on June 17, 2003 reporting the dismissal of the securities class action litigation.

		Current report on Form 8-K filed on May 12, 2003 reporting the filing of certifications required by Section 906 of the Sarbanes-Oxley Act of 2002.

		Current report on Form 8-K filed on April 29, 2003 reporting the Company’s financial results for the fiscal quarter ended March 30, 2003.

SIGNATURES

Pursuant to the requirements 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: August 11, 2003	BY:	/s/ Robert F. Shawver
	Robert F. Shawver Executive Vice President and Chief Financial Officer


Dated: August 11, 2003	BY:	/s/ William M. Bambarger, Jr.
	William M. Bambarger, Jr Corporate Controller

EXHIBITS INDEX

Exhibit No.

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.

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		Stock Purchase Agreement among Carlyle Partners II, L.P., Carlyle International Partners II, L.P., Carlyle International Partners III, L.P., C/S International Partners, Carlyle-GTSD Partners, L.P., Carlyle-GTSD Partners II, L.P., GTS Duratek, Inc. and National Patent Development Corporation dated as of January 24, 1995. Incorporated herein by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on February 1, 1995. (File No. 0-14292)

4.3		Stockholders Agreement by and among Carlyle Partners II, L.P., Carlyle International Partners II, L.P., Carlyle International Partners III, L.P., C/S International Partners, Carlyle-GTSD Partners, L.P., Carlyle-GTSD Partners II, L.P., GTS Duratek, Inc. and National Patent Development Corporation dated as of January 24, 1995. Incorporated herein by reference to Exhibit 4.3 of the Registrant’s Form 8-K filed on February 1, 1995. (File No. 0-14292)

4.4		Registration Rights Agreement by and among Carlyle Partners II, L.P., Carlyle International Partners II, L.P., Carlyle International Partners III, L.P., C/S International Partners, Carlyle-GTSD Partners, L.P., Carlyle-GTSD Partners II, L.P., GTS Duratek, Inc. and National Patent Development Corporation dated as of January 24, 1995. Incorporated herein by reference to Exhibit 4.4 of the Registrant’s Form 8-K filed on February 1, 1995. (File No. 0-14292)

4.5		Certificate of Amendment of the Certificate of Incorporation of Duratek, Inc. dated May 15, 2003. Filed herewith.

10.1		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.

10.2		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)

10.3		Amended and Restated Credit Agreement dated as of June 8, 2000 by and among GTS Duratek, Inc., GTS Duratek Bear Creek, Inc., GTS Duratek Colorado, Inc., Hittman Transport Services, Inc., GTS Instrument Services, Incorporated, General Technical Services, Inc., GTSD Sub III, Inc., GTSD Sub IV, Inc., Frank W. Hake Associates LLC, Chem-Nuclear Systems L.L.C., Waste Management Federal Services, Inc., Waste Management Federal Services of Idaho, Inc., Waste Management Federal Services of Hanford, Inc., Waste Management Technical Services, Inc., Waste Management Geotech, Inc., the Lenders party thereto, First Union National Bank, as Administrative Agent, Credit Lyonnais New York Branch, as Documentation Agent, Fleet National Bank, as Syndication Agent, and First Union Securities, Inc., as Lead Arranger and Book Manager. Incorporated herein by reference to Exhibit 99.4 to the Registrant’s Current Report on Form 8-K filed on June 22, 2000. (File No. 0-14292)

10.4		Second Amended and Restated Security Agreement dated as of June 8, 2000 made by GTS Duratek, Inc., GTS Duratek Bear Creek, Inc., GTS Duratek Colorado, Inc., Hittman Transport Services, Inc., GTS Instrument Services, Incorporated, General Technical Services, Inc., GTSD Sub III, Inc., GTSD Sub IV, Inc., Frank W. Hake Associates, L.L.C., Chem-Nuclear Systems, L.L.C., Waste Management Federal Services, Inc., Waste Management Federal Services of Idaho, Inc., Waste Management Federal Services of Hanford, Inc., Waste Management Technical Services, Inc., Waste Management Geotech, Inc., and First Union National Bank, as Collateral Agent. Incorporated herein by reference to Exhibit 99.5 of the Registrant’s Current Report on Form 8-K filed on June 22, 2000. (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		Executive Employment Agreement dated June 1, 2002 by and between Duratek, Inc. and Robert E. Prince. Incorporated herein by reference to Exhibit 10.15 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.

10.9		Executive Employment Agreement dated June 1, 2002 by and between Duratek, Inc. and Robert F. Shawver. Incorporated herein by reference to Exhibit 10.16 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.

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.

10.11		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.

10.12		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.

10.13		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.

10.14		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.

10.15		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.

10.16		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.

10.17		Fourth Amendment to Credit Agreement dated as of February 28, 2003 made by Duratek, Inc., as borrower and as agent for the Subsidiary Borrowers, the Lenders party to the Credit Agreement, and Wachovia Bank, National Association, as Administrative Agent. Incorporated herein by reference to Exhibit 10.17 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

10.18		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.

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.1		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.