- Revenue of $167.8 million and gross
profit of $6.9 million are higher than comparative period in
2014
- Cash balance of $225 million at
March 31, 2015
- Anticipated year-end 2015 cash
balance is reiterated and expected to be in the range of $175
million to $200 million
Centrus Energy Corp. (NYSE MKT: LEU) today reported a net loss
of $15.4 million or $1.71 per basic and diluted share for the
quarter ended March 31, 2015, compared to a net loss of $50.8
million or $10.37 per basic and diluted share for the first quarter
of 2014.
The financial results for the first quarter of 2015 include
gross profit of $6.9 million, an increase of $27.8 million compared
with the period ended March 31, 2014. Gross profit for the low
enriched uranium (LEU) segment increased $26.9 million in the
three-month period due to the decrease in non-production expenses
and the increase in the average separative work unit (SWU) prices
billed to customers, partially offset by lower SWU sales
volume.
Following the cessation of enrichment at the Paducah Gaseous
Diffusion Plant (GDP) in May 2013, costs for plant activities that
were formerly included in production costs were charged directly to
cost of sales. Non-production expenses, which declined $30.2
million in the first quarter of 2015 compared to the prior year
period, include logistics support, inventory management and
disposition, regulatory compliance, utility requirements for
operations, security, and other Paducah site management activities
related to the transitioning of facilities and infrastructure to
the Department of Energy (DOE).
“We are focused on strengthening our core business of selling
low enriched uranium to our utility customers as we complete the
final phase of transition from our legacy operations at Paducah,”
said Daniel B. Poneman, Centrus president and chief executive
officer. “Our results this quarter reflect these changes with an
increase in gross profit for the quarter as compared with the first
quarter of 2014 and a solid cash balance.”
Results of Operations
Upon emergence from Chapter 11 bankruptcy on September 30, 2014,
Centrus adopted fresh start accounting, which resulted in Centrus
becoming a new entity for financial reporting purposes. References
to “Successor” or “Successor Company” relate to the financial
position of the reorganized Centrus as of and subsequent to
September 30, 2014, and results of operations subsequent to
September 30, 2014. References to “Predecessor” or “Predecessor
Company” relate to the Company prior to September 30, 2014. As a
result of the application of fresh start accounting and the effects
of the implementation of the plan of reorganization, the
consolidated financial statements on or after September 30, 2014,
are not comparable to consolidated financial statements prior to
that date.
Revenue
Revenue for the first quarter of 2015 was $167.8 million, an
increase of $19.2 million or 13 percent compared to the same
quarter of 2014. Revenue from the LEU segment increased $1.2
million in the three months ended March 31, 2015, compared to the
corresponding period in 2014. The volume of SWU sales declined 36
percent reflecting the variability in timing of utility customer
orders and the expected decline in SWU deliveries in 2015 compared
to 2014. The average price billed to customers for sales of SWU
increased 12 percent reflecting the particular contracts under
which SWU were sold during the period.
Revenue from the contract services segment increased $18.0
million (or 600 percent) in the three months ended March 31, 2015,
compared to the corresponding period in 2014, reflecting $20.8
million for American Centrifuge work performed for Oak Ridge
National Laboratory (ORNL) under the American Centrifuge Technology
Demonstration and Operations (ACTDO) Agreement in the current
period, partially offset by a decline in contract services work
performed for DOE and DOE contractors.
In a number of sales transactions, Centrus transfers title and
collects cash from customers but does not recognize the revenue
until the LEU is physically delivered. At March 31, 2015, deferred
revenue totaled $89.0 million compared to $100.9 million at
December 31, 2014. The gross profit associated with deferred
revenue as of March 31, 2015, was $16.1 million.
Cost of Sales and Gross Profit Margin
Cost of sales for the LEU segment declined $25.7 million (or 16
percent) in the three months ended March 31, 2015, compared to the
corresponding period in 2014, due to lower SWU sales volumes and
lower non-production expenses, partially offset by higher uranium
sales volumes.
As we accelerated the expected productive life of plant assets
and ceased enrichment at the Paducah GDP in May 2013, we have
incurred a number of expenses unrelated to production that have
been charged directly to cost of sales. Non-production expenses
totaled $4.7 million in the three months ended March 31, 2015, and
$34.9 million in the corresponding period in 2014.
Cost of sales per SWU, excluding non-production expenses, was 10
percent higher in the three months ended March 31, 2015, compared
to the corresponding period in 2014, primarily due to the increase
to book value of SWU inventories recorded as of September 30, 2014,
as part of the application of fresh start accounting. There were no
purchases of SWU from Russia in the three months ended March 31,
2015, based on our agreed-upon delivery schedule.
Cost of sales for the contract services segment increased $17.1
million (or 407 percent) in the three months ended March 31, 2015,
compared to the corresponding period in 2014, primarily due to
American Centrifuge work performed under the ACTDO Agreement in the
current period.
Gross profit increased $27.8 million to a gross profit of $6.9
million in the three months ended March 31, 2015, from a gross loss
of $20.9 million in the three months ended March 31, 2014. Our
margin was 4.1 percent in the three months ended March 31, 2015,
compared to (14.1 percent) in the corresponding period in 2014.
Gross profit for the LEU segment increased $26.9 million in the
three-month period due to the decrease in non-production expenses
and the increase in the average SWU price billed to customers,
partially offset by lower SWU sales volume. Our gross loss from the
contract services segment improved by $0.9 million in the three
months ended March 31, 2015, compared to the corresponding period
in 2014.
Advanced Technology, SG&A, Amortization, Special Charges
and Other Income
Advanced technology costs declined $31.5 million in the three
months ended March 31, 2015, compared to the corresponding period
in 2014, reflecting development activity in the prior period under
the Cooperative Agreement with DOE, which expired in accordance
with its terms on April 30, 2014. We incurred $1.8 million in the
three months ended March 31, 2015, for certain demobilization and
maintenance costs related to American Centrifuge that are included
in advanced technology costs.
Selling, general and administrative (SG&A) expenses
increased $0.6 million in the three months ended March 31, 2015,
compared to the corresponding period in 2014, reflecting lower
salaries, benefits and other compensation of $0.9 million offset
with additional consulting costs of $0.7 million and additional
office related expenses of $0.9 million.
Amortization commenced in the fourth quarter of 2014 for the
intangible assets resulting from the Company’s emergence from
bankruptcy and adoption of fresh start accounting.
The cessation of enrichment at the Paducah GDP and evolving
business needs have resulted in workforce reductions since July
2013. Special charges in the three months ended March 31, 2015,
consisted of termination benefits of $0.9 million less $0.3 million
of severance paid by the Company and invoiced to DOE for its share
of employee severance. In the first quarter of 2014, $0.6 million
was invoiced to DOE and is reflected as a credit to special
charges.
In the three months ended March 31, 2015, other income included
net gains on sales of assets and property of $0.8 million.
DOE and the Company provided cost-sharing support for American
Centrifuge activities under the Cooperative Agreement, which
expired in accordance with its terms on April 30, 2014. DOE’s cost
share of qualifying American Centrifuge expenditures in the three
months ended March 31, 2014, was recognized as other income.
Cash Flow
Centrus ended the first quarter of 2015 with a consolidated cash
balance of $225.0 million. We anticipate having adequate liquidity
to support our business operations for at least the next 12 months.
Our view of liquidity is dependent on our operations and the level
of expenditures and government funding for the work performed under
the ACTDO Agreement. The change in cash and cash equivalents from
our condensed consolidated statements of cash flows are as follows
on a summarized basis (dollars in millions):
Successor Predecessor
Three Months
Ended
March 31, 2015
Three Months
Ended
March 31, 2014
Net Cash Provided by (Used in) Operating Activities $ 2.3 $ (229.7
) Net Cash Provided by Investing Activities 3.9 0.6 Net Cash
Provided by Financing Activities — — Net
Increase (Decrease) in Cash and Cash Equivalents
$
6.2 $ (229.1 )
Monetization of inventory purchased or produced in prior periods
provided cash flow in the three months ended March 31, 2015, as
inventories declined $124.1 million due to sales deliveries,
ceasing of enrichment, and no additional product received under SWU
purchase agreements in the first quarter. In addition, accounts
receivable declined $37.2 million due to monetization in the first
quarter without increased sales and billings. Payment of the SWU
purchase payables balance of $140.1 million, due to the timing of
deliveries, was a significant use of cash flow in the three-month
period. The net loss of $15.4 million in the three months ended
March 31, 2015, net of non-cash charges including depreciation and
amortization, was a use of cash flow.
In the corresponding period in 2014, payment of the SWU purchase
payables balance of $340.7 million, due to the timing of
deliveries, was a significant use of cash flow. The net loss of
$50.8 million, net of non-cash charges including depreciation and
amortization, was a use of cash flow. Monetization of inventory
purchased or produced in prior periods provided cash flow in the
three-month period as accounts receivable declined $125.0 million
and inventories declined $53.6 million.
2015 Outlook
Centrus will continue its transition during 2015, and we expect
to deliver significantly less SWU to customers than the
approximately 8 million SWU delivered in 2013. During 2014, we
delivered approximately 3 million SWU, and we expect to deliver
approximately 2 million SWU in 2015. We will also continue to
execute our contract with ORNL to conduct research, development and
demonstration of the American Centrifuge technology under the terms
of the ACTDO Agreement.
Specifically, we anticipate SWU and uranium revenue in 2015 in a
range of $350 million to $375 million and total revenue in a range
of $425 million to $450 million. We expect to end 2015 with a cash
and cash equivalents balance in a range of $175 million to $200
million.
Our financial guidance is subject to a number of assumptions and
uncertainties that could affect results either positively or
negatively. Variations from our expectations could cause
differences between our guidance and our ultimate results. Among
the factors that could affect our results are:
- Additional short-term sales;
- Timing of customer orders and related
SWU deliveries;
- Payment of disputed DOE contract
service costs;
- Funding of the ACTDO Agreement or a
successor agreement beyond its current contract expiration date of
September 30, 2015; and
- The cost of any American Centrifuge
demobilization or additional costs related to the overall
transition of Centrus.
About Centrus Energy Corp.
Centrus Energy Corp. is a trusted supplier of enriched uranium
fuel for a growing fleet of international and domestic commercial
nuclear power plants.
Forward-Looking
Statements
This news release contains “forward-looking statements” within
the meaning of Section 21E of the Securities Exchange Act of 1934 -
that is, statements related to future events. In this context,
forward-looking statements may address our expected future business
and financial performance, and often contain words such as
“expects”, “anticipates”, “intends”, “plans”, “believes”, “will”,
“should”, “could” or “may” and other words of similar meaning.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain. For Centrus Energy Corp.,
particular risks and uncertainties that could cause our actual
future results to differ materially from those expressed in our
forward-looking statements include, risks and uncertainties related
to our recent emergence from Chapter 11 bankruptcy, our new capital
structure and the adoption of fresh start accounting; risks related
to our significant long-term liabilities including material
unfunded defined benefit pension plan obligations and
postretirement health and life benefit obligations; risks related
to the limited trading markets in our securities and risks relating
to our ability to maintain the listing of our common stock on the
NYSE MKT LLC; the continued impact of the March 2011 earthquake and
tsunami in Japan on the nuclear industry and on our business,
results of operations and prospects; the impact and potential
extended duration of the current supply/demand imbalance in the
market for low enriched uranium (“LEU”); risks related to the
ongoing transition of our business, including the impact of our
ceasing enrichment at and the de-lease and return to the U.S.
Department of Energy (“DOE”) of the Paducah gaseous diffusion plant
and uncertainty regarding our ability to commercially deploy the
American Centrifuge project; our dependence on deliveries of LEU
from Russia under a commercial supply agreement (the “Russian
Supply Agreement”) with the Russian government entity Joint Stock
Company “TENEX” (“TENEX”); uncertainty regarding funding for the
American Centrifuge project and the potential for a demobilization
or termination of the American Centrifuge project if additional
government funding is not provided following completion of the
current agreement with UT-Battelle, LLC (“UT-Battelle”), the
management and operating contractor for Oak Ridge National
Laboratory (“ORNL”) for continued research, development and
demonstration of the American Centrifuge technology (the “ACTDO
Agreement”); risks related to our ability to perform the work
required under the ACTDO Agreement at a cost that does not exceed
the firm fixed funding provided thereunder; uncertainty regarding
the timing and structure of the U.S. government program for
maintaining a domestic enrichment capability to meet national
security requirements and our role in such a program; the impact of
actions we have taken (including as a result of the reduction in
scope of work under the ACTDO Agreement as compared to the scope of
work under the prior agreement signed with DOE in June 2012 (the
“Cooperative Agreement”)) or might take in the future to reduce
spending on the American Centrifuge project, including the
potential loss of key suppliers and employees and impacts to cost,
schedule and the ability to remobilize for commercial deployment of
the American Centrifuge Plant; the impact of nuclear fuel market
conditions and other factors on the economic viability of the
American Centrifuge project without additional government support
and on our ability to finance the project and the potential for a
demobilization or termination of the project; uncertainty regarding
our ability to achieve targeted performance over the life of the
American Centrifuge Plant which could affect the overall economics
of the American Centrifuge Plant; uncertainty concerning the
ultimate success of our efforts to obtain a loan guarantee from DOE
and/or other financing, including intercompany funding from wholly
owned subsidiary United States Enrichment Corporation (“Enrichment
Corp.”), for the American Centrifuge project or additional
government support for the project and the timing and terms
thereof; the decline in our backlog and risks relating to the
remaining backlog including uncertainty concerning customer actions
under current contracts and in future contracting due to market
conditions, the delay and uncertainty in deployment of the American
Centrifuge technology and/or as a result of changes that may be
required to such contracts due to our cessation of enrichment at
Paducah; the dependency of government funding or other government
support for the American Centrifuge project on Congressional
appropriations or on actions by DOE or Congress; potential changes
in our anticipated ownership of or role in the American Centrifuge
project, including as a result of our role as a subcontractor to
UT-Battelle or as a result of the need to raise additional capital
to finance the project in the future; the potential for DOE to seek
to terminate or exercise its remedies under the 2002 DOE-USEC
agreement, or to require modifications to such agreement that are
materially adverse to Centrus Energy Corp.’s interests; changes in
U.S. government priorities and the availability of government
funding or support, including loan guarantees; risks related to our
ability to manage our liquidity without a credit facility; risks
related to our ability to sell the LEU we procure under our
purchase obligations under the Russian Supply Agreement including
quotas that limit our ability to import Russian LEU we purchase
under the Russian Supply Agreement into the United States, trade
barriers and contract terms that limit our ability to deliver this
LEU to customers in other countries, and risks related to actions
that may be taken by the U.S. government, the Russian government or
other governments that could affect our ability or the ability of
TENEX to perform under the Russian Supply Agreement, including the
imposition of sanctions, restrictions or other requirements; risks
associated with our reliance on third-party suppliers to provide
essential services to us; the decrease or elimination of duties
charged on imports of foreign-produced LEU; pricing trends and
demand in the uranium and enrichment markets and their impact on
our profitability; movement and timing of customer orders; changes
to, or termination of, our agreements with the U.S. government;
risks related to delays in payment for our contract services work
performed for DOE, including our ability to resolve certified
claims for payment filed by Enrichment Corp. under the Contracts
Dispute Act; the impact of government regulation by DOE and the
U.S. Nuclear Regulatory Commission; the outcome of legal
proceedings and other contingencies (including lawsuits and
government investigations or audits); the competitive environment
for our products and services; changes in the nuclear energy
industry; the impact of volatile financial market conditions on our
business, liquidity, prospects, pension assets and credit and
insurance facilities; revenue and operating results can fluctuate
significantly from quarter to quarter, and in some cases, year to
year; and other risks and uncertainties discussed in this and our
other filings with the Securities and Exchange Commission,
including our Annual Report on Form 10-K for the year ended
December 31, 2014.
Readers are urged to carefully review and consider the various
disclosures made in this report and in our other filings with the
Securities and Exchange Commission that attempt to advise
interested parties of the risks and factors that may affect our
business. We do not undertake to update our forward-looking
statements to reflect events or circumstances that may arise after
the date of this news release except as required by law.
CENTRUS ENERGY CORP.
CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS (Unaudited)
(in millions, except per share
data)
Successor
Predecessor
Three Months
Ended
March 31, 2015
Three Months
Ended
March 31, 2014
Revenue: Separative work units $ 103.6 $ 145.6 Uranium 43.2 —
Contract services 21.0 3.0 Total
Revenue 167.8 148.6 Cost of Sales: Separative work units and
uranium 139.6 165.3 Contract services 21.3 4.2
Total Cost of Sales 160.9 169.5
Gross profit (loss) 6.9 (20.9 ) Advanced technology costs 1.8 33.3
Selling, general and administrative 12.3 11.7 Amortization of
intangible assets 4.0 — Special charges (credit) for workforce
reductions 0.6 (0.5 ) Other (income) (0.8 ) (26.2 )
Operating (loss) (11.0 ) (39.2 ) Interest expense 4.9 4.6 Interest
(income) (0.2 ) (0.4 ) Reorganization items, net —
8.4 (Loss) before income taxes (15.7 ) (51.8 )
Provision (benefit) for income taxes (0.3 ) (1.0 )
Net (loss)
$ (15.4 ) $ (50.8
) Net (loss) per share - basic and diluted $ (1.71 )
$ (10.37 ) Weighted-average number of shares outstanding - basic
and diluted 9.0 4.9
CENTRUS ENERGY CORP.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(in millions)
March 31,
2015
December 31,
2014
ASSETS Current Assets Cash and cash equivalents $ 225.0 $
218.8 Accounts receivable, net 20.0 58.9 Inventories 419.2 462.2
Deferred costs associated with deferred revenue 72.9 82.9 Other
current assets 18.5 19.6 Total current assets 755.6
842.4 Property, plant and equipment, net 3.4 3.5 Deferred taxes
20.3 26.0 Deposits for surety bonds 31.1 34.8 Intangible assets
115.2 119.2 Excess reorganization value 137.2 137.2 Other long-term
assets 22.2 20.6 Total Assets
$ 1,085.0
$ 1,183.7 LIABILITIES AND STOCKHOLDERS’
EQUITY Current Liabilities Accounts payable and accrued
liabilities $ 43.2 $ 50.5 Payables under SWU purchase agreements —
140.1 Deferred taxes 20.3 26.0 Inventories owed to customers and
suppliers 240.0 158.9 Deferred revenue 89.0 100.9
Total current liabilities 392.5 476.4 Long-term debt 244.0 240.4
Postretirement health and life benefit obligations 212.8 211.4
Pension benefit liabilities 177.3 179.3 Other long-term liabilities
52.2 54.6 Total Liabilities 1,078.8 1,162.1
Stockholders’ Equity 6.2 21.6 Total Liabilities and
Stockholders’ Equity
$ 1,085.0 $
1,183.7
CENTRUS ENERGY CORP.
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS (Unaudited)
(in millions)
Successor
Predecessor Three Months
Ended
March 31, 2015
Three Months
Ended
March 31, 2014
Cash Flows from Operating Activities Net (loss) $ (15.4 ) $
(50.8 ) Adjustments to reconcile net (loss) to net cash provided by
(used in) operating activities: Depreciation and amortization 4.2
2.8 Interest on paid-in-kind toggle notes 1.8 — Gain on sales of
assets (0.8 ) — Non-cash reorganization items — 1.6 Changes in
operating assets and liabilities: Accounts receivable – decrease
37.2 125.0 Inventories, net – decrease 124.1 53.6 Payables under
SWU purchase agreements – (decrease) (140.1 ) (340.7 ) Deferred
revenue, net of deferred costs – (decrease) (1.9 ) (5.7 ) Accounts
payable and other liabilities – (decrease) (8.6 ) (16.3 ) Other,
net 1.8 0.8 Net Cash Provided by (Used
in) Operating Activities 2.3 (229.7 )
Cash Flows Provided by Investing Activities Deposits for
surety bonds - net decrease 3.7 0.6 Proceeds from sales of assets
0.2 — Net Cash Provided by Investing
Activities 3.9 0.6
Cash Flows
Provided by Financing Activities Net Cash Provided by Financing
Activities — — Net Increase (Decrease) 6.2 (229.1 )
Cash and Cash Equivalents at Beginning of Period 218.8
314.2 Cash and Cash Equivalents at End of
Period
$ 225.0 $ 85.1
Supplemental cash flow information: Interest paid $ 6.0 $ —
Non-cash activities: Conversion of interest payable-in-kind
to long-term debt $ 1.8 $ —
Centrus Energy Corp.Investors:Don Hatcher (301)
564-3460orMedia:Jeremy Derryberry (301) 564-3392
Centrus Energy (AMEX:LEU)
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