- Net loss of $15.1 million on revenue
of $63.3 million for the quarter
- Gross profit of $11.2 million for
six-month period ending June 30, 2015
- Cash balance of $218.5 million at
June 30, 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 $15.1 million or $1.68 per basic and diluted share for the
quarter ended June 30, 2015, compared to a net loss of $28.0
million or $5.71 per basic and diluted share for the second quarter
2014. For the six months ended June 30, 2015, Centrus reported a
net loss of $30.5 million compared to a net loss of $78.8 million
in the same period of 2014.
Gross profit increased $0.8 million in the three months and
$28.6 million in the six months ended June 30, 2015, compared to
the corresponding periods in 2014, reflecting charges in the prior
periods related to the wind-down of the Paducah Gaseous Diffusion
Plant (GDP).
“With our long track record as a reliable supplier and our broad
relationships across the global industry, we are well positioned to
promote reliable and commercially attractive supplies to our
customers,” said Daniel B. Poneman, Centrus president and chief
executive officer. “We are intently focused on securing new
business and diverse sources of supply to support our growth in the
coming years. We are taking a customer-first approach, since
competitively priced nuclear power will drive Centrus’ long-term
success.”
“While we are in the early stages of our fresh start following
reorganization and still have a lot of work to do, we believe the
company is on the right trajectory. Our second quarter results
reflect our declining costs, improving margins, and actions to
manage our order book effectively,” Poneman said.
Revenue
Revenue for the second quarter of 2015 was $63.3 million, a
decrease of $57.9 million or 48 percent compared to the same
quarter of 2014. In the sixth month period ending June 30, 2015,
revenue was $231.1 million, a decrease of $38.7 million or 14
percent from the same period in 2014. The volume of separative work
units (SWU) sales declined 63 percent in the three-month period and
46 percent in the six-month period, reflecting the variability of
timing of 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 9 percent in both the three-
and six-month periods reflecting the particular contracts under
which SWU were sold during the period.
Revenue from the contract services segment increased $4.4
million or 26 percent in the three months and $22.4 million or 114
percent in the six months ended June 30, 2015, compared to the
corresponding periods in 2014, reflecting American Centrifuge work
performed under the American Centrifuge Technology Demonstration
and Operations (ACTDO) Agreement beginning May 1, 2014, partially
offset by a decline in contract services work performed for the
Department of Energy (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 June 30, 2015, deferred
revenue totaled $70.3 million compared to $100.9 million at
December 31, 2014. The gross profit associated with deferred
revenue as of June 30, 2015, was $11.4 million.
Cost of Sales and Gross Profit Margin
Cost of sales for the quarter ended June 30, 2015, was $59.0
million, a decrease of $58.7 million or 50 percent compared to the
corresponding period in 2014. For the six-month period of 2015,
cost of sales was $219.9 million, a reduction of $67.3 million or
23 percent compared to the same period in 2014 due to lower SWU
sales volume and lower direct charges. Direct charges to cost of
sales include logistics support and inventory management and
disposition. In the prior periods, direct charges included costs
associated with the transitioning of the Paducah GDP to DOE. Direct
charges totaled $3.9 million and $8.6 million in the three and six
months ended June 30, 2015, and $14.3 million and $49.2 million in
the corresponding periods in 2014.
Cost of sales per SWU, excluding direct charges, increased 2
percent in the three months and 7 percent in the six months ended
June 30, 2015, compared to the corresponding periods 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. In addition, approximately one-half of our
sales in the prior six-month period were derived from previously
deferred sales, whereby customers made advance payments to be
applied against future deliveries. The unit cost per SWU for these
sales reflects the average inventory cost when the customer took
title to the SWU. These costs were accumulated in deferred costs
and were then recognized as cost of sales as the SWU is
delivered.
Cost of sales for the contract services segment increased $5.4
million or 32 percent in the three months and $22.5 million or 107
percent in the six months ended June 30, 2015, compared to the
corresponding periods in 2014, primarily due to American Centrifuge
work performed under the ACTDO Agreement in the current
periods.
Our gross profit margin was 6.8 percent in the three months
ended June 30, 2015 compared to 2.9 percent in the corresponding
period in 2014, and 4.8 percent in the six months ended June 30,
2015 compared to a loss of (6.4 percent) in the corresponding
period in 2014.
Advanced Technology, SG&A, Amortization, Special Charges
and Other Income
Advanced technology costs declined $14.0 million in the three
months and $45.5 million in the six months ended June 30, 2015,
compared to the corresponding periods in 2014, reflecting
development work performed in the prior periods under the
Cooperative Agreement with DOE, which expired in accordance with
its terms on April 30, 2014.
American Centrifuge costs incurred by the Company that are
outside of the current ACTDO Agreement are included in advanced
technology costs, including certain demobilization and maintenance
costs. Such costs totaled $4.0 million in the three months and $5.8
million in the six months ended June 30, 2015, and $7.0 million in
May-June 2014.
Selling, general and administrative (SG&A) expenses declined
$3.8 million in the three months and $3.2 million in the six months
ended June 30, 2015, compared to the corresponding periods in 2014.
Salaries, benefits and other compensation declined $4.5 million in
the three-month period and $5.4 million in the six-month period,
including a gain of $3.9 million resulting from the remeasurement
of pension obligations under the Employees’ Retirement Plan of
Centrus Energy Corp. and the non-qualified supplemental executive
pension plans. The remeasurements resulted from the level of
lump-sum payments to former employees including those affected by
workforce reductions. Consulting costs increased $0.3 million and
$1.0 million in the three- and six-month periods, respectively.
Office related expenses increased $0.9 million in the six-month
period.
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. In the three and six months ended June 30, 2015, special
charges consisted of termination benefits of $2.9 million and $3.8
million, respectively, less $0.3 million in the six-month period
for severance paid by the Company and invoiced to DOE for its share
of employee severance. In the three and six months ended June 30,
2014, special charges for termination benefits consisted of $4.1
million in the three-month period and $4.2 million in the six-month
period, less amounts paid by the Company and invoiced to DOE of
$1.6 million in the three-month period and $2.2 million in the
six-month period.
In the three and six months ended June 30, 2015, other income
consisted of net gains on sales of assets and property. 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 and six
months ended June 30, 2014 was recognized as other income.
Cash Flow
We ended the second quarter of 2015 with a consolidated cash
balance of $218.5 million. Cash used in operations in the six-month
period of 2015 was $5.8 million compared to $193.4 million in the
same period last year. Monetization of inventory purchased or
produced in prior periods provided cash flow in the six months
ended June 30, 2015 as inventories declined $118.1 million due to
sales deliveries exceeding product received under SWU purchase
agreements. In addition, accounts receivable declined $31.8 million
due to monetization in the first quarter without increased sales
and billings. The net reduction of the SWU purchase payables
balance of $116.9 million, due to the timing of purchase
deliveries, was a significant use of cash flow in the six-month
period. The net loss of $30.5 million in the six months ended June
30, 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 purchase
deliveries, was a significant use of cash flow, as was the net
reduction in accounts payable and accrued liabilities by $34.8
million due to reduced operational activity. The net loss of $78.8
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
six-month period as accounts receivable declined $137.9 million and
inventories declined $127.7 million.
2015 Outlook
Centrus will continue its transition during 2015, and we expect
to deliver significantly less SWU to customers than when we began
our transition in 2013. In 2013, we delivered approximately 8
million SWU, and during 2014, we delivered approximately 3 million
SWU. 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;
- The outcome of legal proceedings and
other contingencies;
- 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.
Condensed Consolidated Financial Statements
(Unaudited)
Included below are excerpts from our Condensed Consolidated
Financial Statements (Unaudited) to be filed as part of our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.
Upon emergence from Chapter 11 bankruptcy, 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.
Investor Call
Centrus plans to hold an investor call on August 26, 2015, to
discuss the second quarter results. Details about the call will be
announced in the near future and will be available on our website
www.centrusenergy.com.
About Centrus Energy Corp.
Centrus Energy Corp. is a trusted supplier of enriched uranium
fuel for commercial nuclear power plants in the United States and
around the world.
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 emergence from Chapter 11 bankruptcy, our resulting 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
the allocation of 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 except as required by law.
CENTRUS ENERGY CORP. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share
data)
Three Months Ended
June 30,
Six Months Ended
June 30,
Successor Predecessor Successor
Predecessor 2015 2014 2015 2014
Revenue: Separative work units $ 42.2 $ 104.5 $ 145.8 $ 250.1
Uranium — — 43.2 — Contract services 21.1 16.7 42.1
19.7 Total Revenue 63.3 121.2 231.1 269.8 Cost of
Sales: Separative work units and uranium 36.7 100.8 176.3 266.1
Contract services 22.3 16.9 43.6 21.1
Total Cost of Sales 59.0 117.7 219.9 287.2
Gross profit (loss) 4.3 3.5 11.2 (17.4 ) Advanced technology
costs 4.0 18.0 5.8 51.3 Selling, general and administrative 6.3
10.1 18.6 21.8 Amortization of intangible assets 2.0 — 6.0 —
Special charges for workforce reductions 2.9 2.5 3.5 2.0 Other
(income) (0.7 ) (8.4 ) (1.5 ) (34.6 ) Operating (loss) (10.2 )
(18.7 ) (21.2 ) (57.9 ) Interest expense 4.9 4.7 9.8 9.3 Interest
(income) — — (0.2 ) (0.4 ) Reorganization items, net — 4.7
— 13.1 (Loss) before income taxes (15.1 )
(28.1 ) (30.8 ) (79.9 ) Provision (benefit) for income taxes —
(0.1 ) (0.3 ) (1.1 ) Net (loss)
$ (15.1
) $ (28.0 ) $ (30.5
) $ (78.8 ) Net (loss) per share
- basic and diluted $ (1.68 ) $ (5.71 ) $ (3.39 ) $ (16.08 )
Weighted-average number of shares outstanding - basic and diluted
9.0 4.9 9.0 4.9
CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in
millions) June 30, 2015 December
31, 2014 ASSETS Current Assets Cash and cash
equivalents $ 218.5 $ 218.8 Accounts receivable, net 27.1 58.9
Inventories 384.8 462.2 Deferred costs associated with deferred
revenue 58.8 82.9 Other current assets 15.2 19.6 Total
current assets 704.4 842.4 Property, plant and equipment, net 3.4
3.5 Deferred taxes 20.5 26.0 Deposits for surety bonds 30.9 34.8
Intangible assets 113.2 119.2 Excess reorganization value 137.2
137.2 Other long-term assets 20.5 20.6 Total Assets
$
1,030.1 $ 1,183.7 LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT) Current Liabilities Accounts
payable and accrued liabilities $ 42.0 $ 50.5 Payables under SWU
purchase agreements 23.2 140.1 Deferred taxes 20.5 26.0 Inventories
owed to customers and suppliers 199.6 158.9 Deferred revenue 70.3
100.9 Total current liabilities 355.6 476.4 Long-term debt
244.0 240.4 Postretirement health and life benefit obligations
214.1 211.4 Pension benefit liabilities 171.5 179.3 Other long-term
liabilities 53.7 54.6 Total Liabilities 1,038.9 1,162.1
Stockholders’ Equity (Deficit) (8.8 ) 21.6 Total Liabilities and
Stockholders’ Equity (Deficit)
$ 1,030.1
$ 1,183.7 CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions) Six Months Ended
June 30,
Successor Predecessor 2015
2014 Cash Flows from Operating Activities Net (loss)
$ (30.5 ) $ (78.8 ) Adjustments to reconcile net (loss) to net cash
(used in) operating activities: Depreciation and amortization 6.2
4.1 Interest on paid-in-kind toggle notes 1.8 — Gain on sales of
assets (1.5 ) (0.9 ) Non-cash reorganization items — 3.1 Changes in
operating assets and liabilities: Accounts receivable – decrease
31.8 137.9 Inventories, net – decrease 118.1 127.7 Payables under
SWU purchase agreements – (decrease) (116.9 ) (340.7 ) Deferred
revenue, net of deferred costs – (decrease) (6.6 ) (10.8 ) Accounts
payable and other liabilities – (decrease) (12.7 ) (34.8 ) Other,
net 4.5 (0.2 ) Net Cash (Used in) Operating Activities (5.8
) (193.4 )
Cash Flows Provided by Investing
Activities Deposits for surety bonds - net decrease 4.0 2.2
Proceeds from sales of assets 1.5 0.4 Net Cash
Provided by Investing Activities 5.5 2.6
Cash Flows (Used in) Financing Activities Common stock
issued (purchased), net — (0.1 ) Net Cash (Used in)
Financing Activities — (0.1 ) Net (Decrease) (0.3 )
(190.9 ) Cash and Cash Equivalents at Beginning of Period 218.8
314.2 Cash and Cash Equivalents at End of Period
$ 218.5 $ 123.3
Supplemental cash flow information: Interest paid $ 6.0 $ —
Non-cash activities: Conversion of interest payable-in-kind to
long-term debt $ 1.8 $ —
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150807005105/en/
Centrus Energy Corp.Investors:Don Hatcher,
301-564-3460orMedia:Jeremy Derryberry, 301-564-3392
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