- Gross loss of $2.1 million for the
third quarter and gross profit of $19.2 million for nine-month
period ended September 30, 2016
- Net loss of $41.3 million for the
quarter on revenue of $21.4 million
- Company expects to generate
approximately 40 percent of 2016 revenue in the fourth quarter
- On track to achieve 2016 guidance of
$275-$300 million in revenue
Centrus Energy Corp. (NYSE MKT: LEU) today reported a net loss
of $41.3 million, or $4.54 per share, for the quarter ended
September 30, 2016, compared to a net loss of $55.1 million, or
$6.05 per share, for the third quarter of 2015. For the nine-month
period, the Company reported a net loss of $58.8 million, or $6.46
per share, compared to a net loss of $85.6 million, or $9.51 per
share, in the same period of 2015.
“With a large percentage of customer deliveries occurring in the
fourth quarter, we expected a slow quarter in the fuel segment, but
we are on track to meet our sales volume and revenue guidance for
2016,” said Daniel B. Poneman, Centrus president and chief
executive officer.
“Looking to the future, we continue to build the business for
future growth on a variety of fronts, including a new contract with
Oak Ridge National Laboratory for advancing our U.S. uranium
enrichment technology, active discussions with customers and
suppliers of LEU to support future sales, and extensive work across
the enterprise to improve our cost structure so that we can support
our growth in the coming years,” Poneman said.
Revenue, Cost of Sales and Gross Loss
Revenue from the LEU segment increased $5.3 million, or 60
percent, in the three months ended September 30, 2016, compared to
the corresponding period in 2015. The volume of SWU sales increased
25 percent, reflecting the variability in timing of utility
customer orders. The average price billed to customers for sales of
SWU increased 32 percent, reflecting the particular contracts under
which SWU were sold during the periods. Revenue from the LEU
segment declined $55.2 million, or 28 percent, in the nine months
ended September 30, 2016, compared to 2015. The volume of SWU sales
declined 10 percent in the nine-month period, but the SWU sales
volume for the full year 2016 is expected to be comparable to 2015.
The average price billed to customers for sales of SWU declined 6
percent, reflecting the particular contracts under which SWU were
sold during the periods. Average SWU prices for sales for the year
will be lower than 2015 reflecting the trend of lower SWU market
prices in recent years. Through September 30, 2016, the indices for
SWU term and spot sales prices, as published by TradeTech, LLC in
Nuclear Market Review, have declined 58 percent and 63 percent,
respectively, since December 31, 2011.
Revenue from the contract services segment declined $13.1
million, or 64 percent, in the three months and $30.3 million, or
48 percent, in the nine months ended September 30, 2016, compared
to 2015. The reduced scope of contract work for American Centrifuge
technology services resulted in declines of $12.7 million in the
three-month period and $38.3 million in the nine-month period. In
the nine-month period, the decline was partially offset by $8.1
million in revenue for March reports on work performed in the
fourth quarter of 2015. As a result of the contract signed with
UT-Battelle in March 2016, revenue in the nine months ended
September 30, 2016, includes $24.2 million for reports on work
performed in the nine months ended September 30, 2016, as well as
$8.1 million for work in the fourth quarter of 2015.
Cost of sales for the LEU segment decreased $17.9 million, or 53
percent, in the three-month period and $79.4 million, or 38 percent
in the nine-month period for 2016. Cost of sales for the contract
services segment declined $12.2 million, or 62 percent, in the
three months and $38.5 million, or 61 percent, in the nine months
ended September 30, 2016, compared to the corresponding periods in
2015, consistent with the declines in contract services
revenue.
Excluding charges for a pension remeasurement in 2015 and
uranium valuation adjustments in 2016, cost of sales for the LEU
segment increased $1.4 million, or 11 percent, in the three-month
period, primarily due to the increase in SWU delivery volumes
partially offset by a 13 percent decline in the average cost of
sales per SWU. In the nine month period, cost of sales declined
$60.8 million, or 32 percent, primarily due to lower SWU and
uranium sales volumes and a 13 percent decline in the average cost
of sales per SWU. The declines in cost of sales per SWU reflect
declines in purchase costs per SWU in recent periods.
Centrus’ recorded a gross loss of $2.1 million in the three
months ended September 30, 2016, an improvement of $22.3 million
compared to the gross loss of $24.4 million in the corresponding
period in 2015. The gross loss for the LEU segment improved $23.2
million in the three-month period primarily due to the
remeasurement of pension obligations that resulted in a charge to
cost of sales of $21.6 million in the corresponding period in 2015.
SWU volumes and prices were higher in the current three-month
period, and SWU costs per unit were lower. Partially offsetting
these favorable impacts was the $2.3 million uranium valuation
adjustment charge in the current period. Centrus recorded a gross
profit of $19.2 million in the nine months ended September 30,
2016, an improvement of $32.4 million compared to the gross loss of
$13.2 million in the corresponding period in 2015. SWU costs per
unit were lower in the current nine-month period, partially offset
by lower SWU and uranium sales volumes, lower average SWU sales
prices and $3.0 million in uranium valuation adjustment
charges.
Advanced Technology Costs and Piketon Demonstration Facility
Decontamination and Decommissioning (D&D) Costs
Advanced technology costs consist of American Centrifuge
expenses that are outside of our contracts with UT-Battelle,
including the costs of decontamination and decommissioning
(D&D) the demonstration facility in Piketon, Ohio, after
completing the cascade demonstration activities. Costs increased
$20.0 million in the three months and $30.9 million in the nine
months ended September 30, 2016, compared to the corresponding
periods in 2015, as the Piketon demonstration facility is no longer
under contract effective October 1, 2015, and is now undergoing
D&D.
Centrus began to incur expenditures in the second quarter of
2016 associated with the D&D of the Piketon facility in
accordance with the requirements of the Nuclear Regulatory
Commission (NRC) and the Department of Energy (DOE). Centrus leases
the Piketon facility from DOE. Charges to advanced technology costs
in the three and nine months ended September 30, 2016, include
approximately $15 million to increase the accrued D&D liability
based on updated cost estimates that reflect changes in the
approach and anticipated timeframe over which the work will be
conducted. Remaining costs to perform the D&D work are
estimated to be within a range of $38.9 million to $49.4 million.
As of September 30, 2016, Centrus has accrued $38.9 million on the
balance sheet as Decontamination and Decommissioning Obligations,
of which $28.3 million is classified as current and $10.6 million
is classified as long-term.
Charges to advanced technology costs also reflect ongoing
support costs to maintain the facilities at Piketon and our NRC
licenses at that location. In the nine months ended September 30,
2016, Centrus has incurred expenses of approximately $15 million
for NRC license support and other costs for the Piketon facility.
The Company anticipates that it will continue to incur NRC license
support and other costs at a similar rate through the completion of
D&D, now projected through 2018.
SG&A and Special Charges
Selling, general and administrative (SG&A) expenses declined
$2.8 million in the three months ended September 30, 2016, compared
to the corresponding period in 2015. SG&A expenses in the three
months ended September 30, 2015, included a loss of $3.2 million
resulting from the remeasurement of pension obligations. Consulting
costs increased $0.4 million in the three months ended September
30, 2016, compared to the corresponding period in 2015.
SG&A expenses increased $2.5 million in the nine months
ended September 30, 2016, compared to the corresponding period in
2015, of which $1.5 million relates to remeasurements of pension
obligations. Excluding the effects of the pension obligation
remeasurements, SG&A expenses increased $1.0 million, or 3
percent, in the nine months ended September 30, 2016, compared to
the corresponding period in 2015. Overhead costs allocated to
SG&A increased $1.3 million in the nine-month period, as less
overhead costs are allocated to the reduced scope of work under
Centrus’ contract with UT-Battelle. Consulting costs increased $1.0
million in the nine-month period for work related to business
development, debt repurchases and qualified pension plans. Other
SG&A expenses, including for office leases, supplies and other,
declined $1.3 million in the nine-month period compared to the
prior year.
In the second quarter of 2016, the Company commenced a project
to align its corporate structure to the scale of its ongoing
business operations and to update related information technology.
The company incurred advisory costs related to the reengineering
project of $0.3 million in the three months and $0.8 million in the
nine months ended September 30, 2016. In addition, special charges
in the three and nine months ended September 30, 2016, included
termination benefits of $0.3 million related to a voluntary
workforce reduction.
Cash Flow
Centrus ended the third quarter with a consolidated cash balance
of $170.8 million. The net reduction of $68.9 million in the SWU
purchase payables balance, due to the timing of purchase
deliveries, was a significant use of cash in the nine months ended
September 30, 2016. American Centrifuge expenses have been a major
use of cash, including demobilization expenses and D&D
expenditures. Sources of cash included the monetization of
inventory purchased in prior periods. Inventories declined $45.8
million in the quarter. In addition, accounts receivable declined
$18.4 million due to collections from customers in the nine-month
period without increased sales and billings. The net loss of $58.8
million in the nine months ended September 30, 2016, net of
non-cash expenses, was a use of cash.
2016 Outlook
Centrus expects to generate approximately 40 percent of its
revenue for 2016 in the fourth quarter. The Company continues to
anticipate SWU and uranium revenue in 2016 in a range of $250
million to $275 million and total revenue in a range of $275
million to $300 million. Centrus expects to end 2016 with a cash
and cash equivalents balance in a range of $200 million to $250
million.
The Company’s financial guidance is subject to a number of
assumptions and uncertainties that could affect results either
positively or negatively. Variations from these expectations could
cause differences between this guidance and the ultimate results.
Factors that could affect these results include the following:
- Additional short-term purchases or
sales of SWU and uranium;
- Timing of customer orders, related
deliveries, and purchases of LEU or components;
- The outcome of legal proceedings and
other contingencies, including discussions with the Pension Benefit
Guaranty Corporation (PBGC);
- Potential use of cash to manage our
capital structure; and
- Additional costs for American
Centrifuge demobilization; decontamination and decommissioning of
the Company’s facility in Ohio.
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. Our mission is to provide reliable and
competitive fuel goods and services to meet the needs of our
customers, consistent with the highest levels of integrity, safety,
and security.
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”, “would” 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 the adoption of fresh start accounting; risks relating
to our outstanding 8.0% paid-in-kind (“PIK”) toggle notes (the “PIK
Toggle Notes”) maturing in September 2019, including the potential
termination of the guarantee by United States Enrichment
Corporation (“Enrichment Corp.”) of the PIK Toggle Notes; risks
related to the limited trading markets in our securities; risks
related to our ability to maintain the listing of our common stock
on the NYSE MKT LLC; the impact and potential extended duration of
the current supply/demand imbalance in the market for low-enriched
uranium (“LEU”); our dependence on others for deliveries of LEU
including deliveries from Russia under a commercial supply
agreement with the Russian government entity Joint Stock Company
“TENEX”; 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 our sources of supply to
perform under contract obligations, including the imposition of
sanctions, restrictions or other requirements; risks relating to
our sales order book, including uncertainty concerning customer
actions under current contracts and in future contracting due to
market conditions and lack of current production capability; risks
associated with our reliance on third-party suppliers to provide
essential services to us; pricing trends and demand in the uranium
and enrichment markets and their impact on our profitability;
movement and timing of customer orders; the impact of government
regulation including by the U.S. Department of Energy and the U.S.
Nuclear Regulatory Commission; the outcome of legal proceedings and
other contingencies (including lawsuits and government
investigations or audits); risks and uncertainties regarding
funding for the American Centrifuge project and our ability to
perform under our agreement with UT-Battelle, LLC, the management
and operating contractor for Oak Ridge National Laboratory, for
continued research and development of the American Centrifuge
technology; the competitive environment for our products and
services; the potential for further demobilization or termination
of the American Centrifuge project; risks related to the current
demobilization of the portions of the American Centrifuge project
including risks that the schedule could be delayed and costs could
be higher than expected; the timing, savings and execution of any
potential restructurings; potential strategic transactions, which
could be difficult to implement, disrupt our business or change our
business profile significantly; changes in the nuclear energy
industry; the impact of financial market conditions on our
business, liquidity, prospects, pension assets 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 our filings
with the Securities and Exchange Commission, including our Annual
Report on Form 10-K for the fiscal year ended December 31, 2015 and
subsequent Quarterly Reports on Form 10-Q, which are available on
our website at www.centrusenergy.com. 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 September 30, Nine
Months Ended September 30, 2016
2015 2016 2015 Revenue: Separative work
units $ 14.1 $ 8.8 $ 128.3 $ 154.6 Uranium — — 14.3 43.2 Contract
services 7.3 20.4 32.2 62.5 Total
revenue 21.4 29.2 174.8 260.3 Cost of Sales: Separative work units
and uranium 15.9 33.8 130.7 210.1 Contract services 7.6 19.8
24.9 63.4 Total cost of sales 23.5 53.6
155.6 273.5 Gross profit (loss) (2.1 ) (24.4 )
19.2 (13.2 ) Advanced technology costs 21.9 1.9 38.6 7.7 Selling,
general and administrative 10.7 13.5 34.6 32.1 Amortization of
intangible assets 1.7 1.1 7.6 7.1 Special charges for workforce
reductions and advisory costs 0.6 9.8 1.2 13.3 Gains on sales of
assets (0.3 ) (0.3 ) (1.0 ) (1.8 ) Operating loss (36.7 ) (50.4 )
(61.8 ) (71.6 ) Gain on early extinguishment of debt — — (16.7 ) —
Interest expense 4.7 4.8 14.8 14.6 Interest (income) (0.1 ) (0.1 )
(0.5 ) (0.3 ) Loss before income taxes (41.3 ) (55.1 ) (59.4 )
(85.9 ) Provision (benefit) for income taxes — — (0.6
) (0.3 ) Net loss
$ (41.3 ) $
(55.1 ) $ (58.8 ) $
(85.6 ) Net loss per share - basic and diluted
$ (4.54 ) $ (6.05 ) $ (6.46 ) $ (9.51 ) Weighted-average number of
shares outstanding - basic and diluted 9.1 9.1 9.1 9.0
CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions, except share and per
share data)
September 30, 2016 December 31,
2015 ASSETS Current assets Cash and cash equivalents
$ 170.8 $ 234.0 Accounts receivable 7.9 26.5 Inventories 185.8
319.2 Deferred costs associated with deferred revenue 77.4 63.1
Other current assets 15.1 15.2 Total current assets
457.0 658.0 Property, plant and equipment, net 6.1 3.5 Deposits for
surety bonds 29.5 29.8 Intangible assets, net 98.2 105.8 Other
long-term assets 23.0 23.0 Total assets
$
613.8 $ 820.1
LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities
Accounts payable and accrued liabilities $ 30.5 $ 44.8 Payables
under SWU purchase agreements 16.5 85.4 Inventories owed to
customers and suppliers 22.2 106.8 Deferred revenue 104.1 83.9
Decontamination and decommissioning obligations - current 28.3
29.4 Total current liabilities 201.6 350.3 Long-term
debt 234.1 247.0 Postretirement health and life benefit obligations
185.2 184.3 Pension benefit liabilities 170.6 172.3 Decontamination
and decommissioning obligations - long-term 10.6 — Other long-term
liabilities 36.0 31.9 Total liabilities 838.1 985.8
Stockholders’ deficit Preferred stock, $1.00 par value per share,
20,000,000 shares authorized, none issued — — Common stock, $0.10
par value per share, 100,000,000 shares authorized, 9,000,000
shares issued and outstanding 0.9 0.9 Excess of capital over par
value 59.4 59.0
Accumulated deficit
(288.5 ) (229.7 ) Accumulated other comprehensive income, net of
tax 3.9 4.1 Total stockholders’ deficit (224.3 )
(165.7 ) Total liabilities and stockholders’ deficit
$
613.8 $ 820.1
CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
(in millions)
Nine Months Ended September 30, 2016
2015 Operating Activities Net loss $ (58.8 ) $
(85.6 ) Adjustments to reconcile net loss to cash used in operating
activities: Depreciation and amortization 8.1 7.5 Immediate
recognition of net actuarial loss — 20.9 PIK interest on
paid-in-kind toggle notes 9.7 5.4 Gain on early extinguishment of
debt (16.7 ) — Gain on sales of assets (1.0 ) (1.8 ) Inventory
valuation adjustments 3.0 — Changes in operating assets and
liabilities: Accounts receivable 18.4 39.0 Inventories, net 45.8
114.9 Payables under SWU purchase agreements (68.9 ) (131.7 )
Deferred revenue, net of deferred costs 5.8 (5.7 ) Accounts payable
and other liabilities 2.2 (12.1 ) Other, net 0.5 4.1
Cash used in operating activities (51.9 ) (45.1 )
Investing Activities Capital expenditures (3.0 ) (0.2 )
Proceeds from sales of assets 1.2 1.8 Deposits for surety bonds -
net decrease 0.3 5.0 Cash (used in) provided by
investing activities (1.5 ) 6.6
Financing
Activities Repurchase of debt (9.8 ) — Cash used in
financing activities (9.8 ) — Decrease in cash and
cash equivalents (63.2 ) (38.5 ) Cash and cash equivalents at
beginning of period 234.0 218.8 Cash and cash
equivalents at end of period
$ 170.8 $
180.3 Supplemental cash flow information:
Interest paid $ 6.5 $ 12.2 Non-cash activities: Conversion of
interest payable-in-kind to long-term debt $ 3.4 $ 1.8
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version on businesswire.com: http://www.businesswire.com/news/home/20161109006331/en/
Centrus Energy Corp.Investors:Don Hatcher,
301-564-3460orMedia:Jeremy Derryberry, 301-564-3392
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