- Reaffirming annual outlook of $200-225
million in revenue and $150-175 million cash balance for year-end
2017
- Revenue of $44.0 million and a net loss
of $22.4 million for the quarter ended June 30, 2017
- Cash balance of $147.7 million at June
30, 2017
Centrus Energy Corp. (NYSE American: LEU) today reported a net
loss of $22.4 million for the quarter ended June 30, 2017, compared
to a net loss of $2.9 million for the second quarter of 2016 that
included a $16.7 million gain on the early extinguishment of debt.
The net loss allocable to common stockholders was $24.4 million, or
$2.69 per basic and diluted share, for the quarter ended June 30,
2017, compared to a net loss allocable to common stockholders of
$2.9 million, or $0.32 per basic and diluted share, for the second
quarter of 2016.
“Our second quarter results are not a surprise, and we remain on
track to meet our guidance for the year,” said Daniel B. Poneman,
Centrus president and chief executive officer. “Beyond the numbers,
we continue to focus on making new sales and securing new sources
of supply, closely managing the decommissioning of our centrifuge
demonstration facility so that it stays on budget, and positioning
Centrus to succeed in a rapidly-changing market that is opening up
new opportunities for the future.”
Revenue and Cost of Sales
Centrus’ annual revenue in the LEU segment comes from long-term
contracts that generally obligate customers to an annual purchase
commitment but give the customers flexibility to determine the
delivery date within a given year. Revenue is recognized at the
time LEU or uranium is delivered under the terms of customer
contracts. As in 2016, Centrus expects a large portion of revenue
to occur in the fourth quarter, with more than one-half of 2017
annual revenue expected in the fourth quarter based on the
anticipated timing of contracted deliveries during the year.
Revenue for the second quarter was $44.0 million, a decrease of
$19.4 million, or 31 percent, compared to the same quarter in 2016.
In the six-month period ended June 30, 2017, revenue was $51.2
million, a decrease of $102.2 million, or 67 percent, from the same
period in 2016. As the enrichment market has continued to soften,
utilities continue to defer their deliveries until later in the
year, which concentrates our revenue recognition later into the
year.
Revenue from the LEU segment declined $17.0 million, or 31
percent, in the three months and $89.8 million, or 70 percent, in
the six months ended June 30, 2017, compared to the corresponding
periods in 2016. The volume of separative work unit (SWU) sales
declined 8 percent in the three-month period and 54 percent in the
six-month period. SWU volumes delivered are expected to decline in
2017 compared to 2016. The average price billed to customers for
sales of SWU declined 24 percent in the three-month period and 26
percent in the six-month period, reflecting the particular
contracts under which SWU were sold during the periods. The average
SWU price for sales during the full year 2017 is expected to be
approximately 3 percent lower than in 2016.
Revenue from the contract services segment declined $2.4
million, or 28 percent, in the three months ended June 30, 2017,
compared to the corresponding period in 2016, reflecting the
reduced scope of contract work for American Centrifuge technology
services in the current period. Revenue from the contract services
segment declined $12.4 million, or 50 percent, in the six months
ended June 30, 2017, compared to the corresponding period in 2016,
due to the reduced scope of work and the timing of revenue
recognition in the prior period. As a result of the contract signed
with UT-Battelle in March 2016, revenue in the six months ended
June 30, 2016, included $16.2 million for work in the six months
ended June 30, 2016, as well as $8.1 million for March 2016 reports
on work performed in the fourth quarter of 2015.
Cost of sales for the quarter ended June 30, 2017, totaled $48.3
million, a decrease of 17 percent from the period in 2016. For the
six-month period, cost of sales were $58.0 million, a decrease of
56 percent from the 2016 period. Cost of sales for the LEU segment
declined $7.2 million, or 15 percent, in the three months and $70.4
million, or 61 percent, in the six months ended June 30, 2017,
compared to the corresponding periods in 2016, primarily due to the
declines in SWU sales volumes noted above and declines in the
average cost of sales per SWU. Cost of sales is affected by sales
volumes, unit costs of inventory, and direct charges to cost of
sales such as legacy benefit costs related to former employees.
Cost of sales for the contract services segment declined $2.4
million, or 28 percent, in the three months and $3.7 million, or 21
percent, in the six months ended June 30, 2017, compared to the
corresponding periods in 2016, due to the reduced scope of contract
work.
Gross Loss
Centrus realized a gross loss of $4.3 million in the three
months ended June 30, 2017, a decline of $9.8 million compared to
the gross profit of $5.5 million in the corresponding period in
2016. The Company realized a decline in gross profit of $9.8
million for the LEU segment primarily due to the decline in the
average SWU price, partially offset by a decline in the average SWU
cost.
Centrus realized a gross loss of $6.8 million in the six months
ended June 30, 2017, a decline of $28.1 million compared to the
gross profit of $21.3 million in the corresponding period in 2016.
The Company realized a decline in gross profit of $19.4 million for
the LEU segment primarily due to the decline in the average SWU
price and the decline in SWU sales volume for the six months
compared to the prior period, partially offset by a decline in the
average SWU cost. Centrus expects a positive gross profit for the
LEU segment for the full year 2017.
Centrus realized a decline in gross profit of $8.7 million for
the contract services segment in the six months ended June 30,
2017, compared to the corresponding period in 2016. Revenue for the
contract services segment in the six months ended June 30, 2016,
included a billing for March 2016 reports on work performed in the
fourth quarter of 2015. Related expenses were included in Advanced
Technology License and Decommissioning Costs in 2015 as they were
incurred before a contract was in place. The Company realized a
gross loss of $1.1 million for the contract services segment in the
six months ended June 30, 2017, due to the timing of costs incurred
and the allocation of indirect corporate costs, which are not fully
recoverable from the revenue under the contract with
UT-Battelle.
Advanced Technology License and Decommissioning Costs
Advanced technology license and decommissioning costs consist of
American Centrifuge expenses that are outside of Centrus’ contracts
with UT-Battelle, including ongoing costs to maintain the
demobilized Piketon, Ohio, demonstration facility and the Company’s
NRC licenses at that location. Costs declined $6.2 million, or 37
percent, in the six months ended June 30, 2017, compared to the
corresponding period in 2016. Costs in the prior period included
demobilization costs in preparation for the decontamination and
decommissioning (D&D) of the Piketon demonstration facility,
which commenced in the second quarter of 2016. D&D costs are
charged against the accrued D&D liability.
SG&A and Special Charges
Selling, general and administrative (SG&A) expenses declined
$1.8 million, or 8 percent, in the six months ended June 30, 2017,
compared to the corresponding period in 2016. Consulting costs
declined $1.1 million and compensation and benefits declined $0.4
million, including the effect of an $0.8 million loss in the prior
period related to the remeasurement of pension obligations.
Special charges in the six months ended June 30, 2017, included
estimated employee termination benefits of $0.8 million in the
first quarter and $0.8 million in the second quarter, less $0.2
million for unvested employee departures. Advisory costs related to
the Company’s project to align its corporate structure to the scale
of its ongoing business operations and to update related
information technology were $1.6 million in the first quarter and
$1.7 million in the second quarter of 2017.
Cash Flow
Centrus ended the second quarter of 2017 with a consolidated
cash balance of $147.7 million. The net reduction of $39.7 million
in the SWU purchase payables balance, due to the timing of purchase
deliveries, was a significant use of cash in the six months ended
June 30, 2017. Other uses of cash were reflected in the reduction
of accounts payable and other liabilities of $24.7 million and
SG&A expenses of $22.1 million. The net decline of $42.7
million in inventories has yet to be fully monetized as indicated
by the net increase of $40.9 million in receivables from utility
customers resulting from sales in June 2017.
2017 Outlook
Centrus anticipates SWU and uranium revenue in 2017 in a range
of $175 million to $200 million, reflecting an expected decline in
SWU and uranium volumes delivered compared to 2016. The Company
anticipates total revenue in a range of $200 million to $225
million. Centrus’ revenues continue to be most heavily weighted to
the fourth quarter, and the Company expects more than one-half of
its annual revenue in the fourth quarter of 2017, compared to 44
percent in the fourth quarter of 2016. Centrus expects to end 2017
with a cash and cash equivalents balance in a range of $150 million
to $175 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 the Company’s guidance and its ultimate
results. Among the factors that could affect Centrus’ results
are:
- 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;
- Execution and funding of a new
agreement with UT-Battelle, the operator of ORNL, for the
continuation of American Centrifuge development and testing
activities in Oak Ridge following the expiration of the agreement
on September 30, 2017;
- Potential use of cash for strategic
initiatives; and
- Additional costs for 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 related to our
significant long-term liabilities, including material unfunded
defined benefit pension plan obligations and postretirement health
and life benefit obligations; risks relating to our outstanding
8.0% paid-in-kind (“PIK”) toggle notes (the “8% PIK Toggle Notes”)
maturing in September 2019, our 8.25% notes maturing in February
2027 and our Series B Senior Preferred Stock, including the
potential termination of the guarantee by United States Enrichment
Corporation of the 8% PIK Toggle Notes; risks related to the
limited trading markets in our securities; risks related to our
ability to maintain the listing of our Class A Common Stock on the
NYSE American; risks related to decisions made by our Class B
stockholders regarding their investment in the Company based upon
factors that are unrelated to the Company’s performance; 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”); our dependence on others for deliveries of LEU
including deliveries from the Russian government entity Joint Stock
Company “TENEX” (“TENEX”) under a commercial supply agreement with
TENEX (the “Russian Supply Agreement”); risks related to our
ability to sell the LEU we procure pursuant to our purchase
obligations under our supply agreements, including the Russian
Supply Agreement; 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 related to the value of our intangible
assets related to the sales order book and customer relationships;
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; risks
related to trade barriers and contract terms that limit our ability
to deliver LEU to customers; 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 their contract obligations to
us, including the imposition of sanctions, restrictions or other
requirements; the impact of government regulation including by the
U.S. Department of Energy and the U.S. Nuclear Regulatory
Commission; uncertainty regarding our ability to commercially
deploy competitive enrichment technology; 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 potential for further demobilization or
termination of the American Centrifuge project; risks related to
the current demobilization of portions of the American Centrifuge
project, including risks that the schedule could be delayed and
costs could be higher than expected; potential strategic
transactions, which could be difficult to implement, disrupt our
business or change our business profile significantly; 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 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 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, 2016.
CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except share and per share data)
Three Months Ended Six Months Ended June 30,
June 30, 2017 2016 2017
2016 Revenue: Separative work units $ 37.9 $ 54.9 $
38.7 $ 114.2 Uranium — — — 14.3 Contract services 6.1 8.5
12.5 24.9 Total revenue 44.0 63.4 51.2 153.4
Cost of Sales: Separative work units and uranium 42.1 49.3
44.4 114.8 Contract services 6.2 8.6 13.6 17.3
Total cost of sales 48.3 57.9 58.0
132.1
Gross profit (loss) (4.3 ) 5.5 (6.8 ) 21.3
Advanced technology license and decommissioning costs 4.4 4.7 10.5
16.7 Selling, general and administrative 9.7 12.5 22.1 23.9
Amortization of intangible assets 2.0 2.7 3.2 5.9 Special charges
for workforce reductions and advisory costs 2.3 0.6 4.7 0.6 Gains
on sales of assets (0.7 ) (0.4 ) (1.7 ) (0.7 ) Operating loss (22.0
) (14.6 ) (45.6 ) (25.1 ) Gain on early extinguishment of debt —
(16.7 ) (33.6 ) (16.7 ) Interest expense 0.7 5.1 3.6 10.1
Investment income (0.3 ) (0.1 ) (0.6 ) (0.4 ) Loss before income
taxes (22.4 ) (2.9 ) (15.0 ) (18.1 ) Income tax benefit — —
(0.2 ) (0.6 )
Net loss (22.4 )
(2.9 ) (14.8 ) (17.5 )
Preferred stock dividends - undeclared and cumulative 2.0 —
3.0 —
Net loss allocable to common
stockholders $ (24.4 ) $
(2.9 ) $ (17.8 ) $
(17.5 ) Net loss per common share – basic and
diluted $ (2.69 ) $ (0.32 ) $ (1.96 ) $ (1.92 ) Average number of
common shares outstanding – basic and diluted (in thousands) 9,077
9,080 9,070 9,071
CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in
millions, except share and per share data)
June 30, December 31, 2017 2016
ASSETS Current assets Cash and cash equivalents $
147.7 $ 260.7 Accounts receivable 60.6 19.9 Inventories 104.0 177.4
Deferred costs associated with deferred revenue 118.3 89.3 Other
current assets 14.9 13.3
Total current assets
445.5 560.6 Property, plant and equipment, net 5.5 6.0 Deposits for
surety bonds 29.6 29.5 Intangible assets, net 90.1 93.3 Other
long-term assets 15.3 24.1
Total assets
$ 586.0 $ 713.5
LIABILITIES AND STOCKHOLDERS’ DEFICIT Current
liabilities Accounts payable and accrued liabilities $ 48.3 $
46.4 Payables under SWU purchase agreements 19.9 59.6 Inventories
owed to customers and suppliers 26.8 57.5 Deferred revenue 166.5
123.6 Decontamination and decommissioning obligations 27.2
38.6
Total current liabilities 288.7 325.7 Long-term
debt 159.8 234.1 Postretirement health and life benefit obligations
170.2 171.3 Pension benefit liabilities 177.4 179.9 Other long-term
liabilities 36.1 38.6
Total liabilities 832.2
949.6
Stockholders’ deficit Preferred stock, par value $1.00
per share, 20,000,000 shares authorized Series A Participating
Cumulative Preferred Stock, none issued — — Series B Senior
Preferred Stock, 7.5% cumulative, 104,574 shares issued and
outstanding and an aggregate liquidation preference of $107.6
million as of June 30, 2017 4.6 — Class A Common Stock, par value
$0.10 per share, 70,000,000 shares authorized, 7,630,369 and
7,563,600 shares issued and outstanding as of June 30, 2017 and
December 31, 2016 0.8 0.8 Class B Common Stock, par value $0.10 per
share, 30,000,000 shares authorized, 1,408,382 and 1,436,400 shares
issued and outstanding as of June 30, 2017 and December 31, 2016
0.1 0.1 Excess of capital over par value 59.7 59.5 Accumulated
deficit (311.5 ) (296.7 ) Accumulated other comprehensive income,
net of tax 0.1 0.2
Total stockholders’ deficit
(246.2 ) (236.1 )
Total liabilities and stockholders’
deficit $ 586.0 $ 713.5
CENTRUS ENERGY CORP. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) (in millions)
Six Months Ended June 30, 2017
2016 Operating Activities Net loss $ (14.8 ) $ (17.5
) Adjustments to reconcile net loss to cash used in operating
activities: Depreciation and amortization 3.6 6.2 PIK interest on
paid-in-kind toggle notes 0.8 3.4 Gain on early extinguishment of
debt (33.6 ) (16.7 ) Gain on sales of assets (1.7 ) (0.6 )
Inventory valuation adjustments — 0.7 Changes in operating assets
and liabilities: Accounts receivable (32.1 ) (25.2 ) Inventories,
net 42.7 50.0 Payables under SWU purchase agreements (39.7 ) (50.9
) Deferred revenue, net of deferred costs 13.9 4.4 Accounts payable
and other liabilities (24.7 ) (4.3 ) Other, net (1.4 ) 0.6
Cash used in operating activities (87.0 ) (49.9 )
Investing Activities Capital expenditures (0.1 ) (2.9 )
Proceeds from sales of assets 1.7 1.0 Deposits for surety bonds -
net decrease — 0.3 Cash provided by (used in)
investing activities 1.6 (1.6 )
Financing
Activities Repurchase of debt (27.6 ) (8.0 ) Cash used in
financing activities (27.6 ) (8.0 ) Decrease in cash and
cash equivalents (113.0 ) (59.5 ) Cash and cash equivalents at
beginning of period 260.7 234.0 Cash and cash
equivalents at end of period
$ 147.7 $
174.5 Supplemental cash flow information:
Interest paid in cash $ 2.1 $ 3.6 Non-cash activities: Conversion
of interest payable-in-kind to long-term debt $ 0.8 $ 3.4
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version on businesswire.com: http://www.businesswire.com/news/home/20170802006539/en/
Centrus Energy Corp.Investors:Don Hatcher,
301-564-3460orMedia:Jeremy Derryberry, 301-564-3392
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