- Revenue of $35.7 million compared to
$7.2 million for the first quarter 2017
- DOE settlement on outstanding contract
issue resulted in $9.5 million revenue recognition
- Net loss of $25.0 million compared to
net income of $7.6 million for the first quarter 2017 (after $33.6
million gain from early extinguishment of debt)
- Diversified long-term supply through
contract with Orano
- Work begun on planned advanced nuclear
fuel capability under contract with X-energy
- Reaffirming annual outlook of $175-200
million in revenue and $100-125 million cash balance for year-end
2018
Centrus Energy Corp. (NYSE American: LEU) today reported a net
loss of $25.0 million or $2.97 per common share (basic and diluted)
for the quarter ended March 31, 2018, compared to net income of
$7.6 million or $0.73 per common share (basic) and $0.72 per common
share (diluted) for the first quarter of 2017, which included a
non-recurring gain on early extinguishment of debt of $33.6
million. While revenue for the nuclear fuel segment increased
compared to the first quarter of last year, the Company still
anticipates generating more than half of its annual revenue in the
fourth quarter.
“We are focused on growing the company in a difficult market by
expanding our core business, diversifying our business offerings,
and mitigating risks,” said Daniel B. Poneman, president and chief
executive officer. “We have made important progress over the last
several months. The long-term supply contract with Orano that we
announced last week supports our commitment to supply diversity and
will support new sales opportunities through 2030. Our new contract
with X-energy to develop the next generation of nuclear fuel
reflects our support of advanced reactor technology. At the same
time, we are beginning to see the benefits of our efforts to cut
costs and reduce our debt. As the world's most diversified supplier
of enriched uranium and an emerging provider of advanced
engineering and manufacturing solutions, our team is working hard
to support the contribution nuclear power makes to building a
low-carbon future for all."
Revenue and Cost of Sales
Revenue for the first quarter of 2018 totaled $35.7 million, an
increase of $28.5 million from the corresponding period in 2017.
Revenue from the LEU Segment increased $20.5 million in the three
months ended March 31, 2018, compared to the corresponding period
in 2017, reflecting the variability in timing of utility customer
orders. Revenue from the Contract Services Segment increased $8.0
million in the three months ended March 31, 2018, compared to the
corresponding period in 2017, reflecting $9.5 million of revenue
related to the January 2018 settlement with the United States
government related to past work performed for the U.S. Department
of Energy (DOE), partially offset by the reduced scope of contract
work for American Centrifuge technology services in the current
period.
Cost of sales for the first quarter of 2018 totaled $41.3
million, an increase of $31.2 million from the corresponding period
in 2017. Cost of sales for the LEU Segment increased $32.1 million
in the three months ended March 31, 2018, compared to the
corresponding period in 2017, due to increases in sales volumes.
Cost of sales for the Contract Services Segment declined $0.9
million in the three months ended March 31, 2018, compared to the
corresponding period in 2017, due to the reduced scope of contract
work.
Gross Loss
Centrus realized a gross loss of $5.6 million in the three
months ended March 31, 2018, an increase of $2.7 million compared
to the gross loss of $2.9 million in the corresponding period in
2017. The gross loss reflects a greater concentration of deliveries
in the quarter under recent contracts that incorporate lower
prices.
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 for work at the Piketon,
Ohio, demonstration facility. Costs were $7.7 million, an increase
of $1.6 million, or 26 percent, in the three months ended March 31,
2018, compared to the corresponding period in 2017. In the current
period, efforts at the Piketon facility were focused on U.S.
Nuclear Regulatory Commission (NRC) license termination and DOE
lease turnover activities and the related costs were charged to
expense. In the prior period, efforts were primarily focused on
decontamination and decommissioning (D&D) of the Piketon
facility and the related costs were recorded as a reduction of the
D&D liability. In addition, a greater allocation of Piketon
facility costs were charged to the license and lease termination
effort in the current period following the relocation of certain
corporate functions from the Piketon facility. The Piketon D&D
effort was largely completed in 2017, with remaining estimated
D&D costs of $1.0 million.
SG&A and Special Charges
Selling, general and administrative (SG&A) expenses were
$11.2 million for the first quarter 2018, a decline of $1.2
million, or 10 percent, compared to the corresponding period in
2017. Allocated overhead declined $0.7 million following the
relocation of certain corporate functions from the Piketon
facility. Consulting costs declined $0.4 million in the more recent
three-month period.
In the three months ended March 31, 2018 and 2017, special
charges included estimated employee termination benefits of $0.5
million and $0.8 million, respectively, net of non-cash
settlements. In the three months ended March 31, 2018 and 2017, the
Company incurred advisory costs of $0.1 million and $1.6 million,
respectively, related to updating its information technology
systems.
Cash Flow
Centrus ended the first quarter of 2018 with a consolidated cash
balance of $153.3 million. The net reduction of $55.9 million in
the SWU purchase payables balance, due to the timing of purchase
deliveries, was a significant use of cash in the three months ended
March 31, 2018. The operating loss of $26.3 million in the three
months ended March 31, 2018, net of non-cash expenses, was a use of
cash. Sources of cash included the net reduction in receivables
from utility customers of $29.5 million.
Settlement with U.S. Government
On January 11, 2018, Centrus entered into a settlement agreement
with the United States government regarding breach of contract
claims relating to work performed by the Company under contracts
with DOE and subcontracts with DOE contractors. DOE agreed to
settle all claims raised as part of and subsequent to the
litigation for a total of $24.0 million and provide a complete
close out of all such contracts and subcontracts settled under the
settlement agreement without any further audit or review of the
Company’s costs or incurred cost submissions, except with respect
to certain claims for pension and postretirement benefits. Prior to
the settlement, the Company had a receivables balance related to
the claims being settled of $14.5 million. In the three months
ended March 31, 2018, the Company received $4.7 million from the
United States government, applied approximately $19.3 million of
advance payments received from the United States government in
prior years against the receivables balance, and recorded
additional revenue of $9.5 million in the Contract Services
Segment.
2018 Outlook
Centrus anticipates SWU and uranium revenue in 2018 in a range
of $150 million to $175 million, reflecting a decline in average
sales prices compared to 2017 as more sales are made under
contracts that reflect more recent market conditions. The Company
anticipates total revenue in a range of $175 million to $200
million. Consistent with prior years, revenue continues to be most
heavily weighted to the fourth quarter; Centrus expects more than
one-half of its 2018 revenue to be generated in the fourth quarter.
The Company expects to end 2018 with a cash and cash equivalents
balance in a range of $100 million to $125 million. The anticipated
decrease in cash and cash equivalents in 2018 is driven by the
expected timing of purchases under supply agreements and an
increase in required cash contributions to the Company’s
postretirement benefit plans.
Centrus’ financial guidance is subject to a number of
assumptions and uncertainties that could affect results either
positively or negatively. Variations from its expectations could
cause differences between the guidance and the ultimate results.
Among the factors that could affect the 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;
- Potential use of cash for strategic
initiatives;
- Actions taken by our customers,
including actions that might affect our existing contracts, as a
result of market and other conditions impacting our customers and
the industry; and
- Additional costs for decontamination
and decommissioning of the Company’s facility in Ohio.
About Centrus Energy Corp.
Centrus is a trusted supplier of nuclear fuel and services for
the nuclear power industry. Centrus provides value to its utility
customers through the reliability and diversity of its supply
sources - helping them meet the growing need for clean, affordable,
carbon-free electricity. Since 1998, the Company has provided its
utility customers with more than 1,750 reactor years of fuel, which
is equivalent to 7 billion tons of coal.
With world-class technical capabilities, Centrus offers turnkey
engineering and advanced manufacturing solutions to its customers.
The company is also advancing the next generation of centrifuge
technologies so that America can restore its domestic uranium
enrichment capability in the future. Find out more at
www.centrusenergy.com.
Forward-Looking Statements
This news release contains “forward-looking statements” within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) - 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 (the “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 use of
our net operating losses (“NOLs”) and net unrealized built-in
losses (“NUBILs”) to offset future taxable income and the use of
the Rights Agreement (as defined herein) to prevent an “ownership
change” as defined in Section 382 of the Internal Revenue Code of
1986, as amended (the “Code”) and our ability to generate taxable
income to utilize all or a portion of the NOLs and NUBILs prior to
the expiration thereof; 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 LLC
(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 financial difficulties
experienced by customers, including possible bankruptcies,
insolvencies or any other inability to pay for our products or
services; 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 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; risks related to existing or new
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 United States 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
(“UT-Battelle”), the management and operating contractor for Oak
Ridge National Laboratory (“ORNL”), 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; failures or security breaches of our information
technology systems; 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 our filings with the Securities and
Exchange Commission, including our Annual Report on Form 10-K for
the year ended December 31, 2017.
CENTRUS ENERGY CORP. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited; in millions, except
share and per share data) Three Months
Ended March 31, 2018 2017
Revenue: Separative work units $ 17.7 $ 0.8 Uranium 3.6 —
Contract services 14.4 6.4 Total revenue 35.7 7.2
Cost of Sales: Separative work units and uranium 34.8 2.7
Contract services 6.5 7.4 Total cost of sales 41.3
10.1
Gross loss (5.6 ) (2.9 ) Advanced
technology license and decommissioning costs 7.7 6.1 Selling,
general and administrative 11.2 12.4 Amortization of intangible
assets 1.3 1.2 Special charges for workforce reductions and
advisory costs 0.6 2.4 Gains on sales of assets (0.1 ) (1.0 )
Operating loss (26.3 ) (24.0 ) Gain on early extinguishment of debt
— (33.6 ) Nonoperating components of net periodic benefit expense
(income) (1.6 ) (0.4 ) Interest expense 1.0 2.9 Investment income
(0.6 ) (0.3 ) Income (loss) before income taxes (25.1 ) 7.4 Income
tax benefit (0.1 ) (0.2 )
Net income (loss) (25.0
) 7.6 Preferred stock dividends - undeclared and
cumulative 2.0 1.0
Net income (loss) allocable to
common stockholders $ (27.0 ) $
6.6 Net income (loss) per common share:
- Basic
$ (2.97 ) $ 0.73
- Diluted
$ (2.97 ) $ 0.72 Average number of common shares outstanding (in
thousands):
- Basic
9,103 9,063
- Diluted
9,103 9,174
CENTRUS ENERGY CORP. CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited; in millions, except
share and per share data) March 31,
2018 December 31, 2017 ASSETS
Current assets Cash and cash equivalents $ 153.3 $ 208.8
Accounts receivable 15.0 60.2 Inventories 164.0 153.1 Deferred
costs associated with deferred revenue 119.6 122.3 Other current
assets 22.4 22.5
Total current assets 474.3
566.9 Property, plant and equipment, net of accumulated
depreciation of $2.3 as of March 31, 2018 and $1.9 as of December
31, 2017 4.6 4.9 Deposits for financial assurance 19.8 19.7
Intangible assets, net 81.3 82.7 Other long-term assets 0.9
1.1
Total assets $ 580.9
$ 675.3 LIABILITIES AND
STOCKHOLDERS’ DEFICIT Current liabilities Accounts
payable and accrued liabilities $ 57.2 $ 54.3 Payables under SWU
purchase agreements 23.5 79.4 Inventories owed to customers and
suppliers 93.8 77.9 Deferred revenue and advances from customers
170.2 191.8
Total current liabilities 344.7
403.4 Long-term debt 155.3 157.5 Postretirement health and life
benefit obligations 153.1 154.2 Pension benefit liabilities 159.2
161.6 Other long-term liabilities 12.3 17.5
Total
liabilities 824.6 894.2
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 $113.5 as of March 31, 2018 and $111.5 as of December
31, 2017 4.6 4.6 Class A Common Stock, par value $0.10 per share,
70,000,000 shares authorized, 7,632,669 shares issued and
outstanding as of March 31, 2018 and December 31, 2017 0.8 0.8
Class B Common Stock, par value $0.10 per share, 30,000,000 shares
authorized, 1,406,082 shares issued and outstanding as of March 31,
2018 and December 31, 2017 0.1 0.1 Excess of capital over par value
60.1 60.0 Accumulated deficit (309.4 ) (284.5 ) Accumulated other
comprehensive income, net of tax 0.1 0.1
Total
stockholders’ deficit (243.7 ) (218.9 )
Total liabilities
and stockholders’ deficit $ 580.9 $
675.3 CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions) Three Months
Ended March 31, 2018 2017
Operating Activities Net income (loss) $ (25.0 ) $ 7.6
Adjustments to reconcile net income (loss) to cash used in
operating activities: Depreciation and amortization 1.6 1.4 PIK
interest on paid-in-kind toggle notes 0.4 0.8 Gain on early
extinguishment of debt — (33.6 ) Gain on sales of assets (0.1 )
(1.0 ) Changes in operating assets and liabilities: Accounts
receivable 45.2 23.0 Inventories, net 5.0 (0.9 ) Payables under SWU
purchase agreements (55.9 ) (59.5 ) Deferred revenue, net of
deferred costs (18.9 ) — Accounts payable and other liabilities
(5.4 ) (9.4 ) Other, net 0.8 (1.4 ) Cash used in operating
activities (52.3 ) (73.0 )
Investing Activities
Capital expenditures (0.1 ) — Proceeds from sales of assets 0.1
0.6 Cash provided by investing activities —
0.6
Financing Activities Payment of interest
classified as debt (3.0 ) — Repurchase of debt — (27.6 ) Payment of
securities transaction costs — (9.0 ) Cash used in financing
activities (3.0 ) (36.6 ) Decrease in cash, cash equivalents
and restricted cash (55.3 ) (109.0 ) Cash, cash equivalents and
restricted cash at beginning of period 244.8 296.7
Cash, cash equivalents and restricted cash at end of period
$ 189.5 $ 187.7
Supplemental cash flow information: Interest paid in cash $ 0.4 $
0.4 Non-cash activities: Conversion of interest
payable-in-kind to long-term debt $ 0.9 $ 0.8 Exchange of debt for
Series B preferred stock $ — $ 4.6
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version on businesswire.com: https://www.businesswire.com/news/home/20180508006778/en/
Centrus Energy Corp.Investors:Don Hatcher,
301-564-3460orMedia:Jeremy Derryberry, 301-564-3392
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