- Reaffirming annual outlook of $175-200
million in revenue and $100-125 million cash balance for year-end
2018
- Cash balance of $140.1 million at June
30, 2018
- Revenue of $39.4 million compared to
$44.0 million for the second quarter of 2017
- Net loss of $26.1 million compared to
net loss of $22.4 million for the second quarter of 2017
Centrus Energy Corp. (NYSE American: LEU) today reported a net
loss of $26.1 million for the quarter ended June 30, 2018, compared
to a net loss of $22.4 million for the second quarter of 2017. The
net loss allocable to common stockholders was $28.1 million or
$3.08 per common share (basic and diluted) for the quarter ended
June 30, 2018, compared to a net loss allocable to common
stockholders of $24.4 million or $2.69 per common share (basic and
diluted) for the second quarter of 2017.
“Centrus is working to expand our long-term fuel supply for our
customers around the world and to develop the fuel supply
infrastructure for the next generation of advanced reactors,” said
Daniel B. Poneman, Centrus president and chief executive officer.
“While our results this quarter reflect the difficult market
dynamics of recent years, the work we have done recently to lock in
low-cost sources of supply and secure new long-term sales contracts
will show in our future results, as our costs and revenues become
more closely aligned.”
Revenue, Cost of Sales and Order Book
Revenue for the second quarter was $39.4 million, a decrease of
$4.6 million, or 10 percent, compared to the same quarter in 2017.
In the six-month period ended June 30, 2018, revenue was $75.1
million, an increase of $23.9 million, or 47 percent, from the same
period in 2017. The Company anticipates generating nearly half of
its annual revenue in the fourth quarter.
Revenue from the Low-enriched Uranium (LEU) Segment declined
$5.0 million in the three months and increased $15.5 million in the
six months ended June 30, 2018, compared to the corresponding
periods in 2017. The volume of separative work units (SWU) sales
increased 18 percent in the three-month period and 97 percent in
the six-month period, reflecting the variability in timing of
utility customer orders. The average price billed to customers for
sales of SWU declined 26 percent in the three-month period and 34
percent in the six-month period, reflecting the particular
contracts under which SWU were sold during the periods and the
trend of lower SWU market prices in recent years.
Revenue from the Contract Services Segment increased $0.4
million in the three months and $8.4 million in the six months
ended June 30, 2018, compared to the corresponding periods in 2017,
reflecting services provided under the X-energy contract beginning
in the second quarter of 2018, partially offset by the reduced
scope of contract work for American Centrifuge technology services
in the current periods. The increase in the six-month period also
reflects $9.5 million of revenue related to the January 2018
settlement with the U.S. Department of Energy (DOE) related to past
work performed.
Cost of sales for the LEU Segment increased $0.4 million in the
three months and $32.5 million in the six months ended June 30,
2018, compared to the corresponding periods in 2017, due to the
increases in sales volumes partially offset by 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 costs related to former gaseous diffusion
plant employees. The average cost of sales per SWU declined
approximately 15 percent in the six months ended June 30, 2018, or
13 percent, excluding legacy costs, reflecting declines in our
purchase costs per SWU in recent periods. The Company anticipates
its average cost of sales per SWU from its diverse sources of
supply will decline in 2019 and subsequent years.
Cost of sales for the Contract Services Segment increased $1.0
million in the three months and declined $0.2 million in the six
months ended June 30, 2018, compared to the corresponding periods
in 2017, reflecting services provided under the X-energy contract
beginning in the second quarter of 2018, and the reduced scope of
contract work for American Centrifuge technology services over the
current six-month period.
As of December 31, 2017, the Company’s LEU Segment order book
was $1.3 billion and approximately 14 percent of the order book was
reported to be at risk due to milestones related to the deployment
of the American Centrifuge Plant or due to customer financial
conditions. As of June 30, 2018, the order book was $1.3 billion,
reflecting completed deliveries and new contracts in the six months
ended June 30, 2018. On July 26, 2018, a customer that had filed
for bankruptcy court protection in March 2018 signed a new contract
with the Company and rejected the existing long-term contract. The
rejection of the prior contract and the acceptance of the new
contract are subject to court approval. After giving effect to the
expected contract rejection and the new contract, the order book
will be $1.1 billion, absent the impact of other order activity in
the interim, and the specific risks the Company had previously
identified to the order book will have been resolved.
Gross Loss
Centrus realized a gross loss of $10.7 million in the three
months ended June 30, 2018, an increase of $6.0 million compared to
the gross loss of $4.7 million in the corresponding period in 2017.
In the six months ended June 30, 2018, the Company realized a gross
loss of $16.0 million, an increase of $8.4 million compared to the
gross loss of $7.6 million in the corresponding period in 2017.
Excluding the $9.5 million of revenue in the current period from
the January 2018 settlement with DOE related to past work
performed, the gross loss in the six months ended June 30, 2018,
was $25.5 million.
The gross loss for the LEU Segment in the three months ended
June 30, 2018, was $10.0 million, an increase of $5.4 million
compared to the gross loss of $4.6 million in the corresponding
period in 2017. In the six months ended June 30, 2018, the gross
loss for the LEU Segment was $23.5 million, an increase of $17.0
million compared to the gross loss of $6.5 million in the
corresponding period in 2017. The particular SWU sales in the three
and six months ended June 30, 2018, reflect a greater concentration
of sales made under contracts that reflect lower prices under more
recent market conditions.
For the Contract Services Segment, Centrus realized a gross loss
of $0.7 million in the three months ended June 30, 2018, compared
to a gross loss of $0.1 million in the corresponding period in
2017. The Company realized a gross profit of $7.5 million in the
six months ended June 30, 2018, including $9.5 million of revenue
from the January 2018 settlement with DOE, compared to a gross loss
of $1.1 million in the corresponding period in 2017.
Advanced Technology License and Decommissioning Costs
Advanced technology license and decommissioning costs consist of
American Centrifuge expenses that are outside of our customer
contracts in the Contract Services Segment, including ongoing costs
for work at the Piketon, Ohio, demonstration facility. Costs
increased $1.0 million, or 23 percent, in the three months and $2.9
million, or 28 percent, in the six months ended June 30, 2018,
compared to the corresponding periods in 2017. In the current
periods, efforts at the Piketon facility were focused on U.S.
Nuclear Regulatory Commission 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 was charged to advanced technology license and
decommissioning costs in the current periods following the
relocation of certain corporate functions from the Piketon
facility.
SG&A and Special Charges
Selling, general and administrative (SG&A) expenses were
unchanged in the three months and decreased $1.2 million, or five
percent, in the six months ended June 30, 2018, compared to the
corresponding periods in 2017. Overhead allocated to SG&A
expenses declined $0.9 million in the three months and $1.5 million
in the six months ended June 30, 2018, following the relocation of
certain corporate functions from the Piketon facility. Compensation
and benefits declined $0.2 million in the three-month period and
$0.4 million in the six-month period. Consulting costs increased
$0.9 million in the three-month period and $0.6 million in the
six-month period, primarily for work related to business
development.
Special charges declined $2.0 million, or 87 percent, in the
three months and $3.8 million, or 81 percent, in the six months
ended June 30, 2018, compared to the corresponding periods in 2017.
Special charges in the six months ended June 30, 2018, and 2017,
consisted of estimated employee termination benefits of $0.8
million and $1.4 million and advisory costs related to updating the
Company’s information technology systems of $0.1 million and $3.3
million, respectively.
Cash Flow
Centrus ended the second quarter of 2018 with a consolidated
cash balance of $140.1 million. The net reduction of $59.9 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, 2018. The operating loss of $53.7 million in the six
months ended June 30, 2018, net of non-cash expenses, was a use of
cash. Sources of cash included the net reduction in receivables
from utility customers of $18.9 million.
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 nearly
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 our 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 Centrus’ customers,
including actions that might affect existing contracts, as a result
of market and other conditions impacting customers and the
industry; and
- Additional costs for decontamination
and decommissioning of Centrus’ 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 and deliveries under a long-term supply agreement with Orano
Cycle; risks related to our ability to sell the LEU we procure
pursuant to our purchase obligations under our supply agreements;
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 to perform 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 June
30,
Six Months Ended June
30,
2018 2017 2018 2017
Revenue: Separative work units $ 32.9 $ 37.9 $ 50.6 $ 38.7
Uranium — — 3.6 — Contract services 6.5 6.1 20.9
12.5 Total revenue 39.4 44.0 75.1 51.2
Cost of
Sales: Separative work units and uranium 42.9 42.5 77.7 45.2
Contract services 7.2 6.2 13.4 13.6
Total cost of sales 50.1 48.7 91.1 58.8
Gross loss (10.7 ) (4.7 ) (16.0 ) (7.6 ) Advanced technology
license and decommissioning costs 5.4 4.4 13.4 10.5 Selling,
general and administrative 9.7 9.7 20.9 22.1 Amortization of
intangible assets 1.5 2.0 2.8 3.2 Special charges for workforce
reductions and advisory costs 0.3 2.3 0.9 4.7 Gains on sales of
assets (0.2 ) (0.7 ) (0.3 ) (1.7 ) Operating loss (27.4 ) (22.4 )
(53.7 ) (46.4 ) Gain on early extinguishment of debt — — — (33.6 )
Nonoperating components of net periodic benefit expense (income)
(1.7 ) (0.4 ) (3.3 ) (0.8 ) Interest expense 1.0 0.7 2.0 3.6
Investment income (0.6 ) (0.3 ) (1.2 ) (0.6 ) Loss before income
taxes (26.1 ) (22.4 ) (51.2 ) (15.0 ) Income tax benefit — —
(0.1 ) (0.2 )
Net loss (26.1 )
(22.4 ) (51.1 ) (14.8 )
Preferred stock dividends - undeclared and cumulative 2.0
2.0 4.0 3.0
Net loss allocable to common
stockholders $ (28.1 ) $
(24.4 ) $ (55.1 ) $
(17.8 ) Net loss per common share - basic and
diluted $ (3.08 ) $ (2.69 ) $ (6.05 ) $ (1.96 ) Average number of
common shares outstanding - basic and diluted (in thousands): 9,118
9,077 9,111 9,070
CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited; in
millions, except share and per share data)
June 30, 2018
December 31, 2017
ASSETS Current assets Cash and cash equivalents $
140.1 $ 208.8 Accounts receivable 27.9 60.2 Inventories 100.0 153.1
Deferred costs associated with deferred revenue 130.2 122.3 Other
current assets 22.7 22.5
Total current assets
420.9 566.9 Property, plant and equipment, net of accumulated
depreciation of $2.2 as of June 30, 2018 and $1.9 as of December
31, 2017 4.5 4.9 Deposits for financial assurance 19.8 19.7
Intangible assets, net 79.9 82.7 Other long-term assets 0.7
1.1
Total assets $ 525.8
$ 675.3 LIABILITIES AND
STOCKHOLDERS’ DEFICIT Current liabilities Accounts
payable and accrued liabilities $ 47.0 $ 54.3 Payables under SWU
purchase agreements 19.5 79.4 Inventories owed to customers and
suppliers 45.1 77.9 Deferred revenue and advances from customers
195.0 191.8
Total current liabilities 306.6
403.4 Long-term debt 155.3 157.5 Postretirement health and life
benefit obligations 151.7 154.2 Pension benefit liabilities 155.2
161.6 Advances from customers 14.5 — Other long-term liabilities
12.3 17.5
Total liabilities 795.6 894.2
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 $115.4 as of
June 30, 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 June 30,
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 June 30, 2018 and December 31, 2017
0.1 0.1 Excess of capital over par value 60.2 60.0 Accumulated
deficit (335.5 ) (284.5 ) Accumulated other comprehensive income,
net of tax — 0.1
Total stockholders’ deficit
(269.8 ) (218.9 )
Total liabilities and stockholders’
deficit $ 525.8 $ 675.3
CENTRUS ENERGY CORP. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in
millions)
Six Months Ended June
30,
2018 2017 Operating Activities Net loss
$ (51.1 ) $ (14.8 ) Adjustments to reconcile net loss to cash used
in operating activities: Depreciation and amortization 3.3 3.6 PIK
interest on paid-in-kind toggle notes 0.9 0.8 Gain on early
extinguishment of debt — (33.6 ) Gain on sales of assets (0.3 )
(1.7 ) Changes in operating assets and liabilities: Accounts
receivable 32.1 (32.1 ) Inventories, net 20.4 42.7 Payables under
SWU purchase agreements (59.9 ) (39.7 ) Deferred revenue, net of
deferred costs (4.7 ) 13.9 Accounts payable and other liabilities
(7.0 ) (15.7 ) Other, net 0.6 (1.4 ) Cash used in operating
activities (65.7 ) (78.0 )
Investing Activities
Capital expenditures (0.1 ) (0.1 ) Proceeds from sales of assets
0.3 1.7 Cash provided by investing activities 0.2
1.6
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 (68.5 ) (113.0 ) Cash, cash
equivalents and restricted cash at beginning of period 244.8
296.7 Cash, cash equivalents and restricted cash at end of
period
$ 176.3 $ 183.7
Supplemental cash flow information: Interest paid in cash $
0.4 $ 2.1 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/20180808005830/en/
Centrus Energy Corp.Investors:Don Hatcher,
301-564-3460orMedia:Jeremy Derryberry, 301-564-3392
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