- Reaffirming annual outlook of $175-200
million in revenue and $100-125 million cash balance for year-end
2018
- Cash balance of $124.9 million at
September 30, 2018
- Gross profit of $7.8 million for the
third quarter on revenue of $34.1 million
- Net loss of $7.8 million for the
quarter
Centrus Energy Corp. (NYSE American: LEU) today reported a net
loss of $7.8 million for the quarter ended September 30, 2018,
compared to a net loss of $8.5 million for the third quarter of
2017. The net loss allocable to common stockholders was $9.7
million, or $1.06 per basic and diluted share, for the quarter
ended September 30, 2018, compared to a net loss allocable to
common stockholders of $10.5 million, or $1.15 per basic and
diluted share, for the third quarter of 2017.
“Our core nuclear fuel segment showed positive results this
quarter as our purchase costs continued to decline,” said Daniel B.
Poneman, president and chief executive officer. “Despite a
difficult market, we continue to make new sales to bolster our
long-term order book, and we are well positioned with a diverse
supply base to compete for the new business we anticipate will
emerge in the early 2020s.
“At the same time, our contract services team has been working
to expand our offerings to new markets. The $15.0 million work
authorization we recently signed with the U.S. Department of Energy
is just one example of how we are leveraging our technical
capabilities to diversify and bring in new business. We see great
potential in other sectors as well, including advanced reactors,
precision manufacturing, and national security programs.”
Revenue and Cost of Sales
Revenue for the third quarter was $34.1 million, a decrease of
$16.2 million, or 32 percent, from the same period in 2017. Revenue
in the nine-month period was $109.2 million, an increase of $7.7
million, or 8 percent, over the period in 2017. Revenue from the
Low-enriched Uranium (LEU) Segment declined $14.6 million, or 34
percent, in the three months and increased $0.9 million, or 1
percent, in the nine months ended September 30, 2018, compared to
the corresponding periods in 2017. Revenue in the three months and
nine months ended September 30, 2018, includes uranium revenue of
$11.3 million and $14.9 million, respectively, with no uranium
revenue in the corresponding prior periods. The volume of
separative work units (SWU) sales declined 61 percent in the
three-month period and increased 31 percent in the nine-month
period ended September 30, 2018, reflecting the variability in
timing of utility customer orders. The average price billed to
customers for sales of SWU increased 2 percent in the three-month
period, reflecting the particular contracts under which SWU were
sold during the periods. The average SWU price declined 37 percent
in the nine-month period ended September 30, 2018, reflecting the
trend of lower SWU market prices in recent years and a greater
concentration of sales made under contracts under more recent
market conditions.
Revenue from the Contract Services Segment declined $1.6
million, or 24 percent, in the three months and increased $6.8
million, or 35 percent, in the nine months ended September 30,
2018, compared to the corresponding periods in 2017, reflecting the
reduced scope of work under the contract with UT-Battelle in the
current periods, partially offset by services provided under the
X-energy contract beginning in the second quarter of 2018. The
increase in the nine-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 declined $11.8 million, or 36
percent, in the three months and increased $20.7 million, or 27
percent, in the nine months ended September 30, 2018, compared to
the corresponding periods in 2017, primarily reflecting changes in
SWU and uranium sales volumes and 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. In the nine-month period ended September 30, 2018,
the average cost of sales per SWU declined approximately 15
percent. The company anticipates its average cost of sales per SWU
to decline again in 2019 – with further declines in subsequent
years – as a result of lower pricing in new supply contracts and
the pricing provisions of existing contracts.
Cost of sales for the Contract Services Segment declined $0.9
million, or 14 percent, in the three months and $1.1 million, or 6
percent, in the nine months ended September 30, 2018, compared to
the corresponding periods in 2017, reflecting the reduced scope of
work under the contract with UT-Battelle over the current
nine-month period, partially offset by costs for services provided
under the X-energy contract beginning in the second quarter of
2018.
Gross Profit
Centrus realized a gross profit of $7.8 million in the three
months ended September 30, 2018, a decline of $3.5 million compared
to the gross profit of $11.3 million in the corresponding period in
2017. In the nine months ended September 30, 2018, the Company
realized a gross loss of $8.2 million, down $11.9 million compared
to the gross profit of $3.7 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, Centrus realized a gross loss in the nine months ended
September 30, 2018, of $17.7 million.
The gross profit for the LEU Segment in the three months ended
September 30, 2018, was $8.0 million compared to $10.8 million in
the corresponding period in 2017. The decline of $2.8 million was
primarily due to the decline in SWU sales volume. In the nine
months ended September 30, 2018, the gross loss for the LEU Segment
was $15.5 million, down $19.8 million compared to the gross profit
of $4.3 million in the corresponding period in 2017. SWU sales in
the nine months ended September 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 $0.2 million in the three months ended September 30, 2018,
compared to a gross profit of $0.5 million in the corresponding
period in 2017. The Company realized a gross profit of $7.3 million
in the nine months ended September 30, 2018, including $9.5 million
of revenue from the January 2018 settlement with DOE, compared to a
gross loss of $0.6 million in the corresponding period in 2017.
Gross losses are due to costs incurred that are greater than the
revenue under the contracts with UT-Battelle and X-energy.
Advanced Technology License and Decommissioning Costs
Advanced technology license and decommissioning costs consist of
American Centrifuge expenses that are outside of Centrus’ customer
contracts in the Contract Services Segment, including ongoing costs
for work at the Piketon, Ohio, facility. Costs increased $1.3
million, or 29 percent, in the three months and $4.2 million, or 28
percent, in the nine months ended September 30, 2018, compared to
the corresponding periods in 2017. In the current periods, efforts
at the Piketon facility were focused on supporting U.S. Nuclear
Regulatory Commission requirements, including working towards an
elimination of the required financial assurance, 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
Selling, general and administrative (SG&A) expenses declined
$2.2 million, or 20 percent, in the three months and $3.4 million,
or 10 percent, in the nine months ended September 30, 2018,
compared to the corresponding periods in 2017. Overhead allocated
to SG&A expenses declined $0.5 million in the three months and
$2.1 million in the nine months ended September 30, 2018, following
the relocation of certain corporate functions from the Piketon
facility. Compensation and benefits declined $0.8 million in the
three-month period and $1.2 million in the nine-month period.
Consulting costs declined $0.4 million in the three-month period
and increased $0.2 million in the nine-month period, primarily for
work related to business development.
Cash Flow
Centrus ended the third quarter of 2018 with a consolidated cash
balance of $124.9 million. The net reduction of $64.8 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, 2018. The operating loss of $62.8 million in the nine
months ended September 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 $42.1 million.
2018 Outlook
Centrus continues to anticipate SWU and uranium revenue in 2018
in a range of $150 million to $175 million and 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 Company’s 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 the Company’s existing
contracts, as a result of market and other conditions impacting its
customers and the industry; and
- Timing of return of cash collateral
supporting financial assurance.
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 our principal subsidiary 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 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 obtain and/or
perform under our future agreements 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 under Part 1. Item1A - “Risk
Factors” in 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 September
30,
Nine Months Ended September
30,
2018 2017 2018 2017
Revenue: Separative work units $ 17.6 $ 43.5 $ 68.2 $ 82.2
Uranium 11.3 — 14.9 — Contract services 5.2 6.8 26.1
19.3
Total revenue 34.1 50.3
109.2 101.5 Cost of Sales: Separative work
units and uranium 20.9 32.7 98.6 77.9 Contract services 5.4
6.3 18.8 19.9
Total cost of sales
26.3 39.0 117.4
97.8 Gross profit (loss) 7.8 11.3 (8.2 ) 3.7 Advanced
technology license and decommissioning costs 5.8 4.5 19.2 15.0
Selling, general and administrative 8.8 11.0 29.7 33.1 Amortization
of intangible assets 1.7 2.5 4.5 5.7 Special charges for workforce
reductions and advisory costs 0.6 2.4 1.5 7.1 Gains on sales of
assets — (0.6 ) (0.3 ) (2.3 ) Operating loss (9.1 ) (8.5 )
(62.8 ) (54.9 ) Gain on early extinguishment of debt — — — (33.6 )
Nonoperating components of net periodic benefit expense (income)
(1.6 ) (0.3 ) (4.9 ) (1.1 ) Interest expense 1.0 0.7 3.0 4.3
Investment income (0.7 ) (0.4 ) (1.9 ) (1.0 )
Loss before income
taxes (7.8 ) (8.5 ) (59.0
) (23.5 ) Income tax benefit — —
(0.1 ) (0.2 )
Net loss (7.8 ) (8.5
) (58.9 ) (23.3 ) Preferred
stock dividends - undeclared and cumulative 1.9 2.0
5.9 5.0
Net loss allocable to common
stockholders $ (9.7 ) $
(10.5 ) $ (64.8 ) $
(28.3 ) Net loss per common share - basic and
diluted $ (1.06 ) $ (1.15 ) $ (7.11 ) $ (3.12 ) Average number of
common shares outstanding - basic and diluted (in thousands) 9,133
9,103 9,118 9,081
CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited; in
millions, except share and per share data)
September 30, 2018
December 31, 2017
ASSETS Current assets: Cash and cash equivalents $ 124.9 $
208.8 Accounts receivable 2.5 60.2 Inventories 129.4 153.1 Deferred
costs associated with deferred revenue 122.7 122.3 Deposits for
financial assurance 30.2 16.3 Other current assets 6.9 6.2
Total current assets 416.6 566.9
Property, plant and equipment, net of accumulated depreciation of
$1.5 as of September 30, 2018 and $1.9 as of December 31, 2017 4.4
4.9 Deposits for financial assurance 6.2 19.7 Intangible assets,
net 78.1 82.7 Other long-term assets 0.7 1.1
Total
assets $ 506.0 $ 675.3
LIABILITIES AND STOCKHOLDERS’ DEFICIT Current
liabilities: Accounts payable and accrued liabilities $ 46.9 $ 48.2
Payables under SWU purchase agreements 14.6 79.4 Inventories owed
to customers and suppliers 70.2 77.9 Deferred revenue and advances
from customers 175.6 191.8 Current debt 39.1 6.1
Total current liabilities 346.4 403.4
Long-term debt 120.2 157.5 Postretirement health and life benefit
obligations 150.9 154.2 Pension benefit liabilities 143.5 161.6
Advances from customers 14.5 — Other long-term liabilities 8.0
17.5
Total liabilities 783.5
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 $117.4 as of
September 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 September
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 September 30, 2018 and December
31, 2017 0.1 0.1 Excess of capital over par value 60.3 60.0
Accumulated deficit (343.3 ) (284.5 ) Accumulated other
comprehensive income, net of tax — 0.1
Total
stockholders’ deficit (277.5 ) (218.9
) Total liabilities and stockholders’ deficit
$ 506.0 $ 675.3
CENTRUS ENERGY CORP. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited; in millions)
Nine Months Ended September
30,
2018 2017 Operating Activities: Net
loss $ (58.9 ) $ (23.3 ) Adjustments to reconcile net loss to cash
used in operating activities: Depreciation and amortization 5.1 6.6
PIK interest on paid-in-kind toggle notes 1.2 1.2 Gain on early
extinguishment of debt — (33.6 ) Gain on sales of assets (0.3 )
(2.3 ) Changes in operating assets and liabilities: Accounts
receivable 57.6 14.5 Inventories, net 30.6 17.9 Payables under SWU
purchase agreements (64.8 ) (42.3 ) Deferred revenue, net of
deferred costs (16.7 ) 2.9 Accounts payable and other liabilities
(1.4 ) (20.1 ) Pension and postretirement liabilities (21.3 ) (6.2
) Other, net (8.8 ) (1.9 )
Cash used in operating activities
(77.7 ) (86.6 ) Investing
Activities: Capital expenditures (0.1 ) (0.3 ) Proceeds from
sales of assets 0.4 2.1
Cash provided by investing
activities 0.3 1.8
Financing Activities: Payment of interest classified as debt
(6.1 ) (3.4 ) Repurchase of debt — (27.6 ) Payment of securities
transaction costs — (9.0 )
Cash used in financing
activities (6.1 ) (40.0 )
Decrease in cash, cash equivalents and restricted cash (83.5 )
(124.8 ) Cash, cash equivalents and restricted cash, beginning of
period 244.8 296.7
Cash, cash equivalents and
restricted cash, end of period $ 161.3
$ 171.9 Supplemental cash flow
information: Interest paid in cash $ 0.8 $ 4.2 Non-cash
activities: Conversion of interest payable-in-kind to debt $ 1.7 $
0.4 Exchange of debt for Series B preferred stock $ — $ 4.6
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Centrus Energy Corp.Investors:Dan Leistikow,
301-564-3399orMedia:Jeremy Derryberry, 301-564-3392
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