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USEC's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Those American Centrifuge expenses more than offset our $84 million gross profit. From an income tax viewpoint that caused a substantial cumulative loss for the past several years that makes it difficult to assume we can use our tax benefit going forward. Therefore USEC recorded a full valuation allowance for the net deferred tax assets of $369 million.

From an operation standpoint, our gross profit was lower due to lower sales volume of our products, uranium and separate work units or SWU and higher cost. While much of our loss was due to expense related to the American Centrifuge project, we also have high production costs at Paducah that are making profitable operations difficult going forward.

Last summer we said that there were three key factors that would drive our decision to operate our Paducah plant beyond May 2012. First we need sufficient demand for Paducah’s output of low-enriched uranium. Second we need a program to re-enrich uranium tails stored at Paducah or find other demand for enrichment that would load the plant sufficiently to keep it economic.

Finally we need attractive power pricing and supply to extend operations beyond the May 31 expiration date of our power contract with TVA. At this point we do not have three elements in place. The earthquakes, tsunami and nuclear event in Japan a year ago has led to virtually all of Japan's reactors being temporarily shut down for inspections and refueling.

It is uncertain how long these outages may extend and our competitors have been left with significant supplies of low-enriched uranium to sell in the near term. Our current view is that we do not see sufficient commercial demand to support Paducah production of LEU for utility customers after the TVA contract expires.

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