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USEC Reports First Quarter 2012 Results

Our contract services work at the former Portsmouth GDP for DOE was largely completed in September 2011, and revenue for that segment is expected to decline significantly in 2012. In prior years, contract work at Portsmouth represented approximately three-quarters of the revenue for the contract services segment. Our subsidiary NAC will represent a majority of revenue for the segment going forward, and we expect annual revenue for contract services in 2012 of approximately $85 million.

USEC Inc., a global energy company, is a leading supplier of enriched uranium fuel and nuclear industry related services for commercial nuclear power plants.

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” and other words of similar meaning. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For USEC, particular risks and uncertainties that could cause our actual future results to differ materially from those expressed in our forward-looking statements include, but are not limited to: risks related to the ongoing transition of our business, including uncertainty regarding the transition of the Paducah gaseous diffusion plant and uncertainty regarding continued funding for the American Centrifuge project and the impact of decisions we may make in the near term on our business and prospects; our success in reaching a multi-party agreement for the enrichment of depleted uranium tails to support continued Paducah enrichment operations through May 2013; the terms of any multi-party agreement we may reach and our dependency on such an agreement; the 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 of excess supply in the market and the lack of uncommitted demand for low enriched uranium over the next two to four years; the potential impacts of a decision to cease enrichment operations at Paducah; the outcome of ongoing discussions with DOE regarding the RD&D program, including uncertainty regarding the timing, amount and availability of funding for such RD&D program and the dependency of government funding on Congressional appropriations; restrictions in our credit facility on our spending on the American Centrifuge project after May 31, 2012 and the potential for us to demobilize the project; the impact of any conditions that are placed on us or on the American Centrifuge project in connection with or as a condition to the RD&D program or other funding, including a restructuring of our role and investment in the project; limitations on our ability to provide any required cost sharing under the RD&D program; the ultimate success of efforts to obtain a DOE loan guarantee for the American Centrifuge project, including the ability through the RD&D program or otherwise to address the concerns raised by DOE with respect to the financial and project execution depth of the project, and the timing and terms thereof; the impact of actions we have taken or may take to reduce spending on the American Centrifuge project, including the potential loss of key suppliers and employees, and impacts to cost and schedule; the impact of delays in the American Centrifuge project and uncertainty regarding our ability to remobilize the project; the potential for DOE to seek to exercise its remedies under the June 2002 DOE-USEC agreement; risks related to the completion of the remaining two phases of the three-phased strategic investment by Toshiba Corporation (“Toshiba”) and Babcock & Wilcox Investment Company (“B&W”), including uncertainty regarding the potential participation of Toshiba and B&W in any potential project structure that may be required under the RD&D program, and the potential for immediate termination of the securities purchase agreement governing their investments; our ability to extend, renew or replace our credit facility that matures on May 31, 2013 and the impact of a failure to timely renew on our ability to continue as a going concern; restrictions in our credit facility that may impact our operating and financial flexibility and spending on the American Centrifuge project; our ability to actively manage and enhance our liquidity and working capital and the potential adverse consequences of any actions taken on the long term value of our ongoing operations; uncertainty regarding the cost of electric power used at our gaseous diffusion plant; our dependence on deliveries of LEU from Russia under a commercial agreement (the “Russian Contract”) with a Russian government entity known as Techsnabexport (“TENEX”) and on a single production facility and the potential for us to cease commercial enrichment of uranium in the event of a decision to shut down Paducah enrichment operations; limitations on our ability to import the Russian LEU we buy under the new supply agreement into the United States and other countries; our inability under many existing long-term contracts to directly pass on to customers increases in our costs; the decrease or elimination of duties charged on imports of foreign-produced low enriched uranium; pricing trends and demand in the uranium and enrichment markets and their impact on our profitability; movement and timing of customer orders; changes to, or termination of, our contracts with the U.S. government, risks related to delays in payment for our contract services work performed for DOE; changes in U.S. government priorities and the availability of government funding, including loan guarantees; our subsidiary NAC may not perform as expected; the impact of government regulation by DOE and the U.S. Nuclear Regulatory Commission; 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 volatile financial market conditions on our business, liquidity, prospects, pension assets and credit and insurance facilities; risks related to the underfunding of our defined benefit pension plans and the impact of the potential requirement to accelerate the funding of these obligations on our liquidity; uncertainty regarding the continued capitalization of certain assets related to the American Centrifuge Plant and the impact of a potential impairment of these assets on our results of operations; the impact of a potential de-listing of our common stock on the NYSE if we are unable to maintain the minimum share price and other listing requirements; the impact of potential changes in the ownership of our stock on our ability to realize the value of our deferred tax benefits; the timing of recognition of previously deferred revenue; and other risks and uncertainties discussed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K and quarterly reports on Form 10-Q, which are available on our website at www.usec.com. Revenue and operating results can fluctuate significantly from quarter to quarter, and in some cases, year to year. We do not undertake to update our forward-looking statements to reflect events or circumstances that may arise after the date of this news release except as required by law.

 

USEC Inc.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(millions, except per share data)

 
 
    Three Months Ended

March 31,

2012

   

2011

Revenue:
Separative work units $537.9 $308.5
Uranium - 14.0
Contract services 23.6   58.0  
Total Revenue 561.5 380.5
Cost of Sales:
Separative work units and uranium 501.2 307.2
Contract services 21.5   59.4  
Total Cost of Sales 522.7   366.6  
Gross profit

38.8

13.9

Advanced technology costs 36.8 26.7
Selling, general and administrative 14.9 15.5
Special charge for workforce reductions and advisory costs 6.4 -
Other (income) -  

(3.7

)

Operating (loss) (19.3 ) (24.6 )
Interest expense 12.7 -
Interest (income) (0.1 ) (0.2 )
(Loss) before income taxes

(31.9

)

(24.4

)

Provision (benefit) for income taxes (3.1 ) (7.8 )
Net (loss) $(28.8 ) $(16.6 )
Net (loss) per share – basic

$(.24

)

$(.14 )
Net (loss) per share – diluted

$(.24

)

$(.14 )
Weighted-average number of shares outstanding:
Basic 122.3 119.6
Diluted 122.3 119.6
 
USEC Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(millions)
 
 
    March 31,

2012

    December 31,

2011

ASSETS
Current Assets
Cash and cash equivalents $72.3 $37.6
Accounts receivable, net 198.0 162.0
Inventories 1,941.4 1,752.0
Deferred costs associated with deferred revenue 139.7 175.5
Other current assets 68.3 64.8
Total Current Assets 2,419.7 2,191.9
Property, Plant and Equipment, net 1,181.9 1,187.1
Other Long-Term Assets
Deposits for surety bonds 151.3 151.3
Deferred financing costs, net 11.6 12.2
Goodwill 6.8 6.8
Total Other Long-Term Assets 169.7 170.3
Total Assets $3,771.3 $3,549.3
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities $110.7 $120.1
Payables under Russian Contract - 206.9
Inventories owed to customers and suppliers 1,407.3 870.1
Deferred revenue and advances from customers 169.1 205.2
Credit facility term loan 85.0 85.0
Convertible preferred stock 91.5 88.6
Total Current Liabilities 1,863.6 1,575.9
Long-Term Debt 530.0 530.0
Other Long-Term Liabilities
Depleted uranium disposition 100.0 145.2
Postretirement health and life benefit obligations 210.2 207.8
Pension benefit liabilities 260.3 258.3
Other liabilities 78.3 79.7
Total Other Long-Term Liabilities 648.8 691.0
Stockholders’ Equity 728.9 752.4
Total Liabilities and Stockholders’ Equity $3,771.3 $3,549.3
 
 
USEC Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(millions)
 
 
    Three Months Ended

March 31,

2012

   

2011

Cash Flows from Operating Activities
Net (loss) $(28.8 ) $(16.6 )
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Depreciation and amortization 10.2 15.0
Deferred income taxes (2.3 ) (1.9 )
Other non-cash income on release of disposal obligation - (0.6 )
Capitalized convertible preferred stock dividends paid-in-kind 2.9 2.5
Gain on extinguishment of convertible senior notes - (3.1 )
Changes in operating assets and liabilities:
Accounts receivable – (increase) decrease (36.0 ) 63.8
Inventories, net – decrease 347.8 147.4
Payables under Russian Contract – (decrease) (206.9 ) (201.2 )
Deferred revenue, net of deferred costs – increase (decrease) (1.6 ) 62.3
Accrued depleted uranium disposition – increase (decrease) (45.2 ) 5.0
Accounts payable and other liabilities – increase (decrease) 2.3 (18.2 )
Other, net 5.3   (3.1 )
Net Cash Provided by Operating Activities 47.7   51.3  
 
Cash Flows Used in Investing Activities
Capital expenditures (2.9 ) (50.7 )
Net Cash (Used in) Investing Activities (2.9 ) (50.7 )
 
Cash Flows Used in Financing Activities
Borrowings under revolving credit facility 96.5 -
Repayments under revolving credit facility (96.5 ) -
Payments for deferred financing costs (9.7 ) -
Common stock issued (purchased), net (0.4 ) (1.8 )
Net Cash (Used in) Financing Activities (10.1 ) (1.8 )
Net Increase (Decrease) 34.7 (1.2 )
Cash and Cash Equivalents at Beginning of Period 37.6   151.0  
Cash and Cash Equivalents at End of Period $72.3   $149.8  
Supplemental Cash Flow Information:
Interest paid, net of amount capitalized $3.0 $ -
Income taxes paid, net of refunds 0.3 1.2
 




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