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USEC Reports Second Quarter 2012 Results

Although we expect to earn a gross profit of approximately $140 million, advanced technology expense, interest expense, and special charges are expected to result in loss for the full year 2012 of approximately $100 million. However, we expect to report cash flow from operations of approximately $30 million and to end the year with a cash balance of approximately $200 million without outstanding loans on the revolving portion of our credit facility, although we will have issued letters of credit. Looking to 2013, we expect the volume of SWU sold will decline by approximately one-third.

Our financial guidance is subject to a number of assumptions and uncertainties that could affect results. Variations from our expectations could cause substantial differences between our guidance and ultimate results. Among the factors that could affect our results are:

  • Movement and timing of customer orders;
  • Changes to SWU and uranium price indicators, and changes in inflation that can affect the price of SWU billed to customers;
  • The pace and number of nuclear power reactors in Japan that are restarted following extensive safety inspections;
  • Availability of funding for and continuance of the RD&D program;
  • Our ability to complete the contract with Energy Northwest to enrich depleted uranium; and
  • Potential acceleration of expenses and depreciation and other costs that may be triggered by decisions with respect to the continuation of Paducah enrichment operations beyond May 2013.

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 dependency on the multi-party arrangement with Energy Northwest, the Bonneville Power Administration, the Tennessee Valley Authority and the U.S. Department of Energy (“DOE”) to support continued enrichment operations at the Paducah gaseous diffusion plant; risks related to Energy Northwest obtaining the financing needed to complete the multi-party arrangement and the potential for termination of the agreement if such financing is not secured on terms acceptable to Energy Northwest; risks related to the performance of each of the parties under the multi-party arrangement, including the obligations of DOE to timely deliver depleted uranium to Energy Northwest; 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 and potential duration of the current supply/demand imbalance in the market for low enriched uranium; the potential impacts of a decision to cease enrichment operations at Paducah; uncertainty regarding the timing, amount and availability of additional funding for the research, development and demonstration (“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 and the potential for us to demobilize 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 and other financing 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; potential changes in our anticipated ownership of or role in the American Centrifuge project; 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 the potential for immediate termination of the securities purchase agreement governing their investments; changes in U.S. government priorities and the availability of government funding, including loan guarantees; 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; 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; 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; 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; 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; the impact of a potential de-listing of our common stock on the NYSE; 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 Six Months Ended
June 30, June 30,

2012

 

2011

2012

 

2011

Revenue:
Separative work units $347.2 $330.3 $885.1 $638.8
Uranium 3.6 67.8 3.6 81.8
Contract services 14.0   56.3   37.6   114.3  
Total Revenue 364.8 454.4 926.3 834.9
Cost of Sales:
Separative work units and uranium 340.4 368.6 841.6 675.8
Contract services 12.1   52.6   33.6   112.0  
Total Cost of Sales 352.5   421.2   875.2   787.8  
Gross profit

12.3

 

33.2

 

51.1

 

47.1

 

Advanced technology costs 85.7 33.5 122.5 60.2
Selling, general and administrative 14.8 16.7 29.7 32.2
Special charge for workforce reductions and advisory costs 3.2 - 9.6 -
Other (income) (10.0 ) -   (10.0 ) (3.7 )
Operating (loss) (81.4 ) (17.0 ) (100.7 ) (41.6 )
Interest expense 12.7 0.1 25.4 0.1
Interest (income) (0.1 ) (0.1 ) (0.2 ) (0.3 )
(Loss) before income taxes

(94.0

)

(17.0

)

(125.9

)

(41.4

)

Provision (benefit) for income taxes (2.0 ) 4.2   (5.1 ) (3.6 )
Net (loss) $(92.0 ) $(21.2 ) $(120.8 ) $(37.8 )
Net (loss) per share – basic $(.76 ) $(.18 ) $(.99 ) $(.31 )
Net (loss) per share – diluted $(.76 ) $(.18 ) $(.99 ) $(.31 )
Weighted-average number of shares outstanding:
Basic 121.7 121.1 122.0 120.3
Diluted 121.7 121.1 122.0 120.3
 
USEC Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(millions)
   
June 30, December 31,

2012

2011

ASSETS
Current Assets
Cash and cash equivalents $229.0 $37.6
Accounts receivable, net 173.4 162.0
Inventories 1,924.4 1,752.0
Deferred costs associated with deferred revenue 130.8 175.5
Other current assets 67.2 64.8
Total Current Assets 2,524.8 2,191.9
Property, Plant and Equipment, net 1,130.6 1,187.1
Other Long-Term Assets
Deposits for surety bonds 107.5 151.3
Deferred financing costs, net 11.2 12.2
Goodwill 6.8 6.8
Total Other Long-Term Assets 125.5 170.3
Total Assets $3,780.9 $3,549.3
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities $111.3 $120.1
Payables under Russian Contract 141.7 206.9
Inventories owed to customers and suppliers 1,382.8 870.1
Deferred revenue and advances from customers 178.9 205.2
Credit facility term loan 85.0 85.0
Convertible preferred stock 94.4 88.6
Total Current Liabilities 1,994.1 1,575.9
Long-Term Debt 530.0 530.0
Other Long-Term Liabilities
Depleted uranium disposition 71.7 145.2
Postretirement health and life benefit obligations 213.2 207.8
Pension benefit liabilities 252.5 258.3
Other liabilities 76.8 79.7
Total Other Long-Term Liabilities 614.2 691.0
Stockholders’ Equity 642.6 752.4
Total Liabilities and Stockholders’ Equity $3,780.9 $3,549.3
 
USEC Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(millions)
 
Six Months Ended

June 30,

2012

 

2011

Cash Flows from Operating Activities
Net (loss) $(120.8 ) $(37.8 )
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Depreciation and amortization 19.5 30.2
Transfer of machinery and equipment to U.S. Department of Energy 44.6 -
Deferred income taxes (4.6 ) 7.3
Other non-cash income on release of disposal obligation (10.0 ) (0.6 )
Capitalized convertible preferred stock dividends paid-in-kind 5.8 5.1
Gain on extinguishment of convertible senior notes - (3.1 )
Changes in operating assets and liabilities:
Accounts receivable – (increase) decrease (11.4 ) 174.6
Inventories, net – decrease 340.3 173.9
Payables under Russian Contract – (decrease) (65.2 ) (56.0 )
Deferred revenue, net of deferred costs – increase 27.1 10.2
Accrued depleted uranium disposition – increase (decrease) (73.5 ) 9.9
Accounts payable and other liabilities – increase (decrease) 3.6 (8.2 )
Other, net 6.7   (19.9 )
Net Cash Provided by Operating Activities 162.1   285.6  
 
Cash Flows Provided by ( Used in) Investing Activities
Capital expenditures (4.1 ) (91.0 )
Deposits for surety bonds - decrease 43.8   -  
Net Cash Provided by (Used in) Investing Activities 39.7   (91.0 )
 
Cash Flows Used in Financing Activities
Borrowings under revolving credit facility 123.6 -
Repayments under revolving credit facility (123.6 ) -
Payments for deferred financing costs (9.8 ) (3.7 )
Common stock issued (purchased), net (0.6 ) (1.7 )
Net Cash (Used in) Financing Activities (10.4 ) (5.4 )
Net Increase 191.4 189.2
Cash and Cash Equivalents at Beginning of Period 37.6   151.0  
Cash and Cash Equivalents at End of Period $229.0   $340.2  
Supplemental Cash Flow Information:
Interest paid, net of amount capitalized $13.2 $ -
Income taxes paid, net of refunds 0.5 2.1




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