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USEC Reports Third Quarter 2012 Results

Stocks in this article: USU

Actions taken to-date related to our organizational structure resulted in workforce reductions at our American Centrifuge design and engineering operations in Oak Ridge, Tenn., the central services operations located in Piketon, Ohio, and at our headquarters operations located in Bethesda, Md. The reductions to-date involved approximately 50 employees, including two senior corporate officers. A charge of $0.4 million was incurred in the third quarter of 2012 for a total of $4.0 million in the nine months ended September 30, 2012, for one-time termination benefits consisting of severance payments, short-term health care coverage and immediate vesting of restricted stock and stock options for certain employees. Additional actions affecting employees to align the organization with our evolving business environment are expected.

Selling, general and administrative expenses in the nine-month period of 2012 were $42.5 million, a decrease of $5.3 million over the same period in 2011, reflecting lower salary and other compensation costs and lower consulting costs as we move forward with cost reductions identified and actions taken in the second quarter.

Interest expense was $37.7 million in the nine months ended September 30, 2012, compared to $0.3 million the corresponding periods in 2011. As noted above, beginning with the fourth quarter of 2011, all American Centrifuge related project costs incurred have been expensed, including interest expense that previously would have been capitalized. For comparison, in the nine months ended September 30, 2011, interest costs of $32.8 million were capitalized. Interest expense in the first quarter of 2012 included $1.4 million of previously deferred financing costs related to the former credit facility that were expensed in connection with the amended and restated credit facility obtained in March 2012.

Cash Flow

At September 30, 2012, USEC had a cash balance of $303.3 million compared to $229.0 million at June 30, 2012 and $37.6 million at December 31, 2011. Cash flow provided by operations in the nine-month period of 2012 was $180.5 million compared to cash flow provided by operations of $107.2 million in the same period last year. Inventories declined $271.1 million in the nine-month period due to monetization of inventory produced in the prior year. Cash collateral deposits of $99.6 million were returned to us following the transfer of certain depleted uranium to DOE in connection with the March 2012 uranium transfer agreement and the June 2012 cooperative agreement to provide cost-share funding for the RD&D program. The remaining pending amounts of $32.1 million are expected to be returned during the fourth quarter of 2012. Capital expenditures were significantly reduced due to our decision to expense all costs related to the American Centrifuge project. Capital expenditures totaled $3.8 million in the nine months ended September 30, 2012, compared to $130.3 million in the same period last year. Cash payments of $10.1 million were made for financing costs in the nine-month period of 2012.

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