Call End:

USEC Inc. (

USU

)

Q2 2011 Earnings Conference Call

Aug 4, 2011, 8:30 AM ET

Executives

Steven Wingfield – Director, Investor Relations

John Welch – President and CEO

John Barpoulis – Senior Vice President and CFO

Philip Sewell – Senior Vice President

Bob Van Namen – Senior Vice President

Tracy Mey – Vice President and Chief Accounting Officer

Analysts

Paul Clegg – Mizuho

George Caffrey – Miller Tabak Roberts Securities

Robert Cuttleburg- Cuttleburg Fund

Brian Grad - DLS Capital Management

Ben Elias – Sterne Agee

Randy Laufman - Imperial Capital

TheStreet Recommends

Ben Mackovak - Rivanna Capital

Presentation

Operator

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Previous Statements by USU
» USEC's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» USEC CEO Discusses Q4 2010 Results - Earnings Call Transcript
» USEC CEO Discusses Q3 2010 Results - Earnings Call Transcript
» USEC Inc. Q2 2010 Earnings Call Transcript

Greetings and welcome to the USEC Inc. second quarter conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the prepared remarks. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Steven Wingfield, Director of Investor Relations for USEC. Thank you, Mr. Wingfield. You may begin.

Steven Wingfield

Good morning. Thank you for joining us for USEC’s conference call regarding the second quarter of 2011, which ended June 30

th

. With me today are John Welch, President and Chief Executive Officer; John Barpoulis, Senior Vice President and Chief Financial Officer; Philip Sewell, Senior Vice President; Bob Van Namen, Senior Vice President and Tracy Mey, Vice President and Chief Accounting Officer.

Before turning the call over to John Welch, I’d like to welcome all of our callers as well as those listening to our webcast. This conference call follows our earnings news release issued yesterday after the markets closed. That news release is available on many financial websites, as well as our corporate website, usec.com.

I want to inform all of our listeners that our news releases and SEC filings, including our 10-K, 10-Qs and 8-Ks are available on our website. We intend to file our quarterly report on Form 10-Q before the end of this week. A replay of this call also will be available later this morning on the USEC website.

I’d like to remind everyone that certain of the information that we may discuss on this call today may be considered forward-looking information that involves risks and uncertainties, including assumptions about the future performance of USEC. Our actual results may differ materially from those in our forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in our forward-looking statements is contained in our filings with the SEC, including our annual report on Form 10-K, our quarterly reports on Form 10-Q and finally, the forward-looking information provided today is time sensitive and is accurate only as of today, August of 4

th

, 2011. This call is the property of USEC. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of USEC is strictly prohibited.

Thank you for your participation and now, and now I’d like to turn the call over to John Welch.

John Welch

Good morning and thank you for joining us to discuss our second quarter results. Yesterday we reported a gross profit of $33 million and a net loss of $21 million. That is a bit better than our prior guidance. Two of the biggest differences between the second quarters of 2010 and 2011 are related to spending on the American Centrifuge project. Last year, about half of the expense for American Centrifuge was offset by cooperative cost sharing program with the Department of Energy or DOE. That program added $20 million of other income in the first six months of 2010. In addition this year we expense $9.6 million in the second quarter for Centrifuge equipment that had been previously capitalized.

We continue to be successful in our efforts to mitigate costs related to the transition of our contract services business and we will continue to be focused on mitigating these transition costs as we finish de-leasing the former Portsmouth plant later this year.

Our second quarter revenue came in at $454 million which was about $5 million less revenue than reported for the second quarter of 2010. In addition our costs were also higher, particularly for the electricity we purchase from the Tennessee Valley Authority.

While our 5 year contract with TBA provides for modest annual increases to the price we pay, a separate fuel cost adjustment has been higher than expected. Severe weather in the mid south during the spring knocked out access to several TVA power stations requiring TVA to purchase power from outside its system. Because electric power accounts for about 70% of our production cost, this contributed to an increase in our unit production cost of 9% compared to the second quarter of 2010. John Barpoulis will go through our earnings in details in a few minutes as well as our updated guidance for 2011.

Let me spend a few minutes updating you on the activities we’ve taken over the past few months to transition our uranium enrichment business to the American Centrifuge. When we reported first quarter earnings in May and provided an update at the end of June, we had hoped that DOE would have provided the conditional commitment for a $2 billion loan guarantee by now. That didn’t happen but we still see a path for financing the project. We still believe in the project and we still see American Centrifuge as the best way to deliver shareholder value.

It has been two years since DOE asked us to address their financial and technical concerns. We spent countless hours addressing those concerns which include assembling a lead cascade production ready AC100 machines. A year ago in 2010 we submitted a comprehensive update to our loan guarantee application. Last October DOE informed us that it had largely completed its initial technical review and we proceeded to the next step in the process, negotiating a term sheet for the loan guarantee.

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