USEC’s business is in a state of significant transition, and in early 2012 we initiated an internal review of our organizational structure. We engaged a management consulting firm to support this review, and costs for the management consulting firm and other advisors totaled $4.5 million in the first quarter of 2012.

Initial actions taken related to our organizational structure resulted in workforce reductions at our American Centrifuge design and engineering operations in Oak Ridge, Tenn., and at our headquarters operations located in Bethesda, Md. The reductions involved 25 employees, including two senior corporate officers. A charge of $1.9 million was incurred in the first quarter of 2012 for one-time termination benefits consisting of severance payments and short-term health care coverage. Related cash expenditures of $0.7 million were incurred in the first quarter of 2012, and most of the remainder is expected to be incurred in the second quarter of 2012.

In April, we took additional action to reduce costs with a focus on headquarters operations in Bethesda and central services located in Piketon, Ohio. Approximately 20 positions were eliminated and related severance costs of $1.1 million are expected in the second quarter 2012.

Interest expense was $12.7 million in the three months ended March 31, 2012. As noted above, all American Centrifuge related project costs incurred have been expensed, including interest expense that previously would have been capitalized. For comparison, in the three months ended March 31, 2011, interest costs of $11.0 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 March 31, 2012, USEC had a cash balance of $72.3 million compared to $37.6 million at December 31, 2011. Cash flow provided by operations in the first quarter of 2012 was $47.7 million, compared to cash flow provided by operations of $51.3 million in the previous year. Inventories declined $347.8 million in the three-month period due to monetization of inventory produced in the prior year. The increase in accounts receivable of $36.0 million reflects the lag in some inventory monetization. Payment of the Russian Contract payables balance of $206.9 million, due to the timing of deliveries, was a significant use of cash flow in the three months ended March 31, 2012. The decrease in accrued depleted uranium disposition in the first quarter associated with the $44.0 million uranium transfer agreement with DOE will not generate cash flow until surety bonds can be modified and cash collateral returned. Capital expenditures were significantly reduced due to our decision to expense all costs related to the American Centrifuge project. In the same period of 2011, capital expenditures totaled $50.7 million.

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