BETHESDA, Md., March 28, 2019 /PRNewswire/ -- Centrus Energy
Corp. (NYSE American: LEU) today reported results for the fourth
quarter 2018 and full year ended December
31, 2018.
2018 Summary:
Financial Results
- Met annual guidance, with total revenues of $193.0 million, separative work units (SWU) and
uranium revenue of $164.4 million,
and year-end cash balance of $123.1
million
- Gross loss of $17.9 million and
net loss of $104.1 million,
reflecting lower market prices, higher retiree benefit expenses due
to recognition of stock market conditions, and higher advanced
technology license and decommissioning costs
- Centrus anticipates that declining supply costs will improve
results in 2019 and future years and that it will return to
profitability in 2020
Commercial Highlights
- Signed long-term supply contract with France's Orano extending through the next
decade
- Order book at $1.0 billion as of
December 31, 2018
- Awarded two contracts to design and support licensing of fuel
fabrication plant for advanced reactor fuels and a $15 million contract from the U.S. Department of
Energy to perform decontamination and decommissioning work in
Tennessee
- U.S. Department of Energy announced intent to contract with
Centrus to demonstrate production of High Assay, Low Enriched
Uranium (HALEU) for advanced reactors
"Declining prices in the enrichment market were the biggest
driver in our losses for the year, but the market has finally begun
to turn around and we made a number of important strides that will
improve the fundamentals of our business moving forward," said
Daniel B. Poneman, Centrus president
and chief executive officer. "While prices have been rising since
August, our supply costs starting in 2019 will be much lower, which
will improve our results this year. We expect a return to
profitability in 2020. We also see significant growth
potential in our contract services segment, where we have been
winning new customers, diversifying our services and putting
ourselves in position to fuel the next generation of advanced
reactors around the world."
Financial Results
For the full year, the Company reported a net loss of
$104.1 million in 2018 compared to
net income of $12.2 million in 2017.
The net loss allocable to common stockholders was $111.9 million, or $12.23 per share, in 2018, compared to net income
allocable to common stockholders of $5.3
million, or $0.58 per share,
in 2017. Revenue for 2018 was $193.0
million, a decrease of $25.4
million or 12 percent from the prior year.
Revenue from the LEU segment declined $31.0 million, or 16 percent, compared to
2017. This reduction was primarily driven by a 46 percent
reduction in the average price billed to customers for sales of SWU
as a result of the trend of lower SWU market prices in recent years
and the particular contracts under which SWU were sold during the
periods.
Cost of sales for the LEU segment increased $25.0 million, or 15 percent, in 2018 reflecting
larger sales volumes for SWU and uranium, partially offset by a 22
percent decline in the average cost of sales per SWU.
Centrus anticipates its average cost of sales per SWU to decline
again in 2019, with further declines in subsequent years, primarily
due to lower pricing in new supply contracts and the pricing
provisions of existing contracts. This will improve our
profitability in 2019 and future years.
Revenue from the Contract Services segment increased
$5.6 million, or 24 percent, in 2018
compared to 2017, reflecting services provided under the X-energy
contract beginning in the second quarter of 2018, as well as
$9.5 million of revenue related to
the January 2018 settlement with the
United States Department of Energy (DOE) related to past work
performed, partially offset by the reduced scope of work under the
contract with UT-Battelle in 2018. Cost of sales for the Contract
Services segment declined $2.3
million, or 9 percent, compared to 2017.
Centrus realized a gross loss of $17.9
million in 2018, a decline of $48.1
million compared to the gross profit of $30.2 million in 2017. Excluding the $9.5 million of revenue in the current period
from the January 2018 settlement with
DOE related to past work performed, the Company realized a gross
loss of $27.4 million in 2018.
Selling, General and Administrative
SG&A expenses declined $3.8
million, or 9 percent, in 2018 compared to 2017. Overhead
allocated to SG&A expenses declined $2.4
million in 2018, following the relocation of certain
corporate functions from the Piketon facility and compensation and benefits
declined $0.8 million in 2018. These
decreases were partially offset by an increase in consulting costs
of $0.6 million in 2018, primarily
for work related to business development.
Nonoperating Components of Net Periodic Benefit
Expense
Centrus recognized $17.3 million
of net actuarial losses in 2018 compared to net actuarial gains of
$25.8 million in 2017 related to the
Company's retiree benefit plans. In 2018, major U.S. stock
indices posted their largest annual losses since 2008. The net
expense in 2018 reflects unfavorable investment returns relative to
the expected return assumption, partially offset by other
factors.
2019 Outlook
Centrus anticipates 2019 SWU and uranium revenue to be in the
range of $85 million to $120 million and total revenue to be in a range
of $125 million to $160 million. Consistent with prior years,
revenue continues to be most heavily weighted in the second half of
the year. Centrus expects to generate sufficient cash flow to repay
PIK toggle notes with a December 31,
2018 balance of $26.7 million
that are due in September 2019, and
that it will end 2019 with a cash and cash equivalents balance in a
range of $120 million to $140 million. Centrus anticipates that declining
supply costs will improve results in 2019 and future years and that
it will return to profitability in 2020 as the impact of lower
supply costs become more fully reflected in its results.
The Company's financial guidance is subject to a number of
assumptions and uncertainties that could affect results either
positively or negatively. Variations from its expectations could
cause differences between this guidance and the ultimate results.
Among the factors that could affect these results are:
- Additional purchases or sales of SWU and uranium;
- Conditions in the LEU and energy markets, including pricing,
demand, operations, and regulations
- Timing of customer orders, related deliveries, and purchases of
LEU or components;
- Timing of execution of letter agreement for HALEU and terms
established in a definitized contract;
- Financial market conditions and other factors that may affect
pension and benefit liabilities and the value of related
assets
- The outcome of legal proceedings and other contingencies;
- Potential use of cash for strategic initiatives;
- Actions taken by customers, including actions that might affect
existing contracts, as a result of market and other conditions
impacting Centrus' customers and the industry; and
- Timing of return of cash collateral supporting financial
assurance for the Piketon
facility.
Conference Call
Centrus Energy's investor conference call to discuss the fourth
quarter and full year 2018 results is scheduled for March 29, 2019, at 8:30
a.m. EDT. A live webcast of the conference call can be
accessed through the Investor Relations section of the Company's
website at www.centrusenergy.com, and a recording of the call will
be available on the site through April 12,
2019.
About Centrus Energy Corp.
Centrus is a trusted supplier of nuclear fuel and services for
the nuclear power industry. Centrus provides value to its utility
customers through the reliability and diversity of its supply
sources – helping them meet the growing need for clean, affordable,
carbon-free electricity. Since 1998, the Company has provided its
utility customers with more than 1,750 reactor years of fuel, which
is equivalent to 7 billion tons of coal.
With world-class technical capabilities, Centrus offers turnkey
engineering and advanced manufacturing solutions to its customers.
The Company is also advancing the next generation of centrifuge
technologies so that America can restore its domestic uranium
enrichment capability in the future. Find out more at
www.centrusenergy.com.
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",
"should", "could", "would" or "may" and other words of similar
meaning. Forward-looking statements by their nature address matters
that are, to different degrees, uncertain. For Centrus Energy
Corp., particular risks and uncertainties that could cause our
actual future results to differ materially from those expressed in
our forward-looking statements include: risks related to our
significant long-term liabilities, including material unfunded
defined benefit pension plan obligations and postretirement health
and life benefit obligations; risks relating to our outstanding
8.0% paid-in-kind ("PIK") toggle notes (the "8% PIK Toggle Notes")
maturing in September 2019, our 8.25%
notes (the "8.25% Notes") maturing in February 2027 and our Series B Senior Preferred
Stock, including the potential termination of the guarantee by our
principal subsidiary United States Enrichment Corporation
("Enrichment Corp.") of the 8% PIK Toggle Notes; risks related to
the use of our net operating loss ("NOLs") carryforwards and net
unrealized built-in losses ("NUBILs") to offset future taxable
income and the use of the Rights Agreement (as defined herein) to
prevent an "ownership change" as defined in Section 382 of the
Internal Revenue Code of 1986, as amended (the "Code") and our
ability to generate taxable income to utilize all or a portion of
the NOLs and NUBILs prior to the expiration thereof; risks related
to the limited trading markets in our securities; risks related to
our ability to maintain the listing of our Class A Common Stock on
the NYSE American LLC (the "NYSE American"); risks related to
decisions made by our Class B stockholders regarding their
investment in the Company based upon factors that are unrelated to
the Company's performance; risks related to the Company's capital
concentration; the continued 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 extended duration of the current supply/demand imbalance
in the market for low-enriched uranium ("LEU"); our dependence on
others for deliveries of LEU including deliveries from the Russian
government entity Joint Stock Company "TENEX" ("TENEX") under a
commercial supply agreement with TENEX and deliveries under a
long-term supply agreement with Orano Cycle ("Orano"); risks
related to our ability to sell the LEU we procure pursuant to our
purchase obligations under our supply agreements; risks relating to
our sales order book, including uncertainty concerning customer
actions under current contracts and in future contracting due to
market conditions and lack of current production capability; risks
related to financial difficulties experienced by customers,
including possible bankruptcies, insolvencies or any other
inability to pay for our products or services; pricing trends and
demand in the uranium and enrichment markets and their impact on
our profitability; movement and timing of customer orders; risks
related to the value of our intangible assets related to the sales
order book and customer relationships; risks associated with our
reliance on third-party suppliers to provide essential services to
us; risks related to existing or new trade barriers and contract
terms that limit our ability to deliver LEU to customers; risks
related to actions, including government reviews, that may be
taken by the U.S. government, the Russian government or other
governments that could affect our ability to perform or the ability
of our sources of supply to perform under their contract
obligations to us, including the imposition of sanctions,
restrictions or other requirements; the impact of government
regulation including by the U.S. Department of Energy ("DOE") and
the U.S. Nuclear Regulatory Commission; uncertainty regarding our
ability to commercially deploy competitive enrichment technology;
risks and uncertainties regarding funding for the American
Centrifuge project and our ability to obtain and/or perform under
our future agreements with UT-Battelle, LLC ("UT-Battelle"), the
management and operating contractor for Oak Ridge National
Laboratory ("ORNL"), for continued research and development of the
American Centrifuge technology; uncertainties regarding uses for
the Piketon, Ohio facility that we
lease from the DOE; the potential for further demobilization or
termination of the American Centrifuge project; risks related to
the current demobilization of portions of the American Centrifuge
project, including risks that the schedule could be delayed and
costs could be higher than expected; risks related to our ability
to perform and receive timely payment under agreements with the
DOE, including risk and uncertainties related to the ongoing
funding of the government and potential audits; the competitive
bidding process associated with obtaining a federal contract; risks
related to our ability to perform fixed-price contracts, including
the risk that costs could be higher than expected; risks that we
will be unable to obtain new business opportunities, achieve market
acceptance of our services or that services provided by others will
render our services obsolete or noncompetitive; risks that we will
not be able to timely complete the work that we are obligated to
perform; failures or security breaches of our information
technology systems; potential strategic transactions, which could
be difficult to implement, disrupt our business or change our
business profile significantly; 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 financial market conditions on our business, liquidity,
prospects, pension assets and insurance facilities; risks related
to the identification of a material weakness in our internal
controls over financial reporting; the risks of revenue and
operating results fluctuating significantly from quarter to
quarter, and in some cases, year to year; and other risks and
uncertainties discussed in this and our other filings with the
Securities and Exchange Commission.
Contact
Investors: Dan Leistikow (301)
564-3399
Media: Jeremy Derryberry (301)
564-3392
CENTRUS ENERGY
CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited, in
millions, except share and per share data)
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenue:
|
|
|
|
|
|
|
|
Separative work
units
|
$
|
62.4
|
|
$
|
113.2
|
|
$
|
130.6
|
|
$
|
195.4
|
Uranium
|
18.9
|
|
—
|
|
33.8
|
|
—
|
Contract
services
|
2.5
|
|
3.7
|
|
28.6
|
|
23.0
|
Total
revenue
|
83.8
|
|
116.9
|
|
193.0
|
|
218.4
|
Cost of
Sales:
|
|
|
|
|
|
|
|
Separative work units
and uranium
|
89.1
|
|
84.8
|
|
187.7
|
|
162.7
|
Contract
services
|
4.4
|
|
5.6
|
|
23.2
|
|
25.5
|
Total cost of
sales
|
93.5
|
|
90.4
|
|
210.9
|
|
188.2
|
Gross profit
(loss)
|
(9.7)
|
|
26.5
|
|
(17.9)
|
|
30.2
|
Advanced technology
license and decommissioning costs
|
6.9
|
|
0.7
|
|
26.1
|
|
15.7
|
Selling, general and
administrative
|
10.2
|
|
10.6
|
|
39.9
|
|
43.7
|
Amortization of
intangible assets
|
2.1
|
|
4.9
|
|
6.6
|
|
10.6
|
Special charges for
workforce reductions and advisory costs
|
0.7
|
|
2.4
|
|
2.2
|
|
9.5
|
Gains on sales of
assets
|
—
|
|
(2.3)
|
|
(0.3)
|
|
(4.6)
|
Operating income
(loss)
|
(29.6)
|
|
10.2
|
|
(92.4)
|
|
(44.7)
|
Gain on early
extinguishment of debt
|
(0.5)
|
|
—
|
|
(0.5)
|
|
(33.6)
|
Nonoperating
components of net periodic benefit expense (income)
|
15.5
|
|
(26.1)
|
|
10.6
|
|
(27.2)
|
Interest
expense
|
1.1
|
|
1.0
|
|
4.1
|
|
5.3
|
Investment
income
|
(0.6)
|
|
(0.3)
|
|
(2.5)
|
|
(1.3)
|
Income (loss)
before income taxes
|
(45.1)
|
|
35.6
|
|
(104.1)
|
|
12.1
|
Income tax provision
(benefit)
|
0.1
|
|
0.1
|
|
—
|
|
(0.1)
|
Net income
(loss)
|
(45.2)
|
|
35.5
|
|
(104.1)
|
|
12.2
|
Preferred stock
dividends - undeclared and cumulative
|
2.0
|
|
1.9
|
|
7.8
|
|
6.9
|
Net income (loss)
allocable to common stockholders
|
$
|
(47.2)
|
|
$
|
33.6
|
|
$
|
(111.9)
|
|
$
|
5.3
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share - basic and diluted
|
$
|
(5.10)
|
|
$
|
3.69
|
|
$
|
(12.23)
|
|
$
|
0.58
|
Average number of
common shares outstanding - basic and diluted (in
thousands)
|
9,246
|
|
9,103
|
|
9,151
|
|
9,081
|
CENTRUS ENERGY
CORP.
|
CONSOLIDATED
BALANCE SHEETS
|
(Unaudited; in
millions, except share and per share data)
|
|
|
December 31,
2018
|
|
December 31,
2017
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
123.1
|
|
$
|
208.8
|
Accounts
receivable
|
60.2
|
|
60.2
|
Inventories
|
129.7
|
|
153.1
|
Deferred costs
associated with deferred revenue
|
134.9
|
|
122.3
|
Deposits for
financial assurance
|
30.3
|
|
16.3
|
Other current
assets
|
6.3
|
|
6.2
|
Total current
assets
|
484.5
|
|
566.9
|
Property, plant and
equipment, net
|
4.2
|
|
4.9
|
Deposits for
financial assurance
|
6.3
|
|
19.7
|
Intangible assets,
net
|
76.0
|
|
82.7
|
Other long-term
assets
|
0.7
|
|
1.1
|
Total
assets
|
$
|
571.7
|
|
$
|
675.3
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
52.4
|
|
$
|
48.2
|
Payables under SWU
purchase agreements
|
46.0
|
|
79.4
|
Inventories owed to
customers and suppliers
|
103.0
|
|
77.9
|
Deferred revenue and
advances from customers
|
204.5
|
|
191.8
|
Current
debt
|
32.8
|
|
6.1
|
Total current
liabilities
|
438.7
|
|
403.4
|
Long-term
debt
|
120.2
|
|
157.5
|
Postretirement health
and life benefit obligations
|
136.2
|
|
154.2
|
Pension benefit
liabilities
|
168.9
|
|
161.6
|
Advances from
customers
|
15.0
|
|
—
|
Other long-term
liabilities
|
14.6
|
|
17.5
|
Total
liabilities
|
893.6
|
|
894.2
|
|
|
|
|
Stockholders'
deficit:
|
|
|
|
Preferred stock, par
value $1.00 per share, 20,000,000 shares authorized
|
|
|
|
Series A Participating
Cumulative Preferred Stock, none issued
|
—
|
|
—
|
Series B Senior
Preferred Stock, 7.5% cumulative, 104,574 shares issued and
outstanding and an
aggregate liquidation preference of
$119.3 and $111.5 as of December 31, 2018 and 2017,
respectively
|
4.6
|
|
4.6
|
Class A Common Stock,
par value $0.10 per share, 70,000,000 shares authorized, 8,031,307
shares and
7,632,669 shares issued and
outstanding as of December 31, 2018 and 2017,
respectively
|
0.8
|
|
0.8
|
Class B Common Stock,
par value $0.10 per share, 30,000,000 shares authorized, 1,406,082
shares
issued and outstanding as of December
31, 2018 and December 31, 2017
|
0.1
|
|
0.1
|
Excess of capital
over par value
|
61.2
|
|
60.0
|
Accumulated
deficit
|
(388.5)
|
|
(284.5)
|
Accumulated other
comprehensive income, net of tax
|
(0.1)
|
|
0.1
|
Total
stockholders' deficit
|
(321.9)
|
|
(218.9)
|
Total liabilities
and stockholders' deficit
|
$
|
571.7
|
|
$
|
675.3
|
CENTRUS ENERGY
CORP.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Unaudited; in
millions)
|
|
|
Year
Ended December 31,
|
|
2018
|
|
2017
|
Operating
Activities:
|
|
|
|
Net income
(loss)
|
$
|
(104.1)
|
|
$
|
12.2
|
Adjustments to
reconcile net loss to cash used in operating activities:
|
|
|
|
Depreciation and
amortization
|
7.4
|
|
12.0
|
Immediate recognition
of retirement benefit plans (gains) losses, net
|
17.3
|
|
(25.8)
|
PIK interest on
paid-in-kind toggle notes
|
1.7
|
|
2.9
|
Gain on early
extinguishment of debt
|
(0.5)
|
|
(33.6)
|
Gain on sales of
assets
|
(0.4)
|
|
(4.6)
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
9.7
|
|
(17.6)
|
Inventories,
net
|
61.0
|
|
44.7
|
Payables under SWU
purchase agreements
|
(33.4)
|
|
19.8
|
Deferred revenue, net
of deferred costs
|
0.1
|
|
15.9
|
Accounts payable and
other liabilities
|
3.7
|
|
(25.2)
|
Pension and
postretirement liabilities
|
(28.0)
|
|
(9.6)
|
Other, net
|
(8.9)
|
|
(7.2)
|
Cash used in
operating activities
|
(74.4)
|
|
(16.1)
|
|
|
|
|
Investing
Activities:
|
|
|
|
Capital
expenditures
|
(0.1)
|
|
(0.5)
|
Proceeds from sales
of assets
|
0.5
|
|
4.7
|
Cash provided by
investing activities
|
0.4
|
|
4.2
|
|
|
|
|
Financing
Activities:
|
|
|
|
Payment of interest
classified as debt
|
(6.1)
|
|
(3.4)
|
Extinguishment of
debt
|
(5.0)
|
|
(27.6)
|
Payment of securities
transaction costs
|
—
|
|
(9.0)
|
Cash used in
financing activities
|
(11.1)
|
|
(40.0)
|
|
|
|
|
Decrease in cash,
cash equivalents and restricted cash
|
(85.1)
|
|
(51.9)
|
Cash, cash
equivalents and restricted cash, beginning of period
|
244.8
|
|
296.7
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
159.7
|
|
$
|
244.8
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
Interest paid in
cash
|
$
|
7.1
|
|
$
|
4.2
|
Non-cash
activities:
|
|
|
|
Conversion of
interest payable-in-kind to debt
|
$
|
1.7
|
|
$
|
0.4
|
Exchange of debt for
Series B preferred stock
|
$
|
—
|
|
$
|
4.6
|
Exchange of debt for
Class A common stock
|
$
|
0.9
|
|
$
|
—
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SOURCE Centrus Energy Corp.