BETHESDA, Md., Aug. 9, 2019 /PRNewswire/ -- Centrus Energy Corp.
(NYSE American: LEU) today reported a net loss of $15.6 million for the quarter ended June 30, 2019, compared to a net loss of
$26.1 million for the second quarter
of 2018. The net loss allocable to common stockholders was
$17.6 million, or $1.84 per common share (basic and diluted),
compared to a net loss allocable to common stockholders of
$28.1 million or $3.08 per common share (basic and diluted), for
the second quarter of 2018.
"This quarter we took another step toward restoring a U.S.
enrichment capability with the signing of an agreement with the
U.S. Department of Energy for the high-assay low-enriched uranium
demonstration cascade," said Daniel
Poneman, Centrus president and chief executive officer. "The
cascade is an integral component of our larger efforts to develop a
fuel cycle to support the next generation of reactors under
development around the world.
"We have made progress in strengthening our two existing
businesses, building upon decades of providing reliable supply for
our customers and of developing and operating fuel technology for
the government. Taken together, they position Centrus to play an
important role in fueling nuclear power for decades to come."
Financial Results
Centrus generated total revenue of $10.6
million for the second quarter of 2019, a decrease of
$28.8 million, or 73%, from the prior
year period. For the six-month period ended June 30, 2019, revenue was $49.3 million, a decrease of $25.8 million or 34%, from the same period in
2018.
Revenue from the LEU segment declined $30.3 million, or 92%, in the three months and
$16.5 million, or 30% in the six
months ended June 30, 2019, compared
to the corresponding periods in 2018, reflecting the variability in
timing of utility customer orders. Consistent with prior years,
revenue is anticipated to be heavily weighted to the second half of
the year. There was no revenue from separative work unit ("SWU")
sales in the current quarter, and the volume of SWU sales declined
62% in the six-month period. The average price billed to customers
for sales of SWU declined 35% in the six-month period ended
June 30, 2019, compared to the
corresponding period in 2018, reflecting the trend of lower SWU
market prices in recent years and the particular contracts under
which SWU were sold during the periods. The volume of uranium sales
increased 528% in the six-month period ended June 30, 2019, compared to the corresponding
period in 2018. The average price billed to customers for uranium
sales increased 13% in the six-month period.
Cost of sales for the LEU segment declined $35.2 million, or 82%, in the three months and
$31.7 million, or 41%, in the six
months ended June 30, 2019, compared
to the corresponding periods in 2018, reflecting the decline in SWU
sales volumes partially offset by the increase in uranium sales
volume. The average cost of sales per SWU declined approximately
21% in the six months ended June 30,
2019, compared to the corresponding period in 2018,
primarily due to lower pricing in supply contracts. Cost of sales
includes legacy costs related to former employees of the Portsmouth
and Paducah Gaseous Diffusion Plants of $1.8
million in the six months ended June
30, 2019 and June 30, 2018.
Our inventories are valued at the lower of cost or net realizable
value. Valuation adjustments for our uranium inventory to reflect
declines in uranium market price indicators totaled $2.3 million in the six months ended June 30, 2019, including $2.0 million in the second quarter of 2019.
Revenue from the contract services segment increased
$1.5 million, or 23%, in the three
months and declined $9.3 million, or
44%, in the six months ended June 30,
2019, compared to the corresponding periods in 2018. The
six-month period in 2018 included $9.5
million of revenue related to the January 2018 settlement with DOE related to past
work performed.
Cost of sales for the contract services segment remained flat in
the three months and declined $0.3
million, or 2%, in the six months ended June 30, 2019, compared to the corresponding
periods in 2018, reflecting the mix of contract services work
performed in each of the periods.
Centrus realized a gross loss of $4.3
million in the three months ended June 30, 2019, a decrease of $6.4 million compared to the gross loss of
$10.7 million in the corresponding
period in 2018. In the six months ended June
30, 2019, the Company realized a gross loss of $9.8 million, a decrease of $6.2 million compared to the gross loss of
$16.0 million in the corresponding
period in 2018.
2019 Outlook Update
Centrus anticipates revenue to increase relative to previous
guidance, with 2019 SWU and uranium revenue to be in the range of
$155 million to $180 million and total revenue to be in a range
of $205 million to $230 million. Consistent with prior years,
revenue continues to be most heavily weighted to the second half of
the year. The Company expects to end 2019 with a cash and cash
equivalents balance in a range of $105
million to $125 million. The
decrease in the outlook for the year-end cash balance is due to
timing of expenses and collections associated with the increased
revenues.
Centrus' financial guidance is subject to a number of
assumptions and uncertainties that could affect results either
positively or negatively. Variations from these expectations could
cause differences between this guidance and the ultimate results.
Among the factors that could affect the Company's 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 agreements for HALEU and with
UT-Battelle, and terms established in the final definitized
contracts;
- 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, trade and other
conditions impacting Centrus' customers and the industry; and
- Timing of return of cash collateral supporting financial
assurance for the Piketon facility.
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-owned 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 products and
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 under our
contract obligations 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 perform under our agreement with DOE to
demonstrate the capability to produce high assay low enriched
uranium ("HALEU") and our ability to obtain and/or perform under
our future agreements with the DOE, 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; the potential
for further demobilization or termination of the American
Centrifuge project; 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 products and services or that products or services provided by
others will render our goods or 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, including under Part
1. Item1A - "Risk Factors" in our Annual Report on Form 10-K for
the year ended December 31, 2018.
Contact
Dan Leistikow (301) 564-3399
CENTRUS ENERGY
CORP.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited;
in millions, except share and per share data)
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenue:
|
|
|
|
|
|
|
|
Separative work
units
|
$
|
—
|
|
$
|
32.9
|
|
$
|
12.4
|
|
$
|
50.6
|
Uranium
|
2.6
|
|
—
|
|
25.3
|
|
3.6
|
Contract
services
|
8.0
|
|
6.5
|
|
11.6
|
|
20.9
|
Total
revenue
|
10.6
|
|
39.4
|
|
49.3
|
|
75.1
|
Cost of
Sales:
|
|
|
|
|
|
|
|
Separative work units
and uranium
|
7.7
|
|
42.9
|
|
46.0
|
|
77.7
|
Contract
services
|
7.2
|
|
7.2
|
|
13.1
|
|
13.4
|
Total cost of
sales
|
14.9
|
|
50.1
|
|
59.1
|
|
91.1
|
Gross
loss
|
(4.3)
|
|
(10.7)
|
|
(9.8)
|
|
(16.0)
|
Advanced technology
costs
|
5.1
|
|
5.4
|
|
11.7
|
|
13.4
|
Selling, general and
administrative
|
7.7
|
|
9.7
|
|
15.8
|
|
20.9
|
Amortization of
intangible assets
|
1.2
|
|
1.5
|
|
2.3
|
|
2.8
|
Special charges
(credits) for workforce reductions and advisory costs
|
(2.9)
|
|
0.3
|
|
(3.0)
|
|
0.9
|
Gain on sales of
assets
|
(0.1)
|
|
(0.2)
|
|
(0.5)
|
|
(0.3)
|
Operating
loss
|
(15.3)
|
|
(27.4)
|
|
(36.1)
|
|
(53.7)
|
Nonoperating
components of net periodic benefit expense (income)
|
—
|
|
(1.7)
|
|
(0.1)
|
|
(3.3)
|
Interest
expense
|
1.0
|
|
1.0
|
|
2.0
|
|
2.0
|
Investment
income
|
(0.7)
|
|
(0.6)
|
|
(1.4)
|
|
(1.2)
|
Loss before income
taxes
|
(15.6)
|
|
(26.1)
|
|
(36.6)
|
|
(51.2)
|
Income tax
benefit
|
—
|
|
—
|
|
(0.1)
|
|
(0.1)
|
Net
loss
|
(15.6)
|
|
(26.1)
|
|
(36.5)
|
|
(51.1)
|
Preferred stock
dividends - undeclared and cumulative
|
2.0
|
|
2.0
|
|
4.0
|
|
4.0
|
Net loss allocable
to common stockholders
|
$
|
(17.6)
|
|
$
|
(28.1)
|
|
$
|
(40.5)
|
|
$
|
(55.1)
|
|
|
|
|
|
|
|
|
Net loss per common
share - basic and diluted
|
$
|
(1.84)
|
|
$
|
(3.08)
|
|
$
|
(4.24)
|
|
$
|
(6.05)
|
Average number of
common shares outstanding - basic and diluted (in
thousands)
|
9,565
|
|
9,118
|
|
9,549
|
|
9,111
|
CENTRUS ENERGY
CORP.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited; in
millions, except share and per share data)
|
|
|
June 30,
2019
|
|
December 31,
2018
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
88.3
|
|
$
|
123.1
|
Accounts
receivable
|
30.2
|
|
60.2
|
Inventories
|
141.7
|
|
129.7
|
Deferred costs
associated with deferred revenue
|
138.7
|
|
134.9
|
Deposits for
financial assurance
|
18.0
|
|
30.3
|
Other current
assets
|
7.4
|
|
6.3
|
Total current
assets
|
424.3
|
|
484.5
|
Property, plant and
equipment, net of accumulated depreciation of $1.9 as of June 30,
2019 and $1.6 as of December 31, 2018
|
3.9
|
|
4.2
|
Deposits for
financial assurance
|
5.7
|
|
6.3
|
Intangible assets,
net
|
73.7
|
|
76.0
|
Other long-term
assets
|
7.7
|
|
0.7
|
Total
assets
|
$
|
515.3
|
|
$
|
571.7
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
37.9
|
|
$
|
52.4
|
Payables under SWU
purchase agreements
|
14.9
|
|
46.0
|
Inventories owed to
customers and suppliers
|
59.0
|
|
103.0
|
Deferred revenue and
advances from customers
|
267.2
|
|
204.5
|
Current
debt
|
33.6
|
|
32.8
|
Total current
liabilities
|
412.6
|
|
438.7
|
Long-term
debt
|
117.1
|
|
120.2
|
Postretirement health
and life benefit obligations
|
132.6
|
|
136.2
|
Pension benefit
liabilities
|
161.5
|
|
168.9
|
Advances from
customers
|
29.4
|
|
15.0
|
Other long-term
liabilities
|
20.4
|
|
14.6
|
Total
liabilities
|
873.6
|
|
893.6
|
|
|
|
|
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 $123.2 as of
June 30, 2019 and $119.3 as of December 31, 2018
|
4.6
|
|
4.6
|
Class A Common Stock,
par value $0.10 per share, 70,000,000 shares authorized, 8,051,307
shares issued and outstanding as of June 30, 2019 and 8,031,307 as
of December 31, 2018
|
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 June 30, 2019 and December 31,
2018
|
0.1
|
|
0.1
|
Excess of capital
over par value
|
61.3
|
|
61.2
|
Accumulated
deficit
|
(425.0)
|
|
(388.5)
|
Accumulated other
comprehensive income, net of tax
|
(0.1)
|
|
(0.1)
|
Total
stockholders' deficit
|
(358.3)
|
|
(321.9)
|
Total liabilities
and stockholders' deficit
|
$
|
515.3
|
|
$
|
571.7
|
CENTRUS ENERGY
CORP.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited;
in millions)
|
|
|
Six Months
Ended
June 30,
|
|
2019
|
|
2018
|
Operating
Activities
|
|
|
|
Net loss
|
$
|
(36.5)
|
|
$
|
(51.1)
|
Adjustments to
reconcile net loss to cash used in operating activities:
|
|
|
|
Depreciation and
amortization
|
2.6
|
|
3.3
|
PIK interest on
paid-in-kind toggle notes
|
0.7
|
|
0.9
|
Gain on sales of
assets
|
(0.5)
|
|
(0.3)
|
Inventory valuation
adjustments
|
2.3
|
|
—
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
24.6
|
|
32.1
|
Inventories,
net
|
(6.6)
|
|
20.4
|
Payables under SWU
purchase agreements
|
(31.1)
|
|
(59.9)
|
Deferred revenue and
advances from customers, net of deferred costs
|
27.0
|
|
9.8
|
Accounts payable and
other liabilities
|
(15.8)
|
|
(12.5)
|
Pension and
postretirement liabilities
|
(11.1)
|
|
(9.0)
|
Other, net
|
(0.7)
|
|
0.6
|
Cash used in operating
activities
|
(45.1)
|
|
(65.7)
|
|
|
|
|
Investing
Activities
|
|
|
|
Capital
expenditures
|
—
|
|
(0.1)
|
Proceeds from sales
of assets
|
0.5
|
|
0.3
|
Cash provided by
investing activities
|
0.5
|
|
0.2
|
|
|
|
|
Financing
Activities
|
|
|
|
Payment of interest
classified as debt
|
(3.1)
|
|
(3.0)
|
Cash used in financing
activities
|
(3.1)
|
|
(3.0)
|
|
|
|
|
Decrease in cash,
cash equivalents and restricted cash
|
(47.7)
|
|
(68.5)
|
Cash, cash
equivalents and restricted cash, beginning of period
|
159.7
|
|
244.8
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
112.0
|
|
$
|
176.3
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
Interest paid in
cash
|
$
|
0.4
|
|
$
|
0.4
|
Non-cash
activities:
|
|
|
|
Conversion of
interest payable-in-kind to debt
|
$
|
0.7
|
|
$
|
0.9
|
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SOURCE Centrus Energy Corp.