-
Revenue of $35.7 million compared to $7.2 million for the first
quarter 2017
-
DOE settlement on outstanding contract issue resulted in $9.5 million
revenue recognition
-
Net loss of $25.0 million compared to net income of $7.6 million for
the first quarter 2017 (after $33.6 million gain from early
extinguishment of debt)
-
Diversified long-term supply through contract with Orano
-
Work begun on planned advanced nuclear fuel capability under contract
with X-energy
-
Reaffirming annual outlook of $175-200 million in revenue and $100-125
million cash balance for year-end 2018
BETHESDA, Md.--(BUSINESS WIRE)--May 8, 2018--
Centrus Energy Corp. (NYSE American: LEU) today reported a net loss of
$25.0 million or $2.97 per common share (basic and diluted) for the
quarter ended March 31, 2018, compared to net income of $7.6 million or
$0.73 per common share (basic) and $0.72 per common share (diluted) for
the first quarter of 2017, which included a non-recurring gain on early
extinguishment of debt of $33.6 million. While revenue for the nuclear
fuel segment increased compared to the first quarter of last year, the
Company still anticipates generating more than half of its annual
revenue in the fourth quarter.
“We are focused on growing the company in a difficult market by
expanding our core business, diversifying our business offerings, and
mitigating risks,” said Daniel B. Poneman, president and chief executive
officer. “We have made important progress over the last several months.
The long-term supply contract with Orano that we announced last week
supports our commitment to supply diversity and will support new sales
opportunities through 2030. Our new contract with X-energy to develop
the next generation of nuclear fuel reflects our support of advanced
reactor technology. At the same time, we are beginning to see the
benefits of our efforts to cut costs and reduce our debt. As the world's
most diversified supplier of enriched uranium and an emerging provider
of advanced engineering and manufacturing solutions, our team is working
hard to support the contribution nuclear power makes to building a
low-carbon future for all."
Revenue and Cost of Sales
Revenue for the first quarter of 2018 totaled $35.7 million, an increase
of $28.5 million from the corresponding period in 2017. Revenue from the
LEU Segment increased $20.5 million in the three months ended March 31,
2018, compared to the corresponding period in 2017, reflecting the
variability in timing of utility customer orders. Revenue from the
Contract Services Segment increased $8.0 million in the three months
ended March 31, 2018, compared to the corresponding period in 2017,
reflecting $9.5 million of revenue related to the January 2018
settlement with the United States government related to past work
performed for the U.S. Department of Energy (DOE), partially offset by
the reduced scope of contract work for American Centrifuge technology
services in the current period.
Cost of sales for the first quarter of 2018 totaled $41.3 million, an
increase of $31.2 million from the corresponding period in 2017. Cost of
sales for the LEU Segment increased $32.1 million in the three months
ended March 31, 2018, compared to the corresponding period in 2017, due
to increases in sales volumes. Cost of sales for the Contract Services
Segment declined $0.9 million in the three months ended March 31, 2018,
compared to the corresponding period in 2017, due to the reduced scope
of contract work.
Gross Loss
Centrus realized a gross loss of $5.6 million in the three months ended
March 31, 2018, an increase of $2.7 million compared to the gross loss
of $2.9 million in the corresponding period in 2017. The gross loss
reflects a greater concentration of deliveries in the quarter under
recent contracts that incorporate lower prices.
Advanced Technology License and Decommissioning Costs
Advanced technology license and decommissioning costs consist of
American Centrifuge expenses that are outside of Centrus’ contracts with
UT-Battelle, including ongoing costs for work at the Piketon, Ohio,
demonstration facility. Costs were $7.7 million, an increase of $1.6
million, or 26 percent, in the three months ended March 31, 2018,
compared to the corresponding period in 2017. In the current period,
efforts at the Piketon facility were focused on U.S. Nuclear Regulatory
Commission (NRC) license termination and DOE lease turnover activities
and the related costs were charged to expense. In the prior period,
efforts were primarily focused on decontamination and decommissioning
(D&D) of the Piketon facility and the related costs were recorded as a
reduction of the D&D liability. In addition, a greater allocation of
Piketon facility costs were charged to the license and lease termination
effort in the current period following the relocation of certain
corporate functions from the Piketon facility. The Piketon D&D effort
was largely completed in 2017, with remaining estimated D&D costs of
$1.0 million.
SG&A and Special Charges
Selling, general and administrative (SG&A) expenses were $11.2 million
for the first quarter 2018, a decline of $1.2 million, or 10 percent,
compared to the corresponding period in 2017. Allocated overhead
declined $0.7 million following the relocation of certain corporate
functions from the Piketon facility. Consulting costs declined $0.4
million in the more recent three-month period.
In the three months ended March 31, 2018 and 2017, special charges
included estimated employee termination benefits of $0.5 million and
$0.8 million, respectively, net of non-cash settlements. In the three
months ended March 31, 2018 and 2017, the Company incurred advisory
costs of $0.1 million and $1.6 million, respectively, related to
updating its information technology systems.
Cash Flow
Centrus ended the first quarter of 2018 with a consolidated cash balance
of $153.3 million. The net reduction of $55.9 million in the SWU
purchase payables balance, due to the timing of purchase deliveries, was
a significant use of cash in the three months ended March 31, 2018. The
operating loss of $26.3 million in the three months ended March 31,
2018, net of non-cash expenses, was a use of cash. Sources of cash
included the net reduction in receivables from utility customers of
$29.5 million.
Settlement with U.S. Government
On January 11, 2018, Centrus entered into a settlement agreement with
the United States government regarding breach of contract claims
relating to work performed by the Company under contracts with DOE and
subcontracts with DOE contractors. DOE agreed to settle all claims
raised as part of and subsequent to the litigation for a total of $24.0
million and provide a complete close out of all such contracts and
subcontracts settled under the settlement agreement without any further
audit or review of the Company’s costs or incurred cost submissions,
except with respect to certain claims for pension and postretirement
benefits. Prior to the settlement, the Company had a receivables balance
related to the claims being settled of $14.5 million. In the three
months ended March 31, 2018, the Company received $4.7 million from the
United States government, applied approximately $19.3 million of advance
payments received from the United States government in prior years
against the receivables balance, and recorded additional revenue of $9.5
million in the Contract Services Segment.
2018 Outlook
Centrus anticipates SWU and uranium revenue in 2018 in a range of $150
million to $175 million, reflecting a decline in average sales prices
compared to 2017 as more sales are made under contracts that reflect
more recent market conditions. The Company anticipates total revenue in
a range of $175 million to $200 million. Consistent with prior years,
revenue continues to be most heavily weighted to the fourth quarter;
Centrus expects more than one-half of its 2018 revenue to be generated
in the fourth quarter. The Company expects to end 2018 with a cash and
cash equivalents balance in a range of $100 million to $125 million. The
anticipated decrease in cash and cash equivalents in 2018 is driven by
the expected timing of purchases under supply agreements and an increase
in required cash contributions to the Company’s postretirement benefit
plans.
Centrus’ 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 the
guidance and the ultimate results. Among the factors that could affect
the results are:
-
Additional short-term purchases or sales of SWU and uranium;
-
Timing of customer orders, related deliveries, and purchases of LEU or
components;
-
The outcome of legal proceedings and other contingencies;
-
Potential use of cash for strategic initiatives;
-
Actions taken by our customers, including actions that might affect
our existing contracts, as a result of market and other conditions
impacting our customers and the industry; and
-
Additional costs for decontamination and decommissioning of the
Company’s facility in Ohio.
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, as
amended (the “Exchange Act”) - 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
United States Enrichment Corporation of the 8% PIK Toggle Notes; risks
related to the use of our net operating losses (“NOLs”) 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; 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 (the “Russian Supply Agreement”); risks related to
our ability to sell the LEU we procure pursuant to our purchase
obligations under our supply agreements, including the Russian Supply
Agreement; 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 that may
be taken by the U.S. government, the Russian government or other
governments that could affect our ability 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 and the United States 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
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 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;
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; revenue and
operating results can fluctuate significantly from quarter to quarter,
and in some cases, year to year; and other risks and uncertainties
discussed in our filings with the Securities and Exchange Commission,
including our Annual Report on Form 10-K for the year ended December 31,
2017.
|
|
| CENTRUS ENERGY CORP. |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (Unaudited; in millions, except share and per share data) |
|
|
|
|
Three Months Ended
March 31, |
|
|
2018 |
|
2017 |
| Revenue: |
|
|
|
|
|
Separative work units
|
|
$
|
17.7
|
|
|
$
|
0.8
|
|
|
Uranium
|
|
3.6
|
|
|
—
|
|
|
Contract services
|
|
14.4
|
|
|
6.4
|
|
|
Total revenue
|
|
35.7
|
|
|
7.2
|
|
| Cost of Sales: |
|
|
|
|
|
Separative work units and uranium
|
|
34.8
|
|
|
2.7
|
|
|
Contract services
|
|
6.5
|
|
|
7.4
|
|
|
Total cost of sales
|
|
41.3
|
|
|
10.1
|
|
| Gross loss |
|
(5.6
|
)
|
|
(2.9
|
)
|
|
Advanced technology license and decommissioning costs
|
|
7.7
|
|
|
6.1
|
|
|
Selling, general and administrative
|
|
11.2
|
|
|
12.4
|
|
|
Amortization of intangible assets
|
|
1.3
|
|
|
1.2
|
|
|
Special charges for workforce reductions and advisory costs
|
|
0.6
|
|
|
2.4
|
|
|
Gains on sales of assets
|
|
(0.1
|
)
|
|
(1.0
|
)
|
|
Operating loss
|
|
(26.3
|
)
|
|
(24.0
|
)
|
|
Gain on early extinguishment of debt
|
|
—
|
|
|
(33.6
|
)
|
|
Nonoperating components of net periodic benefit expense (income)
|
|
(1.6
|
)
|
|
(0.4
|
)
|
|
Interest expense
|
|
1.0
|
|
|
2.9
|
|
|
Investment income
|
|
(0.6
|
)
|
|
(0.3
|
)
|
|
Income (loss) before income taxes
|
|
(25.1
|
)
|
|
7.4
|
|
|
Income tax benefit
|
|
(0.1
|
)
|
|
(0.2
|
)
|
| Net income (loss) |
|
(25.0 |
) |
|
7.6 |
|
|
Preferred stock dividends - undeclared and cumulative
|
|
2.0
|
|
|
1.0
|
|
| Net income (loss) allocable to common stockholders |
|
$ |
(27.0 |
) |
|
$ |
6.6 |
|
|
|
|
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
- Basic
|
|
$
|
(2.97
|
)
|
|
$
|
0.73
|
|
|
- Diluted
|
|
$
|
(2.97
|
)
|
|
$
|
0.72
|
|
|
Average number of common shares outstanding (in thousands):
|
|
|
|
|
|
- Basic
|
|
9,103
|
|
|
9,063
|
|
|
- Diluted
|
|
9,103
|
|
|
9,174
|
|
|
|
|
|
|
|
|
|
|
| CENTRUS ENERGY CORP. |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| (Unaudited; in millions, except share and per share data) |
|
|
|
|
March 31,
2018 |
|
December 31,
2017 |
| ASSETS |
|
|
|
|
| Current assets |
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
153.3
|
|
|
$
|
208.8
|
|
|
Accounts receivable
|
|
15.0
|
|
|
60.2
|
|
|
Inventories
|
|
164.0
|
|
|
153.1
|
|
|
Deferred costs associated with deferred revenue
|
|
119.6
|
|
|
122.3
|
|
|
Other current assets
|
|
22.4
|
|
|
22.5
|
|
| Total current assets |
|
474.3
|
|
|
566.9
|
|
|
Property, plant and equipment, net of accumulated depreciation of
$2.3 as of March 31, 2018 and $1.9 as of December 31, 2017
|
|
4.6
|
|
|
4.9
|
|
|
Deposits for financial assurance
|
|
19.8
|
|
|
19.7
|
|
|
Intangible assets, net
|
|
81.3
|
|
|
82.7
|
|
|
Other long-term assets
|
|
0.9
|
|
|
1.1
|
|
| Total assets |
|
$ |
580.9 |
|
|
$ |
675.3 |
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
| Current liabilities |
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
57.2
|
|
|
$
|
54.3
|
|
|
Payables under SWU purchase agreements
|
|
23.5
|
|
|
79.4
|
|
|
Inventories owed to customers and suppliers
|
|
93.8
|
|
|
77.9
|
|
|
Deferred revenue and advances from customers
|
|
170.2
|
|
|
191.8
|
|
| Total current liabilities |
|
344.7
|
|
|
403.4
|
|
|
Long-term debt
|
|
155.3
|
|
|
157.5
|
|
|
Postretirement health and life benefit obligations
|
|
153.1
|
|
|
154.2
|
|
|
Pension benefit liabilities
|
|
159.2
|
|
|
161.6
|
|
|
Other long-term liabilities
|
|
12.3
|
|
|
17.5
|
|
| Total liabilities |
|
824.6
|
|
|
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
$113.5 as of March 31, 2018 and $111.5 as of December 31, 2017
|
|
4.6
|
|
|
4.6
|
|
|
Class A Common Stock, par value $0.10 per share, 70,000,000 shares
authorized, 7,632,669 shares issued and outstanding as of March 31,
2018 and December 31, 2017
|
|
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 March 31,
2018 and December 31, 2017
|
|
0.1
|
|
|
0.1
|
|
|
Excess of capital over par value
|
|
60.1
|
|
|
60.0
|
|
|
Accumulated deficit
|
|
(309.4
|
)
|
|
(284.5
|
)
|
|
Accumulated other comprehensive income, net of tax
|
|
0.1
|
|
|
0.1
|
|
| Total stockholders’ deficit |
|
(243.7
|
)
|
|
(218.9
|
)
|
| Total liabilities and stockholders’ deficit |
|
$ |
580.9 |
|
|
$ |
675.3 |
|
|
|
|
|
|
|
|
|
|
|
|
| CENTRUS ENERGY CORP. |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited; in millions) |
|
|
|
|
Three Months Ended
March 31, |
|
|
2018 |
|
2017 |
| Operating Activities |
|
|
|
|
|
Net income (loss)
|
|
$
|
(25.0
|
)
|
|
$
|
7.6
|
|
|
Adjustments to reconcile net income (loss) to cash used in operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
1.6
|
|
|
1.4
|
|
|
PIK interest on paid-in-kind toggle notes
|
|
0.4
|
|
|
0.8
|
|
|
Gain on early extinguishment of debt
|
|
—
|
|
|
(33.6
|
)
|
|
Gain on sales of assets
|
|
(0.1
|
)
|
|
(1.0
|
)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
45.2
|
|
|
23.0
|
|
|
Inventories, net
|
|
5.0
|
|
|
(0.9
|
)
|
|
Payables under SWU purchase agreements
|
|
(55.9
|
)
|
|
(59.5
|
)
|
|
Deferred revenue, net of deferred costs
|
|
(18.9
|
)
|
|
—
|
|
|
Accounts payable and other liabilities
|
|
(5.4
|
)
|
|
(9.4
|
)
|
|
Other, net
|
|
0.8
|
|
|
(1.4
|
)
|
|
Cash used in operating activities
|
|
(52.3
|
)
|
|
(73.0
|
)
|
|
|
|
|
|
| Investing Activities |
|
|
|
|
|
Capital expenditures
|
|
(0.1
|
)
|
|
—
|
|
|
Proceeds from sales of assets
|
|
0.1
|
|
|
0.6
|
|
|
Cash provided by investing activities
|
|
—
|
|
|
0.6
|
|
|
|
|
|
|
| Financing Activities |
|
|
|
|
|
Payment of interest classified as debt
|
|
(3.0
|
)
|
|
—
|
|
|
Repurchase of debt
|
|
—
|
|
|
(27.6
|
)
|
|
Payment of securities transaction costs
|
|
—
|
|
|
(9.0
|
)
|
|
Cash used in financing activities
|
|
(3.0
|
)
|
|
(36.6
|
)
|
|
|
|
|
|
|
Decrease in cash, cash equivalents and restricted cash
|
|
(55.3
|
)
|
|
(109.0
|
)
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
244.8
|
|
|
296.7
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
|
$ |
189.5 |
|
|
$ |
187.7 |
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
Interest paid in cash
|
|
$
|
0.4
|
|
|
$
|
0.4
|
|
|
|
|
|
|
|
Non-cash activities:
|
|
|
|
|
|
Conversion of interest payable-in-kind to long-term debt
|
|
$
|
0.9
|
|
|
$
|
0.8
|
|
|
Exchange of debt for Series B preferred stock
|
|
$
|
—
|
|
|
$
|
4.6
|
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180508006778/en/
Source: Centrus Energy Corp.
Centrus Energy Corp.
Investors:
Don Hatcher, 301-564-3460
or
Media:
Jeremy
Derryberry, 301-564-3392
