UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
JUNE 22, 2000
(Date of report)
USEC INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 001-14287 52-2107911
(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
2 DEMOCRACY CENTER
6903 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
(Address of principal executive offices, including zip code)
(301) 564-3200
(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS
On June 21, 2000, the registrant issued the attached news releases
reporting the decision to cease uranium enrichment operations at the Portsmouth
Gaseous Diffusion Plant and related matters.
The news releases are included as exhibits to this report and are
incorporated into this Item 5 by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
(99.1) News release dated June 21, 2000.
(99.2) News release dated June 21, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
USEC INC.
By: /s/ Henry Z Shelton, Jr.
-----------------------------------
Henry Z Shelton, Jr.
Senior Vice President and
Chief Financial Officer
Date: June 22, 2000
EXHIBIT INDEX
Exhibit No. Description
(99.1) News release dated June 21, 2000.
(99.2) News release dated June 21, 2000.
Exhibit (99.1)
[USEC Letterhead]
FOR IMMEDIATE RELEASE: CONTACT:
June 21, 2000 Charles Yulish: (301)564-3391
Elizabeth Stuckle: 301-564-3399
USEC Plant Closure Lowers Costs, Improves Capacity Utilization
- Board's Action Saves $55 Million -
- Guidance Reflects Continued Difficult Operating Environment -
Bethesda, MD - The announcement today by USEC Inc. (NYSE: USU) that it will
cease uranium enrichment at its Portsmouth production plant in June 2001 is an
important step in the Company's ongoing efforts to align its cost of production
with lower market prices.
The financial effect of the decision by USEC's Board of Directors will
be a reduction in fixed production costs of approximately $55 million in fiscal
2002 as uranium enrichment at Portsmouth ceases. Production will continue at
both plants until June 2001, when it is expected that the Paducah plant will
have been upgraded, certified and tested to produce finished customer product.
Electricity, the Company's largest production cost, is expected to increase
primarily because the previous monetization of excess power at Portsmouth will
no longer be available. Depending on levels of SWU production, these higher
power costs will partially offset the improvement in fixed costs. The Company is
in negotiations for a new long-term power contract for the Paducah plant.
After the Portsmouth facility ceases enrichment operations, the
Company's capacity utilization will rise from the 25 percent expected in the
coming year to about 50 percent of the Paducah plant's capacity in fiscal 2002.
Actual capacity utilization will depend upon customer requirements.
Ceasing operations at the Portsmouth plant will result in special
charges of $125 million in fiscal 2000. The pre-tax charges include $75 million
in asset write-offs of production equipment, leasehold improvements and other
fixed assets. The charges also include severance benefits based on current labor
contract requirements, unamortized lease turnover and other exit costs.
The Company's financial outlook for fiscal years 2001 and 2002
continues to be adversely affected by market conditions for the sale of enriched
uranium. As previously reported, global overcapacity for enrichment, aggressive
competitor pricing, unfavorable currency exchange rates and liquidation of
customer SWU inventories are among the factors holding down the price for the
-- more --
Company's enrichment services. USEC's financial projections continue to reflect
a downward trend in average SWU sale prices as historically higher-priced
contracts are displaced with new agreements reflecting today's lower prices.
For fiscal 2001, the Company anticipates net income in the range of
$30 to $35 million reflecting lower anticipated revenue and the end of power
monetization at Portsmouth. The lower revenue forecast includes fewer spot SWU
sales, resulting in anticipated sales volume of 10.5 million SWU, or about 1
million SWU less than previously projected. Natural uranium sales are also
expected to be lower than previously projected due to the continued decline in
uranium market prices. Looking forward, the Company anticipates net income in
fiscal 2002 to be between $45 and $50 million. The fiscal 2002 outlook depends
upon the timely completion of the assay upgrade project at Paducah, including
approval by the Nuclear Regulatory Commission, an agreement for market-based
pricing under the Russian HEU contract beginning in calendar 2002, and
negotiation of a new, long-term power contract for the Paducah plant.
"Faced with a changed pricing paradigm for uranium enrichment
services, USEC has aggressively taken steps to lower its production costs," said
William H. Timbers, president and chief executive officer of USEC. "Given the
global overcapacity for enrichment and the volume of HEU available from
dismantled nuclear weapons, reducing USEC's production capacity is a difficult
but necessary action."
This news release includes certain forward-looking information (within
the meaning of the Private Securities Litigation Reform Act of 1995) that
involves risks and uncertainty, including certain assumptions regarding the
future performance of the Company. Actual results and trends may differ
materially depending upon a variety of factors, including, without limitation,
market demand for the Company's services, pricing trends in the uranium and the
enrichment markets, deliveries and costs under the Russian contract, the
availability and cost of electric power, the Company's ability to successfully
execute its internal performance plans, the refueling cycles of the Company's
customers, and the impact of any government regulation. Additional information
regarding the foregoing factors is contained in the Company's filings with the
Securities and Exchange Commission.
USEC Inc. is the world's leading supplier of enriched uranium fuel for
commercial nuclear power plants. A global energy company, USEC has it
headquarters in Bethesda, Md.
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Exhibit (99.2)
[USEC Letterhead]
FOR IMMEDIATE RELEASE: CONTACT:
June 21, 2000 Charles Yulish: (301)564-3391
Elizabeth Stuckle: 301-564-3399
USEC to Cease Uranium Enrichment
at the Portsmouth, Ohio Facility in June 2001
-Portsmouth Transfer and Shipping Operations to Remain Open-
Company to Return Plant to DOE June 2002-
-USEC to Seek Worker Transition to Government Site-
-Environmental Restoration Jobs-
Bethesda, MD - USEC Inc. (NYSE: USU) announced today that it will
cease uranium enrichment operations at the Portsmouth plant in Piketon, Ohio,
beginning in June 2001. The Company also announced that it will seek prompt
government action to transition as many affected employees as possible to
government site environmental restoration jobs.
The choice to continue to operate the Company's Paducah, Kentucky,
production plant provides long-term financial benefits, more attractive power
price arrangements, operational flexibility for power adjustments and a history
of reliable operations.
No significant layoffs are expected at the Portsmouth plant as a
result of this decision until June 2001. After enrichment ceases in June 2001,
there will be several stages of workforce reduction as USEC prepares the
enrichment portion of the plant to be returned to the U.S. Department of Energy
(DOE) in June 2002. As discussions are completed for the transition to DOE,
specific information will be provided as to the phased timing of post-June 2001
personnel reductions. USEC leases its two enrichment facilities from the DOE.
USEC will continue to operate its transfer and shipping activities at
the Portsmouth plant for about four or five years after enrichment has ceased,
until similar facilities are available at the Paducah plant. The transfer and
shipping facility transfers USEC's enriched uranium product into transportation
cylinders and prepares them for shipping to fuel fabricators.
"The decision to cease enrichment at one of our facilities was
necessary given the business challenges facing the uranium enrichment industry,"
said James R. Mellor, chairman of USEC's Board of Directors. "Choosing to close
the Portsmouth plant was an extremely difficult decision because of the impact
it will have on the lives of many of our workers, their families and the
communities surrounding the plant.
-- more --
"We deeply regret having to take this action, but we clearly could not
continue to operate two production plants," said William H. Timbers, USEC
president and chief executive officer. "We are working hard to achieve a
transition of employees to government site environmental restoration jobs. This
will be a major challenge, and we are asking the government, our employees, the
unions and the communities to work together with us to achieve this goal."
Key business factors in the decision to reduce operations to a single
production plant include a global overcapacity of enrichment and lower demand in
an increasingly competitive market. "With high production costs and production
at only 25 percent capacity at both plants, we must consolidate our production,"
said Timbers. "By increasing capacity utilization at a single plant, USEC will
reduce production costs and strengthen the competitiveness of our core business
going forward."
Reaching the decision on which plant to close involved evaluating many
business considerations. Key factors were long-term and short-term power costs,
operational performance and reliability, design and material condition of the
plants, risks associated with meeting customer orders on time, and other factors
relating to assay levels, financial results and new technology issues.
USEC Inc. is the world's leading supplier of enriched uranium fuel for
commercial power plants. A global energy company, USEC has its headquarters in
Bethesda, Md.
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