- Net income of $7.6 million from gains on early extinguishment of
long-term debt
- Debt securities exchange completed in the first quarter reduced
the face amount of outstanding long-term debt by more than 50 percent
- Regained compliance with NYSE MKT listing standards
- Reaffirming annual outlook of $200-225 million in revenue and
$150-175 million cash balance for year-end 2017
BETHESDA, Md.--(BUSINESS WIRE)--May 9, 2017--
Centrus Energy Corp. (NYSE MKT: LEU) today reported net income of $7.6
million or $0.73 per common share (basic) and $0.72 per common share
(diluted) for the quarter ended March 31, 2017, compared to a net loss
of $14.6 million or $1.60 per basic and diluted share for the first
quarter of 2016. The company remains on track to meet its annual
guidance for nuclear fuel segment revenue, total revenue, and year-end
cash balance.
"This has been an important quarter for the company. During the past
three months, we substantially reduced our long-term debt through our
notes exchange, resolved our outstanding issues with the PBGC, and
continued to develop opportunities to support the future growth of the
company,” said Daniel B. Poneman, Centrus president and chief executive
officer. “As anticipated, we had a slow quarter in our nuclear fuel
segment because most of our contracted annual deliveries are expected
during the fourth quarter of this year. We remain on track to achieve
our revenue guidance for the year.”
Revenue and Cost of Sales
Centrus’ annual revenue in the LEU segment comes from long-term
contracts that generally obligate customers to an annual purchase
commitment, but give the customers flexibility to determine the delivery
date within a given year. Revenue is recognized at the time LEU or
uranium is delivered under the terms of customer contracts. As the
Company noted in its recent 10-K filing and annual guidance, Centrus
expects that more than two-thirds of annual revenue will be booked
during the fourth quarter of 2017 based on the timing of contracted
deliveries during the year, similar to 2016. Accordingly, revenue for
the first quarter of 2017 totaled $7.2 million, a decline of $82.8
million, or 92 percent, from the same period in 2016 when more customers
elected to take their deliveries earlier in the year. In addition, SWU
and uranium volumes delivered are expected to decline in 2017 compared
to 2016. Centrus reaffirms its annual guidance for LEU revenues in the
range of $175 million to $200 million and total revenues in the range of
$200 to $225 million.
Revenue from the contract services segment was $6.4 million in the first
quarter of 2017, a decline of $10.0 million compared to the
corresponding period in 2016. Contract services revenue in the first
quarter of 2016 included $8.1 million for work performed and expensed in
the previous quarter prior to the signing of the contract. In addition,
the reduced scope of work under the current contract resulted in a
decline in contract services revenue of $1.8 million in the first
quarter of 2017 compared to the corresponding period in 2016.
Cost of sales for the first quarter of 2017 totaled $9.7 million, a
decline of $64.5 million, or 87 percent, compared to the 2016 period.
Cost of sales for the LEU segment totaled $2.3 million for the first
quarter and includes costs related to benefits for former employees of
the Paducah and Portsmouth Gaseous Diffusion Plants and inventory
storage costs totaling $2.0 million in the three months ended March 31,
2017, and $4.0 million in the corresponding period in 2016. Cost of
sales for the contract services segment declined $1.3 million in the
three months ended March 31, 2017, compared to the corresponding period
in 2016, due to the reduced scope of contract work.
Gross Loss
Centrus realized a gross loss of $2.5 million in the three months ended
March 31, 2017, a decline of $18.3 million compared to the gross profit
of $15.8 million in the corresponding period in 2016. The Company
realized a decline in gross profit of $9.6 million for the LEU segment
due to the decline in sales volume. The gross loss of $1.5 million for
the LEU segment reflects the legacy costs and inventory storage costs of
$2.0 million described above.
Gross profit for the contract services segment declined $8.7 million in
the three months ended March 31, 2017, due to $8.1 million of profit in
the corresponding period in 2016 for work performed and expensed in the
fourth quarter of 2015 prior to the signing of the contract. Centrus
realized a gross loss of $1.0 million for the contract services segment
in the three months ended March 31, 2017, due to the timing of costs
incurred and the allocation of indirect corporate costs, which are not
fully recoverable from the revenue under the contract with UT-Battelle.
Advanced Technology License and Decommissioning Costs
Advanced technology license and decommissioning costs consist of
American Centrifuge expenses that are outside of the contracts with
UT-Battelle, including ongoing costs to maintain the demobilized Piketon
facility and the Company’s U.S. Nuclear Regulatory Commission licenses
at that location. Costs declined $5.9 million, or 49 percent, in the
three months ended March 31, 2017, compared to the corresponding period
in 2016. Costs in the prior period included demobilization costs in
preparation for the decontamination and decommissioning (D&D) of the
Piketon demonstration facility, which commenced in the second quarter of
2016.
In the three months ended March 31, 2017, D&D costs of $3.7 million were
charged against the accrued D&D liability. The D&D work is expected to
extend through 2017 and be substantially completed by year-end. As of
March 31, 2017, the Company has accrued $34.9 million for the estimated
fair value of the remaining costs to complete the D&D work.
SG&A and Special Charges
Selling, general and administrative (SG&A) expenses increased $1.0
million, or 9 percent in the three months ended March 31, 2017, compared
to the corresponding period in 2016, of which $0.4 million is
attributable to increased consulting costs. Special charges in the three
months ended March 31, 2017, included estimated employee termination
benefits of $0.8 million and advisory costs of $1.6 million related to
the Company’s project to align its corporate structure to the scale of
its ongoing business operations and to update related information
technology.
Gain on Early Extinguishment of Debt
In the three months ended March 31, 2017, the Company recognized a gain
of $33.6 million related to the exchange of securities and cash on
February 14, 2017, which is net of transaction costs of $9.0 million and
previously deferred issuance costs related to the 8% PIK Toggle Notes of
$0.4 million. Based on the success of the exchange and prior note
repurchase last year, Centrus has reduced the total principal amount of
debt outstanding by $143 million, a 58 percent reduction compared to
December 31, 2015. Under the accounting rules, the carrying value of the
new debt includes the principal amount of debt as well as future
interest obligations of $61.5 million. As a result, no interest expense
will be recognized for future interest payments on the new notes.
Cash Flow
Centrus ended the first quarter of 2017 with a consolidated cash balance
of $151.7 million. The net reduction of $59.5 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, 2017.
Other uses of cash are reflected in the reduction of accounts payable
and other liabilities of $18.4 million, as well as the $27.6 million
paid to noteholders in the notes exchange. Sources of cash included the
decline of accounts receivable of $23.0 million due to collections from
customers in the three-month period. The operating loss of $23.6 million
in the three months ended March 31, 2017, net of non-cash expenses, was
a use of cash.
Regained Compliance with NYSE MKT
On April 28, 2017, Centrus received notification from the NYSE MKT LLC
that the Company had regained compliance with the NYSE MKT’s continued
listing standards. In accordance with NYSE MKT regulations, Centrus will
be subject to a 12-month follow-up review period to ensure that the
Company does not fall below any of the NYSE MKT’s continued listing
standards.
2017 Outlook
Centrus reaffirms its prior guidance that the Company anticipates SWU
and uranium revenue in 2017 in a range of $175 million to $200 million,
reflecting an expected decline in SWU and uranium volumes delivered
compared to 2016. The Company anticipates total revenue in a range of
$200 million to $225 million. Centrus’ revenues continue to be most
heavily weighted to the fourth quarter, and the Company expects more
than two-thirds of annual revenue in the fourth quarter of 2017. Centrus
expects to end 2017 with a cash and cash equivalents balance in a range
of $150 million to $175 million.
The Company’s 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 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;
-
Execution and funding of a new agreement with UT-Battelle, the
operator of ORNL, for the continuation of American Centrifuge
development and testing activities in Oak Ridge following the
expiration of the agreement on September 30, 2017;
-
Potential use of cash for strategic initiatives; and
-
Additional costs for decontamination and decommissioning of the
Company’s facility in Ohio.
About Centrus Energy Corp.
Centrus Energy Corp. is a trusted supplier of enriched uranium fuel for
commercial nuclear power plants in the United States and around the
world. Our mission is to provide reliable and competitive fuel goods and
services to meet the needs of our customers, consistent with the highest
levels of integrity, safety, and security.
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 and
uncertainties related to the adoption of fresh start accounting; 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 “PIK Toggle Notes”) maturing
in September 2019, our 8.25% notes due 2027 and our Series B Senior
Preferred Stock , including the potential termination of the guarantee
by United States Enrichment Corporation (“Enrichment Corp.”) of the PIK
Toggle Notes; risks related to the limited trading markets in our
securities; risks related to our ability to maintain the listing of our
common stock on the NYSE MKT LLC; the impact and potential extended
duration of the current supply/demand imbalance in the market for
low-enriched uranium (“LEU”); our dependence on others fordeliveries
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 associated
with our reliance on third-party suppliers to provide essential services
to us; 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 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 U.S. Nuclear Regulatory Commission; risks and
uncertainties regarding funding for the American Centrifuge project and
our ability to perform under our agreement with UT-Battelle, LLC, the
management and operating contractor for Oak Ridge National Laboratory,
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; 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 this and our other filings with the
Securities and Exchange Commission.
|
|
| CENTRUS ENERGY CORP. |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
| (in millions, except share and per share data) |
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2017 |
|
2016 |
| Revenue: |
|
|
|
|
|
Separative work units
|
|
$
|
0.8
|
|
|
$
|
59.3
|
|
|
Uranium
|
|
—
|
|
|
14.3
|
|
|
Contract services
|
|
6.4
|
|
|
16.4
|
|
|
Total revenue
|
|
7.2
|
|
|
90.0
|
|
| Cost of Sales: |
|
|
|
|
|
Separative work units and uranium
|
|
2.3
|
|
|
65.5
|
|
|
Contract services
|
|
7.4
|
|
|
8.7
|
|
|
Total cost of sales
|
|
9.7
|
|
|
74.2
|
|
| Gross profit (loss) |
|
(2.5
|
)
|
|
15.8
|
|
|
Advanced technology license and decommissioning costs
|
|
6.1
|
|
|
12.0
|
|
|
Selling, general and administrative
|
|
12.4
|
|
|
11.4
|
|
|
Amortization of intangible assets
|
|
1.2
|
|
|
3.2
|
|
|
Special charges for workforce reductions and advisory costs
|
|
2.4
|
|
|
—
|
|
|
Gains on sales of assets
|
|
(1.0
|
)
|
|
(0.3
|
)
|
|
Operating loss
|
|
(23.6
|
)
|
|
(10.5
|
)
|
|
Gain on early extinguishment of debt
|
|
(33.6
|
)
|
|
—
|
|
|
Interest expense
|
|
2.9
|
|
|
5.0
|
|
|
Investment income
|
|
(0.3
|
)
|
|
(0.3
|
)
|
|
Income (loss) before income taxes
|
|
7.4
|
|
|
(15.2
|
)
|
|
Income tax benefit
|
|
(0.2
|
)
|
|
(0.6
|
)
|
| Net income (loss) |
|
7.6 |
|
|
(14.6 |
) |
|
Preferred stock dividends - undeclared and cumulative
|
|
1.0
|
|
|
—
|
|
| Net income (loss) allocable to common stockholders |
|
$ |
6.6 |
|
|
$ |
(14.6 |
) |
|
|
|
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
– Basic
|
|
$
|
0.73
|
|
|
$
|
(1.60
|
)
|
|
– Diluted
|
|
$
|
0.72
|
|
|
$
|
(1.60
|
)
|
|
Average number of common shares outstanding (in thousands):
|
|
|
|
|
|
– Basic
|
|
9,063
|
|
|
9,063
|
|
|
– Diluted
|
|
9,174
|
|
|
9,063
|
|
|
|
|
|
|
|
|
|
|
| CENTRUS ENERGY CORP. |
| CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) |
| (in millions, except share and per share data) |
|
|
|
|
|
|
|
March 31,
2017
|
|
December 31,
2016
|
| ASSETS |
|
|
|
|
| Current assets |
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
151.7
|
|
|
$
|
260.7
|
|
|
Accounts receivable
|
|
5.8
|
|
|
19.9
|
|
|
Inventories
|
|
143.6
|
|
|
177.4
|
|
|
Deferred costs associated with deferred revenue
|
|
89.0
|
|
|
89.3
|
|
|
Other current assets
|
|
14.7
|
|
|
13.3
|
|
| Total current assets |
|
404.8
|
|
|
560.6
|
|
|
Property, plant and equipment, net
|
|
5.6
|
|
|
6.0
|
|
|
Deposits for surety bonds
|
|
29.6
|
|
|
29.5
|
|
|
Intangible assets, net
|
|
92.1
|
|
|
93.3
|
|
|
Other long-term assets
|
|
15.5
|
|
|
24.1
|
|
| Total assets |
|
$ |
547.6 |
|
|
$ |
713.5 |
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
| Current liabilities |
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
46.8
|
|
|
$
|
46.4
|
|
|
Payables under SWU purchase agreements
|
|
0.1
|
|
|
59.6
|
|
|
Inventories owed to customers and suppliers
|
|
22.8
|
|
|
57.5
|
|
|
Deferred revenue
|
|
123.3
|
|
|
123.6
|
|
|
Decontamination and decommissioning obligations
|
|
34.9
|
|
|
38.6
|
|
| Total current liabilities |
|
227.9
|
|
|
325.7
|
|
|
Long-term debt
|
|
159.8
|
|
|
234.1
|
|
|
Postretirement health and life benefit obligations
|
|
169.4
|
|
|
171.3
|
|
|
Pension benefit liabilities
|
|
178.6
|
|
|
179.9
|
|
|
Other long-term liabilities
|
|
35.8
|
|
|
38.6
|
|
| Total liabilities |
|
771.5
|
|
|
949.6
|
|
|
Commitments and contingencies
|
|
|
|
|
| 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
$105.6 million at March 31, 2017
|
|
4.6
|
|
|
—
|
|
|
Class A Common Stock, par value $0.10 per share, 70,000,000 shares
authorized, 7,563,600 shares issued and outstanding at March 31,
2017 and December 31, 2016
|
|
0.8
|
|
|
0.8
|
|
|
Class B Common Stock, par value $0.10 per share, 30,000,000 shares
authorized, 1,436,400 shares issued and outstanding at March 31,
2017 and December 31, 2016
|
|
0.1
|
|
|
0.1
|
|
|
Excess of capital over par value
|
|
59.6
|
|
|
59.5
|
|
|
Accumulated deficit
|
|
(289.1
|
)
|
|
(296.7
|
)
|
|
Accumulated other comprehensive income, net of tax
|
|
0.1
|
|
|
0.2
|
|
| Total stockholders’ deficit |
|
(223.9
|
)
|
|
(236.1
|
)
|
| Total liabilities and stockholders’ deficit |
|
$ |
547.6 |
|
|
$ |
713.5 |
|
|
|
|
|
|
|
|
|
|
|
|
| CENTRUS ENERGY CORP. |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
| (in millions) |
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2017 |
|
2016 |
| Operating Activities |
|
|
|
|
|
Net income (loss)
|
|
$
|
7.6
|
|
|
$
|
(14.6
|
)
|
|
Adjustments to reconcile net income (loss) to cash used in operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
1.4
|
|
|
3.6
|
|
|
PIK interest on paid-in-kind toggle notes
|
|
0.8
|
|
|
3.4
|
|
|
Gain on early extinguishment of debt
|
|
(33.6
|
)
|
|
—
|
|
|
Gain on sales of assets
|
|
(1.0
|
)
|
|
(0.3
|
)
|
|
Inventory valuation adjustments
|
|
—
|
|
|
0.5
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
23.0
|
|
|
(29.4
|
)
|
|
Inventories, net
|
|
(0.9
|
)
|
|
48.5
|
|
|
Payables under SWU purchase agreements
|
|
(59.5
|
)
|
|
(61.0
|
)
|
|
Deferred revenue, net of deferred costs
|
|
—
|
|
|
4.2
|
|
|
Accounts payable and other liabilities
|
|
(18.4
|
)
|
|
(9.8
|
)
|
|
Other, net
|
|
(1.4
|
)
|
|
—
|
|
|
Cash used in operating activities
|
|
(82.0
|
)
|
|
(54.9
|
)
|
|
|
|
|
|
| Investing Activities |
|
|
|
|
|
Proceeds from sales of assets
|
|
0.6
|
|
|
0.6
|
|
|
Cash provided by investing activities
|
|
0.6
|
|
|
0.6
|
|
|
|
|
|
|
| Financing Activities |
|
|
|
|
|
Repurchase of debt
|
|
(27.6
|
)
|
|
—
|
|
|
Cash used in financing activities
|
|
(27.6
|
)
|
|
—
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
|
(109.0
|
)
|
|
(54.3
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
260.7
|
|
|
234.0
|
|
|
Cash and cash equivalents at end of period
|
|
$ |
151.7 |
|
|
$ |
179.7 |
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
Interest paid in cash
|
|
$
|
0.4
|
|
|
$
|
3.1
|
|
|
Non-cash activities:
|
|
|
|
|
|
Conversion of interest payable-in-kind to long-term debt
|
|
$
|
0.8
|
|
|
$
|
3.4
|
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170509006799/en/
Source: Centrus Energy Corp.
Centrus Energy Corp.
Investors:
Don Hatcher, 301-564-3460
or
Media:
Jeremy
Derryberry, 301-564-3392
