-
Gross loss of $2.1 million for the third quarter and gross profit
of $19.2 million for nine-month period ended September 30, 2016
-
Net loss of $41.3 million for the quarter on revenue of $21.4
million
-
Company expects to generate approximately 40 percent of 2016
revenue in the fourth quarter
-
On track to achieve 2016 guidance of $275-$300 million in revenue
BETHESDA, Md.--(BUSINESS WIRE)--Nov. 9, 2016--
Centrus Energy Corp. (NYSE MKT: LEU) today reported a net loss of $41.3
million, or $4.54 per share, for the quarter ended September 30, 2016,
compared to a net loss of $55.1 million, or $6.05 per share, for the
third quarter of 2015. For the nine-month period, the Company reported a
net loss of $58.8 million, or $6.46 per share, compared to a net loss of
$85.6 million, or $9.51 per share, in the same period of 2015.
“With a large percentage of customer deliveries occurring in the fourth
quarter, we expected a slow quarter in the fuel segment, but we are on
track to meet our sales volume and revenue guidance for 2016,” said
Daniel B. Poneman, Centrus president and chief executive officer.
“Looking to the future, we continue to build the business for future
growth on a variety of fronts, including a new contract with Oak Ridge
National Laboratory for advancing our U.S. uranium enrichment
technology, active discussions with customers and suppliers of LEU to
support future sales, and extensive work across the enterprise to
improve our cost structure so that we can support our growth in the
coming years,” Poneman said.
Revenue, Cost of Sales and Gross Loss
Revenue from the LEU segment increased $5.3 million, or 60 percent, in
the three months ended September 30, 2016, compared to the corresponding
period in 2015. The volume of SWU sales increased 25 percent, reflecting
the variability in timing of utility customer orders. The average price
billed to customers for sales of SWU increased 32 percent, reflecting
the particular contracts under which SWU were sold during the periods.
Revenue from the LEU segment declined $55.2 million, or 28 percent, in
the nine months ended September 30, 2016, compared to 2015. The volume
of SWU sales declined 10 percent in the nine-month period, but the SWU
sales volume for the full year 2016 is expected to be comparable to
2015. The average price billed to customers for sales of SWU declined 6
percent, reflecting the particular contracts under which SWU were sold
during the periods. Average SWU prices for sales for the year will be
lower than 2015 reflecting the trend of lower SWU market prices in
recent years. Through September 30, 2016, the indices for SWU term and
spot sales prices, as published by TradeTech, LLC in Nuclear Market
Review, have declined 58 percent and 63 percent, respectively, since
December 31, 2011.
Revenue from the contract services segment declined $13.1 million, or 64
percent, in the three months and $30.3 million, or 48 percent, in the
nine months ended September 30, 2016, compared to 2015. The reduced
scope of contract work for American Centrifuge technology services
resulted in declines of $12.7 million in the three-month period and
$38.3 million in the nine-month period. In the nine-month period, the
decline was partially offset by $8.1 million in revenue for March
reports on work performed in the fourth quarter of 2015. As a result of
the contract signed with UT-Battelle in March 2016, revenue in the nine
months ended September 30, 2016, includes $24.2 million for reports on
work performed in the nine months ended September 30, 2016, as well as
$8.1 million for work in the fourth quarter of 2015.
Cost of sales for the LEU segment decreased $17.9 million, or 53
percent, in the three-month period and $79.4 million, or 38 percent in
the nine-month period for 2016. Cost of sales for the contract services
segment declined $12.2 million, or 62 percent, in the three months and
$38.5 million, or 61 percent, in the nine months ended September 30,
2016, compared to the corresponding periods in 2015, consistent with the
declines in contract services revenue.
Excluding charges for a pension remeasurement in 2015 and uranium
valuation adjustments in 2016, cost of sales for the LEU segment
increased $1.4 million, or 11 percent, in the three-month period,
primarily due to the increase in SWU delivery volumes partially offset
by a 13 percent decline in the average cost of sales per SWU. In the
nine month period, cost of sales declined $60.8 million, or 32 percent,
primarily due to lower SWU and uranium sales volumes and a 13 percent
decline in the average cost of sales per SWU. The declines in cost of
sales per SWU reflect declines in purchase costs per SWU in recent
periods.
Centrus’ recorded a gross loss of $2.1 million in the three months ended
September 30, 2016, an improvement of $22.3 million compared to the
gross loss of $24.4 million in the corresponding period in 2015. The
gross loss for the LEU segment improved $23.2 million in the three-month
period primarily due to the remeasurement of pension obligations that
resulted in a charge to cost of sales of $21.6 million in the
corresponding period in 2015. SWU volumes and prices were higher in the
current three-month period, and SWU costs per unit were lower. Partially
offsetting these favorable impacts was the $2.3 million uranium
valuation adjustment charge in the current period. Centrus recorded a
gross profit of $19.2 million in the nine months ended September 30,
2016, an improvement of $32.4 million compared to the gross loss of
$13.2 million in the corresponding period in 2015. SWU costs per unit
were lower in the current nine-month period, partially offset by lower
SWU and uranium sales volumes, lower average SWU sales prices and $3.0
million in uranium valuation adjustment charges.
Advanced Technology Costs and Piketon Demonstration Facility
Decontamination and Decommissioning (D&D) Costs
Advanced technology costs consist of American Centrifuge expenses that
are outside of our contracts with UT-Battelle, including the costs of
decontamination and decommissioning (D&D) the demonstration facility in
Piketon, Ohio, after completing the cascade demonstration activities.
Costs increased $20.0 million in the three months and $30.9 million in
the nine months ended September 30, 2016, compared to the corresponding
periods in 2015, as the Piketon demonstration facility is no longer
under contract effective October 1, 2015, and is now undergoing D&D.
Centrus began to incur expenditures in the second quarter of 2016
associated with the D&D of the Piketon facility in accordance with the
requirements of the Nuclear Regulatory Commission (NRC) and the
Department of Energy (DOE). Centrus leases the Piketon facility from
DOE. Charges to advanced technology costs in the three and nine months
ended September 30, 2016, include approximately $15 million to increase
the accrued D&D liability based on updated cost estimates that reflect
changes in the approach and anticipated timeframe over which the work
will be conducted. Remaining costs to perform the D&D work are estimated
to be within a range of $38.9 million to $49.4 million. As of September
30, 2016, Centrus has accrued $38.9 million on the balance sheet as Decontamination
and Decommissioning Obligations, of which $28.3 million is
classified as current and $10.6 million is classified as long-term.
Charges to advanced technology costs also reflect ongoing support costs
to maintain the facilities at Piketon and our NRC licenses at that
location. In the nine months ended September 30, 2016, Centrus has
incurred expenses of approximately $15 million for NRC license support
and other costs for the Piketon facility. The Company anticipates that
it will continue to incur NRC license support and other costs at a
similar rate through the completion of D&D, now projected through 2018.
SG&A and Special Charges
Selling, general and administrative (SG&A) expenses declined $2.8
million in the three months ended September 30, 2016, compared to the
corresponding period in 2015. SG&A expenses in the three months ended
September 30, 2015, included a loss of $3.2 million resulting from the
remeasurement of pension obligations. Consulting costs increased $0.4
million in the three months ended September 30, 2016, compared to the
corresponding period in 2015.
SG&A expenses increased $2.5 million in the nine months ended September
30, 2016, compared to the corresponding period in 2015, of which $1.5
million relates to remeasurements of pension obligations. Excluding the
effects of the pension obligation remeasurements, SG&A expenses
increased $1.0 million, or 3 percent, in the nine months ended September
30, 2016, compared to the corresponding period in 2015. Overhead costs
allocated to SG&A increased $1.3 million in the nine-month period, as
less overhead costs are allocated to the reduced scope of work under
Centrus’ contract with UT-Battelle. Consulting costs increased $1.0
million in the nine-month period for work related to business
development, debt repurchases and qualified pension plans. Other SG&A
expenses, including for office leases, supplies and other, declined $1.3
million in the nine-month period compared to the prior year.
In the second quarter of 2016, the Company commenced a project to align
its corporate structure to the scale of its ongoing business operations
and to update related information technology. The company incurred
advisory costs related to the reengineering project of $0.3 million in
the three months and $0.8 million in the nine months ended September 30,
2016. In addition, special charges in the three and nine months ended
September 30, 2016, included termination benefits of $0.3 million
related to a voluntary workforce reduction.
Cash Flow
Centrus ended the third quarter with a consolidated cash balance of
$170.8 million. The net reduction of $68.9 million in the SWU purchase
payables balance, due to the timing of purchase deliveries, was a
significant use of cash in the nine months ended September 30, 2016.
American Centrifuge expenses have been a major use of cash, including
demobilization expenses and D&D expenditures. Sources of cash included
the monetization of inventory purchased in prior periods. Inventories
declined $45.8 million in the quarter. In addition, accounts receivable
declined $18.4 million due to collections from customers in the
nine-month period without increased sales and billings. The net loss of
$58.8 million in the nine months ended September 30, 2016, net of
non-cash expenses, was a use of cash.
2016 Outlook
Centrus expects to generate approximately 40 percent of its revenue for
2016 in the fourth quarter. The Company continues to anticipate SWU and
uranium revenue in 2016 in a range of $250 million to $275 million and
total revenue in a range of $275 million to $300 million. Centrus
expects to end 2016 with a cash and cash equivalents balance in a range
of $200 million to $250 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. Factors that could
affect these results include the following:
-
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, including
discussions with the Pension Benefit Guaranty Corporation (PBGC);
-
Potential use of cash to manage our capital structure; and
-
Additional costs for American Centrifuge demobilization;
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
relating to our outstanding 8.0% paid-in-kind (“PIK”) toggle notes (the
“PIK Toggle Notes”) maturing in September 2019, 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 for deliveries of LEU including deliveries from Russia under a
commercial supply agreement with the Russian government entity Joint
Stock Company “TENEX”; 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 contract obligations, including the imposition of sanctions,
restrictions or other requirements; 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; the impact
of government regulation including by the U.S. Department of Energy and
the U.S. Nuclear Regulatory Commission; the outcome of legal proceedings
and other contingencies (including lawsuits and government
investigations or audits); 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 competitive
environment for our products and services; the potential for further
demobilization or termination of the American Centrifuge project; risks
related to the current demobilization of the portions of the American
Centrifuge project including risks that the schedule could be delayed
and costs could be higher than expected; the timing, savings and
execution of any potential restructurings; potential strategic
transactions, which could be difficult to implement, disrupt our
business or change our business profile significantly; 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
fiscal year ended December 31, 2015 and subsequent Quarterly Reports on
Form 10-Q, which are available on our website at www.centrusenergy.com.
We do not undertake to update our forward-looking statements except as
required by law.
|
|
|
|
|
|
|
CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Separative work units
|
|
$
|
14.1
|
|
|
$
|
8.8
|
|
|
$
|
128.3
|
|
|
$
|
154.6
|
|
|
Uranium
|
|
—
|
|
|
—
|
|
|
14.3
|
|
|
43.2
|
|
|
Contract services
|
|
7.3
|
|
|
20.4
|
|
|
32.2
|
|
|
62.5
|
|
|
Total revenue
|
|
21.4
|
|
|
29.2
|
|
|
174.8
|
|
|
260.3
|
|
|
Cost of Sales:
|
|
|
|
|
|
|
|
|
|
Separative work units and uranium
|
|
15.9
|
|
|
33.8
|
|
|
130.7
|
|
|
210.1
|
|
|
Contract services
|
|
7.6
|
|
|
19.8
|
|
|
24.9
|
|
|
63.4
|
|
|
Total cost of sales
|
|
23.5
|
|
|
53.6
|
|
|
155.6
|
|
|
273.5
|
|
|
Gross profit (loss)
|
|
(2.1
|
)
|
|
(24.4
|
)
|
|
19.2
|
|
|
(13.2
|
)
|
|
Advanced technology costs
|
|
21.9
|
|
|
1.9
|
|
|
38.6
|
|
|
7.7
|
|
|
Selling, general and administrative
|
|
10.7
|
|
|
13.5
|
|
|
34.6
|
|
|
32.1
|
|
|
Amortization of intangible assets
|
|
1.7
|
|
|
1.1
|
|
|
7.6
|
|
|
7.1
|
|
|
Special charges for workforce reductions and advisory costs
|
|
0.6
|
|
|
9.8
|
|
|
1.2
|
|
|
13.3
|
|
|
Gains on sales of assets
|
|
(0.3
|
)
|
|
(0.3
|
)
|
|
(1.0
|
)
|
|
(1.8
|
)
|
|
Operating loss
|
|
(36.7
|
)
|
|
(50.4
|
)
|
|
(61.8
|
)
|
|
(71.6
|
)
|
|
Gain on early extinguishment of debt
|
|
—
|
|
|
—
|
|
|
(16.7
|
)
|
|
—
|
|
|
Interest expense
|
|
4.7
|
|
|
4.8
|
|
|
14.8
|
|
|
14.6
|
|
|
Interest (income)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(0.5
|
)
|
|
(0.3
|
)
|
|
Loss before income taxes
|
|
(41.3
|
)
|
|
(55.1
|
)
|
|
(59.4
|
)
|
|
(85.9
|
)
|
|
Provision (benefit) for income taxes
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
(0.3
|
)
|
|
Net loss
|
|
$
|
(41.3
|
)
|
|
$
|
(55.1
|
)
|
|
$
|
(58.8
|
)
|
|
$
|
(85.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
(4.54
|
)
|
|
$
|
(6.05
|
)
|
|
$
|
(6.46
|
)
|
|
$
|
(9.51
|
)
|
|
Weighted-average number of shares outstanding - basic and diluted
|
|
9.1
|
|
|
9.1
|
|
|
9.1
|
|
|
9.0
|
|
|
|
|
|
|
|
|
CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions, except share and per share data)
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
December 31,
2015
|
|
ASSETS
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
170.8
|
|
|
$
|
234.0
|
|
|
Accounts receivable
|
|
7.9
|
|
|
26.5
|
|
|
Inventories
|
|
185.8
|
|
|
319.2
|
|
|
Deferred costs associated with deferred revenue
|
|
77.4
|
|
|
63.1
|
|
|
Other current assets
|
|
15.1
|
|
|
15.2
|
|
|
Total current assets
|
|
457.0
|
|
|
658.0
|
|
|
Property, plant and equipment, net
|
|
6.1
|
|
|
3.5
|
|
|
Deposits for surety bonds
|
|
29.5
|
|
|
29.8
|
|
|
Intangible assets, net
|
|
98.2
|
|
|
105.8
|
|
|
Other long-term assets
|
|
23.0
|
|
|
23.0
|
|
|
Total assets
|
|
$
|
613.8
|
|
|
$
|
820.1
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
30.5
|
|
|
$
|
44.8
|
|
|
Payables under SWU purchase agreements
|
|
16.5
|
|
|
85.4
|
|
|
Inventories owed to customers and suppliers
|
|
22.2
|
|
|
106.8
|
|
|
Deferred revenue
|
|
104.1
|
|
|
83.9
|
|
|
Decontamination and decommissioning obligations - current
|
|
28.3
|
|
|
29.4
|
|
|
Total current liabilities
|
|
201.6
|
|
|
350.3
|
|
|
Long-term debt
|
|
234.1
|
|
|
247.0
|
|
|
Postretirement health and life benefit obligations
|
|
185.2
|
|
|
184.3
|
|
|
Pension benefit liabilities
|
|
170.6
|
|
|
172.3
|
|
|
Decontamination and decommissioning obligations - long-term
|
|
10.6
|
|
|
—
|
|
|
Other long-term liabilities
|
|
36.0
|
|
|
31.9
|
|
|
Total liabilities
|
|
838.1
|
|
|
985.8
|
|
|
Stockholders’ deficit
|
|
|
|
|
|
Preferred stock, $1.00 par value per share, 20,000,000 shares
authorized, none issued
|
|
—
|
|
|
—
|
|
|
Common stock, $0.10 par value per share, 100,000,000 shares
authorized, 9,000,000 shares issued and outstanding
|
|
0.9
|
|
|
0.9
|
|
|
Excess of capital over par value
|
|
59.4
|
|
|
59.0
|
|
|
Accumulated deficit
|
|
(288.5
|
)
|
|
(229.7
|
)
|
|
Accumulated other comprehensive income, net of tax
|
|
3.9
|
|
|
4.1
|
|
|
Total stockholders’ deficit
|
|
(224.3
|
)
|
|
(165.7
|
)
|
|
Total liabilities and stockholders’ deficit
|
|
$
|
613.8
|
|
|
$
|
820.1
|
|
|
|
|
|
|
CENTRUS ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2016
|
|
2015
|
|
Operating Activities
|
|
|
|
|
|
Net loss
|
|
$
|
(58.8
|
)
|
|
$
|
(85.6
|
)
|
|
Adjustments to reconcile net loss to cash used in operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
8.1
|
|
|
7.5
|
|
|
Immediate recognition of net actuarial loss
|
|
—
|
|
|
20.9
|
|
|
PIK interest on paid-in-kind toggle notes
|
|
9.7
|
|
|
5.4
|
|
|
Gain on early extinguishment of debt
|
|
(16.7
|
)
|
|
—
|
|
|
Gain on sales of assets
|
|
(1.0
|
)
|
|
(1.8
|
)
|
|
Inventory valuation adjustments
|
|
3.0
|
|
|
—
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
18.4
|
|
|
39.0
|
|
|
Inventories, net
|
|
45.8
|
|
|
114.9
|
|
|
Payables under SWU purchase agreements
|
|
(68.9
|
)
|
|
(131.7
|
)
|
|
Deferred revenue, net of deferred costs
|
|
5.8
|
|
|
(5.7
|
)
|
|
Accounts payable and other liabilities
|
|
2.2
|
|
|
(12.1
|
)
|
|
Other, net
|
|
0.5
|
|
|
4.1
|
|
|
Cash used in operating activities
|
|
(51.9
|
)
|
|
(45.1
|
)
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
Capital expenditures
|
|
(3.0
|
)
|
|
(0.2
|
)
|
|
Proceeds from sales of assets
|
|
1.2
|
|
|
1.8
|
|
|
Deposits for surety bonds - net decrease
|
|
0.3
|
|
|
5.0
|
|
|
Cash (used in) provided by investing activities
|
|
(1.5
|
)
|
|
6.6
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
Repurchase of debt
|
|
(9.8
|
)
|
|
—
|
|
|
Cash used in financing activities
|
|
(9.8
|
)
|
|
—
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
|
(63.2
|
)
|
|
(38.5
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
234.0
|
|
|
218.8
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
170.8
|
|
|
$
|
180.3
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
Interest paid
|
|
$
|
6.5
|
|
|
$
|
12.2
|
|
|
Non-cash activities:
|
|
|
|
|
|
Conversion of interest payable-in-kind to long-term debt
|
|
$
|
3.4
|
|
|
$
|
1.8
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20161109006331/en/
Source: Centrus Energy Corp.
Centrus Energy Corp.
Investors:
Don Hatcher, 301-564-3460
or
Media:
Jeremy
Derryberry, 301-564-3392
