Net income of $17.3 million for second quarter on revenue of $514 million Cash flow from operations of $221.7 million for the six-month period Previous earnings and cash flow guidance withdrawn given uncertainty regarding effect of demobilization of American Centrifuge activities Conference call with investors to be held at later date
BETHESDA, Md.--(BUSINESS WIRE)--Jul. 31, 2009--
USEC Inc. (NYSE:USU) today reported net income for its second quarter
ended June 30, 2009, of $17.3 million, or 11 cents per diluted share,
compared to net income of $10.8 million, or 8 cents per diluted share,
for the same quarter in 2008. For the six-month period, net income was
$15.2 million, or 10 cents per diluted share, compared to $15.2 million,
or 12 cents per diluted share, in the corresponding period of 2008.
Second quarter financial results reflect substantially higher sales
volume of separative work units (SWU) compared to the same quarter in
2008 at higher average prices billed to customers. Improved revenue was
partially offset by higher costs for producing and purchasing SWU.
Profit margins for contract work done for the U.S. government were lower
due to changes in the mix of contract services performed. Revenue from
uranium sales was also substantially higher.
“We had a solid second quarter with revenue that was roughly double the
revenue recorded in the same quarter last year. Our core business
remains profitable and is generating substantial cash flow from
operations,” said John K. Welch, USEC president and chief executive
officer. “The sale of SWU was notably stronger as our customers refueled
their nuclear power reactors on established schedules. Although electric
power production is down due to economic conditions, nuclear power
continues to be our customers’ first choice for generating their lowest
cost base load electricity.”
A majority of reactors served by USEC are refueled on an 18-to-24-month
cycle, and we expect SWU sales volume in 2009 to increase by
approximately 30 percent year over year, which reflects the higher
number of customer reactors to be refueled in 2009 compared to 2008.
Therefore, short-term comparisons of USEC’s financial results are not
necessarily indicative of longer-term results.
“Due to actions by DOE regarding our application for a loan guarantee to
construct the American Centrifuge Plant (ACP), we have decided to begin
to demobilize the project workforce. Decisions we make during the next
quarter will have an effect on advanced technology spending, capital
spending, one-time costs related to employee layoffs and capital
investments. These amounts are not currently known and therefore we have
withdrawn our earlier guidance and are not able to provide a meaningful
update to our earnings or cash flow guidance for 2009 at this time,”
Welch said.
“On July 29, we announced that we are pursuing discussions with the
Obama administration regarding a review of the substantial benefits that
the ACP provides for our nation’s economic recovery, as well as national
and energy security. Given the evolving and fluid nature of such
discussions, management has decided to postpone conducting its regular
second quarter conference call for investors until such time as our
options for going forward with the ACP are clarified. We will hold a
conference call in the near future to discuss both the quarter’s results
and the events surrounding ACP, but we did not want to delay release of
this financial information in the meantime as we await further clarity
from the U.S. government,” Welch said.
Revenue
Revenue for the second quarter was $514.3 million, an increase of 107
percent compared to the same quarter of 2008. Revenue from the sale of
SWU for the quarter was $371.3 million compared to $125.7 million in the
same period last year, an increase of 195 percent. The volume of SWU
sales increased 162 percent in the quarter while average prices billed
to customers increased 13 percent. Revenue from the sale of uranium was
$95.4 million, an increase of $37.3 million, or 64 percent, from the
same quarter last year. Uranium revenue reflects a 109 percent increase
in uranium volume sold at average prices that were 21 percent lower than
in the 2008 quarter due to the mix, timing and terms of uranium
contracts. Revenue from our U.S. government contracts segment was $47.6
million compared to $65.2 million in the same quarter last year, a 27
percent decrease, primarily driven by net declines in contract services
performed and higher benefit costs. Revenue for the government services
segment in the corresponding period in 2008 included incremental revenue
for fiscal 2002 DOE contract work based on the resolution of concerns
regarding billable incurred costs.
For the six-month period, revenue was $1,019.9 million, an increase of
$427.6 million, or 72 percent, compared to the same period in 2008.
Revenue from the sale of SWU for the six months was $799.2 million, an
increase of $428.4 million, or 116 percent, compared to the same period
last year. Uranium revenue was $124.0 million, an increase of $18.7
million, or 18 percent. Revenue from the U.S. government contracts
segment totaled $96.7 million, a decline of $19.5 million, or 17 percent.
In a number of sales transactions, USEC transfers title and collects
cash from customers but does not recognize the revenue until low
enriched uranium is physically delivered. At June 30, 2009, deferred
revenue totaled $231.0 million, an increase of $34.7 million from
December 31, 2008. The gross profit associated with deferred revenue as
of June 30, 2009, was $69.5 million.
Cost of Sales, Gross Profit Margin and Expenses
Cost of sales for the second quarter for SWU and uranium was $391.9
million, an increase of $256.4 million or 189 percent. For the six-month
period, cost of sales for SWU and uranium was $806.8 million, an
increase of $410.6 million or 104 percent. The higher cost of sales in
both periods of 2009 was due to the substantial increase in SWU sales
volume noted above and higher SWU unit costs. Cost of sales for SWU and
uranium reflects monthly moving average inventory costs based on
production and purchase costs. The cost of sales per SWU was 18 percent
higher in the quarter and 17 percent higher in the six-month period than
in the year before, reflecting changes in the monthly moving average SWU
inventory costs.
Production costs declined $12.6 million, or 3 percent, in the six-month
period compared to the same period of 2008, primarily as a result of
producing 6 percent less SWU. Production volume was affected by reduced
electricity availability and a partial loss of enrichment capacity for
the Paducah plant following a severe ice storm in January 2009. Unit
production costs increased 3 percent reflecting an increase in benefit
costs and the greater impact of fixed costs on reduced volume. A sharp
downturn in the fair value of pension and postretirement benefit plan
assets in 2008 will result in higher net benefit costs in 2009. The cost
of electric power declined by $21.4 million in the first six months of
2009 due to a 4 percent decline in megawatt hours purchased and a 2
percent decline in the average cost per megawatt hour compared to the
same period last year.
We continue to buy power from TVA for SWU production and to underfeed
the enrichment process based on market conditions. The quantity of
uranium that is added to uranium inventory from underfeeding is
accounted for as a byproduct of the enrichment process. Production costs
are allocated to the uranium added to inventory based on the net
realizable value of the uranium, and the remainder of the production
costs are allocated to SWU inventory costs. The decline in value of
uranium in the six-month period of 2009 compared to the same period last
year resulted in a greater allocation of production cost to SWU
inventory.
Our estimate of the unit disposal cost for depleted uranium increased 9
percent during the second quarter. This change in our estimate affects
the cost of sales for accumulated depleted uranium we have stored for
ultimate treatment and disposal, and for depleted uranium we generate
going forward. This cost is reflected in our cost of sales but the
increase in the estimate resulted in a charge of $11.4 million in the
quarter ended June 30, 2009.
We purchase approximately 5.5 million SWU annually from Russia, and this
year’s deliveries began in April following approval of the 2009 pricing
contract by the Russian government. Purchase cost for the SWU component
of LEU under the Megatons to Megawatts program increased $23.4 million
during the six-month period compared to the corresponding period of
2008, reflecting an 11 percent increase in the market-based unit
purchase cost.
Cost of sales for the U.S. government contracts segment was nearly
unchanged for the six-month period, compared to the corresponding period
in 2008.
The gross profit for the second quarter was $77.4 million, an increase
of $13.9 million, or 22 percent, over the same quarter last year. The
gross profit for the six-month period was $119.6 million, an increase of
$17.3 million, or 17 percent, over the corresponding period of 2008. The
gross profit in both periods of 2009 improved due to higher SWU volume
and average prices billed to customers, offset by higher SWU inventory
costs and lower margin for the U.S. government contracts segment. The
gross profit margin for the quarter was 15.0 percent compared to 25.5
percent in the same quarter of 2008 and 11.7 percent in the six-month
period compared to 17.3 percent in the same period last year.
Selling, general and administrative (SG&A) expenses in the six-month
period were $31.1 million, an increase of $2.8 million over the same
period last year. Compensation, benefits and consulting expenses
increased compared to the corresponding period of 2008, which included a
$1 million credit to stock-based compensation expense due to a decline
in our stock price during that prior period. During the first six months
of 2009, consulting expenses were $0.7 million higher than the same
period of 2008 and employee benefits increased $0.7 million due to the
decline in the valuation of pension and post-retirement benefit plan
assets in 2008.
Advanced technology expenses, primarily related to the demonstration of
the American Centrifuge technology, were $62.1 million in the six-month
period, an increase of $10.0 million, or 19 percent, compared to the
same period last year. The increase in advanced technology costs
reflects increased research and development activities associated with
value engineering the AC100 centrifuge machine to lower its capital
cost, as well as preparation for Lead Cascade testing of the initial
AC100 series machines. In addition, commercial plant activities have
increased compared to efforts in the corresponding period in 2008,
including training and procedure development and facility turnover
preparations.
Cash Flow and Liquidity
At June 30, 2009, USEC had a cash balance of $77.7 million compared to
$37.9 million at March 31, 2009, and $248.5 million at December 31,
2008. We repaid the remaining principal balance of $95.7 million for our
maturing senior notes on their due date of January 20, 2009, with
available cash. Cash flow from operations in the six-month period was
$221.7 million, compared to cash flow used by operations of $170.0
million in the same period in 2008. The $391.7 million improvement is
primarily due to our building inventory in 2008 and monetizing that
inventory through sales in 2009. Inventories declined by $109.7 million
in the six-month period of 2009, but the full cash impact was delayed by
timing of customer payments, as seen in the $231.4 million balance in
accounts receivable at June 30, 2009. Payables under the Russian
Contract were $258.2 million at the end of the second quarter after
deliveries for 2009 commenced in April. Capital expenditures, primarily
related to construction of the American Centrifuge Plant, totaled $257.8
million during the six-month period, compared to $199.4 million in the
same period last year. In addition, we made cash deposits of $38.2
million in the six-month period of 2009 as collateral for surety bonds
in connection with financial assurance requirements for the American
Centrifuge Plant.
In response to statements made by DOE, we have taken steps to begin to
demobilize the American Centrifuge project and thereby reduce
project-related spending to a level that will ensure we have sufficient
liquidity for at least 12 months. Sources of liquidity are expected to
include our cash, expected internally generated cash flow from
operations, expected receipt of approximately $70 million, pre tax,
resulting from the settlement of a trade case, and available borrowings
under our revolving credit facility. However, additional funds may be
necessary sooner than we currently anticipate if we are not successful
in our efforts to reduce spending and conserve cash or in the event of
unanticipated payments to suppliers, increases in financial assurance,
delays in the payment of amounts we expect to receive from monies
deposited by importers of French LEU, or any shortfall in our estimated
levels of operating cash flow or available borrowings under the
revolving credit facility, or to meet other unanticipated expenses. We
believe the output from the Paducah gaseous diffusion plant provides a
meaningful source of operational cash flow and we have the flexibility
to extend its operations as part of any alternative planning we may
evaluate going forward.
USEC Inc., a global energy company, is a leading supplier of enriched
uranium fuel for commercial nuclear power plants.
Forward Looking Statements
This news release contains “forward-looking statements” – 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” and other words of similar
meaning. Forward-looking statements by their nature address matters that
are, to different degrees, uncertain. For USEC, particular risks and
uncertainties that could cause our actual future results to differ
materially from those expressed in our forward-looking statements
include, but are not limited to: risks related to the deployment of the
American Centrifuge technology, including risks related to performance,
cost, schedule and financing; our success in obtaining a loan guarantee
for the American Centrifuge Plant; the impact of the demobilization of
the American Centrifuge project and uncertainty regarding our ability to
remobilize the project; uncertainty regarding the cost of electric power
used at our gaseous diffusion plant; our dependence on deliveries under
the Russian Contract and on a single production facility; our inability
under most existing long-term contracts to directly pass on to customers
increases in our costs; the decrease or elimination of duties charged on
imports of foreign-produced low enriched uranium; delays in U.S.
government actions needed for us to collect money from antidumping
duties deposited by importers of French low enriched uranium on past
imports of French low enriched uranium in connection with trade measures
imposed on such imports; pricing trends and demand in the uranium and
enrichment markets and their impact on our profitability; changes to, or
termination of, our contracts with the U.S. government and changes in
U.S. government priorities and the availability of government funding,
including loan guarantees; the impact of government regulation; 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 volatile financial market conditions on our pension assets
and credit and insurance facilities; and other risks and uncertainties
discussed in our filings with the Securities and Exchange Commission,
including our Annual Report on Form 10-K and subsequent quarterly
reports on Form 10-Q. We do not undertake to update our forward-looking
statements except as required by law.
|
|
|
USEC Inc.
|
|
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
|
|
(millions, except per share data)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Separative work units
|
|
$371.3
|
|
|
$125.7
|
|
|
$799.2
|
|
|
$370.8
|
|
|
Uranium
|
|
95.4
|
|
|
58.1
|
|
|
124.0
|
|
|
105.3
|
|
|
U.S. government contracts and other
|
|
47.6
|
|
|
65.2
|
|
|
96.7
|
|
|
116.2
|
|
|
Total revenue
|
|
514.3
|
|
|
249.0
|
|
|
1,019.9
|
|
|
592.3
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
Separative work units and uranium
|
|
391.9
|
|
|
135.5
|
|
|
806.8
|
|
|
396.2
|
|
|
U.S. government contracts and other
|
|
45.0
|
|
|
50.0
|
|
|
93.5
|
|
|
93.8
|
|
|
Total cost of sales
|
|
436.9
|
|
|
185.5
|
|
|
900.3
|
|
|
490.0
|
|
|
Gross profit
|
|
77.4
|
|
|
63.5
|
|
|
119.6
|
|
|
102.3
|
|
|
Advanced technology costs
|
|
30.7
|
|
|
28.2
|
|
|
62.1
|
|
|
52.1
|
|
|
Selling, general and administrative
|
|
16.6
|
|
|
16.3
|
|
|
31.1
|
|
|
28.3
|
|
|
Operating income
|
|
30.1
|
|
|
19.0
|
|
|
26.4
|
|
|
21.9
|
|
|
Interest expense
|
|
0.3
|
|
|
5.2
|
|
|
0.8
|
|
|
11.5
|
|
|
Interest (income)
|
|
(0.4
|
)
|
|
(6.0
|
)
|
|
(1.0
|
)
|
|
(16.8
|
)
|
|
Income before income taxes
|
|
30.2
|
|
|
19.8
|
|
|
26.6
|
|
|
27.2
|
|
|
Provision for income taxes
|
|
12.9
|
|
|
9.0
|
|
|
11.4
|
|
|
12.0
|
|
|
Net income
|
|
$17.3
|
|
|
$10.8
|
|
|
$15.2
|
|
|
$15.2
|
|
|
Net income per share – basic
|
|
$.16
|
|
|
$.10
|
|
|
$.14
|
|
|
$.14
|
|
|
Net income per share – diluted
|
|
$.11
|
|
|
$.08
|
|
|
$.10
|
|
|
$.12
|
|
|
Weighted-average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
111.5
|
|
|
110.6
|
|
|
111.1
|
|
|
110.3
|
|
|
Diluted
|
|
160.3
|
|
|
158.7
|
|
|
159.8
|
|
|
158.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USEC Inc.
|
|
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
|
|
(millions)
|
|
|
|
|
|
June 30,
2009
|
|
December 31,
2008
|
|
ASSETS
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
Cash and cash equivalents
|
|
$77.7
|
|
$248.5
|
|
Accounts receivable
|
|
231.4
|
|
154.1
|
|
Inventories
|
|
1,270.5
|
|
1,231.9
|
|
Deferred income taxes
|
|
53.4
|
|
67.9
|
|
Other current assets
|
|
230.6
|
|
188.3
|
|
Total Current Assets
|
|
1,863.6
|
|
1,890.7
|
|
Property, Plant and Equipment, net
|
|
964.0
|
|
736.1
|
|
Other Long-Term Assets
|
|
|
|
|
|
Deferred income taxes
|
|
293.5
|
|
273.3
|
|
Deposits for surety bonds
|
|
173.7
|
|
135.1
|
|
Bond financing costs, net
|
|
11.0
|
|
12.0
|
|
Goodwill
|
|
6.8
|
|
6.8
|
|
Other long-term assets
|
|
1.3
|
|
1.3
|
|
Total Other Long-Term Assets
|
|
486.3
|
|
428.5
|
|
Total Assets
|
|
$3,313.9
|
|
$3,055.3
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
Current portion of long-term debt
|
|
$ -
|
|
$95.7
|
|
Accounts payable and accrued liabilities
|
|
141.8
|
|
172.3
|
|
Payables under Russian Contract
|
|
258.2
|
|
121.5
|
|
Inventories owed to customers and suppliers
|
|
278.5
|
|
130.2
|
|
Deferred revenue and advances from customers
|
|
231.3
|
|
196.7
|
|
Total Current Liabilities
|
|
909.8
|
|
716.4
|
|
Long-Term Debt
|
|
575.0
|
|
575.0
|
|
Other Long-Term Liabilities
|
|
|
|
|
|
Depleted uranium disposition
|
|
143.0
|
|
119.5
|
|
Postretirement health and life benefit obligations
|
|
172.8
|
|
168.1
|
|
Pension benefit liabilities
|
|
227.6
|
|
223.1
|
|
Other liabilities
|
|
98.4
|
|
90.8
|
|
Total Other Long-Term Liabilities
|
|
641.8
|
|
601.5
|
|
Stockholders’ Equity
|
|
1,187.3
|
|
1,162.4
|
|
Total Liabilities and Stockholders’ Equity
|
|
$3,313.9
|
|
$3,055.3
|
|
|
|
|
|
|
|
|
|
USEC Inc.
|
|
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
(millions)
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2009
|
|
2008
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
Net income
|
|
$15.2
|
|
|
$15.2
|
|
|
Adjustments to reconcile net income to net cash provided
by
(used in) operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
14.7
|
|
|
21.6
|
|
|
Deferred income taxes
|
|
(8.1
|
)
|
|
(29.7
|
)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable – (increase) decrease
|
|
(77.3
|
)
|
|
140.4
|
|
|
Inventories – (increase) decrease
|
|
109.7
|
|
|
(349.9
|
)
|
|
Payables under Russian Contract – increase
|
|
136.7
|
|
|
46.4
|
|
|
Deferred revenue, net of deferred costs – increase (decrease)
|
|
(15.5
|
)
|
|
12.5
|
|
|
Accrued depleted uranium disposition
|
|
23.5
|
|
|
11.2
|
|
|
Accounts payable and other liabilities – increase (decrease)
|
|
10.4
|
|
|
(16.6
|
)
|
|
Other, net
|
|
12.4
|
|
|
(21.1
|
)
|
|
Net Cash Provided by (Used in) Operating Activities
|
|
221.7
|
|
|
(170.0
|
)
|
|
|
|
|
|
|
|
Cash Flows Used in Investing Activities
|
|
|
|
|
|
Capital expenditures
|
|
(257.8
|
)
|
|
(199.4
|
)
|
|
Deposits for surety bonds
|
|
(38.2
|
)
|
|
-
|
|
|
Net Cash (Used in) Investing Activities
|
|
(296.0
|
)
|
|
(199.4
|
)
|
|
|
|
|
|
|
|
Cash Flows Used in Financing Activities
|
|
|
|
|
|
Borrowings under credit facility
|
|
-
|
|
|
47.0
|
|
|
Repayments under credit facility
|
|
-
|
|
|
(47.0
|
)
|
|
Repayment and repurchases of senior notes
|
|
(95.7
|
)
|
|
(12.6
|
)
|
|
Common stock issued (purchased), net
|
|
(0.8
|
)
|
|
(0.3
|
)
|
|
Net Cash (Used in) Financing Activities
|
|
(96.5
|
)
|
|
(12.9
|
)
|
|
Net (Decrease)
|
|
(170.8
|
)
|
|
(382.3
|
)
|
|
Cash and Cash Equivalents at Beginning of Period
|
|
248.5
|
|
|
886.1
|
|
|
Cash and Cash Equivalents at End of Period
|
|
$77.7
|
|
|
$503.8
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
Interest paid, net of amount capitalized
|
|
$1.9
|
|
|
$10.2
|
|
|
Income taxes paid
|
|
4.3
|
|
|
47.9
|
|
Source: USEC Inc.
USEC Inc.
Investors: Steven Wingfield (301) 564-3354
Media:
Elizabeth Stuckle (301) 564-3399
