UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2005

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-14287

USEC Inc.

Delaware (State of incorporation)		52-2107911 (I.R.S. Employer Identification No.)

2 Democracy Center
6903 Rockledge Drive
Bethesda, Maryland 20817
(301) 564-3200

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       Yes þ       No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act of 1934.)       Yes þ       No o

     As of July 31, 2005, there were 86,185,000 shares of Common Stock issued and outstanding.

 

 

TABLE OF CONTENTS

				Page
PART I
Financial Information
Item 1.		Consolidated Condensed Financial Statements:
		Consolidated Condensed Balance Sheets at June 30, 2005 (Unaudited) and December 31, 2004			3
		Consolidated Condensed Statements of Income (Loss) for the Three and Six Months Ended June 30, 2005 and 2004 (Unaudited)			4
		Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004 (Unaudited)			5
		Notes to Consolidated Condensed Financial Statements (Unaudited)			6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3.		Quantitative and Qualitative Disclosures about Market Risk			28
Item 4.		Controls and Procedures			28
PART II
Other Information
Item 1.		Legal Proceedings			30
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			30
Item 4.		Submission of Matters to a Vote of Security Holders			30
Item 6.		Exhibits			31
Signature					32
Exhibit Index					33

     Forward-Looking Statements

     This document 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: market demand for our products and services, including the refueling cycles of our customers; changes in the nuclear energy industry; pricing trends in the uranium and enrichment markets; our dependence on deliveries under the Russian Contract and on a single production facility; the impact of the availability and cost of electric power on our production levels and costs; the implementation of agreements with the Department of Energy regarding uranium inventory remediation and the use of centrifuge technology and facilities; the success of the demonstration and deployment of the American Centrifuge technology; our ability to successfully execute our internal performance plans; final determinations of environmental and other costs; the outcome of litigation, arbitration and trade actions; changes to existing restrictions on imports of foreign-produced LEU and uranium; our ability to renegotiate or replace revolving credit commitments by September 2005 and to refinance senior notes by January 2006; performance under U.S. government contracts and audits of allowable costs billed under U.S. government contracts; the impact of government regulation; and other risks and uncertainties discussed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K/A. We do not undertake to update our forward-looking statements.

USEC Inc.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, the consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations, including risks and uncertainties, included in the annual report on Form 10-K/A for the year ended December 31, 2004. As reported in USEC’s annual report on Form 10-K/A for the year ended December 31, 2004, USEC restated the consolidated statements of income (loss) and cash flows for the first, second and third quarters of 2004.

Overview

     USEC, a global energy company, is the world’s leading supplier of low enriched uranium (“LEU”) for commercial nuclear power plants. LEU is a critical component in the production of nuclear fuel for reactors to produce electricity. USEC, either directly or through its subsidiaries United States Enrichment Corporation and NAC International Inc. (“NAC”):

	•		supplies LEU to both domestic and international utilities for use in over 150 nuclear reactors worldwide,
	•		is the exclusive executive agent for the U.S. government under a nuclear nonproliferation program with Russia, known as Megatons to Megawatts,
	•		is demonstrating and plans to deploy what is expected to be the world’s most efficient uranium enrichment technology, known as the American Centrifuge,
	•		performs contract work for the U.S. Department of Energy (“DOE”) and DOE contractors at the Paducah and Portsmouth plants, and
	•		provides transportation and storage systems for spent nuclear fuel and nuclear and energy consulting services, including nuclear materials tracking.

     Low Enriched Uranium

     LEU is sold and measured by two components: separative work units (“SWU”) and uranium. SWU is a standard unit of measurement that represents the effort required to transform a given amount of natural uranium into two components: enriched uranium having a higher percentage of U²³⁵ and depleted uranium having a lower percentage of U²³⁵. The SWU contained in LEU is calculated using an industry standard formula based on the physics of enrichment. The amount of enrichment contained in LEU under this formula is commonly referred to as the SWU component.

     USEC produces or acquires LEU from two principal sources. LEU is produced at the gaseous diffusion plant in Paducah, Kentucky, and LEU is acquired by purchasing the SWU component of LEU from Russia under the Megatons to Megawatts program.

     Revenue from Sales of SWU and Uranium

     The majority of our customers are domestic and international utilities that operate nuclear power plants. Revenue is derived primarily from:

	•		sales of the SWU component of LEU,
	•		sales of both the SWU and uranium components of LEU, and
	•		sales of uranium.

     Agreements with electric utilities are primarily long-term contracts under which customers are obligated to purchase a specified quantity of SWU or uranium or a percentage of their annual SWU or uranium requirements. Under requirements contracts, customers are not obligated to make purchases if the reactor does not have requirements.

     Revenue and operating results can fluctuate significantly from quarter to quarter, and in some cases, year to year. Customer requirements are determined by refueling schedules for nuclear reactors, which are affected by, among other things, the seasonal nature of electricity demand, reactor maintenance, and reactors beginning or terminating operations. Utilities typically schedule the shutdown of their reactors for refueling to coincide with the low electricity demand periods of spring and fall. Thus, some reactors are scheduled for annual or two-year refuelings in the spring or fall, or for 18-month cycles alternating between both seasons. Customer payments for the SWU component of LEU typically average $12.0 million per order. Customer requirements and orders are more predictable over the longer term, and we believe our performance is best measured on an annual, or even longer, business cycle.

     Revenue could be adversely affected by actions of the U.S. Nuclear Regulatory Commission (“NRC”) or nuclear regulators in foreign countries issuing orders to delay, suspend or shut down nuclear reactor operations within their jurisdictions. In late 2002, regulators in Japan ordered the temporary shutdown of 17 reactors operated by The Tokyo Electric Power Company. USEC supplies LEU for 10 of the 17 reactors, which have all returned to service. The shutdowns have postponed the utility’s requirements for reloading fuel. Revenue in 2004 was reduced as a result of the shutdowns, and USEC expects revenue in 2005 will continue to be affected, but to a lesser extent.

     USEC’s financial performance over time can be significantly affected by changes in prices for SWU. The base-year price for SWU under new long-term contracts, as published by TradeTech in Nuclear Market Review, was $110 per SWU on June 30, 2005, compared with $107 per SWU on December 31, 2004. However, our backlog includes contracts awarded to USEC when prices were lower. As a result, the average SWU price billed to customers declined in recent years, leveled off in 2004 and has begun to improve in 2005. USEC expects that sales under new contracts will increase the average SWU price billed to customers.

     The spot price indicator for uranium hexafluoride, published by Nuclear Market Review, was $87.25 per kilogram of uranium on June 30, 2005, an increase of $24.25 (or 38%) from $63.00 on December 31, 2004. The spot price increased 42% in 2004 from $44.25 on December 31, 2003. The long-term price for uranium hexafluoride, as calculated using indicators published by Nuclear Market Review, was $90.39 per kilogram of uranium on June 30, 2005, an increase of $15.07 (or 20%) from $75.32 on December 31, 2004. The long-term price increased 62% in 2004 from $46.50 on December 31, 2003. However, most of USEC’s uranium inventory has been committed under sales contracts with utility customers, and the positive impact of higher prices is limited to sales under new contracts and to sales under contracts with prices determined at the time of delivery.

     USEC expects that its inventory of uranium is sufficient to continue sales through 2007. We will continue to supplement our supply of uranium by underfeeding the production process at the Paducah plant, as long as it continues to be economical, and by purchasing uranium from suppliers. Underfeeding is a mode of operation that uses or feeds less uranium but requires more SWU in the enrichment process, which requires more electric power. In producing the same amount of LEU, we vary our production process to underfeed uranium based on the economics of the cost of electric power relative to the price of uranium. Underfeeding increases the inventory of uranium that can be sold.

     Revenue from U.S. Government Contracts

     We perform and earn revenue from contract work for DOE and DOE contractors at the Paducah and Portsmouth plants, including contracts for cold standby and processing out-of-specification uranium at the Portsmouth plant, both of which continue through September 2005. Continuation of the contracts is subject to DOE funding and Congressional appropriations. Revenue from U.S.

government contracts is based on allowable costs and any fees earned under the contracts. Allowable costs include direct costs as well as allocations of indirect plant and corporate overhead costs and are determined under government cost accounting standards that are subject to audit by the Defense Contract Audit Agency. Revenue from U.S. government contracts includes revenue from NAC, which was acquired by USEC in November 2004.

     Cost of Sales

     Cost of sales for SWU and uranium is based on the amount of SWU and uranium sold during the period and is determined by a combination of inventory levels and costs, production costs, and SWU purchase costs. Production costs consist principally of electric power, labor and benefits, depleted uranium disposition costs, materials, depreciation and amortization, and maintenance and repairs. Under the monthly moving average inventory cost method coupled with USEC’s inventories of SWU and uranium, an increase or decrease in production or purchase costs will have an effect on inventory costs and cost of sales over future periods.

     (a) Purchase Costs under Russian Contract

     USEC is the Executive Agent of the U.S. government under a contract (“Russian Contract”) to implement a government-to-government agreement to purchase the SWU component of LEU recovered from dismantled nuclear weapons from the former Soviet Union for use as fuel in commercial nuclear power plants.

     USEC has agreed to purchase 5.5 million SWU each calendar year for the remaining term of the Russian Contract through 2013. Over the life of the 20-year Russian Contract, USEC expects to purchase 92 million SWU contained in LEU derived from 500 metric tons of highly enriched uranium. In the third quarter of 2005, the program is expected to reach its halfway point with the conversion into LEU of 250 metric tons of highly enriched uranium, thus eliminating nuclear material equal to 10,000 nuclear warheads.

     Purchases under the Russian Contract approximate 50% of our supply mix. Prices are determined using a discount from an index of international and U.S. price points, including both long-term and spot prices. A multi-year retrospective of the index is used to minimize the disruptive effect of short-term market price swings. We expect that increases in these price points in recent years will result in increases to the index used to determine prices under the Russian Contract.

     (b) Production Costs

     The gaseous diffusion process uses significant amounts of electric power to enrich uranium. In 2004, the power load at the Paducah plant averaged 1,330 megawatts, and in 2005, USEC anticipates Paducah’s average power load to be at least that level. USEC expects that approximately 88% of the Paducah plant’s 2005 electric power load requirements will be obtained at fixed prices as part of the multiyear contract signed with the Tennessee Valley Authority (“TVA”) in 2000. Almost all of the remaining expected load requirements for 2005 have been contracted for under higher cost fixed-price contracts.

     Capacity and prices for electric power under the 2000 TVA power contract are fixed through May 2006, and we are negotiating power supply arrangements for periods beyond that time. Forward market prices for electricity have increased approximately 45% since the TVA power contract was signed in 2000. USEC is anticipating a significant increase in our cost of power beginning in June 2006. An increase in electric power costs will increase overall SWU production costs, which will negatively impact our gross margin. Further, while historically electric power has represented about 60% of our production costs, we anticipate that this percentage will increase subsequent to May 2006

as a result of an increase in power costs. Management continues to explore cost cutting measures, improvements to production efficiencies and incremental revenue opportunities, including underfeeding, that are expected to offset some but not all of the anticipated power cost increases.

     We store depleted uranium at the plants and accrue estimated costs for the future disposition of depleted uranium. The long-term liability is dependent upon the volume of depleted uranium generated and estimated transportation, conversion and disposal costs. Under the DOE-USEC Agreement, USEC incurred costs to process and remove contaminants from out-of-specification uranium, and in return, DOE took title to 23.3 million kilograms of the depleted uranium generated by USEC at the Paducah plant over a four-year period. For this quantity of depleted uranium, USEC’s effective disposition costs were reduced. Transfers of depleted uranium to DOE were completed in the quarter ended June 2005, and costs for the future disposition of depleted uranium generated subsequent to June 2005 will increase production costs.

     (c) Remediating or Replacing USEC’s Out-of-Specification Uranium Inventory

     Reference is made to information regarding out-of-specification uranium inventories transferred to USEC by DOE prior to privatization in 1998 and in the process of being remediated or replaced, reported in note 4 to the consolidated condensed financial statements.

     (d) Environmental Matter

     Reference is made to information regarding an environmental matter involving Starmet CMI, the U.S. Environmental Protection Agency, the South Carolina Department of Health and Environmental Control, DOE, USEC and others, reported in “Legal Matters” in note 9 to the consolidated condensed financial statements.

     American Centrifuge Technology

     We are in the process of demonstrating our next-generation American Centrifuge uranium enrichment technology. Demonstration activities are underway at centrifuge test facilities located in Oak Ridge, Tennessee, and refurbishment work has begun at the American Centrifuge Demonstration Facility in Piketon, Ohio. In January 2005, USEC met a program milestone under the DOE-USEC Agreement and began testing a full-size centrifuge machine at facilities in Oak Ridge, Tennessee, and, in April 2005, USEC met another program milestone and began manufacturing centrifuge machine components for use in the American Centrifuge Demonstration Facility in Piketon, Ohio. The next milestone under the DOE-USEC Agreement, scheduled for October 2006, is obtaining satisfactory reliability and performance data from the lead cascade at the American Centrifuge Demonstration Facility.

     Below is an update on USEC’s current view of progress toward demonstrating and deploying the American Centrifuge:

	•		The lead cascade of the American Centrifuge Demonstration Facility is expected to begin operating and providing important performance data in the first half of 2006. USEC had anticipated beginning operation of the lead cascade by the end of 2005. However, delays have occurred relating to quality of material, performance issues of certain centrifuge components, and compliance with recently issued regulatory requirements.
	•		We do not expect that these near-term delays will impact our ability to meet the DOE-USEC agreement milestones or our anticipated dates for reaching full production capacity. USEC expects to begin construction of the American Centrifuge Plant in 2007, reaching an annual production capacity of 3.5 million SWU during 2010.

     USEC expects the American Centrifuge Plant will cost approximately $1.7 billion (previously reported as approximately $170 million for centrifuge demonstration costs and plant costs of up to $1.5 billion), which includes demonstration and plant expenses and capital costs since 2002 and excludes capitalized interest. Please refer to the 2005 Outlook section below.

     The successful construction and operation of the American Centrifuge Plant is dependent upon a number of factors including, but not limited to, satisfactory performance of the American Centrifuge technology at various stages of demonstration, NRC licensing, financing, the cost of raw materials, installation and operation of centrifuge machines and equipment, and the achievement of milestones under the DOE-USEC Agreement. In addition, certain actions by DOE are required, including USEC and DOE entering into a long-term lease agreement for the facilities, removal of machines, wastes and other materials from the buildings by DOE, and USEC and DOE agreeing on terms for USEC’s license of the centrifuge intellectual property. In the event DOE fails to take appropriate and timely action, it could delay or disrupt USEC’s ability to meet certain milestones in the DOE-USEC Agreement, which could delay demonstration or deployment of the American Centrifuge technology.

     Government Investigation of Imports from France, Germany, the Netherlands and the United Kingdom

     USEC believes its European competitors have curtailed unfair trading practices in the United States since the U.S. government began an investigation in 2000. This investigation led to the imposition of countervailing duty (anti-subsidy) orders on imports of LEU produced in France by Eurodif, S.A., and in Germany, the Netherlands and the United Kingdom by Urenco, Ltd. and an antidumping order on imports of LEU produced in France by Eurodif. The government’s action has helped to restore stability to the enrichment market and ensure a long-term supply of competitive and reliable fuel.

     The U.S. Department of Commerce (“DOC”) recently concluded administrative reviews of 2003 imports subject to the countervailing duty orders. These reviews establish the definitive countervailing duties for imports of LEU in 2003 and the deposit rates for future imports. The reviews resulted in a small increase in the duty margin on imports of LEU from France, from 0.71% to 1.23%. The margin on imports of LEU produced in Germany, the Netherlands and the United Kingdom by Urenco remained unchanged at 0%. However, the existing countervailing duty order on imports of LEU from Urenco remains in force and Urenco could again face duties if found to have received subsidies in the future.

     In September 2005, the DOC is expected to issue the final results of its administrative review of 2003 imports subject to the antidumping order on LEU produced in France. The current duty is 4.56%.

     Appeals of the U.S. government’s determinations in connection with the February 2002 orders are now pending before the U.S. Court of International Trade and the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”). In March 2005, the Federal Circuit ruled that enrichment contracts were sales of services, not merchandise, and thus were not subject to the U.S. antidumping law. The Federal Circuit also ruled that a subsidy conferred by means of government purchases of SWU at above-market prices under an enrichment contract is not subject to the countervailing duty law. These rulings could lead to the termination of both the antidumping and countervailing duty orders against imports of French LEU. As a result, USEC and the U.S. government are seeking a rehearing of the Federal Circuit’s rulings. If a rehearing is denied, Supreme Court review of these rulings may be sought.

     The Federal Circuit’s rulings do not affect the countervailing duty order on imports of LEU produced by Urenco, which, as noted above, are not subject to duties at the present time.

Russian Suspension Agreement

     Imports of LEU produced in the Russian Federation are subject to restrictions imposed under a 1992 agreement suspending an antidumping investigation of imports of all forms of Russian uranium (the “Russian SA”) that was initiated by the DOC at the request of the U.S. producers of natural uranium and uranium workers. The Russian SA prohibits nearly all imports of LEU from Russia for consumption in the United States other than LEU derived from highly enriched uranium imported by USEC under the Russian Contract.

     On July 1, 2005, the DOC and the U.S. International Trade Commission (“ITC”) initiated a “sunset” review of the Russian SA. In this statutorily mandated review, which occurs every five years, the DOC will determine whether termination of the Russian SA is likely to lead to a continuation or recurrence of dumping of Russian uranium products, including LEU. Further, the ITC will determine whether such termination is likely to lead to a continuation or recurrence of material injury to the relevant U.S. industry, including USEC.

     If either the DOC or ITC makes a negative determination (i.e., if the DOC determines that dumping will not continue or recur, or if the ITC concludes that injury will not continue or recur), the Russian SA and the suspended antidumping investigation will be terminated, meaning that commercial Russian LEU (i.e., LEU outside of the Russian Contract) could be imported by others without trade restrictions. An increase in imports of such LEU could adversely affect USEC’s sales and profitability.

     On July 18, 2005, USEC submitted a notice of intent to participate in the sunset review with the DOC, and filed an entry of appearance with the ITC on July 22, 2005. USEC intends to vigorously support the continuation of the Russian SA before both the DOC and ITC. Other parties, including the union that represents workers at the Paducah and Portsmouth plants, are expected to join in this effort. It is unclear what impact, if any, the March 2005 Federal Circuit rulings in the appeal of the orders on French LEU will have on the Russian SA.

Results of Operations — Three and Six Months Ended June 30, 2005 and 2004

     The following table sets forth certain items as a percentage of revenue:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
						As restated								As restated
Revenue:
SWU			70	%			65	%			69	%			68	%
Uranium			12				21				14				16
U.S. government contracts and other			18				14				17				16
Total revenue			100	%			100	%			100	%			100	%
Cost of sales			85				84				85				87
Gross profit margin			15				16				15				13
Advanced technology costs			9				4				8				4
Selling, general and administrative			5				5				5				6
Operating income			1	%			7	%			2	%			3	%

     Revenue

     Revenue from sales of SWU declined $2.9 million (or 1%) in the three months ended June 30, 2005, compared with the corresponding period in 2004. SWU revenue increased $59.1 million (or 17%) in the six months ended June 30, 2005, compared with the corresponding period in 2004 when the level of sales was low in the first quarter. The volume of SWU sold increased 13% and the average price billed to customers increased 3.5% in the six-month period. The increase in volume reflects an increase in contractual purchases from customers and the timing and mix of customer orders. USEC expects revenue from sales of SWU in 2005 will be approximately $1.1 billion, about the same as in 2004, and revenue will again be weighted to the fourth quarter reflecting the timing of customer orders. The average SWU price billed to customers is expected to improve modestly in 2005.

     Revenue from sales of uranium declined $31.2 million (or 48%) in the three months and $4.8 million (or 6%) in the six months ended June 30, 2005, compared with the corresponding periods in 2004. The volume of uranium sold declined 14% in the six-month period reflecting lower contractual commitments from customers and the timing of customer orders. The average uranium price billed to customers increased 10% in the six-month period.

     Revenue from the U.S. government contracts segment increased $9.0 million (or 22%) in the three months and $21.5 million (or 27%) in the six months ended June 30, 2005 compared with the corresponding periods of 2004. The increases primarily reflect revenue from NAC, which was acquired by USEC in November 2004, revenue from contract work that began in April 2004 to refurbish a portion of the centrifuge process buildings in Piketon, Ohio under a contract with DOE, and additional revenue from the resolution of outstanding issues relating to contract work performed by USEC for a DOE contractor. Revenue from NAC amounted to $7.9 million and $13.0 million in the three and six months ended June 30, 2005, respectively.

     Cost of Sales

     Cost of sales for SWU and uranium declined $25.3 million (or 12%) in the three months ended June 30, 2005, compared with the corresponding period in 2004. Cost of sales for SWU and uranium increased $38.2 million (or 10%) in the six months ended June 30, 2005, compared with the corresponding period in 2004 when the level of SWU sales was low in the first quarter. The increase in the six-month period resulted primarily from the increase in the volume of SWU sold. Cost of sales per SWU was 1% higher in the six-month period. Under the monthly moving average inventory cost method coupled with USEC’s inventories of SWU and uranium, an increase or decrease in production or purchase costs has an effect on inventory costs and cost of sales over future periods.

     (a) Purchase Costs under Russian Contract

     USEC purchases 5.5 million SWU per year under the Russian Contract. Purchases of the SWU component of LEU under the Russian Contract increased $18.3 million in the three months and declined $5.5 million in the six months ended June 30, 2005, compared with the corresponding periods in 2004, due to the timing of deliveries. Under the market-based formula, the purchase cost per SWU is higher in 2005 compared with 2004.

     (b) Production Costs

     Production costs increased $12.4 million in the three months and $19.0 million in the six months ended June 30, 2005, compared with the corresponding periods in 2004. The production level declined 1% and unit production costs increased 11% in the three-month period. In the six-month period, the production level increased 4% and unit production costs increased 3%. Cost for electric

power increased $9.3 million in the three-month period and $15.3 million in the six-month period. These increases included costs for power required to underfeed the production process, which results in USEC having incremental uranium for sale at today’s higher prices. In addition, the average cost per megawatt hour increased 13% in the three-month period and 7% in the six-month period, reflecting increases in the cost of market-based power purchased above the fixed-price power included in the 2000 TVA power contract. Estimated costs for the future disposition of depleted uranium increased compared to the corresponding periods in 2004 due to declines in transfers of depleted uranium to DOE under the DOE-USEC Agreement. USEC’s effective disposition costs were reduced for quantities of depleted uranium transferred to DOE under the agreement. Transfers under the agreement were completed in the quarter ended June 30, 2005.

     Cost of sales for the U.S. government contracts segment increased $6.5 million (or 17%) in the three months and $14.0 million (or 19%) in the six months ended June 30, 2005, compared with the corresponding periods in 2004. Cost of sales in the 2005 periods for NAC, which was acquired by USEC in November 2004, amounted to $4.9 million and $9.0 million in the three and six months ended June 30, 2005, respectively.

     Gross Profit

     The gross profit margin in the three months ended June 30, 2005 was 15.2% compared to 16.0% in the corresponding period in 2004. In the six-month period, the gross profit margin increased to 15.3% from 12.9%, compared with the corresponding period in 2004, due primarily to increases in average SWU and uranium prices billed to customers. USEC expects the gross profit margin will be 13% to 15% in 2005 compared with 14% in 2004. As a result of increases in prices of uranium over the last few years, sales of uranium are generating a high gross profit margin.

     Gross profit for SWU and uranium declined $8.8 million (or 20%) in the three months ended June 30, 2005, compared with the corresponding period in 2004, reflecting a lower volume of uranium sold, partly offset by higher sales prices. Gross profit for SWU and uranium increased $16.1 million (or 27%) in the six-month period, reflecting the higher average SWU and uranium prices billed to customers and increases in the volume of SWU, partly offset by the lower volume of uranium sold.

     Gross profit for the U.S. government contracts segment increased $2.5 million (or 61%) in the three months and $7.5 million (or 134%) in the six months ended June 30, 2005, compared with the corresponding periods in 2004. USEC resolved a number of outstanding issues and recovered past due billings to a DOE contractor, for which an allowance had previously been accrued, resulting in nonrecurring income of $2.3 million in the first three months of 2005. Gross profit of NAC, which was acquired by USEC in November 2004, amounted to $3.0 million and $4.0 million in the three and six months ended June 30, 2005, respectively.

     Advanced Technology Costs

     Advanced technology costs, primarily demonstration costs for the American Centrifuge technology, increased $13.3 million (or 125%) in the three months and $26.6 million (or 133%) in the six months ended June 30, 2005, compared with the corresponding periods in 2004. Expenses increased primarily as a result of an increase in the number of employees and contractors working on demonstration activities, increased spending to manufacture centrifuge components for the lead cascade, and costs to upgrade equipment at the American Centrifuge Demonstration Facility in Piketon, Ohio in preparation for the anticipated startup of centrifuge machines in the lead cascade. The expenses also represent unanticipated increases in demonstration and lead cascade costs incurred and expenses that had originally been anticipated to be capitalized. (Please refer to the 2005 Outlook section below.) Advanced technology costs for NAC amounted to $1.0 million in the six months ended June 30, 2005. NAC was acquired by USEC in November 2004.

     Selling, General and Administrative

     Selling, general, and administrative expenses declined $1.9 million (or 12%) in the three months and $2.7 million (or 8%) in the six months ended June 30, 2005, compared with the corresponding periods in 2004. Consulting expenses declined $3.8 million and compensation and employee benefit costs declined $1.2 million in the six-month period. The decline was partly offset by expenses of $3.0 million of NAC, which was acquired by USEC in November 2004.

     Operating Income (Loss)

     Operating income declined $17.7 million (or 80%) in the three months and $.3 million (or 2%) in the six months ended June 30, 2005, compared with the corresponding periods in 2004. The declines reflect higher centrifuge demonstration costs, partly offset by lower selling, general and administrative expenses and by increases in gross profit in the six-month period.

     Interest Expense and Interest Income

     Interest expense declined $1.3 million (or 13%) in the three months and $2.0 million (or 10%) in the six months ended June 30, 2005, compared with the corresponding periods in 2004. The declines resulted primarily from the repurchase in December 2004 of $25.0 million of the 6.625% senior notes due January 20, 2006.

     Interest income increased $2.4 million (or 300%) in the three months and $3.6 million (or 240%) in the six months ended June 30, 2005, compared with the corresponding periods in 2004. The average balance of invested cash, cash equivalents and short-term investments was higher.

     Provision (Credit) for Income Taxes

     The provision for income taxes of $3.5 million reflects an overall effective income tax rate of 250% in the six months ended June 30, 2005, compared with a credit for income taxes of $1.5 million based on an effective income tax rate of 38% in the corresponding period in 2004. The difference between the effective tax rate of 250% and the statutory federal income tax rate of 35% in the 2005 period resulted primarily from the negative effects on deferred tax assets from reductions in the Kentucky tax rate in the first quarter of 2005 and the Ohio tax rate in the second quarter of 2005. The effective rate for USEC excluding the Kentucky and Ohio one-time effects is 33% for the six months ended June 30, 2005. USEC expects the effective tax rate, excluding the one-time effects of the Kentucky and Ohio deferred tax asset reductions, to be approximately 35% for 2005.

     Net Income (Loss)

     There was a net loss of $3.0 million (or $.03 per share) in the three months ended June 30, 2005, compared with net income of $7.4 million (or $.09 per share) in the corresponding period in 2004. In the six months ended June 30, 2005, there was a net loss of $2.1 million (or $.02 per share) compared with a net loss of $2.4 million (or $.03 per share) in the corresponding period in 2004. Net losses in the 2005 periods reflect higher centrifuge demonstration costs and the higher effective tax rate. The six-month period benefited from an increase in gross profit compared with the corresponding period in 2004. Centrifuge demonstration costs reduced net income by $29 million (or $.34 per share) after tax in the six months ended June 30, 2005, compared with $12 million (or $.14 per share) after tax in the corresponding period in 2004.

2005 Outlook

     USEC is updating its annual guidance to take into account improvements in its core business and the impact of a higher allocation of American Centrifuge costs to expense. Specifically, USEC expects revenue to total approximately $1.5 billion in 2005. The Company anticipates higher gross profits from improved prices billed to customers for SWU and uranium, and improved unit SWU cost of sales that should result in a $30 million improvement to gross profit compared to 2004. In addition, selling, general and administrative expenses are expected to be approximately $5 million below 2004 even with the addition of $6 million in expenses related to NAC. The average gross margin for all business segments will be in a range of 13% to 15%.

     Offsetting these improvements are higher expenses for the American Centrifuge. The delay in beginning operation of the lead cascade noted earlier has resulted in more of the spending being expensed as opposed to capitalized. USEC expects to spend approximately $120 million on the American Centrifuge technology in 2005, with the accounting for these expenditures being roughly $100 million in expense and $20 million in capital. The $10 million increase in spending from earlier guidance is due to incremental costs incurred for outside services.

     USEC expects net income for 2005 in a range of $20 to $25 million, or $.23 to $.29 per share. Net income is dependent on several key factors, including the timing of deliveries to customers and the recognition of revenue. USEC will continue to assess the accounting allocation between expense and capital for American Centrifuge during the year, and a higher allocation of the costs to expense would reduce net income.

     An increase in gross profit will improve cash flow from operating activities. USEC expects cash flow from operating activities in a range of $180 to $200 million — an improvement of $30 million over previous guidance — and capital expenditures are expected to total approximately $33 million. USEC anticipates ending the year with a cash balance in a range of $240 to $250 million.

Liquidity and Capital Resources

     Operating Activities

     Positive net cash flow from operating activities was $38.2 million in the six months ended June 30, 2005, compared with negative net cash flow of $155.6 million in the corresponding period in 2004. Cash flow in the 2005 period benefited from a reduction of $135.5 million in accounts receivable from customer collections following the high level of sales in the fourth quarter of 2004, an increase of $30.5 million in payables under the Russian Contract reflecting the timing of purchases, partly offset by a net inventory increase of $133.7 million.

     The negative net cash flow of $155.6 million in the six months ended June 30, 2004 reflects a payment of $33.2 million resulting from the settlement of termination obligations under a power purchase agreement. In addition, there was a net inventory increase or temporary build up of $194.9 million and a decline of $51.5 million in accounts receivable. The increase in inventory and the decline in accounts receivable resulted from the low level of sales in the six months ended June 30, 2004.

     Investing Activities

     Capital expenditures amounted to $11.8 million in the six months ended June 30, 2005, compared with $11.2 million in the corresponding period in 2004. Capital expenditures include capitalized costs associated with the American Centrifuge Plant.

     Financing Activities

     The issuance of common stock, primarily from the exercise of stock options, provided cash flow from financing activities of $5.4 million in the six months ended June 30, 2005, compared with $8.1 million in the corresponding period in 2004. There were 86.2 million shares of common stock outstanding at June 30, 2005, compared with 85.1 million at December 31, 2004, an increase of 1.1 million shares (or 1%).

     Dividends paid to stockholders amounted to $23.6 million (or a quarterly rate of $.1375 per share) in the six months ended June 30, 2005, compared with $23.0 million in the corresponding period in 2004. The increase reflects the increase in the number of shares outstanding.

     Working Capital

		June 30,				December 31,
		2005				2004
						As restated
		(millions)
Cash and cash equivalents		$	183.0			$	174.8
Short-term investments			30.0				—
Accounts receivable — trade			103.0				238.5
Inventories			1,205.5				1,009.4
Current portion of long-term debt			(325.0	)			—
Other current assets and liabilities, net			(356.6	)			(299.1	)
Working capital		$	839.9			$	1,123.6

     The primary factor in reducing USEC’s working capital total as of June 30, 2005, compared to December 31, 2004, relates to the current portion of long-term debt. At June 30, 2005, long-term debt of $325.0 million is classified as a current liability for the senior notes scheduled to mature January 20, 2006.

     Capital Structure and Financial Resources

     At June 30, 2005, debt consisted of $325.0 million of 6.625% senior notes due January 20, 2006, representing the current portion of long-term debt included in current liabilities, and $150.0 million of 6.750% senior notes due January 20, 2009 and reported as long-term debt. The senior notes are unsecured obligations and rank on a parity with all other unsecured and unsubordinated indebtedness of USEC Inc.

     In September 2002, United States Enrichment Corporation, a wholly owned subsidiary of USEC, entered into a three-year syndicated revolving credit facility. The facility provides up to $150.0 million in revolving credit commitments (including up to $50.0 million in letters of credit) until September 27, 2005, and is secured by certain assets of USEC’s subsidiaries and, subject to certain conditions, certain assets of USEC. Borrowings under the facility are subject to limitations based on percentages of our eligible accounts receivable and inventory. Obligations under the facility are fully and unconditionally guaranteed by USEC.

     Outstanding borrowings under the facility bear interest at a variable rate equal to, based on the borrower’s election, either:

	•		the sum of (x) the greater of the JPMorgan Chase Bank prime rate or the federal funds rate plus 1/2 of 1% plus (y) a margin ranging from .75% to 1.25% based upon collateral availability, or
	•		the sum of LIBOR plus a margin ranging from 2.5% to 3% based on collateral availability.

     The revolving credit facility includes various operating and financial covenants that are customary for transactions of this type, including, without limitation, restrictions on the incurrence and prepayment of other indebtedness, granting of liens, sales of assets, making of investments, maintenance of a minimum amount of inventory, and payment of dividends or other distributions. The facility does not restrict USEC’s payment of common stock dividends at the current level, subject to the maintenance of a specified minimum level of collateral. Failure to satisfy the covenants would constitute an event of default. As of June 30, 2005, USEC was in compliance with covenants under the revolving credit facility. There were no short-term borrowings under the revolving credit facility at June 30, 2005 or December 31, 2004.

     The total debt-to-capitalization ratio was 34% at June 30, 2005 and December 31, 2004. In June 2005, Moody’s lowered its ratings on USEC’s senior notes to B2 from Ba3, lowered the senior implied rating to B1 from Ba2, and commented that USEC’s outlook is stable. The reasons stated for the downgrade were (a) Moody’s expectation that earnings and cash generated from the company’s core enrichment operation will remain constrained over the near to intermediate term, (b) the exposure to potentially higher energy costs as a major fixed price power purchase agreement expires in 2006, (c) uncertainty over plans for refinancing existing bank facilities and for debt maturing in January 2006, (d) risks and uncertainty associated with the company’s plans to build the American Centrifuge project, and (e) a very high dividend payout in comparison to earnings and cash generation. In October 2004, Standard & Poor’s lowered its ratings on USEC as follows: corporate credit rating to BB- with negative outlook from BB with stable outlook, senior notes to B from BB-, and revolving credit facility to BB+ from BBB-.

     USEC’s three-year revolving credit facility of $150.0 million is scheduled to expire September 27, 2005, and $325.0 million of 6.625% senior notes mature January 20, 2006. USEC is actively engaged in discussions with financial institutions to replace the revolving credit facility prior to the September 2005 expiration date. We may also repurchase some or all of the senior notes prior to the scheduled maturity. The terms of a new revolving credit facility or refinancing of senior notes would be based on market conditions and other factors prevailing at the time such agreements are negotiated. Further downgrades in our credit rating, should they occur, may adversely affect our ability to secure adequate financing, including our ability to replace the credit facility or refinance or repurchase the senior notes. There can be no assurance that a credit facility or debt refinancing will be available on terms that are acceptable to us, or at all. If adequate funds are not available on acceptable terms, our ability to maintain current operations, make deliveries to customers, purchase SWU under the Russian Contract, demonstrate and deploy American Centrifuge technology or pay quarterly dividends could be affected.

     We expect that our cash, internally generated funds from operations, and available financing under the revolving credit facility or the expected replacement revolving credit facility will be sufficient over the next 12 months to meet our cash flow obligations.

     USEC expects to begin construction of the American Centrifuge Plant in 2007. The American Centrifuge project, including the plant, is expected to cost approximately $1.7 billion, which includes demonstration and plant expenses since 2002 and excludes capitalized interest. Under the DOE-USEC Agreement, the milestone date for securing a financing commitment for a 1 million SWU

centrifuge plant is January 2007. USEC expects to fund American Centrifuge costs with internally generated cash through 2006. Thereafter, USEC expects it will fund capital costs using a number of sources, including dedicating all cash flow from operations to American Centrifuge and proceeds from debt or equity offerings the terms of which will depend on conditions at the time funds are needed for construction.

New Accounting Standards

     Reference is made to “Stock-Based Compensation” in note 6 and “New Accounting Standards” in note 12 of the notes to the consolidated condensed financial statements for information on new accounting standards.

EXHIBIT 10.82

CHANGE IN CONTROL AGREEMENT

               AGREEMENT (this “Agreement”) by and between USEC Inc., a Delaware corporation (the “Company”) and [NAME] (the “Executive”) dated as of [DATE].

               WHEREAS, the Executive is currently an employee of the Company;

               WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is essential to the best interests of the Company and its shareholders to foster the continued employment of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined in Section 1 hereof) of the Company;

               WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of the Executive in the Executive’s assigned duties without distraction in the face of potentially disturbing circumstances arising from any possible Change in Control of the Company; and

               WHEREAS, the Board has concluded that the interests of the Company described above can be best satisfied by agreeing to make certain payments to the Executive if the Executive’s employment is terminated following a Change in Control;

               NOW, THEREFORE, the parties hereto hereby agree as follows:

               1. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

               “Affiliate” shall mean (i) any entity that, directly or indirectly, is controlled by the Company, (ii) any entity in which the Company has a significant equity interest and (iii) an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act, in each case as determined by the Committee.

“Cause” shall mean any of the following:

(i) the engaging by the Executive in willful misconduct that is injurious to the Company or its Affiliates;

(ii) the embezzlement or misappropriation of funds or property of the Company or its Affiliates by the Executive, or the conviction of the Executive of a felony or the entrance of a plea of guilty or nolo contendere by the Executive to a felony; or

(iii) the willful failure or refusal by the Executive to substantially perform his or her duties or responsibilities that continues after demand for substantial performance is delivered by the Company to the Executive that specifically identifies the manner in

which the Company believes the Executive has not substantially performed his or her duties (other than (x) any such failure resulting from the Executive’s incapacity due to Disability, or (y) any such actual or anticipated failure after the issuance of a Notice of Termination by the Executive for Good Reason).

For purposes of this definition, no act, or failure to act, on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive’s employment shall not be deemed to have been terminated for Cause unless (A) a reasonable notice shall have been given to him or her setting forth in reasonable detail the reasons for the Company’s intentions to terminate for Cause, and if such termination is pursuant to clause (i) or (iii) above, and the damage to the Company is curable, only if the Executive has been provided a period of ten business days from receipt of such notice to cease the actions or inactions, and he or she has not done so; (B) an opportunity shall have been provided for the Executive together with his or her counsel, to be heard before the Board; and (C) if such termination is pursuant to clause (i) or (iii) above, delivery shall have been made to the Executive of a Notice of Termination from the Board finding that in the good faith opinion of a majority of the non-management members of the Board he or she was guilty of conduct set forth in clause (i) or (iii) above, and specifying the particulars thereof in reasonable detail. Any determination of Cause made by the Company in accordance with the foregoing procedure shall be made by the Company, in its sole discretion. Any such determination shall be final and binding on the Executive.

           “Change in Control” shall mean the following and shall be deemed to have occurred if any of the following events shall have occurred:

               (i) any “Person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (C) any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of Shares), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company’s then outstanding voting securities;

               (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date (as defined below), constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-

thirds (2/3) of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended;

(iii) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 60% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person, directly or indirectly, acquired 40% or more of the combined voting power of the Company’s then outstanding securities (not including any securities acquired directly from the Company or its Affiliates); or

(iv) the shareholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction having a similar effect), other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 60% of the combined voting power of the voting securities of which are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Committee” shall mean the Compensation Committee of the Company’s Board of Directors.

“Disability” shall mean that the Executive has become totally and permanently disabled as defined or described in the Company’s long term disability benefit plan applicable to executive officers as in effect at the time the Executive’s disability is incurred.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Good Reason” shall mean, without the Executive’s express written consent, any of the following, unless such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof:

(i) the Executive is removed from the Executive’s position as in effect immediately prior to the Change in Control for any reason other than (A) by reason of death, Disability or Retirement or (B) for Cause;

               (ii) the Executive is assigned any duties inconsistent in a material respect with the Executive’s position (including status, offices, titles and reporting relationships), authority, duties or responsibilities as in effect immediately prior to the Change in Control if such assignment results in a diminution in such position, authority, duties or responsibilities (excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly following notice thereof given by the Executive);

               (iii) the Company fails to pay the Executive any amounts otherwise vested and due to the Executive under any employment agreement or any other compensation plan of the Company and such failure continues for ten business days following notice to the Company thereof;

               (iv) the Executive’s annual base salary or annual bonus opportunity as in effect immediately prior to the Change in Control (or thereafter if higher) is reduced (except for across-the-board reductions similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company);

               (v) the failure by the Company to continue to provide the Executive with benefits at least as favorable in the aggregate as those enjoyed by the Executive under the Company’s pension, life insurance, medical, health and accident, disability, travel, deferred compensation and savings plans in which the Executive was participating at the time of the Change in Control, the taking of any action by the Company that would directly or indirectly materially reduce such benefits in the aggregate or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control unless such material fringe benefit is replaced with a comparable benefit, or the failure by the Company to continue to provide the Executive with the number of paid vacation days to which the Executive is entitled;

               (vi) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 9 hereof;

               (vii) any relocation of the Executive’s principal place of business from its location as of the date immediately preceding a Change in Control, by more than 50 miles; or

               (viii) any purported termination of the Executive’s employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(b) hereof, which termination for purposes of this Agreement shall be ineffective.

Notwithstanding the foregoing, a termination shall not be treated as a termination for Good Reason unless the Executive shall have delivered a Notice of Termination within 90 days of the Executive’s having actual knowledge of the occurrence of one of such events, stating that the

Executive intends to terminate employment for Good Reason. For purposes of this Agreement, any good faith determination of “Good Reason” made by the Executive shall be conclusive.

           “Retirement” shall mean the attainment by the Executive of normal retirement age as defined in the Company’s tax qualified defined benefit pension plan.

           “Shares” shall mean shares of common stock, $0.10 par value, of the Company, or such other securities of the Company as may be designated by the Committee from time to time.

           2.  Term of Agreement. The term of this Agreement will commence as of the date hereof (the “Effective Date”) and shall continue in effect until the third anniversary of the Effective Date, unless further extended or sooner terminated as hereinafter provided. Commencing on the first anniversary of the Effective Date, and on each anniversary of such date thereafter (each, an “Anniversary Date”), the term shall automatically be extended for one additional year unless the Board of Directors of the Company (the “Board”) gives notice to the Executive, at least two months prior to such Anniversary Date, that it does not wish to extend the term. Notwithstanding the foregoing, upon the occurrence of a Change in Control during the term of this Agreement, this Agreement shall continue in effect for a period of not less than three years from the date of such Change in Control, unless sooner terminated as hereinafter provided.

           3.  Termination Following Change in Control. (a) If a Change in Control shall have occurred, upon a termination of employment during the term of this Agreement by the Company without Cause, or by the Executive for Good Reason, the Executive shall be entitled to the benefits provided in Section 4 hereof.

           (b)  Notice of Termination. Following a Change in Control, any purported termination of employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and shall specify the Date of Termination. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company under this Agreement or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights under this Agreement.

           (c)  Date of Termination. Following a Change in Control, “Date of Termination” shall mean the date specified in the Notice of Termination, which shall not be less than 30 nor more than 60 days from the date such Notice of Termination is given, (except for a termination pursuant to paragraph (vi) of the definition of Good Reason, in which event the date upon which any succession referred to therein becomes effective shall be deemed the Date of Termination, or

a termination by the Company for Cause, in which event the date such notice is received shall be the Date of Termination).

               4.  Compensation upon Termination without Cause or for Good Reason. Following a Change in Control, upon any termination of the Executive’s employment by the Company without Cause (other than because of death, Disability or Retirement), or any termination of employment by the Executive for Good Reason, in any case, during the term of this Agreement, in lieu of any severance benefits Executive would otherwise be eligible to receive under any employment agreement with the Company or under the Company’s severance plan, if any, as in effect immediately prior to the Change in Control, the Executive shall be entitled to the following benefits and payments:

               (a) A cash lump sum payment (payable within ten days of the Date of Termination) of full base salary through the Date of Termination at the rate in effect at the time the Notice of Termination is given or, if higher, at the rate in effect immediately prior to the reduction giving rise (pursuant to clause (iv) of the definition of Good Reason) to such termination, plus all other amounts to which the Executive is entitled under any compensation or benefit plan of the Company at the time such payments are due under the terms of such plans;

               (b) A cash lump sum payment (payable within ten days of the Date of Termination) equal to two and one-half times the sum of the Final Average Salary and the Final Average Bonus, where (A) the “Final Average Salary” means the average of the Executive’s Annual Base Salary as in effect for each of the three years preceding the Date of Termination and commencing no earlier than February 3, 1999 (or, if shorter, the number of years from February 3, 1999 to the Date of Termination) and (B) the “Final Average Bonus” means the average of the Bonuses awarded to the Executive pursuant to the Annual Incentive Program with respect to the three years preceding the Date of Termination and commencing no earlier than February 3, 1999 (or, if shorter, the number of years from February 3, 1999 to the Date of Termination);

               (c) Subject to the Executive’s continued compliance with Section 7 hereof, life, disability, accident and health insurance benefits substantially similar to those that the Executive was receiving immediately prior to the Change in Control (or thereafter, if higher) until the earlier to occur of (i) the 30 month anniversary of the Date of Termination or (ii) such time as the Executive is covered by comparable programs of a subsequent employer; provided, however, that in the event the Company is unable to provide such benefits, the Company shall make annual payments to the Executive in an amount such that following the Executive’s payment of applicable taxes thereon, the Executive retains an amount equal to the cost to the Executive, net of any cost that would otherwise be borne by the Executive, of obtaining comparable life, disability, accident and health insurance coverage. Benefits otherwise receivable by the Executive pursuant to this Section 4(c) shall be reduced to the extent comparable benefits are actually received during the 30 month period following termination, and any such benefits actually received by the Executive shall be reported to the Company.

               (d) In addition to all other amounts payable under this Section 4, the Executive shall be entitled to receive all benefits payable under any other plan or agreement relating to retirement benefits (including plans or agreements of any successor following a Change in Control) in accordance with the terms of such plan or agreement; provided that, to the extent permitted by applicable law, the Executive shall be credited under such plans or agreements (including plans and agreements of any successor) with two and one-half years’ additional service with the Company after the Date of Termination for all purposes, including vesting, eligibility and benefit accrual.

               5.  Full Settlement; Mitigation. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against the Executive or others. The Executive shall not be required to mitigate the amount of any payment or benefit provided for in Section 4 hereof by seeking other employment or otherwise, nor (except as specifically provided in Section 4 hereof) shall the amount of any payment or benefit provided for in Section 4 hereof be reduced by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise.

               6.  Certain Tax Consequences. Whether or not the Executive becomes entitled to the payments and benefits described in Section 4 hereof, if any of the payments or benefits received or to be received by the Executive in connection with a change in ownership or control of the Company (as defined in section 280G of the Code (a “Statutory Change in Control”)) or the Executive’s termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a Statutory Change in Control or any person affiliated with the Company or such person) (collectively, the “Severance Benefits”) will be subject to any excise tax (the “Excise Tax”) imposed under section 4999 of the Code, the Company shall pay to the Executive an additional amount equal to the Excise Tax (the Excise Tax Payment”).

               For purposes of determining whether any of the Severance Benefits will be subject to the Excise Tax and the amount of such Excise Tax:

               (a) all of the Severance Benefits shall be treated as “parachute payments” within the meaning of Code section 280G(b)(2), and all “excess parachute payments” within the meaning of Code section 280G(b)(1) shall be treated as subject to the Excise Tax, unless, in the opinion of tax counsel selected by the Company’s independent auditors and reasonably acceptable to the Executive, such other payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of Code section 280G(b)(4)(A), or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered, within the meaning of Code section 280G(b)(4)(B), in excess of the “Base Amount” as defined in Code section 280G(b)(3) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax; and

               (b) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Code section 280G(d)(3) and (4).

               In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Executive’s employment, the Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined (the “Reduced Excise Tax”), the difference of the Excise Tax Payment and the Reduced Excise Tax. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of the Executive’s employment (including by reason of any payment the existence or amount of which could not be determined at the time of the Excise Tax Payment), the Company shall make an additional Excise Tax payment in respect of such excess (plus any interest or penalties payable by the Executive with respect to such excess) at the time that the amount of such excess is finally determined. The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Severance Benefits.

               7.  Confidential Information; Non-Solicitation; Non-Competition. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret, proprietary, or confidential materials, knowledge, data or any other information relating to the Company or any of its affiliated companies, and their respective businesses (“Confidential Information”), which shall have been obtained by the Executive during the Executive’s employment by the Company or any of its affiliated companies and that shall not have been or now or hereafter have become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). During the term of this Agreement and (a) for a period of five years thereafter with respect to Confidential Information that does not include trade secrets, and (b) any time thereafter with respect to Confidential Information that does include trade secrets, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any Confidential Information to anyone other than the Company and those designated by it.

               In addition, the Executive shall not, at any time during the term of this Agreement and for a period of two and one-half years thereafter, (a) engage or become interested as an owner (other than as an owner of less than 5% of the stock of a publicly owned company), stockholder, partner, director, officer, employee (in an executive capacity), consultant or otherwise in any business that is competitive with any business conducted by the Company or any of its affiliated companies during the term of this Agreement or as of the Date of Termination, as applicable or (b) recruit, solicit for employment, hire or engage any employee or consultant of the Company or any person who was an employee or consultant of the Company within two (2) years prior to the Date of Termination. The Executive acknowledges that these provisions are necessary for the Company’s protection and are not unreasonable, since he would be able to obtain employment

with companies whose businesses are not competitive with those of the Company and its affiliated companies and would be able to recruit and hire personnel other than employees of the Company. The duration and the scope of these restrictions on the Executive’s activities are divisible, so that if any provision of this paragraph is held or deemed to be invalid, that provision shall be automatically modified to the extent necessary to make it valid.

               8.  Remedies. The Executive acknowledges that a violation or attempted violation on the Executive’s part of Section 7 will cause irreparable damage to the Company, and the Executive therefore agrees that the Company shall be entitled as a matter of right to an injunction, out of any court of competent jurisdiction, restraining any violation or further violation of such promises by the Executive or the Executive’s employees, partners or agents. The Executive agrees that such right to an injunction is cumulative and in addition to whatever other remedies the Company may have under law or equity.

               9.  Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as defined above and any successor to its business and/or assets that assumes and agrees to perform this Agreement by operation of law, or otherwise. Prior to a Change in Control, the term “Company” shall also mean any Affiliate of the Company to which the Executive may be transferred and the Company shall cause such successor employer to be considered the “Company” and to be bound by the terms of this Agreement and this Agreement shall be amended to so provide. Following a Change in Control the term “Company” shall not mean any Affiliate of the Company to which Executive may be transferred unless Executive shall have previously approved of such transfer in writing, in which case the Company shall cause such successor employer to be considered the “Company” and to be bound by the terms of this Agreement and this Agreement shall be amended to so provide. Failure of the Company to obtain an assumption and agreement as described in this Section 9(a) prior to the effective date of a succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to under this Agreement if the Executive were to terminate the Executive’s employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

               (b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee or other designee or, if there is no such designee, to the Executive’s estate.

               10.  Notices. Any notice, request, instruction or other document given under this Agreement shall be in writing and shall be addressed and delivered, in the case of the Company, to the Secretary of the Company at the principal office of the Company and, in the case of the Executive, to the Executive’s address as shown in the records of the Company or to such other address as may be designated in writing by either party.

               11.  Withholding Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

               12.  Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

               13.  Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws provisions thereof.

               14.  Validity. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

               15.  Counterparts. This Agreement may be signed in several counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

               16.  Arbitration. Except as otherwise provided in Section 8 hereof, the parties agree that any dispute, claim, or controversy based on common law, equity, or any federal, state, or local statute, ordinance, or regulation (other than workers’ compensation claims) arising out of or relating in any way to this Agreement, its termination or any termination of employment, including whether such dispute is arbitrable, shall be settled by arbitration. This agreement to arbitrate includes but is not limited to all claims for any form of illegal discrimination, improper or unfair treatment or dismissal, and all tort claims. The Executive shall still have a right to file a discrimination charge with a federal or state agency, but the final resolution of any discrimination claim shall be submitted to arbitration instead of a court or jury. The arbitration proceeding shall be conducted under the employment dispute resolution arbitration rules of the American

Arbitration Association in effect at the time a demand for arbitration under the rules is made. The decision of the arbitrator(s), including determination of the amount of any damages suffered, shall be exclusive, final, and binding on all parties, their heirs, executors, administrators, successors and assigns.

                17.  Status Prior to Change in Control. Nothing contained in this Agreement shall impair or interfere in any way with the Executive’s right to terminate employment or the right of the Company to terminate the Executive’s employment with or without Cause prior to a Change in Control. Nothing contained in this Agreement shall be construed as a contract of employment between the Company and the Executive.

                18.  Legal Fees. The Company shall pay the Executive’s reasonable legal fees and expenses that may be incurred by the Executive in contesting or disputing any termination of employment following a Change in Control or in seeking to obtain or enforce any right or benefit provided by this Agreement, if the Executive is the prevailing party in connection with any such dispute.

                19.  Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter herein and supersedes any prior agreements between the Company and the Executive. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein.

                IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, James R. Mellor, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of USEC Inc.;
2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Ellen C. Wolf, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of USEC Inc.;
2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

EXHIBIT 32

CERTIFICATION OF CEO AND CFO PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the quarterly report on Form 10-Q of USEC Inc. for the quarter ended June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, James R. Mellor, Chairman of the Board, President and Chief Executive Officer, and Ellen C. Wolf, Senior Vice President and Chief Financial Officer, each hereby certifies, that, to the best of his or her knowledge:

     (1)    The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of USEC Inc.