-
Net loss of $50.8 million primarily due to non-production costs
at Paducah GDP
-
American Centrifuge demonstration & operations continue in Ohio
and Tennessee
-
Chapter 11 process continues; Company anticipates emerging this
summer
BETHESDA, Md.--(BUSINESS WIRE)--May 15, 2014--
USEC Inc. (NYSE:USU) today reported a net loss of $50.8 million for the
quarter ended March 31, 2014, compared to a net loss of $2.0 million for
the first quarter of 2013.
The financial results for the first quarter of 2014 reflect a reduction
in separative work unit (SWU) revenue compared to the same period in
2013 following the cessation of enrichment at the Paducah Gaseous
Diffusion Plant (GDP) in the second quarter of 2013. The net loss was
primarily driven by non-production expenses of $34.9 million related to
transition activities at the Paducah GDP as USEC prepares the facility
for return to the Department of Energy (DOE) later this year. Other
factors affecting financial results for the quarter were lower SWU sales
volume and expenses for our reorganization efforts, workforce
reductions, advisory costs and USEC’s share of costs under the 2012
Cooperative Agreement for research, development and demonstration of the
American Centrifuge technology. The Cooperative Agreement expired by its
terms on April 30, 2014. Results in the first quarter of 2013 benefited
from the sale of a USEC subsidiary, NAC International.
“We successfully achieved or exceeded all of the technical milestones
and performance indicators under the Cooperative Agreement. I am pleased
to report this was accomplished on or ahead of schedule, and on or under
budget,” said John K. Welch, USEC president and chief executive officer.
“These activities reduced the technical risks and improved the future
prospects for deployment of the American Centrifuge technology.
“On May 1, we signed an agreement with Oak Ridge National Laboratory
(ORNL) to continue cascade operations in Piketon, Ohio and core American
Centrifuge research and technology activities through the end of the
federal fiscal year, September 30, 2014,” Welch said. “Under the
American Centrifuge Technology Demonstration and Operations Agreement,
or ACTDO Agreement, USEC is maintaining the American Centrifuge
technology capability as a subcontractor to ORNL. The agreement calls
for fixed-cost funding of approximately $33.7 million for the remainder
of this fiscal year, with an option for two, six-month extensions.
“ORNL has been involved with America’s centrifuge technology for many
years, and the new agreement builds on our cooperative research and
development relationship. Our goal is to preserve a reliable and
economic domestic uranium enrichment capability for national security
while laying the groundwork for future private sector deployment for
commercial purposes,” Welch concluded.
Revenue
Revenue for the first quarter of 2014 was $148.6 million, a decrease of
$171.8 million or 54 percent compared to the same quarter of 2013. The
volume of SWU sales decreased 49 percent in the quarter reflecting the
variability in timing of utility customer orders and the expected
decline in SWU deliveries in 2014 compared to 2013. The average price
billed to customers for sales of SWU declined 4 percent reflecting the
mix of the particular contracts under which SWU were sold during the
periods.
Cost of Sales and Gross Profit Margin
Cost of sales for the quarter ended March 31, 2014, was $169.5 million,
a decrease of $137.6 million or 45 percent, compared to the
corresponding period in 2013 due to lower SWU sales volume, partially
offset by higher non-production expenses.
Cost of sales per SWU, excluding non-production expenses, declined 6
percent in the three months ended March 31, 2014, compared to the
corresponding period in 2013. Approximately two-thirds of our sales in
the first quarter of 2014 were derived from previously deferred sales,
whereby customers made advance payments to be applied against future
deliveries. The unit cost per SWU for these sales reflects the average
inventory cost when the customer took title to the SWU. These costs were
accumulated in deferred costs and are now recognized as cost of sales as
the SWU is delivered. Cost of sales for SWU reflects monthly moving
average inventory costs based on historic production and purchase costs.
As we accelerated the expected productive life of plant assets and
ceased enrichment at the Paducah GDP in May 2013, we have incurred a
number of expenses unrelated to production that have been charged
directly to cost of sales. Non-production expenses totaled $34.9 million
in the three months ended March 31, 2014, and $5.8 million in the
corresponding period in 2013.
Gross profit declined $34.2 million in the three months ended March 31,
2014, compared to the corresponding period in 2013. Our margin was (14.1
percent) in the three months ended March 31, 2014 compared to 4.2
percent in the corresponding period in 2013, primarily due to increases
in non-production expenses and lower SWU sales volume discussed above.
Advanced Technology, Special Charges and Other Income
Advanced technology costs were $33.3 million in the three months ended
March 31, 2014, a decrease of $26.0 million compared to the
corresponding period in 2013, reflecting a decrease in development
activity under the Cooperative Agreement. Costs in the corresponding
period in 2013 included construction of our American Centrifuge
commercial demonstration cascade, which was completed in April 2013.
DOE and USEC provided cost-sharing support for American Centrifuge
activities under the Cooperative Agreement that expired April 30, 2014.
DOE’s share of 80 percent of qualifying American Centrifuge expenditures
is recognized as other income. USEC reported $26.2 million in other
income during the first quarter, which was primarily payment for DOE’s
share of qualifying expenditures.
Selling, general and administrative expenses in the first quarter were
$11.7 million, a decrease of $1.2 million over the same period in 2013,
reflecting a decrease in salaries and other compensation costs resulting
from reduced staffing levels.
Beginning in the first quarter of 2014, expenses, gains and losses
directly associated with our reorganization are reported as
Reorganization Items, Net. Costs for advisors related to our bankruptcy
filing totaled $7.2 million in three months ended March 31, 2014. For
debt that is subject to compromise, associated deferred financing costs
are expensed so that the net carrying amount of the debt equals the
amount of the allowed claim. Previously deferred financing costs of $1.2
million related to our convertible senior notes were expensed in three
months ended March 31, 2014.
On March 15, 2013, USEC sold its NAC subsidiary to a subsidiary of
Hitachi Zosen Corporation. Results of NAC operations through the date of
divestiture, including our gain on the sale of $35.6 million, are
presented under net income from discontinued operations for the three
months ended March 31, 2013.
Cash Flow
At March 31, 2014, USEC had a cash balance of $85.1 million compared to
$314.2 million at December 31, 2013, and $71.9 million at March 31,
2013. Cash flow used by operations in the first quarter of 2014 was
$229.7 million, compared to cash flow used by operations of $175.3
million in the previous year’s period. Inventories declined $53.6
million in the three-month period due to monetization of inventory
purchased or produced in prior periods. Payment of the Russian Contract
payables balance of $340.7 million for deliveries in prior periods was a
significant use of cash flow in the three months ended March 31, 2014.
2014 Outlook Update
USEC is going through a period of transition during 2014 and we are:
-
Taking steps to strengthen our financial structure by addressing
balance sheet issues through a Chapter 11 filing with the U.S.
Bankruptcy Court so that we can emerge as a stronger sponsor of the
American Centrifuge project;
-
Completing the Cooperative Agreement and any transition activities,
and beginning work under the ACTDO Agreement; and
-
Preparing for the transition of the Paducah site, and appropriately
reducing the size of our corporate organization.
Given the uncertainties of these transitions and the uncertain and
incremental nature of federal funding for work under the ACTDO
Agreement, our guidance for USEC financial results and metrics for 2014
will be limited.
Our ability to continue as a going concern is contingent upon the
bankruptcy court’s approval of our proposed reorganization plan and our
ability to successfully implement the proposed reorganization plan,
among other factors. As a result of the bankruptcy filing, the
realization of assets and the satisfaction of liabilities are subject to
uncertainty. While operating as a debtor-in-possession under Chapter 11,
USEC Inc. may sell or otherwise dispose of or liquidate assets or settle
liabilities, subject to the approval of the bankruptcy court or as
otherwise permitted in the ordinary course of business (and subject to
restrictions contained in the Debtor-In-Possession Credit Facility
provided by United States Enrichment Corporation, USEC Inc.’s
subsidiary) for amounts other than those reflected in the accompanying
consolidated condensed financial statements. Further, our reorganization
could materially change the amounts and classifications of assets and
liabilities reported in the consolidated condensed financial statements.
In 2013, uranium enrichment ceased at the Paducah plant and the 20-year
Megatons to Megawatts program successfully concluded. During a five-year
period from 2008 to 2012, our average sales volume was approximately 11
million SWU annually. In 2013, our sales volume declined to a level that
was approximately 70 percent from that average. In 2014, we expect our
sales volume to decline to a level that is approximately 30 percent of
that historic average with our sources of supply consisting of LEU from
existing inventory, purchases from Russia under the Russian Supply
Agreement and potential other suppliers. We expect our sales volume
going forward to be at levels consistent with our reduced sources of
supply.
Additional Information
USEC plans to file its quarterly report on Form 10-Q with the Securities
and Exchange Commission today. This report will be available in the
Investor Relations section of the USEC website, www.usec.com.
During the period its case is pending in Bankruptcy Court, USEC will not
hold quarterly telephonic conference calls with investors.
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” within the
meaning of Section 21E of the Securities Exchange Act of 1934 - that is,
statements related to future events. In this context, forward-looking
statements may address our expected future business and financial
performance, and often contain words such as “expects”, “anticipates”,
“intends”, “plans”, “believes”, “will” 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 USEC Inc.'s
“pre-arranged” case under Chapter 11 of the bankruptcy code including
risks related to obtaining approval and confirmation of USEC Inc.’s plan
of reorganization, the impact of any delay or inability in obtaining
such confirmation, the impact of a potential de-listing of our common
stock on the NYSE, and the impact of our restructuring on the holders of
our common stock, preferred stock and convertible notes; risks related
to the ongoing transition of our business, including the impact of our
ceasing enrichment at the Paducah gaseous diffusion plant and
uncertainty regarding our ability to deploy the American Centrifuge
project; uncertainty regarding funding for the American Centrifuge
project and the potential for a demobilization or termination of the
American Centrifuge project if additional government funding is not
provided during the term of the agreement with UT-Battelle, LLC, the
management and operating contractor for the Oak Ridge National
Laboratory ("ORNL") for continued research, development and
demonstration of the American Centrifuge technology (the "ACTDO
Agreement"), including for any option periods, or upon completion of
such agreement; risks related to our ability to perform the work
required under the ACTDO Agreement at a cost that does not exceed the
firm fixed funding provided thereunder; the impact of actions we have
taken or may take (including as a result of the reduction in scope of
work under the ACTDO Agreement) to reduce spending on the American
Centrifuge project, including the potential loss of key suppliers and
employees, impacts to cost and schedule and the ability to remobilize
for commercial deployment of the American Centrifuge plant, impacts on
our liquidity as a result of demobilization or termination liabilities,
and potential impacts on our proposed plan of reorganization; risks
related to the underfunding of our defined benefit pension plans and
potential actions the Pension Benefit Guarantee Corporation could pursue
in connection with ceasing enrichment at the gaseous diffusion plants or
with any demobilization or termination of the American Centrifuge
project; the impact of uncertainty regarding our ability to continue as
a going concern on our liquidity and prospects; our ability to reach an
agreement with the U.S. Department of Energy (“DOE”) regarding the
transition of the Paducah gaseous diffusion plant and uncertainties
regarding the transition costs and other impacts of USEC ceasing
enrichment at the Paducah gaseous diffusion plant and returning the
plant to DOE; the continued impact of the March 2011 earthquake and
tsunami in Japan on the nuclear industry and on our business, results of
operations and prospects; the impact and potential extended duration of
the current supply/demand imbalance in the market for low enriched
uranium (“LEU”); the impact of enrichment market conditions, increased
project costs and other factors on the economic viability of the
American Centrifuge project without additional government support and on
our ability to finance the project and the potential for a
demobilization or termination of the project; uncertainty concerning the
ultimate success of our efforts to obtain a loan guarantee from DOE
and/or other financing for the American Centrifuge project or additional
government support for the project and the timing and terms thereof; the
dependency of government funding or other government support for the
American Centrifuge project on Congressional appropriations or on
actions by DOE or Congress; potential changes in our anticipated
ownership of or role in the American Centrifuge project, including as a
result of our role as a subcontractor to ORNL or as a result of the need
to raise additional capital to finance the project in the future; the
potential for DOE to seek to terminate or exercise its remedies under
the 2002 DOE-USEC agreement; changes in U.S. government priorities and
the availability of government funding or support, including loan
guarantees; risks related to our ability to manage our liquidity without
a credit facility; our dependence on deliveries of LEU from Russia under
a commercial supply agreement (the “Russian Supply Agreement”) with a
Russian government entity known as Techsnabexport (“TENEX”) and
limitations on our ability to import the Russian LEU we buy under the
Russian Supply Agreement into the United States and other countries;
risks related to actions that may be taken by the U.S. Government, the
Russian Government or other governments that could affect our ability or
the ability of TENEX to perform the Russian Supply Agreement, including
the imposition of sanctions, restrictions or other requirements; risks
related to our ability to sell the LEU we procure under our fixed
purchase obligations under the Russian Supply Agreement; the decrease or
elimination of duties charged on imports of foreign-produced LEU;
pricing trends and demand in the uranium and enrichment markets and
their impact on our profitability; movement and timing of customer
orders; changes to, or termination of, our agreements with the U.S.
government; risks related to delays in payment for our contract services
work performed for DOE, including our ability to resolve certified
claims for payment filed by USEC under the Contracts Dispute Act; the
impact of government regulation by DOE and the U.S. Nuclear Regulatory
Commission; 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 business, liquidity, prospects, pension assets and
credit and insurance facilities; the timing of recognition of previously
deferred revenue; and other risks and uncertainties discussed in our
filings with the Securities and Exchange Commission, including our
Annual Report on Form 10-K for the year ended December 31, 2013 , and
quarterly reports on Form 10-Q, which are available at www.usec.com.
Revenue and operating results can fluctuate significantly from quarter
to quarter, and in some cases, year to year. Readers are urged to
carefully review and consider the various disclosures made in this
report and in our other filings with the Securities and Exchange
Commission that attempt to advise interested parties of the risks and
factors that may affect our business. We do not undertake to update our
forward-looking statements except as required by law.
|
|
|
|
|
USEC Inc.
|
|
(DEBTOR-IN-POSSESSION)
|
|
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
|
|
(Unaudited)
|
|
(millions, except per share data)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
2013
|
|
Revenue:
|
|
|
|
|
|
Separative work units
|
|
$
|
145.6
|
|
|
$
|
290.2
|
|
|
Uranium
|
|
|
—
|
|
|
|
27.6
|
|
|
Contract services
|
|
|
3.0
|
|
|
|
2.6
|
|
|
Total revenue
|
|
|
148.6
|
|
|
|
320.4
|
|
|
Cost of Sales:
|
|
|
|
|
|
Separative work units and uranium
|
|
|
165.3
|
|
|
|
303.8
|
|
|
Contract services
|
|
|
4.2
|
|
|
|
3.3
|
|
|
Total cost of sales
|
|
|
169.5
|
|
|
|
307.1
|
|
|
Gross profit (loss)
|
|
|
(20.9
|
)
|
|
|
13.3
|
|
|
Advanced technology costs
|
|
|
33.3
|
|
|
|
59.3
|
|
|
Selling, general and administrative
|
|
|
11.7
|
|
|
|
12.9
|
|
|
Special charges (credit) for workforce reductions and advisory costs
|
|
|
(0.5
|
)
|
|
|
2.4
|
|
|
Other (income)
|
|
|
(26.2
|
)
|
|
|
(47.6
|
)
|
|
Operating (loss)
|
|
|
(39.2
|
)
|
|
|
(13.7
|
)
|
|
Interest expense
|
|
|
4.6
|
|
|
|
13.3
|
|
|
Interest (income)
|
|
|
(0.4
|
)
|
|
|
(0.3
|
)
|
|
Reorganization items, net
|
|
|
8.4
|
|
|
|
—
|
|
|
(Loss) from continuing operations before income taxes
|
|
|
(51.8
|
)
|
|
|
(26.7
|
)
|
|
Provision (benefit) for income taxes
|
|
|
(1.0
|
)
|
|
|
(3.0
|
)
|
|
Net (loss) from continuing operations
|
|
|
(50.8
|
)
|
|
|
(23.7
|
)
|
|
Net income from discontinued operations
|
|
|
—
|
|
|
|
21.7
|
|
|
Net (loss)
|
|
$
|
(50.8
|
)
|
|
$
|
(2.0
|
)
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
Net (loss) from continuing operations per share – basic and diluted
|
|
$
|
(10.37
|
)
|
|
$
|
(4.84
|
)
|
|
Net (loss) per share – basic and diluted
|
|
$
|
(10.37
|
)
|
|
$
|
(0.41
|
)
|
|
Weighted-average number of shares outstanding – basic and diluted
|
|
|
4.9
|
|
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USEC Inc.
|
|
(DEBTOR-IN-POSSESSION)
|
|
CONSOLIDATED CONDENSED BALANCE SHEETS
|
|
(Unaudited)
|
|
(millions)
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
2014
|
|
2013
|
|
ASSETS
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
85.1
|
|
|
$
|
314.2
|
|
|
Accounts receivable, net
|
|
|
38.0
|
|
|
|
163.0
|
|
|
Inventories
|
|
|
571.7
|
|
|
|
967.6
|
|
|
Deferred costs associated with deferred revenue
|
|
|
80.9
|
|
|
|
165.5
|
|
|
Other current assets
|
|
|
20.0
|
|
|
|
21.7
|
|
|
Total current assets
|
|
|
795.7
|
|
|
|
1,632.0
|
|
|
Property, plant and equipment, net
|
|
|
5.2
|
|
|
|
7.9
|
|
|
Deposits for surety bonds
|
|
|
39.2
|
|
|
|
39.8
|
|
|
Other long-term assets
|
|
|
25.8
|
|
|
|
25.8
|
|
|
Total Assets
|
|
$
|
865.9
|
|
|
$
|
1,705.5
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
94.3
|
|
|
$
|
114.5
|
|
|
Payables under Russian Contract
|
|
|
—
|
|
|
|
340.7
|
|
|
Inventories owed to customers and suppliers
|
|
|
157.4
|
|
|
|
499.7
|
|
|
Deferred revenue
|
|
|
105.6
|
|
|
|
195.9
|
|
|
Convertible senior notes
|
|
|
—
|
|
|
|
530.0
|
|
|
Convertible preferred stock
|
|
|
—
|
|
|
|
113.9
|
|
|
Total current liabilities
|
|
|
357.3
|
|
|
|
1,794.7
|
|
|
Postretirement health and life benefit obligations
|
|
|
198.0
|
|
|
|
195.0
|
|
|
Pension benefit liabilities
|
|
|
113.8
|
|
|
|
121.2
|
|
|
Other long-term liabilities
|
|
|
51.7
|
|
|
|
52.8
|
|
|
Liabilities subject to compromise
|
|
|
653.6
|
|
|
|
—
|
|
|
Total Liabilities
|
|
|
1,374.4
|
|
|
|
2,163.7
|
|
|
Stockholders’ Equity (Deficit)
|
|
|
(508.5
|
)
|
|
|
(458.2
|
)
|
|
Total Liabilities and Stockholders’ Equity (Deficit)
|
|
$
|
865.9
|
|
|
$
|
1,705.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USEC Inc.
|
|
(DEBTOR-IN-POSSESSION)
|
|
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
(millions)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
2013
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
Net (loss)
|
|
$
|
(50.8
|
)
|
|
$
|
(2.0
|
)
|
|
Adjustments to reconcile net (loss) to net cash (used in) operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2.8
|
|
|
|
9.4
|
|
|
Reorganization items, non-cash
|
|
|
1.6
|
|
|
|
—
|
|
|
Deferred income taxes
|
|
|
—
|
|
|
|
(2.6
|
)
|
|
Convertible preferred stock dividends payable-in-kind
|
|
|
—
|
|
|
|
3.2
|
|
|
Gain on sale of subsidiary
|
|
|
—
|
|
|
|
(35.6
|
)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable – (increase) decrease
|
|
|
125.0
|
|
|
|
(15.1
|
)
|
|
Inventories, net – decrease
|
|
|
53.6
|
|
|
|
57.1
|
|
|
Payables under Russian Contract – (decrease)
|
|
|
(340.7
|
)
|
|
|
(209.8
|
)
|
|
Deferred revenue, net of deferred costs – increase (decrease)
|
|
|
(5.7
|
)
|
|
|
41.9
|
|
|
Accounts payable and other liabilities – (decrease)
|
|
|
(16.3
|
)
|
|
|
(3.4
|
)
|
|
Restricted cash – (increase)
|
|
|
—
|
|
|
|
(15.1
|
)
|
|
Other, net
|
|
|
0.8
|
|
|
|
(3.3
|
)
|
|
Net Cash (Used in) Operating Activities
|
|
|
(229.7
|
)
|
|
|
(175.3
|
)
|
|
|
|
|
|
|
|
Cash Flows Provided by Investing Activities
|
|
|
|
|
|
Deposits for surety bonds - net (increase) decrease
|
|
|
0.6
|
|
|
|
(0.3
|
)
|
|
Proceeds from sale of subsidiary
|
|
|
—
|
|
|
|
39.9
|
|
|
Net Cash Provided by Investing Activities
|
|
|
0.6
|
|
|
|
39.6
|
|
|
|
|
|
|
|
|
Cash Flows Used in Financing Activities
|
|
|
|
|
|
Repayment of credit facility term loan
|
|
|
—
|
|
|
|
(83.2
|
)
|
|
Payments for deferred financing costs
|
|
|
—
|
|
|
|
(2.0
|
)
|
|
Common stock issued (purchased), net
|
|
|
—
|
|
|
|
(0.1
|
)
|
|
Net Cash (Used in) Financing Activities
|
|
|
—
|
|
|
|
(85.3
|
)
|
|
Net (Decrease)
|
|
|
(229.1
|
)
|
|
|
(221.0
|
)
|
|
Cash and Cash Equivalents at Beginning of Period
|
|
|
314.2
|
|
|
|
292.9
|
|
|
Cash and Cash Equivalents at End of Period
|
|
$
|
85.1
|
|
|
$
|
71.9
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
Interest paid
|
|
$
|
—
|
|
|
$
|
3.2
|
|
|
Income taxes paid, net of refunds
|
|
|
—
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
Source: USEC Inc.
USEC Inc.
Investors:
Steven Wingfield, 301-564-3354
or
Media:
Paul
Jacobson, 301-564-3399
