BETHESDA, Md., Nov. 7, 2019 /PRNewswire/ -- Centrus Energy
Corp. (NYSE American: LEU) today reported net income of
$22.8 million for the quarter ended
September 30, 2019, compared to a net
loss of $7.8 million for the third
quarter of 2018. The net income allocable to common stockholders
was $20.9 million, or $2.18 per common share (basic) and $2.17 per common share (diluted), compared to a
net loss allocable to common stockholders of $9.7 million or $1.06 per common share (basic and diluted), for
the third quarter of 2018.
"This quarter we posted positive income results and repaid the
outstanding balance on our remaining 8.0% notes," said Daniel Poneman, Centrus president and chief
executive officer. "We also completed D&D work on DOE's K-1600
facility in Oak Ridge on time and on budget and finalized our
three-year, $115 million contract
with DOE to demonstrate production of advanced reactor fuel."
Financial Results
Centrus generated total revenue of $104.7
million for the third quarter of 2019, an increase of
$70.6 million, or 207%, from the same
period in the prior year. For the nine-month period ended
September 30, 2019, revenue was
$154.0 million, an increase of
$44.8 million or 41%, from the same
period in 2018.
Revenue from the LEU segment increased $58.9 million (or 204%) in the three months and
$42.4 million (or 51%) in the nine
months ended September 30, 2019,
compared to the corresponding periods in 2018, reflecting the
variability in timing of utility customer orders. As noted in the
2019 Outlook below and consistent with prior years, revenue
is anticipated to be heavily weighted to the second half of the
year. The volume of SWU sales increased 752% in the three-month
period and 41% in the nine-month period. The average price billed
to customers for sales of SWU declined 50% in the three-month
period and 9% in the nine-month period ended September 30, 2019, compared to the corresponding
periods in 2018, reflecting the trend of lower SWU market prices in
recent years and the particular contracts under which SWU were sold
during the periods. The volume of uranium sales increased 15% in
the three-month period and 137% in the nine-month period ended
September 30, 2019, compared to the
corresponding periods in 2018. The average price billed to
customers for uranium sales declined 2% in the three-month period
and increased 8% in the nine-month period.
Cost of sales for the LEU segment increased $33.5 million (or 160%) in the three months and
$1.8 million (or 2%) in the nine
months ended September 30, 2019,
compared to the corresponding periods in 2018, reflecting the
increases in SWU and uranium sales volumes partially offset by
declines in the average cost of sales per SWU. The average cost of
sales per SWU declined approximately 48% in the nine months ended
September 30, 2019, compared to the
corresponding period in 2018, primarily due to lower pricing in
supply contracts. Cost of sales includes legacy costs related to
benefits for former employees of the Portsmouth and Paducah Gaseous
Diffusion Plants of $2.8 million in
the nine months ended September 30,
2019 and $2.9 million in the
nine months ended September 30,
2018.
Revenue from the contract services segment increased
$11.7 million (or 225%) in the three
months and increased $2.4 million (or
9%) in the nine months ended September 30,
2019, compared to the corresponding periods in 2018. The
increase in the three and nine-month periods was primarily the
result of work performed under the HALEU contract and the K-1600
D&D, partially offset by a decrease in work performed for the
Battelle contract. The nine-month period in 2018 included
$9.5 million of revenue related to
the January 2018 settlement with DOE
related to past work performed.
Cost of sales for the contract services segment increased
$9.4 million (or 174%) in the three
months and $9.1 million (or 48%) in
the nine months ended September 30,
2019, compared to the corresponding periods in 2018,
reflecting the mix of contract services work performed in each of
the periods.
Centrus realized a gross profit of $35.5
million in the three months ended September 30, 2019, an increase of $27.7 million compared to the gross profit of
$7.8 million in the corresponding
period in 2018. In the nine months ended September 30, 2019, the Company realized a gross
profit of $25.7 million, an increase
of $33.9 million compared to the
gross loss of $8.2 million in the
corresponding period in 2018.
2019 Outlook
Centrus reiterates its annual guidance for 2019, including SWU
and uranium revenue in the range of $155
million to $180 million and
total revenue to be in a range of $205
million to $230 million.
Consistent with prior years, revenue continues to be most heavily
weighted to the second half of the year. The Company continues to
expect to end 2019 with a cash and cash equivalents balance in a
range of $105 million to $125 million.
Based on cost estimates that are currently under review for the
three-year HALEU program, Centrus expects to recognize a contract
loss in the fourth quarter of 2019 in the approximate range of
$17-22 million. For further details,
refer to the Company's Press Release dated November 5, 2019.
Our financial guidance is subject to a number of assumptions and
uncertainties that could affect results either positively or
negatively. Variations from our expectations could cause
differences between our guidance and our ultimate results. Among
the factors that could affect our results are:
- Additional purchases or sales of SWU and uranium;
- Conditions in the LEU and energy markets, including pricing,
demand, operations, and regulations;
- Timing of customer orders, related deliveries, and purchases of
LEU or components;
- Contracts for any additional scope of work with
UT-Battelle;
- Financial market conditions and other factors that may affect
pension and benefit liabilities and the value of related
assets;
- The outcome of legal proceedings and other contingencies;
- Potential use of cash for strategic or financial
initiatives;
- Actions taken by customers, including actions that might affect
existing contracts; and,
- Market, international trade and other conditions impacting
Centrus' customers and the industry.
About Centrus Energy Corp.
Centrus is a trusted supplier of nuclear fuel and services for
the nuclear power industry. Centrus provides value to its utility
customers through the reliability and diversity of its supply
sources – helping them meet the growing need for clean, affordable,
carbon-free electricity. Since 1998, the Company has provided its
utility customers with more than 1,750 reactor years of fuel, which
is equivalent to 7 billion tons of coal.
With world-class technical capabilities, Centrus offers turnkey
engineering and advanced manufacturing solutions to its customers.
The Company is also advancing the next generation of centrifuge
technologies so that America can restore its domestic uranium
enrichment capability in the future. Find out more at
www.centrusenergy.com.
Forward-Looking Statements
This news release contains "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934 -
that is, statements related to future events. In this context,
forward-looking statements may address our expected future business
and financial performance, and often contain words such as
"expects", "anticipates", "intends", "plans", "believes", "will",
"should", "could", "would" or "may" and other words of similar
meaning. Forward-looking statements by their nature address matters
that are, to different degrees, uncertain. For Centrus Energy
Corp., particular risks and uncertainties that could cause our
actual future results to differ materially from those expressed in
our forward-looking statements include: risks related to our
significant long-term liabilities, including material unfunded
defined benefit pension plan obligations and postretirement health
and life benefit obligations; risks relating to our 8.25% notes
(the "8.25% Notes") maturing in February
2027 and our Series B Senior Preferred Stock; risks related
to the use of our net operating loss ("NOLs") carryforwards and net
unrealized built-in losses ("NUBILs") to offset future taxable
income and the use of the Rights Agreement (as defined herein) to
prevent an "ownership change" as defined in Section 382 of the
Internal Revenue Code of 1986, as amended (the "Code") and our
ability to generate taxable income to utilize all or a portion of
the NOLs and NUBILs prior to the expiration thereof; risks related
to the limited trading markets in our securities; risks related to
our ability to maintain the listing of our Class A Common Stock on
the NYSE American LLC (the "NYSE American"); risks related to
decisions made by our Class B stockholders regarding their
investment in the Company based upon factors that are unrelated to
the Company's performance; risks related to the Company's capital
concentration; 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"); our dependence on
others for deliveries of LEU including deliveries from the Russian
government-owned entity TENEX, Joint-Stock Company ("TENEX"), under
a commercial supply agreement with TENEX and deliveries under a
long-term supply agreement with Orano Cycle ("Orano"); risks
related to our ability to sell the LEU we procure pursuant to our
purchase obligations under our supply agreements; risks relating to
our sales order book, including uncertainty concerning customer
actions under current contracts and in future contracting due to
market conditions and lack of current production capability; risks
related to financial difficulties experienced by customers,
including possible bankruptcies, insolvencies or any other
inability to pay for our products or services; pricing trends and
demand in the uranium and enrichment markets and their impact on
our profitability; movement and timing of customer orders; risks
related to the value of our intangible assets related to the sales
order book and customer relationships; risks associated with our
reliance on third-party suppliers to provide essential products and
services to us; risks related to existing or new trade barriers and
contract terms that limit our ability to deliver LEU to customers;
risks related to actions, including government reviews, that may be
taken by the U.S. government, the Russian government or other
governments that could affect our ability to perform under our
contract obligations or the ability of our sources of supply to
perform under their contract obligations to us, including the
imposition of sanctions, restrictions or other requirements; the
impact of government regulation including by the U.S. Department of
Energy ("DOE") and the U.S. Nuclear Regulatory Commission;
uncertainty regarding our ability to commercially deploy
competitive enrichment technology; risks and uncertainties
regarding funding for the American Centrifuge project and our
ability to perform under our agreement with DOE to
demonstrate the capability to produce high assay low enriched
uranium ("HALEU") and our ability to obtain and/or perform under
our future agreements with the DOE, UT-Battelle, LLC
("UT-Battelle"), the management and operating contractor for Oak
Ridge National Laboratory ("ORNL"), for continued research and
development of the American Centrifuge technology; the potential
for further demobilization or termination of our American
Centrifuge work; risks related to our ability to perform and
receive timely payment under agreements with the DOE, including
risk and uncertainties related to the ongoing funding of the
government and potential audits; the competitive bidding process
associated with obtaining a federal contract; risks related to our
ability to perform fixed-price contracts, including the risk that
costs could be higher than expected; risks that we will be unable
to obtain new business opportunities, achieve market acceptance of
our products and services or that products or services provided by
others will render our goods or services obsolete or
noncompetitive; risks that we will not be able to timely complete
the work that we are obligated to perform; failures or security
breaches of our information technology systems; potential strategic
transactions, which could be difficult to implement, disrupt our
business or change our business profile significantly; the outcome
of legal proceedings and other contingencies (including lawsuits
and government investigations or audits); the competitive
environment for our products and services; changes in the nuclear
energy industry; the impact of financial market conditions on our
business, liquidity, prospects, pension assets and insurance
facilities; risks related to the identification of a material
weakness in our internal controls over financial reporting; the
risks of revenue and operating results fluctuating significantly
from quarter to quarter, and in some cases, year to year; and other
risks and uncertainties discussed in this and our other filings
with the Securities and Exchange Commission, including under Part
1. Item1A - "Risk Factors" in our Annual Report on Form 10-K for
the year ended December 31, 2018.
These factors may not constitute all factors that could cause
actual results to differ from those discussed in any
forward-looking statement. Accordingly, forward-looking statements
should be not be relied upon as a predictor of actual results.
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 to reflect events or circumstances that may arise after
the date of this Quarterly Report on Form 10-Q, except as required
by law.
Contact
Investors: Dan Leistikow (301)
564-3399
Media: Lindsey Geisler (301)
564-3392 or GeislerLR@centrusenergy.com
CENTRUS ENERGY
CORP
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited; in millions, except
share and per share data)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenue:
|
|
|
|
|
|
|
|
Separative work
units
|
$
|
75.0
|
|
|
$
|
17.6
|
|
|
$
|
87.4
|
|
|
$
|
68.2
|
|
Uranium
|
12.8
|
|
|
11.3
|
|
|
38.1
|
|
|
14.9
|
|
Contract
services
|
16.9
|
|
|
5.2
|
|
|
28.5
|
|
|
26.1
|
|
Total
revenue
|
104.7
|
|
|
34.1
|
|
|
154.0
|
|
|
109.2
|
|
Cost of
Sales:
|
|
|
|
|
|
|
|
Separative work units
and uranium
|
54.4
|
|
|
20.9
|
|
|
100.4
|
|
|
98.6
|
|
Contract
services
|
14.8
|
|
|
5.4
|
|
|
27.9
|
|
|
18.8
|
|
Total cost of
sales
|
69.2
|
|
|
26.3
|
|
|
128.3
|
|
|
117.4
|
|
Gross profit
(loss)
|
35.5
|
|
|
7.8
|
|
|
25.7
|
|
|
(8.2)
|
|
Advanced technology
costs
|
1.3
|
|
|
5.8
|
|
|
13.0
|
|
|
19.2
|
|
Selling, general and
administrative
|
8.7
|
|
|
8.8
|
|
|
24.5
|
|
|
29.7
|
|
Amortization of
intangible assets
|
1.8
|
|
|
1.7
|
|
|
4.1
|
|
|
4.5
|
|
Special charges
(credits) for workforce reductions and advisory costs
|
0.8
|
|
|
0.6
|
|
|
(2.2)
|
|
|
1.5
|
|
Gain on sales of
assets
|
(0.2)
|
|
|
—
|
|
|
(0.7)
|
|
|
(0.3)
|
|
Operating income
(loss)
|
23.1
|
|
|
(9.1)
|
|
|
(13.0)
|
|
|
(62.8)
|
|
Nonoperating
components of net periodic benefit expense (income)
|
(0.1)
|
|
|
(1.6)
|
|
|
(0.2)
|
|
|
(4.9)
|
|
Interest
expense
|
0.9
|
|
|
1.0
|
|
|
2.9
|
|
|
3.0
|
|
Investment
income
|
(0.5)
|
|
|
(0.7)
|
|
|
(1.9)
|
|
|
(1.9)
|
|
Income (loss) before
income taxes
|
22.8
|
|
|
(7.8)
|
|
|
(13.8)
|
|
|
(59.0)
|
|
Income tax
benefit
|
—
|
|
|
—
|
|
|
(0.1)
|
|
|
(0.1)
|
|
Net income (loss)
and comprehensive income (loss)
|
22.8
|
|
|
(7.8)
|
|
|
(13.7)
|
|
|
(58.9)
|
|
Preferred stock
dividends - undeclared and cumulative
|
1.9
|
|
|
1.9
|
|
|
5.9
|
|
|
5.9
|
|
Net income (loss)
allocable to common stockholders
|
$
|
20.9
|
|
|
$
|
(9.7)
|
|
|
$
|
(19.6)
|
|
|
$
|
(64.8)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share:
|
|
|
|
|
|
|
|
Basic
|
$
|
2.18
|
|
|
$
|
(1.06)
|
|
|
$
|
(2.05)
|
|
|
$
|
(7.11)
|
|
Diluted
|
$
|
2.17
|
|
|
$
|
(1.06)
|
|
|
$
|
(2.05)
|
|
|
$
|
(7.11)
|
|
Average number of
common shares outstanding (in thousands):
|
|
|
|
|
|
|
|
Basic
|
9,582
|
|
|
9,133
|
|
|
9,560
|
|
|
9,118
|
|
Diluted
|
9,626
|
|
|
9,133
|
|
|
9,560
|
|
|
9,118
|
|
CENTRUS ENERGY
CORP
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited; in
millions, except share and per share data)
|
|
|
September 30,
2019
|
|
December 31,
2018
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
77.2
|
|
|
$
|
123.1
|
|
Accounts
receivable
|
19.1
|
|
|
60.2
|
|
Inventories
|
105.2
|
|
|
129.7
|
|
Deferred costs
associated with deferred revenue
|
136.1
|
|
|
134.9
|
|
Deposits for
financial assurance
|
17.2
|
|
|
30.3
|
|
Other current
assets
|
8.3
|
|
|
6.3
|
|
Total current
assets
|
363.1
|
|
|
484.5
|
|
Property, plant and
equipment, net of accumulated depreciation of $2.1 as of September
30, 2019
and $1.6 as of December 31, 2018
|
3.8
|
|
|
4.2
|
|
Deposits for
financial assurance
|
5.7
|
|
|
6.3
|
|
Intangible assets,
net
|
71.9
|
|
|
76.0
|
|
Other long-term
assets
|
6.7
|
|
|
0.7
|
|
Total
assets
|
$
|
451.2
|
|
|
$
|
571.7
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
42.0
|
|
|
$
|
52.4
|
|
Payables under SWU
purchase agreements
|
13.0
|
|
|
46.0
|
|
Inventories owed to
customers and suppliers
|
36.9
|
|
|
103.0
|
|
Deferred revenue and
advances from customers
|
233.1
|
|
|
204.5
|
|
Current
debt
|
6.1
|
|
|
32.8
|
|
Total current
liabilities
|
331.1
|
|
|
438.7
|
|
Long-term
debt
|
114.1
|
|
|
120.2
|
|
Postretirement health
and life benefit obligations
|
130.3
|
|
|
136.2
|
|
Pension benefit
liabilities
|
159.0
|
|
|
168.9
|
|
Advances from
customers
|
29.4
|
|
|
15.0
|
|
Other long-term
liabilities
|
22.7
|
|
|
14.6
|
|
Total
liabilities
|
786.6
|
|
|
893.6
|
|
|
|
|
|
Stockholders'
deficit:
|
|
|
|
Preferred stock, par
value $1.00 per share, 20,000,000 shares authorized
|
|
|
|
Series A Participating
Cumulative Preferred Stock, none issued
|
—
|
|
|
—
|
|
Series B Senior
Preferred Stock, 7.5% cumulative, 104,574 shares issued and
outstanding and
an aggregate liquidation preference of $125.2 as of
September 30, 2019 and $119.3 as of
December 31, 2018
|
4.6
|
|
|
4.6
|
|
Class A Common Stock,
par value $0.10 per share, 70,000,000 shares authorized, 8,051,307
and
8,031,308 shares issued and outstanding as of September 30,
2019 and December 31, 2018,
respectively
|
0.8
|
|
|
0.8
|
|
Class B Common Stock,
par value $0.10 per share, 30,000,000 shares authorized,
1,406,082
shares issued and outstanding as of September 30, 2019 and
December 31, 2018
|
0.1
|
|
|
0.1
|
|
Excess of capital
over par value
|
61.4
|
|
|
61.2
|
|
Accumulated
deficit
|
(402.2)
|
|
|
(388.5)
|
|
Accumulated other
comprehensive income, net of tax
|
(0.1)
|
|
|
(0.1)
|
|
Total
stockholders' deficit
|
(335.4)
|
|
|
(321.9)
|
|
Total liabilities
and stockholders' deficit
|
$
|
451.2
|
|
|
$
|
571.7
|
|
CENTRUS ENERGY
CORP
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited; in
millions)
|
|
|
Nine Months
Ended
September 30,
|
|
2019
|
|
2018
|
Operating
Activities
|
|
|
|
Net loss
|
$
|
(13.7)
|
|
|
$
|
(58.9)
|
|
Adjustments to
reconcile net loss to cash used in operating activities:
|
|
|
|
Depreciation and
amortization
|
4.5
|
|
|
5.1
|
|
PIK interest on
paid-in-kind toggle notes
|
1.1
|
|
|
1.2
|
|
Gain on sales of
assets
|
(0.7)
|
|
|
(0.3)
|
|
Inventory valuation
adjustments
|
2.3
|
|
—
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
31.3
|
|
|
57.6
|
|
Inventories,
net
|
(9.3)
|
|
|
30.6
|
|
Payables under SWU
purchase agreements
|
(33.0)
|
|
|
(64.8)
|
|
Deferred revenue and
advances from customers, net of deferred costs
|
18.9
|
|
|
(16.7)
|
|
Accounts payable and
other liabilities
|
(11.2)
|
|
|
(10.3)
|
|
Pension and
postretirement liabilities
|
(15.9)
|
|
|
(21.4)
|
|
Other, net
|
(0.8)
|
|
|
0.2
|
|
Cash used in operating
activities
|
(26.5)
|
|
|
(77.7)
|
|
|
|
|
|
Investing
Activities
|
|
|
|
Capital
expenditures
|
—
|
|
|
(0.1)
|
|
Proceeds from sales
of assets
|
0.7
|
|
|
0.4
|
|
Cash provided by
investing activities
|
0.7
|
|
|
0.3
|
|
|
|
|
|
Financing
Activities
|
|
|
|
Principal payments on
debt
|
(27.5)
|
|
|
—
|
|
Payments for deferred
financing costs
|
(0.2)
|
|
|
—
|
|
Payment of interest
classified as debt
|
(6.1)
|
|
|
(6.1)
|
|
Cash used in financing
activities
|
(33.8)
|
|
|
(6.1)
|
|
|
|
|
|
Decrease in cash,
cash equivalents and restricted cash
|
(59.6)
|
|
|
(83.5)
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
159.7
|
|
|
244.8
|
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
100.1
|
|
|
$
|
161.3
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
Interest paid in
cash
|
$
|
1.5
|
|
|
$
|
0.8
|
|
Non-cash
activities:
|
|
|
|
Conversion of
interest payable-in-kind to debt
|
$
|
0.7
|
|
|
$
|
1.7
|
|
Deferred financing
costs included in accounts payable and accrued
liabilities
|
$
|
0.4
|
|
|
$
|
—
|
|
Right to use lease
assets acquired under operating lease
|
$
|
2.9
|
|
|
$
|
—
|
|
Disposal of right to
use lease assets for early termination
|
$
|
0.2
|
|
|
$
|
—
|
|
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SOURCE Centrus Energy Corp.