USEC Inc. Reports $11.7 Million Net Income for 2nd Quarter; Higher Uranium Prices Help Improve Gross Margin.BETHESDA Bethesda, city, United States Bethesda, uninc. city (1990 pop. 62,936), Montgomery co., W central Md., an affluent residential and commercial suburb of Washington, D.C. The area was settled in the late 17th cent. , Md. -- USEC USEC Microsecond USEC United States Enrichment Corporation USEC United States East Coast USEC Unity Security Force (gaming) USEC Universal Services Echo Canceller USEC Umts Security USEC User Based Security Model Inc. (NYSE NYSE See: New York Stock Exchange :USU USU Usually USU Utah State University (Logan, UT) USU Uniformed Services University USU Ural State University (Ekatherinburg, Russia) USU Universidade Santa Úrsula ) today reported financial results for the second quarter ended June June: see month. 30, 2004, of net income of $11.7 million or $.14 per share compared to net income of $4.3 million or $.05 per share in the same quarter last year. The gross margin improved quarter over quarter due to higher prices for natural uranium Natural uranium (NU) refers to refined uranium with the same [isotopic ratio] as found in nature. It contains 0.7 % uranium-235, 99.3 % uranium-238, and a trace of uranium-234 by weight. In terms of the amount of radioactivity, approximately 2.2 % comes from uranium-235, 48. sold. Quarterly earnings are higher than recent guidance due to the timing of additional uranium uranium (y  rā`nēəm), radioactive metallic chemical element; symbol U; at. no. 92; at. wt. 238.0289; m.p. 1,132°C;; b.p. 3,818°C;; sp. gr. 19. revenue recorded in the second quarter that
had previously been expected in the third quarter. This order movement
does not affect the Company's full-year earnings guidance of $14 to
$16 million net income, or 17 to 19 cents per share Cents per shareThe amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. . For the six months ended June 30, 2004, USEC reported net income of $0.5 million or $.01 per share compared to net income of $6.4 million or $.08 per share in the same period last year. USEC's customers generally place orders under their long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. contracts tied to reactor Reactor (electricity) A device for introducing an inductive reactance into a circuit. Inductive reactance x is a function of the product of frequency f and inductance L; thus, x = 2πfL. refuelings that occur on a 12- to 24-month cycle. Therefore, short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. comparisons of USEC's financials are not necessarily indicative of the Company's longer-term results. Additional natural uranium available for sale in 2004 is the result of underfeeding underfeeding see malnutrition, starvation. operations at the Paducah Paducah (pədy `kə, –d`–), city (1990 pop. 27,256), seat of McCracken co., SW Ky. enrichment enrichment Food industry The addition of vitamins or minerals to a food–eg, wheat, which may have been lost during processing. See White flour; Cf Whole grains. plant rather than
accelerating the drawdown DrawdownThe peak to trough decline during a specific record period of an investment or fund. It is usually quoted as the percentage between the peak to the trough. Notes: from USEC's uranium inventories. Underfeeding uses less uranium in the enrichment process but requires more Separative Work Units (SWU SWU Srinakharinwirot University (Thailand) SWU Star Wars Universe SWU Southwestern University (Cebu City, Philippines) SWU Showa Women's University (Tokyo, Japan) ), which requires more electric power. The value of the uranium exceeds the incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. power cost. "We operate the Paducah plant in a manner that optimizes the economic value of the two primary inputs of production - electricity and natural uranium. Accordingly, in today's market, we have the opportunity to sell additional natural uranium produced through underfeeding into a strong, attractively priced market," said William H. Timbers William Homer Timbers (September 5, 1915 - November 26, 1994) was a longtime federal judge in the United States. Timbers graduated from Dartmouth College and Yale Law School. , president and chief executive officer. "These sales also meet the needs of customers who have looked to us for natural uranium in what has been a volatile market. Improved uranium prices and the additional volume of uranium generated in our production process should improve the gross margin and boost net income for the year, in line with our updated earnings guidance," Timbers said. Revenue and Cost of Sales Revenue for the second quarter was $318.6 million, compared to $362.6 million for the same quarter a year ago. The volume of the SWU component of low-enriched uranium sold declined 27 percent compared to second quarter 2003, and the average SWU price billed to customers was about the same quarter over quarter. Uranium sales were $81 million, an increase of $29.3 million over the same quarter last year, reflecting higher volume and higher average prices. Revenue from U.S. government contracts was $1.2 million higher quarter over quarter, totaling $41.4 million. For the six-month period ended June 30, 2004, revenue was $498.6 million compared to $689.7 million in the same period of 2003 on 37 percent lower SWU volume. As previously disclosed, the lower revenue in the first half of 2004 reflects significantly lower SWU volume and prices as customers take delivery of enriched uranium Enriched uranium is a sample of uranium in which the percent composition of uranium-235 has been increased through the process of isotope separation. Natural uranium is 99.284% 238U isotope, with 235U only constituting about 0.711 % of its weight. under low-priced contracts signed during the late 1990s and shift volume and higher-priced deliveries to later in 2004. The volume of natural uranium sold declined by 2 percent in the six-month period but the average price billed to customers increased by 28 percent. The decline in SWU sales volume produced a corresponding reduction of $180.1 million or 34 percent in the cost of sales for SWU and uranium in the six-month period. The unit cost of SWU sales was 3 percent lower than in the same period of 2003, reflecting the impact of lower production and purchase costs in previous periods. Unit production costs per SWU were 3 percent higher in the six-month period due to lower production volumes compared with the corresponding period in 2003. Electric power costs were lower but labor and benefit costs increased compared to 2003, a period when labor costs were reduced by a strike at the Paducah plant. The Company's purchase costs per SWU increased 3 percent under a market-based formula with Tenex TENEX may refer to:
associated in some way with Russia. Russian blue a breed of cats with short, dense, silver-tipped blue-colored coat and vivid green eyes. government's executive agent, which reflects the impact of higher SWU prices since 2001. Under the average inventory cost method, coupled with USEC's inventory position, an increase or decrease in costs will have an effect on cost of sales in future periods. The gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. for the quarter was 17.4 percent compared to 11.5 percent in the same period last year, due to improved margins on natural uranium. For the full year, USEC expects its gross margin to be approximately 13 percent. Selling, general and administrative expenses totaled $15.9 million in the quarter, $1.1 million higher than in the same period last year due primarily to increased compensation and benefit costs, additional legal and consulting fees and higher insurance expense. American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Centrifuge centrifuge (sĕn`trəfy j), device using centrifugal force to separate two or more substances of different density, e.g., two liquids or a liquid and a solid. Progress ContinuesThe Company continues to make steady progress toward its goal of demonstrating the American Centrifuge uranium enrichment technology. USEC expects the American Centrifuge to be the world's most efficient enrichment technology when the commercial plant is deployed later this decade. Expenses during the quarter were $10.6 million, about the same as the second quarter last year. Spending on demonstration activities had the effect of reducing after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. income by approximately $7 million or $.08 per share during the quarter. Under a contract with the U.S. Department of Energy (DOE), USEC has begun refurbishing the portion of the building where the American Centrifuge Demonstration Facility will be operated. USEC is removing centrifuge machines remaining from the DOE centrifuge program of the early 1980s at the Piketon, Ohio Piketon is a village in Pike County, Ohio, United States, along the Scioto River. The village is best known for the uranium enrichment plant located there (one of only three such plants in the United States). The population was 1,907 at the 2000 census. facility. Approximately one-third of the 1,400 DOE-era machines have been removed, making room for USEC to refurbish re·fur·bish tr.v. re·fur·bished, re·fur·bish·ing, re·fur·bish·es To make clean, bright, or fresh again; renovate. re·fur the area. In June, USEC announced that it has teamed with Fluor Enterprises, a subsidiary of Fluor Corp., to provide engineering, procurement and construction  The introduction to this article is vague. To comply with Wikipedia's guidelines, it should be improved. management services for the American Centrifuge Plant.
Fluor's responsibilities include design and detailed engineering
over the next two years. USEC expects to agree on terms for a
fixed-price contract in 2006 with Fluor covering all major aspects of
building the commercial plant, apart from the centrifuge machines. In
August, USEC plans to apply for an operating license for the commercial
plant from the U.S. Nuclear Regulatory Commission Nuclear Regulatory Commission (NRC), an independent U.S. government commission, created by the Energy Reorganization Act of 1974 and charged with licensing and regulating civilian use of nuclear energy to protect the public and the environment. . The review of that
application is expected to take about two years.Cash Flow At June 30, 2004, USEC's cash balance was $32.4 million. Cash from SWU and uranium deliveries lag the sales by 30 to 60 days and are recorded as accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying . Cash flow from operating activities for the six-month period, as anticipated in the Company's guidance, was negative $190.6 million, compared to positive $23.1 million in the same period a year ago. The $213.7 million difference between the two periods was primarily due to increasing SWU inventory in preparation for fourth quarter sales. Inventory levels fluctuate based on timing of anticipated deliveries and seasonal production schedules. Other factors affecting cash flow included a $33.2 million payment to settle issues related to the termination of a power contract in 2003, higher income tax payment, and decreased SWU deliveries. The Company currently has no short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. but expects to temporarily borrow under its bank credit agreement in coming months, repaying the loan before year's end. As previously reported, net cash flow from operating activities is expected to return to positive levels in 2005. Outlook The Company projects revenue for the full year will be almost $1.4 billion. USEC expects about half of its revenue to come in the fourth quarter due to the timing of customer orders. Total revenue is basically unchanged from earlier guidance, but revenue from natural uranium sales is now expected to be $40 million higher at $210 million due to higher volume and prices. The additional natural uranium available for sale is the result of underfeeding operations at the Paducah plant. Revenue from SWU sales is expected to decline on lower volume due to movement of customer orders but will benefit from modestly higher average prices billed to customers than originally projected. The Company now expects the average price billed to customers in 2004 to be about the same as in 2003 as the average price billed to customers begins improving in the second half of the year. SWU volume in 2004 is being negatively affected by the postponed refuelings due to the shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down of a Japanese Japanese (jăp'ənēz`), language of uncertain origin that is spoken by more than 125 million people, most of whom live in Japan. There are also many speakers of Japanese in the Ryukyu Islands, Korea, Taiwan, parts of the United States, and customer's reactors for special inspections and lower customer commitments. Fourteen of the 17 Japanese reactors have since been returned to service. USEC expects to invest approximately $70 million in the American Centrifuge technology in 2004. Of this amount, approximately $50 million related to demonstration activities is being expensed, which will have the effect of reducing net income by about $30 million. Approximately $20 million related to the American Centrifuge Plant is being capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. in 2004. After the substantial investment in the American Centrifuge referenced above, USEC expects 2004 net income to be in a range of $14 to $16 million, or 17 to 19 cents per share. A small loss is anticipated in the third quarter followed by a strong fourth quarter. This is in line with the Company's typical cycle of stronger financial results in the second and fourth quarters. USEC also expects that cash flow from operating activities will be in a range of negative $95 to $105 million in 2004 and that capital expenditures will be approximately $35 million, including expenditures related to the American Centrifuge Plant. The Company anticipates ending the year with a cash balance in a range of $55 to $70 million, after the purchase of NAC See network access control. International, or about $15 million higher than earlier guidance. Other Business Matters --As announced on July July: see month. 29, USEC will purchase NAC International from Pinnacle pinnacle (pĭn`ĭkəl), minor architectural motif of vertical tapering shape, usually crowning a pier, buttress, or gable. Although sometimes it appears in Renaissance design, as in the Certosa di Pavia, it is almost exclusively a medieval West Capital Corporation. The acquisition will enable the Company to offer nuclear utility customers an expanded portfolio of products and services, including transportation and storage systems for spent nuclear fuel Spent nuclear fuel, occasionally called used nuclear fuel, is nuclear fuel that has been irradiated in a nuclear reactor (usually at a nuclear power plant) to the point where it is no longer useful in sustaining a nuclear reaction. . The $16 million cash transaction is expected to close later this year, subject to customary closing conditions. --As of June 30, 2004, USEC had processed and cleaned 4,552 metric tons (Transparent Optical Networking Services) A marketing term for providing dark fiber to a customer. The customer is responsible for generating the transmission signal and interpreting it at the other end. See dark fiber. of out-of-specification uranium contaminated contaminated, v 1. made radioactive by the addition of small quantities of radioactive material. 2. made contaminated by adding infective or radiographic materials. 3. an infective surface or object. with technetium technetium (tĕknē`shēəm) [Gr. technetos=artificial], artificially produced radioactive chemical element; symbol Tc; at. no. 43; mass no. of most stable isotope 98; m.p. 2,200°C;; b.p. 4,877°C;; sp. gr. 11. (Tc99), or 48 percent of the total. The remaining amount of uranium inventory to be replaced or remediated is 4,998 metric tons. Under the June 2002 DOE-USEC Agreement, DOE is obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to replace or remediate re·me·di·a·tion n. The act or process of correcting a fault or deficiency: remediation of a learning disability. re·me the contaminated uranium. In June, DOE notified the Company that it is authorizing the transfer of 2,116 metric tons of uranium to USEC in exchange for 2,116 metric tons of out-of-specification uranium. This news release contains forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information that involves risks and uncertainty, including certain assumptions regarding the future performance of USEC. Actual results and trends may differ materially depending upon a variety of factors, including, without limitation, market demand for USEC's products, pricing trends in the uranium and enrichment markets, deliveries under the Russian Contract, the availability and cost of electric power, implementing agreements with the Department of Energy (DOE) regarding uranium inventory remediation and the use of centrifuge technology and facilities, satisfactory performance of the American Centrifuge technology at various stages of demonstration, USEC's ability to successfully execute its internal performance plans, the refueling cycles of USEC's customers, final determinations of environmental and other costs, the outcome of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and trade actions, performance under government contracts and audits of allowable costs on government contract work, and the impact of any government regulation. Revenue and operating results can fluctuate significantly from quarter to quarter, and in some cases, year to year. Please refer to our SEC filings, which can be accessed through the Company's website www.usec.com, for a more complete discussion of these factors. USEC Inc., a global energy company, is the world's leading supplier of enriched uranium fuel for commercial nuclear power plants.
USEC Inc.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
(millions, except per share data)
Three Months Six Months Ended
Ended June 30, June 30,
----------------- -----------------
2004 2003 2004 2003
-------- -------- -------- --------
As As
restated restated
Revenue:
Separative work units $196.2 $270.7 $323.6 $532.4
Uranium 81.0 51.7 95.0 76.2
U.S. Government contracts 41.4 40.2 80.0 81.1
-------- -------- -------- --------
Total revenue 318.6 362.6 498.6 689.7
Cost of sales:
Separative work units and
uranium 225.9 281.7 353.2 533.3
U.S. Government contracts 37.3 39.3 74.4 79.7
-------- -------- -------- --------
Total cost of sales 263.2 321.0 427.6 613.0
-------- -------- -------- --------
Gross profit 55.4 41.6 71.0 76.7
Centrifuge demonstration costs 10.6 11.0 20.0 20.6
Selling, general and administrative 15.9 14.8 31.9 29.2
-------- -------- -------- --------
Operating income 28.9 15.8 19.1 26.9
Interest expense
10.4 9.7 19.8 18.9
Interest (income) (.8) (1.4) (1.5) (3.1)
-------- -------- -------- --------
Income before income taxes 19.3 7.5 .8 11.1
Provision for income taxes 7.6 3.2 .3 4.7
-------- -------- -------- --------
Net income $11.7 $4.3 $.5 $6.4
======== ======== ======== ========
Net income per share - basic and
diluted $.14 $.05 $.01 $.08
Dividends per share $.1375 $.1375 $.2750 $.2750
Average number of shares
outstanding 84.0 82.2 83.5 82.1
USEC Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(millions)
(Unaudited)
June 30, December 31,
2004 2003
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $32.4 $249.1
Accounts receivable - trade 203.0 254.5
Inventories 1,112.5 883.2
Other 24.7 39.9
------------ ------------
Total Current Assets 1,372.6 1,426.7
Property, Plant and Equipment, net 180.7 185.1
Other Assets
Deferred income taxes 54.0 52.5
Prepayment and deposit for depleted uranium 23.5 47.1
Prepaid pension benefit costs 79.5 76.3
Inventories 227.7 266.1
------------ ------------
Total Other Assets 384.7 442.0
------------ ------------
Total Assets $1,938.0 $2,053.8
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $171.7 $188.3
Payables under Russian Contract 90.8 119.3
Uranium owed to customers and suppliers 41.4 45.0
Termination settlement obligation under
power purchase agreement - 33.2
Deferred revenue and advances from customers 30.1 25.8
------------ ------------
Total Current Liabilities 334.0 411.6
Long-Term Debt 500.0 500.0
Other Liabilities
Deferred revenue and advances from customers 6.7 13.5
Depleted uranium disposition 28.9 53.5
Postretirement health and life benefit
obligations 142.5 138.1
Lease turnover and other liabilities 52.3 50.9
------------ ------------
Total Other Liabilities 230.4 256.0
Stockholders' Equity 873.6 886.2
------------ ------------
Total Liabilities and Stockholders' Equity $1,938.0 $2,053.8
============ ============
USEC Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(millions)
Six Months Ended
June 30,
-----------------
2004 2003
-------- --------
Cash Flows from Operating Activities
Net income $.5 $6.4
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 15.5 14.3
Deferred revenue and advances from customers (2.5) (19.6)
Changes in operating assets and liabilities:
Accounts receivable - (increase) decrease 51.5 (22.7)
Inventories - net (increase) decrease (194.9) 14.5
Payables under Russian Contract - increase
(decrease) (28.5) 35.6
Payment of termination settlement
obligation under power purchase agreement (33.2) -
Accounts payable and other - net increase
(decrease) 1.0 (5.4)
-------- --------
Net Cash Provided by (Used in) Operating Activities (190.6) 23.1
-------- --------
Cash Flows Used in Investing Activities
Capital expenditures (11.2) (14.9)
-------- --------
Net Cash (Used in) Investing Activities (11.2) (14.9)
-------- --------
Cash Flows Used in Financing Activities
Dividends paid to stockholders (23.0) (22.6)
Common stock issued 8.1 1.6
-------- --------
Net Cash (Used in) Financing Activities (14.9) (21.0)
-------- --------
Net (Decrease) (216.7) (12.8)
Cash and Cash Equivalents at Beginning of Period 249.1 171.1
-------- --------
Cash and Cash Equivalents at End of Period $32.4 $158.3
======== ========
Supplemental Cash Flow Information:
Interest paid $17.2 $17.5
Income taxes paid (refund) 8.1 (2.8)
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