USEC Reports Higher First Quarter Earnings.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 ): --$34.6 million net income for first quarter 2006; pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income $46.9 million before 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. expenses--Revenue up 16 percent on higher sales of SWU SWU Srinakharinwirot University (Thailand) SWU Star Wars Universe SWU Southwestern University (Cebu City, Philippines) SWU Showa Women's University (Tokyo, Japan) and 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. --Gross margin higher due to timing and mix of customer orders --New power contract to substantially increase production costs, affecting results in 2007 and beyond --Progress toward Lead Cascade A connected series of devices or images. It often implies that the second and subsequent device takes over after the previous one is used up. For example, cascading tapes in a dual-tape backup system means the second tape is written after the first one is full. operations continues --Earnings and cash flow guidance reiterated USEC Inc. (NYSE:USU) today reported net income of $34.6 million or 40 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. in the quarter ended March 31, 2006, compared to $0.9 million or 1 cent per share in the same quarter of 2005. Pro forma net income before American Centrifuge expenses was $46.9 million in the first quarter of 2006, compared to $14.6 million in the same period of 2005. The strong first quarter 2006 results were a result of 16 percent higher revenue than a year earlier, increased sales of higher margin 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. , lower interest expense following the repayment of bonds
maturing in January January: see month. 2006, and lower selling, general and administrative
(SG&A) expense. Spending related to the American Centrifuge was
slightly lower as last year's refurbishment 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 of the demonstration facility is substantially complete. "The steps taken in 2005 to reduce expenses coupled with improved pricing for our products produced a very good quarter for USEC," said John K. Welch Welch , William Henry 1850-1934. American pathologist and bacteriologist who discovered the bacteria that causes gas gangrene. , president and chief executive officer. "I am particularly pleased that our effort to reduce headquarters overhead expense is bearing fruit. "After months of tough negotiations, we signed a one-year adj. 1. completing its life cycle within a year. Adj. 1. one-year - completing its life cycle within a year; "a border of annual flowering plants" annual phytology, botany - the branch of biology that studies plants pricing agreement with our primary power supplier that will raise our base electricity price by about 50 percent, before taking into account summer power or an anticipated adjustment for higher fuel and power purchase costs for the Tennessee Valley Authority Tennessee Valley Authority (TVA), independent U.S. government corporate agency, created in 1933 by act of Congress; it is responsible for the integrated development of the Tennessee River basin. . These higher prices go into effect June June: see month. 1 and will have a substantial impact on our production costs later this year and into 2007," Welch said. "So while we are pleased with our current financial results, we have more work ahead to find additional ways to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. this sharp
increase in our costs," he added."We can also report continued progress with testing and demonstrating the American Centrifuge technology in Oak Ridge, Tennessee Oak Ridge is an incorporated city in Anderson and Roane Counties in East Tennessee, about 25 miles northwest of Knoxville. Oak Ridge's population was 27,387 people at the 2000 census. . Recent performance results have been very positive," Welch said. "We expect to begin installing centrifuge machines this summer in our Piketon facility, with cascade operations beginning thereafter. And we continue to expect to meet the next milestone in October October: see month. under the DOE-USEC Agreement by obtaining satisfactory performance and operating data from the Lead Cascade." USEC is currently expensing most of its spending related to the American Centrifuge, directly reducing net income. To help investors evaluate the impact of these adjustments to current business results, USEC is reporting a non-GAAP financial measure - pro forma net income before American Centrifuge expenses. A table reconciling this measure to net income is included in this news release. Revenue Revenue for the first quarter was $361.3 million, compared to $311.2 million in the same period a year earlier. Revenue from sales of Separative Work Units (SWU) was $234.0 million, which was $19.7 million or 9 percent higher than the first quarter of 2005. The increase was due to 8.6 percent higher average prices billed to customers as volume was essentially flat quarter over quarter. Uranium revenue was $75.8 million, $30 million higher than a year earlier, reflecting substantially higher average prices billed to customers, partly offset by a 15 percent decline in volume. The increase in prices was due primarily to new sales of material obtained from underfeeding underfeeding see malnutrition, starvation. the Paducah Paducah (pədy `kə, –d`–), city (1990 pop. 27,256), seat of McCracken co., SW Ky. plant at current market prices. Revenue from
U.S. government contracts and other was nearly unchanged at $51.5
million.At March 31, 2006, deferred revenue amounted to $108.2 million, with a deferred gross profit of $41.7 million. In a number of uranium sales transactions, USEC transfers title and collects cash from customers but does not recognize the revenue until low 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. is physically delivered. Cost of Sales, 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. and Expenses Cost of sales in the first quarter of 2006 for SWU and uranium was $225.7 million, a 3 percent increase that reflects a higher SWU cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold , partially offset by lower volume of uranium sold. Cost of sales for SWU reflects monthly moving average inventory costs based on production and purchase costs. The cost of sales per SWU during the quarter was 4 percent higher than the year before. The higher unit cost reflects a higher starting inventory cost, 12 percent lower production volume, the impact of increasing production costs, and higher purchase prices paid to Russia Russia, officially the Russian Federation, Rus. Rossiya, republic (2005 est. pop. 143,420,000), 6,591,100 sq mi (17,070,949 sq km). , which are set by a market-based pricing formula and have increased as market prices have increased in recent years. Cost of sales for U.S. government contracts was $43.6 million, a $1 million decrease. The gross profit for the first quarter was $92 million, a $44.3 million or 93 percent increase over the same period in 2005. The gross profit margin in the quarter was 25.5 percent compared to 15.3 percent in the first quarter of 2005 due to higher prices billed to customers for both SWU and uranium. The uranium component of low enriched uranium is generating a higher gross profit margin. The Company reiterates its guidance that for the full year the gross profit margin is expected to be in a range of 15 to 16 percent. SG&A expenses totaled $11.7 million in the first quarter, a reduction of $3.5 million or 23 percent from the same period in 2005. Compensation, benefits and consulting expenses were lower. The Company also recorded a special charge of $1.5 million in connection with our ceasing use of leased headquarters property vacated as part of a restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). in September September: see month. 2005. Advanced technology costs, primarily related to the demonstration of the American Centrifuge technology, were $19.8 million. The $2.9 million, or 13 percent, reduction in spending compared to the same quarter last year was due to lower spending on manufacturing centrifuge parts and the Lead Cascade as testing of single machines continued in Oak Ridge Oak Ridge, city (1990 pop. 27,310), Anderson and Roane counties, E Tenn., on Black Oak Ridge and the Clinch River; founded by the U.S. government 1942, inc. as an independent city 1959. . Spending in the first quarter of 2005 reflected efforts 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 American Centrifuge Demonstration Facility. In the same period of 2006, the refurbishment was substantially complete and efforts focused on Lead Cascade start-up Start-up The earliest stage of a new business venture. , procedure development, training and other lower-cost activities. In addition, in the first quarter of 2006 USEC spent $5.6 million related to the commercial plant that was 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. , compared to $4.1 million capitalized in the same period last year. Interest expense during the first quarter was $4.7 million, a reduction of $4 million that was a result of the repayment of bonds that matured in January 2006. Cash flow At March 31, 2006, USEC had a cash balance of $21.6 million. Short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. under the bank credit facility was $20.5 million. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses during the quarter was $37.1 million compared to $80.5 million in the same period a year earlier. Results from operations generated more cash year over year but this was offset by additional purchases from Russia due to timing, fewer customer collections and lower accounts payable and other liabilities other liabilities Small and relatively insignificant liabilities. For financial reporting purposes, firms often combine small liabilities into this single category rather than listing each liability separately. . The largest use of cash during the quarter just ended was the repayment of principal on the remaining $288.8 million of bonds due in January 2006. The Company also had $7.5 million in capital expenditures, including $5.6 million in capitalized costs for the American Centrifuge Plant, compared to $6.1 million in capital expenditures in the same quarter last year. American Centrifuge Update USEC continues to demonstrate our next-generation American Centrifuge uranium 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. technology. Testing of individual machines in special test equipment located in Oak Ridge has shown very good progress toward achieving our targeted performance level. Refurbishment work at the Piketon facility has been substantially completed and employees have been practicing assembling centrifuge machines in advance of the installation of machines in the Lead Cascade. USEC expects to begin installing Lead Cascade machines this summer and to begin demonstrating a cascade configuration thereafter. We anticipate meeting the next milestone in October under the DOE-USEC Agreement by obtaining satisfactory performance and operating data gained from the Lead Cascade. The Company continues to evaluate various options for financing construction of the American Centrifuge Plant, including an equity securities offering later this year. Any offering would be subject to market conditions. Restrictions in our revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility provide that unless we complete an offering of at least $150 million prior to July 19, 2006, availability under the $400 million credit facility will, until we complete such an offering, be reduced by up to $150 million. Power Contract with TVA TVA: see Tennessee Valley Authority. Signed USEC and its primary electricity provider, Tennessee Valley Authority (TVA), agreed on April 6, 2006 to a one-year contract that sets the quantity and pricing of power used by the Paducah plant beginning June 1. USEC will purchase from 300 megawatts of electricity during the three summer months to 1600 megawatts during the non-summer months, which is essentially the same as in previous years. The agreement is a "take-or-pay" contract that requires USEC to pay for the electricity regardless of whether the Paducah plant uses the power. However, if mutually agreed, TVA may buy back power. Pricing under the agreement includes both a summer and non-summer base price that is subject to a fuel cost adjustment that can increase or decrease the price based on TVA's fuel costs, purchased power costs and related costs. This fuel cost adjustment will be made monthly based on TVA's forecast and then trued-up to actual costs in the following month. The new price is approximately 50 percent higher than under the previous contract, not including the impact of the fuel cost adjustment. In addition, USEC will purchase 600 megawatts of power from TVA during the summer months of 2006 at fixed market-based prices. As a result of these substantially higher power Higher power is a term used in a 12-step program, such as Alcoholics Anonymous, to describe "a power greater than yourself." Although many participants equate their higher power with God, a belief in God or in formal religion is not mandatory; the higher power is intended as a prices, USEC evaluated the negative economic implications of this agreement and determined there is no impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. to the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of our long-term assets Long-Term Assets 1. Reported on the balance sheet, it's the value of a company's property, equipment and other capital assets, less depreciation. 2. A stock, bond or other asset that you plan on holding in your portfolio for a lengthy period of time. related to the Paducah plant. We will continue to monitor and evaluate the situation. 2006 Outlook The Company reiterates its previous earnings and cash flow guidance for 2006 provided in February 2006. Specifically, the guidance recognizes that an approximately 50 percent increase in power prices will begin to impact results in the second half of the year. USEC reiterates its guidance for net income in a range of $70 to $80 million after expenses for the American Centrifuge and USEC expects a gross profit margin of 15 to 16 percent. Pro forma net income before American Centrifuge expenses is expected to be in a range of $120 to $135 million. Cash flow from operations in 2006 is expected to generate approximately $145 to $155 million. USEC has not provided guidance for 2007 but we expect higher electricity prices to have a substantial impact on financial results in 2007 and beyond. USEC Inc., a global energy company, is a leading supplier of enriched uranium fuel for commercial nuclear power plants. Use of Non-GAAP Financial Information The earnings release contains a non-GAAP financial measure - pro forma net income before American Centrifuge expenses. Management believes that, because pro forma net income before American Centrifuge expenses excludes the significant charges related to the Company's development of the American Centrifuge uranium enrichment technology, which is not the technology the Company now uses in its uranium enrichment operations, it is more reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of the Company's current core operating results and provides investors with additional useful information to measure the Company's performance, particularly with respect to performance from period to period, and to measure management's efforts toward achieving its stated cost reduction and other objectives. While the Company believes this non-GAAP financial measure is useful in evaluating the Company, the information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . Forward Looking Statements This document contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " - 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: the cost of electric power used at our gaseous diffusion Gaseous diffusion is a technology used to produce enriched uranium by forcing gaseous uranium hexafluoride, UF6, through semi-permeable membranes. This produces a slight separation between the molecules containing uranium-235 and uranium-238. plant; our dependence on deliveries under the Russian Russian associated in some way with Russia. Russian blue a breed of cats with short, dense, silver-tipped blue-colored coat and vivid green eyes. Contract and on a single production facility; the success and timing of the demonstration and deployment of the American Centrifuge technology and the costs to develop that technology; difficulties in obtaining financing; changes in existing restrictions on imports of Russian enriched uranium; the elimination of duties charged on imports of foreign-produced low enriched uranium and uranium; pricing trends in the uranium and enrichment markets; changes to, or termination of, our contracts with the U.S. government and changes in U.S. government priorities and the availability of government funding; the impact of government regulation; the outcome of legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. and other contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. (including lawsuits, government investigations or audits and government/regulatory and environmental remediation Generally, remediation means providing a remedy, so environmental remediation deals with the removal of pollution or contaminants from environmental media such as soil, groundwater, sediment, or surface water for the general protection of human health and the environment or from a efforts); the competitive environment for our products and services; changes in the nuclear energy industry; and other risks and uncertainties discussed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and subsequent quarterly Form 10-Qs Form 10-Q See 10-Q. . We do not undertake to update our forward-looking statements except as required by law.
USEC Inc.
RECONCILIATION OF NON-GAAP PRO FORMA NET INCOME BEFORE AMERICAN
CENTRIFUGE EXPENSES TO GAAP NET INCOME (Unaudited)
Three Months Ended
Amounts in millions March 31
-------------------
2006 2005
-------------------
Pro forma net income before American Centrifuge
expenses $ 46.9 $ 14.6
--------- ---------
LESS: American Centrifuge expenses (a) 19.5 22.1
ADD: Provision for income taxes
(based on an assumed statutory rate
of 37% in 2006 and 38% in 2005) 7.2 8.4
--------- ---------
SUBTOTAL: American Centrifuge
expenses, net of taxes 12.3 13.7
--------- ---------
Net income, GAAP basis $ 34.6 $ 0.9
========= =========
Note (a): American Centrifuge expenses included in
Advanced Technology costs.
USEC Inc.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
(millions, except per share data)
Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
Revenue:
Separative work units $ 234.0 $ 214.3
Uranium 75.8 45.8
U.S. government contracts and other 51.5 51.1
--------- ---------
Total revenue 361.3 311.2
--------- ---------
Cost of sales:
Separative work units and uranium 225.7 218.9
U.S. government contracts and other 43.6 44.6
--------- ---------
Total cost of sales 269.3 263.5
--------- ---------
Gross profit 92.0 47.7
Special charge for organizational restructuring 1.5 -
Advanced technology costs 19.8 22.7
Selling, general and administrative 11.7 15.2
--------- ---------
Operating income 59.0 9.8
Interest expense 4.7 8.7
Interest (income) (1.8) (1.9)
--------- ---------
Income before income taxes 56.1 3.0
Provision for income taxes 21.5 2.1
--------- ---------
Net income $ 34.6 $ 0.9
========= =========
Net income per share - basic and diluted $ .40 $ .01
Dividends per share - $ .1375
Weighted-average number of shares outstanding:
Basic 86.3 85.5
Diluted 86.6 86.0
USEC Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(millions)
March 31, December 31,
2006 2005
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 21.6 $ 259.1
Restricted short-term investments 14.8 17.8
Accounts receivable - trade 196.7 256.7
Inventories 970.8 974.3
Deferred income taxes 28.4 39.1
Other current assets 78.3 68.7
------------ ------------
Total Current Assets 1,310.6 1,615.7
Property, Plant and Equipment, net 170.1 171.2
Other Long-Term Assets
Deferred income taxes 105.9 100.6
Deposit for depleted uranium 25.8 24.6
Prepaid pension benefit costs 85.7 86.2
Inventories 88.9 71.4
Goodwill and other intangibles 11.0 11.1
------------ ------------
Total Other Long-Term Assets 317.3 293.9
------------ ------------
Total Assets $ 1,798.0 $ 2,080.8
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 20.5 $ -
Current portion of long-term debt - 288.8
Accounts payable and accrued liabilities 188.2 217.4
Payables under Russian Contract 78.4 111.6
Uranium owed to customers and suppliers 13.3 2.3
Deferred revenue and advances from
customers 130.2 132.9
------------ ------------
Total Current Liabilities 430.6 753.0
Long-Term Debt 150.0 150.0
Other Long-Term Liabilities
Depleted uranium disposition 52.5 47.0
Postretirement health and life benefit
obligations 151.7 153.9
Other liabilities 69.4 69.3
------------ ------------
Total Other Long-Term Liabilities 273.6 270.2
Commitments and Contingencies
Stockholders' Equity 943.8 907.6
------------ ------------
Total Liabilities and Stockholders' Equity $ 1,798.0 $ 2,080.8
============ ============
USEC Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(millions)
Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
Cash Flows from Operating Activities
Net income $ 34.6 $ 0.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9.0 8.4
Deferred income taxes 5.4 0.8
Depleted uranium disposition 4.3 2.2
Changes in operating assets and liabilities:
Accounts receivable - decrease 60.0 105.8
Inventories - net (increase) (3.0) (32.5)
Payables under Russian Contract -
(decrease) (33.2) (3.2)
Deferred revenue, net of deferred costs -
increase (decrease) (10.5) 2.4
Accounts payable and other liabilities -
(decrease) (31.7) (9.0)
Other, net 2.2 4.7
--------- ---------
Net Cash Provided by Operating Activities 37.1 80.5
--------- ---------
Cash Flows Used in Investing Activities
Capital expenditures (7.5) (6.1)
--------- ---------
Net Cash (Used in) Investing Activities (7.5) (6.1)
--------- ---------
Cash Flows Used in Financing Activities
Borrowings under credit facility 99.0 -
Repayments under credit facility (78.5) -
Repayment of senior notes (288.8) -
Tax benefit related to stock-based compensation 0.3 -
Dividends paid to stockholders - (11.7)
Common stock issued 0.9 4.9
--------- ---------
Net Cash (Used in) Financing Activities (267.1) (6.8)
--------- ---------
Net Increase (Decrease) (237.5) 67.6
Cash and Cash Equivalents at Beginning of Period 259.1 174.8
--------- ---------
Cash and Cash Equivalents at End of Period $ 21.6 $ 242.4
========= =========
Supplemental Cash Flow Information:
Interest paid $ 14.8 $ 16.1
Income taxes paid 22.9 12.4
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion