BETHESDA, Md.--(BUSINESS WIRE)--Centrus Energy Corp. (NYSE MKT: LEU) today reported a net loss of $2.9 million or $0.32 per basic and diluted share for the quarter ended June 30, 2016, compared to a net loss of $15.1 million or $1.68 per basic and diluted share for the second quarter of 2015.

“The second quarter was a steady one for Centrus, and we remain on track to meet our revenue and cash balance guidance for the year,” said Daniel B. Poneman, Centrus president and chief executive officer. “We reduced the debt this quarter and are sharply focused on lowering costs, pursuing strategic partnerships and business development opportunities, and repositioning our company as the world’s most diversified supplier of nuclear fuel.

“During the quarter, we repurchased some of our PIK Toggle Notes, lowering our debt by 10 percent and reducing interest costs. In addition, we launched a program to increase efficiencies across our business and to align our corporate structure with the scale of our ongoing operations. While we recognize it will take some time before our efforts are fully reflected in our financial results, we are continuing to make progress and are committed to delivering value to our stakeholders.”

Revenue, Cost of Sales and Gross Profit

Revenue for the second quarter was $63.4 million, an increase of $0.1 million compared to the same quarter in 2015. In the six-month period ended June 30, 2016, revenue was $153.4 million, a decrease of $77.7 million, or 34 percent, from the same period in 2015. Gross profit was $5.5 million for the quarter and $21.3 million in the six-month period, which is an increase of $1.2 million and $10.1 million, respectively, compared to the corresponding periods in 2015.

For the LEU segment, revenue for the second quarter was $54.9 million, an increase of $12.7 million, or 30 percent, compared to the same quarter in 2015. A 19 percent decline in the average sales price was largely offset by an 18 percent decline in the average cost of sales per SWU. As a result, gross profits in this segment held steady, with a year-over-year increase of $0.1 million, or 2 percent.

The volume of SWU sales increased 63 percent in the second quarter and decreased 13 percent for the six-month period compared to the corresponding periods in 2015. The variation in SWU sales volumes reflects the timing of utility customer orders. For the full year 2016, the SWU sales volume is expected to be comparable to full year 2015.

In the contract services segment, revenues and cost of sales also decreased in the three and six month periods ending on June 30, 2016, compared to the same periods in the previous year. These changes reflect the reduction in the scope of work for American Centrifuge technology services for the U.S. Department of Energy (DOE) under the Company’s contract with UT-Battelle. Gross profit for the six-month period includes $8.1 million in contract services revenue received during the first quarter of 2016 that was related to work in the fourth quarter of 2015.

Advanced Technology Costs, American Centrifuge Demobilization and D&D

Advanced technology costs consist of American Centrifuge expenses that are outside of Centrus’ contracts with UT-Battelle, including certain site maintenance costs. Advanced technology costs in the six months ended June 30, 2016, include demobilization costs for the demonstration cascade in Piketon, Ohio. In the second quarter of 2016, the Company commenced with the decontamination and decommissioning (D&D) of the Piketon facility in accordance with the requirements of the U.S. Nuclear Regulatory Commission (NRC) and DOE. Costs related to this process totaled $3.7 million in the second quarter of 2016, which were charged to the accrued liability Decontamination and Decommissioning Obligations. The Company is experiencing delays in implementing the D&D process and is working to finalize contractual and regulatory arrangements for the disposition of materials. The charge to advanced technology costs of $4.7 million in the second quarter of 2016 reflects delays as the Company continues to incur period costs as the facility caretaker. The D&D work is now expected to extend through 2017 and additional period costs associated with delays in fully implementing the D&D process are expected. The Company is evaluating the impact the delays will have on future costs.

Centrus has previously provided financial assurance to the NRC and DOE for D&D and lease turnover costs in the form of surety bonds of approximately $16 million and $13 million, respectively, which are fully cash collateralized by the Company. Centrus expects to receive cash when surety bonds are reduced and/or cancelled as the Company fulfills its D&D and lease obligations. Centrus has not made a decision on lease turnover and is continuing to evaluate future uses for the site.

SG&A and Special Charges

Selling, general and administrative (SG&A) expenses increased $6.2 million in the three months and $5.3 million in the six months ended June 30, 2016, compared to the corresponding periods in 2015, of which $4.7 million relates to the remeasurement of pension obligations. A remeasurement in the second quarter of 2016 resulted in a loss of $0.8 million. A remeasurement in the second quarter of 2015 resulted in a gain of $3.9 million. The loss and gain are mainly attributable to changes in market interest rates used to measure long-term pension obligations. Excluding the effects of the pension obligation remeasurements, SG&A expenses increased $0.6 million, or 3 percent, in the six months ended June 30, 2016, compared to the corresponding period in 2015. Consulting costs increased $0.5 million in the six-month period for work related to business development, debt repurchases and the Company’s qualified pension plans.

In the second quarter of 2016, the Company commenced a project to align its corporate structure to the scale of its ongoing business operations and to update related information technology. Centrus incurred advisory costs related to the reengineering project of $0.5 million in the three months ended June 30, 2016.

PIK Toggle Note Repurchase

In June 2016, the Company repurchased PIK Toggle Notes pursuant to a pre-arranged trading plan with an aggregate principal balance of $26.1 million and accrued interest payable balance of $0.5 million. The Company paid $9.8 million in cash, of which $1.8 million is included in accounts payable and accrued liabilities as of June 30, 2016, and was paid in July 2016. The gain on the early extinguishment of the PIK Toggle Notes was $16.7 million, net of commissions and unamortized deferred financing costs totaling $0.1 million.

Cash Flow

The net reduction of $50.9 million in the SWU purchase payables balance, due to the timing of purchase deliveries, was a significant use of cash in the six months ended June 30, 2016. American Centrifuge expenses have been a major use of cash, including demobilization expenses and D&D expenditures. Sources of cash included the monetization of inventory purchased in prior periods. Inventories declined $50.0 million in the quarter, less an increase in receivables from utility customers of $22.1 million. The net loss of $17.5 million in the six months ended June 30, 2016, net of non-cash expenses, was a use of cash.

2016 Outlook

Centrus continues to anticipate SWU and uranium revenue in 2016 in a range of $250 million to $275 million and total revenue in a range of $275 million to $300 million. The Company anticipates the SWU sales volume for 2016 to be comparable to 2015. The Company expects to end 2016 with a cash and cash equivalents balance in a range of $200 million to $250 million.

Centrus’ financial guidance is subject to a number of assumptions and uncertainties that could affect results either positively or negatively. Variations from the Company’s expectations could cause differences between its guidance and its ultimate results. Factors that could affect Centrus’ results include the following:

• Additional short-term purchases or sales of SWU and uranium;
• Timing of customer orders, related deliveries, and purchases of LEU or components;
• The outcome of legal proceedings and other contingencies, including discussions with the Pension Benefit Guaranty Corporation (PBGC);
• Execution and funding of a new agreement with UT-Battelle, the operator of ORNL, for the continuation of American Centrifuge development and testing activities in Oak Ridge following the expiration of the current agreement on September 30, 2016; and
• Additional costs for American Centrifuge demobilization; decontamination and decommissioning of the Company’s facility in Ohio; or related to the overall transition of Centrus.

About Centrus Energy Corp.

Centrus Energy Corp. is a trusted supplier of enriched uranium fuel for commercial nuclear power plants in the United States and around the world. Our mission is to provide reliable and competitive fuel goods and services to meet the needs of our customers, consistent with the highest levels of integrity, safety, and security.