USEC Reports Third Quarter 2009 Results

http://www.businesswire.com/news/home/20091102006487/en

* Company reports net loss for quarter; net income of $9 million in 9-month
period
* Cash flow from operations of $319 million for 9-month period
* 2009 financial guidance improves to net income of $50 to $65 million; cash
flow from operations of $360 to $375 million

BETHESDA, Md.--(Business Wire)--
USEC Inc. (NYSE:USU) today reported a net loss for its third quarter ended
September 30, 2009, of $6.2 million, or 6 cents per diluted share, compared to
net income of $8.4 million, or 6 cents per diluted share, for the same quarter
in 2008. For the nine-month period, net income was $9.0 million, or 6 cents per
diluted share, compared to $23.6 million, or 18 cents per diluted share, in the
corresponding period of 2008.

Third quarter financial results reflect sales volume of separative work units
(SWU) that was 10 percent lower than the same quarter in 2008 at average prices
billed to customers that were 6 percent higher. Revenue in the quarter from
uranium sales was 47 percent lower year over year on 75 percent lower sales
volume. The gross profit margin for the quarter was 7.1 percent compared to 8.2
percent in the same quarter last year due to an increase in cost of sales,
partially offset by increases in SWU and uranium prices.

Although we expect SWU sales to be approximately 30 percent higher in 2009
compared to last year, the timing of reactor refueling orders and related orders
for low enriched uranium can result in variability in our quarterly results. A
majority of reactors served by USEC are refueled on an 18-to-24-month cycle,
causing revenues to fluctuate quarter to quarter, and even annually. Therefore,
short-term comparisons of USEC`s financial results are not necessarily
indicative of longer-term results.

"We now see net income in 2009 in a range of $50 million to $65 million and cash
flow from operations has improved significantly to $360 million to $375
million," said John K. Welch, USEC president and chief executive officer. "Our
updated earnings and cash flow guidance for 2009 reflects the likely receipt in
the fourth quarter of approximately $70 million, pretax, from the U.S.
government distributions of antidumping duties as a result of settlement of a
trade case. We anticipate our gross profit margin for the year will be roughly
10 percent."

USEC today also issued an update on the American Centrifuge project.

Revenue

Revenue for the third quarter was $549.3 million, a decrease of 7 percent
compared to the same quarter of 2008. Revenue from the sale of SWU for the
quarter was $467.0 million compared to $490.4 million in the same period last
year, a decrease of 5 percent. Revenue from the sale of uranium was $26.2
million, a decrease of $23.0 million from the same quarter last year. The
average price billed to customers for uranium was more than 100 percent higher
in the quarter but sales volume was 75 percent lower than in the 2008 quarter
due to the mix, timing and terms of uranium contracts. Revenue from our U.S.
government contracts segment was $56.1 million, an increase of $5.3 million over
the same quarter last year.

For the nine-month period, revenue was $1,569.2 million, an increase of $386.5
million, or 33 percent, compared to the same period in 2008. Revenue from the
sale of SWU for the nine months was $1,266.2 million, an increase of $405.0
million, or 47 percent, compared to the same period last year. Uranium revenue
was $150.2 million, a decrease of $4.3 million, or 3 percent. Uranium volume was
37 percent lower in the nine-month period but the average price increased by 54
percent, compared to the same period in 2008. Revenue from the U.S. government
contracts segment totaled $152.8 million, a decline of $14.2 million, or 9
percent. The decrease reflects declines in contract services performed in the
current year. Revenue for the government contracts segment in the corresponding
period in 2008 included incremental revenue for fiscal 2002 DOE contract work
based on the resolution of concerns regarding billable incurred costs.

In a number of sales transactions, USEC transfers title and collects cash from
customers but does not recognize the revenue until low enriched uranium is
physically delivered. At September 30, 2009, deferred revenue totaled $230.4
million, nearly unchanged from June 30, 2009 but an increase of $34.1 million
from December 31, 2008. The gross profit associated with deferred revenue as of
September 30, 2009, was $58.5 million.

Cost of Sales, Gross Profit Margin and Expenses

Cost of sales for the third quarter for SWU and uranium was $461.3 million, a
decrease of $36.7 million or 7 percent. For the nine-month period, cost of sales
for SWU and uranium was $1,268.1 million, an increase of $373.9 million or 42
percent. The cost of sales was lower in the quarter due to the decline in SWU
sales volume noted above, partially offset by higher SWU unit costs. In the
nine-month period, cost of sales in the LEU segment increased due to higher SWU
sales volumes and higher SWU unit costs compared to the same period last year.
Cost of sales for SWU and uranium reflects monthly moving average inventory
costs based on production and purchase costs. The cost of sales per SWU was 13
percent higher in the quarter and 14 percent higher in the nine-month period
than in the year before, reflecting changes in the monthly moving average SWU
inventory costs described below.

Production costs declined $28.9 million, or 5 percent, in the nine-month period
compared to the same period of 2008, primarily as a result of producing 4
percent less SWU. Unit production costs were flat reflecting lower power costs
offset by an increase in benefit costs and accrued costs for depleted uranium
disposition. The cost of electric power declined by $44.0 million or 9 percent
in the first nine months of 2009, primarily due to a 6 percent decline in the
average cost per megawatt hour compared to the same period last year. A sharp
downturn in the fair value of pension and postretirement benefit plan assets in
2008 resulted in higher net benefit costs in 2009.

The electricity we purchase is used for SWU production and to underfeed the
enrichment process based on market conditions. The quantity of uranium that is
added to uranium inventory from underfeeding is accounted for as a byproduct of
the enrichment process. Production costs are allocated to the uranium added to
inventory based on the net realizable value of the uranium, and the remainder of
the production costs are allocated to SWU inventory costs. The decline in value
of uranium in the nine-month period of 2009 compared to the same period last
year resulted in a greater allocation of production cost to SWU inventory.

We purchase approximately 5.5 million SWU annually from Russia. Purchase cost
for the SWU component of LEU under the Megatons to Megawatts program increased
$63.6 million during the nine-month period compared to the corresponding period
of 2008, reflecting an 11 percent increase in the market-based unit purchase
cost.

Cost of sales for the U.S. government contracts segment increased $4.5 million
for the nine-month period, compared to the corresponding period in 2008. Higher
benefit costs were incurred due to a decline in the valuation of pension and
postretirement benefit plan assets in 2008, which are only partially recoverable
under government contract regulations.

The gross profit for the third quarter was $39.2 million, a decrease of $9.2
million, or 19 percent, over the same quarter last year. The gross profit in the
third quarter declined due to an increase in SWU inventory costs, lower SWU
sales volume and reduced uranium sales. The gross profit for the nine-month
period was $158.8 million, an increase of $8.1 million, or 5 percent, over the
corresponding period of 2008. The gross profit in the nine-month period of 2009
improved due to higher SWU volume and higher average prices billed to customers,
offset by higher SWU inventory costs and lower margin for the U.S. government
contracts segment. The gross profit margin for the quarter was 7.1 percent
compared to 8.2 percent in the same quarter of 2008 and 10.1 percent in the
nine-month period compared to 12.7 percent in the same period last year.

Advanced technology expenses, primarily related to the demonstration of the
American Centrifuge technology, were $93.8 million in the nine-month period, an
increase of $12.6 million, or 16 percent, compared to the same period last year.
The increase in advanced technology costs reflects increased research and
development activities associated with value engineering the AC100 centrifuge
machine to lower its capital cost, as well as preparation for Lead Cascade
testing of the AC100 series machines. In addition, prior to demobilization,
commercial plant activities had increased compared to efforts in the
corresponding period in 2008, including training and procedure development. We
recorded a special charge of $2.5 million in the third quarter related to
one-time termination benefits for severance payments and short-term health care
coverage. The cash expenditures are expected primarily in the fourth quarter.
Amounts capitalized on the ACP totaled $327.2 million in the nine-month period
of 2009, an increase of $7.7 million over the same period of the previous year.
This level of capital expenditures was well below our capital spending plan for
2009.

Selling, general and administrative (SG&A) expenses in the nine-month period
were $45.1 million, an increase of $4.4 million over the same period last year.
During the first nine months of 2009, consulting expenses were $1.0 million
higher than the same period of 2008 and employee benefits expenses increased
$1.7 million primarily due to the decline in the valuation of pension and
postretirement benefit plan assets in 2008.

Cash Flow and Liquidity

At September 30, 2009, USEC had a cash balance of $69.3 million compared to
$77.7 million at June 30, 2009, and $248.5 million at December 31, 2008. We
repaid the remaining principal balance of $95.7 million for our maturing senior
notes on their due date of January 20, 2009, with available cash. Cash flow from
operations in the nine-month period was $319.4 million, compared to cash flow
used in operations of $184.2 million in the same period in 2008. The $503.6
million improvement is primarily due to our building inventory in 2008 and
monetizing that inventory through sales in 2009. Inventories declined by $212.7
million in the nine-month period of 2009, compared to an increase of $219.8
million in the same period last year. Capital expenditures, primarily related to
construction of the American Centrifuge Plant, totaled $363.2 million during the
nine-month period, compared to $309.2 million in the same period last year. In
addition, we made cash deposits of $38.2 million in the nine-month period of
2009 as collateral for surety bonds in connection with financial assurance
requirements for the American Centrifuge Plant. We had not borrowed under our
credit facility in the nine-month period ended September 30, 2009, but have
short-term borrowings during the fourth quarter.

In February 2009, we initiated steps to conserve cash and reduce the planned
escalation of project construction and machine manufacturing activities. We have
further reduced project spending as a result of the project demobilization and
expect to continue funding at a reduced rate based on our anticipated available
funds. We expect that our cash, internally generated cash flow from operations,
the expected receipt of approximately $70 million (pretax) from U.S. government
distributions of antidumping duties as the result of the settlement of a trade
case, and available borrowings under USEC`s revolving credit facility will
provide sufficient cash to meet our cash needs for at least 12 months. This
assumes the renewal of the credit facility that matures on August 18, 2010, and
includes the reduced rate of funding of American Centrifuge project activities
as part of the demobilization and does not include any DOE loan guarantee or
other financing.

2009 Outlook

We are providing annual net income and cash flow from operations guidance for
fiscal year 2009. We expect revenue to total approximately $2 billion, with more
than $1.6 billion derived from SWU sales, an increase of 40 percent over 2008
SWU sales. Our average SWU price billed to customers in 2009 is expected to be 8
percent higher than 2008. In addition, revenue from uranium sales is expected to
be about $175 million and revenue from the U.S. government contracts segment is
expected to be just over $200 million.

Our cost of sales reflects higher production and purchase costs rolling though
our inventory. The impact of the fuel cost adjustment clause under our power
contract with the Tennessee Valley Authority (TVA) has not been as significant
as originally forecast by TVA, but the purchase cost for Russian supply under
the Megatons to Megawatts program increased by 11 percent, year over year. Thus,
although the average price billed to customers has increased, the rate of
increase in the cost of sales has been greater. We now expect the gross profit
margin for 2009 to be roughly 10 percent, which is at the low end of our initial
guidance.

Below the gross profit line, we expect selling, general and administrative
expense to be approximately $57 million.

Advanced technology expense in 2009 is expected to be in a range of $115 to $120
million, as advanced technology expense declines in the fourth quarter,
reflecting the demobilization of construction of the American Centrifuge Plant
and ongoing centrifuge Lead Cascade and related demonstration activities. We
recorded a special charge of $2.5 million in the third quarter related to
one-time termination benefits for severance payments and short-term health care
coverage. The cash expenditures are expected primarily in the fourth quarter. In
addition to ACP spending through year end, we are working with project suppliers
to reduce any incremental exposure for additional payments. That total exposure
is currently estimated to be between $65 and $75 million at December 31, 2009.
That amount includes anticipated payments for materials to be delivered, as well
as contract termination exposure. The termination exposure is a function of
timing, project schedule and any modifications to work scope. This estimate
could be affected by ongoing discussions with suppliers.

Earlier this year, USEC and Eurodif S.A. reached a settlement agreement
regarding a long-standing trade case. As a result of that settlement, we expect
to receive approximately $70 million (pretax) during the fourth quarter, but the
timing of such payments is uncertain. The receipt of these funds is included in
our guidance below. Any delays in these payments to a later period would
materially impact our 2009 net income and cash flow from operations guidance.

Based on these projections, we anticipate net income in a range of $50 to $65
million. Cash flow from operations is expected to be in a range of $360 to $375
million. Cash generation is well above our initial guidance, reflecting
liquidation of inventory built up in 2008, lower than expected cash
disbursements for power and other production costs, and expected receipt of
funds related to the trade case settlement.

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 substantial differences between our guidance and
ultimate results. Among the factors that could affect net income and cash flows
are:

* A delay beyond the fourth quarter in receiving distributions from the U.S.
government of liquidated import duties as a result of the trade case settlement
described above;
* Changes in demobilization costs from our estimates and any additional special
charges related to the demobilization of the project;
* Changes to spending on the ACP or the potential receipt of funds from DOE to
support further development of the American Centrifuge technology (our guidance
does not include the receipt of any funds from DOE to support further
development of the American Centrifuge technology);
* The amount of spending on the ACP that is classified as an expense;
* Any unexpected changes to the amount of fuel cost adjustment paid to TVA under
our power agreement; and
* The timing of recognition of previously deferred revenue, particularly related
to the sale of uranium.

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" - 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 the deployment of the American
Centrifuge technology, including risks related to performance, cost, schedule
and financing; our success in obtaining a loan guarantee for the American
Centrifuge Plant, including our ability to address the technical and financial
concerns raised by DOE; our ability to renew our revolving credit facility on
reasonable terms; the impact of the demobilization of the American Centrifuge
project and uncertainty regarding our ability to remobilize the project and the
potential for termination of the project; the outcome of discussions with DOE
regarding milestones under the June 2002 DOE-USEC Agreement related to the
deployment of the American Centrifuge technology; uncertainty regarding the cost
of electric power used at our gaseous diffusion plant; our dependence on
deliveries under the Russian Contract and on a single production facility; our
inability under most existing long-term contracts to directly pass on to
customers increases in our costs; the decrease or elimination of duties charged
on imports of foreign-produced low enriched uranium; delays in U.S. government
actions needed for us to collect money from antidumping duties deposited by
importers of French low enriched uranium on past imports of French low enriched
uranium in connection with trade measures imposed on such imports; pricing
trends and demand in the uranium and enrichment markets and their impact on our
profitability; changes to, or termination of, or limitations on our ability to
compete for, our existing or other potential contracts with the U.S. government
and changes in U.S. government priorities and the availability of government
funding, including loan guarantees; the impact of government regulation; 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 pension assets and credit and
insurance facilities; and other risks and uncertainties discussed in our filings
with the Securities and Exchange Commission, including our Annual Report on Form
10-K and quarterly reports on Form 10-Q. Revenue and operating results can
fluctuate significantly from quarter to quarter, and in some cases, year to
year. We do not undertake to update our forward-looking statements except as
required by law.

USEC Inc.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(millions, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Revenue:
Separative work units $467.0 $490.4 $1,266.2 $861.2
Uranium 26.2 49.2 150.2 154.5
U.S. government contracts and other 56.1 50.8 152.8 167.0
Total revenue 549.3 590.4 1,569.2 1,182.7
Cost of sales:
Separative work units and uranium 461.3 498.0 1,268.1 894.2
U.S. government contracts and other 48.8 44.0 142.3 137.8
Total cost of sales 510.1 542.0 1,410.4 1,032.0
Gross profit 39.2 48.4 158.8 150.7
Special charge for workforce reduction 2.5 - 2.5 -
Advanced technology costs 31.7 29.1 93.8 81.2
Selling, general and administrative 14.0 12.4 45.1 40.7
Operating income (loss) (9.0 ) 6.9 17.4 28.8
Interest expense 0.2 4.0 1.0 15.5
Interest (income) (0.2 ) (4.5 ) (1.2 ) (21.3 )
Income (loss) before income taxes (9.0 ) 7.4 17.6 34.6
Provision (benefit) for income taxes (2.8 ) (1.0 ) 8.6 11.0
Net income (loss) $(6.2 ) $8.4 $9.0 $23.6
Net income (loss) per share - basic $(.06 ) $.08 $.08 $.21
Net income (loss) per share - diluted $(.06 ) $.06 $.06 $.18
Weighted-average number of shares outstanding:
Basic 111.8 110.8 111.3 110.5
Diluted 111.8 158.9 160.0 158.7

USEC Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(millions)

September 30, December 31,
2009 2008
ASSETS
Current Assets
Cash and cash equivalents $69.3 $248.5
Accounts receivable 164.7 154.1
Inventories 1,435.0 1,231.9
Deferred income taxes 45.3 67.9
Other current assets 227.9 188.3
Total Current Assets 1,942.2 1,890.7
Property, Plant and Equipment, net 1,063.5 736.1
Other Long-Term Assets
Deferred income taxes 293.0 273.3
Deposits for surety bonds 173.8 135.1
Bond financing costs, net 10.5 12.0
Goodwill 6.8 6.8
Other long-term assets 2.0 1.3
Total Other Long-Term Assets 486.1 428.5
Total Assets $3,491.8 $3,055.3

LIABILITIES AND STOCKHOLDERS` EQUITY
Current Liabilities
Current portion of long-term debt $ - $95.7
Accounts payable and accrued liabilities 153.4 172.3
Payables under Russian Contract 154.9 121.5
Inventories owed to customers and suppliers 546.0 130.2
Deferred revenue and advances from customers 230.8 196.7
Total Current Liabilities 1,085.1 716.4
Long-Term Debt 575.0 575.0
Other Long-Term Liabilities
Depleted uranium disposition 147.8 119.5
Postretirement health and life benefit obligations 174.8 168.1
Pension benefit liabilities 225.5 223.1
Other liabilities 99.0 90.8
Total Other Long-Term Liabilities 647.1 601.5
Stockholders` Equity 1,184.6 1,162.4
Total Liabilities and Stockholders` Equity $3,491.8 $3,055.3

USEC Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(millions)

Nine Months Ended
September 30,
2009 2008
Cash Flows from Operating Activities
Net income $9.0 $23.6
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 23.2 27.6
Deferred income taxes (0.1 ) (11.7 )
Changes in operating assets and liabilities:
Accounts receivable - (increase) decrease (10.6 ) 6.5
Inventories - (increase) decrease 212.7 (219.8 )
Payables under Russian Contract - increase (decrease) 33.4 (2.4 )
Deferred revenue, net of deferred costs - increase (decrease) (26.4 ) 14.8
Accrued depleted uranium disposition 28.3 15.4
Accounts payable and other liabilities - increase (decrease) 22.9 (17.7 )
Other, net 27.0 (20.5 )
Net Cash Provided by (Used in) Operating Activities 319.4 (184.2 )

Cash Flows Used in Investing Activities
Capital expenditures (363.2 ) (309.2 )
Deposits for surety bonds (38.2 ) (10.3 )
Net Cash (Used in) Investing Activities (401.4 ) (319.5 )

Cash Flows Used in Financing Activities
Borrowings under credit facility - 48.3
Repayments under credit facility - (48.3 )
Repayment and repurchases of senior notes (95.7 ) (23.6 )
Payments for deferred financing costs (0.7 ) -
Common stock issued (purchased), net (0.8 ) (0.2 )
Net Cash (Used in) Financing Activities (97.2 ) (23.8 )
Net (Decrease) (179.2 ) (527.5 )
Cash and Cash Equivalents at Beginning of Period 248.5 886.1
Cash and Cash Equivalents at End of Period $69.3 $358.6
Supplemental Cash Flow Information:
Interest paid, net of amount capitalized $5.6 $11.3
Income taxes paid 5.3 49.2

USEC Inc.
Investors: Steven Wingfield, 301-564-3354
Media: Elizabeth Stuckle, 301-564-3399

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