LEU 10-Q

Centrus Energy Corp (LEU)

10-Q 2023-08-04 For: 2023-06-30

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Added on April 08, 2026

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Delaware			52-2107911
(State of incorporation)			(I.R.S. Employer Identification No.)


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Class A Common Stock, par value $0.10 per share	LEU	NYSE American


		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):
	Consolidated Balance Sheets at June 3 0 , 2023 and December 31, 2022	9
	Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended Ju ne 3 0 , 2023 and 2022	10
	Consolidated Statements of Cash Flows for the Six Months Ended June 3 0 , 2023 and 2022	11
	Consolidated Statements of Stockholders’ Deficit for the Three and Six Months Ended June 3 0 , 2023 and 2022	12
	Notes to Consolidated Financial Statements	13
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46

	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 5.	Other Information	47
Item 6.	Exhibits	48
Signatures		49


Centrus Energy Corp. and Related Entities
Board			Centrus Energy Corp.’s Board of Directors
Centrus			Centrus Energy Corp.
Enrichment Corp.			United States Enrichment Corporation
Oak Ridge			Technology and Manufacturing Center in Oak Ridge, Tennessee
Paducah GDP			Paducah Gaseous Diffusion Plant, an enrichment plant in Paducah, Kentucky formerly operated by Enrichment Corp.
Piketon			Centrifuge production facility in Piketon, Ohio
Portsmouth GDP			Portsmouth Gaseous Diffusion Plant, an enrichment plant near Portsmouth, Ohio, formerly operated by Enrichment Corp.
USEC-Government			Enrichment Corp. prior to July 28, 1998, when it was a wholly-owned government corporation

Other Terms and Abbreviations
2002 DOE-USEC Agreement			June 17, 2002 agreement between Centrus (then known as USEC Inc.) and the DOE
8.25% Notes			8.25% Notes maturing February 2027
Annual Meeting			The Company’s annual meeting of shareholders
ARDP			DOE’s Advanced Reactor Demonstration Program
ATM			At-the-Market
Class A Common Stock			Class A common stock, $0.10 par value per share
Class B Common Stock			Class B common stock, $0.10 par value per share
Common Stock			Class A Common Stock and Class B Common Stock
D&D			Decontamination & Decommissioning
DOC			U.S Department of Commerce
DOE			U.S. Department of Energy
EU			European Union
Exchange Act			Securities Exchange Act of 1934, as amended
Exchange Agreement			Exchange Agreement entered into by the Company and Kulayba LLC, dated February 2, 2021
GAAP			Generally Accepted Accounting Principles in the United States
HALEU			High Assay Low-Enriched Uranium
HALEU Demonstration Contract			Three-year, $115 million cost-share contract with DOE signed in 2019 by Centrus’ subsidiary, ACO, and concluded in November 2022
HALEU Operation Contract			HALEU production contract with DOE signed in 2022
IEA			International Energy Agency
IRC			Internal Revenue Code of 1986
IT			Information Technology
ITC			U.S. International Trade Commission
LEU			Low-Enriched Uranium; term is also used to refer to the Centrus Energy Corp. business segment which supplies commercial customers with various components of nuclear fuel
MB Group			Mr. Morris Bawabeh, Kulayba LLC and M&D Bawabeh Foundation, Inc.
Natural Uranium Hexafluoride			UF6 component of LEU; Unenriched uranium hexafluoride used as feed material to produce HALEU
NOL			Net Operating Loss
NRC			U.S. Nuclear Regulatory Commission
NUBIL			Net unrealized built-in loss


Orano			Orano Cycle
Orano Supply Agreement			Long-term supply of SWU contained in LEU, signed by United States Enrichment Corporation with Orano in 2018
Order Book			LEU Segment order book of sales under contract
Power MOU			Memorandum of understanding between the DOE and USEC-Government
Price-Anderson Act			Price-Anderson Nuclear Industries Indemnity Act (Section 170 of the U.S. Atomic Energy Act of 1954, as amended)
Rights Agreement			Section 382 Rights Agreement, dated as of April 6, 2016, by and among the Company and Computershare Trust Company, N.A. and Computershare Inc., as rights agent
RSA			1992 Russian Suspension Agreement, as amended
SARs			Stock appreciation rights
SEC			U.S. Securities & Exchange Commission
SWU			Separative work unit
Technical Solutions			The Centrus Energy Corp. business segment which offers technical, manufacturing, engineering, procurement, construction, and operations services to public and private sector customers, e.g. ACO
TENEX			Russian government-owned entity TENEX, Joint-Stock Company
TENEX Supply Contract			Long-term supply of SWU contained in LEU, signed by United States Enrichment Corporation with TENEX in 2011
TRISO			Tri-Structural Isotopic fuel
U235			Uranium-235 isotope
UF6			Uranium hexafluoride
Voting Agreement Amendment			The Company’s amendment to its existing Voting and Nomination Agreement with the MB Group
Voting Rights Agreement			The Company’s agreement with the MB Group entered into in December 2022
Warrant			Warrant to purchase common stock of Centrus Energy Corp., held by Kulayba LLC and dated February 2, 2021
New Warrant			Amended Warrant to extend the terms of the Warrant held by Kulayba LLC
WNA			World Nuclear Association


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	212.5	$	179.9
Accounts receivable	9.0		38.1
Inventories	288.6		209.2
Deferred costs associated with deferred revenue	137.0		135.7
Other current assets	9.0		24.2
Total current assets	656.1		587.1
Property, plant and equipment, net of accumulated depreciation of $3.9 million as of June 30, 2023 and $3.6 million as of December 31, 2022	5.7		5.5
Deposits for financial assurance	32.3		32.3
Intangible assets, net	42.9		45.7
Deferred tax assets	21.5		26.8
Other long-term assets	3.5		8.1
Total assets	$	762.0	$	705.5

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	50.9	$	65.5
Payables under inventory purchase agreements	33.8		43.6
Inventories owed to customers and suppliers	72.8		60.8
Deferred revenue and advances from customers	295.3		273.2
Current debt	6.1		6.1
Total current liabilities	458.9		449.2
Long-term debt	92.6		95.7
Postretirement health and life benefit obligations	83.8		84.5
Pension benefit liabilities	43.3		43.6
Advances from customers	32.8		46.2
Long-term inventory loans	74.1		48.7
Other long-term liabilities	9.0		11.7
Total liabilities	794.5		779.6
Commitments and contingencies (Note 11)
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, none issued	—		—
Class A Common Stock, par value $0.10 per share, 70,000,000 shares authorized, 14,806,438 and 13,919,646 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	1.5		1.4
Class B Common Stock, par value $0.10 per share, 30,000,000 shares authorized, 719,200 shares issued and outstanding as of June 30, 2023 and December 31, 2022	0.1		0.1
Excess of capital over par value	179.8		158.1
Accumulated deficit	(214.0)		(233.9)
Accumulated other comprehensive income	0.1		0.2
Total stockholders’ deficit	(32.5)		(74.1)
Total liabilities and stockholders’ deficit	$	762.0	$	705.5


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue:
Separative work units	$	48.1	$	85.5	$	106.9	$	98.3
Uranium	39.5		—		39.5		4.9
Technical solutions	10.8		13.6		18.9		31.2
Total revenue	98.4		99.1		165.3		134.4
Cost of Sales:
Separative work units and uranium	60.8		26.1		95.7		40.9
Technical solutions	9.6		12.1		18.6		26.3
Total cost of sales	70.4		38.2		114.3		67.2
Gross profit	28.0		60.9		51.0		67.2
Advanced technology costs	4.1		3.5		7.5		4.6
Selling, general and administrative	7.8		8.3		18.1		15.8
Amortization of intangible assets	1.7		4.0		2.8		5.1
Special charges for workforce reductions	—		0.5		(0.1)		0.5
Operating income	14.4		44.6		22.7		41.2
Nonoperating components of net periodic benefit loss (income)	0.4		(3.4)		0.7		(6.7)
Interest expense	0.2		—		0.5		—
Investment income	(2.2)		(0.2)		(4.1)		(0.2)
Income before income taxes	16.0		48.2		25.6		48.1
Income tax expense	3.3		10.8		5.7		11.1
Net income and comprehensive income	$	12.7	$	37.4	$	19.9	$	37.0




Net income per share:
Basic	$	0.84	$	2.56	$	1.33	$	2.54
Diluted	$	0.83	$	2.51	$	1.30	$	2.48
Average number of common shares outstanding (in thousands):
Basic	15,161		14,587		15,002		14,567
Diluted	15,369		14,876		15,306		14,903


	Six Months Ended June 30,
	2023		2022
OPERATING
Net income	$	19.9	$	37.0
Adjustments to reconcile net income to cash used in operating activities:
Depreciation and amortization	3.2		5.4
Accrued loss on long-term contract	(11.3)		(0.5)
Deferred tax assets	5.3		10.6
Equity related compensation	1.6		1.4
Revaluation of inventory borrowing	2.9		5.5
Changes in operating assets and liabilities:
Accounts receivable	29.2		5.1
Inventories	(54.8)		(10.7)
Inventories owed to customers and suppliers	12.0		(8.1)
Other current assets	15.2		(15.1)
Accounts payable and other liabilities	(2.1)		(8.0)
Payables under inventory purchase agreements	(9.8)		(37.9)
Deferred revenue and advances from customers, net of deferred costs	5.3		(30.6)

Pension and postretirement benefit liabilities	(1.2)		(10.0)
Other, net	(0.2)		(0.3)
Cash provided by (used in) operating activities	15.2		(56.2)

INVESTING
Capital expenditures	(0.7)		(0.5)
Cash used in investing activities	(0.7)		(0.5)

FINANCING
Proceeds from the issuance of common stock, net	23.2		—
Exercise of stock options	—		0.2


Withholding of shares to fund grantee tax obligations under stock-based compensation plan	(1.9)		—
Payment of interest classified as debt	(3.1)		(3.1)
Other	(0.1)		(0.3)
Cash provided by (used in) financing activities	18.1		(3.2)

Increase (decrease) in cash, cash equivalents and restricted cash	32.6		(59.9)
Cash, cash equivalents and restricted cash, beginning of period (Note 3)	212.4		196.8
Cash, cash equivalents and restricted cash, end of period (Note 3)	$	245.0	$	136.9

Non-cash activities:

Reclassification of stock-based compensation liability to equity	$	—	$	10.6
Adjustment of right to use lease assets from lease modification	$	4.2	$	—
Property, plant and equipment included in accounts payable and accrued liabilities	$	—	$	0.2
Equity issuance costs included in accounts payable and accrued liabilities	$	0.1	$	—
Shares withheld for employee taxes	$	1.1	$	1.9


	Preferred Stock, Series B		Common Stock, Class A, Par Value $0.10 per Share		Common Stock, Class B, Par Value $0.10 per Share		Excess of Capital Over Par Value		Accumulated Deficit		Accumulated Other Comprehensive Income		Total
Balance at December 31, 2021	$	—	$	1.4	$	0.1	$	140.7	$	(284.6)	$	0.5	$	(141.9)
Net loss for the three months ended March 31, 2022	—		—		—		—		(0.4)		—		(0.4)

Options exercised	—		—		—		0.2		—		—		0.2
Reclassification of stock-based compensation liability to equity	—		—		—		10.6		—		—		10.6
Stock-based compensation shares withheld for employee taxes	—		—		—		(1.9)		—		—		(1.9)
Other comprehensive loss	—		—		—		—		—		(0.1)		(0.1)
Stock-based compensation	—		—		—		0.5		—		—		0.5
Balance at March 31, 2022	$	—	$	1.4	$	0.1	$	150.1	$	(285.0)	$	0.4	$	(133.0)

Net income for the three months ended June 30, 2022	—		—		—		—		37.4		—		37.4



Other comprehensive loss	—		—		—		—		—		(0.1)		(0.1)
Stock-based compensation	—		—		—		0.8		—		—		0.8
Balance at June 30, 2022	$	—	$	1.4	$	0.1	$	150.9	$	(247.6)	$	0.3	$	(94.9)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
United States	$	72.8	$	7.3	$	131.5	$	19.9
Foreign	14.8		78.2		14.9		83.3
Revenue - SWU and uranium	$	87.6	$	85.5	$	146.4	$	103.2


	June 30, 2023		December 31, 2022
	($ millions)
Accounts receivable:
Billed	$	2.5	$	29.0
Unbilled *	6.5		9.1

Accounts receivable	$	9.0	$	38.1

* Billings under certain contracts in the Technical Solutions segment are invoiced based on approved provisional billing rates. Unbilled revenue represents the difference between actual costs incurred and invoiced amounts. The Company expects to invoice and collect the unbilled amounts after actual rates are submitted to the customer and approved. Unbilled revenue also includes unconditional rights to payment that are not yet billable under applicable contracts pending the compilation of supporting documentation.


	June 30, 2023		December 31, 2022		Year-To-Date Change
Accrued loss on HALEU Operation Contract:
Current - Accounts payable and accrued liabilities	$	8.7	$	20.0	$	(11.3)

Deferred revenue - current	$	265.1	$	258.4	$	6.7
Advances from customers - current	$	30.2	$	14.8	$	15.4
Advances from customers - noncurrent	$	32.8	$	46.2	$	(13.4)


	June 30, 2023				December 31, 2022
	Current		Long-Term		Current		Long-Term
Collateral for Inventory Loans	$	—	$	29.8	$	—	$	29.8
Workers Compensation	—		2.4		—		2.4
Other	0.2		0.1		0.2		0.1
Total deposits for financial assurance	$	0.2	$	32.3	$	0.2	$	32.3


	June 30, 2023						December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
Sales order book	$	54.6	$	40.4	$	14.2	$	54.6	$	39.9	$	14.7
Customer relationships	68.9		40.2		28.7		68.9		37.9		31.0
Total	$	123.5	$	80.6	$	42.9	$	123.5	$	77.8	$	45.7


	June 30, 2023					December 31, 2022
	Carrying Value			Estimated Fair Value (a)		Carrying Value			Estimated Fair Value (a)
8.25% Notes	$	98.7	(b)	$	68.3	$	101.8	(b)	$	68.8


			Centrus Energy Corp.

August 4, 2023			/s/ Philip O. Strawbridge
			Philip O. Strawbridge
			Senior Vice President, Chief Financial Officer,
			Chief Administrative Officer and Treasurer
			(Duly Authorized Officer and Principal Financial Officer)


	June 30, 2023						December 31, 2022
	Current Assets		Current Liabilities (a)		Inventories, Net		Current Assets		Current Liabilities (a)		Inventories, Net
Separative work units	$	19.9	$	—	$	19.9	$	24.1	$	—	$	24.1
Uranium	268.7		72.8		195.9		185.1		60.8		124.3
Total	$	288.6	$	72.8	$	215.8	$	209.2	$	60.8	$	148.4


		June 30, 2023				December 31, 2022
	Maturity	Current		Long-Term		Current		Long-Term
8.25% Notes:	Feb. 2027
Principal		$	—	$	74.3	$	—	$	74.3
Interest		6.1		18.3		6.1		21.4
Total		$	6.1	$	92.6	$	6.1	$	95.7


	June 30, 2023								December 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	212.5	$	—	$	—	$	212.5	$	179.9	$	—	$	—	$	179.9
Deferred compensation asset (a)	3.0		—		—		3.0		2.4		—		—		2.4

Liabilities:
Deferred compensation obligation (a)	$	3.0	$	—	$	—	$	3.0	$	2.4	$	—	$	—	$	2.4


Exhibit No.			Description
4.1			Fifth Amendment to the Section 382 Rights Agreement, dated as of June 20, 2023, by and among Centrus Energy Corp., Computershare Trust Company, N.A. and Computershare Inc. (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed on June 21, 2023)

10.1			Modification 31 to Agreement, dated April 2, 2023, by and between American Centrifuge Operating, LLC and the U.S. Department of Energy (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q, for the quarter ended March 31, 2023, filed on May 9, 2023)

10.2			Modification 3 to Agreement, dated April 3, 2023, by and between American Centrifuge Operating, LLC and the U.S. Department of Energy (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q, for the quarter ended March 31, 2023, filed on May 9, 2023)





31.1			Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). (a)

31.2			Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). (a)

32.1			Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350. (a)

101			Unaudited Consolidated Financial Statements from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed in interactive data file (XBRL) format.