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Non-Tech : USU: USEC Inc.

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From: Jack Hartmann	3/2/2010 9:06:38 AM
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Highlights from CC Taking a look at the bottom line we reported net income for the year of $58.5 million compared to net income of $48.7 million in 2008. Our annual results were bolstered by a fourth quarter where we reported net income of $49.5 million or roughly double the net income reported in the fourth quarter of 2008. Full-year 2009 SWU sales volume was 30% higher than 2008 due to the timing of nuclear utility refuelants As you know, we began demobilizing construction activities for the American Centrifuge Plant in August. In 2008 the main reason we had a negative cash flow from operations was that we increased our inventory by $271 million to prepare for an increase in customer deliveries during 2009. Clearly we are facing a challenging environment. Although our revenues are expected to stay strong at approximately $2 billion gross profit margin is under pressure. We are seeing a repeat of an average inventory cost that is expected to rise at a faster rate than the average price billed to customers. There is some open demand for SWU but probably not enough to change that picture in 2010 We have seen clear signals and actions by the DOE and the Obama Administration that are supportive of nuclear power and USEC. Following the regularly scheduled quarterly meeting with DOE officials to update them on our progress towards deploying the American Centrifuge we learned that DOE is prepared to work with us to reach an agreement that would provide USEC with $45 million in matching funds to continue American Centrifuge development and demonstration activities As we have previously discussed, DOE raised technical and financial concerns last summer about our loan guarantee application for $2 billion. As a result, the DOE and USEC agreed to delay final review of our application. We took the steps necessary to de-mobilize construction of the plant and to scale back some development activities to preserve liquidity as we focused on addressing DOE’s concerns. We also underwent a quality stand-down to remove, disassemble and inspect all of the AC100 machines. We have reassembled these machines with improved components. The procedures coming out of that stand down will insure full compliance with our quality assurance program for centrifuge component manufacturing and assembly. We have revised our technology and demonstration program to fully address the concerns and issues identified in the DOE’s independent engineer’s report on the project. The engineers in DOE want to see production ready machines operate in a commercial cascade configuration. To address that concern we have installed more than two dozen production ready AC100 machines with updated components in Piketon, Ohio. The machines are spinning and have been going through a lengthy process of commissioning on uranium gas. In essence we are keeping the supply chain warm so that we can restart more quickly when we receive the DOE loan guarantee funding. Two, we are further demonstrating that the quality control issues in assembly have been rectified. We recognize the cost of demobilizing and remobilizing the project and higher costs for building the plant and machines will require more than $2 billion from the DOE loan guarantee program and our expected internally generated cash flow from operations to complete the project. We do continue to see great interest by our customers in completing the American Centrifuge Project. There are more than 50 reactors currently under construction worldwide and a new wave of U.S. reactors would add to the future demand of our product. They also want diversity of supply and they want to see a U.S. owned and operated enrichment plant. As is typical for USEC our SWU sales made up the majority of revenue. Revenue from SWU sales was 21% and 40% higher for the quarter and year respectively compared to the same period for 2008. For the full-year SWU volume increased 30% compared to 2008 due to the timing of utility customer refueling. As SWU contracts that we have signed in recent years at higher prices and with price adjusters become a larger portion of our backlog we are seeing an increase in average prices billed to customers. Uranium revenue was $31 million in the fourth quarter which was a decrease of $32 million compared to the same quarter in 2008. For the full-year uranium revenue totaled $181 million, a decrease of $36 million or 17%. Looking at the annual results the average price billed to customers for uranium was up 28% over the prior year but uranium sales volume was 35% lower due to the mix and timing of sales contracts. Uranium market prices generally declined during the past year so we do not expect to see the same kind of price increase in 2010.

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