What d'ya think?
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USEC Reports Results for the First Fiscal Quarter Ended September 30, 1998
Business Wire - October 15, 1998 17:41
BETHESDA, Md.--(BUSINESS WIRE)--Oct. 15, 1998--
Management Reaffirms Strong Returns, Margins and Dividends;
Sees FY99 Revenue on Target; Expects FY99 Earnings to be Below
Analysts' Estimates Due to Record High Midwest Electricity Costs
and Downward Revision in Department of Commerce's Inflation Index
USEC Inc. (NYSE: USU) Thursday reported revenue and earnings in line with analysts' expectations for the first fiscal quarter ended September
30, 1998, as follows:
Three Months Ended September 30, 1998
before special after special
tax benefit(a) tax benefit(a)
---------------- ----------------
Revenue $307.9 million $307.9 million
Gross Profit $ 59.3 million $ 59.3 million
Net income $ 8.6 million $ 63.1 million
Net income per share
share $.09 per share $.63 per share
(a) The quarter includes a special tax benefit of $54.5 million
for deferred income tax benefits that arise from the Company's
transition to taxable status.
Commenting on the Company's results, William H. Timbers, Jr., President and Chief Executive Officer of USEC said, "First quarter results are on
target, and revenue for the fiscal year is anticipated to be in line with analysts' expectations. However, our fiscal year 1999 costs will be greater
than previously estimated because the effects of record-high electric power costs have continued from early summer into the fall, an
unanticipated downward revision in the inflation index by the Department of Commerce, and increased interest and income tax expenses. Despite
these changes in this year's costs, we are confident that USEC will continue to generate strong returns, margins and dividends."
Persistent hot weather, high electricity demand in the Midwest and power generation shortages resulted in unexpected widespread continuation
of higher power costs through August, September and into October with a resulting negative impact on the Company's Paducah, Ky. plant's
production costs. Management initially responded by curtailing production at Paducah to help reduce the impact of these higher power prices on
production costs. Because the power costs continued to remain unusually high through August, September and into October, management has
extended its response by restoring production at the Paducah plant over a longer period than contemplated earlier in the summer, and will be
increasing total production over the remainder of the fiscal year to help meet production and cost targets.
Under the Company's average inventory cost method, most of the impact of higher power costs and lower production volumes on unit production
costs is expected to affect cost of sales over the next several quarters. Additionally, as one of the largest consumers of electric power in the
United States, with flexibility to shape its production schedules and use of power, the Company is aggressively pursuing opportunities to secure
more favorable power arrangements and establish contingencies against a recurrence of this year's events.
During the quarter, the U.S. Commerce Department revised its inflation index downward, causing existing contract sales price appreciation to be
slower than anticipated going forward. The Company also expects increased interest expense from additional borrowings during the year. In
addition, the Company became a taxable entity in July and made sales at the end of that month, thereby incurring income tax expense sooner.
"While we expect revenue to be in line with current estimates, due to the factors previously identified, management currently believes the
Company's fiscal 1999 earnings could be about 25 percent below analysts' consensus estimate of $1.60 per share," Timbers said. "Because of the
unique timing and size of customer orders, USEC management gauges Company performance over the longer term, not on a quarter-to-quarter
basis. This is based upon factors that include the refueling schedules for customer reactors (18 to 24 months) that are affected by the seasonal
nature of electricity demand and reactor maintenance schedules. We reaffirm that USEC will continue to generate strong returns, margins and
dividends," Timbers concluded.
USEC Inc. is the world leader in production and sales of uranium fuel enrichment services for commercial nuclear power plants. A global energy
company with customers in 14 countries, the Company's operations involve approximately 5,000 people. With headquarters in Bethesda, the
Company manages production plants in Kentucky and Ohio, and is developing an advanced laser enrichment technology in California.
This news release includes certain forward-looking information (within the meaning of the Private Securities Litigation Reform Act of 1995) that
involves risks and uncertainty, including certain assumptions regarding the future performance of the Company. Actual results and trends may
differ materially depending upon a variety of factors, including, without limitation, market demand for the Company's services, pricing trends in the
enrichment market, the availability and cost of electric power, the Company's ability to successfully execute its internal performance plans, the
cyclical nature of the Company's business and the impact of any government regulation. Additional information regarding the foregoing factors is
contained in the Company's Registration Statement on Form S-1, as previously filed with the Securities and Exchange Commission.
USEC Inc.
Condensed Statements of Income (a)
(millions, except per share data)
(Unaudited)
Three Months Ended
September 30,
1998 1997
-----------------------
Revenue $307.9 $440.4
Cost of sales 248.6 342.1
------ ------
Gross profit 59.3 98.3
Project development costs 31.6 32.2
Selling, general and administrative 7.9 8.1
------ -----
Operating income 19.8 (b) 58.0 (b)
Interest expense 6.5 -
Other (income) expense, net (1.6) (2.0)
------ -----
Income before income taxes 14.9 60.0
Provision (benefit) for income taxes (48.2) (c) -
------ ------
Net income $63.1 (d) $60.0
====== ======
Net income per share-basic and diluted $.63 (d)
Average number of shares outstanding 100.0
(a) Because of the unique timing and size of customer orders,
USEC management gauges Company performance over the longer term, not
on a quarter-to-quarter basis. This is based upon factors that
include the refueling schedules for customer reactors (18 to 24
months) that are affected by the seasonal nature of electricity
demand and reactor maintenance schedules.
(b) Operating income currently includes product development costs
for AVLIS. The Company intends to capitalize its future AVLIS
project development costs as soon as appropriate.
(c) At the time of the Offering, the Company became subject to
federal, state and local income taxes. The provision for income
taxes includes a special income tax benefit of $54.5 million for
deferred income tax benefits that arise from the Company's transition
to taxable status. Deferred tax benefits represent differences
between the carrying amounts for financial reporting purposes and the
Company's estimate of the tax bases of its assets and liabilities.
Excluding the special tax benefit, the provision for income taxes
for the first fiscal quarter ended September 30, 1998, amounted to
$6.3 million.
(d) Excluding the special tax benefit, net income was $8.6 million
or $.09 per share. |
