Centrus Energy (LEU) - 2024 Q2 - Quarterly Report

Geopolitical and Supply Chain Risks - Risks related to the war in Ukraine and geopolitical conflicts, including potential sanctions or bans impacting the company's ability to obtain, deliver, or sell LEU and natural uranium hexafluoride components under the TENEX Supply Contract[11] - Risks related to laws banning imports of Russian LEU into the United States, including the Import Ban Act, and transactions with Rosatom or its subsidiaries[11] - Risks related to the company's dependence on suppliers like TENEX and Orano, and potential negative impacts on liquidity due to supply chain disruptions[13] - Risks related to increasing quantities of LEU being imported into the U.S. from China, potentially affecting future sales and financing for enrichment capacity buildout[13] HALEU and Government Contracts - Risks related to government funding or demand for HALEU (High-Assay Low-Enriched Uranium) for government or commercial uses, and uncertainty regarding its materialization[13] - Risks related to the company's ability to perform under the HALEU Operation Contract and secure new contracts and funding for continued operations[13] - The HALEU Operation Contract has a base value of approximately $150 million, with Phase 1 completed and Phase 2 expected to be worth approximately$90 million[41] - The company has delivered approximately 179 kilograms of HALEU UF6 to the DOE, with a target of 900 kilograms per year under Phase 2 of the HALEU Operation Contract[41] Cybersecurity and Operational Risks - Risks related to cybersecurity incidents that may impact business operations and the ability to perform under government contracts[15] Financial Liabilities and Pension Obligations - Risks related to the company's long-term liabilities, including unfunded pension plan obligations and postretirement health and life benefit obligations[16] - The company recorded a remeasurement gain of $16.6 million for both the three and six months ended June 30, 2024, due to lump sum payouts and the transfer of pension plan obligations to an insurer[66][67] - The company transferred approximately$234 million of pension plan obligations to an insurer, funded by $224 million of pension plan assets[66] Competitive and Industry Risks - Risks related to the competitive environment for the company's products and services, including potential changes in the nuclear energy industry[18] Legal and Regulatory Risks - Risks related to legal proceedings, government investigations, and potential claims or litigation arising from past activities at operational sites[19] - The company is assessing a potential liability of approximately$9.6 million related to the Joppa Power Plant D&D costs under the Power MOU with DOE[87] - The company is involved in a class action lawsuit related to alleged off-site contamination from activities at the Portsmouth GDP site, with claims proceeding to the discovery stage[89] - The company is named as a defendant in a lawsuit alleging radiation release in violation of the Price-Anderson Act, with the company seeking indemnification under the Act[90] - The company and Enrichment Corp. are involved in legal proceedings related to alleged radiation release, but believe their operations were in compliance with NRC regulations and expect indemnification under the Price-Anderson Act[91][93] - The company does not believe that the outcome of any legal matters will have a material adverse effect on its cash flows, results of operations, or consolidated financial condition[94] Financial Performance and Revenue Growth - Total revenue for Q2 2024 increased to $189.0 million, up from$98.4 million in Q2 2023, driven by growth in separative work units and technical solutions[24] - Net income for Q2 2024 rose to $30.6 million, compared to$12.7 million in Q2 2023, reflecting improved profitability[24] - Gross profit for Q2 2024 was $36.5 million, up from$28.0 million in Q2 2023, driven by higher revenue and cost management[24] - Basic net income per share for Q2 2024 was $1.89, compared to$0.84 in Q2 2023, indicating strong earnings growth[24] - Revenue from separative work units surged to $139.7 million in Q2 2024, up from$48.1 million in Q2 2023, reflecting strong demand[24] - Technical solutions revenue grew to $19.4 million in Q2 2024, up from$10.8 million in Q2 2023, indicating expansion in this segment[24] - Net income for the six months ended June 30, 2024, increased to $24.5 million from$19.9 million in 2023, reflecting a 23.1% growth[26] - Revenue from SWU and uranium sales for the six months ended June 30, 2024, was $193.2 million, up from$146.4 million in 2023, a 32.0% increase[35] - Revenue from foreign markets for the six months ended June 30, 2024, was $107.1 million, up from$14.9 million in 2023, a 618.8% increase[35] - Revenue for the LEU segment in June 2024 was $169.6 million, compared to$87.6 million in June 2023, representing a significant increase[95] - Revenue for the Technical Solutions segment in June 2024 was $19.4 million, compared to$10.8 million in June 2023, showing growth[95] - Gross profit for the LEU segment in June 2024 was $33.0 million, compared to$26.8 million in June 2023[95] - Gross profit for the Technical Solutions segment in June 2024 was $3.5 million, compared to$1.2 million in June 2023[95] - Total revenue for the company in June 2024 was $189.0 million, compared to$98.4 million in June 2023[95] - Total gross profit for the company in June 2024 was $36.5 million, compared to$28.0 million in June 2023[95] - Four major customers in the LEU segment contributed $42.3 million,$35.4 million, $34.5 million, and$30.2 million respectively in the three months ended June 30, 2024[97] - One major customer in the Technical Solutions segment contributed $18.9 million in the three months ended June 30, 2024[97] Cash Flow and Liquidity - Cash and cash equivalents increased to$227.0 million as of June 30, 2024, up from $201.2 million at the end of 2023[22] - Total current assets decreased to$592.5 million as of June 30, 2024, down from $685.4 million at the end of 2023, primarily due to lower inventories[22] - Total liabilities decreased to$591.6 million as of June 30, 2024, down from $763.9 million at the end of 2023, reflecting reduced long-term debt and other liabilities[22] - Total stockholders' equity increased to$76.6 million as of June 30, 2024, up from $32.3 million at the end of 2023, driven by improved retained earnings[22] - Cash provided by operating activities for the six months ended June 30, 2024, was$12.3 million, compared to $15.2 million in 2023, a decrease of 19.1$34.5 million from $49.4 million at December 31, 2023, a 30.2$8.7 million, down from $9.2 million at December 31, 2023, a 5.4$259.6 million as of June 30, 2024, from $233.8 million at the beginning of the period, a 11.0$27.8 million from $252.4 million on December 31, 2023, to$224.6 million on June 30, 2024[37] - Advances from customers (current) increased by $2.6 million from$30.2 million on December 31, 2023, to $32.8 million on June 30, 2024[37] - Previously deferred sales and advances from customers recognized in revenue totaled$64.7 million for the six months ended June 30, 2024[37] - Cash and cash equivalents increased by $25.8 million from$201.2 million on December 31, 2023, to $227.0 million on June 30, 2024[50] - Cash and cash equivalents classified as Level 1 assets increased from$201.2 million in December 2023 to $227.0 million in June 2024[60] Capital Expenditures and Investments - Capital expenditures for the six months ended June 30, 2024, were$2.4 million, compared to $0.7 million in 2023, a 242.9$12.1 million in common stock during the three months ended June 30, 2024, contributing to the increase in stockholders' equity[28] - The company sold 275,202 shares of Class A Common Stock for $12.5 million in the three months ended June 30, 2024, and 451,830 shares for$19.9 million in the six months ended June 30, 2024, with net proceeds of $12.2 million and$19.3 million respectively after expenses[71] - In the six months ended June 30, 2023, the company sold 722,568 shares of Class A Common Stock for $24.4 million, with net proceeds of$23.4 million after expenses[72] - The company plans to use the net proceeds from the sale of securities for working capital, capital expenditures, repayment of indebtedness, potential acquisitions, and other business opportunities[73] - The Fifth Amendment to the Rights Agreement increased the purchase price for each one one-thousandth of a share of Series A Participating Cumulative Preferred Stock from $18.00 to$160.38 and extended the Final Expiration Date to June 30, 2026[76] Inventory and Asset Management - Inventories, net decreased by $27.9 million from$222.1 million on December 31, 2023, to $194.2 million on June 30, 2024[54] - Intangible assets related to the LEU segment backlog decreased from$13.0 million in December 2023 to $10.5 million in June 2024, reflecting amortization as deliveries to customers reduced the backlog[56] - The total intangible assets decreased from$39.4 million in December 2023 to $34.6 million in June 2024, primarily due to amortization of customer relationships and backlog[56] - The carrying value of the 8.25$95.7 million in December 2023 to $92.6 million in June 2024, with an estimated fair value of$74.0 million as of June 2024[62][63] Legal and Contractual Obligations - The company has purchase commitments under the TENEX Supply Contract that could extend to 2028, with the obligation to pay for all SWU in its minimum purchase obligation each year[81] - The Orano Supply Agreement, amended in 2018, provides for the supply of SWU through 2030, with pricing determined by a formula using market-related price points and other factors[83] - The company's total remaining performance obligations were $0.9 billion as of June 30, 2024, extending to 2030[46] - Remaining performance obligations in the LEU segment were approximately$0.8 billion as of June 30, 2024[47] - Remaining performance obligations in the Technical Solutions segment were approximately $38.9 million as of June 30, 2024[49] Shareholder and Equity Information - The weighted average number of common shares outstanding for diluted net income per share increased from 15,306 thousand in June 2023 to 16,125 thousand in June 2024[68] - The company filed a shelf registration statement in June 2023, allowing it to offer and sell up to$200 million in securities[70]