leu-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2023


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

Commission file number 1-14287

Centrus Energy Corp.


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

6901 Rockledge Drive, Suite 800, Bethesda, Maryland 20817

(301) 564-3200

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of May 1, 2023, there were 14,761,818 shares of the registrant’s Class A Common Stock, par value $0.10 per share, and 719,200 shares of the registrant’s Class B Common Stock, par value $0.10 per share, outstanding.

TABLE OF CONTENTS


		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):
	Consolidated Balance Sheets at March 3 1 , 202 3 and December 31, 202 2	9
	Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended Mar ch 3 1 , 202 3 and 202 2	10
	Consolidated Statements of Cash Flows for the Three Months Ended March 3 1 , 202 3 and 202 2	11
	Consolidated Statements of Stockholders’ Deficit for the Three Months Ended March 3 1 , 202 3 and 202 2	12
	Notes to Consolidated Financial Statements	13
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40

	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 6.	Exhibits	42
Signatures		43

Glossary of Certain Terms and Abbreviations


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
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			Unenriched UF6 used to produce LEU
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)
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, and operations services to public and private sector customers
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
U.S. GAAP			Generally accepted accounting principles in the United States
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

FORWARD-LOOKING STATEMENTS

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q of Centrus (the “Company,” “we” or “us”) contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. In this context, forward-looking statements mean statements related to future events, which may impact our expected future business and financial performance, and often contain words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “will”, “should”, “could”, “would” or “may” and other words of similar meaning. These forward-looking statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q and represent management’s current views and assumptions with respect to future events and operational, economic and financial performance. Forward-looking statements are not guarantees of future performance, events or results and involve known and unknown risks, uncertainties and other factors, which may be beyond our control.

The factors that could cause actual results to differ materially from the forward-looking statements made by us include those factors discussed herein, including those factors discussed in (a) Part I, Item 1. Financial Statements (Unaudited): Note 11, Commitments and Contingencies, (b) Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, (c) Part II, Item 1A. Risk Factors, and (d) other factors discussed in the Company’s filings with the SEC.

For Centrus, 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 the following which are, and will be, exacerbated by any worsening of the global business and economic environment as a result:

Risks related to the war in Ukraine factors primarily include:

•risks related to the war in Ukraine and geopolitical conflicts and the imposition of sanctions or other measures by (i) the U.S. or foreign governments, (ii) organizations (including the United Nations, the EU or other international organizations), or (iii) entities (including private entities or persons), that could directly or indirectly impact our ability to obtain, deliver or sell LEU under the TENEX Supply Contract or make related payments or deliveries of natural uranium; and

•risks related to the refusal of TENEX to deliver LEU to us if, among other reasons, TENEX is unable to receive payments, or to receive the return of natural uranium, as a result of any government, international or corporate actions or directions or other reasons.

Risks related to economic and industry factors primarily include:

•risks related to whether or when government funding or demand for HALEU for government or commercial uses will materialize;

•risks and uncertainties regarding funding for continuation and deployment of the American Centrifuge technology;

•risks related to (i) our ability to perform and absorb costs under the HALEU Operation Contract, (ii) our ability to obtain contracts and funding to be able to continue operations and (iii) our ability to obtain and/or perform under other agreements;

•risks that (i) we may not obtain the full benefit of the HALEU Operation Contract and may not be able or allowed to operate the HALEU enrichment facility to produce HALEU after the completion of the HALEU Operation Contract or (ii) the HALEU enrichment facility may not be available to us as a future source of supply;

•risks related to our dependence on others, such as TENEX, under the TENEX Supply Contract, Orano under the Orano Supply Agreement and other suppliers (including transporters) who provide us the goods and services we need to conduct our business;

•risks related to natural and other disasters, including the continued impact of the March 2011 earthquake and tsunami in Japan on the nuclear industry and on our business, results of operations and prospects;

•risks related to financial difficulties experienced by customers or suppliers, including possible bankruptcies, insolvencies, or any other situation, event or occurrence that affect the ability of others to pay for our products or services in a timely manner or at all;

•risks related to pandemics, endemics, and other health crises;

•risks related to the impact and potential extended duration of a supply/demand imbalance in the market for LEU;

•risks related to our ability to sell or deliver the LEU we procure pursuant to our purchase obligations under our supply agreements and the impacts of sanctions or limitations on imports of such LEU, including those imposed under the RSA, international trade legislation and other international trade restrictions;

•risks related to existing or new trade barriers and to contract terms that limit our ability to procure LEU for, or deliver LEU to customers;

•risks related to pricing trends and demand in the uranium and enrichment markets and their impact on our profitability;

•risks related to the movement and timing of customer orders;

•risks related to our reliance on third-party suppliers and service providers to provide essential products and services to us;

•risks related to the fact that we face significant competition from major producers who may be less cost sensitive or are wholly or partially government owned;

•risks that our ability to compete in foreign markets may be limited for various reasons;

•risks related to the fact that our revenue is largely dependent on our largest customers; and

•risks related to our sales Order Book, including uncertainty concerning customer actions under current contracts and in future contracting due to market conditions, global events or other factors including our lack of current production capability.

Risks related to operational factors primarily include:

•risks related to uncertainty regarding our ability to commercially deploy competitive enrichment technology;

•risks related to the potential for demobilization or termination of our American Centrifuge work;

•risks that we will not be able to timely complete the work that we are obligated to perform; and

•risks related to our ability to perform fixed-price and cost-share contracts such as the HALEU Operation Contract, including the risk that costs that we must bear could be higher than expected.

Risks related to financial factors primarily include:

•risks related to our significant long-term liabilities, including material unfunded defined benefit pension plan obligations and postretirement health and life benefit obligations;

•risks related to our 8.25% Notes maturing in February 2027;

•risks of revenue and operating results fluctuating significantly from quarter to quarter, and in some cases, year to year;

•risks related to the impact of financial market conditions on our business, liquidity, prospects, pension assets and insurance facilities;

•risks related to the Company’s capital concentration;

•risks related to the value of our intangible assets related to the Order Book and customer relationships;

•risks related to the limited trading markets in our securities;

•risks related to decisions made by our Class B stockholders regarding their investment in the Company based upon factors that are unrelated to the Company’s performance;

•risks that a small number of holders of our Class A Common Stock (whose interests may not be aligned with other holders of our Class A Common Stock), may exert significant influence over the direction of the Company and may be motivated by interests that are not aligned with the Company’s other Class A stockholders;

•risks related to (i) the use of our NOL carryforwards and NUBILs to offset future taxable income and the use of the Rights Agreement (as defined herein) to prevent an “ownership change” as defined in Section 382 of the IRC and (ii) our ability to generate taxable income to utilize all or a portion of the NOLs prior to the expiration thereof and NUBILs; and

•failures or security breaches of our information technology systems.

Risks related to general factors primarily include:

•risks related to our ability to attract and retain key personnel;

•risks related to actions, including reviews, that may be taken by the U.S. government, the Russian government, or other governments that could affect our ability to perform under our contractual obligations or the ability of our sources of supply to perform under their contractual obligations to us;

•risks related to our ability to perform and receive timely payment under our agreements with the DOE or other government agencies, including risks and uncertainties related to the ongoing funding by the government and potential audits;

•risks related to changes or termination of our agreements with the U.S. government or other counterparties, or the exercise of contract remedies by such counterparties;

•risks related to the competitive environment for our products and services;

•risks related to changes in the nuclear energy industry;

•risks related to the competitive bidding process associated with obtaining contracts, including government contracts;

•risks that we will be unable to obtain new business opportunities or achieve market acceptance of our products and services or that products or services provided by others will render our products or services obsolete or noncompetitive; and

•risks related to potential strategic transactions that could be difficult to implement, disrupt our business or change our business profile significantly.

Risks related to legal and compliance factors primarily include:

•risks related to the outcome of legal proceedings and other contingencies (including lawsuits and government investigations or audits);

•risks related to the impact of government regulation and policies, including by the DOE and the U.S. NRC;

•risks of accidents during the transportation, handling, or processing of toxic hazardous or radioactive material that may pose a health risk to humans or animals, cause property or environmental damage, or result in precautionary evacuations, and lead to claims against the Company;

•risks associated with claims and litigation arising from past activities at sites we currently operate or past activities at sites that we no longer operate, including the Paducah, Kentucky and Portsmouth, Ohio GDPs; and

•other risks and uncertainties discussed in this and our other filings with the SEC.

For a more detailed discussion of these risks and uncertainties and others that could cause actual results to differ materially from those contained in our forward-looking statements, please see our Annual Report on Form 10-K for the year ended December 31, 2022. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Report. These factors may not constitute all factors that could cause actual results to differ from those discussed in any forward-looking statement. Accordingly, forward-looking statements should not be relied upon as a predictor of actual results. Readers are urged to carefully review and consider the various disclosures made in this report and in our other filings with the SEC that attempt to advise interested parties of the risks and factors that may affect our business. We do not undertake to update our forward-looking statements to reflect events or circumstances that may arise after the date of this Quarterly Report on Form 10-Q, except as required by law.

CENTRUS ENERGY CORP.

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except share and per share data)


	March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	188.8	$	179.9
Accounts receivable	34.1		38.1
Inventories	209.4		209.2
Deferred costs associated with deferred revenue	135.7		135.7
Other current assets	9.0		24.2
Total current assets	577.0		587.1
Property, plant and equipment, net of accumulated depreciation of $3.8 million as of March 31, 2023 and $3.6 million as of December 31, 2022	5.4		5.5
Deposits for financial assurance	32.3		32.3
Intangible assets, net	44.6		45.7
Deferred tax assets	24.6		26.8
Other long-term assets	5.1		8.1
Total assets	$	689.0	$	705.5

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	55.4	$	65.5
Payables under inventory purchase agreements	32.6		43.6
Inventories owed to customers and suppliers	17.2		60.8
Deferred revenue and advances from customers	273.3		273.2
Current debt	6.1		6.1
Total current liabilities	384.6		449.2
Long-term debt	92.6		95.7
Postretirement health and life benefit obligations	84.1		84.5
Pension benefit liabilities	43.4		43.6
Advances from customers	46.2		46.2
Long-term inventory loans	73.3		48.7
Other long-term liabilities	9.3		11.7
Total liabilities	733.5		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, 14,746,643 and 13,919,646 shares issued and outstanding as of March 31, 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 March 31, 2023 and December 31, 2022	0.1		0.1
Excess of capital over par value	180.5		158.1
Accumulated deficit	(226.7)		(233.9)
Accumulated other comprehensive income	0.1		0.2
Total stockholders’ deficit	(44.5)		(74.1)
Total liabilities and stockholders’ deficit	$	689.0	$	705.5

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

CENTRUS ENERGY CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited; in millions, except share and per share data)


	Three Months Ended March 31,
	2023		2022
Revenue:
Separative work units	$	58.8	$	12.8
Uranium	—		4.9
Technical solutions	8.1		17.6
Total revenue	66.9		35.3
Cost of Sales:
Separative work units and uranium	34.9		14.8
Technical solutions	9.0		14.2
Total cost of sales	43.9		29.0
Gross profit	23.0		6.3
Advanced technology costs	3.4		1.1
Selling, general and administrative	10.3		7.5
Amortization of intangible assets	1.1		1.1
Special charges for workforce reductions	(0.1)		—
Operating income (loss)	8.3		(3.4)
Nonoperating components of net periodic benefit loss (income)	0.3		(3.3)
Interest expense	0.3		—
Investment income	(1.9)		—
Income (loss) before income taxes	9.6		(0.1)
Income tax expense	2.4		0.3
Net income (loss) and comprehensive income (loss)	$	7.2	$	(0.4)




Net income (loss) per share:
Basic	$	0.49	$	(0.03)
Diluted	$	0.47	$	(0.03)
Average number of common shares outstanding (in thousands):
Basic	14,841		14,547
Diluted	15,241		14,547

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

CENTRUS ENERGY CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)


	Three Months Ended March 31,
	2023		2022
OPERATING
Net income (loss)	$	7.2	$	(0.4)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization	1.3		1.3
Accrued loss on long-term contract	(5.6)		(0.5)
Deferred tax assets	2.2		0.3
Equity related compensation	1.2		0.5
Revaluation of inventory borrowing	2.1		—
Changes in operating assets and liabilities:
Accounts receivable	5.3		16.6
Inventories	22.3		11.1
Inventories owed to customers and suppliers	(43.6)		(8.1)
Other current assets	15.1		(0.8)
Accounts payable and other liabilities	(4.2)		1.2
Payables under inventory purchase agreements	(11.1)		(28.3)
Deferred revenue and advances from customers, net of deferred costs	0.1		(0.3)

Pension and postretirement benefit liabilities	(0.7)		(5.1)
Other, net	(1.3)		(0.1)
Cash used in operating activities	(9.7)		(12.6)

INVESTING
Capital expenditures	(0.3)		(0.1)
Cash used in investing activities	(0.3)		(0.1)

FINANCING
Proceeds from the issuance of common stock, net	22.0		—
Exercise of stock options	—		0.2



Payment of interest classified as debt	(3.1)		(3.1)
Other	—		(0.3)
Cash provided by (used in) financing activities	18.9		(3.2)

Increase (decrease) in cash, cash equivalents and restricted cash	8.9		(15.9)
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)	$	221.3	$	180.9

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

Shares withheld for employee taxes	$	1.9	$	1.9
ATM proceeds included in accounts receivable	$	1.2	$	—

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

CENTRUS ENERGY CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited; in millions, except per share data)


	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)

SEC Form 10-Q filed by Centrus Energy Corp.