10-Q 1 leu-20220930.htm 10-Q leu-20220930
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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 September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-14287
Centrus Energy Corp.
Delaware52-2107911
(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 ClassTrading SymbolName of Each Exchange on Which Registered
Class A Common Stock, par value $0.10 per shareLEUNYSE 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 filerNon-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 November 1, 2022, there were 13,820,556 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):
 
 
 
 
 
 
Notes to Consolidated Financial Statements
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4.
Controls and Procedures
  
 PART II – OTHER INFORMATION 
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 6.
Exhibits
Signatures

FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2, contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. In this context, forward-looking statements mean statements related to future events, may address 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. Forward-looking statements by their nature address matters that are, to different degrees, uncertain.

For Centrus Energy Corp., 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 the novel coronavirus (“COVID-19”) pandemic and subsequent variants, and any worsening of the global business and economic environment as a result; risks related to the war in Ukraine and geopolitical conflicts and the imposition of sanctions or other measures imposed by either the U.S. or foreign governments, organizations (including the United Nations, the European Union or other international organizations), entities or persons, that could directly or indirectly impact our ability to obtain or sell low enriched uranium (“LEU”) under our existing supply contract with the Russian government-owned entity TENEX, Joint-Stock Company (“TENEX”); risks related to the refusal of TENEX to deliver LEU to us if TENEX is unable to receive payments, receive the return of natural uranium, as a result of any government, international or corporate actions or directions or other reasons; 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 inability to pay for our products or services or delays in making timely payment; 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 the LEU we procure pursuant to our purchase obligations under our supply agreements including those imposed under the 1992 Russian Suspension Agreement as amended, international trade legislation and other international trade restrictions; risks related to existing or new trade barriers and 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 dependence on others, such as our transporters, for deliveries of LEU including deliveries from TENEX, under our commercial supply agreement with TENEX and deliveries under our long-term commercial supply agreement with Orano Cycle (“Orano”) or other suppliers; risks associated with our reliance on third-party suppliers and service providers to provide essential products and
2


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; risks related to our sales order book, including uncertainty concerning customer actions under current contracts and in future contracting due to market conditions and our lack of current production capability; risks related to whether or when government funding or demand for high-assay low-enriched uranium (“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 our agreement with the U.S. Department of Energy (“DOE”) to deploy a cascade of centrifuges to demonstrate production of HALEU for advanced reactors (the “HALEU 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 Contract and may not be able or allowed to operate the HALEU enrichment facility to produce HALEU after the completion of the existing HALEU Contract or (ii) the HALEU enrichment facility may not be available to us as a future source of supply; risks related to uncertainty regarding our ability to commercially deploy competitive enrichment technology; risks related to the potential for further 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; risks related to our ability to perform fixed-price and cost-share contracts such as the HALEU Contract, including the risk that costs could be higher than expected; risks related to our significant long-term liabilities, including material unfunded defined benefit pension plan obligations and postretirement health and life benefit obligations; risks relating to our 8.25% notes (the “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 sales 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, par value $0.10 per share (“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; risks related to (i) the use of our net operating losses (“NOLs”) carryforwards and net unrealized built-in losses (“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 Internal Revenue Code of 1986, as amended (the “Code”) and (ii) our ability to generate taxable income to utilize all or a portion of the NOLs prior to the expiration thereof and NUBILs; failures or security breaches of our information technology systems; risks related to our ability to attract and retain key personnel; risks related to the potential for the DOE to seek to terminate or exercise its remedies under its agreements with the Company; risks related to actions, including reviews, that may be taken by the United States 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 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 agreements with the U.S. government or other 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; risks related to potential strategic transactions that could be difficult to implement, disrupt our business or change our business profile significantly; 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. Nuclear Regulatory Commission; risks of accidents during the transportation, handling or processing of hazardous or radioactive material that may pose a health risk to humans or animals, cause property or environmental damage, or result in precautionary evacuations; 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, gaseous diffusion plants; and other risks and uncertainties discussed in this and our other filings with the Securities and Exchange Commission (“SEC”), including under Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2021, and under Part II, Item 1A, Risk Factors of this Quarterly Report on Form 10-Q.

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.
3


CENTRUS ENERGY CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except share and per share data)
 September 30, 
 2022
December 31, 
 2021
ASSETS  
Current assets:  
Cash and cash equivalents$131.7 $193.8 
Accounts receivable7.4 29.1 
Inventories209.3 91.1 
Deferred costs associated with deferred revenue135.3 143.3 
Other current assets25.2 8.6 
Total current assets508.9 465.9 
Property, plant and equipment, net of accumulated depreciation of $3.4 million as of September 30, 2022 and $3.0 million as of December 31, 2021
5.4 5.3 
Deposits for financial assurance21.1 2.8 
Intangible assets, net48.5 54.7 
Deferred tax assets32.6 41.4
Other long-term assets1.7 2.3 
Total assets$618.2 $572.4 
LIABILITIES AND STOCKHOLDERS’ DEFICIT  
Current liabilities:  
Accounts payable and accrued liabilities$30.0 $37.8 
Payables under inventory purchase agreements21.5 37.9 
Inventories owed to customers and suppliers75.4 8.4 
Deferred revenue and advances from customers264.9 303.1 
Current debt6.1 6.1 
Total current liabilities397.9 393.3 
Long-term debt95.7 101.8 
Postretirement health and life benefit obligations112.8 114.9 
Pension benefit liabilities12.4 23.1 
Advances from customers46.2 45.1 
Long-term inventory loans45.8 22.4 
Other long-term liabilities7.7 13.7 
Total liabilities718.5 714.3 
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, 13,770,556 and 13,649,933 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
1.4 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 September 30, 2022 and December 31, 2021
0.1 0.1 
Excess of capital over par value151.7 140.7 
Accumulated deficit(253.7)(284.6)
Accumulated other comprehensive income0.2 0.5 
Total stockholders’ deficit(100.3)(141.9)
Total liabilities and stockholders’ deficit$618.2 $572.4 

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
4



CENTRUS ENERGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited; in millions, except share and per share data)

Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
2022202120222021
Revenue:
Separative work units$7.7 $19.1 $106.0 $102.4 
Uranium12.5 12.9 17.4 12.9 
Technical solutions13.0 59.3 44.2 94.0 
Total revenue33.2 91.3 167.6 209.3 
Cost of Sales:
Separative work units and uranium18.9 23.7 59.8 76.1 
Technical solutions12.0 18.1 38.3 54.9 
Total cost of sales30.9 41.8 98.1 131.0 
Gross profit2.3 49.5 69.5 78.3 
Advanced technology costs5.4 0.6 10.0 1.3 
Selling, general and administrative8.6 9.0 24.4 25.0 
Amortization of intangible assets1.1 1.7 6.2 5.4 
Special charges for workforce reductions  0.5  
Operating income (loss)(12.8)38.2 28.4 46.6 
Nonoperating components of net periodic benefit income(4.4)(4.3)(11.1)(12.9)
Interest expense0.1  0.1  
Investment income(0.6) (0.8) 
Income (loss) before income taxes(7.9)42.5 40.2 59.5 
Income tax expense (benefit)(1.8)0.4 9.3 0.7 
Net income (loss) and comprehensive income (loss)(6.1)42.1 30.9 58.8 
Preferred stock dividends - undeclared and cumulative0.72.1
Distributed earnings allocable to retired preferred shares6.6
Net income (loss) allocable to common stockholders$(6.1)$41.4 $30.9 $50.1 
Net income (loss) per share:
   Basic$(0.42)$3.01 $2.12 $3.75 
   Diluted$(0.42)$2.95 $2.06 $3.66 
Average number of common shares outstanding (in thousands):
   Basic14,62313,74114,58613,365
   Diluted14,62314,05614,97413,702


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

5



CENTRUS ENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Nine Months Ended September 30,
 20222021
OPERATING 
Net income$30.9 $58.8 
Adjustments to reconcile net income to cash used in operating activities:
Depreciation and amortization6.7 5.8 
Accrued loss on long-term contract(0.5)(6.5)
Deferred tax assets8.8 (0.1)
Equity related compensation2.2 0.4 
Revaluation of inventory borrowing5.5 4.8 
Changes in operating assets and liabilities:
Accounts receivable21.8 12.7 
Inventories(98.9)0.1 
Inventories owed to customers and suppliers66.9 2.1 
Other current assets(16.6)(1.5)
Accounts payable and other liabilities(1.9)7.2 
Payables under inventory purchase agreements(16.3)(19.0)
Deferred revenue and advances from customers, net of deferred costs(30.4)(8.6)
Pension and postretirement benefit liabilities(13.0)(55.3)
Other, net(0.3)(0.1)
Cash provided by (used in) operating activities(35.1)0.8 
INVESTING
Capital expenditures(0.6)(0.7)
Cash used in investing activities(0.6)(0.7)
FINANCING
Proceeds from the issuance of common stock, net 27.2 
Exercise of stock options0.2 0.5 
Withholding of shares to fund grantee tax obligations under stock-based compensation plan(1.9)(2.4)
Payment of interest classified as debt(6.1)(6.1)
Other(0.3)(0.3)
Cash provided by (used in) financing activities(8.1)18.9 
Increase (decrease) in cash, cash equivalents and restricted cash(43.8)19.0 
Cash, cash equivalents and restricted cash, beginning of period (Note 3)196.8 157.9 
Cash, cash equivalents and restricted cash, end of period (Note 3)$153.0 $176.9 
Non-cash activities:
Common stock and warrant issued in exchange for preferred stock$ $7.5 
Reclassification of stock-based compensation liability to equity$10.6 $7.5 
Disposal of right to use lease assets from lease modification$ $1.0 
Property, plant and equipment included in accounts payable and accrued liabilities$ $0.4 
Equity issuance costs included in accounts payable and accrued liabilities$ $0.1 


The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
6


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 DeficitAccumulated
Other Comprehensive Income
Total
Balance at December 31, 2020
$0.1 $1.1 $0.1 $85.0 $(407.7)$0.8 $(320.6)
Net income for the three months ended March 31, 2021
— — — — 5.1 — 5.1 
Issuance of common stock— 0.1 — 23.7 — — 23.8 
Receivable from issuance of stock— — — (0.7)— — (0.7)
Exchange of preferred stock for common stock and common stock warrant— — — 7.5 (7.6)— (0.1)
Reclassification of stock-based compensation liability to equity— — — 7.5 — — 7.5 
Other comprehensive loss— — — — — (0.1)(0.1)
Stock-based compensation— — — 0.3 — — 0.3 
Balance at March 31, 2021
$0.1 $1.2 $0.1 $123.3 $(410.2)$0.7 $(284.8)
Net income for the three months ended June 30, 2021
— — — — 11.6 — 11.6 
Issuance of common stock— 0.1 — 3.4 — — 3.5 
Proceeds from prior issuance of stock— — — 0.7 — — 0.7 
Stock-based compensation shares withheld for employee taxes— — — (2.4)— — (2.4)
Other comprehensive loss— — — — — (0.1)(0.1)
Stock-based compensation— — — 0.1 — — 0.1 
Balance at June 30, 2021
$0.1 $1.3 $0.1 $125.1 $(398.6)$0.6 $(271.4)
Net income for the three months ended September 30, 2021
— — — — 42.1 — 42.1 
Other comprehensive loss— — — — — (0.1)(0.1)
Stock-based compensation— — — 0.3 — — 0.3 
Balance at September 30, 2021
$0.1 $1.3 $0.1 $125.4 $(356.5)$0.5 $(229.1)

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



















7


CENTRUS ENERGY CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited; in millions, except per share data) (Continued)
 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 DeficitAccumulated
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)
Net loss for the three months ended September 30, 2022
— — — — (6.1)— (6.1)
Other comprehensive loss— — — — — (0.1)(0.1)
Stock-based compensation— — — 0.8 — — 0.8 
Balance at September 30, 2022
$ $1.4 $0.1 $151.7 $(253.7)$0.2 $(100.3)


The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
8


CENTRUS ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. BASIS OF PRESENTATION

Basis of Presentation and Principles of Consolidation

The unaudited Consolidated Financial Statements of Centrus Energy Corp. (“Centrus” or the “Company”), which include the accounts of the Company, its principal subsidiary, United States Enrichment Corporation, and its other subsidiaries, as of September 30, 2022, and for the three and nine months ended September 30, 2022, and 2021, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited Consolidated Balance Sheet as of December 31, 2021, was derived from audited Consolidated Financial Statements, but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”). In the opinion of management, the unaudited Consolidated Financial Statements reflect all adjustments, including normal recurring adjustments, necessary for a fair statement of the financial results for the interim period. Certain prior year amounts have been reclassified for consistency with the current year presentation. Certain information and notes normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. All material intercompany transactions have been eliminated. The Company’s components of comprehensive income for the three and nine months ended September 30, 2022 and 2021, are insignificant.

Operating results for the three and nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Annual Report on Form 10-K for the year ended December 31, 2021.

Significant Accounting Policies

The accounting policies of the Company are set forth in Note 1 to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There has not been a material change to the Company’s accounting policies since that report.


2. REVENUE AND CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following table presents revenue from separative work units (“SWU”) and uranium sales disaggregated by geographical region based on the billing addresses of customers (in millions):

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
United States$7.4 $13.8 $27.3 $68.6 
Foreign 12.8 18.2 96.1 46.7
Revenue - SWU and uranium$20.2 $32.0 $123.4 $115.3 

Refer to Note 12, Segment Information, for disaggregation of revenue by segment. SWU sales are made primarily to electric utility customers and uranium sales are made primarily to other nuclear fuel related companies. Technical Solutions revenue resulted primarily from services provided to the government and its contractors. SWU
9


and uranium revenue is recognized at point of sale and Technical Solutions revenue is generally recognized over time.

Accounts Receivable
September 30, 2022December 31, 
 2021
($ millions)
Accounts receivable:
Billed$2.0 $23.1 
Unbilled *5.4 6.0 
Accounts receivable$7.4 $29.1 
* 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.

Contract Liabilities

The following table presents changes in contract liability balances (in millions):
September 30, 2022December 31, 
 2021
Year-To-Date Change
Accrued loss on HALEU Contract:
Current - Accounts payable and accrued liabilities
$ $0.5 $(0.5)
Deferred revenue - current$249.6 $288.1 $(38.5)
Advances from customers - current$15.3 $15.0 $0.3 
Advances from customers - noncurrent$46.2 $45.1 $1.1 

Previously deferred sales recognized in revenue totaled $59.7 million and $28.5 million in the nine months ended September 30, 2022 and 2021, respectively.

LEU Segment

The SWU component of low-enriched uranium (“LEU”) typically is bought and sold under contracts with deliveries over several years. The Company’s agreements for natural uranium sales generally are shorter-term, fixed-commitment contracts. The Company’s order book of sales under contract in the LEU segment (“order book”) extends to 2029. As of September 30, 2022, the order book was approximately $1.0 billion. The order book represents the estimated aggregate dollar amount of revenue for future SWU and uranium deliveries under contract and includes approximately $311.1 million of Deferred Revenue and Advances from Customers. As of December 31, 2021, the order book was also approximately $1.0 billion.

Most of the Company’s customer contracts provide for fixed purchases of SWU during a given year. The Company’s order book is partially based on customers’ estimates of the timing and size of their fuel requirements and other assumptions that are subject to change. For example, depending on the terms of specific contracts, the customer may be able to increase or decrease the quantity delivered within an agreed range. The Company’s order book estimate also is based on the Company’s estimates of selling prices, which may be subject to change. For example, depending on the terms of specific contracts, prices may be adjusted based on escalation using a general inflation index, published SWU price indicators prevailing at the time of delivery, and other factors, all of which are variable. The Company uses external composite forecasts of future market prices and inflation rates in its pricing estimates.
10



Technical Solutions Segment

Revenue for the Technical Solutions segment, representing the Company’s technical, manufacturing, engineering, procurement, construction, and operations services offered to public and private sector customers, is recognized over the contractual period as services are rendered.

On October 31, 2019, the Company signed a cost-share contract with the U.S. Department of Energy (“DOE”) (the “HALEU Contract”) to deploy a cascade of centrifuges to demonstrate production of high-assay, low-enriched uranium (“HALEU”) for advanced reactors. HALEU is a component of an advanced nuclear reactor fuel that is not commercially available today and may be required for a number of advanced reactor and fuel designs currently under development in both the commercial and government sectors. The program has been under way since May 31, 2019, when the Company and DOE signed a preliminary letter agreement that allowed work to begin while the full contract was being finalized.

In 2019, under the HALEU Contract, DOE agreed to reimburse the Company for 80% of its costs incurred in performing the contract. The DOE has modified the contract several times to increase the total contract funding to $156.3 million as of September 30, 2022. Subsequent to September 30, 2022, an additional modification increased the total contract funding to $158.9 million. In April 2022, the DOE modified the HALEU Contract to extend the period of performance to November 30, 2022. Costs under the HALEU Contract include program costs, including direct labor and materials and associated indirect costs that are classified as Cost of Sales, and an allocation of corporate costs supporting the program that are classified as Selling, General and Administrative Expenses. The impact to Cost of Sales in the nine months ended September 30, 2022 and 2021, is $0.5 million and $6.5 million, respectively, for previously accrued contract losses attributable to work performed in the periods. As of September 30, 2022, a total of $19.6 million of previously accrued contract losses have been realized and the accrued contract loss balance included in Accounts Payable and Accrued Liabilities is $0. The Company has received aggregate cash payments under the HALEU Contract of $155.1 million through September 30, 2022.

As previously reported, the DOE experienced a COVID-19 related supply chain delay in obtaining the HALEU storage cylinders. As a result, the DOE elected to change the scope of the existing contract and move the operational portion of the demonstration to a new, competitively-awarded contract. The Company does not currently have a contractual obligation to perform work in excess of the funding provided by DOE. If the DOE does not commit to additional costs above the existing funding, the Company may incur material additional costs or losses in future periods that could have an adverse impact on its financial condition and liquidity.

On June 28, 2022, the DOE released a request for proposals (“RFP”) for the completion and operation of the demonstration cascade. The RFP provides for a 50/50 cost share contract for the initial phase to complete the cascade and produce 20 kg of HALEU. Once 20 kg of HALEU has been produced, the base contract will transition to a cost-plus-incentive-fee contract for production of 900 kg over the subsequent 1-year period. The RFP includes options held by the DOE to extend performance up to an additional nine years, comprised of three options of three-years each, also on a cost-plus-incentive-fee basis.

Revenue for the Technical Solutions segment in the three and nine months ended September 30, 2021, also includes $43.5 million related to the settlement of the Company’s claims for reimbursements for certain pension and postretirement benefits costs incurred in connection with a past cost-reimbursable contract with DOE unrelated to the HALEU Contract. Under the terms of the settlement agreement, DOE paid the Company $43.5 million, of which $33.8 million was contributed to the pension plan in September 2021 for its subsidiary United States Enrichment Corp. (“Enrichment Corp.”) and $9.7 million was deposited in October 2021 in a trust for payment of postretirement health benefits payable by Enrichment Corp. After receiving payment, at the Company’s request, the case was dismissed.


11


3. CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table summarizes the Company’s cash, cash equivalents and restricted cash as presented on the Consolidated Balance Sheets to amounts on the Consolidated Statements of Cash Flows (in millions):
September 30, 2022December 31, 2021
Cash and cash equivalents$131.7 $193.8 
Deposits for financial assurance - current (a)0.2 0.2 
Deposits for financial assurance - noncurrent21.1 2.8 
Total cash, cash equivalents and restricted cash$153.0 $196.8 

(a) Deposits for financial assurance - current is included within Other Current Assets in the Consolidated Balance Sheets.

The following table provides additional detail regarding the Company’s deposits for financial assurance (in millions):
September 30, 2022December 31, 2021
CurrentLong-TermCurrentLong-Term
Collateral for Inventory Loans$ $18.6 $ $ 
Workers Compensation 2.4  2.6 
Other0.2 0.1 0.2 0.2 
Total deposits for financial assurance$0.2 $21.1 $0.2 $2.8 

The Company has provided financial assurance to states in which it was previously self-insured for workers’ compensation in accordance with each state’s requirements in the form of a surety bond or deposit that is fully cash collateralized by Centrus. Each surety bond or deposit is subject to reduction and/or cancellation, as each state determines the likely reduction of workers’ compensation obligations pertaining to the period of self-insurance. In March and May 2022, the Company entered into two inventory loans which required a cash deposit into an escrow fund. See Note 4, Inventories.


4. INVENTORIES

Centrus holds uranium at licensed locations (e.g., fabricators) in the form of natural uranium and as the uranium component of LEU. Centrus also holds SWU as the SWU component of LEU at licensed locations to meet book transfer requests by customers and suppliers. Fabricators process LEU into fuel for use in nuclear reactors. Components of inventories are as follows (in millions):
 September 30, 2022December 31, 2021
 Current
Assets
Current
Liabilities
(a)
Inventories, NetCurrent
Assets
Current
Liabilities
(a)
Inventories, Net
Separative work units$12.0 $ $12.0 $8.8 $ $8.8 
Uranium197.3 75.4 121.9 82.3 8.4 73.9 
Total$209.3 $75.4 $133.9 $91.1 $8.4 $82.7 

(a)This includes inventories owed to suppliers for advances of uranium.

Inventories are valued at the lower of cost or net realizable value. There were no valuation adjustments in the three and nine months ended September 30, 2022 and 2021.

12


The Company may also borrow SWU or uranium from customers or suppliers, in which case the Company will record the SWU and/or uranium and the related liability for the borrowing using a projected and forecasted purchase price over the borrowing period. In March and May 2022, the Company borrowed SWU which was recorded to inventory at a value of $9.4 million and $8.5 million, respectively. The inventory value was calculated based on the anticipated sourcing of inventory for repayment at the date of acquisition. In June 2022, the Company performed a revaluation of the Long-term Inventory Loans reflecting an updated projection of the timing and sources of inventory to be used for repayment. This revaluation was recorded to Cost of Sales and resulted in an increase of $5.5 million to the related liability. In October 2022, the Company borrowed additional SWU which was collateralized by restricted cash of $11.2 million.

In 2018 through 2020, the Company borrowed SWU inventory valued at $20.7 million. The cumulative liability was revalued to $25.5 million in the third quarter of 2021 to reflect an updated projection of the timing and sources of inventory to be used for repayment. Cost of Sales for the three and nine months ended September 30, 2021, includes the related expense of $4.8 million.


5. INTANGIBLE ASSETS

Intangible assets originated from the Company’s reorganization and application of fresh start accounting as of the date the Company emerged from bankruptcy, September 30, 2014, and reflect the conditions at that time. The intangible asset related to the Company’s sales order book is amortized as the order book, existing at emergence, is reduced, principally as a result of deliveries to customers. The intangible asset related to customer relationships is amortized using the straight-line method over the estimated average useful life of 15 years. Amortization expense is presented below gross profit on the Consolidated Statements of Operations and Comprehensive Income. Intangible asset balances are as follows (in millions):
September 30, 2022December 31, 2021
Gross Carrying AmountAccumulated AmortizationNet AmountGross Carrying AmountAccumulated AmortizationNet Amount
Sales order book$54.6 $38.3 $16.3 $54.6 $35.5 $19.1 
Customer relationships68.9 36.7 32.2 68.9 33.3 35.6 
Total$123.5 $75.0 $48.5 $123.5 $68.8 $54.7 


6. DEBT

A summary of debt is as follows (in millions):
September 30, 2022December 31, 2021
MaturityCurrentLong-TermCurrentLong-Term
8.25% Notes:
Feb. 2027
Principal$— $74.3 $— $74.3 
Interest6.1 21.4 6.1 27.5 
 Total$6.1 $95.7 $6.1 $101.8 

Interest on the Company’s 8.25% notes (the “8.25% Notes”) maturing in February 2027 is payable semi-annually in arrears as of February 28 and August 31 based on a 360-day year consisting of twelve 30-day months. The 8.25% Notes were issued in connection with a troubled debt restructuring, therefore, all future interest payment obligations on the 8.25% Notes are included in the carrying value of the 8.25% Notes. As a result, interest payments are reported as a reduction in the carrying value of the 8.25% Notes and not as interest expense. As of September 30, 2022 and December 31, 2021, $6.1 million of interest was recorded as current and classified as Current Debt in the Consolidated Balance Sheets. Additional terms and conditions of the 8.25% Notes are described in Note 8, Debt, of
13


the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.


7. FAIR VALUE

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value of assets and liabilities, the following hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable:
Level 1 assets include investments with quoted prices in active markets that the Company has the ability to liquidate as of the reporting date.
Level 2 assets include investments in U.S. government agency securities, corporate and municipal debt whose estimates are valued based on observable inputs, other than quoted prices.
Level 3 assets include investments with unobservable inputs, such as third-party valuations, due to little or no market activity.

Financial Instruments Recorded at Fair Value (in millions):
September 30, 2022December 31, 2021
 Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:        
Cash and cash equivalents$131.7 $ $ $131.7 $193.8 $ $ $193.8 
Deferred compensation asset (a)2.3   2.3 3.2   3.2 
Liabilities:  
Deferred compensation obligation (a)$2.3 $ $ $2.3 $3.2 $ $ $3.2 
 
(a)    The deferred compensation obligation represents the balance of deferred compensation plus net investment earnings. The deferred compensation plan is funded through a rabbi trust. Trust funds are invested in mutual funds for which unit prices are quoted in active markets and are classified within Level 1 of the valuation hierarchy.

There were no transfers between Level 1, 2 or 3 during the periods presented.

Other Financial Instruments

As of September 30, 2022, and December 31, 2021, the Consolidated Balance Sheets carrying amounts for Accounts Receivable, Accounts Payable and Accrued Liabilities (excluding the deferred compensation obligation described above), and Payables under Inventory Purchase Agreements approximate fair value because of their short-term nature.

The carrying value and estimated fair value of long-term debt were as follows (in millions):
September 30, 2022December 31, 2021
Carrying Value
Estimated Fair Value (a)
Carrying Value
Estimated Fair Value (a)
8.25% Notes$101.8 
(b)
$70.0 $107.9 
(b)
$74.3 
(a) Based on recent trading prices and bid/ask quotes as of or near the balance sheet date, which are considered Level 2 inputs based on the frequency of trading.
(b)    The carrying value of the 8.25% Notes consists of the principal balance of $74.3 million and the sum of current and noncurrent interest payment obligations until maturity. Refer to Note 6, Debt.
14




8. PENSION AND POSTRETIREMENT HEALTH AND LIFE BENEFITS

The components of net periodic benefit (credits) for the defined benefit pension plans were as follows (in millions):
Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
2022202120222021
Service costs$0.7 $0.6 $2.0 $2.0 
Interest costs4.7 4.6 14.3 13.6 
Amortization of prior service costs (credits), net(0.1)(0.1)(0.2)(0.1)
Expected return on plan assets (gains)(8.9)(9.6)(26.7)(28.8)
Net periodic benefit (credits)$(3.6)$(4.5)$(10.6)$(13.3)


The components of net periodic benefit costs for the postretirement health and life benefit plans were as follows (in millions):
Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
2022202120222021
Interest costs$0.9 $0.9 $2.7 $2.6 
Amortization of prior service costs (credits), net$ $(0.1)(0.1)
Net periodic benefit costs$0.9 $0.9 $2.6 $2.5 

The Company reports service costs for its defined benefit pension plans and its postretirement health and life benefit plans in Cost of Sales and Selling, General and Administrative Expenses. The remaining components of net periodic benefit (credits) costs are reported as Nonoperating Components of Net Periodic Benefit Income.
On September 7, 2021, the Company collected $43.5 million from DOE, of which $33.8 million was contributed to the pension plan in September 2021 for its subsidiary, Enrichment Corp., and $9.7 million was deposited in October 2021, in a trust for payment of postretirement health benefits payable by Enrichment Corp. Refer to Note 2, Revenue and Contracts with Customers.


9. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is calculated by dividing income (loss) allocable to common stockholders by the weighted average number of shares of common stock outstanding during the period. In calculating diluted net income (loss) per share, the number of shares is increased by the weighted average number of potential shares related to stock compensation awards. No dilutive effect is recognized in a period in which a net loss has occurred.
On February 2, 2021, the Company completed the exchange of 3,873 shares of its outstanding Series B Senior Preferred Stock, par value $1.00 per share (“Preferred Stock”) for (i) 231,276 shares of Class A Common Stock and (ii) a warrant to purchase 250,000 shares of Class A Common Stock at an exercise price of $21.62 per share, for an aggregate valuation of approximately $7.5 million. Refer to Note 10, Stockholders’ Equity.
The aggregate valuation of approximately $7.5 million, less accrued but unpaid dividends attributable to the acquired and retired shares of Preferred Stock, was considered for purposes of Net Income per Share for the nine months ended September 30, 2021, to be a deemed dividend in the aggregate amount equal to the amount by which it exceeded the carrying value of the Preferred Stock on the Balance Sheet of $6.6 million.
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The weighted average number of common and common equivalent shares used in the calculation of basic and diluted income (loss) per share are as follows:
 Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
2022202120222021
Numerator (in millions):
Net income (loss)$(6.1)$42.1 $30.9 $58.8 
Less: Preferred stock dividends - undeclared and cumulative0.72.1
Less: Distributed earnings allocable to retired preferred shares6.6
Net income (loss) allocable to common stockholders$(6.1)$41.4 $30.9 $50.1 
Denominator (in thousands):
Average common shares outstanding - basic14,623 13,74114,58613,365
Potentially dilutive shares related to stock options, restricted stock units, and warrant (a)315388337
Average common shares outstanding - diluted14,623 14,056 14,974 13,702 
Net income (loss) per share (in dollars):
Basic$(0.42)$3.01 $2.12 $3.75 
Diluted$(0.42)$2.95 $2.06 $3.66 
(a) Common stock equivalents excluded from the diluted calculation because they would have been antidilutive (in thousands)401