The Paducah Sun
The Paducah Sun
Paducah, Kentucky
Friday, April 26, 2002

USEC's net income drops by $62 million
Although sales rose, profits dropped because of high inventory costs and disappointing purchases of enriched uranium.

By Joe Walker

Despite more revenue, net income for USEC Inc. dropped by nearly $62 million over the past nine months, but the firm expects gradual improvements because of cheaper enriched uranium from Russia.

USEC, which operates the 1,500-employee Paducah Gaseous Diffusion Plant, reported $4.3 million, or 5 cents a share, in net income during the third quarter, ending March 31. That compares with $45.4 million during the same period last year.

Net income during the past nine months was $9.1 million, or 11 cents per share, compared with $70.9 million, or 88 cents per share, during the same period a year ago.

Third-quarter revenue rose 3 percent from $243.1 million to $249.4 million, and nine-month revenue increased 30 percent from $857 million to $1.11 billion. USEC said the rise was related mainly to timing and movement of orders for uranium enriched for use in nuclear fuel, and was partly offset by a 2 percent decline in average prices billed to customers.

Although sales rose, profits dropped because of high average inventory costs and lower-than-planned purchases of enriched uranium derived from dismantled Russian nuclear warheads, USEC said.

Sale costs rose by $292 million during the comparative nine-month periods because of more enriched uranium sold, less Russian uranium purchased and higher production costs. USEC's cost of producing units of enriched uranium rose because it closed Paducah's sister plant near Portsmouth, Ohio, in June and merged the work with Paducah.

In February, the company reached a new agreement to lower Russian uranium prices through 2013, but the deal has still not been approved by American and Russian governments. USEC has repeatedly said lower Russian uranium costs help preserve the Paducah plant, where production expenses are higher.

As a result of the new pact, "USEC has put into place the most critical building block for a stronger financial future and the transition over the next decade to a new, more efficient technology," said William Timbers, president and chief executive officer.

USEC expects to phase out power-intensive gaseous diffusion over the next decade and replace it with more efficient gas centrifuge technology. Paducah, which is competing with Portsmouth for the new process, is expected to offer an aggressive state-local incentive package later this year.

USEC expects to earn $9 million to $12 million this fiscal year. Those results, lower than initially forecast, are attributable to delays in implementing the cheaper Russian contract and the costs of winning a trade case barring governmentally subsidized foreign competitors from undercutting USEC's prices in the United States.

Because USEC has agreed to keep paying higher prices for Russian uranium through this year, better results from cheaper prices will not be seen until early next year, the company said.