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Transition Charges | 9 Months Ended
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Sep. 30, 2013
Restructuring and Related Activities [Abstract] |
Transition Charges | 3. TRANSITION CHARGES Non-Production Expenses Related to Ceasing Enrichment at the Paducah Plant On May 24, 2013, USEC announced that it was not able to conclude a deal for the short-term extension of uranium enrichment at the Paducah GDP. USEC ceased uranium enrichment at the end of May 2013 and completed withdrawing material from the cascade in early June. USEC is in discussions with the U.S. Department of Energy ("DOE") regarding the timing of USEC’s de-lease of the Paducah GDP from DOE and is seeking to minimize its transition costs related to lease turnover, which could be substantial. Under the terms of the lease, USEC can terminate the lease prior to June 2016 upon two years' notice. Also, as USEC's requirements change, USEC can de-lease portions of the property under lease upon 60 days' notice with DOE's consent, which cannot be unreasonably withheld. However, the right of partial de-lease does not include the right of USEC to terminate the lease in its entirety or with respect to the Paducah GDP, which termination is permitted only in accordance with the two-year termination provision of the lease. On August 1, 2013, USEC provided notice to DOE that USEC exercised its rights to terminate the lease with respect to the Paducah GDP and USEC has been in discussions with DOE regarding the timing of USEC’s de-lease. USEC anticipates being able to complete the return of leased premises and terminate the Paducah GDP lease as early as July 2014, but DOE and USEC have not reached agreement on a lease termination date prior to August 1, 2015. DOE has indicated that its ability to agree to such an earlier date will depend on the availability of funding among other things. In the event that USEC is unable to agree with DOE on a schedule for termination prior to two years, USEC plans to retain a small portion of the leased premises until August 1, 2015, at which time the Paducah GDP lease will terminate and any remaining portion of the leased premises will be returned to DOE. In such an event, during this period USEC plans to return portions of the leased premises no longer required to meet its business needs. However, limitations on available funding to DOE in light of federal budget constraints and spending cuts could limit DOE's willingness to accept the return of areas that USEC wishes to de-lease on a timely basis. In addition, while DOE has stated that it continues to be willing to work with USEC to develop a transition plan and schedule for the safe and secure return of the Paducah GDP, DOE has taken the position that USEC is foreclosed from invoking its rights to a partial return of facilities under the lease. USEC strongly disagrees with this DOE position. Disputes could also arise regarding the requirements of the lease and responsibility for associated turnover costs. The Paducah GDP operated for more than 60 years. Environmental liabilities associated with plant operations by agencies of the U.S. government prior to USEC's privatization on July 28, 1998 are the responsibility of the U.S. government. The USEC Privatization Act and the lease for the plant provide that DOE remains responsible for decontamination and decommissioning of the Paducah site. As USEC accelerated the expected productive life of plant assets and ceased uranium enrichment at the Paducah GDP, USEC has incurred a number of expenses unrelated to production that have been charged directly to cost of sales. Non-production expenses totaled $47.7 million and $123.4 million in the three and nine months ended September 30, 2013, and $6.1 million and $12.7 million in the three and nine months ended September 30, 2012, as follows:
- | Site expenses, including lease turnover activities and Paducah and Portsmouth retiree benefit costs, of $37.4 million in the three months and $63.8 million in the nine months ended September 30, 2013. Following the cessation of enrichment at the Paducah GDP, costs for plant activities that formerly were capitalized as production costs are now charged directly to cost of sales including inventory management and disposition, ongoing regulatory compliance, utility requirements for operations, security, and other site management activities related to transition of facilities and infrastructure.
Prior to the start of 2012, a significant portion of retiree benefit costs were attributed to Portsmouth contract services, based on the employee base performing contract services work. Starting in 2012, ongoing retiree benefit costs related to USEC's former Portsmouth employees are charged to cost of sales of the LEU segment rather than the contract services segment based on continuing operations that support USEC's active and retired employees. Non-production expenses of $3.3 million and $9.9 million in the three and nine months ended September 30, 2012, respectively, relate to Portsmouth retiree benefit costs;
- | Accelerated asset charges of $5.3 million and $13.5 million in the three and nine months ended September 30, 2013, respectively, and $2.8 million in the three and nine months ended September 30, 2012. Beginning in the fourth quarter of 2012, the expected productive life of property, plant and equipment at the Paducah GDP was reduced from the lease term ending June 2016 to an accelerated basis ending December 2014. In addition, beginning in the third quarter of 2012, costs that would have been previously treated as construction work in progress are treated similar to maintenance and repair costs because of the shorter expected productive life of the Paducah GDP. The expected productive life of the Paducah GDP was further reduced following the ceasing of enrichment at the end of May 2013. In general, these assets, depending on their continuing economic life, are now expected to be useful only through the first or second quarters of 2014;
- | Inventory valuation adjustments of $5.0 million in the three months and $15.0 million in the nine months ended September 30, 2013. Inventories of SWU and uranium are valued at lower of cost or market. In the three-month period, a uranium inventory valuation adjustment of $5.0 million was charged to cost of sales to reflect declines in uranium market price indicators. The nine-month period also included the expense of $7.7 million of residual uranium contained in certain cylinders that will be transferred to DOE. USEC determined that it was currently uneconomic to recover this residual uranium for resale. In addition, certain materials and supplies used in the enrichment process with a book value of $2.3 million were expensed following the termination of enrichment at the end of the second quarter 2013;
- | Asset retirement charges of $19.3 million in the nine months ended September 30, 2013 for property, plant and equipment formerly used in the enrichment process at the Paducah GDP;
- | Power contract losses of $11.8 million in the nine months ended September 30, 2013. In anticipation of a potential short-term extension of uranium enrichment at the Paducah GDP, USEC purchased approximately 700 megawatts of power for the period from June 1 through September 30, 2013 from several power providers. Due to falling prices in power markets following the purchase of this power, as part of agreements to unwind these purchases, USEC incurred expenses of approximately $11.8 million.
USEC may incur additional non-production expense and special charges in future periods based on the results of the planning and execution of the Paducah transition and assessments of evolving business needs. Special Charges for Workforce Reductions and Advisory Costs On May 31, 2013, USEC notified its Paducah employees of potential layoffs beginning in August 2013. The notifications were provided under the Worker Adjustment and Retraining Notification Act ("WARN Act"), a federal statute that requires an employer to provide advance notice to its employees of potential layoffs in certain circumstances. Special charges for one-time termination benefits totaled $1.5 million and $3.6 million in the three and nine months ended September 30, 2013, respectively. Following the cessation of enrichment at the Paducah GDP in the second quarter of 2013, USEC initiated an initial workforce reduction of 140 employees that was substantially completed in August 2013. Associated year-to-date charges of $2.0 million for severance payments are net of $0.7 million of severance paid by USEC and invoiced to DOE. Total cash payments associated with this initial workforce reduction totaled $2.5 million as of September 30, 2013. Accounts receivable as of September 30, 2013 include $0.7 million for DOE's share of severance paid by USEC. On September 30, 2013, USEC's senior management authorized an additional workforce reduction of approximately 90 Paducah employees. This workforce reduction is expected to occur between October 2013 and January 2014. USEC currently estimates that it could incur employee related severance costs of approximately $1.6 million to $2.4 million for this expected workforce reduction depending on the seniority of the workers and final number of employees severed, with DOE owing a portion of this amount estimated to be up to $0.5 million. As such, USEC accrued a special charge associated with this workforce reduction of $1.6 million in the three months ended September 30, 2013 for estimated one-time termination benefits consisting of severance payments. Related cash expenditures are expected primarily in the fourth quarter of 2013 and first quarter of 2014. Additional layoffs are expected to occur in stages through 2014 depending on business needs to manage inventory, fulfill customer orders, meet regulatory requirements and transition the site back to DOE in a safe and orderly manner. Information on these additional layoffs would be communicated to affected employees in future notices and may result in additional charges. USEC currently estimates that it could incur total employee related severance costs of approximately $23 million to $27 million for all Paducah GDP workers in the event of a full termination of activities at the site without a transfer of employees to another employer, depending on the timing of severances, if incurred, and with DOE owing a portion of this amount estimated to be up to $6 million. Actions taken in the prior year resulted in special charges of $0.4 million and $4.0 million in the three and nine months ended September 30, 2012, respectively, for one-time termination benefits for affected employees at USEC's American Centrifuge design and engineering operations in Oak Ridge, Tennessee, the headquarters operations located in Bethesda, Maryland, and the central services operations located in Piketon, Ohio. Related cash expenditures were completed in 2012. In early 2012, USEC initiated an internal review of its organizational structure and engaged a management consulting firm to support this review. USEC is also engaged with its advisors and certain stakeholders on alternatives for a possible restructuring of its balance sheet. Special charges recorded for these advisors totaled $2.0 million and $6.7 million in the three months and nine months ended September 30, 2013, compared to $1.1 million and $7.1 million in the corresponding periods of 2012. As discussed in Note 11, "Pension and Postretirement Health and Life Benefits," USEC froze benefit accruals under its defined benefit pension plans, effective August 5, 2013, for active employees who are not covered by a collective bargaining agreement. Pension benefits will no longer increase for these employees to reflect changes in compensation or credited service. However, these employees will not lose any benefits earned through August 4, 2013 under the pension plans. Unamortized prior service costs related to those pension plan participants were accelerated and a plan re-measurement was conducted. The result was a curtailment gain of $0.7 million recorded in the second quarter of 2013 to special charges.

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 5.P.3) -URI http://asc.fasb.org/extlink&oid=27011515&loc=d3e140864-122747 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 5 -Section P -Subsection 3, 4 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 5.P.4) -URI http://asc.fasb.org/extlink&oid=27011515&loc=d3e140904-122747 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6394359&loc=d3e17939-110869 + Details
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