TRANSITION CHARGES

Direct Charges

The Company ceased uranium enrichment at the Paducah Gaseous Diffusion Plant (the “Paducah GDP”) at the end of May 2013 and subsequently completed transferring its inventory to off-site licensed locations to meet future customer orders. On October 21, 2014, all of the leased portions of the Paducah GDP were de-leased and returned to the U.S. Department of Energy (“DOE”). Pursuant to a June 2014 agreement with DOE, the lease terminated with respect to the Paducah GDP on August 1, 2015. The termination of the lease with respect to the Paducah GDP does not affect the Company’s right to lease portions of the DOE-owned site in Piketon, Ohio needed for the American Centrifuge program. The USEC Privatization Act and the lease for the plant provide that DOE remains responsible for decontamination and decommissioning of the Paducah GDP site.

Since ceasing uranium enrichment at the Paducah GDP in May 2013, the Company has incurred a number of expenses unrelated to production that have been charged directly to cost of sales. Direct charges totaled $23.9 million and $32.5 million in the three and nine months ended September 30, 2015 and $17.5 million and $66.7 million in the corresponding periods in 2014 as follows:


-	Lump-sum pension payments to former employees in the first nine months of 2015 resulted in the remeasurement of pension obligations under the Retirement Program Plan for Employees of United States Enrichment Corporation and direct charges to cost of sales of $21.6 million in both the three and nine months ended September 30, 2015;

Operating expenses of $2.3 million and $10.6 million in the three and nine months ended September 30, 2015, compared to $15.6 million and $51.3 million in the corresponding periods in 2014. Charges in 2015 include off-site inventory management and logistics costs. Charges in 2014 include inventory management and disposition, ongoing regulatory compliance, utility requirements for operations, security, and other Paducah site management activities related to the transitioning of facilities and infrastructure to DOE;

Inventory charges of $0 and $0.3 million in the three and nine months ended September 30, 2015, compared to $1.8 million and $13.5 million in the three and nine months ended September 30, 2014, including the cost of inventories deployed for cascade drawdown, assay blending and repackaging, and residual uranium in cylinders transferred to DOE. The Company determined that it was uneconomic to recover resulting residual quantities for resale; and


-	Asset depreciation charges of $0.1 million and $1.9 million in the three and nine months ended September 30, 2014. Paducah GDP asset depreciation was completed as of June 30, 2014.

Special Charges for Workforce Reductions

Centrus notified its American Centrifuge employees in September 2015 of possible layoffs beginning in November 2015 as a result of DOE’s decision to reduce funding for advanced uranium enrichment centrifuge research under the Company’s contract with Oak Ridge National Laboratory (“ORNL”). Based on the level of funding reduction, Centrus incurred a special charge of $8.7 million in the third quarter of 2015 for estimated termination benefits consisting primarily of payments under its severance plan. Centrus expects to make payments for these workforce reductions over the next 18 months. Additional details are provided in Note 13 under American Centrifuge - Project Funding.

In addition, the cessation of enrichment at the Paducah GDP and evolving business needs have resulted in workforce reductions since July 2013. In the three and nine months ended September 30, 2015, special charges included related termination benefits of $1.1 million and $4.9 million, respectively, less $0.3 million in the nine-month period for severance paid by the Company and invoiced to DOE for its share of employee severance pursuant to the USEC Privatization Act.

A summary of special charges and changes in the related balance sheet accounts in the nine months ended September 30, 2015 follows (in millions):



	Liability Balance to Be Paid, Dec. 31, 2014		Nine Months Ended September 30, 2015						Liability Balance to Be Paid, Sep. 30, 2015
	Liability Balance to Be Paid, Dec. 31, 2014		Special Charges			Paid			Liability Balance to Be Paid, Sep. 30, 2015
Workforce reductions, primarily severance payments	$	2.4	$	13.6		$	(6.7	)	$	9.3
Less: Amounts billed to DOE			(0.3		)
Special charges for workforce reductions			$	13.3