BETHESDA, Md. - USEC Inc. (NYSE: USU) today reported earnings of $109.1 million or $1.20 per share for its fiscal year ended June 30, 2000, before special charges and an inventory valuation adjustment. In fiscal 1999, earnings before special items were $120.6 million or $1.21 per share.

Special charges in fiscal 2000 included $126.5 million ($79.3 million after tax) related to the decision to cease uranium enrichment at the Portsmouth facility in June 2001 and $15 million ($9.4 million after tax) for workforce reductions in July 2000. In addition, a non-cash inventory adjustment reduced gross profit by $19.5 million ($12.2 million after tax). Taking the special charges and inventory adjustment into account, USEC reported net income of $8.9 million or $.10 per share for fiscal 2000.

In the fourth quarter of fiscal 2000, earnings before special charges were $37.8 million or $.45 per share, compared to $63.7 million or $.64 per share in the same period a year earlier. Taking into account the special charges this year, the Company reported a net loss of $62.4 million or $.74 per share in the fourth quarter.

Earnings for fiscal 2000 reflect lower revenue due to the expected lower average SWU price billed to customers, lower expenses for advanced technology, and lower production levels and higher unit costs due to increased volume of SWU purchased from the Russian Federation. The term "SWU" represents a standard unit of uranium enrichment.

Revenue in fiscal 2000 totaled $1,489.4 million, compared to $1,528.6 million in the previous fiscal year. Revenue from the sale of SWU declined $87.2 million and reflects a 7 percent decline in the average SWU price billed to customers. Sales of natural uranium were $101.6 million in fiscal 2000, compared to $53.6 million in the year earlier.

Although the average market price of uranium declined 9 percent during the year, downward price pressure at the end of the fiscal year resulted in a market price on June 30, 2000 that was 22 percent lower than June 30, 1999. The Company’s uranium inventory is based on the lower of cost or market, and a non-cash valuation adjustment of $19.5 million was charged against income for fiscal 2000 to reflect the decline in market prices.

Cost of sales continued to be adversely affected by lower production volumes and higher unit costs due to increased purchases of SWU from Russia. As executive agent for the U.S. Government in the "Megatons to Megawatts" program, the Company purchased higher volumes of SWU from Russia for resale during the year. Russian SWU represented 41 percent of the Company’s supply mix during the year, compared with 31 percent in the previous year.

The results also reflect a shift in USEC’s evaluation of its advanced technology options from the AVLIS program to centrifuge and SILEX. Project development costs during the year declined to $11.4 million from $106.4 million in the previous year.

In February 2000, USEC’s Board of Directors augmented a June 1999 share repurchase program. The Board authorized the repurchase of an additional 20 million shares of common stock, for a total of up to 30 million shares, through June 2001. There have been 17.8 million shares repurchased under the program, including 8.1 million shares repurchased since February 3 when the Board authorized the extension. As of June 30, the Company had 82.5 million shares outstanding.

Net cash flow was strong in fiscal 2000, producing $262.8 million of cash generated from operations as compared to $230.4 million in fiscal 1999. A total of $200.5 million was returned to shareholders in fiscal 2000 – cash dividends of $75.9 million and share repurchases of $124.6 million. In the fourth quarter, strong cash flow allowed the Company to reduce its short-term debt by $35 million, and USEC ended the year in a net cash position of $23 million.

USEC has made significant progress on initiatives announced in February to lower costs and improve the Company’s competitive position, stated William H. Timbers, USEC president and chief executive officer. "We have made tough but necessary decisions for the future of our business as we now pursue the full range of actions necessary for a commercial enterprise," Timbers said.

Negotiations with Russia regarding pricing have made significant headway. "We have reached an agreement in principle with our counterparts in Russia to adopt market-based pricing in January 2002 for the SWU that we purchase. We expect to obtain approvals from both the United States and Russian governments for an agreement well before its implementation date," Timbers said.

During the fourth quarter, the Company signed an agreement to monetize excess power available this summer to the Portsmouth plant valued at $44 million (pre-tax income over three years); concluded a 10-year power supply agreement with the Tennessee Valley Authority to provide competitively priced electricity to the Paducah plant; and continued its high-priority evaluation of advanced enrichment technologies. In addition, steps were taken to reduce the workforce by 575 employees in July 2000, which together with normal attrition, achieved the Company’s target of $39 million in annual production cost savings.

Despite these cost-cutting steps, additional action was needed to respond to the realities of the dramatically changed global marketplace and lower SWU prices. In June, the Company made the difficult business decision to cease enrichment operations at the Portsmouth gaseous diffusion plant in June 2001.

"Workforce reductions and the Portsmouth plant closure are painful for all involved, but absolutely necessary to put our core business on firm footing. We are aggressively seeking to join the efforts of the government, our union and this company to establish a meaningful worker transition program, founded on a mutual respect for the clear distinction between the public and private responsibilities at the Portsmouth site," Timbers said.

"This past quarter presents a strong record of our clear commitment to the goal of being a strong, competitive enterprise that is a long-term, reliable supplier of domestic enrichment services," Timbers said. "This core business will be the foundation on which the Company moves forward."

This news release includes certain forward-looking information (within the meaning of the Private Securities Litigation Reform Act of 1995) that involves risks and uncertainty, including certain assumptions regarding the future performance of the Company. Actual results and trends may differ materially depending upon a variety of factors, including, without limitation, market demand for the Company’s services, pricing trends in the uranium and the enrichment markets, deliveries and costs under the Russian contract, the availability and cost of electric power, the Company’s ability to successfully execute its internal performance plans, the refueling cycles of the Company’s customers, and the impact of any government regulation. Additional information regarding the foregoing factors is contained in the Company’s filings with the Securities and Exchange Commission.

USEC Inc, a global energy company, is the world’s leading supplier of enriched uranium fuel for commercial nuclear power plants.

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