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Remarks by James R. Mellor,
Chairman of the Board of Directors
Annual Shareholders' Meeting of USEC Inc.
Bethesda, MD
April 25, 2006
While the votes are being tallied by the inspectors, allow me to share briefly some of what we have accomplished in the past year, and more importantly, to talk about what’s ahead.
As I’ve said in the past, the board of directors of USEC strives for outstanding performance and responsible stewardship. And, I am here to report that over the past year, the Company achieved just that.
In particular, I want to talk about four things:
First, restructuring.
The focus of any business should be to maximize what you’re getting out of current operations, while still preparing for the future.
The restructuring we completed last year places priority on the demonstration and deployment of American Centrifuge, while maintaining reliable and efficient enrichment operations at the gaseous diffusion plant in Paducah.
Our restructuring was essentially a streamlining—to get more from what we have, of course, but also to create more direct lines of communication and decision-making:
By eliminating some senior positions and realigning responsibilities under a smaller senior management team, we now more readily share information among those who need it. Today we move more directly from analysis to decision-making.
That means more effective use of our resources and, therefore, better support for the American Centrifuge project.
The second topic I want to discuss this morning is the Board’s emphasis on careful and transparent corporate governance.
Institutional Shareholder Services, or ISS, is a leading provider of proxy statement analysis for thousands of mutual funds in the United States. A few years back, ISS created a Corporate Governance Quotient. This is a rating tool to assist institutional investors in evaluating the quality of corporate governance practices.
Earlier this month, ISS rated USEC as better than 99.2 percent of the companies in the Russell 3000. Basically, that’s the top 3000 companies in America.
For several years now, we’ve been ranked above 90 percent of the largest American companies by ISS. That is a positive reflection of our bylaws, and the Board’s emphasis on the highest ethics and transparency to shareholders. And we should all be proud of that.
With that background, I want to next talk about our action to redirect the dividend.
All of us who own shares in this company expect the Board to do what’s best for the long-term interests of shareholders. We have a fiduciary responsibility to you, and we take that very seriously.
In the past several years we have been investing much of our profits in the development of a new technology. This new technology – the American Centrifuge – is literally the future of our company. The Board believes completing this project is the best vehicle to generate strong financial returns for many years to come.
That’s why the Board of Directors voted in February to redirect the funds used to pay the common stock dividend.
Instead, those funds—about a quarter-of-a-billion dollars over the next five years—will go to reduce the amount of external financing we need to build the American Centrifuge Plant.
This new facility is a very large investment for a company of our size. We will, of course, need external financing. But, we also need to marshal as much of our own resources as possible.
Every dollar of internally generated cash that we use to build our plant is one less dollar USEC has to raise in the capital markets.
We believe investment in the new plant is the best use of our resources today – for our shareholders, for our customers, and for America’s national energy security interests. When construction of the facility is completed, we will revisit the dividend issue.
In closing, I now want to say a few words about how we selected our new CEO.
Early last year, the Board retained an executive search firm to find the highly qualified individual best suited to lead USEC. A special committee of the Board worked directly with this firm. We were very hands-on.
Here’s what we told the search firm:
First, we said we needed someone with a strong nuclear industry background, and a track record of successfully running a large company.
We said he (or she) needed to have exceptional communications and people skills, and be comfortable in the international arena.
We said we wanted a strong leader with the highest ethical standards, with a proven track record of building successful management teams.
And with the American Centrifuge project underway, we said he needed to know how to bring in a major construction project on-time and on-budget.
We found a leader I’m very pleased with—and I know you will be, too.
John joined us as the Chief Executive Officer and as a member of the Board of Directors last October.
He comes to us having served as executive vice president at General Dynamics and president of their Electric Boat division. As you know, General Dynamics is a company I’m quite familiar with, and I followed John as he rose through the executive ranks.
He began his career as a submarine officer in the United States Navy. He is also a registered professional engineer, which is especially valuable for someone in an industry as technical as nuclear power.
Plus, I just like working with John. He’s bright, but he’s also down-to-earth. He’s got the expertise, but he’s also got the good judgment and common sense to back it up. We are fortunate to have him.
Now I’d like to turn the podium over to John to talk about his views on the nuclear industry and what’s ahead for our company.