Net Earnings and Revenue

Our net earnings attributed to equity holders (net earnings) were $185 million ($0.47 per share diluted) compared to $318 million ($0.81 per share diluted) in 2013, mainly due to:

• write-downs totalling $327 million of our investments in Eagle Point mine assets at Rabbit Lake – $126 million, GLE – $184 million, and Goviex – $17 million
• no earnings from BPLP, which we divested in the first quarter of 2014
• the write-off of $41 million of assets under construction as a result of changes made to the scope of a number of projects
• an early termination fee of $18 million incurred as a result of the cancellation of our toll conversion agreement with SFL, which was to expire in 2016
• settlement costs of $12 million with respect to the early redemption of our Series C debentures
• lower earnings in our fuel services segment as a result of a decrease in sales volumes and higher unit cost of sales
• higher losses on foreign exchange derivatives due to the weakening of the Canadian dollar

partially offset by:

• a $127 million gain on the sale of our interest in BPLP
• higher earnings in our uranium segment due to higher average realized prices
• a favourable settlement of $66 million in a dispute regarding a long-term supply contract with a utility customer
• lower exploration costs due to a more focused effort on our core projects in Saskatchewan, with decreases in activity elsewhere, particularly in Australia and at Inkai
• higher tax recoveries resulting from pre-tax losses in Canada, see Income taxes for details

Three-year trend

Our net earnings normally trend with revenue, but, in recent years, have been significantly influenced by unusual items.

In 2013, our net earnings were $65 million higher than in 2012 primarily due a decrease in impairment charges (the Kintyre project in 2012 – $168 million, the Talvivaara asset in 2013 – $70 million), as well as higher earnings from our fuel services business as a result of an increase in sales volumes and realized prices, lower exploration expenditures, and higher tax recoveries in 2013. This was partially offset by lower earnings from our electricity business and higher losses on foreign exchange derivatives.

Impairment charge on producing assets

During the fourth quarter of 2014, we recognized a $126 million impairment charge related to our Rabbit Lake operation. The impairment was due to the deferral of various projects that were related to planned production over the remaining life of the Eagle Point mine. The amount of the charge was determined as the excess of the carrying value over the recoverable amount. The recoverable amount of the mine was determined to be $29 million. See note 10 to the financial statements.

Non-IFRS measures

Adjusted net earnings

Adjusted net earnings is a measure that does not have a standardized meaning or a consistent basis of calculation under IFRS (non-IFRS measure). We use this measure as a more meaningful way to compare our financial performance from period to period. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance. Adjusted net earnings is our net earnings attributable to equity holders, adjusted to better reflect the underlying financial performance for the reporting period. The adjusted earnings measure reflects the matching of the net benefits of our hedging program with the inflows of foreign currencies in the applicable reporting period, and adjusted for impairment charges, the write-off of assets, NUKEM inventory write-down, loss on exploration properties, gain on interest in BPLP (after tax), and income taxes on adjustments.

Adjusted net earnings is non-standard supplemental information and should not be considered in isolation or as a substitute for financial information prepared according to accounting standards. Other companies may calculate this measure differently, so you may not be able to make a direct comparison to similar measures presented by other companies.

To facilitate a better understanding of these measures, the table below reconciles adjusted net earnings with our net earnings for the years ended 2014, 2013 and 2012.

The following table shows what contributed to the change in adjusted net earnings for 2014.

Three-year trend

Our adjusted net earnings increased from 2012 to 2013, but decreased in 2014.

The 3% increase from 2012 to 2013 resulted from:

• addition of gross profit from NUKEM
• lower exploration costs due to a decrease in activity at our Kintyre project in Australia
• lower income taxes

partially offset by:

• lower earnings from our electricity business due to lower generation, a lower average realized price and higher costs

The 7% decrease from 2013 to 2014 resulted from:

• no earnings from BPLP due to divestiture of our interest in the first quarter of 2014
• an early termination fee of $18 million incurred as a result of the cancellation of our toll conversion agreement with SFL, which was to expire in 2016
• settlement costs of $12 million with respect to the early redemption of our Series C debentures
• lower earnings from our fuel services business as a result of lower sales volumes and higher unit cost of sales
• higher losses on foreign exchange derivatives due to the weakening of the Canadian dollar

partially offset by:

• higher earnings in our uranium segment due to higher average realized prices
• a favourable settlement of $66 million with respect to a dispute regarding a long-term supply contract with a utility customer
• lower exploration costs due to a more focused effort on our core projects in Saskatchewan, with decreases in activity elsewhere, particularly at our Kintyre project in Australia and at Inkai

Revenue

The table below shows what contributed to the change in revenue this year.

See 2014 Financial results by segment for more detailed discussion.

Three-year trend

In 2013, revenue increased by 29% compared to 2012 due to the addition of NUKEM, as well as a higher realized price for uranium.

In 2014, revenue decreased by 2% compared to 2013 due to lower sales revenues in our NUKEM and fuel services segments as we reduced sales volume in response to market conditions. This was partially offset by higher revenues in our uranium business due to higher realized price for uranium resulting from the weakening of the Canadian dollar compared to 2013. The realized foreign exchange rate was 1.10 compared to 1.03 in 2013.

Outlook for 2015

We expect consolidated revenue to decrease up to 5% in 2015 due to an expected decrease in uranium and fuel services sales volumes.

In our uranium and fuel services segments, our customers choose when in the year to receive deliveries, so our quarterly delivery patterns and, therefore, our sales volumes and revenue, can vary significantly. We expect the quarterly distribution of uranium deliveries to be relatively balanced in 2015. However, not all delivery notices have been received to date, which could alter the delivery pattern. Typically, we receive notices six months in advance of the requested delivery date.

Average realized prices

Discontinued operation

On March 27, 2014, we completed the sale of our 31.6% limited partnership interest in BPLP. The aggregate sale price for our interest in BPLP and certain related entities was $450 million. The sale has been accounted for effective January 1, 2014. We realized an after tax gain of $127 million on this divestiture. See note 6 to the financial statements for more information.