Perma-Fix Environmental Services, Inc. (PESI)

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Perma-Fix Environmental Services (PESI)

Q1 2013 Earnings Call

May 10, 2013 2:30 pm ET


David Waldman

Louis F. Centofanti - Chairman, Chief Executive Officer and President

Ben Naccarato - Chief Financial Officer, Chief Accounting Officer, Vice President and Secretary

James A. Blankenhorn - Chief Operating officer and Vice President


Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Jason Schacht - Heartland Advisors, Inc.



Greetings, and welcome to the Perma-Fix Environmental Services, Inc. First Quarter 2013 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Waldman from Crescendo Communications. Thank you, Mr. Waldman. You may now begin.

David Waldman

Thank you. Good morning, everyone, and welcome to Perma-Fix Environmental Services First Quarter Conference Call. On the call with us this afternoon is Dr. Lou Centofanti, Chairman and CEO; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing first quarter 2013 financial results, which is also posted on the company’s website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020.

I'd also like to remind everyone that certain statements contained within this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

All statements on this conference call, other than the statements of historical fact, are forward-looking statements that are subject to known and unknown risks and uncertainties and other factors, which could cause actual results and performance of the company to differ materially from such statements. These risks and uncertainties are detailed in the company’s filings with the U.S. Securities and Exchange Commission. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events or circumstances after the date hereof that bear upon forward-looking statements.

I'd now like to turn the call over to Dr. Lou Centofanti. Please go ahead, Lou.

Louis F. Centofanti

Thank you, David, and welcome, everyone. As anticipated, we've continued to see experienced weakness in business and had a very weak first quarter. In fact, on the waste treatment side, it was probably the weakest we've ever had. This continues to be due to delayed projects and redirected government spending of DOE.

However, heading into the second quarter, we are beginning to see the signs of improvement and the usual seasonal increase in the waste shipments. Also, we've been awarded some initial small contracts. So we expect the market will further improve heading into the second half of the year.

Because of all these challenges we've been facing and as we discussed on last call in March, we have continued to reduce overhead and SG&A and attempt to rightsize the organization to the present market.

SG&A in March was reduced another $4.3 million on an annualized basis. And since last June, we've reduced costs by approximately $10 million. Therefore, we believe our reduced overhead and improved cost structure will translate into improved profitability.

Of course, we are not alone in these challenges. It's been a very difficult environment for the whole industry. However, from a competitive perspective, we believe we've weathered the market and we feel we'll emerge a much stronger company.

Our reputation in the industry continued to be stellar, and we have strengthened our relationships both with government and commercial customers.

As I've stated in the past, we do continue to see a rather solid pipeline, although we also continue to see indecision, and we continue to aggressively pursue some very significant opportunities, treat more complex and higher activity waste streams.

In particular, one that we've been focusing on, which you probably read in the papers about, is the -- our efforts to potentially treat some of the tank waste at Hanford. The recent announcement for the leaks coming from tank waste at Hanford has focused a lot of attention on the tank waste cleanup. Our permits and licenses at the Perma-Fix facilities would allow us to accept this waste for treatment today. We already handle transuranic waste, and we are the only commercial treatment facility that can handle these high-priority waste streams.

Through these dark days of the first quarter, we looked hard for a silver lining in the -- on what's going on in the cost cutting. And probably the one that I see is this tank project demonstrates an effort there. As I've discussed in the past, one of our main competitors for large projects, like the tank waste at Hanford, is for DOE to build a Perma-Fix like facility on the site to treat the waste.

As you can imagine, building a Perma-Fix facility on a DOE facility, would -- when we analyzed that, it's prohibitive with tremendous cost and schedule impact. In a tight fiscal environment, Perma-Fix provides a significant cost to opportunity for the DOE to outsource mission and support waste managed on operations.

DOE has recognized this and is moving in this direction. The tank waste is a perfect example, where on a cost basis, we'll always be cheaper. When we look around the DOE complexes, there are many of these type of opportunities and existing on-site operations. And if we compare it to what Perma-Fix could accomplish, those operations are more costly and could represent substantial cost savings.

As for the present status of the Hanford tank waste, we are, as it sits today, we are one of the leading options. And every time we look at it, we see we are the least expensive. But exactly how and when DOE will move forward on this project is still uncertain, at least -- especially until the new Secretary of Energy is put in place.

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