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Perma-Fix Environmental Services, Inc. (PESI)
Q2 2008 Earnings Call
August 7, 2008 10:00 am ET
David Waldman - Crescendo Communications
Dr. Louis F. Centofanti – President and Chief Executive Officer
Steven T. Baughman - Chief Financial Officer
Robert Braus – Wunderlich Securities
Dennis Scannel – Rutabaga Capital
Walter Schenker – Titan Capital
Ronald Rubin – Private Investor
Al Kaschalk – Wedbush Morgan
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This morning we have Dr. Lou Centofanti, Chairman and CEO, and Steve Baughman, Chief Financial Officer. The company issued a press release this morning containing the second quarter financial results, which is posted on the company’s website. If you have any questions after the call or would like additional information about the company, please contact Crescendo Communications at 212-671-1020.
I would also like to remind everyone that certain statements contained within this conference call may deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements on this conference call other than statements of historical facts are forward-looking statements that are subject to known and unknown risks, 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 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.
With that taken care of, I would now like to turn the call over to Dr. Lou Centofanti.
Dr. Louis F. Centofanti
As you know, this quarter has probably been one of the most eventful quarters in the company’s history, the biggest event being the RC winning at the Hanford Plateau Contract.
Before I get into that, though, we just had another event occur here that I would like to announce, because of its importance. We just completed funding approximately $7.0 million refinancing from PNCR Bank as part of our $25.0 million credit facility. The new note is a 4-year loan amortized over 7 years, bears an interest of prime +1%. These funds are in additional to our $18.0 million revolver capacity and will provide supplemental liquidity in the forms of working capital and capital investment in future growth of the company. So we’re very pleased with PNC’s continued faith in us and what we’ve been doing.
The big event of the quarter, of course, was our team winning the Plateau Contract at Hanford, that we announced in June. As I have discussed in the past, we have been very active in the bidding process for on-site management projects at DOE and we are pleased to report in June that our M&EC division was part of the consortium that won the Plateau Remediation Contract at the Hanford site in Richland, Washington.
The project is to clean up the legacy waste that is the result of decades of plutonium production for the U.S. Defense Program. It is basically a cost-plus award sheet contract with a base period of five years and the option to renew for an additional five-year period. As a subcontractor to the project, our M&EC subsidiary will provide waste facility operations expertise in support of the team’s mission to perform remediation clean up and waste management activities for the DOE. In addition, our Perma-Fix Northwest facility, located adjacent to the Hanford site, will also provide local support for the contract.
Playing a role in the monumental Hanford clean-up project along side some of the major players in the industry is particularly gratifying for us at this moment. And really, as I said earlier, is a major turning point for us. Although the contract has now been awarded and we are past the protest period, the project will not actually begin until October 1. We are presently in the transition period of the contract so the impact on the company will be minor until really 2009. We will see some revenue in the fourth quarter but basically the major impact is 2009.
The dollar amount of the contract for the team as a whole was $4.5 billion over ten years. The exact dollar amount of revenue that we will derive is very difficult to determine at this time, but as we look at our scope and our parts of the project, we expect to recognize approximately $40 million to $50 million per year for both the on-site work, we’re working on the Hanford reservation, and for off-site work we will do under this contract at our Richland facility. So we are very excited about this project.
Right now our major focus is staffing up the project and putting in place the right team to basically hit the ground running on October 1. We will have approximately, when we’re fully staffed up on this project, about 250 additional employees.
As the on-site work continues to be our major focus for us moving forward, and again, as I’ve mentioned in the past, we are continuing to bid on additional projects for on-site management and watching for new opportunities on the on-site management side.
Now we will turn to our results for the quarter. Revenues within our Nuclear segment increased by 17% over the period last year. This included sales from our Perma-Fix Northwest facility at Hanford, which was acquired in June 2007. We are very pleased with this despite, as we’ve talked about over the last year, the industry-wide slow down that we’ve seen throughout DOE.