Perma-Fix Environmental Services - Earnings Call - Q2 2018
August 8, 2018
Transcript
Speaker 0
Greetings, and welcome to the Perma Fix Environmental Services First Quarter twenty eighteen Business Update Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Waldman of Crexenda Communications.
Thank you, sir. You may begin.
Speaker 1
Thank you. Good morning, everyone, and welcome to Perma Fix Environmental Services second quarter conference call. On the call with us this morning are Mark Duff, CEO Doctor. Lou Senefani, Executive Vice President of Strategic Initiatives and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing second quarter twenty eighteen 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 Recynda 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 and include certain non GAAP financial measures. All statements on this conference call other than a statement of historical fact 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 U. S.
Securities and Exchange Commission as well as this morning's press release. 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. In addition, today's discussion will include references to non GAAP measures. Perma Fix believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website.
I'd now like to turn the call over to Mark Duff. Please go ahead, Mark.
Speaker 2
Thanks, David. I'm happy to report we achieved another solid quarter with growth in both revenue and profitability. We're beginning to see the impact of our new sales strategies and increased focus on delivering innovative solutions to our clients. As a result, we see enormous potential going forward. It's also important to note we achieved these results despite several activities related to the closure of our M and EC facility, which impacted both revenue and gross profit.
Despite this temporary disruption, as we shift resources among our facilities, revenue for the 2018 increased to $13,200,000 versus $12,700,000 for the same period last year. Gross profit included $1,200,000 of closure costs related to the Embassy facility. Excluding this expense, gross profit would have increased to $3,300,000 versus $2,400,000 for the 2017. We achieved adjusted EBITDA of $846,000 compared to $586,000 for the same period in 2017, and we generated net income attributed to shareholders of $610,000 or $05 a share versus a loss of $1,200,000 or loss of $0.10 a share for the same period last The transition issues related to our MEGC facility are largely behind us with closure activities expected to be ramping down and regulatory approvals expected in September. It's important to note that the completion of plant closure under the applicable regulatory frameworks of both RECRA and CERCLA excuse me, RECRA and TOSCA for MEC is being accomplished while we transition our primary treatment capabilities to other locations.
This transition has occurred successfully while maintaining waste receipt levels at or near those of 2017. While we would have liked to have closed MEC months ago, our teams worked very hard to ensure impacts to Perma Fix performance is minimized until we can begin to realize the benefits of that closure. Turning first to our Treatment Segment. We entered the third quarter with a backlog in excess of $7,000,000 which bodes well for the second half of the year. From a macro perspective, we're encouraged by the improved budget within the Department of Energy that provides $7,100,000,000 of environmental management activities, which is about $7.00 $6,000,000 above the $6,400,000,000 level enacted in fiscal year twenty seventeen.
We're also optimistic that Perma Fix could realize increased opportunities for waste treatment growth in the latter half of 2018 as our clients need to spend this money to ensure earned value and secure similar budgets 2019. We've also seen a pickup amongst defense clients that are beginning to procure for the procurement process for remediation projects, which will increase provide an increase in nuclear services field opportunity over the several last over the next several quarters while also providing waste treatment growth. These opportunities support new technology deployments by Perma Fix, including our soil sorter technology, which segregates contaminated waste streams, including debris and soils, to reduce volumes that must be disposed of in expensive landfills and minimize costs to our clients. We currently have four outstanding bids that provide this technology and hope to be operating our soil sorters in the next year. Also within the Treatment Segment, construction activities are continuing at our Perma Fix Florida facility to accept and treat radioactively contaminated water and additional commercial waste streams.
While we realized some challenges in achieving operational status due to delays in permit approvals, we have already begun to receive waste treatment backlog inventories to support our operations. We're also continuing our expansion program in the hazardous waste processing market, primarily targeting geographically focused opportunities in the Southeast U. S. Markets, including specifically Atlanta and surrounding areas in order to maximize utilization and throughput of our facilities. While we're also making progress with installation of our GMO facility or excuse me, GMO systems at our Perma Fix Northwest facility through a partnership with Veolia Nuclear Solutions.
Upon completion of construction, installation and start up testing, the GML petrification system will be used to treat waste drums containing sodium residual waste. We expect this petrification capability to come in Q4 and will provide the capacity to treat non bulk sodium waste as otherwise represented a waste stream with no path for disposition. Completion of this capability is critical to Permafix and the federal government as it will allow us to address large inventories of radioactive waste currently in storage. We continue to look outside The U. S.
As well, and we're seeing a number of new international opportunities that should contribute to our growth. Once waste overseas is treated in our U. S.-based facilities, we return the waste in a stable form for final disposal in the country of origin. We anticipate receiving new waste streams from Canada in September and are currently developing proposals for additional projects in Mexico and Italy, which should be awarded later this year. We believe we a good chance of winning a number of these given our unique capabilities of four specific waste streams that are being procured.
Within the Services segment, revenue increased by over $900,000 or 30% for the 2018 versus 2017 versus 2017. We have worked hard to increase our bidding activity and proposal quality within the Services segment, and we expect to see the results of our initiatives coming to fruition over the next two quarters. While Q2 was a bit lighter in proposal activities, including 13 submittals within Services, we've seen an unprecedented surge in July and August with opportunities well suited for Perma Fix from within the DOE, U. S. Army Corps of Engineers and the Navy.
We expect to hear back on more of these projects in the weeks and months ahead. It's taken a while to get Services segment back on track as we respond to these procurements, but I'm encouraged by the near term outlook as we are currently waiting for awards or announcements for outstanding procurements with total values in excess of $100,000,000 in total revenues. We're also expanding our role in the oil and gas markets in Pennsylvania, Ohio and West Virginia for the treatment of naturally occurring radiological material waste, also known as NORM waste, which can be difficult waste streams to manage for oil and gas producers and is a significant byproduct of fracking. This business line has seen progress this quarter as we opened a new office and a facility in West Virginia, deep in the heart of the Marcellus Shale region to provide radiological analysis services to fracking operators supporting a natural gas production. As we mentioned last quarter, we continue efforts to develop formal teaming arrangements with other large companies in the industry in order to support the Department of Energy site operating contracts bidding bids at both Oak Ridge, Tennessee and Hanford, Washington.
Some of these projects are entering the procurement phase within the next few quarters, and we've seen significant excuse me, we've seen successful teaming arrangements who are providing unique value from our projects, new technologies through our fixed facilities, which provides significant cost savings within the project based on budgets and schedules. On one final note, let me briefly touch base on Medical Subsidiary, where we continue to carefully manage costs. As I mentioned last quarter, we're able to operate on a minimal budget as we've shifted our strategy to focus on international partnering strategy, where we can work with partners that are much better equipped to develop a medical product and advance it through the appropriate regulatory bodies. Our partners continue to advance the process in order to address the regulatory roadmap. Initially, we are focusing on small markets such as Italy and Canada, where the costs and regulatory hurdles are much lower.
This will allow us to show proof of concept with minimal capital expenditures at the subsidiary level. This strategy will allow us to advance the development of our process without the need to raise near term capital at the subsidiary level and dilute our fixed interest in the subsidiary. Once we hit certain milestones in these other markets, we will either pursue The U. S. Market on our own or negotiate a partnership on much better terms.
So to wrap up, we saw solid growth and improved profitability. Our sales pipeline is strong, and we're encouraged by the improved federal budgets. As a result of our facility upgrades and technology deployments, we are very well positioned to support large procurements within the DOE as well as providing continued support to the test bed initiative at Hanford, all providing the potential for significant positive impacts to our revenue base over the next few years. Importantly, several of the projects we're working on could be quite significant and potentially transform the business when they materialize as well. On that note, I'll turn it over turn the call over to Ben, who will discuss the financial results in more detail.
Ben? Thank you, Mark. I'll start with revenue. Our total revenue from continuing operations for the second quarter was $13,200,000 compared to $12,700,000 in the second quarter of last year or an increase of 3.5%. Our service segment revenue increased $929,000 or 30%, which was partially offset by a reduction in our treatment segment of $484,000 or 5%.
This decrease at treatment was primarily due to the closure of our M and EC facility, which last year recognized $1,700,000 of revenue and only $76,000 in this quarter. As we continue to work towards transitioning the capabilities from that facility over to our other plants. For the six months ended June 3038, our total revenue was $25,800,000 consistent with $25,400,000 in the prior year. And again, as with the quarter, the year to date service revenue exceeded the prior year, while the year to date treatment segment was lower than the prior year primarily due to the reduction at the M and EC facility. On the cost of sales side, our cost of sales were 11,100,000.0 up from the prior year cost of 10.4 Within the quarter, we did book $1,200,000 of additional reserves related to the MNEC closure.
Without this expense, our cost of sales would have shown a small decrease of approximately 459,000 even though we had more revenue in the quarter. Our gross profit for the quarter decreased by 2,400,000.0 in 2017, I'm sorry, it decreased from 2,400,000.0 in Q2 of last year to $2,000,000 this year, a decrease of $311,000 or 13%. Again, the impact of the 1,200,000 reserve for M and EC closure negatively impacted the gross profit. Excluding this increase in the reserve, our gross profit would have increased by approximately $904,000 On the year to date, gross profit was $5,400,000 compared to $5,100,000 last year. And finally, again, this gross profit includes this additional reserve at M and EC and excluding it, our gross profit improved by approximately $1,500,000 on comparable revenue.
Our SG and A costs for the quarter were $2,600,000 down from $2,800,000 last year, primarily due to lower costs for outside services and bad debt. For six months ended June 30, our SG and A expenses dropped about $264,000 due to lower payroll related costs. In the second quarter of note, we booked a net gain of $1,600,000 related to the share exchange and cancellation of our preferred shares of our M and EC subsidiary. This transaction removed approximately $1,300,000 of M and EC preferred shares from our balance sheet as well as approximately $1,000,000 of accrued dividends. We had income from continuing operations net of taxes for the quarter of $788,000 compared to a loss of $1,200,000 last year, an improvement of 2,000,000 For the six months ended June 30, our income from continuing operations net of taxes was $1,000,000 compared to a loss of $1,900,000 in the prior year.
We had net income attributable to common shareholders of $610,000 compared to last year's net loss of $1,200,000 And over six months, our net income attributable to common shareholders improved from a loss of $1,900,000 in prior year to a profit of $745,000 this year. We had net income per share for the quarter of $05 compared to a loss per share of $0.10 in the prior year. Our adjusted EBITDA from continuing operations as we defined in this morning's press release was $846,000 compared to $586,000 last year. Our adjusted EBITDA from continuing operations year to date is now at $1,600,000 compared to $1,400,000 last year. Turning to the balance sheet, as compared to December 3137, our cash balance at the end of the year was 2,200,000.0 up from $1,100,000 and reflecting the improved collections of our receivables.
Collectively, our accounts receivable and current unbilled receivables dropped 3,400,000.0 reflecting our improved collection and billing efforts. Our current liabilities were down approximately 1,700,000 reflecting the company's improved liquidity position despite the increase in the closure cost of the 1,200,000.0 Our backlog at the end of the second quarter was $7,400,000 compared to 7,700,000.0 at year end and $6,500,000 in June 2017. Our current closure reserve at the M And EC facility was $924,000 at the end of the quarter. Our total debt at the end of the quarter was 3,500,000.0 and that's net of all debt issuance costs, all of which is primarily owed to our credit facility P and C Bank. Finally, I'll summarize our year to date cash flow activity in the second quarter.
Our cash provided for continuing operations was $2,700,000 Our cash used by discontinued operations was $322,000 Our cash used for investing in continuing operations was $528,000 of which $554,000 was for cap spending. Cash provided from discontinued ops is $36,000 and cash used for financing was $579,000 which represents is represented primarily from our monthly payments on our term loan of $610,000 and offset by cash received for the issuance of common stock on exercise of options. With that, operator, I'll now open the call for questions.
Speaker 0
Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. Our first question is coming from the line of Evan Greenberg with Legend Capital. Please proceed with your question.
Speaker 3
Hey, how are you guys?
Speaker 2
Hey.
Speaker 3
I'm glad that wasn't my question, by the way. Glad to see all the progress you're making on the cost side and backlogs have really good year over year even quarterly had grown. I know the business is lumpy. I wanted to get an idea there was a recent article in The Wall Street Journal and in Seattle Times about the Hanford facility and increased spending of $200,000,000 and whether you're going to see any of that revenue flow through to Perma Fix, what the opportunity is there for Perma Fix?
Speaker 2
Adam, this is Mark. I'm not sure exactly what you're referring to in regards to $200,000,000 What I think you're referring to is the budget increases for the DUEM budget, which was resulting in a $200,000,000 increase for the Hanford facility.
Speaker 3
That's correct.
Speaker 2
Yes. So to answer your question, no. We do we are seeing impacts as we speak from the budget in regards to additional waste streams that we're currently looking at and providing proposals for the third quarter. But basically, Hanford doesn't have a significant amount of waste in stores that they're funding with that money to come our way that we know of at this point. So we kind of we see Hanford, as far as the site itself, as largely flat through the quarter.
We are seeing impacts to other facilities, though.
Speaker 3
Okay. Do you think that just takes a while to flow through or that bid activity will increase on that over the next year or so?
Speaker 2
Yes, we do. Because 2019 is looking good as well. When it comes down to the 11, it depends on the DOE, site managers and their counterparts at DOE, whether and how they prioritize their budget increases. And we do expect through next year to see increased waste come out of storage because they do have to keep a large amount of storage and trickle it out based on how much we want to fund labor versus waste management. And so we do expect that to increase.
And we're working with them right now on what FY 2019 is going to look like, but we are seeing numbers click.
Speaker 3
Okay, great. Thanks a lot, Mark.
Speaker 0
Our next question is coming from the line of Bill Netskovits with Heartland Funds. Please proceed with your question.
Speaker 4
Good morning, fellas.
Speaker 2
Good morning, Bill.
Speaker 4
Congratulations on the trend is our friend here. We're moving the right way.
Speaker 2
All right.
Speaker 4
So Mark, you mentioned that you've seen increased activity from the Navy and other governmental bodies. Do you associate that with or what's the catalyst to it?
Speaker 2
Well, Bill, on the DOE side, it's historically budget. But outside of DOE, for example, the Navy has got a number of new opportunities that they don't normally have on the radiological waste generation side. And the Navy generates a very sustainable amount of waste each year from nuclear propulsion that is easy to estimate. And we get a certain portion of that every year that they generate. What's increased on the Navy side, which is quite interesting, are the opportunities associated specifically in remediation projects in San Francisco as well as other locations around the country where they're cleaning up sites.
And so we're seeing some increase there. On the Corps of Engineers side, they're also doing a number of remediation jobs at formerly used with the FEEDRAT project, they call it, which are formerly sites that the Army use in defense projects that had radiological components. So we're seeing more remediation projects underway. When they generate that waste, that's where we get the opportunities. And as I mentioned, Bill, we're excited about the soil sorting technology.
This is a real game changer. And there's a couple out there right now. We've deployed a number in the past. But as they're going into large volume remediation projects, these soil sorters dramatically cut the cost because you're segregating the soil before you go to landfill with it. So you're only sending what has to go.
So I hope to answer your questions in general, Will.
Speaker 4
Could you give us just a general like, what what the size might be or the range of
Speaker 2
You know, I I really can't because we got procurements that are out right now. But, the Navy in general and overall is going to be spending hundreds of millions in San Francisco. There's a number of projects you can look up online that are very high publicity projects going on out there. And in the core side, the FUSWRAP budget, which generally runs around 120,000,000 or $150,000,000 has seen some substantial increases, I want to say 20%, 25% this year as well. That's where most of the radiological work for the core engineers comes out of.
And in addition to that, we also see I haven't mentioned Canada much, but we're also seeing continued growth in our Canada work as well at several sites up there that are new to remediation as well.
Speaker 4
And what do you anticipate we'll do up in Canada for the year in terms of overall revenue?
Speaker 2
It's pretty flat. As far as overall revenue, Canada this year, I'm going to estimate between 2,000,000 and $3,000,000 and I would hope to significantly increase that at least two or threefold for next year based on the types of work that we're bidding and the position that we're in up there.
Speaker 4
I came on late, so I might have missed any commentary on services. Can you give us a little bit more color in terms of the type of contracts and the size of contracts and who you might be bidding with?
Speaker 2
You know, I really I can't get into details on specific bids, Bill, because of the sensitivity associated with procurements. But we're bidding a lot of work right now. And I can give you numbers of bids. For example, we have 16 bids being developed today in here, which typically we have four or five. And it doesn't we're win them, but we like to think we have a pretty good idea of our win percentage.
And so that's encouraging to me. And so we're seeing a lot of procurement activity. We did go through a little bit of a down period, as I mentioned in my notes. Well, we didn't do a lot of I think we did 13 bids, as I mentioned, through Q2 alone. So we're way ahead of that for this quarter and should see services increase in the coming months and quarters.
And keep in mind, when services bid, it can be some period of time before they make the award. So we still have a lot of awards outstanding, as I mentioned, about $100,000,000 in the queue that we're waiting for clients to award. And then we'll easily do that for this quarter as far as additional bids that we'll be putting in.
Speaker 4
Could you just maybe for shareholders, just outline where services might be? I mean what do you think is possible looking at two, three years or so?
Speaker 2
General strategy
Speaker 4
And will be kind of margins are possible in that
Speaker 2
business? It's a thinner margins than on the treatment side, Bill. But generally, our goal is get to $100,000,000 in the next couple of years in total revenue and to have services be at least 50% of that. And that's very attainable, but we plan to be a lot bigger. That's without any really material wins.
With the what I mentioned on the call was we're supporting some large businesses on these D. We. Site contracts. And these are 4,000,000,000 to 5,000,000,006 billion dollars contracts over ten years each. And this is the first time in a long time where Perma Fix has been able to offer up our treatment facilities as part of the overall plan to clean up the sites.
And that puts us in a position for a lot more significant role, a lot more sustainable revenue and a lot more profitability through volume than we've seen in quite some time. And Perma Fix had one of these contracts. The CHPRC contract was awarded in 2012, or I think it was, but it was ended in 2012. But it went for a number of years. And that's the type of contract we're bidding now with the same type of revenue expectations.
So there's a number of material contracts. There's big DOE ones I've mentioned. The RFPs or draft RFPs are due out in Q3, so basically next two months. And we're expecting final RFPs and bids to go in, in the springtime and awards within six to nine months after that. So that's kind of the timeframe.
Speaker 4
Okay. You mentioned less profitable, but what kind of margins can shareholders expect from this if we get to 50,000,000
Speaker 2
It's tough to say. It's a really difficult answer, because it is scalable. Your overall range on services would likely be between 515%, maybe up to 2025% depending on the risk that the contract is taking. But 5% to 15% is, at the end of the day, is pretty safe. Bill, I'll let Chad kind of average it averages in the 10% range.
As Mark said, the bigger and probably more competitive ones are going to be tighter margins. And then the smaller stuff can be up fifteen, twenty. So we see about 10 on average, 10 to 12.
Speaker 5
Okay. Thank you.
Speaker 0
Thank you. The next question is coming from the line of Joe Brown, a Private Investor. Please proceed with your question.
Speaker 5
Yes. Good afternoon. Congratulations on your progress. I wondered, you must have some pretty good visibility on revenue for the current quarter. And I'm just wondering, do you have a range for revenue in this quarter, the third quarter?
Speaker 2
Morning, Joe. Basically, see ourselves bullish in Q3. And with our backlog where it is right now at seven million dollars and growing as well, That provides a lot of clarity on where we should be in the third quarter, barring any type of significant delay in receipts, which can always happen. Based on the budgets and some of that lagging revenue from waste that we're processing right now, we expect to beat Q2 and to see a modest increase in profitability as well at a minimum. So Q3 looks good.
We're five weeks into it. And we've met our receipt goal pretty much for the quarter overall, which is obviously seven weeks or so ahead of plan, ahead of schedule. So as long as we continue to see the path that we're on right now for the next seven weeks, we expect to beat last quarter's numbers.
Speaker 5
Well, do you think you can hit $15,000,000 in revenue this quarter?
Speaker 2
I hate to commit to that, Joe, because I never know exactly what services proposals are going be awarded or not. But again, we expect the bullets we're bullets over Q2.
Speaker 5
Okay. You still had some write offs pertaining to that shutdown that you had, which affected your earnings last quarter. Are you done with that? Are you getting more write offs related to that one facility shutdown?
Speaker 2
That's the M and EC facility. And I'll let Ben provide specifics. But basically, right now, we're at the final throes of expenses. We have some waste we have to dispose of, not much left. Think we've disposed of 95% of the waste that we've generated from there.
And that's where the major cost liabilities lie is when you clean up a facility like that, you generate a lot of waste that obviously didn't have revenue associated with it. So that's mostly been removed. Our labor is down to a minimum level. We're basically just doing surveys now to address to characterize the facility for turnover and free release. And then we have the regulatory approvals to get through, which the state's been very supportive with us on, very supportive.
So we expect to be out of there by September with minimal additional cost. Ben, do you have anything to add to that? No. Yes. We setting that reserve is important for financial reporting.
And as of right now, we believe that we are fully reserved for it. The difference why we had to book it was new and that showed up different other ways that we weren't aware of and the time it took to cut materials up, it's a very laborious procedure. But we are, as Mark said, we're kind of in the stretch drive here and we believe that should be it.
Speaker 5
Okay. I also wanted to ask you about the conversion of those preferred shares. That had an impact on your earnings as well, right? Do you it seemed like your report you had pay off some dividends for those?
Speaker 2
Well, we didn't pay off. We had approximately $1,000,000 of dividends on the balance sheet. And we wrote them off, right. So that was part of the pickup and then the difference in value between the preferred shares and the common stock we swapped for them added to that profitability. So it was kind of a it was a combination of the two.
Speaker 5
I you know, I I was I obviously, you must follow your stock price, your valuation of your stock. And we had I think earlier earlier in the quarter, you got up to, like, I don't know, $5.15. And then the stock went backwards all the way down to about, I don't know, $4.30 or $4.40, somewhere around there. So I'm just wondering, to what you attribute that? Do you think that some of those preferred shareholders that got converted or sold off the common stock that they got or I'm just wondering what your thoughts are on that?
Speaker 2
Joe, no, those shares are restricted for six months under 144. So those shareholders have to hold them at least that long.
Speaker 5
I see. So what I mean what I can't
Speaker 2
I mean, there was not a lot of news either way. I think it's just the market movement in the market.
Speaker 5
Yes. As I follow this, it seems it also seems to me that because of the the low price of your stock and and the limited share, it seems like it's very easy to manipulate the stock up and down. Sometimes you see that, you know, somebody sells or buys a 100 or 200 shares, they can move they can move stock significantly by doing that. I just wondered, have you ever given some thought to, you know, how to prevent this manipulation of of your stocks up and down like that with, you know, it's just almost, you know, a minimal purchase? You know what I'm saying?
We we've got understand what I'm saying. Yeah. We we've looked hard at that at times because we've had questions from investors on and off. It's Luis Ndafani. Is and we've also had to be honest with you, we've had Nasdaq look at it.
And what you see is with the you'll see at the end of the day some trading going on. But again, it's it's when we've talked to people who looked at it real closely, it's usually been computer, you know, computer generated trading at the end of the day when people are, getting out of positions. Very minor there's no yeah. Yeah. I mean, I've I've seen a 100 shares, you know, water sold.
It was just that four or 5%. I mean, that's that's is there any defense against something like that? Or have you ever thought of any strategy to cover that? We find we have very with the trading itself, we have very little control over that. We watch for irregularities and I'm trying to be on top of that.
We the end of the day trades are the ones that are the most painful which we see and when we've talked to the experts and we've talked to NASDAQ compliance people, they They have had it and they said there's very little you could do about that.
Speaker 0
Thank you. Our next question is coming from the line of Chuck Dickinson, a Private Investor. Please proceed with your question.
Speaker 6
Good morning. I just wanted to clarify on the M and EC facility. Are your remaining cash costs then to finish up whatever you need to do there about that number that you quoted on the on the reserve, $924,000, is that the additional cash that you think you're going to need in sort of a conservative worst case scenario to close that facility, and it will be completely done, targeted by the September such that going forward from the September, there'll be no further costs related to that?
Speaker 2
Correct. That would be on the expense as opposed to cash though. That's expense, yes.
Speaker 6
How about the cash cost to finish up close out?
Speaker 2
Cash is there is some in the accounts payable. So it's approximately in the $2,000,000 range.
Speaker 6
$2,000,000 left to go. And that would include the reserve of $924,000 that's subsumed in $2,000,000 as well? Correct.
Speaker 5
Correct. Yes.
Speaker 6
And your cash balance, I was confused. I couldn't tell if you were giving a cash balance figure of $2,200,000 as of the December 3137, or
Speaker 5
as of the end of
Speaker 6
the most recent quarter here, June 30 that you just reported?
Speaker 2
At June 31, our cash balance was $2,200,000
Speaker 4
$2,200,000 okay.
Speaker 6
And are you seeing anything last question from the government in terms of are all the officials in place within this current administration that would be involved in helping your case along or at least expediting work that needs to be done on cleanup? Because a comment was made, I think, a couple of quarters ago, maybe Lou had made it, that, one of the problems that, tended to crop up was, it's one thing to have the money there. It's another thing to have people in place at their jobs to have this stuff move along. There was a sense that there were a lot of positions that were still vacant and you really didn't have the personnel in place to see through the work
Speaker 5
that needed to be done.
Speaker 2
Yes, Chuck. There has been significant improvement inside of the government to fill those positions in the last two quarters. And particularly within the Department of Energy and the EM organization, those positions are filled. We have good relationships with those officials. They know what our facilities can do and the value that Perma brings to the overall mission.
So we're very pleased with who they put in there. We know that they're very strong managers that have been in the industry a long time, know what they're doing, and they're really charging hard, and we're very encouraged by that.
Speaker 6
Okay. And are you concerned at all about any of the noise going on about the wall and the potential government shutdown if the administration doesn't get what it wants? I would presume that would be fairly short in nature given the pain that would be exacted. But do you have sort of a contingency plan should the government shut down for a short period of time?
Speaker 2
Yes. We don't that does not that as risks go in our business, that's not one of the bigger ones. Obviously, a shutdown can always have some type of impact. With backlogs that we have, what that would typically do is delay shipments, but the waste still needs to move. And so it wouldn't be that big of an impact it shouldn't be that big of an impact on a quarter basis, at least.
Speaker 6
Thank you.
Speaker 2
Hey, Chuck, last comment on the cash and the MNEC closure. As we reported in prior quarters, upon closure and release of that facility by the state, we will free up $5,000,000 of cash that's currently in restricted securing bonds right now. And so that's you can add that to the $2,000,000 we have current.
Speaker 6
That's not already in the cash balance or it's when you say cash is $2,200,000 currently, that doesn't include another 5,000,000 potentially that you should have coming?
Speaker 2
We currently carry and it's not real visible on the balance sheet that goes out with the press release, but we have $15,300,000 or so, dollars 15 plus million that secures our closure bonds at our facilities. And with that closure requirement is going to drop significantly with M and EC, which is one of our biggest plans. And so we've already gotten arrangement with our insurance company to release $5,000,000 shortly after we get full release. So that regulatory part at the end of the process that Mark mentioned will trigger a short term turnaround of cash.
Speaker 6
So potentially, if there were no other changes in your cash balance, and I realize that's a moving target, and hopefully, it's a positive target with positive cash flow. But if there's no change from the current balance of $2,200,000 then shareholders could reasonably expect either at the end of the September or certainly by December 31, assuming you have the regulatory sign off on that facility, the cash balance could move from $2,000,000 to somewhere closer to $7,000,000 on the balance sheet?
Speaker 2
Correct. Now keep in mind the liabilities that I mentioned are higher than they would normally be, but you will be covering those liabilities with the extra cash, right?
Speaker 6
And what are the liabilities you're talking about, $2,000,000 of Correct.
Speaker 2
Yes.
Speaker 6
So you're still gonna have net of at least several million, $2,000,000 extra to the cash balance. So that so then you're looking at, you know, a pretty low level of debt, 3 and a half million.
Speaker 5
I think you said
Speaker 6
on the last conference call, there was really no need to pay it down much further. I mean, you could if you want, but it's low enough now that you wouldn't have to do that. Would the cash then just go to fund the further operational growth organically here? Or would you ever consider buying back some shares if they stay below the $5 range?
Speaker 2
Yes. In the short term, with the initiatives we have, it would be the former. We would look at reinvesting it at least from what we can see visibly. But you're absolutely right. We will be in a much stronger cash position all other things equal.
Speaker 6
Yeah. Okay. Well, it's certainly different from what it used to be when you were carrying close to, what, 15,000,000 to 20,000,000, not that many many years ago. So you've done a great job of paying down that debt, I'd love to see that continue. Thank you.
Speaker 0
Thank you. We have reached the end of our question and answer session. So I'd like to pass the floor back over to Mr. Duff for any additional concluding comments.
Speaker 2
Okay. Thank you. I'd like to thank everyone for participating in our second quarter conference call. As I mentioned earlier, we achieved solid growth and profitability in Q2. Our backlog is up.
We've increased bidding activity in our Services segment and we're looking forward to several large projects within the Treatment segment that could be transformative. We look forward to updating you again next quarter and I'd like to thank you again.
Speaker 0
Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.