Perma-Fix Environmental Services - Earnings Call - Q4 2018

Transcript

Speaker 0

Greetings. Welcome to the Perma Fix Environment's Fourth Quarter and Fiscal twenty eighteen Business Update Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. Please note this conference is being recorded.

I will now turn the conference over to David Waldman with Crexendo Communications. Please go ahead, David.

Speaker 1

Thank you, Rob. Good afternoon, everyone, and welcome to Perma Fix Environmental Services fourth quarter and year end conference call. On the call with us this afternoon are Mark Duff, President and CEO Doctor. Luz Zanifani, Executive Vice President of Strategic Initiatives and Ben Macarado, Chief Financial Officer. The company issued a press release this morning containing fourth 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 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 during 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 reference to non GAAP measures. Permafix believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of 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

Great. Thanks, David. We had a couple of minor setbacks in the fourth quarter that resulted in isolated impacts on our financial performance. First, there was an unplanned outage of approximately two weeks at our Perma Fix Northwest facility, which has been resolved. Second, we incurred a continued delay in expenses associated with the planned closure of our M and EC facility.

Despite these challenges, which I'll discuss more in a moment, I'm pleased to report that our Treatment Segment revenue increased, and we ended 2019 with a strong backlog and sales pipeline. On top of this, we have recently been awarded several new projects in early March, valued at approximately 17,000,000 for 2019 with significant potential growth in future years as well. These latest contracts significantly increase our funded backlog and will bolster our Services segment beginning in the 2019. These wins, which will be formally signed and announced in the coming weeks, include remediation work in Canada as well as several DOE or Department of Energy locations throughout The United States. We believe these awards are a direct result of the improvements we've made over the last year within our business development organization.

Suffice to say, we've been very busy in the procurement processes, even though it's not always really apparent through our press releases, given the limitation placed on us by some of our customers regarding disclosure. Also, we completed testing and demonstration of the GeoMelt vitrification unit at our Perfect Northwest facility in the 2018. We formally commenced commercial operations of the GeoMelt unit through our partnership with Veolia Nuclear Solutions and have completed our sixth treatment event for sodium residual waste. This new capacity allows us to address a large inventory of radioactive waste currently in storage and provides us a substantial multiyear backlog from a new incremental waste stream. It also reflects our successes in diversifying our revenue streams.

Also within the Treatment Segment, construction activities are continuing at our Perma Fix Florida facility to accept and treat radioactively contaminated water and also an additional commercial waste streams. We've begun to receive water treatment backlog inventories in Florida and should be fully operational this summer after a few delays that we've had in the construction and permitting processes. We're continuing our expansion of the hazardous waste processing markets as well in Florida, primarily targeting geographically focused opportunities in the Southeast U. S. Markets in order to maximize utilization and throughput of our facilities.

In terms of the unplanned outage at our Permaix Northwest facility in early December, the shutdown lasted approximately two weeks, and the total impact was approximately $800,000 During this time, waste receipts were halted and production activities remained idle while crews addressed some operational controls associated with processing a specific low level waste stream. Since this period in December, Perma Fix Northwest has realized strong momentum through Q1 and adjustments implemented during the outage have proven to be effective in ensuring the highest level of safety for our workers while maintaining efficient operations. Regarding the plant closure of the M and EC facility, clearly this has been a larger challenge than anticipated and has resulted in a negative impact to our performance overall for several years. This is due to the costs associated with closure cleanup activities as well as the distraction to our workers and our management team to complete the termination of the permits. I'm pleased to report we have completed the cleanup phase associated with decontamination to support releasing of the building under the commitments of the closure plan.

We're approximately 80% complete in the final verification process and surveys that are required and working directly with the landlord and the state of Tennessee for release of the permits in Q2. On one final note, we're encouraged by the current direction of the Department of Energy as it relates to procurement processes within the DOE's Office of Environmental Management. The department has adopted a new end state approach to cleanup, which provides a greater emphasis on acceleration of project schedules to include waste management metrics such as waste disposition. This change in procurement strategy is directly aligned with our offering, which reduces the long term carrying costs associated with the nation's nuclear waste legacy by accelerating commercialization of waste processing and treatment. In fact, the new approach favors advanced cost effective technologies such as our grouting process demonstrated for the TestPut initiative at Hanford as well as the large component dismantlement capabilities we bring to support faster and more efficient off-site processing.

So to wrap up, we entered 2019 with treatment backlog of approximately 11,100,000 which bodes well for the rest of the year. We've significantly increased our funded backlog through new contracts in the Services segment with over $17,000,000 in new contracts awarded in March alone. And we're actively bidding on a number of additional larger projects even within our Services segment and look forward to providing further updates as those proposal developments unfold. On that note, I'll turn over the call to Ben Naccaratto, who will discuss the financial results in more detail. Ben?

Speaker 3

Thank you, Mark. Beginning with revenue. Our total revenue from continuing operations for the fourth quarter was $11,700,000 compared to last year's fourth quarter of $12,600,000 a decrease of $851,000 or 6.8%. Our Treatment Segment revenue increased by $333,000 in the quarter compared to prior year due to increases in both receipt and production volume at our plants. The service segment was lower than prior year by $1,200,000 due to lower project revenue, which is timing related and was impacted by the completion of certain phases of one of our ongoing contracts.

For the year ended 2018, revenue was $49,500,000 compared to $49,800,000 in 2017. Our service segment increased revenue increased by $1,200,000 as we perform more scope with one of our ongoing customers compared to prior year. Our treatment segment revenue was lower by $1,500,000 due to lower processing and disposal revenue compared to prior year. The offset of this drop in revenue though at the Treatment Segment was a sharp increase in our opening waste backlog to $11,100,000 compared to $7,700,000 at the 2017. Turning to our cost of sales, our total cost of sales was $10,500,000 in the fourth quarter compared to 10,800,000.0 in the prior year, a decrease of $322,000 or 3%.

Our Treatment Segment costs increased by $443,000 compared to prior year. Included in this increase was cost of sales of $1,000,000 closure reserve booked at the M and EC facility compared to a smaller increase of $850,000,000 in Q4. Cost of sales from our Services segment were down $765,000 consistent with the drop in project revenue. Gross profit for the quarter was $1,300,000 compared to $1,800,000 in 2017. Lower revenue at our Services segment and the additional costs related to M and EC in the Treatment segment were the main reasons for this drop.

For the year ended 2018, gross profit was $8,500,000 compared to $8,600,000 in 2017. We had a modest improvement in our margin from revenue mix, but that was offset by the impact of the lower volume and lower fixed costs were offset by the higher M and EC costs. Our G and A costs for the quarter were $2,700,000 compared to $2,800,000 last year, a decrease of about $84,000 and lower bad debt was offset by higher marketing and payroll costs. For the year end 2018, our G and A costs were $10,700,000 compared to $11,100,000 in the prior year. And as with the quarter, bad debt was offset by higher marketing payroll costs.

Our research and development expenses were higher than prior year by $396,000,000 reflecting the write down of certain assets in our Medical segment. Our loss from continuing operations net of taxes for the quarter was $2,400,000 compared to $340,000 last year. Included in this loss was $1,000,000 of additional closure reserve booked at M and EC, the continuing operating expenses at M and EC of $308,000 and the write off of certain assets at our Medical segment of $455,000 The net loss from continuing operations for the year ended December 31 was 1,100,000 excuse me, compared to net loss of $3,500,000 in the prior year. Excluding all the income and expenses related to M and EC and the write down of the Medical segments,

Speaker 2

net income would have improved

Speaker 3

by 2,600,000.0 Net loss attributable to common shareholders for the quarter was $2,400,000 compared to last year's net income of 2,600,000.0 For the year ended December 31, net loss attributable to common shareholders was $1,400,000 compared to $3,700,000 in the prior year. Our total loss per share for the quarter was $0.20 compared to income per share of $02 in the prior year. And our loss per share for the year ended twelvethirty oneeighteen was $0.12 compared to $0.31 in the prior year. Our adjusted EBITDA from continuing operations for the quarter as defined in this morning's press release was a negative 167,000 compared to $329,000 last year. For the year ended August 18, adjusted EBITDA was $2,000,000 compared to 2,400,000.0 in 2017.

Turning to the balance sheet. In comparison to our year end of 2017, our cash balance dropped by 253,000 Our current unbilled receivables were down by $1,400,000 reflecting improved billing and the completion of most of the outstanding M and EC invoicing. Other current assets were down $673,000 due to the reduction of prepaid at M and EC and the write down of an asset at the Medical segment. Intangibles and other assets were down $333,000 due to the elimination of M and EC's long term unbilled receivables and the write down of a prepaid asset in our Medical segment. Our current liabilities were up $1,900,000 primarily due to increased accounts payable related to the MNEC closure.

Our wage backlog sits at $11,100,000 compared to $7,700,000 at year end 2017. Our long term liabilities were down $1,700,000 as a result of the elimination of our preferred share dividend payable at M and EC in the second quarter and the decrease in our deferred tax liability, which netted down against our indefinite lived deferred tax assets for tax net operating loss carryforwards generated in 2017. Our current debt, including capital leases and excluding debt issuance costs, was 1,400,000 with $1,200,000 due to our primary lender PNC Bank. Total debt at year end was $3,800,000 including capital leases and excluding debt issuance costs with $3,400,000 due to our primary lender PNC Bank. Our current working capital was a negative $6,700,000 compared to a negative $2,300,000 in 2019.

A couple of things should be noted, however, 5,000,000 of cash collateral, which we expect to receive upon closure of the MNEC facility, is still listed as long term assets. And when received, we will use this to reduce the working capital deficit. In addition, we have just closed on a $2,500,000 of sub debt with favorable terms that will further improve our liquidity position. Next, I'll summarize our cash flow for 2018. Cash provided by continuing operations continuing operating activities was $2,600,000 Our cash used by discontinued ops was $618,000 Our cash used by investing activities was $1,400,000 primarily on cash spending.

Proceeds for the sale of discontinued ops property was $67,000 Cash used for financing was $580,000 consisting of $1,200,000 payment on our term loan and $639,000 received from the revolver. With that, I'll now turn over the call to questions.

Speaker 0

Thank you. We'll now be conducting a question and answer session. Our first question is from the line of Bill Naskowitz with Heartland Advisors. Please proceed with your questions.

Speaker 4

Thank you. Well, thanks for the update here. Ben, did I get this right? For the quarter, there was a $2,600,000 improvement, was that?

Speaker 3

Not improvement, Bill. What I was trying to for the year, when you calculate all of the closure expenses and ongoing costs at M and EC and net out some of the positives from the tax credits and the dividends, we without M and EC, we would have had an improvement of $2,600,000

Speaker 4

Okay. And in terms of this outage for two weeks, what specifically was the problem? And what did it cost us in terms of revenues?

Speaker 2

Bill, overall revenue impact was about $800,000 because we had to shut down and that facility with the backlog ahead of time for the fourth quarter was about $400,000 a week. We had to make some adjustments in our processes out there to make sure that we had given the types of waste that we are processing, making sure that we contained the contamination properly. And it took about two weeks to make the adjustments we needed to make and to make sure that everyone's working safely. It's largely a product of or result of when you can get a waste treatment to make sure that the right precautions are being taken, procedures are correct, and then no one gets contaminated.

Speaker 4

Okay. So our treatment backlog is $11,100,000 as of the end of the year, is that right?

Speaker 2

Correct. Going into the new year, correct.

Speaker 4

And then funded backlog, you referred to $17,000,000 of new contracts, but what roughly what is the funded backlog?

Speaker 2

Ben, do you have the actual funded backlog, Ben? The actual no, I don't have

Speaker 3

it with me, but it's probably we were sitting at about 7,000,000 before the wins. So it would probably be in the mid-20s.

Speaker 4

Dollars 24,000,000 or so.

Speaker 3

Well, that's encouraging, isn't it?

Speaker 4

Could you just lay out perhaps the potential in terms of the sodium market that we're now in and also the H2O market down there in Florida?

Speaker 2

Yes, Bill. The H2O market is a lot more subjective because it depends so much on marketing and it's so cost competitive. I would say for us, what that means is if we hit on all cylinders, we could probably do 5,000,000 or $6,000,000 a year there if we with a couple of good wins and what we think is our near term clients. I am pleased to say though on the sodium market that market is much larger because we don't have a lot of competition. In fact, there's no competition on it.

So it's really just a matter of what people's what our clients' budgets are. The way that it works at Idaho excuse me, at Northwest is that we get we have a permit for two years to do what we call a treatability study. But you're allowed to pretty much demonstrate operational capability of your system while you're getting your permit, which is a very friendly way of supporting new technologies by the State of Washington. And we have about $5,000,000 of backlog for that waste during that two year period. But we're viewing Veolia and us together after sitting down really analyzing the market out there.

We would agree together that the market is closer to $100,000,000 in total inventory that's out there in the system now over the next ten years or so. And that could be accelerated or decelerated depending on budget levels. So to answer your question on the sodium side, 5,000,000 in backhaul right now for the next eighteen months or so to two years and about $100,000,000 over the next ten years or so for the total market.

Speaker 4

And we have no competition, so the margins are what kind of margins do you expect? And how is it shared with Veolia?

Speaker 2

Well, that's largely a proprietary, but the margins are good. As far as some of our other margins, it's not as aggressive as some of the other margins we have. But they are good margins and good sustainability. And that being the only source for this processing doesn't necessarily mean you can charge whatever you want. You have to be reasonable or they'll leave everything in storage.

So we have to balance that out and make sure we're providing a good value so that it's cheaper to treat it and get rid of it than it is to store it. And we work very closely with Department of Energy and particularly the Idaho site to work out a long term arrangement for treatment of their waste as well as we're looking at other clients as well.

Speaker 4

So is this a fifty-fifty partnership?

Speaker 2

Yes, really can't get into details on the partnership, Bill, at this point.

Speaker 0

Our next question is from the line of Stephen Fine, a Private Investor. Please proceed with your question.

Speaker 5

Good afternoon, guys.

Speaker 3

Afternoon. Hello, Steve.

Speaker 5

Yes, great summary, Mark. I just want to appreciate that. Some of my questions I had a lot of questions and some of them were answered already. On the $5,000,000 in the sinking fund that you're getting back from the closing plant, you say that 80% is finished relative to the final claim. So does this mean that there could be more work done that has to be done?

Speaker 2

Yeah. That's a good question, Steve. And after reading that out loud, kind of wondered if it was clear. The way this works is that you have to go through and do complete decontamination and cleaning of the entire facility anywhere there's contamination. And that's been 100% completed.

So we've gone through, scaveled the floors, taken down the drywall, generated a ton of waste, cleaned it all up. And what you have is lagging after that cleanup. You have the final surveys. And people are going over the Geiger counters basically and survey equipment just to make sure there's nothing residual or nothing nothing was missed. We do that while we're doing the decontamination as well.

This is kind of a final step that's required under your permit to go in and, with a separate group of people, and do that survey. There's four different permits. We've already finished and closed out three of them completely. So they've already done that verification process. All done, completely done, or already into the state, for closure.

We're on the last one. So we finished the cleaning on the last one, and we're about three or four weeks away from the final verification process of the last one. So it's very low risk that there's any additional cleanup costs. I can't say there's a 0% chance you can find something, a nugget here and there, you might have to clean up. But it's very, very minimal and final quality assurance steps.

We're just about done that last verification process.

Speaker 5

So you were able to bet what you think is could be there?

Speaker 2

Yeah. We're able yeah. We're we're we're yeah. Basically, he's going through the final we call final QA step, quality assurance step to make sure that everything was done, yes.

Speaker 5

Right. Second question. Regarding the medical and the write off of $552,000,000 I thought in previous earnings report, it was stated that that's over. There's no more cost. So where did that come from?

Speaker 3

There were there was two prepaids on the books. Or one was a receivable and one was a prepaid related to the grant that we've we had at the medical company. That grant has been completed, but there was a receivable which we're still discussing with the grant agency on whether we're going to receive it or not. So the we thought we felt it prudent to write it off in the event we do not collect it, just to move on. The other the other prepaid that was written off was related to a prepaid fee that was paid to get the grant to bankers.

And with the grant being finished with a couple of tasks not yet finalized due to technical reasons, we again, we wrote off a prepaid. So neither were cash, both were sort of well, the receivable probably was cash not received, but the other one was just for a prepaid from a few years ago.

Speaker 5

So Ben, is there value there relative to this medical technology? I mean, there potential value? Hey, Steve, this is Lou. Yeah, let me you know, the what we see with the technology is, yes, there is there is still value. We have several people still working on the technology for Grata.

They're working at their cost. So it's not costing us anything. So at this point, we we think there is. And so we're still providing support on that part. Thank you.

All right. With regard to the backlog, there was one comment there that you had going into this year, an 11,000,000 backlog. And then Bill was questioning, the number came out to $7,000,000 So I guess the question should be, we finished the first quarter is over. And so basically, was the first quarter basically on normal track? I mean sales seem to be around the same amount for the last three, four years.

So was at least the first quarter on track relative to, let's say, 2018?

Speaker 2

Yes. Let

Speaker 3

me clarify quick, Mark, and then you can take it. The $7,000,000 I mentioned was the backlog for services, not for treatment. We sort of separate to the 11,000,000 is just treatment.

Speaker 5

Oh, that's right. So you're talking potentially $35,000,000 with the $17,000,000 that you're going to sign this month?

Speaker 3

Might be a little high, but

Speaker 5

close, yes. Okay. That's wonderful. Yeah. Mark, did you have something to say?

Speaker 3

I'm sorry.

Speaker 2

Yeah. That 11,000,000 is is typically viewed as what we have in our inventory sitting on our sites for, treatment. So that's the it's it's waste we've already received or already billed for, but, basically, we're we have a signed contract and typically have the waste in our possession. So when you have 11,000,000 inventory, backlog for for treatment, that's that's pretty much all. I'm just like ready to go.

Speaker 5

No. That's fabulous. Alright. I have a bunch of comments, and please bear with me. I've, they're they're written and some of them have been answered already.

I was going to start out with the GML system and I think, you know, Bill asked some really poignant questions there. And, you know, I think it needs to be pointed out because I went in and researched Veolia. And it seems that this GeoMelt system has been, you know, there have been people in other countries that have been licensed at. But Perma Fix has been the only company in The United States licensed for all of The United States. And I think this is a real statement in my mind relating to Perma Fix, special capabilities relative to this.

Is there so you were explaining, Mark, about how this is progressing. So this has to be further permitted? Is that what I have to understand here?

Speaker 2

Yes, Steve. Basically, it's we got rolling very quickly under what we call treatability study. And what you do is you permit you have a treatability study, which includes a pretty significant amount of quantity you can you can treat under the treatability study. And you pretty much are in a position where you can do that treatment while you're applying for your operational permit. So the the risk of the operational permit is very limited as far as getting it.

But typically, it leverages the production and performance of the treatability study to get your permit. So as a regulator, they want to see that your technology is gonna work, that it's safe, that you have your missions under control and all those types of things to support your permit request. And then you add that treatment to your overall permit for the site. So it's a modification to your existing permit.

Speaker 5

Right. Alright. And you answered the question. I had a question, how large is the market? You answered that.

Okay. With one other question I have about the GeoMelt is, can this system, this GeoMelt system, be used for the processing of other types of nuclear waste other than this salt rad type?

Speaker 2

Yeah. It's a good question, Steve. It's important to know that it is a very robust system. You you can put a lot of waste in it. Basically, it's a five cubic meter box that you melt at one time.

You can only put 30% to 40% of that box can be your waste form, and the rest of it has to be basically play sand because it melts it all together into one large monolith. So it's a batch process. It's not the type of process that's continuous operation. So there's limitations on very, very large quantities of waste. It just doesn't make a lot of sense.

But it does for these types of waste that DUE has a lot of, like a drum here and a drum there and a piece here and a piece there. You could throw in there with some sand and you fire it up. It's two twenty kilowatts of energy goes into it and makes it into a glass. And it's a very stable waste form that you can dispose of. So to answer your question, for sodium waste, it's optimal and it is for other types of reactive wastes as well, but it certainly doesn't it's it's not the kind of thing you could run, you know, like, tank waste or other any other type of waste in large quantities, so it just wouldn't be feasible.

Speaker 5

Thank you. Alright. There has been a plethora of articles this year in the public domain relating to nuclear waste relevant to Perma Fix. Based on these articles and other public information, first, I want to applaud people of Perma Fix for their patience, endurance in developing the business landscape. Moreover, I want to applaud DOE for looking at the nuclear and nuclear waste business in a pragmatic, realistic and cost effective way.

As the recent closing of the MOX plan in Savannah that had issues with timelines and costs. With all the environmental issues facing our government, hard decisions have to be made in order to optimize the deal budget. The Testbed Initiative has been an exciting prospect for Fix, wherein as I read, Perma Fix can treat in its North its Pacific Northleaf plant next to the Hanford Reservation low rad waste at the Hanford Tank Farm at some $300 per gallon versus a lowball cost of $1,000 per gallon at the BIP plant. I have read numbers that such an effort would save 12,000,000,000 to $1,000,000,000 in cost savings. And obviously, this could mean hundreds of millions of dollars of sales for PermaFit.

I understand Phase one of this initiative of treating three gallons was treated last year. And I note that 90% of the 56,000,000 gallons at the tank farm are estimated by various parties and studies to be low rad. And early this year, there was a public announcement by DOE that Perma Fix was awarded a $4,800,000 for Phase II of the TBI or the 2,000 gallon sample with a completion date inclusive of building a pretreatment unit, treating the waste, and filing the report that is due in September. So my question is, how is the phase two work progressing? Is the pretreatment machine finished?

And will you meet the September deadline?

Speaker 2

Appreciate the question, Steve. The bottom line is TBI has made a lot of progress this year. There's there's two components to it. There's the Perma piece as well as the the remaining piece. The Perma Fix piece, we have gotten our permit for our mixer, which was was a hurdle for us, as well as our air permit.

So we're ready to receive the waste under Phase two, the 2,000 gallons. DOE is progressing on their permitting side of the house, and they're still working through that process with the state of Washington getting over those hurdles. So that's the third that's the second component of the process is the permitting seven eighty degree. And then the third piece are the other components, which are the tank extraction system that Columbia Energy is supporting along with the rest of the TBI team. That's made great progress in Columbia Energy.

Last time I checked was like a week ago, was through 90% design and construction and have a mock up or I believe they actually have the unit completed, 90% completed in a mock up type of form and are testing it now. We're getting ready to so the engineering construction of the pig extraction system unit is also moving along very well. So to answer your question, I think it's going to be a little bit delayed based on some of the permitting side of the house with DOE. It has to get through. There's still some risk there as far as timelines go, but the project is moving along.

And currently, the schedule for the 2,000 gallons is this fall. Things are still happening. I think we're very encouraged by the fact that I believe it's the President's budget had TBI in it as a line item for $10,000,000 for 2020. So we're really pleased that DOE is still recognizing this as a viable supplemental treatment capability for the site.

Speaker 5

Okay. Thank you. All right. There were articles in a large pretreatment machine being designed for the VIC plant for separating low and high rad nuclear waste at a much higher rate. Think eight to 10 gallons per minute.

So what is the status of installation and permitting of this pretreatment machine?

Speaker 2

That's not in our scope, Steve. That's within the WRPS contract. So I don't have a status on that. But I know it's ongoing. They made an award and they're moving forward.

I'm just not sure the status of it.

Speaker 5

So is this machine going to be the pretreatment machine for the VicPlan site?

Speaker 2

I can't I can't I'm afraid, Steve, I can't address what the the all the objectives associated with that equipment.

Speaker 5

Yeah. I then can Steve, let me Yeah. Respond. Yeah. The Atlantic unit is there.

It's going through its final permitting also. It will be the pretreatment for the as it stands today for the pretreating waste before it goes to the vet plant or before it comes to us. Okay. So then one can presume that it can be, it would be used for larger quantities when and if the test bed initiative requires larger quantities of low rad waste for treatment? It it would be an it would sure be an option.

Okay. Alright. Fine. Okay. I note that the same week that Perma Fix was awarded the second phase of the TBI, the DOE announced 2019 current cost estimate to finish cleaning up Hanford.

According to the article, the last cost estimate was in 2016 and was about $130,000,000,000 to complete all the Hanford cleanup. The 2019 estimate by DOE was quite shocking in that it tripled on the low side to $400,000,000,000 and on the high side to as much as $600,000,000,000 And DOE estimated that work could extend to 02/1980, which could mean parts or systems of the complete the completed hamper would have to be replaced because of wearing out over time. The article suggests that other ways of processing the waste needs to be explored based on the stark escalated cost increase. So my question is, how do you look at this increased cost estimation by DOE?

Speaker 2

We certainly believe, Steve, that it plays well for evaluation of alternatives. There's a lot of other factors here and that play into this whole initiative. We feel obviously that the technology we have would be very applicable to the tank processing for the low level tank waste. Continue to work with DOE to make sure that it's moving forward. We can't really address the article that came out.

Know what you're talking about. They've shown dramatic increases in total life cycle costs. And we do believe that our technology is about 10 times less. But the folks in DOE have been working very closely with us. I've been very supportive of us, and we're just moving through the process to get to a point where we can demonstrate it in a larger scale.

Speaker 5

I note that last week, Rick Perry, the Secretary of DOE, was in front of Congress and underscored the state of escalating costs at Hanford and that new approaches are being explored. I have no I I asked no comments on that. I think you've answered that. Alright. I now move to the tank closure contract.

Question. Has the bid date closed? Or is it passed? Has the contract closed?

Speaker 2

As far as the and this is all public arrangements, Steve, but the RFP excuse me, the proposals were submitted in response to the RFP on March 21 by all the bidders. And my understanding now, Steve, is that they're they're just getting ready to enter into a an oral presentation session with each of the bidders here in the next couple of weeks. That's kind of the status of it.

Speaker 5

Alright. Great. Okay. As I read this bid request, this contract, is radically changed by DOE, and that is that its spirit is to pretreat and treat low rad waste. Am I still here?

Speaker 3

Hello? Yes, Steve. Here.

Speaker 5

Okay. I'm sorry. Sorry. I heard a noise. As I we okay.

The the contract has radically changed changed by DOE, and that its spirit is to pretreat and treat low rad waste as well as to maintain the 56,000,000 gallons of waste in the tank farm, thus the main change from tank maintenance to tank closure. The present contract that expires this September just involved maintenance of the 56,000,000 gallons for when the big plant was ready to treat the 56,000,000 gallons. But pursuing to winning the new contractor, the contractor aside from continuing to be responsible to maintain the 56,000,000 gallons in tank farm, the contractor has to have a pretreatment capability to separate low and high rad waste and also provide a deliberate cost of shipping the low rad waste to a treatment facility. And I emphasize the word treatment facility and not Vic plant. But the key point is that cleaning up waste reduces the maintenance cost of waste in the tank farm.

And I read the existing maintenance contract with a $7,000,000 or so per contract per year or, I'm assuming $7,000,000,000 over ten years. Anyway, this contract has been now expanded cost wise with a limit of $13,000,000,000 for ten years, which is about $4,000,000,000 or $5,000,000,000 more potentially, which I would presume would be for pretreatment and treatment of low rad rates. So here's my question, all right, and there are a couple. So what do you guys think of this contract? Have you bid it?

And if so, are you bidding in partnership with larger players? And if so, who are they?

Speaker 2

Those are all great questions, Steve. And I can't argue all your numbers are spot on. But I guess I would ask that to have some understanding that we are in a procurement situation. We're involved in procurement, and therefore, we can't tell you anything about the procurement itself. We're teasing with it.

It would all be sensitive information, and we hope that we can talk about it here in a couple of quarters. But there's really nothing we can say. It's so procurement sensitive, Steve, at this point.

Speaker 0

You. The next question comes from the line of Tom Beakin, a Private Investor. Yes. I just have one question with regard to TBI. You've had a difference of opinion with the State of Washington, where they have been they you're you're trying to renew a contract that I think you've been working on it for the last ten years.

But, anyway, my point is that you you potentially could treat the second 2,000 gallons at Hanford or you could ship them to Tennessee. And my question is, when are you gonna make that decision? I mean, it it sounds like it's up in the air at this point.

Speaker 2

Yeah. What you're referring to, Tom, is the renewal of our record permit, which has been ongoing for since 02/2009, which we're making we are making progress with the state on now and hope to have that in place. Tennessee was a backup alternative for Perma Fix Northwest. It's certainly our our our desire and hope that we would we'd be able to do it Northwest. And at this point, we could accept it there under our current conditions as long as the state supported it under our existing license.

But we did receive the permit for our mixer, which was the other thing that was potentially holding it up, and that's been supported by the state as well as our air permit. So we should be pretty much good to go in Northwest right now as far as I understand. Lou, is there anything you wanna add about that?

Speaker 5

No. Yeah. That I think at this it did say, at this point, the state is supportive of us doing it at our site. So we don't the Tennessee was the backup after there was problems with our permit, but that doesn't seem to be the case at this point.

Speaker 0

So that that's that's real news because the last thing that I read was just a couple of few weeks ago in the tri Tri City paper there that they have by Hanford. And the the Washington there was somebody in the ecology department. And it sounded like they were they wanted to be super super super super careful, you know, before they allowed you to to to to to do that waste, rather than shipping shipping it to to to Tennessee I

Speaker 5

I I guess, as Mark said, the the option is one, is as we sit today, we have all the permits we need, and they're very well defined, and the state has given them to us. If if in the end they come up and say you can't do it, then our backup is we move it to Tennessee.

Speaker 0

That that would add cost, though. Right? I mean, it's gonna it's it has it has a certain amount of cost to ship that, doesn't it?

Speaker 5

Minimal. Our shipping costs are fairly minimal. It's not a

Speaker 0

problem. Okay.

Speaker 5

Yeah. Yeah.

Speaker 0

Okay. The the other thing I was wondering about is it, you know, it looks like you're really growing the company, and I I I think you have everybody has to give credit to Mark for for the great job that he's done since he's come on board. Have you, I know it's tough to get, talent, but have you been hiring people, like, you know, like, I mean, level people more? Are are you planning on expanding? I mean, you're it sounds like you're getting a lot of extra work.

Speaker 2

Well, thanks for the kind words, Tom. We do have a great team and people have made a lot of adjustments to support these wins. And hopefully, we'll have a bunch more here this year. But yes, we actually are hiring project management positions as well as safety positions and field folks as well. So we have a number of of positions open on our website and, are are in the process of hiring now.

Speaker 0

Okay. And my last question is, you know, I think it wouldn't take a whole lot for you guys to get, you know, with this plant closure behind you and additional work coming, it wouldn't take a whole lot for you guys to become cash flow positive. Can you see that happening this year?

Speaker 3

Yes. If all goes to plan with the cash flow expected, we would definitely and we were cash flow positive last year as well from operations. So yes, we definitely think we would generate good liquidity in the plan we see coming up.

Speaker 2

But along the line, we are very optimistic we will be with MEC particularly behind us, the sheet looks much better.

Speaker 4

Our

Speaker 0

next question is from the line of Chuck Dickinson, a Private Investor.

Speaker 6

Hi, good morning guys. Question, I want to drill down just a little bit further on this permitting process with the Washington Department of Ecology. And it sounds like it's progressing. I know that you've been working with them on that for an extended period of time. Can you give any more color on both the timing and the likelihood of that permitting, when it's going to occur and what would happen in the interim if there's any sort of further delay.

I don't know how long you can keep going under the current extensions that you have. What I what I wanna have a good feeling about is that you can keep doing everything that you need to do up there in Washington while this process is taking place with the hope that it comes to, fruition and and ends at some point and either get re permitted or the the new permit.

Speaker 2

Yes, Chuck. Just a couple of things, I'll let Lou jump in. Just to kind of give you a status, we just finished our public comment period and had a public hearing here mid March. It went very well. There were lots of support from the public and from city officials.

So we're very comfortable with where we are in the community and we have that support. The state's been working well with us the last year or so. There's been disagreements here and there, but we're working through the issues to make sure that the permit that we get, the renewal we get addresses all of the things that have changed in the last ten years. All the things that have been added, and those have been added formally. And making sure that it's a permit that's robust enough to handle what we're doing now, what we'd be planning to do.

So the risk is very low. The state's been very supportive. And frankly, Chuck, the state understands the importance of Perma Fix as it relates to the closure of Mission at Hanford. We treat a lot of waste at Hanford that wouldn't have any other alternatives or if it did, would have been very expensive. So it's an important plant for the environment and for the city as well as the Hanford site and the DOE mission.

It's we feel that support. It's taken a lot longer than we thought, but we're pretty confident it won't have any impact on our ongoing operations or our future operations. Lou, is there anything Yes. To add to

Speaker 5

The only thing I would add that's real important to understand is that under RCRA, which is the permit that we're working on on hazardous materials, our we will continue indefinitely into the future under the renewal process. There is that will continue. There's no risk with that unless the state said we want you to close. So at this point, as long as we're moving forward, there's there's no risk to our permit.

Speaker 6

Okay. The only other question I had was the, sort of new information here on this Department of Energy and state guidelines or initiative or whatever they've come up with here, and you you sort of made a real passing reference with regard to how that might favor what you wanna do in terms of routing. Do you wanna just leave that comment there, or would you like to elaborate on that a little bit more? I

Speaker 3

don't

Speaker 6

know if people have a real sense, at least I don't have a real sense, that this end state initiative, what exactly it means and just how positive it could potentially be?

Speaker 2

Yes. I'll just say this, Chuck, and it's all in that RFP, which is quite a lengthy RFP, is that Department of Energy is looking at projects like what we used call the tank operating contract, which Steve had mentioned, the existing contract. And the contractor was not necessarily incentivized as much to close operations and close down the way this contract is structured. The changes in the contract structure is under this new one is that there's great emphasis on completion on closing tanks. And as it relates to that, as what we offer relates to that, we have a technology that would be able to be utilized to close tanks.

And so to the extent the deal is looking for that and an award, we certainly have something to offer in regards to a proven technology that's local.

Speaker 6

Right. And Lou had also mentioned or maybe you'd mentioned that under the Phase two that you folks have your permitting side pretty much ready to go. Assuming the DOE gets approval on what they need to do, is there the sense that if phase two does indeed take place in Washington, that that greatly enhances the possibility of phase three also being done there? In other words, it sounded like, I think the Department of Ecology wanted to say, maybe there's a separate permitting process as you go from a Phase II to a Phase III. Am I correct in that?

Or is that not really, worked out yet?

Speaker 2

Yes. It's safe to say, I think, Chuck, that if Phase two gets rolling, there's a good potential for it to roll right into an operational phase. Now I think the question you're really asking is what kind of quantities are we talking about? There may be some limitation on total quantities of gallons per year, gallons per month or something like that. But overall, if we could fit once Phase two gets rolling, we'll be in a position to continue hopefully continue operations at least for a limited period of time until the next phase or the next level is addressed in regards to quantities.

Speaker 6

Our

Speaker 0

next question is a follow-up from the line of Stephen Fine, a Private Investor.

Speaker 5

I wasn't done. So in all due respect, you brought out one thing that I was asking. Does DOE have any power relative to permitting with the Washington State Ecology?

Speaker 2

Power is a difficult word to address, Steve.

Speaker 5

Whatever the word is, to help They effectuate

Speaker 2

are independent agencies. Mean, have authority under EPA, the state does. And certainly if DOE was not supportive, it would be difficult to get support of EPA. Think that's a subjective statement. Luke, do have anything else you want add about that being

Speaker 5

No. That's a hard question. I mean, you you said that's Alright. Alright. Appreciate that.

Alright. I I'm almost done. I'm almost done. Just just bear with me. I also note that on 01/03/2019, there was an article written in the Tri Sentinel Herald that said there is going to be a contract coming out later in the year that will reward a contractor to treat and maintain the one the the rates once the Vic plant

So my question is, if that is so, then why is DOE awarding such a contract years before the Vic plant is completed?

Speaker 2

Are you referring to when you said the awarding your contract, you're talking about the

Speaker 5

Well, there was an article there was an article in you can look this up in the Tri Sentinel Herald on 01/03/2019, and the the the the writer stated that there's a contract coming out, or supposedly a new contract coming out later in the year that will create a contractor to treat and maintain the rates once the VIC plan is done. So the accent of the article was that, hey, the operator, the person who's building the VIC plan is not going to operate it. There's going to be a bidding process for a contractor. So if that is so, I mean, if you have no answer, you have no answer. If that is so, I'm just curious why this is being done so early when supposedly the finishing of the big plant and thereof is not in the immediate future.

Speaker 2

Yes. I'm afraid, Steve. I'm not sure what

Speaker 5

the difference is. All right. All Leave it alone. All right. Leave it alone.

I feel that. All right. I just want to thank you for all your efforts. As a stockholder of Perma Fix, a concerned citizen of The United States relative to nuclear waste, and an engineer whose career is centered on hazardous chemicals, it seems clear that a change is needed in treating nuclear waste, particularly in light of cost escalation, other environmental problems facing our government, and particularly at Hanford, the chance of an earthquake and or a black swan event that negates any cleanup and potentially makes the West Coast inhabitable. We must realize that time is of the essence and the enemy.

It seems treatment of nuclear waste must be approached from a different perspective. As a Perma Fix stockholder and US citizen, I applaud Perma Fix for positioning to assist and participate in the possible paradigm shift required vis a vis treating nuclear waste in a different way that is faster and more cost efficient. So thank you guys.

Speaker 2

Thanks, Steve.

Speaker 0

Thank you. At this time, I will turn the floor back to management for closing remarks.

Speaker 2

All right. Thank you. I'd like to thank everyone for participating in our fourth quarter conference call and all the questions today. As I've mentioned earlier, our backlog and sales pipeline is growing. We're recently awarded a number of important contracts in our Services segment and are bidding on many more, several of which could be substantial.

And we're working towards several large projects within the Treatment segment as well that could be transformative. We look forward to updating you again next quarter. Thank you very much.

Speaker 0

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.