Perma-Fix Environmental Services Inc (PESI) 2010 Q4 法說會逐字稿

Greetings and welcome to the Perma-Fix Environmental Services fourth-quarter and year-end conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) It is now my pleasure to introduce your host, David Waldman, Crescendo Communications. Thank you Mr. Waldman. You may begin.

Thank you. Good morning everyone, and welcome to Perma-Fix Environmental Services fourth-quarter 2010 conference call. On the call with us this morning are Dr. Louis Centofanti, Chairman and CEO, and Ben Naccarato, Chief Financial Officer.The Company issued a press release this morning containing fourth-quarter 2010 financial results, which is also 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 be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

All statements on this conference call other than 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 US Securities and Exchange Commission. The Company makes no commitment to disclose any revisions to the forward-looking statements or any facts, events, or circumstances after the date hereof that bear upon forward-looking statements. I would now like to turn the call over to Dr. Lou Centofanti. Please go ahead, Lou.

Thank you, David, and welcome, everyone. Very pleased to report that 2010 was one of our most positive and transformative years we've had in a long time. First, I would like to touch on the numbers. We are pleased to report a pickup in business in the fourth quarter of 2010, following a relatively weak third quarter caused by timing issues related to remediation projects. Sales have continued into 2011 at desired levels. Revenue for the fourth quarter was $25.5 million versus $26.4 million. Income was $2.6 million for the quarter versus $4.1 million in 2009. Revenue from our Nuclear division for the year increased 7% to $95 million in 2010. This improvement was due to the growth in our on-site service business, and not only did we experience an increase in revenue, but we had a pretax income from continuing operations for the year of $5.1 million. EBITDA was $10.7 million, making 2010 one of our better years, even as we overcame a variety of challenges throughout the year.

As we look into 2010 sales, as I mentioned earlier, sales are holding at desired levels and expect a positive 2011. First quarter sales were fine, but revenue may be, in the short-term, a little weak due to timing issues in terms of receipts of sales, and then our ability to process the waste during the quarter. As I've discussed in other calls, as we start the year, we have several major short-term goals. Number one that was talked about in the past has been the selling of the remaining industrial assets and focusing our effort on the Nuclear segment. Within that segment a major focus has been on services, especially on-site and is tied to waste management, and we're continuing to have that as one of our primary short-term goals.

The other is we continue to move into higher activity waste and we've made tremendous progress in 2010 and continuing into 2011 in our movement into higher activity markets. As we've -- as for the divestures of the industrial assets, we've had tremendous interest, very, very strong interest in the assets, as I've said in the past. And we've -- as disclosed in our filing on Friday, we have signed an LOI for approximately $7.5 million to sell Fort Lauderdale and Orlando, rwo of our three remaining facilities. Of course, all three of our industrial facilities have been placed in discontinued operations. As we sit today, we are very satisfied with the price and the ability of the buyer to close. The agreement for the sale of Fort Lauderdale and Orlando is still preliminary at this time. It is just a letter of intent, and of course, I can't provide many more details.

Our second short-term goal has been our effort to build our Nuclear Service group. Initially, our focus is to provide on-site waste management expertise to Tier 1 contractors, the prime contractors that operate the DOE facilities and other nuclear sites. Besides our Hanford contract, we have won over the last year, a variety of small contracts that enable us to build our team and develop our resume. Our largest recent win, which we have disclosed, was a commercial contract worth approximately $4.1 million, with Energy Northwest, leading power supplier to the northwest. About 25% of that contract is on-site service. The remainder is treatment and disposition of low-level radioactive waste. The duration of contract is about a year.

As part of our efforts to grow our Service group, we have continually looked at both organic growth and growth from acquisitions. Again, as disclosed in our 10-K, we've now signed an LOI to purchase a major nuclear service company, mostly the debt that would approximately double our present total size. The agreement for the purchase, again, is preliminary, and at this time, I can't provide more details. Our final goal, as mentioned, has been our escalation into higher activity waste. At the beginning of 2010, we completed our demonstration of our process to treat high activity tritium. The process was very successful, but unfortunately, DOE is temporarily shifted its priorities away from treating tritium at this time and we have not seen any more tritium of the higher activity tritium available.

On the other hand, our work with transuranic waste has been a major success. In 2010, a major project for us was ramping up our treatment of both transuranic waste and lower activity transuranic waste. We continued to see these materials moving ahead in 2011 and will be a very major project for us this year. One of the most exciting developments has been our recent hiring of Jim Blankenhorn as Chief Operating Officer for the Company. Jim is a proven veteran in the industry and will officially come on board at the end of May. Very strong background, 24 years experience in all aspects of the nuclear industry, working both to commercial and government customers. Spent many years at URS, the New York Stock Exchange company, where he led large teams in the deactivation, decommissioning, and cleanup of nuclear facilities. In addition to his technical and management experience, his proven ability to bid on and win major contracts. We are very excited about this and we really look forward to him joining the team and contributing and helping lead the Company.

As we look ahead in 2011, we're very, very confident. We see uncertainty in the 2011 budget, but we feel it can be managed and I would be very happy to discuss this any further. Our goals as we enter the year are very similar to last year; continue to focus on the service side of our business in terms of growth; continue to focus on the higher activity materials and continue to move in those areas; and then continue to work on some other growth initiatives that are still a little in the early stage and for competitive reasons are confidential. But excited that these could bear fruit in the upcoming years. At this point, I would like to turn the call over to Ben, who will go into more details in the numbers and then we will be back for questions and conclusions.

Thank you, Lou. I'll begin with revenue. Our total revenue from continuing operations for the fourth quarter was $25.5 million compared to last year's fourth quarter of $26.4 million, a decrease of $845,000 or 3.2%. The Nuclear segment revenue decreased $671,000, or 2.6% for the quarter compared to the same period last year. Revenue at our nuclear treatment facilities was down $1.4 million, but was offset by revenue at the Hanford contract, which increased by $697,000. At the Hanford contract, we had increased head count and the related billable hours as the main driver for the increase there, while the lower volume of mix and low-level waste for treatment, accounted for the drop at our plants.

Revenue from our Engineering segment was also down $174,000 for the quarter, as billable hours were down approximately 27%. Total revenue for continue -- from continuing operations for the 12 months ended December 31, 2010, were $97.8 million compared to prior year of $92.4 million, an increase of $5.4 million or 5.8%. The Nuclear segment revenue increased $6.3 million or 7.1% compared with 2009. Hanford revenue actually increased by $7.8 million or 22.8%, finishing the year with revenues of $42 million compared to $34.2 million in 2009. Offsetting this increase was a decrease in revenue at our nuclear treatment facilities of $1.4 million due to the lower waste volumes received. Engineering revenue for the year was also down $924,000 due to lower billable hours.

Turning to cost of goods sold, our total cost of sales was $19.6 million in fourth quarter compared to $18 million in the prior year. Our Nuclear segment cost of sales was up $1.6 million due to the increased costs of the Hanford contract of $949,000, which is a cost plus contract and relates directly to the increased revenue. Cost of sales at our treatment facilities was up $639,000 from prior year, primarily due to increase -- certain increases in facility-related costs. Our Engineering segment cost of goods sold was in line with prior year. Total cost of sales for the 12 months ended December 31, 2010, was $77.1 million compared to last year's $67.9 million, an increase of $9.2 million. Costs related to the Hanford contract were higher than prior year by $7 million due to higher revenues. Cost of sales related to our nuclear treatment facilities were also up $2.5 million due to higher fixed costs at our plants. Engineering costs were lower than prior year related to the decrease in revenue.

Gross profit for the quarter decreased by $2.4 million, finishing up at $5.9 million, or 23.1% of gross revenue compared to last year's $8.3 million or 31.5%. In the Nuclear segment, we saw a 3% to 4% shift from treatment revenue to on-site revenue, which carries significantly lower margins. In addition, within the treatment facilities, the mix of waste received changed with lower high activity waste volumes received and processed compared with 2009. Finally, the Engineering segment gross profit decreased $155,000 due to lower revenues. Gross profit for 12 months ended December 31, 2010, was $20.6 million or 21.1% of gross revenue compared to last year's $24.5 million or 26.5%, a decrease of $3.9 million. Gross profit from the Hanford contract increased $751,000, while treatment facilities gross profit was down $3.9 million. As with the quarter, more lower margin on-site work offset the drop in higher margin treatment revenue. The Engineering segment gross profit was down $680,000 due to lower revenue.

Total G&A costs for the quarter were $3.1 million, or 12.1% of revenue, down from $4.1 million or 15.4% of revenue in 2009. Lower employee-related expenses from head count, incentive expenses, stock option expenses, and audit fees offset higher costs in our outside services. Administrative costs for 12 months were $13.4 million or 13.7% compared to $14.4 million or 16.6% in prior year. The drop in our administrative costs reflects our continued focus on centralizing the Company's accounting and support functions, while increasing revenue with minimal increase in our administrative costs. Income from our continuing operations for the quarter was $1.5 million compared to $6 million last year. 2009 included an income tax pickup related to the recognition of deferred tax asset of $2.5 million. Conversely, 2010 includes an income tax expense of $817,000. Therefore, looking at the numbers on a pretax basis, income from continuing operations in 2010 was actually $2.4 million compared with $3.7 million in 2009.

Income from continuing operations for 12 months ended December 31, was $3.3 million compared to $9.7 million in 2009. For the same reasons as just discussed, attention should be directed to pretax income in 2010 of $5.1 million compared to $7.7 million in 2009. Of note, the $1.8 million income tax expense recorded, approximately $1.5 milliion is noncash due to our utilizing our net operating losses. Net income applicable to common shareholders for the quarter was $1.6 million compared to last year's net income of $5.7 million. Net income of applicable common shareholders for 12 months ended December 31, was $2.6 million compared to last year's $9.6 million. Total earnings per share for the quarter were $0.03 per share compared to $0.10 last year. Year-to-date earnings per share were $0.05 compared to $0.18 in 2009.

Our EBITDA from continuing operations for the quarter was $3.8 million compared to $5.2 million last year. And for 12 months, our EBITDA was $10.7 million compared to $13.8 million last year. I'll now hit on a couple of balance sheet highlights. Total trade receivables were down $3.3 million due to improved collections and the reduced revenues at our treatment facilities. Our capital spending was $2.6 million. Our finite risk taking fund increased by $1.9 million to $17.4 million at year end. Goodwill increased $3 million due to the earnout of our Nuvotec acquisition. Our backlog at year end was $6.9 million, down from $16.9 million at the end of 2009. Total debt for the year was $10.7 million compared to $12.4 million at the end of '09. Our PNC debt makes up approximately $6.7 million of that total debt. Our working capital improved $839,000, ending the year at $2.3 million.

Finally, a few cash flow notes. Our cash from continuing operations was $8.1 million. Our cash used by discontinued ops was $344,000. Cash used for capital spending was $1.6 million for continuing ops and $580,000 for our disops. Cash used for the finite risk closure policy was $1.9 million. Cash used in the acquisition or earnout payments for the Nuvotec acquisition was $1 million, and cash used in financing to pay down debt was $2.6 million, including reductions to our PNC credit facility of $640,000 to the revolver and $1 million to the term note. I'll now turn the call over to questions -- for questions. Operator?

(Operator Instructions) Our first question comes from Al Kaschalk with Wedbush securities. Please proceed with your question.

Good morning, guys.

Good morning, Al.

Hello, Al.

First of all, good to see the turnaround or the refocus for 2010 versus '09, and while it's probably not the same dollar level, seems like it's going in the right direction. Lou, since you offered and I know you would like to add some detailed comments specific to Perma-Fix, could you talk about the budget, and what you're looking for, and what investors should anticipate how you may benefit from that?

Well, what we see on the federal side is, of course, there's a lot of uncertainty right now. One, you've got the Administration and the Senate side with a budget that's very similar to past years moving ahead. On the House side, we've seen, I guess, what I could say there, is we started out with some initial comments that were pretty negative towards the DOE cleanup budget and as time has gone on, that has improved. There's a very strong political support in the communities and in the states to continue this cleanup, and of course, it's a liability on the federal balance sheet. So, in a sense, it's just paying off a liability there.

The -- It's still uncertain in the House. Over the weekend, the House, it looks like they announced they are just going to pass another continuing resolution for three weeks while they do work on what a cutback would look like. As we look at and talk to the financial people in both the House and the Senate, we continue to see an improvement in terms of what they are looking at for DOE. So, as we sit today, there's still a lot of uncertainty, but it's moving closer to about where it's been. And so, if there is a cutback in the funding, we're not expecting anything real draconian at this point. But there's still a lot of uncertainty, because the House has to come up with a proposal and then they and the Senate have to reach some agreement on that proposal.

But, I go back politically to what I've always said, you've got, like Oak Ridge, you've got the most highly educated, most politically astute community in the US sitting in the middle of a lot of problems. And they find it very unacceptable to live in those environments, even though they are heavily republican and highly educated and very pro-nuclear. So, we see a lot of local pressure coming in terms of what's important to people's health. And so, we'll see, but at this point, the key will be what the House does, what that budget proposal, and how the Senate responds to it.

But are you -- so, if I recall correctly, it's -- we're talking on the low end $5 billion and upper end $6 billion in terms of budget dollars for EM. Is there any program that you're more exposed to at maybe not sustaining, or one in particular that you would like to highlight as more critical than maybe some of the others?

Well, we're probably more exposed when you look at the Hanford budget. I think Hanford will be funded at a pretty good level, because of the problems there and the legal agreements and commitments. It's really then, what are the priorities? And we are very much tied to the plateau contract at Hanford, and if the dollars stay the same for Hanford, then the question becomes among the various contracts at that site, which includes building of the WTP, the waste treatment plant, the vitrification plant, or cleaning up waste on the plateau, at the river. Which ones will benefit? So, we would be happier if it was spent cleaning up waste than building a waste treatment plant that may come online in 15 years or something.

Okay. Backlog, as you know, is down and obviously a function of head count and volumes and the outlook, but how do you expect that to evolve over the next couple of quarters and ahead of what will be the end of stimulus spending by September 30? So, really a two-part. One, how should backlog progress over the next couple of quarters? And B, could you just remind us how much you're benefiting from stimulus, or (technical difficulty) stimulus by the end of the third quarter?

Well let me answer first the bigger picture, and then I'll let Ben answer on some of the others. From the bigger picture point of view, we really, in 2010, we saw a big drop-off in sales, as we've talked about in the past. It really affected us, especially in the third quarter, and with that, we were living off of our backlog. So, we had fairly dramatically reduced our backlog throughout 2010. With the improved sales, we've seen that turn back around, and our backlog, starting in 2010, is heading back up. Now, as far -- we've got pretty good visibility for two, three months ahead, and as we look ahead, we see pretty good sales coming into our facilities, which should continue to build that backlog.

So, at least as far as we have very good visibility on, we're feeling comfortable at the moment. In the first quarter, like I mentioned, with a somewhat depleted backlog, it hurts our revenue, because then as the sales come in, can we really process it fast enough to overcome the -- and show the revenue numbers. So, -- but as for the whole year, right now, between all the projected spending and the work going on, we think it should be a pretty good year in terms of profitability and in terms of revenue. Maybe a little weak in the first quarter, but moving into the second, it should pick up very nicely and we should see very good numbers for the year in general.

So, does that mean that levels off 2010 or are you setting expectations for it to be a little bit below 2010. I'm not quite sure what that means.

No, I think we should at least be at 2010.

Okay.

We're confident that we should see at least 2010-type numbers and then depending upon what projects, and how fast they move. DOE has a lot of projects in the works. We have now some commercial work going on and we have a lot of other new initiatives that we're looking at. So, as we sit today, we see a lot of opportunity and expect that to continue.

Okay. Finally--

Go ahead, Al. Sorry.

Finally, if I may ask a little bit more probing on the LOI on the acquisition side. I realize you don't want to talk about details, but did I hear you right and is the disclosure in the K that it would double your nuclear revenue if the deal was completed?

Or our present revenue. Yes. New, which is almost all nuclear now in continuing operations, yes.

And you would expect to finance this by the proceeds from the sale of -- is it dependent on realizing the proceeds identified from the industrial assets, plus some debt, or what is the -- ?

Well, it would make it very easy if we completed the sale of those industrial assets. I think we probably could do it if we didn't, but it would make it much harder.

Do you need to issue equity or increase the facility on the credit side to pull it off and make it more manageable from a cash flow perspective? The balance sheet certainly has improved, but I don't know what you're trying to set up the expectations on the leverage perspective.

Yes, Al, I think with assuming the funds from the divestiture and an increase to the credit facility, that would be the best case scenario and would be pretty manageable. If we didn't -- if timing wise the industrial divestiture lagged behind, we still have a plan for getting it done, but it would be a little tighter, right.

Okay, and then just a component of the deal or revenues, is it annuity like yours? Is it a larg -- larger DOE-specific contract? What's the makeup of the revenue other than nuclear services or nuclear-oriented?

Well, it's very similar to our Service group. So, I hate to say anymore than that. It is a service company, all service work. So, much more predictable, much more level, and it's under contracts, and a -- but more cost plus, not fixed price.

Excellent. Thanks a lot.

Our next question comes from Robert Brous with Wunderlich Securities. Please proceed with your question.

Hi, Lou.

Hello.

With regards to the acquisition, more questions there. Can you define the number of contracts and the remaining duration of those contracts, of on-site contracts, and is it all DOE?

No. I really don't want to get into that right now, yes.

Okay and since you're not going to answer any questions on the acquisition, with regards to commercial contracts, what we saw here, is that a one-time thing, or do you expect to see more of those within 2011?

We have a tremendous advantage with the utility in the northwest. So, it's a -- and there are more of those that are occur, with the rail spur, it gives us a little more competitive advantage, but in general, we have that one. It helps build our resume. It helps us in terms of doing on-site service work with the utilities and we would hope it would lead to more, but I would also say at this point, we have nothing in the works that would be comparable to that with other utilities.

Yes, and with regards to the sale of the industrial, is there any earnout there?

No.

Okay and would you expect to sell South Georgia this year?

Once we have the other two finalized, we will work very hard on South Georgia. We have several people who are very interested in it. It's a -- it has a lot of value as a facility in terms of its processes and treatment ability. So, we think it's moveable. We've already had some very serious offers. We were just not completely satisfied with the ability of the buyers to -- didn't fit our profile. So, at this point, we could sell it tomorrow if we just wanted to sell it, but we want the right type of buyer with the right -- under the right conditions.

I think you answered this question. With regard to the acquisition, does that include any on -- off-site treatment facilities?

No, no.

So, it's all onsite. So, you're not going to have to put up money for -- additional money for a sinking fund for this, correct?

No, no, no more sinking funds.

That's good to hear.

Now, for on-site work, you do need bonding, though. So, there is bonding requirements with many on-site jobs, especially those outside a DOE.

Yes and when can we expect to hear more additional information on the acquisition?

Unclear. We're still in the due diligence process, so -- .

Thank you.

Okay.

Our next question comes from Jon Gruber with Gruber and McBaine. Please proceed with your question.

Thank you. I was going to ask on the acquisition, but enough has been asked there. Lou, growth rate, what kind of nuclear growth do you see this year for the Company?

Well, as we look ahead, Jon, it's a -- the -- organically, we're looking at around a 10% growth rate. That's our usual. Some years we can do better than that and some years we don't do quite as well, depending on how the projects end up. But as we sit today, with the projects we have going, the big effect there would be we've got a couple new things we're pushing hard on and will they -- can they hit in 2011. But as we sit today with existing contracts, existing business, and nothing big, new coming, which we hope that of course doesn't happen, we do see more opportunities. Right now, our existing business is approximately about 10% growth.

If this potential acquisition is not near term, why did you even discuss it?

Well, we're in -- the problem you have when you file a 10-K is you have disclosure items. And again, people have asked me why we did it. Disclosed -- and we filed the way we did is we have a lot going on, lot of moving pieces, and thought it was more appropriate to file the 10-K with the letter of intent being so significant, and having already done so much work on it, it had to be disclosed. And so, it's why we did what we did.

And what's the operating pretax profit margin of this company?

Not sure I can really say much more at this point. It's a profitable company.

More profitable -- well, obviously, more profitable than you. But are they more profitable than you?

No.

What?

No.

No?

No, they are not, no. Remember, it's on-site services. So, the margins are not as good as our treatment margins, but it's very steady, and it's service work, and it's very predictable, and it dramatically complements what we do.

And in the industrial sales, since that's key to the acquisition, when do you expect to close these things? We've been working on these for quite a while. So, why all of a sudden should we expect to be instantaneously have these things sold?

Yes, we're very close with industrial and we're hoping we close here in the second quarter.

On all the sales?

On industrial and on the two facilities, right. The two industrial facilities.

Okay, thank you.

Our next question comes from Walter Schenker with MAZ Partners. Please proceed with your question.

Hi, Lou.

Hello, Walter. How are you?

A couple of questions. First, let me just make an editorial comment, which is if in fact your attorneys, flash accountants, thought it was relevant to mention both the acquisition and the LOIs to sell the two industrial facilities on page 89 of your 10-K on Friday, I personally believe it belonged in the press release today. I did see it on Friday, but then I tend to look at 10-Ks on maybe a more timely basis than some others, but if you are going to disclose it publicly in a 10-K, it should be in your press release. That's my statement. On this can agree or disagree, but I feel it very strongly. Then, I'll go onto questions. You don't have to respond to it. Can you give us some sense as to how you look at, I have like two or three questions, transuranic, which is a big opportunity for you as it plays out during the year, since you brought it up?

What was -- I'm sorry. The question--

The question is can you give us some sense as to how you see the opportunity, or give us some sense as to the opportunity in transuranic waste up at Hanford over the next 12 to 24 months?

Yes. The transuranic and the higher activity waste are still continue to be one of DOE's top priorities over the short run here. And we've been treating transuranic waste at our Hanford facility -- at Perma-Fix Northwest, our off-site facility now for -- it's been going on for six, seven months. We continue -- we've built the rail line specifically to help bring that material in, although it has uses throughout our business and we expect the remainder of the year, as far as we can see, to continue to receive transuranic waste at our facility there for treatment.

So, it's been coming in steadily, and we think it will continue to come in steadily. We are receiving some lower activity transuranic waste now from a variety of other DOE sites and at several of our facilities and we will continue to see that as being one of our major sources of revenue income as the year continues. So, right now, it's come steady. It gets very difficult to talk much about it, because we have never -- DOE and our other customers are all very sensitive about this material and so, it gets hard to make major public statements about it, but it continues to be a major source of material for us. And in the Hanford work is going very well, with the very large boxes and material that are moving to our facility for treatment.

Okay. Second question, could you define, since you have defined the LOI on the acquisition as doubling total corporate revenues, the 10-K also states doubling of earnings. What is the definition -- is it net income, EBITDA? What did you define or hope to mean by the word earnings? What did you mean, not hope, what did you mean? Ben?

Yes, I think the main focus was to describe the revenue, though the earnings would be close in that regard as well, on an EBITDA basis, maybe a little lighter on the EBITDA side.

Perfect and the last question, we spend many years trying to get permits to do PCBs. We've had a competing facility owned by the government close, this down in Tennessee. What's happening with our facility there as we look to the next year or two?

What we've seen and I know everyone gets tired of hearing this, but we have seen PCBs come in. They have not been at the kind of levels we had hoped for and that the government had told us was available. But that's as much because the major PCB sites are not going through any major remediation right now. That's the Paducah, Portsmouth and Y-12 (inaudible). All of those are highly contaminated with PCBs, with tremendous volumes and they are still there. So, with that, I think, Ben, we -- the number we have received over the last year was, how much on -- ?

We received about 1.2 million of PCBs in 2010, about 2 million, 2.2 million, or actually about 2.5 million in 2009. So, it hasn't come in gang busters, but it's very high margin waste and so, it hasn't made the big splash I think that --

Yes, that we had hoped.

Yes.

Okay. Thanks a lot, Lou.

All right, thank you.

Our next question comes from Stephen Rudd with USIP. Please proceed with your question.

Hello. Ben, tell us, what's available on the line of credit right now?

Our availability at year end was, let me just look at that for you, it was, I know it was in the north of -- it was about $9.7 million.

Okay and we're looking to get roughly $7.5 million from Fort Lauderdale and Orlando. Is that about right?

Correct.

And maybe your $9.7 million, we can get another $10 million on the line. So, we're probably doing this acquisition for about $30 million?

Rather not comment. That's somewhat high.

So, we're picking up -- all right. I understand. So, we're picking up the $100 million revenue company for about $30 million or less. That's kind of the long and the short of it?

Right.

Okay, got it. And do you they have a breakup fee in your letter of intent?

No, no breakup fees.

Okay. The drop-off for the first quarter, we're going to drop off versus our fourth quarter, or we're going to drop off versus last year first quarter? I wasn't quite clear. I know the first questioner had something about that, but I wasn't quite clear.

Probably on the income side, it would be both. Revenue, it could be close to last year or maybe even lower.

I think what you had last year, we're definitely seeing better sales this year, as Lou mentioned, which will either result in a -- go to the bottom line or improve our backlog heading into second. Last year, we had a very strong backlog and so, to cite very slow sales in the first and second quarter, the backlog pretty much helped us through the quarters. So, it probably will be a little more on the bottom line side due to the fact that the timing of this year's revenue will -- or sales will come in late in the quarter and therefore possibly push into second quarter.

Okay. So, basically we're going to pay a little bit for it in the first quarter and then see some pretty dynamic second and third quarters. Is that about right?

We think so, yes.

Okay. Your visibility right now is pretty good. You're saying you're two to three months out, so, that would bring us almost into -- 67% into the second quarter.

Correct, yes.

Yes. What's the delay in the new guy coming on? What -- I didn't quite understand why it takes him three months to show up at work. What's happening there?

He has a very important role today on an extremely critical project for URS and when we discussed everything with him, we thought it was very important to help his former company and to -- on that project. So, his key role there makes it important that he sees it through.

Okay and it's important to us as well, I take it?

Yes, URS is one of the largest Tier 1 suppliers to both DOE and the utility. So, we thought it was very important to help if we can.

Okay. He sounds like a terrific hire, my enthusiasm in him is coming along. What other observation, and obviously, these events in Japan are horrific, and fairly unrelated to our business, but it seems to me that there's a political momentum that could be built up. There's all this very justified concern about the ongoing meltdown in Japan at those nuclear facilities, but what people fail to focus on are those barrels that's are our business. And it seems to me that a quick and a good hit right now would be for some politically minded people to make some hay about that. You talk about a good storm or a good fire or a good explosion, and there's tremendous toxicity that can be released into our atmosphere without anything as dramatic as an earthquake and tsunami.

So, I'm just hoping you'll get the word out to folks who know how to beat the drums, because this is the time to start beating them, both in the media and it's probably not our role, but I know you know folks in that -- who can beat them both in the media and politically, because you'll find that funds follow that very, very quickly, and this is your moment. We don't have to wait for a catastrophe on our end and that should be the mantra. I hope you'll make a few calls to get to that result.

Well, it's very unfortunate what's happening. I think we all need to stay calm. No one has been hurt by the nuclear side of what's going on in Japan. It scares a lot of people. The passive systems that are built into these plants all seem to be working. The -- and I can always tell you that my second company that I operated was a plant that dealt with coal waste and I could tell you today, I would rather live, no matter what happens there, under the worst scenario, I would rather live next to a nuclear plant than a coal plant. So, I -- we're a society that needs energy and we need a variety and we need to just stay calm and see what happens. Let the technical guys deal with it right now, and try to keep it under control.

So, I apologize for my lack of clarity. I was making a different point. The point I was trying to make was that much of our -- many of our projects come up -- come across slowly. The dollars, while allocated, are not spent and they are not spent on the most immediate need and those are all political issues. And right now you have a political tail wind, not a head wind, but I believe a tail wind for those in the cleanup industry, such as we are.

And so, what I'm suggesting is, because we wouldn't need in the United States for there to be an earthquake or for there to be a tsunami to have problems with existing waste that is waiting to be cleaned up. In other words, our business, what we do every day is something that's imperative. And right now, if you can -- and maybe there's folks on the call who can make some hay on this, but it is a political right moment to say -- hey, gosh, we've got X millions of tons of nuclear waste that needs to be cleaned up that prevent, if not cleaned up, an environmental hazard, and let's spend this money right now and get these projects moving right now. That's the point without getting into efficacy of nuclear power. I'm just saying it would promote our business, and I'm hoping--

Yes, I'm sorry about that, yes. No, and as we started several months ago, you heard very strong opinions coming out of the House on what should be done, but when the reality started hitting in terms of the local community and the -- really doing what you're saying, because the communities are dramatically affected by these sites. And they are very, like I said, highly educated and very politically astute. There's been a gradual shift on the House side. We've seen that. And in a sense, you are spending money, but you're, as I've said many times, this is the third largest liability on the federal balance sheet, is the DOE cleanup of the weapons plants. So, we think there's a lot of pressure to continue doing it. There are a lot of competing needs. So, we'll see how it works out in congress, but we're pushing real hard and if anybody wants to call their congressman to keep this going, of course.

Well, yes, and you may be one of those people who makes that call and frankly from an analyst point of view, this is a time where you could see the cleanup industry getting a good deal of momentum. So, anyway, I wish you the luck and I hope that fellow comes along when his project is done and I appreciate your forthrightness.

Yes. Thank you.

(Operator Instructions) Our next question is a follow-up question from Robert Brous with Wunderlich Securities. Please proceed with your question.

Publicly, whether or not you completed the construction of the rail spurs, is that done?

That is complete. It should be operational in April.

Operational in April. And it's fully permitted?

Yes.

Okay, and with regards to Blankenhorn, looks like a good hire. When he comes on board, what are his primary tasks that he'll be charged with?

Well, he'll be COO. So, his primary tasks will be continue rationalization of our organization. He comes with tremendous focus from the service side. So, to help us in our efforts to grow the service business. And just extremely well rounded background in nuclear to look at -- help us with a lot more of these development projects we have from an operational point of view. So, COO, I see his role very much being COO, also with involvement on the sales side.

And will he be providing a public face to the Company as well, or no?

With time, yes.

Okay, and then with regards to the acquisition, your peers kind of traded at a seven times multiple EBITDA. Are -- do you -- is this acquisition going to be at a discount or premium to that multiple?

Yes. No comment, but you heard our earlier comment. You could probably do a calculation.

Just wanted to hear it from you.

Yes, okay.

Thank you.

All right.

There are no further questions in queue at this time. I would like to turn the call back over to Management for closing comments.

Thank you very much for your time and support. Through a -- like I said, it's been an interesting year, both challenging and -- but in the end, successful. Look forward to a year of continued growth and success. Thank you all very much.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.