Perma-Fix Environmental Services Inc (PESI) 2014 Q4 法說會逐字稿

Greetings and welcome to the Perma-Fix Environmental Services fourth-quarter and year-end 2014 conference call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce David Waldman with Crescendo Communications. Thank you. You may begin.

Thank you. Good afternoon, everyone, and welcome to Perma-Fix Environmental Services' fourth quarter and 2014 conference call. On the call with us this afternoon are Dr. Louis Centofanti, Chairman and CEO; and Ben Naccarato, Chief Financial Officer.

The Company issued a press release this morning containing fourth-quarter 2014 as well as fiscal-year 2014 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 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 the statements 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 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 a call over to Dr. Lou Centofanti. Please go ahead, Lou.

Thank you, David, and welcome, everyone. I am pleased to report our fourth-quarter and full-year 2014 financial results. Having gone through an exceptionally difficult industrywide period from 2012 to the first half of 2014, we have emerged as a stronger Company, as evidenced by revenue margins and backlog.

We turned the corner in the third quarter and experienced solid revenue in the fourth. Nevertheless, we continue to see our largest client, DoE, continue to be weak with several large projects siphoning off waste dollars.

We have partially offset this weakness by focusing on other markets including commercial and international. This strategy is working, but it's a slow process. It takes time to develop these markets; and in the meantime our revenue continues to be a little bit lumpy.

Fourth-quarter revenue in the treatment and services segment increased 37% and 23%, respectively, compared to the same period last year. At the same time our gross margin increased more than 100 basis points to 27.6% in the fourth quarter from 16.7% in the same period last year.

In the fourth quarter we continued to see the benefits of our efforts to streamline the organization. For the fourth quarter we generated $2.2 million of EBITDA and achieved $796,000 of net income. While we are pleased with this improvement, we continue to look at additional ways to improve our operating efficiency even further and are not satisfied with these results.

We are encouraged by the outlook for 2015 given our sales pipeline within the service segment and our backlog within the treatment segment. In the service segment, our sales pipeline is improving, as evidenced by recent contract wins and additional contracts we are bidding on at the present time.

On the treatment side of our business we have seen DoE shipping some waste, and we are optimistic about the growth prospects for our treatment business. However as I mentioned earlier, we continue to experience some weakness at DoE and would anticipate continued lumpiness.

At year-end 2014 our backlog stood at $9.2 million, up from $7.7 million at year-end in 2013. In the fourth quarter we continued to expand commercial and international business to diversify our revenue streams beyond government work, and I am happy to report these initiatives are continuing to pay off, but slowly.

In particular, we are growing our Canadian business. We are expanding in Europe, including the UK.

On our -- with our medical process we continue to advance our process to produce tech-99m, as evidenced by a patent issued by the Patent Office earlier this year. We have crossed an important threshold with the issuance of this patent; not only protects our property but enables us to move forward unencumbered with our mission of solving the global supply chain related to tech-99.

Our process enables production of this essential medical isotope for diagnostic procedures in a way that is cost-effective and does not require the use of uranium. We view this as an exciting and viable opportunity.

To date we have successfully developed and demonstrated a process to produce Tech-99, but our next step is to scale it up to commercial use. We hope to complete a large-scale version well before the end of 2015, at which time we will apply to the FDA.

Lastly I would like to comment on our funding efforts. We are pleased to announce that a consortium we formed to develop a next-generation tech-99 generator was awarded a $2.8 million grant, of which Perma-Fix Medical, our Polish-based subsidiary, will directly receive approximately $800,000.

We've also entered into a pulmonary letter of intent with Digirad, one of the largest national providers of in-office nuclear cardiology imaging services, as a partner. Digirad plans to invest $1 million in Perma-Fix Medical and will participate in the development and commercialization of our process to produce tech-99.

The other milestone, which should occur here very shortly, we have been in the process of staffing up and hiring a new senior management team to run Perma-Fix Medical with experience in the tech-99 market. We are very close and expect to announce these appointments in the next several months, as we go through some regulatory approval processes for the positions in the Polish company. Overall we are extremely proud of our accomplishments to date in Medical and look forward to announcing additional major milestones in the near future.

As of December 31, 2014, we had a strong cash position with $3.8 million of cash and cash equivalents. We remain focused on strengthening our balance sheet as we continue to pay down and increase our cash position.

So to wrap up, we are encouraged by the outlook for 2015 given our sales pipeline, service segment, and improved backlog within treatment segment, which increased by 19.5% to $9.2 million at the end of the fourth quarter. Looking ahead I would remind everyone that the first quarter tends to be our weakest period; as we watched the first quarter we've also seen some shipments being delayed. Nevertheless, we expect to be around breakeven EBITDA or possibly a small loss in the first quarter.

As we have discussed in the past, we are not only focused on growing our revenue but we have also cut significantly operating expenses out of the business and continue to look at additional incentives to further streamline the organization. At the same time we remain very focused on paying down debt and strengthening the balance sheet.

We appreciate the support from our investors. We are positioned to grow the Company in 2015 and are optimistic about the outlook.

At this point I'd like to turn the call over to Ben, who will go into more detail on the numbers. And then I will be back to answer any questions at the conclusion. So, Ben?

Thank you, Lou. Let me begin with revenue. Our total revenue from continuing operations for the fourth quarter was $17 million compared to $12.7 million in the fourth quarter of 2013, an increase of $4.2 million or 33.2%. Revenue from the treatment segment increased by $3.4 million or 37.2% as a result of increases both in volume and price. In our service segment revenue increased by $821,000 or 23%, as the segment continues to make modest progress winning smaller projects.

Revenue for the year ended December 31, 2014, decreased by $17.3 million or 23.3%. This shortfall was the direct result of the termination of the Plateau Remediation Contract on September 30 of 2013. This contract contributed $17.7 million in 2013, but only $168,000 in 2014.

The treatment segment revenue, though, improved by $6.8 million, but was offset by a drop of approximately $6.2 million in the rest of the services segment excluding the Plateau Contract.

Turning to our cost of goods sold, our total cost of sales for the fourth quarter was $12.3 million compared to $10.6 million in the same period last year. Cost of sales from our treatment segment increased $914,000 or 12% from the fourth quarter of 2013. This variance was a result of incremental expenses related to increased revenue.

Our service segment cost of sales increased by $767,000 or 25.2%. Most of this cost increase was related to higher revenue, offset partially by lower fixed costs.

Cost of sales for the year 2014 were below prior year by $19.4 million or 30%. In the services segment the Plateau Remediation Contract was terminated, accounted for $13.9 million of this increase; and then reduced variable expenses from lower revenue accounted for $6 million; and lower fixed costs related to cost-reduction initiatives accounted for another $1.4 million. The treatment segment costs increased by $1.9 million due to increased revenue.

Gross profit for the quarter was $4.7 million or 27.6% of revenue, compared to prior year of $2.1 million or 16.7% of revenue. Our gross profit from treatment segment increased by $2.5 million as both volume and improved waste mix contributed to the improvement.

In the services segment gross profit was relatively flat, as the improved gross profits were offset by reduced gross profits from the Plateau Contract loss and the SYA business sold.

Our gross profit for the year ended December 31, 2014, improved by $2.1 million versus prior year, primarily from the improvement in the treatment segment of $4.9 million, offset by lower services segment gross profit, which of course again was related to the terminated Plateau Contract.

Our total G&A costs for the quarter were $3.1 million or 18% of revenue, down from $3.5 million or 27.8% of revenue last year. Lower payroll and subcontract expenses accounted for most of this decrease.

For the 12 months ended December 31, 2014, our G&A costs were $12 million or 20.9% of revenue, down by about $2.5 million from last year. Our income from continuing operations was $741,000 compared to a loss of $30 million in the prior year. Of course, our loss in the continuing operations in the prior year included a goodwill impairment charge of $26.7 million, which represented our total goodwill at the treatment and services reporting units.

For the year ended December 31, our loss from continuing ops was $3 million compared to a loss of $34.5 million. In addition to the $26.7 million goodwill charge mentioned related to the fourth quarter, our 2013 loss also included additional goodwill impairment of $1.1 million recorded in the second quarter of 2013, which represented goodwill from the Plateau Remediation reporting unit being completed.

Income applicable to common shareholders for the quarter was $875,000 compared to last year's net loss of $31.4 million. For the year the loss was $1.2 million compared to loss in the prior year of $36 million. These results, again, include the goodwill expenses discussed previously.

Our total income per share for the quarter was $0.08 compared to a loss per share of $2.75 last year. For the year the loss per share was $0.11 compared to a loss per share of $3.18 last year.

Our adjusted EBITDA from continuing operations for the quarter was $2.2 million compared to a loss of $1.5 million in 2013. For the year EBITDA was $2.8 million compared to a negative $1.3 million in 2013.

Turning to the balance sheet now, I'm going to talk about cash and equivalents, which increased by $3.3 million, reflecting the Company's improved cash position and the consolidation of the Company's Medical company, which raised approximately $1.2 million at year-end.

Our total receivables were up $2.3 million, primarily due to an increase in unbilled receivables related to our improved revenue in the fourth quarter. Assets from discontinued ops were down $3.1 million, reflecting the collection of insurance proceeds receivable at the end of 2013. Our backlog was up $1.5 million to $9.2 million, an increase of $1.5 million from prior year.

Total debt was $11.4 million, of which our facility, our PNC credit lender, made up $9 million of it. We had working capital of $757,000 at year-end as compared to a working capital deficit of $2.5 million at the end of the prior year.

Finally, I will quickly summarize cash flow. Cash provided for the year from continuing operations was $661,000. Cash used from discontinued operations was $2.1 million.

Cash provided by investing activities was $856,000, which consisted of $1.2 million from the sale of our SYA business, offset by capital spending of $464,000. Cash provided from investing activities from discontinued ops was $5.7 million related to the insurance settlement at one of our discontinued operations. And cash used in financing was $1.8 million, consisting of debt payments of $3 million offset by the equity raised by our Medical company of $1.2 million.

With that, operator, I will now open the call to questions.

(Operator Instructions) Al Kaschalk, Wedbush Securities.

Just one housekeeping item, if you could update us on -- there was a plant or facility fire. Just wondering what the status is of either repairing that or where that stands in terms of the business.

At this time, Al, we are going through closure of the facility. (multiple speakers)

So you're going to (multiple speakers)?

Well, we are going in a parallel path, Al, of both selling it and closure. It still has a permit, which has value; so we have a timeline of which, when it is not operating, to close it.

So we are going down both paths. But within a year I believe -- or within this year we'll know the final status of that facility.

Does that mean that today there is no real revenue generation?

That's correct. Yes, in fact it is just being -- at a very low cost it is just being maintained at this time.

Got it, okay. Thank you. Lou, you talked about the first quarter having some delays in shipments. Could you talk to that?

And then is the breakeven a function of the shipments' revenue mix, or are there some other items in there from a cost perspective that would push you up?

Yes, the big impact was the delay in shipments. We had quite a bit of material come right at the end of the quarter; so we will see very little revenue or income from those shipments, which initially had been scheduled earlier in the quarter.

And fairly significant shipments for us. So we did receive them, but they were late in the quarter, so they would have a somewhat negative impact on revenue and income.

Okay. So that is just a period issue, because that implies a much bigger Q2?

Right. It's just more an issue with timing than it is with losing the business or anything.

All right. Would you place that at the level that you did in Q1 of last year of about $7.5 million or $7.6 million? Or is it more draconian than that?

Are you talking about revenue, or --?

That was the treatment revenue that you reported in Q1 of 2014, $7.7 million.

Yes, yes. We expect it will be a little better than that. It won't be that bad.

So then for the full year you're comfortable in a $45 million, $50 million range on treatment? Or is there enough you're getting from the commercial and the international front to help offset the DoE's issue?

Yes, we are comfortable in that range of number, maybe a little bit lower on the treatment side, but a little better on the services side. We see the services side still with the opportunities picking up.

We think the treatment side will do what it has historically done, which is peak and valley. And usually starts with a slow first; it'll ramp up in second; be more than we need in third; and then taper in fourth. So we are still comfortable with similar numbers out of treatment, and we see the improvement coming up from the service side.

Is there any funding update or commentary, Lou, that you can provide on the DoE, or at least the government customer?

Well, we continue to see major inflows of -- the DoE budget overall is good. Unfortunately, we see a WIPP recovery for the waste isolation plant in terms of getting that back in operation as a high priority and siphoning off significant money.

We see the WTP, waste treatment plant, at Hanford continuing to be you might say a black hole for cash at DoE. And the mix off-site fuel plant continues to consume money.

So you have in one way three major construction or recovery projects going on that continue to negatively impact DoE. And it has caused significant problems for DoE on the -- in their environmental program because they are missing just about every milestone now they have with every state. And unfortunately we are more tied to all those other programs that are being missed right now.

So we see them continuing to try to divert funds back into the environmental side, but -- and we think it won't be too bad a year for us at DoE. But for their budget it's not where we're real happy at the moment, more because of the priorities they have at the moment.

So does that mean you will have to fight hard to keep it flat with 2014 in 2015?

What our focus has been as they refocus, as I've been saying for the last year, we focus very hard on all the other various markets. There's a lot of work going on internationally; there's a tremendous effort to grow nuclear around the world. And we see a lot of projects where we can be very involved in.

So there is the international, and then in the US we are also very focused on growing the commercial. As always in this business, moving into new markets can never be real fast. It takes time to develop those leads.

We've had success. The last half of 2014 was very successful because of those efforts in commercial and international, and we think that should continue.

Could you give us a little color about the revenue mix, though? Is it a series of contracts, multiyear? Is it one large contract? Is it multiple geographic locations?

We are -- again, like always with our work, we have lots of little contracts that drive us and provide our base; and the same is true on international. We have a variety of smaller contracts that are driving it, from $1 million, $2 million contracts like we have in the UK where we have been chosen to provide all the mercury treatment services for one of their major facilities, and that probably will evolve into a contract to treat all the mercury waste in the UK, which will go on for long periods; to several international contracts we are bidding on for waste treatment that are fairly large, very significant contracts. But it can take a lot of time to develop and evolve.

On the service side again the same thing. We see a lot of opportunities. We are winning a variety of smaller ones, especially in Canada; and we are bidding on some extremely large ones in Canada on the service side.

So we see a lot. It's hard to talk about them individually because , again, we'd prefer to lump them together and tell you we have an expectation of winning a certain percentage of them.

Okay. Then my final question is on the service side; you announced, I think it was either -- I believe it was February, a contract that you were part of a group of 10 that were awarded. But there have been no lets on the contract. Can you update us on that contract in particular?

Yes. That was more like what we call in IDIQ, which -- in terms of they pick a group of companies that are allowed to then do final bids on any projects that appear. At this point there have been -- they have not issued any task orders to bid on. We expect some in the near future.

And we have a variety of those type of contracts with both the Corps and with the Department of Energy. So if we win task orders and they are significant enough we would announce them.

That one there has not been any task orders issued at this point. We expect some in the near future, though.

Okay, great. Good luck, and I will hop back in queue.

Gregg Hillman, First Wilshire Securities.

Good afternoon, gentlemen; long time. A couple things. Do you expect a going-concern opinion for the year-end from the accountants for the Company?

I'm sorry, Gregg, can you say that again?

I think in your 10-K for 2013 you got a going-concern from your accountant. Do you expect the same thing for 2014?

No. I'm happy to report that we should be -- when we file our 10-K it will be without a going-concern.

Okay. Then just your relationship with your lenders, are there any bullet maturities that you are concerned about, like in maybe 2016? And how are you going to refinance those? And do you think it's going to be okay on covenant trips for 2015 and 2016?

Yes. Our covenant we feel strongly we have recovered from the issues we had a year ago; and I give full credit to our great relationship with our lender, who has supported us during this time.

As you may know, they modified our covenant program to allow us to build back up and eliminate the bad first quarter we had last year. So as we stand at the end of the year, we have got a healthy covenant number and we are confident we will maintain that.

As far as the credit facility, it is due for reload about October of 2016. All indications are it's a very positive relationship. I think if I didn't just say it, we have been with them for about 14 years now, so we've been through highs and lows with them.

We would probably begin discussions on reloading probably toward the end of this year. They have always worked with us on our needs, and they've been a great partner to this date and I don't expect anything differently.

Okay. Then, Lou, could you talk a little bit about the economics of the techtanium-99? I think you said 25 procedures are performed with it, 25 million every year in the US.

What is the price of it? And how are you going to -- are you going to lower -- are you going to be competing on price? Or, I don't -- maybe just go into some parameters about how the business model would work for that.

Yes, the model isn't price driven. I'd like to point -- I always point out that when you look at our process, the basics are -- it's a much more competitive process, so that we should have no problem competing on a price level.

The real concern in the tech-99 medical imaging business is really supply. You have the Canadian reactor that will be going down, will close down next year. It supplies pretty much all of North America today, and that supply will be lost.

Is that permanently or temporarily?

Permanently.

Okay.

Yes. In fact the Canadian government has now made a decision -- their initial reaction was to continue the reactor as a research facility. But they have now made the decision to not renew the license for the facility in 2018, so the whole reactor will be permanently closed in 2018. It will run for two years as a research facility, and then be closed.

There is a second reactor in France at the moment that is also being closed. So really -- the present suppliers have tried to develop alternate reactor routes; but the loss of the Canadian reactor is going to be fairly monumental to the industry, as it supplies such a large amount of material.

It's very difficult to transport. We here, in our system, the advantage our system has is we don't need the large reactors. We can produce tech-99 in any research reactor in the world, of which there are many.

Okay. Lou, what was the value of that stuff that was sold from Canada in the last year or the most recent year?

What's the value of the tech-99?

Technetium; yes.

Well, remember that is somewhat proprietary because of the -- it is sold as a very raw material to one company, who then re-processes it and then further supplies it to two companies. So it's not easy to get the numbers on the supply.

The estimates, though, are in the -- North America for just the generator itself, which is the primary market we are going after, you are talking $400 million to $500 million a year in revenue.

Wow, that's pretty impressive. Then what kind of margins are you talking about? Is this north of 50% margins for this thing?

Margins are different than the industry we are in. There's much more impressive margins; but then of course you've got a lot of cost below the gross line. But from a gross profit you are talking in the 30% to 50% kind of numbers.

Okay. Then just this structure, this vehicle, is the thing that -- is it the heart imaging companies investing their million dollars, is that the same company as the Polish company? Or is that a different company?

They are investing in the Polish company.

Okay. So the Polish company is capitalized now or will be capitalized with like $3.8 million?

Well, the $3.8 million you might be talking about is the grant that we are working on for that company. The Polish company is capitalized. We did in equity raise at the end of last year.

It currently has approximately $1.2 million in the bank and some other receivables still to come. And the investment would be towards -- would increase that number.

Then the $3.8 million that I believe you are thinking of is -- we have discussed and we've reported that we were awarded a grant in Poland for approximately $3.8 million, of which about $2.7 million is the grant amount. The whole project is $3.8 million; the grant is about $2.7 million. And this is going to go a long way towards all of the things we have been discussing as the next six to nine months of development of the product.

Is this company going to be run out of Poland, or are you going to have like an office in the United States with US managers that you are hiring to run it?

Most of the management oversight R&D is still being done in the US. Now with that grant you will see most of that money will be spent in Poland working at POLATOM, which is a big reactor where we will be doing most of the testing in Poland.

So at the present time the overall management structure is still pretty much US and Perma-Fix. Now we will have a new CEO here in the very near future, as I mentioned earlier; but that will be someone from the US out of the tech-99 industry.

Okay. Then the thing about the FDA approval, could this thing get pushed to [large], because of the problems with the supply, the FDA might put it on a fast-track?

Well, what we saw with our patent work, the Patent Office moved very rapidly to make a decision, which we were very pleased with, because they do have most of the tech-99 on fast-track. But I think the FDA has the process, has a time limit, and I'm not expecting significant fast-track.

I think they have a process they will go through and make sure it is -- everything is correct from their point of view. But we expect, we think, we have a path forward.

The nice thing about our system compared to the market is it's almost indistinguishable what our generator would look like with the existing generators. The only difference is we are changing the holding resin in the column with our resin; so otherwise they are indistinguishable.

The generator will work exactly like the existing generators work. You pour saline, saltwater, in the top and out the bottom comes tech-99. So it's a very simple process from a user point of view.

Our production is a very simple process that does not require a large robust reactor like the Canadian NRU reactor. And the purification of the material and putting in the column is dramatically simpler than reprocessing uranium and dealing with all the high-activity isotopes.

There's a whole series of institutional, social, nonproliferation issues to go with our process; and then on top of it's economics. So we are very excited about it and see a nice potential market here.

In terms of when it's going to happen, do you think like two to three years is a reasonable timeline for [pre]?

If you are looking to where we can really sell product, yes. I mean, this is -- we've got to apply -- we've got to finish the final scale-up and design. We then have to apply to the FDA and the EU regulatory community. And then we can sell product.

Okay. But is the market going to run out of product before then, given the closure in Canada and stuff like that? Will there be like a shortage?

There will be -- it will be difficult for us to produce tech-99 in time for the closure of the Canadian NRU reactor. So you will have a crisis occurring in about a little over a year.

Okay. Is there a place and is there some other thing that could do the same thing as tech-99 out there, that could be a substitute for it?

No. It's a very versatile nuclear -- it's 90% of the nuclear isotope market. People have tried for years to come up with something that could replace it or is simpler, and it's been very unsuccessful.

Radiologists love tech-99. It's a very good isotope. If you can produce, it you will be able to sell it.

Okay. Then Perma-Fix owns what percentage of this Medical Perma-Fix?

We are at 64%.

64%? So that's the lion's share. Okay, great. I really appreciate the update. It's very interesting. Thanks, guys.

(Operator Instructions) Bill Nasgovitz, Heartland Funds.

Why are these two, both Canada and France, closing?

I'm sorry. Why are what?

Why are the Canadians and the French closing these two facilities?

Oh, why are they closing? Yes. The Canadian reactor is very old; highly subsidized by the Canadian government; and in need of either a license renewal or closure. And the Canadian government because of the costs have decided on closure.

And it's pretty irreversible at this point. They would've had to start their renewal process months ago to even keep it open.

Okay. Just going back to 2014, so treatment was around $45 million; is that what I heard?

Yes.

And you anticipate that is going to be somewhere in the $40 million to $45 million level for 2015?

Correct, yes.

And services, you expect that to be up a little bit. What was the 2014 level? I missed that.

It's about $13 million, $14 million.

So you expect it to be up 5%, 10%, or more?

More.

The hard thing, to give you a stronger number, is that we are bidding on a lot of projects. And if we just win one of these larger ones we will see a fairly significant uptick in services.

If we continue to just win smaller ones we could talk about a 5%, 10%, 20% increase. But our hope is --

Okay. So if you win a large, significant -- what is significant to you? You said if you win a significant one. What might the range be?

Five-year project somewhere between $40 million, $50 million to several hundred million over that period of time.

$40 million, $50 million to a couple of hundred million?

To a couple hundred million over a five-year period. Most of these larger ones are longer-term contracts so that they go for much longer periods of time.

Okay. Then international, what percent of our business today is international? And what was the increase? I think you said it increased over last year.

It's not a large number. We are getting -- we have always gotten work from Canada, and it's gone up and down.

But roughly, what are we doing in international and what do you think you could do?

Yes, I think we are probably doing in the 10% to 14% range on the treatment side; $2 million to say $5 million-ish. And then on the potential side, the services side and some of these larger contracts Lou mentioned is really where the upside would -- you would see it.

Canada has a few big contracts in the range of what Lou just mentioned that are out there. So it would grossly increase our numbers.

Okay. That sounds fantastic. This Company certainly does need top-line growth, doesn't it?

Yes.

No, we are very much a -- as you know, Bill, especially on the treatment side, fixed cost. So that if we could produce a little bit of revenue it is a very dramatic affect on the bottom line.

So have you done anything in terms of -- just on the sales side, have you beefed up the sales leadership or staff on the services international side?

On the service side we have. We have added a Canadian sales rep part-time; and on the international side we have our UK office, where we have a business development person working very hard on Europe, UK, and some other areas that he has expertise in.

Also we have refocused the whole sales group in terms of the service side, and have the service group actually selling now its services directly. We have seen some good success with that, because these are mostly technical sales; and so having the technical service group out there selling has had a real -- what we've seen is we believe a very good effect. We will see on these bigger contracts how it works.

Do you have one person responsible now for services on the sales side, is that it?

Yes, the head of the service group is responsible also for the sales in that group.

Okay. Well, good luck on these international service contracts.

Well, thank you.

Just one final question. I guess going back to the black hole here, Hanford, at what point -- is there any point -- I know when I was there, how many years ago? Two or three years ago, the number was just astounding. We're talking about billions of dollars with this classification or Lord knows what they were trying to remediate or store these wastes.

Is there some point where they just say because it is tremendously over budget or it's just not doing the job -- can you give us any color there in terms of what has been spent and what might happen at some point when the government finally sees the light?

As you know this has always been my view of life, is that we have a facility on the fence line that in terms of hitting standards for disposal we strongly believe that our facility could treat a large volume of that tank waste with the facility we have with rather minor increases in expanding the facility. And we see some day -- I will tell you that someday I'm convinced we may end up treating more waste than the WTP, the waste treatment plant.

I think there's a major single-minded effort focused on WTP, and there has been a fortune put into it. But there are many ways to treat waste, and we think we have simpler ways to treat waste.

So how much has been spent on that?

The numbers are -- the estimates right now are -- I believe the last estimate I have seen was about $14 billion or $15 billion just to build the plant.

Is it treating waste?

I hope no one from DoE is listening to my speech, Bill, but I really feel strongly that we have an option there someday, when someone sees the light.

Are they treating waste today after spending $14 billion or $15 billion?

No. No, there has not been a one drop treated.

And as you probably remember, we have made proposals to take 10 or 15 of it. There's like 150 tanks sitting there, and we have given DOE -- and they got very mad at us -- we gave them a proposal: we will take over the next two years 10 of the tanks that are sitting there and we could treat them tomorrow.

So there all alternatives. But at this point they are very focused on trying to finish the plant.

And when might that happen?

Finish the plant? The schedule today is about 2022.

Unbelievable. So the waste keeps building, or just laying there and --?

Yes, actually it does keep building. They keep trying to reduce the volumes by drying it. But as we sit today the volumes just continue to stay about the same or increase a little bit. And there are a couple that may be leaking of the tanks.

Well, it sounds as if a simpler, cheaper process -- I know you don't want to butt heads with one of your -- your largest customer. But my gosh.

Does Perma-Fix engage a lobbyist? Or do you at all get involved into the politics of this?

Yes. Yes, we have a lobbyist; and as you have seen in the past we have gotten in the middle of this and have made proposals. No, I think everything is a moment in time in our time will come here. Like I say this is a speech I don't like to make in public because it's --

Yes, well, okay. It sounds as if there's tremendous opportunity here is we could capitalize on it. Thank you very much, Lou.

Bill Chapman, Morton Stanley.

I saw an article last week. Four senators proposed a new nuclear waste agency that the Treasury Department would fund to dispose of spent nuclear fuel. Could you comment on that, please?

Yes, that's more on the very high activity side. It's really the -- we have in terms of waste disposal, waste treatment, the only thing that doesn't get treated these days are the reactor cores. And it's a fairly small volume, but it contains a lot of the worst stuff there is, and it's sitting at the reactors in storage pools right now.

When -- Yucca Mountain was supposed to be the final storage area for those cores, and it was killed with the start of the Obama administration. What was proposed was to start all over again and find a new site. So that is the beginning of that process, to find a new site.

We -- our interest, especially on the military side in terms of the high-level waste, we will follow that as it evolves. Probably the first step would be to find a central storage area, which several sites have already proposed. Like WCS has proposed a central storage area at their landfill in West Texas.

So Congress will go through some process to try to evaluate what to do, and that is one of the first steps in doing that. We will be involved from a side issue point of view as it evolves because of our expertise and our interest in it. But I wouldn't see a lot other than paper studies for the next several years.

Okay. Let me ask too, you mentioned Digirad investing in your Perma-Fix Medical, the technetium-99 technology. Have they invested in any other technologies for technetium-99 processes beside yourself, just to hedge themselves?

No. No, they looked around and they thought ours was the best.

Okay. Do you still feel good about whatever -- putting more resin into the column to get more production of the isotopes, you are still confident whatever changes that can create you guys can redesign around it? Is that how you still feel right now?

Oh, yes. No, we are fairly confident we can get to -- we can scale the process up to a more commercial size. We have demonstrated it at a size that was a little small for the US, North American, European market but would be sufficient for the rest of the world.

But we really would like to get to a size that can satisfy the Europe and North America, which is where all of our efforts are today, is the scale-up.

Well it would seem if Chalk River is closed down, this is going to be a increase in shortages of the Tc-99 and then we are going to have outcries in the medical community. It seemed like that would speed up the FDA down the -- to get your process. You've got to of course have a filing first; but we will get to that bridge when we come to it.

Let me ask you one last -- go ahead.

Yes, it will create a major issue here like I said, in about -- a major shortage. The present suppliers have worked hard at trying to develop some other international routes. In fact the reactor we work with at POLATOM is a minor supplier for tech-99; they've looks real hard at ways they might in the short run provide more tech-99 for the present industry.

But when you add it all up it's going to be -- it's a very short half-life. There are other reactors around, like the ones in Australia; but that's a long ways off and it's hard to get it back, to move a highly radioactive material around the world. So it creates major issues from a transportation, logistics point of view if you don't have something close by.

Okay. Let me ask one more question. On your latest investor PowerPoint you were talking about a spinoff of Perma-Fix Medical to the Perma-Fix shareholders, co-listing it here in the US, and then a spinoff of the shares. What circumstances would you be inclined to enact this?

Well, what we see, we really see two goals from a Perma-Fix Medical point of view. One is uplisting it in Poland and to the big board in Poland, the main Warsaw Exchange; and that we are evaluating. Then the second is to do a listing in the US on NASDAQ, co-listed on NASDAQ.

The idea here is over the next six, eight months we would review those to see the value in them. But really the major focus for the Medical is really put in a management team that understands tech-99 so they can speak, and my hope here is that will be very shortly we will be able to announce that.

And then the second is developing more strategic partners and completing the scale-up. And then with that really looking at what's the best strategy moving forward from there.

So all of those are moving pieces right now, in the process. We would consider a NASDAQ listing in the future; we just -- at this point not sure the value of it today.

Now we have sufficient capital now to get where we need to get to for the application to the FDA, we feel. So the next step would really be, do we need more capital to get through that process? And then do we have other partners who would join with us to help commercialize it?

Okay, good.

(multiple speakers) what the priorities we see at the moment. We have a variety of priorities with a variety of possible paths forward because it's fairly -- given our druthers, we don't want to really re-create a logistical system here. We would rather have partners that we work with that have already -- have them in place or that we could work with.

Okay. Sounds good. Thank you very much.

[Robert Manning], private investor.

Could you give us a little bit more flavor on these large service contracts? I know that some of them have been pending for quite a long while. Are these the same contracts that have been pending for a long while?

Have some of those been awarded, and these are new contracts? Or are these the same ones? And is there any decision point at which anybody is going to decide any of these?

Yes, most -- pretty much all of them are the same contracts, unfortunately. But several of them, what we're seeing is they're both Corps contracts, Corps of Engineers; they're international contracts; and they're some DoE contracts. So our experience is that we are hoping you see things move a little more rapidly with the Corps; the international stuff has a way of dragging.

And Canada we see both slow and fast. It's hard to judge that, but we think that could move in a reasonable period of time.

And the DoE contracts we are bidding on have been out for a while, and DOE will be running out of time in the very near future in terms of those contracts where they will have to award something. So it's hard to give you any kind of color on them; but as you can imagine we are as on the edge of our chairs as anyone.

Yes. You say the DoE is going to run out of time, though. It sounds like there may be some deadline there.

These others I think have dragged on for literally years, right? So we have no way of knowing if they are going to be resolved in 2015.

But if you say the DoE has got some kind of a time limit that they are running out of, maybe it means that one of these might actually be awarded this year. What flavor can you give me there?

Some of these, they -- as we sit today we have bid on a lot of contracts. So that again at some point they are going to be awarded. It's hard to give you a time frame other than they say a couple of them are imminent.

Were they saying a couple of them were imminent a year ago? I am just interested if we're -- are we getting any closer, or are we not getting any closer?

Bob, let me try. I think some of them we have been talking about, expecting the proposals to come out, Request for Proposals. What we are trying to say is some of them have come out now, and there are probably similar ones we were waiting on last year and we have bid them. So we are awaiting decisions.

Yes, and we're further -- probably the right way to say it, we are much further along in the process, where they told us they were coming and they said we want your bid by this date; and that never happened. Where now we have actually bid on them and we are waiting to hear from the clients.

So they gave us a date we had to have a bid in. Is there any date when they have to make a decision?

No. Well, I shouldn't say that. The only place that occurs is where there's an existing operation going on that will expire. But even there the client usually has an option of extending those for some period of time while they work on the rebids.

So I guess the bottom line is, it's hard to be really precise, but it is your feeling that maybe we are getting a little closer on some of these?

It's hard to be precise. In our experience with it, it's very hard to be precise. But we have enough out there now that we are just waiting for.

Yes. Is the number two or three? You can't probably tell exactly. But have we got half a dozen, and how does that compare with a year ago?

This time last year we had almost none out bid. We were waiting for the proposals. Today we have, I believe, six fairly -- five or six fairly significant ones.

Is -- fairly significant is in the range that I think you talked to Bill Nasgovitz about earlier, 5 years, $40 million, $50 million. Below that it's not significant?

Right. So all we need is one of them. Yes.

Yes. Okay, well we need one of these several hundred million or a couple of the $40 million or $50 million. But okay.

So there is a little bit of a build-up there even though the language and the words you use now are the same as the words that were used a year ago. But in fact we are farther along in the process now.

We are further along in the process, yes.

Yes, good. Cool. Thank you.

Gregg Hillman, First Wilshire Securities.

Lou, I had a question about I guess hospital waste. That company Stericycle I think, disposes of a lot of hospital waste. Do you have any process or anything that you bring to the party that is differentiated in that space, either for mixed or hazardous?

Well, we do a lot of hospital waste. We do a variety of nuclear hospital waste.

It is brought to us by brokers like -- we consider Stericycle a broker. They collect everything, and then farm out what they can't treat, which is mostly nuclear. So Vivendi, Stericycle, companies like that we use those extensively at one of our facilities that treats mostly medical waste.

But it's all radioactive, basically. Or it's all -- has some special, very special issue with it.

But you don't have any special process? You just use whatever the current state of the art is?

Well, we have a very special process unique to those kinds of waste, and that's why we treat most of it. We treat most of the medical nuclear isotope waste that must be treated. It will come to us because we have a special process in our Gainesville facility for that type of waste.

Okay. That's pretty neat. Then --

We get most of that waste.

Okay; that's promising. Then just finally getting back to the tech-99, are you recycling old tech-99 for your reactors? Or what would be the input? Or I mean, how do you -- where is it coming from?

You don't recycle it. It is strictly made new.

The difference is the existing process starts with uranium, weapons-grade uranium. You take highly enriched uranium.

If you listen to the Iranians they almost tell our story. It is, why does Iran want to enrich uranium? It's to make medical isotopes -- which is all baloney, but that is their excuse.

You take highly enriched uranium, you send it to a reactor, you irradiate t and produce large volumes of molybdenum-99, which then decays into technetium-99m. So that's the existing process.

And what do you do?

What we do is we take natural molybdenum. We put it in a research reactor. We irradiate it, and out comes the back end molybdenum-99. Same molybdenum you get out of uranium, only it is not as concentrated.

So the secret to our process, we have developed a resin that concentrates it and allows you to put as much in a generator as you can get from the uranium process. And it's a much cheaper process in that you don't have to reprocess the uranium, which is a very, very difficult and really not a very acceptable process, because that's the same way you make plutonium

and weapons-grade material.

Okay, I see. But your end product at the end is what's on the market today -- will be?

Our moly-99 that would be in our generator would be equivalent. Unless you are the world's expert in nuclear physics you would not be able to tell the difference between where it came from, whether it came from a uranium process or our process.

Okay, great. Thanks, Lou.

Thank you. At this time I would like to turn the floor back over to Dr. Louis Centofanti for closing comments.

I would like to thank everyone for participating in our fourth-quarter conference call. As I mentioned earlier we've turned the corner. We are very encouraged by the outlook of the business.

Revenue is growing; margins are improving. We continue to generate cash flow. We're strengthening our balance sheet, and we are in a strong position from a competitive point of view.

We have a medical asset that we believe will play a meaningful role in our business in the years ahead. With that I would like to thank you again for your support. We look forward to following up with you in the next quarter. Thank you very much.