After a record-setting year in 2011, Perma Fix continued a downward slide that has typified its 2012 year to date in its second quarter earnings release yesterday. Though revenue for the second quarter of 2012 increased 17.5 percent to $34 million versus $28.9 million for the same period last year, Perma Fix reported an operating loss of $1.4 million—compared to a profit of $4.2 million in the second quarter of 2011—and a decline in gross profit for the second quarter of 2012 to $3.8 million, versus $8 million for the second quarter of 2011. Net loss for the second quarter of 2012 was $1.3 million, compared to net income of $2.5 million for the same period in 2011. Lou Centofanti, chairman and CEO for Perma Fix, said in an earnings call with investors yesterday that the numbers can be attributed to delayed Department of Energy spending. “DOE, from what we’ve seen, has redirected funding to several large projects we are not currently involved in such as vitrification at Hanford,” he said. “This has temporarily delayed some funding for waste treatment at Hanford and other sites.” However, Centofanti said, the third quarter and remainder of the year should pick up. “Our strong balance sheet at the end of 2011 helped us to weather the current market, while investing considerable resources in expanding our bidding organization,” Centofanti said.
The company said it has benefitted from some of the cost-cutting efforts, including layoffs, that it introduced in June. “We expect to realize the benefit of these cost-saving measures in the second half of the year.” Part of the lay-offs came during work on integrating Perma Fix’s acquisition, Safety & Ecology Corporation. “As we continue with the integration of our two organizations, we implemented staff reductions at the end of June as we look to ‘right-size’ the organization,” Centofanti said. “As a result of the integration, we were able to reduce back office and support function by approximately $2 million a year. In addition we have further initiated reductions at the end of the second quarter, reducing our costs by $1.2 million per quarter, which is approximately 10 percent of our fixed-cost base. We expect to realize the benefit of these cost savings measures in the second half of the year.”
But an underperforming contract that Perma Fix inherited from SEC continues to eat into the acquisition’s bottom line. “We are also in the process of completing a large remediation contract we inherited from SEC which is a fixed price contract with cost overruns,” Centofanti said. “We expect this project to be completed in second half of the year, at which time SEC’s service business should become accretive. We are also taking steps to offset some of these unanticipated costs related to this contract. Also, as disclosed in our [Securities and Exchange Commission filing] on July 18, we have notified the former owners of SEC that we believe we have a claim against their rep’s warrantee … and we plan to enforce our rights under the agreement.” However, Centofanti added, “We remain excited about the opportunities provided by the acquisition of SEC, evidenced by the fact our sales pipeline is stronger than at any point in the Company’s history.”