Perma-Fix Environmental Services, Inc. (PESI) Q2 2013 Earnings Report, Transcript and Summary

Greetings, and welcome to the Perma-Fix Environmental Services Second Quarter 2013 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Waldman, of Crescendo Communications. Thank you. Mr. Waldman, you may now begin.

Thank you. Good morning, everyone, and welcome to Perma-Fix Environmental Services Second Quarter Conference Call. On the call with us this morning are Dr. Lou Centofanti, Chairman and CEO; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing second quarter 2013 financial results, which is also posted on the company’s website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020. I'd also like to remind everyone that certain statements contained in 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 statement of historical fact, are forward-looking statements that are subject to known and unknown risks, uncertainties and other factors, which could cause actual results and performance of the company to differ materially from such statements. These risks and uncertainties are detailed in the company’s filings with the U.S. Securities and Exchange Commission. 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'd now like to turn the call over to Dr. Lou Centofanti. Please go ahead, Lou.

Thank you, David. Now this has been, by far, one of the most challenging fiscal environments in the company's history. And yet, I am happy to say our gross margin increased to 17.7% from 11.7% same period last year, and we achieved nearly $2 million of adjusted EBITDA for the quarter. I think it's also important to point out, in addition, if you exclude the goodwill write-off, our net income would have been positive. This indicates that the financial and operational measures we took in the fourth quarter and first quarter this year are beginning to show some positive results. And in addition, we believe the funding environment is starting to improve. Within the Service segment, they've been awarded several small initial contracts, and we're actively bidding on a number of very sizable projects. As I've mentioned previously, our Service pipeline is significant and is, in most cases, just a case of waiting for the projects to be issued. Back to the Treatment segment, what we see, there's a pent-up demand due to delayed treatment at a number of DOE sites, and funding for these projects have slowly begun to return. With our streamlined operational structure, we stand to benefit from higher-margin waste and improved profitability as we increase throughput at our Fix facilities. And as we all know, in addition, we see a number of very exciting opportunities, treating more complex and higher activity waste streams. As most of our investors know, the most substantial opportunity for our Treatment segment is in addressing the tank waste at Hanford. We're not yet at the stage of responding to RFPs, but the DOE has issued a request for an expression of interest to retrieve and process TRU waste from Hanford tanks. I'd like to point out something, we have both met the Department of Energy and officials at the congressional level. That said, exactly how and when DOE would move forward on this project is yet to be determined. Demonstrating our capability to treat tank waste at Hanford, even on a small scale, would open the door to larger opportunities. And I'd like to point out that our facility at Hanford, with its permits and licenses, allows us to accept a lot of these waste streams today. If DOE were able to ship, we could bring those materials into our facility today. As you already know, we've already handled transuranic waste, and we're the only commercial facility who can handle these high-priority Hanford waste streams. Back to the macro picture, as I've discussed in the past, we're not alone on macro funding challenges that have plagued the entire industry. This was illustrated by the DOE spending reductions on the Plateau contract which led CH2M Hill to change their strategy and self-perform certain tasks on the project that were formerly subcontracted. We have lost revenue margin associated with this project, but believe our cost-saving initiatives on these projects will more than overcome this shortfall next year. I'd like to point out, CH2M Hill remains one of our largest and most supportive customers, and we continue to pursue a variety of opportunities as strategic partners. Outside of DOE, we've increased our sales and marketing effort, in particular on the international front. We're working aggressively on a number of opportunities in North America, Europe and Asia. And we're somewhat positive we're beginning to see some fruit from that, and we believe we will continue to. I'd like to -- we have not had a lot of discussion about the medical isotope project since we've been in a -- we turn back internally on that to solve some problems. But I would like to discuss a little bit on this call and give you a quick update. The project continues to move forward, and particularly in 2 areas. First, within the international market. What we've recognized is that our technology, can now be used as is in some of the emerging markets, in the international, say, business, and we're in a commercial development phase in those markets. But they're very small compared to the North American market and Europe market, but they would be a way to demonstrate our technology. In the North American market, we're still in the final stages of R&D. We currently meet North American standards. However, we're continuing to refine the process to meet the specific needs of the pharmaceutical industry, which require a more concentrated form of tc-99m than we can produce today. But we're very optimistic we can get there. So we're continuing the development stage in the R&D in the U.S. And I'll continue to try to give you an update on this -- on the progress of the isotope project. But this is just today, the -- for the North American and -- markets, we're still in that R&D phase. On a separate note, I'm pleased, very pleased to announce, we renewed our sub debt agreement with an existing investor. The financing provides us a $3 million subordinated loan at 2.99% interest over 3 years. The additional funding allows us to pay down our revolver and provides us greater financial flexibility. As I discussed in the past, our relationships with PNC is very strong. We've met all our bank covenants during the second quarter. Finally, I'm also pleased that our board has chosen to nominate Dr. Gary Kugler, election to our Board of Directors. We have been looking to add 2 board members, and at this time, we are adding Gary. Gary currently serves as Chairman of the Canadian Board of Nuclear Waste Management. He's been a leader in the Canadian nuclear industry, and we believe, if elected, will be tremendous asset to the board as we expand our international footprint. So to wrap up, we continue to pursue a number of opportunities while taking actions to reduce expenses. We seek to diversify our revenue in order to emerge a stronger company with sustained cash flow and improving margins. And at this point, I'd like to turn the call over to Ben, who'll go into more detail on the numbers. Then I'll be back to answer questions at the conclusion.

Thank you, Lou. I'll begin with revenue. Our total revenue from continuing operations for the second quarter was $22.8 million compared to the last year's second quarter of $33.7 million, a decrease of $10.9 million or 32%. Revenue from our Treatment segment remained flat at $10.1 million as our waste receipts improved from prior year, so we had a small offset from the lower backlog at the starting point. In our Service segment, revenue decreased by $11 million as new projects awarded were smaller in scope and failed to replace the sizable projects which were completed in the past year. We also saw a modest decrease in our Hanford contract, and revenue from our engineering group was flat. Turning to cost of sales. Our total cost of goods sold was $18.8 million in the second quarter compared to $29.8 million in prior year. Our Treatment segment cost of sales were down $1.2 million or 12.9% compared to prior year. The majority of this improvement came from workforce and other fixed cost reductions in our facility, and our variable costs related to revenue remains relatively flat. Our cost of sales from our Service segment were down $9.8 million from prior year and the majority of this variance was due to lower cost from fewer projects and also included lower indirect expenses as we continue to streamline our Services support structure. Cost related to the Hanford contract and our engineering group changed minimally and offset each other. Turning to gross profit. We were able to maintain our gross profit for the quarter at $4 million compared to $3.9 million in 2012 despite the significant drop in revenue. On the Treatment side, our gross profit increased by $1.2 million compared to prior year as the mix of waste processed resulted in lower volume but higher-priced waste. This, along with the fixed cost reductions I mentioned earlier, resulted in a margin of 22.9% compared to only 10.8% in the prior year. In the Services segment, gross profit was below the prior year by $1.1 million. Again, lower project revenue accounted for most of this variance, and the gross profit from our Hanford contract was also down slightly due to lower revenue. On the G&A side, our total SG&A cost for the quarter were $3.4 million or 14.8% of revenue, down from $4.6 million in 2012, which was about 13.6%. Cost associated with labor and third-party services were down as reductions in force were implemented to support the lower project load on the -- in the Service segment. A loss from continuing operations for the quarter was $980,000 compared to a loss of $1 million last year. And the 2013 loss, as Lou mentioned, includes a $1.1 million goodwill impairment related to the Hanford contract, which will expire at the end of the third quarter. Our loss applicable to common shareholders was $876,000 compared to last year's net loss of $1.2 million. Total loss per share for the quarter was $0.02 a share compared to a loss last year of $0.02 a share. Our adjusted EBITDA number from continuing operations, as we defined in our earnings release, was $1.9 million compared to $695,000 last year. Turning to our balance sheet. For a quick comparison with our year-end numbers, our cash was down $4.3 million, which primarily reflects the year-to-date operating losses. Our receivables and payables are down reflective of our reduced project revenue. Our backlog was down $2.9 million from year end and pretty consistent or flat with June of 2012, a year ago, at $5.9 million. Our debt was up $204,000 to $14.5 million of which our PNC bank debt makes up $14.1 million of this amount. And our working capital remained remain relatively flat at $3.1 million compared to $3.3 million at the end of the year. And finally, I'll summarize our cash flow activity for the year. Our cash used by continuing operations was $3.6 million, cash used by disco was $167,000, cash used for cap spending was $175,000, and we also used another $508,000 to pay out a minority interest position. And finally, our cash provided for financing for continuing operations was $222,000. With that, I'll now turn the call back to Lou.

Thank you, Ben. I'm very pleased to report a solid quarter with improved gross margins and almost $2 million EBITDA. As we look forward, we believe we can sustain the positive cash flow going forward, even in this challenging environment, and we are optimistic that the worst is now behind us. I'd even go so far as the third quarter, we should have a positive earnings. We see significant opportunities for growth within the Service segment. And as we increase throughput and revenue within Treatment, we should see improving margins and cash flow. I'd like to thank all of you for your patience during the challenging period and we look forward to driving value for shareholders in the months and years ahead. Operator, we're now open for questions.

[Operator Instructions] Our first question comes from the line of Steve Shaw from Sidoti & Company. Steve Shaw - Sidoti & Company, LLC: Can you get a little more detailed on some of the streamlining done on the direct operation costs?

Yes. Most -- and most was labor-related. As you know, our Fix facilities are pretty simple math. We have some -- we have certain fixed cost infrastructure that we need to maintain, primarily labor, but obviously some other costs. And we look hard at the labor and we -- how we operate and process, and much of it was from reductions in force. Steve Shaw - Sidoti & Company, LLC: And I'm sorry, Ben, what did you say the backlog was, $5.9 million?

$5.9 million, yes. Steve Shaw - Sidoti & Company, LLC: Okay. And, Lou, did you say you expect positive earnings in the third quarter?

We're very sure we're going to have positive cash flow, positive EBITDA. And we should be profitable on the earnings side as long as there is no -- we'd have been positive this quarter without the goodwill. And we -- in fact, in the third quarter, we'd be positive, yes. Steve Shaw - Sidoti & Company, LLC: Okay. And back to the gross margins, is that level sustainable for the second half of the year?

Yes. That number and that kind of margin, especially at the Treatment level, is -- to further what we had said, had a -- some had a, what we would call, a normal revenue level, which we didn't see in the first quarter. When we're getting numbers, we pass our fixed cost then have a pretty strong incremental margin. And so, yes, we think that in the second half of the year, with what we're seeing, we should be able to sustain that. Services, we think Services side margin should only improve as we kind of work through some of the last vestiges of the inherited projects. Steve Shaw - Sidoti & Company, LLC: Okay. And then a final one. I'm sorry, Lou, you mentioned -- when were you expecting some responses to the Hanford RFPs?

Well, the first step they put out was a -- what is called an expression of interest, which is -- and that's not due for -- the end of this week, the beginning -- or the end of -- sometime next week. That then is usually a first step before some sort of RFP or some sort of contracting mechanism. So as we said today, all they've asked for is an expression of interest, which is a nonbinding RFP. It's -- it doesn't -- it's just how would you do it and what would you do. Anyone and anybody could submit in a proposal to treat that waste. And we think we're about the only option out there that is cost effective, including Department of Energy trying to do it themselves on-site.

Our next question comes from the line of Doug Dyer from Heartland Advisors.

Lou, if you could, could you talk about the Canadian opportunities and [indiscernible] face some of the same funding difficulties that we face in the U.S.?

The Canadian -- Canada has a very strong nuclear industry. They developed their own reactor system called the CANDU. They're the leaders in production of medical isotopes with the Chalk River reactor. And the industry is reaching a point at which, in Canada, they need to start retiring some reactors and cleaning up some of the material they have. They have allocated a lot of money over the next 5 years within that program. And so what we see in Canada is a tremendous opportunity right now since we already do a lot of work in Canada through a treat and return processes, bringing waste into the U.S., treat it and return it. And we see a variety of projects coming up for bid over the next several years, some very dramatic projects that the -- within the industry, at Chalk River and up at the -- several of the mining operations. So we're very focused on Canada and see a great opportunity there. And they have the money. They have allocated the money, and they plan on spending it.

Okay. That sounds like it's a couple years away. Do you think there's any chance of getting anything in the door sooner from Canada, maybe into next year, possibly?

Yes. No, we're -- we have several smaller front-end projects that are kicking off, and we have some small projects up there already on the Service side. So yes, it's already happening, and it will continue to grow over the next year. We think next year could be -- we could see some major projects.

All right. Well, it looks like you've done a great job with realigning your cost structure for the current business environment, and it looks like you would have tremendous upside with any increases in revenue.

We believe so. We believe we've aligned it properly for the moment. We're continuing to focus on our costs and looking at any other ways we can further align the cost structure to meet the market needs.

Our next question comes from Michael Potter from Monarch Capital.

Lou, can you give us a sense on the medical isotope development? How much is being spent in R&D in order to develop this process on an annualized or quarterly basis?

It's -- we're spending about -- hold on here, let me get the -- get you an exact number. It's about $400,000 for '13, well, for the quarter. A lot of that is internal cost. So I'd be careful there when you read our R&D. The actual -- if we the stop that project totally, the actual cost is probably closer to about $100,000 a quarter that's unique to that project. That R&D number includes all our R&D in the cost of our whole operation that supports a variety of our work. With the isotope project, it's probably about $100,000 a quarter.

So isotope's $100,000 per quarter?

Right.

And how much have we spent on it to date, since inception?

I don't have that number, but it's -- we had cut it back at the -- about 6 months ago, it was running probably $150,000 a quarter. So we probably spent maybe about 6, maybe...

2 years.

Yes. $1 million to $1.5 million, yes, somewhere in that range. But I can get you that number better, the summary number.

Okay. And then with the -- with some of the, I'm sorry, complex or higher-activity waste, I know we got some big, or at least the beginnings of some higher-margin revenue from treating tritium and transuranic. Are we still treating tritium and transuranic? Is -- are they releasing high-activity waste to us?

The transuranic, we are still seeing transuranic waste come to our facilities. And the tritium now, that's all still in storage. It's all still there, still waiting for someone to love it and send it somewhere. So -- but now it's -- haven't lost it. It's still there. The main driver probably over what we'll see over the next year, probably will continue to be the transuranic waste. There's a lot of that moving right now -- or I mean, there is some of that moving. And it's -- we're optimistic over the next year that, that will continue to help give us something to treat.

Okay. So -- but we're not really treating much transuranic or tritium currently?

We're treating transuranic, and there are several levels of transuranic. There is the real low-end transuranic, and we treat a lot of that everyday. And then there is the higher-activity transuranic, where -- which is done at our Hanford facility, and that is dribbling in day-to-day. We're seeing a little bit of that. That has returned. It was pretty much shut down for the last 6 to 8 months, but we are now seeing some. So it's helping drive the Treatment group.

All right. And any news out of Los Alamos?

They are sending low-end material, but it's -- we're not seeing big numbers from Los Alamos, no. Not much happening there.

And our next question comes from Igor Novgorodtsev from Lares Capital.

It's me, Igor. I have a couple of questions. You mentioned that you have a private investor which puts you up with subordinated debt, and it didn't say such number. So is that $2.5 million, right?

It was $3 million. And it was really -- if you look at it, we had subordinated debt previously, and it was really a renewal of that subordinated -- we renewed the note. So it's $3 million at 2.99% interest. In fact, it's cheaper than our credit line with -- in Citi. So that was renewed, yes, about $3 million. So our debt stays the same, because we just basically used it to pay down PNC.

Okay. But if I look at your cash balance, it looks like you have only $130,000. So you expect that you will be able to fund your needs for the rest of the year with this subordinated debt, right?

Yes. We have been a net borrower on and off, yes.

Okay. My other -- also quick question related to the debt. This PNC, I know that you had an issue with this covenant. And you had a negotiation and PNC accepted the covenants. Should we expect any further development, or you think for the rest of the year, PNC is [indiscernible]?

We believe we should be able to continue to meet covenants, and don't see any problems. PNC seems very pleased with us. We're one of their oldest customers, and the -- they -- so we've had a good relationship with PNC.

Okay. And also when I talked to you a while ago during conference, you had a few contracts of which you inherited from SEHC which were a cost -- I mean, were a drag on your earnings, and you said that you're working out some of these contracts. Do you still have any legacy contracts which are currently are weighing you down?

That one -- the one we have is actually in the process of closing down, so -- as we sit here. They're dismantling as we sit, but there are no others.

Okay. And that's -- what do you think going to be the impact of having this contract going down? How much do you still have to cover the expenses?

It's been a big negative for us in the past. And without it, we should see much better numbers moving forward.

But you wouldn't be able to quantify exactly how much it would change?

No. I mean, if -- we can lay out to you what it's cost us in the past per quarter, and I think we've tried to do that. But it's kind of hard to say -- but now that's gone. So it's now a question of just -- can the rest of the operation continue to improve -- perform like it is?

Okay. And my last question, just real quick. I understand you have -- you're under the threat of being delisted from NASDAQ, and I think you have an extension until December.

Right.

To meet the listing requirements, am I correct about this?

Yes, you're right.

Okay. So I'm assuming they are borrowing a significant [indiscernible]. You probably would not be able to meet the requirements. I mean, even if the reverse stock to [ph] estimated, you probably wouldn't have enough market cap to meet the requirements. I'm not sure about this. Do you have any specific plan, or you just wanted to go on the bulletin board?

No. It's -- we have filed a proxy. And in that proxy, we're asking shareholders for the right to do a reverse. We will do what we can, whatever we need to do to stay on the NASDAQ. So with the proxy out there now, it's just been approved by the SEC, we will ask the shareholders for the right to do a reverse. And if they approve that, then we will do a reverse in order to meet NASDAQ requirements, if necessary. So who knows? I mean, I -- maybe the stock will go back to $1. But if it doesn't, we will do a reverse.

Our next question comes from Craig Egenthall [ph] from -- who's a private investor.

Just a couple of questions. Over the years, you've had a bunch of private initiatives with U.S. utility industry. Can you tell us how that's proceeding at this point?

Well, we have some very unique assets, and we have a variety of projects to -- it's been one of our top priorities in terms of going after the utility business. Our initial emphasis when we started Perma-Fix was really on the DOE side since we saw the value there. We have facilities that can handle components, and we've already demonstrated that for the utility, especially with northwest utilities at their nuclear plant, brought in a large component to -- during their outages. We have a variety of services we can offer the utilities and working very hard there to expand not only the customer base, but also the list of services we can offer the utilities. And we've worked real hard. I've had to -- I've slowed it down during this -- the leaner times. But one of our biggest efforts is on the soil separation process. We have a very unique technology for being able to separate radioactivity from soil, the debris and other materials. And we've been developing that technology, and it would be ideal for the utilities to reduce their volume of their radioactive waste. So we see it as a big opportunity. We see it as -- for us, it's fairly untapped. And like all markets here, it takes a little time to develop the services with the client base. But we're -- I don't know if that -- that was a long answer for a short question, Craig, but it's...

That's okay. I mean, obviously, this is not the highest priority right now. And just going back to the isotope. One of the -- just following up on a couple of questions from some of the other speakers on the call. You've said specifically that you needed a little bit more refinement or something to that nature on the isotope itself. Can you be a little bit more specific in terms of what that means? How far are you? I mean, are you 90% there? When do you think you might be able to reach whatever the benchmarks are so this can proceed?

The issue for the North American market is -- for our product is somewhat simple. We meet all the standards, and that's why we're so optimistic initially. The problem we run into is that we produce a generator that doesn't have the concentrated technetium that the pharmaceutical -- the nuclear pharmacies are used to and would be a problem for the North American market as they -- from -- the generators they have today produce large quantities of high -- very high-activity technetium. Now what you find in the business is that that's not necessarily needed, but of course, that is what everyone has become used to. When we look at our resin, it is not as concentrated as the existing market. And we felt that if we try to push it at this point in the North American market, which -- and the European market, would be a mistake. And that what would be much more important is to focus on increasing the concentration of that -- the ability of that generator to produce a higher-activity technetium. So that's been our efforts. And that's why we step back is that when we really started looking at it commercially, it -- we didn't think we could make the pharmacies happy. So we're very focused on then doing that, and we're very optimistic we can. So that we've been very focused now on producing a much higher-activity material. At the same time, we see developing markets that have set standards that we can meet today. So we're now focused on some of those international opportunities. They'd be fairly small in tonnage. They wouldn't be large. But the advantage we have is that we could produce with a very simple nuclear reactor that you find like in a university. We could produce isotopes for a developing market that would meet all the needs. And we've identified 4 or 5 of those markets that are now developing, where they're pushing for it, and we're going to go after those markets initially, while we develop a more concentrated form for Europe and North America.

Just -- again, I'm just trying to get some specificity. How close -- I mean, how far are we from -- for meeting the benchmarks that you think are necessary?

The -- part of the answer is that by me even talking about it, it feels that we're starting to get close to being able to talk about what the real problem is here and how we're solving it. I'm hoping to have detailed plan and where I can talk about on this international effort over the next 6 to 8 months. The U.S.-North American approach, we've made a lot of progress on the developer research side in terms of doing something. And we're -- but we're still in the research phase. We're getting close to coming out and starting to run some real live tests out in the field, but that's probably 6 to 8 months away, which will tell us, can we produce a concentrated form. If everything continues to go right, which, so far, it's been a very tough -- I must admit, this has been a extremely complicated project, and we have very limited resources we've been allocating to it. And -- but I'm not sure that's really been bad. I think we've limited what we spent on it, but these things just take time to understand the chemistry and the physics that go on in these type of material -- very complicated system. But so far, we've made good progress, and I think we're getting close to having another real live test here in the very near future, in the next 6 to 8 months.

Our next question comes from Greg Weaver from Invicta.

A couple of quick ones. Just on the subordinated debt. Ben, would I see that in the last 10-Q anywhere or is that -- you said you renewed it, but was it no longer -- you hadn't gone off it at that point?

No. We did our last payment on -- it was actually May of last year, May of '12, I think. So we had -- the original -- we originally done it in May of 29 -- 2009. And it was a 3 year. It was a very similar note, same principles. So it was -- it expired around May of 2012.

All right. So you're -- okay. So you paid down monthly or quarterly or whatever?

Correct.

Got you. Okay, that's helpful. And there's no convertible instruments associated with that in any way? It's just straight debt?

Correct. I was just going to mention, it is interest-only for the first year.

Okay, that's helpful. And, Lou, I thought I heard you say something about the Hanford contract, the expiration. You're talking about goodwill write-off or something. What -- did I mishear that?

No. That -- the -- our Hanford service contract work -- the service work we've been doing at Hanford has been cut back, and it will not be renewed when it expires in -- at the end of September. So it's -- yes, it's ending. So there, we had a goodwill write-off. We had goodwill from that contract that we wrote off.

Okay. Maybe you covered that in the top of the call. I missed the first couple of minutes. But I guess, what was the run rate associated that over the last year or so?

$23 million.

About -- $23 million a year.

Okay. And what was it last quarter?

$5.7-ish million, about $5.7 million.

Our next question comes from Walter Schenker from MAZ Partners.

On -- just a couple of asides. First, in regard to, it's an old topic, moving to -- what has happened with PCBs, if anything? Is there some flow or...

Yes. We keep receiving. We don't talk about them because they're fairly -- a couple of million a year on PCBs. They're still there, still coming. The -- right now is -- the 2 things that produces the PCB, the Fort Smith and Paducah. And both are going through, over the last year, contract changes, it is up for rebid, short -- next 6 months. So both of those have an effect on [indiscernible] because [indiscernible] PCB [indiscernible] and also [indiscernible]. But we see a little bit coming in now.

And nothing ever happened on the private sector flowing, which, theoretically, is sitting on a fair amount of these things?

Utilities, we've seen very little, almost nothing PCB move.

Okay. And at Hanford then, we're going to have about $4 million of revenues in the current quarter for 2 months, and then it drops off to 0 on Services?

No. It's the full quarter, Walter.

Okay. And if we take out Hanford, that means that the acquisition is running well below where it was running in revenues a couple of years ago?

I'm sorry, what?

The other piece of your Services business is largely the acquisition, correct?

Right, yes.

And that is running down meaningfully from where it was a year or 2 years ago, or is it leveled off?

Our little contract's ending. We're about to see the end of that though. We're starting to see, especially technical services which are the help physics part, are picking up significantly. So we're seeing a lot of effort with help physics in terms of moving into the utility industry, moving into the shale frac-ing industry with the technical services and just a full [indiscernible] their technologies and their expertise. So that part of it is we're very pleased with. It's growing well.

Our next question comes from Robert Menna [ph] who's a private investor.

Could you talk a little bit about the road ahead to get the business from the tank waste going to Hanford? Just looking at the local Hanford newspapers, it seems that just about every day there's some new report on an issue affecting the safety of transporter, combining Hanford wastes and so forth, all of which sound like they might take a long time to get resolved. How long is it likely to -- are these issues likely to affect us and our ability to get the result to the point that we can begin the actual treatment of the tank waste?

That's the good question is that we live in a very regulated environment with a lot of public attention and with -- we've had some -- there had been some issues out there in terms of how DOE has packaged some material and send it to us. It caused -- really didn't cause any problem. I mean, we had a load that came in. It was in a container. We opened the container, and there had been some material that leaked out of the box into the container there, so totally -- but it seems to be a -- there was a lot of attention because there is a lot of attention right now at Hanford on the possibility of actually moving tank waste to us. So with those projects, it wasn't our fault on the problem. But it does attract attention and raise questions about transportation. But now that they've looked at it, they've -- there are some higher things that could be done to improve it. On this business, what always happen is you do -- when you have a problem, you stop everything, do a cause analysis, put in controls to make sure it never happens again and then move on. And that's sort of what's going on with the issues that have already happened. It's our standard procedure is always to shut down, develop a root cause analysis, put in controls to make sure it never happens again, and then have the state and regulators sign off on it, and then move on. It's very common process. And as we speak today, again, I think moving this material, we're right, you don't have to go very far. We do have a rail line if we would need that could move it. So there's a variety of ways this material could be transported. The simplest is over the road, where they close the road and don't allow anyone near it while it's being transported. So that's the normal process we've been going through, and we think that will continue because it's really a very simple process and very safe.

But it sounds as though the period of time before we actually get the RFPs out, there may have to wait -- not only in a problem getting solved from a technical point of view, but how to get the public and all the relevant public officials are onboard. And what stage are we there? Do we think we have the relevant public officials pretty much on board? And are we're going to have people lying down in front of the transport vehicles? How do you see all that?

We don't think there'll be people lying down in front of the transport vehicles. But the real issue comes back down to priorities. You have leaking tanks sitting at Hanford. I could also say you have boxes of transuranic waste leaking at Hanford. So there are a variety of leaking things at Hanford, and that really comes -- and we could treat all of those. Do you want -- does the people of the State of Washington want those treated, or what do they want? Then -- so you've got some basic issues there, that in terms of priorities, what's going to be done and how are they going to be done. And that's sort of the question that DOE and the state need to answer. And they are working on setting up priorities on what's the most important thing and what should be done first. And so this is one of them, but where they'll actually fall into priorities, is a question for the state and DOE. Someday, it will be done, and we will treat tank waste. I can almost guarantee you that. I -- it's hard for me to give you a date.

[Operator Instructions] Our next question comes from Joseph Vaughn [ph] who's a private investor.

I'm curious, you compete in, you've mentioned, many, many segments. And we've had some financial difficulties. You've acquired one of your competitors. What I'm wondering about is what does this competitive landscape look like? You talk about, in some areas, you're the only viable source. A year ago, you talked about working with a bunch of companies. There were several hundred million dollars worth of contacts that were -- you anticipated that they would be awarded. You're working in cooperation with some people, competing directly against some others. I'm just wondering, how has the competitive landscape changed? And I'm also curious about -- is there -- there must be some concern, I would think, at the federal government about the effect that these tough times have had on your industry and the fact that they need viable companies like you to do this kind of work. I mean, you're very specialized. I'm just wondering -- and I just wonder what your dialogue is with -- I mean, I know you've had a long continuing relationship with federal officials. But I mean, they must have some awareness of the difficulties that you are having -- going through and maybe some of your competitors and the fact that this industry needs to be viable. And I just wonder how -- and also how you guys work together. I mean, it's kind of a specialized segment. But yet, it's hard to see where you compete and where you cooperate. I know this is kind of a complex question, but...

Let me try to break that down in pieces. Number one, is that on our Treatment side, we have very unique assets. They're the most unique nuclear treatment assets in the world. No one can treat like we can treat. So let me keep going here. So number one, is Treatment. Very unique. No -- almost no competition. And so if they're sending the waste out, it's probably going to come to us for treatment. Number two is Service. On the Service side, we're not unique. We offer a variety of services on -- nuclear services where we compete and we also partner. And so that when we go after a project -- in a very complex project, so we're usually part of a team. Sometimes we lead those teams, and sometimes we're a member of those teams. And that -- and those 2 stories will continue. That's exactly where we are. And so in one area, we work with others and we have to compete with them and their cost-plus contracts. In the other area, we're very unique. There's nothing like us in the whole world, nowhere in any other country. And those assets are -- it's mind-boggling for me to sit here and see our Treatment assets being -- this company is being valued at the value of our restricted cash and those assets have no value. It's just real sad. But they're the most unique assets in the world. Now the -- so that's sort of the overview, is that we compete in some areas on the Service side, which is cost plus, and we seldom compete on the Treatment side, where those assets are extremely unique and you couldn't find them anywhere in the world. So the other question was the government. The government, actually, we've had discussions at the highest level in DOE about -- they're -- they see dramatically the value that the whole Treatment, commercial Treatment business brings to DOE. And our problem is so much that Congress has cut back the money, the problem, as I said before on my discussions, is -- the problem we see is the priority at the DOE in terms of large construction projects right now is draining all the cash. And over the last -- what we finally have seen is that DOE has moved to reallocate some of the money from those construction projects into areas of treatment and trying to meet some of the milestones they have for treating waste and cleaning up sites. It's been very small, but we don't need much. And so that -- what you're beginning to see is some of that take effect, where they're actually cleaning up some things. Whereas for the last year, that was basically shut down, because of that cash drain over on the construction side of DOE. So -- but they are very aware. And we've met, like I say, with the highest levels at the -- at DOE to -- They've called us in to talk about it.

I would think that they -- why couldn't they give you a grant for some of this stuff? I mean, it's...

We don't want a grant. We've never accepted DOE money. We were happy to treat waste for them. So just send us some more waste and we'll all be happy. They'll get something for it. We'll get something for it.

When you talk about construction, are you talking about like building nuclear plants? What kind of construction are you talking about that they've been...

This -- on the environmental side, there's 2 major construction projects going on right now at DOE that are sucking all the cash. Number one is the vitrification plant at Hanford, where they're going to treat some fraction of the high-level waste in the tanks, and that's the big one. The second monster is the MOX fuel facility at Savannah River, where they're building a MOX fuel -- mixed oxide fuel to use up all the surplus plutonium use it and -- as a commercial reactor fuel. So those 2 projects are both out of control, both draining lots of money and are making very slow progress. The deal is very -- yes, both of those are new environmental sites.

This new Energy Secretary that we have, he comes out of your industry. Does he have a better understanding of the need for you guys and -- I mean, do you have a better -- does he -- has he shifted any of the priorities more in your direction and away from some of these construction -- has there been any change with this new energy guy, new Energy Secretary?

We're excited about the new secretary. He is a very much a -- he understands nuclear. That would be the most positive thing I'd say about him. Number one, he understands it. Two, he was undersecretary and so he understands also the organization and how it works. And so in one way, he's -- we have some hope that he will -- he has a better understanding of nuclear and how it works and what is needed to make it work properly. It's been somewhat neglected in the past here, over the last 4 years, the nuclear side.

Okay. And -- all right. So -- and then just looking at the overall composition of your competitors and so forth, this industry, has it shrunk? I mean, is there less competition overall? I mean, obviously, you bought out one of your competitors. But I'm just wondering, if people are looking at the segment, is there less competition or more?

On the service side, it's less. We've seen -- with the dramatic drop in spending on the services and on non-construction projects, yes, there's been a big drop. We've seen a lot of people fall by the wayside. So the industry has shrunk dramatically on the service side. Besides consolidation, we've also seen shrinking from -- on the competitive side.

So that does work to your benefit as a survivor?

In the long run, it is -- it'll be very important to be the survivor, yes, because this will come back. And the industry as a whole, especially in the world, you're seeing a dramatic movement to nuclear. Even as you look around at all the options, it's still nuclear, compared to other options, is much, much better. So when everybody gets over the hysteria -- if you look at Fukushima, no one died at Fukushima. There were no even serious injuries at Fukushima. It's a big cost in the cleanup. But compare that to coal where everyday you see hundreds of deaths every month caused by coal. So when you look at the options and you're rational, it's hard to beat. Most of the world is doing that. We've seen a dramatic shift in nuclear, and we're trying to be right in the middle of that.

I will now turn the floor back over to Lou Centofanti for closing comments.

Well, thank you, everyone. We appreciate it and look forward to talking to you in the very near future. Thank you for your support and understanding. Thank you.

Thank you. This does concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.