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Perma-Fix Environmental Services Inc. Message Board

  • roboklerk roboklerk Jun 26, 2013 9:29 AM Flag

    Need to Cut Almost 250 More From Workforce

    to lower the operating cash flow breakeven point further. These guys keep thinking they are a $150-$160 million annual revenue enterprise. They are not. They are an $80-$90 million annual revenue company at present. Sure, in a normalized environment they may be a $150 million or even $200 million revenue company. But a normalized environment could be years or even nearly a decade away (Sequester runs through 2021). They keep thinking they can hold the line on revenues year-on-year to be flat. They cannot. The government is going to cut spending, then cut a little more, and cut again for good measure. Unless the company and its CFO and its CEO face this reality, right-size to the CURRENT spending environment, equity holders will likely face a total loss IMO. The company keeps fooling itself that they have little debt and an annual interest expense that runs only about $600,000 a year. That is true. But they have $2.7 million in short term debt coming due (w/only $2.2 million cash on the Balance Sheet), and they are running close to a $3 million annual EBITDA loss in just the last quarter alone. And that's before even more work could be lost. The BOD and management seem blissfully optimistic this is all going to turn around. It won't, at least not enough. The government is not going to spend the money, not on Hanford, not on Los Alamos, not on "normalized waste streams"--at least not in time to help the company.

    The need to refund or reclassify that short term debt to long term status in order to conserve cash and have it available to pay the required severance to downsize the company. Actually, they will probably need even a little more cash than that and should be pursuing asset sales. The market realizes the company is at the 11th hour, even if the company itself does not. You cannot have scientists running companies and you cannot have the CEO and Chairman positions filled by the same individual.

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    • Couldn't a larger company like Bechtel or CH2M Hill absorb PESI and keep its employees busy across their operations. I read somewhere that Bechtel has a $12B contract at Hanford. If I were PESI's management, I'd be looking hard at ways to market its human capital while it is still an asset to the organization.

      • 1 Reply to selllowtome
      • While there is only minimal equity value left, management's and the BOD's first fiduciary responsibility as a public company is to its stockholders. That is true by definition of all public companies. In reality, and generically speaking, it's usually the equity holders who get hosed w/a total loss, while many employees get to keep their jobs (after their company is acquired by vulture companies, continuing to be employed as the company enters workout status, etc). And remember all the while equity holders are seeing their investment dwindle, the BOD and management team still has been and will continue to get paid via salary, bonus and stock options. It is true that they also own stock, but working for PESI has provided them w/income and various other rewards and backstops shareholders will never have gotten. 2Q results will show if the company has taken the necessary further cost reduction steps, whether treatment streams have stabilized at more normal levels, etc. My biggest concern remains: From where and when will the next big contract ($100 million+) come?

    • Robo

      Appreciate your speculations, but you're not sitting in their meetings and aren't privy to
      what what's going on....

      How do you know they haven't already cut their workforce by another
      250 employees this quarter?

      How do you know SEHC hasn't been growing its outside, "non-traditional" work? (diversifying was the reason for buying it in the first place).

      How do you know what potential loss of that contract in September wasn't
      already baked into CENTO's revenue projections?

      I'm sure you've got answers to all these kinds of rhetorical questions, but the
      company knows everything you know -- and a lot more that you don#$%$ not just
      CENTO but several guys making decisions. And with the stock they've got, they
      stand to lose a lot more than any retail investor....I just don't buy your endless
      doom and gloom scenarios....A $2.5 million loan? That's lunch money for several
      of the baseball players in our city....

      • 1 Reply to rabbitw96
      • rabbit I hope you are right. I was just enumerating what would be on my wish list. They may or may not be doing just that. But I have my doubts they are really on top of everything. They said on the yearend CC that they expected flat revenues as a kind of low/worst case scenario for 2013 versus 2012. Well the results are in: In 2013 Q1 revs. were down 48% year-over-year $18.1 million lower than a year ago. The absolute number for the Q1 2013 was just under $20 million. Now in 2012 Q2 they recorded just over $34 million. What are the odds that in 2013 Q2 they even match that number--which would require an incremental sequential improvement of another $14 million over and above the $20 million they recorded in 2013 Q1. And they would still be over $18 million behind year ago at the half way point of 2013 if they somehow miraculously match just the 2Q rev. level of a year ago.

        Then they lose Hanford work after Sept. 30. They sure better have a lot of work coming in, and coming fast if they are going to record flat revenues in 2013 vs. 2012. Could it happen? maybe, you are right, I am not sitting in their shoes looking at their field projections. I'm just saying it's long odds., IMHO. Remember in 2012 they also guided badly on the top line and missed their annual projections for the year every quarter as I recall. These guys need to run their cost structure on a "real" worst case scenario---and maybe they are enacting that now. i hope so. the stock price is saying something else about what the market believes. Could the market be wrong---sure it could. And if you are saying another $2.5 million loan is lunch money, I remind you bankers since 2008 have gotten a bit ticklish about throwing "good money after bad"--even if it is a small amount. They need to refund the $2.7 million short term outstanding and move it to long term status, plus raise more money IMO.

 
PESI
4.3154-0.0846(-1.92%)Jul 31 3:25 PMEDT

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