Perma-Fix Reports Financial Results and Provides Business Update for the Second Quarter of 2016

ATLANTA, GA -- (Marketwired) -- 08/22/16 -- Perma-Fix Environmental Services, Inc. (NASDAQ: PESI) today announced results for the second quarter and six months ended June 30, 2016.

Dr. Louis F. Centofanti, Chief Executive Officer, stated, "As previously disclosed, we experienced growth in our Services Segment and achieved positive Adjusted EBITDA, despite continued delays of waste shipments within our Treatment Segment during the second quarter of 2016. Based on our current sales pipeline, we anticipate improvement in revenue and cash flow in the second half of 2016 as many of the waste shipments that were delayed remain on track for later this year. Nevertheless, due to timing issues and our revenue recognition model, we are revising our guidance, and now believe adjusted EBITDA for the full year should be approximately of $3 to $4 million."

"We are very pleased to report continued progress on an important demonstration project we are currently conducting with a significant customer related to the treatment of high level waste streams. We believe that if this project is successful, it could open the door to a new market opportunity."

"As discussed in our preliminary financial results reported on August 16, 2016, with the expiration of our lease at our M&EC facility located in Oak Ridge, Tennessee, scheduled for January 2018, we are proceeding to shut down this facility, which we anticipate will result in certain fixed costs savings. We believe that M&EC can reroute waste streams with minimal impact to our revenue or disruption to our customers. As a result of this decision, our second quarter financial results include certain non-cash tangible and intangible asset impairment losses and other charges as described below in connection with our M&EC subsidiary."

Financial Results

Revenue for the second quarter of 2016 was $14.8 million versus $16.4 million for the same period last year. Revenue for the Treatment Segment was $8.0 million compared to $11.1 million for the same period in 2015. Revenue from the Services Segment was $6.8 million versus $5.3 million for the same period in 2015.

Gross profit for the second quarter of 2016 was $1.8 million versus $4.0 million for the second quarter of 2015 primarily due to lower revenue in the Treatment Segment resulting from lower waste volume. Gross profit for the second quarter of 2016 also included a write-off of approximately $587,000 in prepaid fees in connection with the impairment of certain equipment at our M&EC facility which is expected to be shut down as discussed above. Gross profit decreased approximately $2.2 million and gross margin decreased to 12.3% from 24.7% for the same period last year primarily due to decreased revenue in the Treatment Segment and the impact of our fixed costs structure. Our gross profit and margin were also impacted by the $587,000 write-off as discussed above.

Operating loss for the second quarter of 2016 was $11.2 million versus an operating income of $613,000 for the second quarter of 2015. Operating loss for the second quarter of 2016 included non-cash tangible and intangible asset impairment charges of approximately $1.8 million and $8.3 million, respectively, resulting from the pending shut down of the Company's M&EC facility in Oak Ridge, Tennessee. Operating loss also included the $587,000 write-off in prepaid fees as discussed above. Net loss attributable to common stockholders for the second quarter of 2016 was $8.2 million or ($0.71) per share, versus net loss of $154,000 or ($0.01) per share, for the same period in 2015. Net loss attributable to common stockholders for the second quarter of 2016 included a tax benefit of approximately $3.2 million resulting from the impairment loss incurred on intangible assets for our M&EC facility.

The Company recorded Adjusted EBITDA of $824,000 from continuing operations during the quarter ended June 30, 2016, as compared to Adjusted EBITDA of $2.0 million for the same period of 2015. The Company defines EBITDA as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before research and development costs related to the Medical Isotope project, impairment charges on tangible and intangible assets and write-off of prepaid fees resulting from tangible asset impairment loss. Both EBITDA and Adjusted EBITDA are not measures of performance calculated in accordance with Generally Accepted Accounting Principles in the United States of America ("GAAP"), and should not be considered in isolation of, or as a substitute for, earnings as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. The Company believes the presentation of EBITDA and Adjusted EBITDA is relevant and useful by enhancing the readers' ability to understand the Company's operating performance. The Company's management utilizes EBITDA and Adjusted EBITDA as a means to measure performance. The Company's measurements of EBITDA and Adjusted EBITDA may not be comparable to similar titled measures reported by other companies. The table below reconciles EBITDA and Adjusted EBITDA, both non-GAAP measures, to GAAP numbers for (loss) income from continuing operations for the three and six months ended June 30, 2016 and 2015.

             
             
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands)   2016     2015     2016     2015  
(loss) Income from continuing operations   $ (8,134 )   $ 407     $ (11,980 )   $ (1,606 )
                                 
                                 
Adjustments:                                
  Depreciation & amortization     912       943       1,796       1,909  
  Interest income     (31 )     (11 )     (47 )     (20 )
  Interest expense     108       140       276       267  
  Interest expense - financing fees     29       56       85       115  
  Income tax (benefit) expense     (3,167 )     36       (3,130 )     71  
                                 
EBITDA     (10,283 )     1,571       (13,000 )     736  
                                 
Research and development costs related to                                
Medical Isotope project     416       432       854       827  
Impairment loss on tangible assets     1,816             1,816        
Impairment loss on intangible assets     8,288             8,288        
Write-off of prepaid fees resulting from impairment                                
loss on tangible asset     587             587        
                                 
Adjusted EBITDA   $ 824     $ 2,003     $ (1,455 )   $ 1,563  
                                 
                                 

The tables below present certain unaudited financial information for the business segments, excluding allocation of corporate expenses and research and development costs related to our Medical Isotope project:

             
             
    Three Months Ended     Six Months Ended  
    June 30, 2016     June 30, 2016  
    (Unaudited)     (Unaudited)  
(In thousands)   Treatment     Services   Medical     Treatment     Services   Medical  
Net revenues   $ 7,985     $ 6,824   $     $ 15,189     $ 9,658   $  
Gross profit     582       1,234           444       1,406      
Segment (loss) profit     (7,390 )     1,046     (416 )     (8,675 )     322     (854 )
                                             
                                             
             
             
    Three Months Ended     Six Months Ended  
    June 30, 2015     June 30, 2015  
    (Unaudited)     (Unaudited)  
(In thousands)   Treatment   Services   Medical     Treatment   Services     Medical  
Net revenues   $ 11,087   $ 5,267   $     $ 20,836   $ 9,119     $  
Gross profit     3,335     697           4,570     940        
Segment profit (loss)     2,258     60     (432 )     2,443     (241 )     (827 )
                                           
                                           

The Company failed to meet its quarterly fixed charge coverage ratio in the second quarter of 2016. The Company's inability to meet its quarterly fixed charge coverage ratio in the second quarter of 2016 was primarily due to delays in receipt of certain waste shipment which have been rescheduled for later this year. Based on discussions with the Company's lender, the Company expects to receive a waiver from its lender for this non-compliance. In the event that the Company is unable to secure this waiver, the Company would be required to reclassify the long-term portion of its bank debt, in the amount of approximately $9.4 million as of June 30, 2016 as included in Long-term liabilities on the Company's balance sheet as reported below to Current liabilities, which would result in the Company's working capital being adjusted to approximately a negative $7.4 million. Under our credit facility, as amended, our failure to meet any of the financial covenants contained in the credit facility, unless waived by our lender, could result in our lender declaring our credit facility in default allowing them to immediately require the repayment of all outstanding debt under the credit facility and terminate all commitments to extend further credit. Our lender has not declared our credit facility in default, and, as provided above, based on discussions with our lender, we expect our lender to waive our failure to meet our quarterly fixed charge coverage ratio for the second quarter of 2016.

Based on our discussion with the Company's lender, the Company also expects to receive a revision in the methodology to be used in calculating our fixed charge coverage ratio which we believe will enable us to meet our fixed charge coverage ratio requirement for the remaining quarters of 2016.

Conference Call

Perma-Fix will host a conference call at 11:00 a.m. ET on Monday, August 22, 2016. The call will be available on the Company's website at www.perma-fix.com, or by calling (877) 407-0778 for U.S. callers, or +1 201-689-8565 for international callers. The conference call will be led by Dr. Louis F. Centofanti, Chairman and Chief Executive Officer, Ben Naccarato, Vice President and Chief Financial Officer, and Mark Duff, Executive Vice President, of Perma-Fix Environmental Services, Inc.

A webcast will also be archived on the Company's website and a telephone replay of the call will be available approximately one hour following the call, through midnight August 29, and can be accessed by calling: (877) 481-4010 (U.S. callers) or +1 (919) 882-2331 (international callers) and entering conference ID: 10081.

About Perma-Fix Environmental Services

Perma-Fix Environmental Services, Inc. is a nuclear services company and leading provider of nuclear and mixed waste management services. The Company's nuclear waste services include management and treatment of radioactive and mixed waste for hospitals, research labs and institutions, federal agencies, including the Department of Energy ("DOE"), the Department of Defense ("DOD"), and the commercial nuclear industry. The Company's nuclear services group provides project management, waste management, environmental restoration, decontamination and decommissioning, and radiological protection, safety and industrial hygiene capability to our clients. The Company operates four nuclear waste treatment facilities and provides nuclear services at DOE, DOD, and commercial facilities, nationwide.

Please visit us on the World Wide Web at http://www.perma-fix.com.

This press release contains "forward-looking statements" which are based largely on the Company's expectations and are subject to various business risks and uncertainties, certain of which are beyond the Company's control. Forward-looking statements generally are identifiable by use of the words such as "believe", "expects", "intends", "anticipate", "plans to", "estimates", "projects", and similar expressions. Forward-looking statements include, but are not limited to: anticipate improvement in revenue and cash flow in the second half of 2016; receipt of certain large waste treatment shipments later this year; anticipate adjusted EBITDA of $3 to $4 million for the full year; fixed costs savings from M&EC facility shut down; financial results of our M&EC subsidiary; receipt of waiver from our lender as a result of failure to meet a certain financial covenant during the second quarter of 2016; meeting fixed charge coverage ratio requirement for remaining quarters of 2016; and the effect of failure to obtain the waiver from our lender. These forward-looking statements are intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. While the Company believes the expectations reflected in this news release are reasonable, it can give no assurance such expectations will prove to be correct. There are a variety of factors which could cause future outcomes to differ materially from those described in this release, including, without limitation, future economic conditions; industry conditions; competitive pressures; our ability to apply and market our new technologies; the government or such other party to a contract granted to us fails to abide by or comply with the contract or to deliver waste as anticipated under the contract; that Congress fails to provides continuing funding for the DOD's and DOE's remediation projects; ability to obtain new foreign and domestic remediation contracts; inability to meet financial covenants; and the "Risk Factors" discussed in, and the additional factors referred to under "Special Note Regarding Forward-Looking Statements" of, our 2015 Form 10-K and Forms 10-Q for quarters ended March 31, 2016 and June 30, 2016. 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.

Please visit us on the World Wide Web at http://www.perma-fix.com.

FINANCIAL TABLES FOLLOW

PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(Amounts in Thousands, Except for Per Share Amounts)   2016     2015     2016     2015  
                         
Net revenues   $ 14,809     $ 16,354     $ 24,847     $ 29,955  
Cost of goods sold     12,993       12,322       22,997       24,445  
  Gross profit     1,816       4,032       1,850       5,510  
                                 
Selling, general and administrative expenses     2,375       2,930       5,431       5,776  
Research and development     554       489       1,128       918  
(Gain) loss on disposal of property and equipment     (1 )           4        
Impairment loss on tangible assets     1,816             1,816        
Impairment loss on intangible assets     8,288             8,288        
  (Loss) income from operations     (11,216 )     613       (14,817 )     (1,184 )
                                 
Other income (expense):                                
Interest income     31       11       47       20  
Interest expense     (108 )     (140 )     (276 )     (267 )
Interest expense-financing fees     (29 )     (56 )     (85 )     (115 )
Foreign currency gain                       (4 )
Other     21       15       21       15  
(Loss) income from continuing operations before taxes     (11,301 )     443       (15,110 )     (1,535 )
Income tax (benefit) expense     (3,167 )     36       (3,130 )     71  
(Loss) income from continuing operations, net of taxes     (8,134 )     407       (11,980 )     (1,606 )
                                 
Loss from discontinued operations, net of taxes     (264 )     (713 )     (431 )     (936 )
  Net loss     (8,398 )     (306 )     (12,411 )     (2,542 )
                                 
Net loss attributable to non-controlling interest     (164 )     (152 )     (337 )     (324 )
                                 
Net loss attributable to Perma-Fix EnvironmentalServices, Inc. common stockholders   $
(8,234
)   $
(154
)   $
(12,074
)   $
(2,218
)
                                 
Net (loss) income per common share attributable to Perma-Fix                                
Environmental Services, Inc. stockholders - basic and diluted:                                
Continuing operations   $ (.69 )   $ .05     $ (1.00 )   $ (.11 )
Discontinued operations     (.02 )     (.06 )     (.04 )     (.08 )
  Net loss per common share   $ (.71 )   $ (.01 )   $ (1.04 )   $ (.19 )
                                 
Number of common shares used in computing net income (loss) per share:                                
Basic     11,574       11,505       11,566       11,496  
Diluted     11,574       11,536       11,566       11,496  
                                 
The accompanying notes are an integral part of these consolidated financial statements.  
   
PERMA-FIX ENVIRONMENTAL SERVICES, INC.  
CONSOLIDATED BALANCE SHEET  
             
    June 30,     December 31,  
    2016     2015  
    (Unaudited)     (Audited)  
(Amounts in Thousands, Except for Share and Per Share Amounts)            
                 
ASSETS                
Current assets:                
  Cash and equivalents   $ 379     $ 1,534  
 
Account receivable, net of allowance for doubtful accounts of $1,122 and $1,474, respectively     10,213       9,673  
  Unbilled receivables     3,956       4,569  
  Other current assets     2,695       4,306  
  Assets of discontinued operations included in current assets, net of allowance                
  for doubtful accounts of $0 for each period presented     85       34  
    Total current assets     17,328       20,116  
                 
Net property and equipment     18,268       19,993  
Property and equipment of discontinued operations, net of accumulated depreciation of $10 for each period presented     81       531  
Intangibles and other assets     33,196       42,273  
Other assets related to discontinued operations     303        
    Total assets   $ 69,176     $ 82,913  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities   $ 14,832     $ 16,619  
Current liabilities related to discontinued operations     521       531  
    Total current liabilities     15,353       17,150  
                 
Long-term liabilities     19,386       18,997  
Long-term liabilities related to discontinued operations     1,002       1,064  
    Total liabilities     35,741       37,211  
Commitments and Contingencies                
Series B Preferred Stock of subsidiary, $1.00 par value; 1,467,396 shares authorized, 1,284,730 shares issued and outstanding, liquidation value $1.00 per share plus accrued and unpaid dividends of $899 and $867, respectively    
 1,285
     
 1,285
 
Stockholders' equity:                
  Preferred Stock, $.001 par value; 2,000,000 shares authorized, no shares issued and outstanding            
  Common Stock, $.001 par value; 30,000,000 shares authorized, 11,581,973 and 11,551,232 shares issued, respectively; 11,574,331 and 11,543,590 shares outstanding, respectively    
11
     
 11
 
  Additional paid-in capital     105,717       105,556  
  Accumulated deficit     (72,882 )     (60,808 )
  Accumulated other comprehensive loss     (134 )     (117 )
  Less Common Stock in treasury at cost: 7,642 shares     (88 )     (88 )
    Total Perma-Fix Environmental Services, Inc. stockholders' equity     32,624       44,554  
  Non-controlling interest     (474 )     (137 )
      Total stockholders' equity     32,150       44,417  
                 
    Total liabilities and stockholders' equity   $ 69,176     $ 82,913  
                     

Contacts:
David K. Waldman
US Investor Relations
Crescendo Communications, LLC
(212) 671-1021

Herbert Strauss
European Investor Relations
herbert@eu-ir.com
+43 316 296 316

Source: Perma-Fix Environmental Services, Inc.