SEC Company Response from PERMA FIX ENVIRONMENTAL SERVICES INC (PESI) (CIK 0000891532) (PESI) — Jun 24, 2005
PERMA FIX ENVIRONMENTAL SERVICES INC (PESI) (CIK 0000891532)
Date: June 24, 2005 · CIK: 0000891532 · Accession: 0001275287-05-002320
AI Filing Summary & Sentiment
Referenced dates: June 10, 2005
Letter
June 24, 2005 VIA EDGAR Securities and Exchange Commission Division of Corporate Finance 450 Fifth Street, N.W. Washington D.C. 20549 Attn: John Cash
Re: Perma-Fix Environmental Services, Inc.; Form 10-K for fiscal year ended December 31, 2004 and Form 10-Q for fiscal quarter ended March 31, 2005; file No. 1-11596
Dear Ladies and Gentlemen:
The following are responses to the comments of the Securities and Exchange Commission (the "SEC") with respect to Perma-Fix Environmental Services, Inc. (the "Company") Form 10-K for the year ended December 31, 2004, File No. 1-11596 (the "Form 10-K"), and Form 10-Q for the quarter ended March 31, 2005 (the "Form 10-Q"), File No. 1-11596, that we received by letter dated June 10, 2005 (the "Comment Letter"). The SEC's comments and the Company's responses thereto are set forth below; numbered as such comments were numbered in the Comment Letter. Page numbers referenced in responses indicate the pages of each respective document. As denoted by the comment letter, revisions requested in the comment letter will be included in our future filings beginning with, to the extent practical, our Form 10-Q for the quarter ended June 30, 2005.
The Company acknowledges that:
o The Company is responsible for the adequacy and accuracy of the disclosure in the filing;
o Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
o The Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Form 10-K for Fiscal Year Ended December 31, 2004
Contractual Obligations, page 32
1. Please revise your table of contractual cash obligations to also include the following: (a) Estimated interest payments on your variable rate debt;
<PAGE>
Securities and Exchange Commission June 24, 2005 Page 2
(b) Estimated payments under interest rate swap agreements; and (c) Required ongoing environmental remediation efforts.
Because the table is aimed at increasing transparency of cash flow, we believe these payments should be included in the table. Please also disclose any assumptions you made to derive these amounts.
Response: (a) We will begin to include the estimated interest payments of our variable rate debt in our next quarterly report on Form 10-Q for the period ended June 30, 2005. We will disclose the assumptions utilized to develop such estimates, including interest rates and revolving loan balances.
(b) Our interest rate swap payments for the quarter ended March 31, 2005, was approximately $14,000 and we estimate the payment for the quarter ended June 30, 2005 to be approximately $12,000. In addition the interest rate swap agreement terminates in December 2005. As such we feel the amounts remaining are insignificant to the table and do not see the benefit to including this amount.
(c) In an attempt to reduce redundancy in our filing, we had not included the estimated spending on the current environmental remediation, in this section, Contractual Obligations, as it is also on pages 36 and 37 under the heading Environmental Contingencies. We will include the environmental contingency totals in the contractual obligations table, but we propose to continue our presentation and assumptions of environmental remediation issues as a separate disclosure.
The contractual obligation table is presented below for the fiscal year ended December 31, 2004, as if the changes were made at that time. The footnotes to the table are omitted except where new footnotes are added. All changes to the disclosure are highlighted in bold letters.
<TABLE> <CAPTION> Payments due by period ----------------------------------------------- Less than 1-3 4-5 After Contractual Obligations Total 1 year years years 5 years ---------------------------------- ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> Long-term debt $ 18,956 $ 6,376 $ 12,556 $ 24 $ -- Interest on long-term debt (1) 1,322 -- -- 1,322 -- Interest on variable rate debt (5) 1,919 634 1,285 -- -- Operating leases 3,506 1,433 2,042 31 -- Finite risk policy (2) 8,030 1,004 3,011 2,008 2,007 Pension withdrawal liability (3) 1,680 1,680 -- -- -- Environmental Contingencies (6) 5,210 1,265 3,092 312 541 Purchase obligations (4) -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total contractual obligations $ 40,623 $ 12,392 $ 21,986 $ 3,697 $ 2,548 ========== ========== ========== ========== ========== </TABLE>
<PAGE>
Securities and Exchange Commission June 24, 2005 Page 3
(5) We have variable interest rates on our Term Loan and Revolving Credit of 1 1/2% and 1% over the prime rate of interest, respectively, and as such we have made certain assumptions in estimating future interest payments on this variable interest rate debt. We assume a renewal of the debt at March 31, 2005 at a .5% reduction in the interest rate, a 1.25% increase in prime rate during 2005, and prime rate increases of .5% annually. We also anticipate increasing our Term Loan balance at June 30, 2005, to the original loan balance of $7,000,000. Additionally, we assume a full repayment of our Revolving Credit by December 2006, and full repayment of our Term Loan by May of 2008.
(6) The environmental contingencies and related assumptions are discussed further in the Environmental Contingencies section of this Management's Discussion and Analysis, and are based on estimated cash flow spending for these liabilities.
Consolidated Statement of Cash Flows, page 51
2. We note your classification of $192,000 related to the issuance of common stock for services in non-cash investing and financing activities. Tell us the nature of the services provided and why this amount is not more appropriately reflected as an adjustment to reconcile net loss to net cash flows provided by operating activities within your consolidated statement of cash flows.
Response: The $192,000 of common stock issued for services, is related to issuance of common stock for payment of fees to our board of directors. We separated that amount out in the supplemental information as it was a non-cash issuance. In addition the amount is included as an adjustment of accrued expenses to arrive at net cash provided by operations. In future filings we will eliminate the supplemental disclosure and separate the amount from the accrued expense adjustment in the cash flow statement under operating cash flow.
The Consolidated Statements of Cash Flows is presented below for the fiscal years ended December 31, 2004, 2003, and 2002, as if the changes were made at that time. All changes to the disclosure are highlighted in bold.
<PAGE>
Securities and Exchange Commission June 24, 2005 Page 4
PERMA-FIX ENVIRONMENTAL SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31
<TABLE> <CAPTION> (Amounts in Thousands) 2004 2003 2002 ---------------------------------------------------------------------- ---------- ---------- ---------- <S> <C> <C> <C> Cash flows from operating activities: Net income (loss) $ (19,361) $ 3,118 $ 2,202 Adjustments to reconcile net income (loss) to cash provided by (used in) operations: Depreciation and amortization 4,631 4,237 3,738 Debt discount amortization 838 324 -- Provision for bad debt and other reserves 224 271 697 (Gain)loss on disposal/impairment of plant, property and equipment 994 (4) 19 Intangible asset impairment 9,002 -- -- Issuance of Common Stock for services 192 34 120 Discontinued operation 9,162 (292) 772 Changes in assets and liabilities, of continuing operations net of effects from business acquisitions: Accounts receivable (1,636) (2,382) (5,379) Prepaid expenses, inventories and other assets 827 (741) (267) Accounts payable, accrued expenses and unearned revenue 2,024 (606) 3,711 ---------- ---------- ---------- Net cash provided by operations 6,897 3,959 5,613
Cash flows from investing activities: Purchases of property and equipment, net (2,733) (2,126) (4,548) Proceeds from sale of plant, property and equipment (3) 17 10 Change in restricted cash, net (2) (13) (6) Change in finite risk sinking fund (991) (1,234) -- Cash used for acquisition consideration, net of cash acquired (2,903) -- -- Cash used in discontinued operations (122) (52) (213) ---------- ---------- ---------- Net cash used in investing activities (6,754) (3,408) (4,757)
Cash flows from financing activities: Net borrowings (repayments) of revolving credit (2,755) 494 78 Principal repayments of long term debt (8,535) (3,530) (2,094) Proceeds from issuance of stock 10,951 2,684 512 ---------- ---------- ---------- Net cash used in financing activities (339) (352) (1,504) ---------- ---------- ---------- Increase (decrease) in cash (196) 199 (648) Cash at beginning of period 411 212 860 ---------- ---------- ---------- Cash at end of period $ 215 $ 411 $ 212 ========== ========== ==========
---------------------------------------------------------------------------------------------------------
Supplemental disclosure: Interest paid $ 1,920 $ 2,381 $ 2,569 Non-cash investing and financing activities: Issuance of Common Stock for payment of dividends 125 125 125 Interest rate swap valuation 89 85 57 Long-term debt incurred for purchase of property and equipment 320 1,284 1,061 </TABLE>
Operating Segments, page 81
3. Please reconcile for each period presented your segment profit or loss to your consolidated income before income taxes, discontinued operations, and the cumulative effect of changes in accounting principles. See paragraph 32.b. of SFAS 131.
Response: In our annual financial statement footnotes we have historically reported our "segment profit (loss)" as consolidated income before income taxes, discontinued operations and cumulative effect of changes in accounting principles, but have included preferred dividends as it is an allocated amount. In future filings we will eliminate preferred dividends from our segment profit amount, and thus the segment profit or loss will tie directly to the consolidated income before income taxes, disco
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<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
[LOGO OF PERMAFIX(R) ENVIRONMENTAL SERVICES]
June 24, 2005
VIA EDGAR
Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street, N.W.
Washington D.C. 20549
Attn: John Cash
Re: Perma-Fix Environmental Services, Inc.; Form 10-K for fiscal year ended
December 31, 2004 and Form 10-Q for fiscal quarter ended March 31, 2005;
file No. 1-11596
Dear Ladies and Gentlemen:
The following are responses to the comments of the Securities and Exchange
Commission (the "SEC") with respect to Perma-Fix Environmental Services, Inc.
(the "Company") Form 10-K for the year ended December 31, 2004, File No. 1-11596
(the "Form 10-K"), and Form 10-Q for the quarter ended March 31, 2005 (the "Form
10-Q"), File No. 1-11596, that we received by letter dated June 10, 2005 (the
"Comment Letter"). The SEC's comments and the Company's responses thereto are
set forth below; numbered as such comments were numbered in the Comment Letter.
Page numbers referenced in responses indicate the pages of each respective
document. As denoted by the comment letter, revisions requested in the comment
letter will be included in our future filings beginning with, to the extent
practical, our Form 10-Q for the quarter ended June 30, 2005.
The Company acknowledges that:
o The Company is responsible for the adequacy and accuracy of the
disclosure in the filing;
o Staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filing; and
o The Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
Form 10-K for Fiscal Year Ended December 31, 2004
Contractual Obligations, page 32
1. Please revise your table of contractual cash obligations to also include
the following:
(a) Estimated interest payments on your variable rate debt;
<PAGE>
Securities and Exchange Commission
June 24, 2005
Page 2
(b) Estimated payments under interest rate swap agreements; and
(c) Required ongoing environmental remediation efforts.
Because the table is aimed at increasing transparency of cash flow, we
believe these payments should be included in the table. Please also
disclose any assumptions you made to derive these amounts.
Response: (a) We will begin to include the estimated interest payments
of our variable rate debt in our next quarterly report on
Form 10-Q for the period ended June 30, 2005. We will
disclose the assumptions utilized to develop such
estimates, including interest rates and revolving loan
balances.
(b) Our interest rate swap payments for the quarter ended
March 31, 2005, was approximately $14,000 and we estimate
the payment for the quarter ended June 30, 2005 to be
approximately $12,000. In addition the interest rate swap
agreement terminates in December 2005. As such we feel the
amounts remaining are insignificant to the table and do
not see the benefit to including this amount.
(c) In an attempt to reduce redundancy in our filing, we had
not included the estimated spending on the current
environmental remediation, in this section, Contractual
Obligations, as it is also on pages 36 and 37 under the
heading Environmental Contingencies. We will include the
environmental contingency totals in the contractual
obligations table, but we propose to continue our
presentation and assumptions of environmental remediation
issues as a separate disclosure.
The contractual obligation table is presented below for
the fiscal year ended December 31, 2004, as if the changes
were made at that time. The footnotes to the table are
omitted except where new footnotes are added. All changes
to the disclosure are highlighted in bold letters.
<TABLE>
<CAPTION>
Payments due by period
-----------------------------------------------
Less
than 1-3 4-5 After
Contractual Obligations Total 1 year years years 5 years
---------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Long-term debt $ 18,956 $ 6,376 $ 12,556 $ 24 $ --
Interest on long-term debt (1) 1,322 -- -- 1,322 --
Interest on variable rate debt (5) 1,919 634 1,285 -- --
Operating leases 3,506 1,433 2,042 31 --
Finite risk policy (2) 8,030 1,004 3,011 2,008 2,007
Pension withdrawal liability (3) 1,680 1,680 -- -- --
Environmental Contingencies (6) 5,210 1,265 3,092 312 541
Purchase obligations (4) -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total contractual obligations $ 40,623 $ 12,392 $ 21,986 $ 3,697 $ 2,548
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
Securities and Exchange Commission
June 24, 2005
Page 3
(5) We have variable interest rates on our Term Loan and
Revolving Credit of 1 1/2% and 1% over the prime rate of
interest, respectively, and as such we have made certain
assumptions in estimating future interest payments on this
variable interest rate debt. We assume a renewal of the
debt at March 31, 2005 at a .5% reduction in the interest
rate, a 1.25% increase in prime rate during 2005, and
prime rate increases of .5% annually. We also anticipate
increasing our Term Loan balance at June 30, 2005, to the
original loan balance of $7,000,000. Additionally, we
assume a full repayment of our Revolving Credit by
December 2006, and full repayment of our Term Loan by May
of 2008.
(6) The environmental contingencies and related assumptions
are discussed further in the Environmental Contingencies
section of this Management's Discussion and Analysis, and
are based on estimated cash flow spending for these
liabilities.
Consolidated Statement of Cash Flows, page 51
2. We note your classification of $192,000 related to the issuance of common
stock for services in non-cash investing and financing activities. Tell us
the nature of the services provided and why this amount is not more
appropriately reflected as an adjustment to reconcile net loss to net cash
flows provided by operating activities within your consolidated statement
of cash flows.
Response: The $192,000 of common stock issued for services, is
related to issuance of common stock for payment of fees to
our board of directors. We separated that amount out in
the supplemental information as it was a non-cash
issuance. In addition the amount is included as an
adjustment of accrued expenses to arrive at net cash
provided by operations. In future filings we will
eliminate the supplemental disclosure and separate the
amount from the accrued expense adjustment in the cash
flow statement under operating cash flow.
The Consolidated Statements of Cash Flows is presented below
for the fiscal years ended December 31, 2004, 2003, and 2002,
as if the changes were made at that time. All changes to the
disclosure are highlighted in bold.
<PAGE>
Securities and Exchange Commission
June 24, 2005
Page 4
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
<TABLE>
<CAPTION>
(Amounts in Thousands) 2004 2003 2002
---------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (19,361) $ 3,118 $ 2,202
Adjustments to reconcile net income (loss) to cash provided by
(used in) operations:
Depreciation and amortization 4,631 4,237 3,738
Debt discount amortization 838 324 --
Provision for bad debt and other reserves 224 271 697
(Gain)loss on disposal/impairment of plant, property and equipment 994 (4) 19
Intangible asset impairment 9,002 -- --
Issuance of Common Stock for services 192 34 120
Discontinued operation 9,162 (292) 772
Changes in assets and liabilities, of continuing operations net of
effects from business acquisitions:
Accounts receivable (1,636) (2,382) (5,379)
Prepaid expenses, inventories and other assets 827 (741) (267)
Accounts payable, accrued expenses and unearned revenue 2,024 (606) 3,711
---------- ---------- ----------
Net cash provided by operations 6,897 3,959 5,613
Cash flows from investing activities:
Purchases of property and equipment, net (2,733) (2,126) (4,548)
Proceeds from sale of plant, property and equipment (3) 17 10
Change in restricted cash, net (2) (13) (6)
Change in finite risk sinking fund (991) (1,234) --
Cash used for acquisition consideration, net of cash acquired (2,903) -- --
Cash used in discontinued operations (122) (52) (213)
---------- ---------- ----------
Net cash used in investing activities (6,754) (3,408) (4,757)
Cash flows from financing activities:
Net borrowings (repayments) of revolving credit (2,755) 494 78
Principal repayments of long term debt (8,535) (3,530) (2,094)
Proceeds from issuance of stock 10,951 2,684 512
---------- ---------- ----------
Net cash used in financing activities (339) (352) (1,504)
---------- ---------- ----------
Increase (decrease) in cash (196) 199 (648)
Cash at beginning of period 411 212 860
---------- ---------- ----------
Cash at end of period $ 215 $ 411 $ 212
========== ========== ==========
---------------------------------------------------------------------------------------------------------
Supplemental disclosure:
Interest paid $ 1,920 $ 2,381 $ 2,569
Non-cash investing and financing activities:
Issuance of Common Stock for payment of dividends 125 125 125
Interest rate swap valuation 89 85 57
Long-term debt incurred for purchase of property and equipment 320 1,284 1,061
</TABLE>
Operating Segments, page 81
3. Please reconcile for each period presented your segment profit or loss to
your consolidated income before income taxes, discontinued operations, and
the cumulative effect of changes in accounting principles. See paragraph
32.b. of SFAS 131.
Response: In our annual financial statement footnotes we have
historically reported our "segment profit (loss)" as
consolidated income before income taxes, discontinued
operations and cumulative effect of changes in accounting
principles, but have included preferred dividends as it is
an allocated amount. In future filings we will eliminate
preferred dividends from our segment profit amount, and
thus the segment profit or loss will tie directly to the
consolidated income before income taxes, disco