May 10, 2013
Executives
David Waldman Louis F. Centofanti - Chairman, Chief Executive Officer and President Ben Naccarato - Chief Financial Officer, Chief Accounting Officer, Vice President and Secretary James A.
Blankenhorn - Chief Operating officer and Vice President
Analysts
Albert Leo Kaschalk - Wedbush Securities Inc., Research Division Jason Schacht - Heartland Advisors, Inc.
Operator
Greetings, and welcome to the Perma-Fix Environmental Services, Inc. First 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 from Crescendo Communications.
Thank you, Mr. Waldman.
You may now begin.
David Waldman
Thank you. Good morning, everyone, and welcome to Perma-Fix Environmental Services First Quarter Conference Call.
On the call with us this afternoon is Dr. Lou Centofanti, Chairman and CEO; and Ben Naccarato, Chief Financial Officer.
The company issued a press release this morning containing first 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 within 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 statements of historical fact, are forward-looking statements that are subject to known and unknown risks and 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.
Louis F. Centofanti
Thank you, David, and welcome, everyone. As anticipated, we've continued to see experienced weakness in business and had a very weak first quarter.
In fact, on the waste treatment side, it was probably the weakest we've ever had. This continues to be due to delayed projects and redirected government spending of DOE.
However, heading into the second quarter, we are beginning to see the signs of improvement and the usual seasonal increase in the waste shipments. Also, we've been awarded some initial small contracts.
So we expect the market will further improve heading into the second half of the year. Because of all these challenges we've been facing and as we discussed on last call in March, we have continued to reduce overhead and SG&A and attempt to rightsize the organization to the present market.
SG&A in March was reduced another $4.3 million on an annualized basis. And since last June, we've reduced costs by approximately $10 million.
Therefore, we believe our reduced overhead and improved cost structure will translate into improved profitability. Of course, we are not alone in these challenges.
It's been a very difficult environment for the whole industry. However, from a competitive perspective, we believe we've weathered the market and we feel we'll emerge a much stronger company.
Our reputation in the industry continued to be stellar, and we have strengthened our relationships both with government and commercial customers. As I've stated in the past, we do continue to see a rather solid pipeline, although we also continue to see indecision, and we continue to aggressively pursue some very significant opportunities, treat more complex and higher activity waste streams.
In particular, one that we've been focusing on, which you probably read in the papers about, is the -- our efforts to potentially treat some of the tank waste at Hanford. The recent announcement for the leaks coming from tank waste at Hanford has focused a lot of attention on the tank waste cleanup.
Our permits and licenses at the Perma-Fix facilities would allow us to accept this waste for treatment today. We already handle transuranic waste, and we are the only commercial treatment facility that can handle these high-priority waste streams.
Through these dark days of the first quarter, we looked hard for a silver lining in the -- on what's going on in the cost cutting. And probably the one that I see is this tank project demonstrates an effort there.
As I've discussed in the past, one of our main competitors for large projects, like the tank waste at Hanford, is for DOE to build a Perma-Fix like facility on the site to treat the waste. As you can imagine, building a Perma-Fix facility on a DOE facility, would -- when we analyzed that, it's prohibitive with tremendous cost and schedule impact.
In a tight fiscal environment, Perma-Fix provides a significant cost to opportunity for the DOE to outsource mission and support waste managed on operations. DOE has recognized this and is moving in this direction.
The tank waste is a perfect example, where on a cost basis, we'll always be cheaper. When we look around the DOE complexes, there are many of these type of opportunities and existing on-site operations.
And if we compare it to what Perma-Fix could accomplish, those operations are more costly and could represent substantial cost savings. As for the present status of the Hanford tank waste, we are, as it sits today, we are one of the leading options.
And every time we look at it, we see we are the least expensive. But exactly how and when DOE will move forward on this project is still uncertain, at least -- especially until the new Secretary of Energy is put in place.
That said, we can expect to get much greater clarity in terms of priorities in the coming months. On the service side, we have won several smaller contracts and we are also seeing the issuance of smaller task orders and are hopeful that this will continue in the coming months.
As I've discussed in the past, having seen -- anticipated some of these issues, we have increased our sales and marketing focus on other non-DOE clients, in particular on the international front and on the commercial front. We are working aggressively behind the scenes on a number of opportunities in North America, Europe and Asia.
Although we are still facing many of the same headwinds we experienced in '12 and in the first quarter, I remain confident we can achieve an improved operating results and be cash flow positive this year. The upcoming appointment of new Energy secretary, new leadership within DOE's Office of Environmental Management should help alleviate some of the slowdown.
And as you probably know, if you follow the issue there, key topic -- one of the key topics of the confirmation hearings of the new secretary was the cleanup activity at Hanford, and we believe this should -- focus should directly benefit Perma-Fix in the coming years. In closing, we believe the upside opportunities on the service side of the business and the rebound in our waste treatment business, coupled with our recent fairly dramatic expense reductions, position us well from a competitive standpoint.
I remain confident in our ability to generate positive cash flow, improved profitability in the remainder of 2013 and beyond. Finally, our lender continues to support us from a compliance standpoint, and Ben will discuss that further in his discussion.
At this point I'd like to turn the call over to Ben, who'll go into a -- more details on the numbers, and we'll be back to answer questions at the conclusion of our formal remarks. Ben?
Ben Naccarato
Thank you, Lou. I'll begin with revenue.
Our total revenue from continuing operations in the first quarter was $19.8 million compared to last year's first quarter of $37.9 million, a decrease of $18.1 million. Revenue from our treatment segment decreased $5.5 million.
The waste from our government customer, DOE, continues to be low and down and this, combined with a much lower backlog entering the year, is really the main reason for this drop in revenue. On our services side, our revenue decreased by $12.6 million.
The revenue drop was primarily due to the lack of incoming new projects to replace projects completed, representing approximately 12.3% of this variance [ph]. We also saw a slight decrease in our revenue from our Hanford group contract and our engineering group.
On the cost of sales. Our cost of sales were $19.3 million in the first quarter compared to $33.6 million in the prior year.
In our treatment segment, cost of sales were down $2.6 million compared to prior year. Variable costs, such as materials, transportation and disposal, were all down, approximately about -- in total of about $2 million, and they relate to the reduced revenue, while we also saw fixed expenses, such as payroll and other type expenses, down approximately $1 million, as a result of the reductions in workforce we implemented both in June of 2012 and in February of '13.
Our fixed cost reductions were offset in the quarter by approximately $400,000 of onetime expenses related to severance and other costs. Our cost of sales on -- in the Service segment were down 11.6% from the prior year.
Costs relating to the Hanford contract were down slightly approximately $291,000, due to lower payroll-related cost, while the remainder of the reduction came from our project expenses, including payroll, which was down approximately $5.3 million. This reduction was due to the lower project revenue and reductions in the workforce in June and February of '12 and '13, respectively.
On the gross profit. The company's gross profit for the quarter was $537,000 compared to $4.4 million in 2012, a reduction of $3.3 million.
Gross profit in our treatment segment decreased by $2.9 million compared to prior year. Low rate volume was the main impact on the gross profit, contributing about $4 million of this drop but was offset by reduced fixed costs and lower variable expense from improved waste mix.
On the service side, our gross profit was below the prior year by $966,000. Lower project revenue and the impact of a fixed cost contract accounted for most of this variance, while gross profit from our Hanford contract and engineering group remained relatively flat.
Our G&A costs for the quarter were $4.2 million, down from $5 million in prior year. Our costs associated with outside services and payroll were down, as 2012 first quarter included many integration expenses and some redundant labor.
Our loss from continuing operations for the quarter was $2.9 million compared to a loss of $807,000 last year. Our loss applicable to common shareholders was $2.9 million compared to last year's net loss of $1 million.
Our loss per share for the quarter was $0.05 compared to a loss per share in the prior year of $0.02. And our adjusted EBITDA from continuing operations for the quarter was a loss of $2.4 million compared to income of $1.3 million last year.
I'll now take a minute to discuss our bank covenant with our lender PNC Bank. We operate under a covenant requiring a fixed charge ratio of 1.25:1 for a trailing 12-month period.
This fixed charge ratio is heavily impacted by the company's adjusted EBITDA numbers. As you know, we had low adjusted EBITDA in the past 12 months and were unable to meet this fixed charge ratio requirement.
Our lender have subsequently waived this noncompliance and has amended our requirement for the remainder of 2013 in order to help the company get through the difficult market environment we're operating in. This waiver reinforces our strong relationship with our lender, and they're confident in our business.
Turning quickly to the balance sheet. Our total cash was down $2.1 million, primarily from $2.3 million of cash used by operations.
Our unbilled receivables decreased $2.5 million, primarily as we continue to reduce our unbilled in our treatment segment. Our backlog was down $1.4 million to $7.3 million, as a result of processing more wastes in the quarter than we received.
Our total debt was up $260,000 to $14.5 million, of which $13.9 million comes from PNC. Our working capital dropped by $1.4 million ending the quarter at $2 million.
And finally, I'll summarize cash flow activity. Our cash from continuing operations was $2.1 million.
Cash used by disc ops was $139,000, cash used for capital spending was $116,000 and cash received for financing of continuing operations was $269,000. I will now turn the call over to Lou.
Louis F. Centofanti
Thank you, Ben. I appreciate it, and we'd like to now open the call to questions.
Besides Ben and myself, we also have here Jim Blankenhorn, our COO. So if you have any questions for him, he'd be also happy to respond.
So with that, let's open it to questions.
Operator
[Operator Instructions] Our first question comes from Al Kaschalk from Wedbush Securities.
Albert Leo Kaschalk - Wedbush Securities Inc., Research Division
Ben, just real quick on the bank covenant. Is it -- it's waived for the year so -- and that's -- the covenant is not there?
Or the covenant was lowered? The fixed charge ratio was lowered?
What's the exact detail on the covenant?
Ben Naccarato
Yes. We waived the first quarter noncompliance and for the next 3 quarters, it's a billback.
It's still a 1.25:1, but it's not on a trailing 12. So in June, we'll be focused on just a quarter.
In September, on 6 -- on 2 quarters; December, 3 quarters; and by March of next year, we'll be back to a 4 quarter trailing 12.
Albert Leo Kaschalk - Wedbush Securities Inc., Research Division
Okay, do you need to file anything in terms of disclosures to see...
Ben Naccarato
Yes, that will be filed in the 10-Q.
Albert Leo Kaschalk - Wedbush Securities Inc., Research Division
Okay, great. Second, I missed the backlog number.
I'm sorry. Can you repeat?
Ben Naccarato
The backlog finished at $7.3 million.
Albert Leo Kaschalk - Wedbush Securities Inc., Research Division
And that was up, down?
Ben Naccarato
It was down $1.4 million.
Albert Leo Kaschalk - Wedbush Securities Inc., Research Division
All right. In terms of business conditions, obviously, I think we're all aware that they were a struggle and challenging.
How should we think about the next 90 days, given we're deep here in the May already and the rollout to the end of the calendar year? It sounds, from what I heard, is that you're still hopeful for some awards.
What I didn't hear is the magnitude of the win in terms of either helping your current run rate of revenue or pushing that higher. So could you talk a little bit about the actual business you have in hand and maybe some incremental as opposed to that's going to be forthcoming?
Louis F. Centofanti
Well, Al, the -- first on the waste treatment side, of course, we really don't need contracts. There's still -- it's more a case of under existing contracts, a low material flow.
And we've seen a somewhat normal pickup in orders and sales. And with that, it should get us back to somewhat of a normal run rate compared to the first -- especially, compared to the first quarter, which I would say, was just a extremely bad quarter for us on the waste treatment side.
On the service side, we're -- we have some wins going on and we are anticipate wins. They're fairly -- they're not large.
But I guess, not to repeat, the service group -- I'm not sure if we put up the thing in those, but it's still about the same rate that we're presently at on the service side.
Albert Leo Kaschalk - Wedbush Securities Inc., Research Division
Okay. And for the quarter again, that revenue run rate was how much?
Louis F. Centofanti
On the service side, the run rate was running for about...
Ben Naccarato
First quarter was about $12 million...
Louis F. Centofanti
$12 million, $12.5 million. Yes, $12.5 million.
Down significantly from $12 million, as you can see, also also expected.
Albert Leo Kaschalk - Wedbush Securities Inc., Research Division
And then that should continue to eclipse the treatment side? Is that what you're suggesting for us in terms of size of the operation?
Ben Naccarato
I think, Al, in the short term, the 90-day kind of window you're talking about, I think you want to focus more on the fact that treatment will come back to normal rates because that's really where, as you know, the margin is. We've talked about in about sort of the fixed cost burden we have in treatment.
And if you take that $5 million shortfall year-over-year and put a fairly healthy margin on that number, you would see that fall to the bottom line. So I think in the short term, it's more having seen treatment rebound, and then sort of the gradual increase in service side business to supplement that.
Albert Leo Kaschalk - Wedbush Securities Inc., Research Division
What I'm trying to get at is I don't appreciate the -- what normal levels for waste treatment is, given the environment has just been through over the last 3 quarters. And for lack of a better word, the lack of certainty and visibility on when the government will spend some money, so you can get the flow of material.
And so to me, I certainly appreciate the margins better. But are we sort of standing in place here for the next 90 days until we get to July 1 is what I'm really getting after.
Ben Naccarato
No. Again, our visibility short term is treatment volumes, and we are seeing a pickup on treatment.
Louis F. Centofanti
Closer to what is needed, all right?
Albert Leo Kaschalk - Wedbush Securities Inc., Research Division
Closer to what, I'm sorry?
Louis F. Centofanti
To what is needed, to have profitability on treatment.
Operator
[Operator Instructions] Our next question comes from Jason Schacht from Heartland Advisors.
Jason Schacht - Heartland Advisors, Inc.
So just for starters, housekeeping. What was the size of the overall debt burden at the end of the quarter?
Ben Naccarato
Say that again, Jason?
Jason Schacht - Heartland Advisors, Inc.
The amount of debt carried on the balance sheet at the end of the quarter?
Ben Naccarato
Oh, $14.5 million.
Jason Schacht - Heartland Advisors, Inc.
Okay. And then you talked a little bit about the tank waste opportunity.
What is the revenue opportunity there, on tank waste? Can you handicap what the size of that opportunity is?
Louis F. Centofanti
Again, this is going to be long term. I mean, the long-term revenue...
Jason Schacht - Heartland Advisors, Inc.
Is it the overall -- the overall size of that opportunity.
Louis F. Centofanti
In terms of TRU waste, the part where you're looking at, which is what's called the TRU tank waste is our portion for treating only. It would be about $150 million, $200 million.
Jason Schacht - Heartland Advisors, Inc.
Okay. That's significant given the overall size of this company.
Ben Naccarato
Correct.
Louis F. Centofanti
And obviously a significant event for us. We would keep our facility busy there for several years.
Jason Schacht - Heartland Advisors, Inc.
And then the other issue, maybe more importantly that I wanted to have you guys address is, is given what the balance sheet looks like and what the P&L look like today, I'm wondering what is the benefit to remaining an independent publicly traded company versus what the alternative might be? And I guess, what benefit does the company get, your shareholders get and the U.S.
management get by remaining independent and by remaining publicly traded at this point?
Louis F. Centofanti
Well, we realized there's very -- been very little benefit for the shareholders, and we've looked and worked hard at looking at options there and really haven't come up with any. I can't really say as we sit today, there's a lot about it.
I don't see the benefits, but I'm -- we are a public company at the present time. So it's -- as with the variability in the revenue and income of this company, it makes it tough to be a public company, as you've all seen.
So...
Jason Schacht - Heartland Advisors, Inc.
Great. So I mean, I see the -- we did this acquisition to -- of the services business to try to alleviate some of the variability in the top end and bottom line.
But at this point, we've had 5 consecutive quarters of net income losses. So it appears that, that strategy has failed, and there's definite volatility to the government were coming through, such that it doesn't look like we have any predictability into the revenue levels coming from government.
So I guess, what is the strategy to return this company to profitability other than hoping that the government increases their spend levels at some point in the near future? I mean, do we have a strategy to get this to profitability in the next quarter or 2?
Or is it all contingent on government spend levels at this point?
Louis F. Centofanti
Well let's allow Jim Blankenhorn to give few first words over here. I hate to throw him into the vat[ph] in the fire.
James A. Blankenhorn
Jason, so your questions are very good ones in terms of what else can we do with government's spending uncertainty. Our strategy has been to move from the government sector, not to abandon it but to expand our market share into some other areas.
And So we're looking very aggressively at some international opportunities and we've got about $25 million in opportunities that we're looking at in this fiscal year, internationally. We're looking at the commercial sector.
Basically, trying to expand the portfolio so that we're not solely dependent on Department of Energy specifically, and on the federal government, more generally, and can weather the storm when they go through their ups and downs of budget uncertainties. So the strategy, in very simple terms, is to expand the base and move into international and commercial for the markets.
Jason Schacht - Heartland Advisors, Inc.
Okay. I guess, that's encouraging to hear.
And I guess, I'll make a statement and then I'll hop off and let you guys either discuss it or move on to other questions. But the level of profitability that we've seen here over the past several quarters is unacceptable.
And while it's encouraging that you have some opportunities out there, I think the clock is definitely ticking on you as a management team and on the board and on the company here to right this ship because we are obviously unsatisfied with where the share price has gone over the last years. And I think every shareholder that's been in the same for any period of time has to be just as dissatisfied as we are.
So we definitely look to speaking with you some more in the future and see how we can turn this around.
Louis F. Centofanti
We understand and appreciate it.
Operator
Our last question comes from Sen Provotsky [ph] from SCR Asset Management [ph].
Unknown Analyst
Lou, the $4.3 million annualized savings. Have we seen anything in the current quarter from that savings?
Ben Naccarato
Yes. For the current recorded quarter, very little just because it was done in February and the severance type cost that go with it pretty much nullified it.
We -- it's labor and it was mostly non-revenue-generating labor overhead types. So absolutely, we expect to see that in the next quarter.
Unknown Analyst
It would appear, based on the $5 million in 2012 -- I don't have the total number whether it's $20 million for the year, the fact that you could reduce your revenue 50%, there has to be some other way to make these expenses more variable. Is there any way to make these expenses, the SG&A, more variable so that you could reduce more costs?
I don't understand. It drops -- revenue was down 50% but you can't -- this is only off $20 million.
Ben Naccarato
It's fair. Yes, I can answer, I think.
There's a couple of components to that. One, as our last caller mentioned being public, there are certain costs that go with being a public company and infrastructure costs that -- at a corporate level that you really can't do much with.
And then there's -- we have reduced costs more than those -- the numbers we gave you. Those are the non-revenue type.
We have a lot of project costs that the nature of the project business is when the project goes away, everything with it goes, including the people. So that number -- it's been a very dramatic revenue drop.
And so the numbers, what we focus on is what are the fixed-type expenses that shouldn't go up when revenue goes up. And that's what this approximately $10 million over the past 12 months represent.
Unknown Analyst
I'm going to give a little suggestion. One of those companies I'm involved with is Friedman Industries, FRD.
They're in the steel industry and their sales for a period went down 80%. Their costs, management and various other costs were down significantly so they basically broke even.
So to the extent that you can make certain costs more variable and increase when the profitability occurs, this would be helpful.
Louis F. Centofanti
Agreed.
Unknown Analyst
Okay. Let me -- the waiver, does that cost anything?
And what does it cost going forward, if anything?
Ben Naccarato
No change to interest rates, $20,000 onetime fee.
Unknown Analyst
Okay. Is it on a quarter-to-quarter basis, if you have a problem?
Or if you don't need it the next quarter, do you need to get another waiver? Or you expect to need it?
Or...
Ben Naccarato
We hope to not need it. But it is not quarter-to-quarter.
We would have to talk to the banks again.
Unknown Analyst
Okay. Now what is your breakeven?
What amount of sales do you need to break even?
Louis F. Centofanti
On the treatment side...
Ben Naccarato
On the treatment side, it's about $30-plus million.
Louis F. Centofanti
A year.
Unknown Analyst
$30 plus million per year.
Louis F. Centofanti
That is $8 million a quarter.
Unknown Analyst
That's the treatment. But for example, the -- I guess, last year, with the $38 million, you didn't breakeven.
What I'm trying to understand, on a total basis, what is it that you need, more than $38 million to breakeven? Or what do you need to do?
Ben Naccarato
Well, we did great. We were positive in the treatment side last year.
The cost last year -- a lot of the cost last year were related to legacy contracts that came with our acquisitions. And so when we get past that, I think $38 million of treatment certainly would be profitable on the treatment side.
And again, treatment is very unique in that it has a very steep incremental curve when the revenue goes above that breakeven line. And so when we -- $7.5 million, as we did in the first quarter, annualized is $30 million, that's the trick here, and that's why our total income was down so much.
But as you add to that, you can add at a 60% to 70% clip to the bottom line as it goes up over that $30 million or so.
Unknown Analyst
Okay. Now what is the -- I think you said your backlog was $7.3 million.
But what is the amount of bids you have out there? And what is -- and is it basically, is the government that has to let contracts go?
And is it the EPA, which is -- I guess, they were against the Keystone pipeline, it would assume, the EPA is for treating nuclear waste. Hence, is there a disconnect there?
Ben Naccarato
Yes, a little bit. Let me start, and then I may pass the service side over to Jim or Lou.
The $7.3 million represents our waste treatment backlog, and that's a number that we've historically given our investors on a quarterly basis. It represents waste on-site that revenue has not been treated and, therefore, recognized.
And then when we're busy, that number can be -- it's in its high, $16 million, $17 million, $20 million. And when we're down it's in the low, $7 million to $8 million, like it is today.
That represents waste that we don't need anymore. Waste coming in that we can still generate as income.
So that's the waste treatment side. Now backlog on the services side is a little different, and I'll let Jim kind of jump in on that and describe that to you.
James A. Blankenhorn
Yes. So fundamentally, there's some different definitions we use for backlog.
And you're probably familiar with at least one of them. But for everybody's benefit, on waste, when we talk about backlog, it's materials that we've received that we just haven't finished processing yet.
It's not, like in services, where you have a contract and you have a backlog of waste based on that contract that hasn't been performed. So 2 different definitions depending on what are we talking, facilities or services.
So Ben described to you what we have in terms of waste backlog at the facilities. What we have in forecast for the facilities is a another -- if we -- if the forecast and the projections maintain and the funding is available, we've got generators that have indicated about another $27 million to $30 million in waste for the remainder of the year.
In services, you've got funded contracts, which we would consider backlog. You've got unfunded contracts, and then we've got the contracts that we are bidding or that we consider in pipeline.
And I think the question was asked on the last call, what was our pipeline? And we indicated, it was several hundred million.
That is still the case in terms of contracts that we are bidding on and have a very high probability of success. In terms of ongoing backlog, yes, it's roughly, for the remainder of the year, $18 million or so in funded backlog and about the same in unfunded backlog.,
Unknown Analyst
Okay, okay. So I guess, somebody has to let loose some money for you to succeed or you have to just keep cutting expenses and -- which seems to be a problem.
Have you sought -- I presume you sought people with capital to permit you to continue like this because the way you're going, it appears you're going to continue to lose money.
Louis F. Centofanti
Well, remember, we're losing money. But other than the first quarter, we've been positive cash flow.
So even last -- we continue to generate cash overall, like I said, first quarter was not the case. We expect in the second quarter to be positive cash again, and go from there.
Unknown Analyst
So you expect to be positive cash flow, but you're not able to -- presumably to be profitable, you need a little more of revenue to flow through. And I presume, do you expect to be positive cash flow for the balance of the year?
And are you saying that you're going to be -- as you have the -- and you may not have the visibility on profitability also. Or what do you have for this?
Louis F. Centofanti
Well, the -- if you're looking at it realistically, we've dug ourselves a real deep hole in the first quarter from a profitability point of view. So we have a big hole to dig out of.
As for we expect to be positive cash flow for the year and starting in the second quarter and from a profitability point of view, it's hard to see right now. We don't have good visibility that far out.
Unknown Analyst
And are the other companies in your industry facing the same problem because of the government? Is that the basic problem?
Louis F. Centofanti
The basic problem is DOE is spending most of its money on 3 large construction projects. So in terms of the environmental cleanup, there is very little real progress going on at the moment, in terms of actual cleanup.
Most of it is going into construction projects or large construction projects.
Unknown Analyst
All right. Well, I guess we need a wing and a prayer.
Louis F. Centofanti
Number one is we think we've -- I won't tell you we haven't -- that we have properly rightsized the company, but we've made some very significant progress in downsizing. We haven't seen the effects yet in -- all the effects in the numbers, they will start showing up.
But we'll continue to do what we need to do to be positive cash.
Unknown Analyst
How about reducing salaries?
Louis F. Centofanti
We have done all of that already, and we're going to continue, we will continue to do whatever we need to do.
Operator
Thank you. I'll now turn the call back over to our speakers for closing comments.
Louis F. Centofanti
No other comments? I appreciate your patience, and we'll keep you informed of all events.
Thank you, all.
Operator
Thank you. This does conclude today's teleconference.
You may disconnect your lines at this time. Thank you for your participation.