PESI

Analyst: Victor Sula, Ph.D. Initial Report May 18th, 2009

PESI daily

5/18/09

2.50 2.25 2.00 1.75 1.50 1.25 volume

800 600 400 200

Thousand

© BigCharts.com

0

Mar

Apr

May

MARKET DATA

Share Statistics (04/29/09) Symbol Current price Low/ High 52 weeks Average Volume Market Cap Dil. Shares Outstanding

FY 2006

FY 2007

FY 2008

‘08 vs.’07

PESI

Revenue $Mn.

68.2

64.5

75.5

17.0%

$2.16

Gross margin

36.7%

29.4%

26.7%

-2.69%

$0.63 - 3.18

Operating margin

10.6%

-1.7%

2.9%

4.55%

127,497

Net margin

6.9%

-14.3%

2.5%

16.80%

0.10

(0.18)

0.04

n/m

$116.61 Mn 53.99 Mn

EPS, $

Recommendation Perma-Fix Environmental Services (PESI) is one of the top nuclear waste management services providers in the U.S., with annual revenue poised to exceed $100 million in 2009. PESI is well positioned for future growth based on the recently signed subcontracts with the United States Department of Energy (DOE), and President Obama’s $6 billion stimulus to clean up nuclear weapons sites at Cold War-era facilities. With expanded capabilities to clean nuclear waste, we expect PESI to be an important beneficiary of this plan.

Accordingly we rate PESI as a Buy.

Highlights PESI reported a 17% growth in revenue in 2008 mainly due to new contract wins, building alliances, expanding operating capabilities, obtaining coveted permits and refocusing the Company on nuclear services. The full impact of 2008 achievements will likely be seen in 2009, as the Company is forecast to report revenue that will exceed $100 million.

Perma-Fix Environmental Services Inc. (Nasdaq: PESI)

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Analyst: Victor Sula, Ph.D. Initial Report May 18th, 2009

Perma-Fix Environmental Services Inc., through its subsidiaries, operates as an environmental and technology know-how company in the U.S. It operates through three segments: Nuclear Waste Management Services (Nuclear Segment), Consulting Engineering Services (Engineering Segment), and Industrial Waste Management Services (Industrial Segment).

The Nuclear Segment provides nuclear waste management services, such as treatment, storage, processing and disposal of low-level radioactive and hazardous waste; on and off-site waste remediation and processing; nuclear, low-level radioactive, and mixed waste treatment, as well as processing and disposal; and research and development of ways to process low-level radioactive and mixed waste.

The Engineering Segment offers consulting engineering services, which includes consulting services regarding air, water and hazardous waste permitting; air, soil and water sampling; compliance reporting, emission reduction strategies, compliance auditing; and various compliance and training activities.

The Industrial Segment provides industrial waste management services, including treatment, storage, processing, and disposal of hazardous and non-hazardous waste; and wastewater management services, including the collection, treatment, processing and disposal of hazardous and non-hazardous wastewater. It services research institutions, commercial companies, public utilities, and governmental agencies, including the DOE and Department of Defense.

During 2008 PESI take actions to focus on growing nuclear services. In line with this strategic initiative, during the first half of 2008, the Company has sold three of its Industrial Segment operations. The remaining operating facilities of Industrial Segment operations will be restructured and retained to allow the Company to benefit from their cash flow and growth prospects.

The Company was awarded a subcontract in Q2 2008 by CH Plateau Remediation Company (CHPRC) to clean up the DOE’s Hanford nuclear waste site in Washington State. The work on the project officially started on October 1, 2008. As a result, PESI generated approximately $7 million of revenue from the contract during the Q4 2008. Going forward, we expect this contract to add solid revenue streams and expand the Company’s core competencies.

In November of 2008 PESI a permit from the U.S. Environmental Protection Agency to commercially store and dispose of radioactive Polychlorinated Biphenyls at the Company’s Diversified Scientific Services Inc. facility. The Company had been pursuing this permit over the last four years and now its DSSI facility is able to accept a wider range of Toxic Substances Control Act (TSCA) regulated wastes, allowing the U.S.DOE to adhere to its current closure plan for the TSCA incinerator in fiscal 2009 in favor of PESI’s newly permitted alternative.

In April 2009, PESI announced that it has filed a shelf registration statement that would give the Company ability to sell up to 5 million shares of its common stock. After the shelf registration becomes effective, the common stock may be sold from time to time and we expect the Company to use the proceeds to expand its expertise and capabilities in the nuclear waste management services.

Perma-Fix Environmental Services Inc. (Nasdaq: PESI)

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Analyst: Victor Sula, Ph.D. Initial Report May 18th, 2009

Financial Analysis STOCK PERFORMANCE (%)

3 Mo. 68.80

Price Change

GROWTH (%)

1 Yr.

3 Yr. (Ann)

-15.60%

-7.20

Last Qtr.

12 Mo.

3 Yr CAGR

Revenues EPS

46.3 129.8

17.0 137.8

14.7 -25.6

RETURN ON EQUITY (%)

PESI

Ind Avg

S&P 500

TTM 5 Yr. Avg.

1.53 -0.54

0.77 7.75

20.74 20.4

P/E comparison, ttm

Revenue for 2008 increased 17% from $64.5 million in 2007 to $75.5 million. The increase in revenue was due primarily to work that commenced October 1 in relation to the CH Plateau Remediation Contract to clean up the DOE’s Hanford nuclear waste site. Going forward, the Company expects the revenue to exceed $100 million in 2009 and continue growing at double digits rates due to greater capabilities to perform a wider range of services at its facilities.

Net income increased from a loss of $9.2 million in 2007 to $1.9 million in 2008 mainly due to $6.8 million loss from the sale of discontinued Industrial segment facilities and $1.8 million expenditures related with impairment of intangible assets.

During 2008, PESI has taken steps to improve its working capital. The working capital position at December 31, 2008, is a negative $3,886,000, as compared to a negative working capital of $17,154,000 as of December 31, 2007. The improvement in the Company’s working capital is the result of the reclassification of indebtedness to certain of its lenders from current (less current maturities) to long term in the first quarter of 2008. In 2007, the Company failed to meet its fixed charge coverage ratio as of December 31, 2007, and as a result was required under generally accepted accounting principles to reclassify approximately $11,403,000 in debt under the existing credit facilities from long term to current as of December 31, 2007. The Company met the fixed charge coverage ratio in each quarter in 2008 and it anticipates meeting this ratio in 2009.

Industry analysis

Source:Reuters.com

According to America’s Nuclear Wastelands: Politics, Accountability, and Cleanup, the last 45 years of nuclear industry development left behind an impressive U.S.-wide toxic waste legacy: 1.7 trillion gallons of contaminated groundwater, 40 million cubic meters of tainted soil and debris, more than 2,000 tons of radioactive spent nuclear fuel, more than 160,000 cubic meters of radioactive and hazardous waste, and more than 100 million gallons of liquid, high-level radioactive waste.

Despite copious quantities of waste, the DOE has stated a goal of cleaning all presently contaminated sites successfully by 2025.

The United States has at least 108 sites designated as areas that are contaminated and unusable, sometimes many thousands of acres.

DOE wishes to clean or mitigate many or all by 2025, however the task can be difficult and it acknowledges that some will never be completely remediated.

Perma-Fix Environmental Services Inc. (Nasdaq: PESI)

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Analyst: Victor Sula, Ph.D. Initial Report May 18th, 2009

FY 2007 31-Dec-07

FY 2008 31-Dec-08

64.5 19.0 -1.1 -9.2

75.5 20.2 2.2 1.9

0.2 32.6 126.0 49.8 18.2 58.7

0.2 29.7 123.7 33.6 16.2 61.6

29.4% -1.7% -14.3% 51.2% -7.3% -15.7%

26.7% 2.9% 2.5% 61.0% 1.5% 3.1%

DEBT Current Ratio Debt/Capital Interest Exp. ($mil) Interest Coverage

0.66 0.24 1.4 -0.75

0.88 0.21 1.5 1.43

SHARE DATA Dil. Shar. Outst.(mil) EPS Book value / share Institutional Own % Avg Daily Volume

53.70 -0.18 1.61 n/a 150,733

53.93 0.04 1.44 46 120,600

Net Sales ($mil) Gross profit ($mil) EBIT ($mil) Net Income ($mil) BALANCE SHEET Cash & Equiv. ($mil) Current Assets ($mil) Total Assets ($mil) Current liabil.($mil) Total Debt ($mil) Equity ($mil) PROFITABILITY Gross Margin Operating Margin Net margin Assets Turnover Return on Assets Return on Equity

Source: SEC filings; analyst estimates.

The DOE will spend $6 billion as part of President Obama’s stimulus package to clean up nuclear weapons sites at Cold War-era facilities, with more than half the money going to sites in Washington and South Carolina. The DOE has until 2011 -- or about two and a half years -- to spend the money.

We are optimistic that PESI could be a beneficiary of the stimulus plan that was approved in February 2009. In addition, the DOE fiscal 2009 annual budget has been increased to $6.4 billion, from $5.2 billion in fiscal 2008. Time will tell what the full impact might be for PESI, but one thing is certain—the new administration’s commitment to cleaning up the nation’s legacy nuclear waste will benefit the Company in the coming years.

Analyst opinion The Company has undertaken actions to reorganize its assets and focus on growing nuclear waste management services segment. The new contract wins with DOE, expanding treatment capabilities, new permits to perform nuclear waste cleaning positions the Company to outperform the industry in 2009 and 2010. Besides, the restructuring program undertaken in 2008 should allow the company to report better margins and EPS. In addition, the government funding that will be available for DOE projects under the recently enacted government stimulus plan should positively impact PESI’s Nuclear Segment and stimulate the double digit growth in revenues.

PESI announced that for fiscal 2009, it expects to generate revenue of more than $100 million. The Company announced that, historically, its EBITDA has ranged in the range of 10% to 15%, assuming current trends continue. According to Reuters Estimates, analysts on an average were expecting the Company to report revenue of $104 million for fiscal 2009 and $115 million for 2010.

Priced at 14.4 times 2010 earnings, the Company seems expensive to the rest of the waste treatment industry, but PESI’s outstanding growth and strengths give good reason for the higher price levels.

Perma-Fix Environmental Services Inc. (Nasdaq: PESI)

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Analyst: Victor Sula, Ph.D. Initial Report May 18th, 2009

Consensus Estimates PESI

FY 2009 31-Mar-09

FY 2010 31-Mar-10

EPS, $ Revenue, $Mil

0.05 103.7

0.15 115.4

consensus estimates are provided by Thomson Financial

Rev. consensus estimates, $Mil. Ticker Symbol ECOLmpany CLH ES WMII RSG URS

Company Name 04.24.2009

2009 154.9 1,050 1,690 12,380 8,500 9,870

Ticker Symbol

Price per Share, $

P/E Mrkt. Cap. $ Mn 2008 2009

American Ecology Corp.

Clean Harbors Inc. EnergySolutions Inc. Waste Management Inc. Republic Services Inc. URS Corp.

Median

ECOL CLH ES WMII RSG URS

16.00 46.24 9.49 26.98 19.63 42.86

290 1,100 838 13260 7,400 3640

14.68 16.63 16.65 13.29 14.76 14.63 14.72

13.01 15.26 13.18 12.32 12.42 13.23 13.09

Perma-Fix Environ.

PESI

2.16

117

43.20

14.40

Revenue, $ Mn

Source: Thomson Reuters.

2010

%Chg

150.0 1,100 1,760 12,560 8,590 10,540

-3.2% 4.8% 4.1% 1.5% 1.1% 6.8% 2.8%

Median 103.7

PESI

Comparative analyses

115.4

11.3%

Source: Thomson Reuters.

EPS. consensus estimates, $ Ticker Symbol ECOL CLH ES WMII RSG URS

EPS, $

2009 1.09 2.78 0.57 2.03 1.33 2.93

2010

%Chg

1.23 3.03 0.72 2.19 1.58 3.24

12.8% 9.0% 26.3% 7.9% 18.8% 10.6% 11.7%

Median PESI

0.05

0.15

200%

Source: Thomson Reuters.

Perma-Fix Environmental Services Inc. (Nasdaq: PESI)

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Analyst: Victor Sula, Ph.D. Initial Report May 18th, 2009

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We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www. finra.org.

All decisions are made solely by the analyst and independent of outside parties or influence.

I, Victor Sula, Ph.D, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report.

Victor Sula, Ph.D. - Senior Analyst Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Productivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.

Perma-Fix Environmental Services Inc. (Nasdaq: PESI)

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