formcorresp.htm

Perma-Fix Environmental Services, Inc. (the “Company”) hereby responds to comments of the Staff of the Securities and Exchange Commission (the “SEC”) on the Company’s Form 10-K for fiscal year ended December 31, 2009 (the “2009 Form 10-K”). The Staff comments were delivered to Ben Naccarato, the Company’s Vice President and Chief Financial Officer (“CFO”), by letter dated October 19, 2010 (the “Comment Letter”). We appreciate the Staff’s extending until November 16, 2010, the time to file this response, as agreed between our retained securities counsel and Mr. Hagen Ganem, Staff Attorney. As agreed by Mr. Ganem, the responses to comments 1, 3, and 4 are not required to be included in an amendment to the 2009 Form 10-K.

1. The summary compensation table on page 126 reflects that Mr. Schreiber earned a $69,130 bonus in 2009 yet we cannot locate any disclosure in the Compensation Discussion and Analysis relating to the award. Please provide the information required by Item 402(b) of Regulation S-K with respect to Mr. Schreiber’s bonus award, including the reasons the compensation committee chose to pay the bonus, how it fits into your overall compensation objectives, and the method the compensation committee used to determine the bonus amount.

Response: The following provides the information required by Item 402(b) of Regulation S-K with respect to Mr. Schreiber’s 2009 bonus award. Disclosure similar to the following will be included in future Compensation Discussion and Analysis disclosure, as required by applicable rules and regulations.

In 2009, Mr. Robert Schreiber, Jr., the President of our environmental engineering and regulatory compliance consulting services firm, Schreiber, Yonley & Associates (“SYA”), was awarded a bonus of $69,130 for his performance during such year. Mr. Schreiber’s bonus was based on an allocation of a portion of a bonus pool applicable only to SYA employees. The amount of the bonus pool is equal to 40% of the net income of SYA, minus 5% of SYA’s total revenues for 2009. The Compensation Committee believes that this formula ties any bonus awarded to employees of SYA directly to SYA’s performance, rewards performance, and motivates the SYA employees to achieve our operational goals (although such formula is not linked to specific targets or benchmarks). The Board delegated to our CEO the authority to determine what portion, if any, of the SYA bonus pool is allocated to Mr. Schreiber for his performance. Our CEO considered the following factors when reviewing Mr. Schreiber’s performance for the purpose of determining Mr. Schreiber’s bonus compensation as a portion of the SYA bonus pool:

The determination of Mr. Schreiber’s bonus is a subjective determination, with the maximum amount of such bonus being 100% of the SYA bonus pool. Mr. Schreiber’s 2009 bonus represented 40% of the SYA bonus pool. Accordingly, Mr. Schreiber’s compensation is not based on objective metrics, but a subjective assessment of his performance, with the maximum amount of such bonus compensation defined by the Compensation Committee’s formula.

2. We note that your compensation committee bases its executive compensation programs, in part, on each named executive officer’s contribution to company performance and other leadership achievements. In future filings, please describe in more detail the elements of individual performance that your compensation committee takes into account when designing compensation programs and determining the payouts to be made to each named executive officer. To the extent that considerations vary significantly among the named executive officers, describe the elements of individual performance separately with respect to each.

Response: In future filings, the Company will describe in more detail the elements of individual performance considered by the Company’s Compensation Committee when it designs compensation programs and determines payouts to each named executive officers.

3. We note that in making compensation decisions, your compensation committee compares compensation you pay your named executive officers against amounts paid by your peer companies to their executives. Please provide us with a detailed explanation of how your compensation committee uses comparative compensation information and how this comparison affects its compensation decisions. For example, if the committee uses specific benchmarks, please disclose them and discuss where your named executive officers’ actual compensation levels fell relative to those benchmarks. To the extent amounts fall significantly above or below those targeted amounts, please discuss the reasons for such variance. See Item 402(b)(2)(xiv) of Regulation S-K.

Response: The following explains how our Compensation Committee uses comparative compensation information and how this comparison affects its compensation decisions, which can be incorporated into future Compensation Discussion and Analysis disclosures, as required by applicable rules and regulations. As noted on page 119 of the 2009 Form 10-K, the Compensation Committee does not use specific benchmarks against the peer group. Further, as discussed below, the Compensation Committee does not target our NEOs compensation as a percentage of the compensation of the executive officers within the Peer Group. As requested, the following is based on the process utilized with respect to 2009, and would replace the “Peer Group Assessment” discussion beginning on page 119 of the 2009 Form 10-K.

Peer Group Assessment. The Compensation Committee compares our compensation program with a group of companies against which the Compensation Committee believes we compete for talented individuals (the “Peer Group”). The composition of the Peer Group is periodically reviewed and updated by the Compensation Committee. The companies currently comprising the Peer Group are Clean Harbors, Inc., American Ecology Corporation, and EnergySolutions, Inc., each of which is a waste disposal/management company. The Compensation Committee considers the Peer Group’s executive compensation programs as a whole and the compensation of individual officers in the Peer Group, if job responsibilities are meaningfully similar. When comparing the Peer Group’s executive compensation programs to our programs, the Compensation Committee considers that the companies within this Peer Group have substantially greater revenues than our Company, and subjective factors with respect to each of our NEOs. These individual subjective factors include the relative level of experience of each executive officer, the general responsibilities of each executive officer, and the relative capitalization and revenues of the Peer Group members.

The Compensation Committee believes that the Peer Group comparison assists in attempting to structure an executive compensation program that is competitive with other companies in the industry, subject to size and revenues of companies within the Peer Group. This process was undertaken in 2009 with respect to our CEO, CFO, and Chief Operating Officer (“COO”) (who resigned in September 2009) in setting the base salary for each such officer set forth in the Employment Agreements. Although our Compensation Committee makes a comparison to the Peer Group compensation, the Compensation Committee does not use the Peer Group as a benchmark for compensation of the Company’s NEOs. Instead, the Compensation Committee considers the following criteria and bases its review on the following factors when reviewing the Peer Group compensation information:

The Compensation Committee understands that our competitors generally have greater capital resources than us and are larger businesses than us; and, as a result, the Compensation Committee does not attempt to match the compensation packages offered by the Peer Group or to set our compensation packages at a certain percentage or other objective target level as compared to members of the Peer Group compensation;

As described above, the Compensation Committee (along with our CEO) reviews the publicly available compensation disclosures of the Peer Group. However, when making its own annual compensation decisions, the Compensation Committee currently has no policy for setting our compensation levels based on or as compared to the compensation practices of such Peer Group members. Accordingly, the Company does not believe that benchmarking is currently material to the Company's compensation policies and decisions.

4. We note that performance compensation for 2009 was based on pre-established company goals. Item 402(b) of Regulation S-K requires that you disclose all previously established goals and discuss how the incentive compensation actually awarded reflects those goals. If you believe that disclosure of such information would result in competitive harm such that the information could be excluded under Instruction 4 to Item 402(b) of Regulation S-K, please provide us with a detailed analysis supporting your conclusions. To the extent that it is appropriate to omit specific targets or performance objectives, you are required to provide appropriate disclosure pursuant to Instruction 4 to Item 402(b) of Regulation S-K. In discussing how difficult or likely it will be to achieve the target levels or other factors, you should provide as much detail as necessary short of disclosing information that poses a reasonable risk of competition harm. Refer generally to Question 118.04 of the Regulation S-K and Disclosure Interpretations.

Response: The following provides the disclosure set forth on page 121 of the 2009 Form 10-K, with revisions based on the Staff’s comment, and would be updated in future filings to disclose our MIP programs in a manner similar to the following discussion. Note that the revised disclosure lists all objective performance targets, except our internal annual budgeted revenue and net income amounts, which constitute confidential financial information not otherwise made public, and which we believe are not material to investors’ for the reasons described in the following paragraph.

The nature of our primary customer, the U.S. Department of Energy (“DOE”), necessarily poses major challenges in projecting our annual revenue and net income. These challenges stem from the fact that the DOE may or may not decide to undertake the projects to which we provide services for reasons that we believe include, political, budgetary, or Congressional funding allocation matters. In addition, the internal budgeted revenue and net income amounts are subject to adjustment from to time to time, based on unforeseen events, such as tax adjustments, which may affect our actual revenues or net income, but may be disregarded for purposes of determining bonus compensation under the MIPs. Thus, we do not believe that our internal budget amounts for annual revenues and net income, which we have budgeted at the beginning of the year, are meaningful or material to investors’ understanding of our bonus compensation policies.

During May 2009, the Compensation Committee approved individual MIPs for fiscal year 2009 for Dr. Louis F. Centofanti, our CEO, Larry McNamara, our COO, and Ben Naccarato, our CFO, effective as of January 1, 2009. Mr. McNamara resigned as the Company’s COO, effective September 1, 2009 and remained as a Company employee through September 30, 2009. When Mr. McNamara resigned as the COO, his MIP also terminated. The MIP provides guidelines for calculating an annual cash incentive based compensation, subject to the Compensation Committee oversight and modification. Each MIP awards cash compensation based on achieving performance thresholds, and measured as a percentage of base salary. The potential target performance compensation ranged from 25% to 44% of the 2009 base salary for the CFO, and 50% to 87% of the base salary for both the COO and the CEO.

2009 CEO and COO performance compensation was based upon meeting corporate financial net income and revenue, health, safety, and environmental compliance objectives during fiscal year 2009. Of the total potential performance compensation, 55% was based on net income goals, 15% on revenue goals, 15% on the number of health and safety claim incidents that occurred during fiscal year 2009, and the remaining 15% on the number of notices alleging violations relating to environmental, health or safety requirements under our permit or license violations that occur during the fiscal year. The revenue and net income components were based on our board approved 2009 budget. The specific components of the MIP for our CEO are as follows:

Target Objectives
				Performance Target Thresholds
	Weights				85-100%	101-120%	121-130%	131-140%	141-150%	151-160%	161%+

Revenue		15	%		18,982	22,778	24,680	26,653	28,472	30,371	33,218
Net Income		55	%		69,601	83,521	90,484	97,446	104,400	111,361	121,801
Health & Safety		15	%		18,982	22,778	24,680	26,653	28,472	30,371	33,218
Permit & License Violations		15	%		18,982	22,778	24,680	26,653	28,472	30,371	33,218
Unbilled Receivables	* If criteria (Item #5) for reducing unbilled AR are not met bonus will be reduced by 15%.
Potential Maximum		100	%		126,547	151,856	164,524	177,404	189,816	202,475	221,455

Revenue is defined as the total consolidated third party top line revenue as publicly reported in the Company’s financial statements. The percentage achieved is determined by comparing the actual consolidated revenue to the Board approved budgeted revenue. The Board reserves the right to modify or change the Revenue Targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition.

Net Income is defined as the total consolidated bottom line net income applicable to Common Stock as publicly reported in the Company’s financial statements. The net income will include all subsidiaries, corporate charges, dividends and discounted operations. The percentage achieved is determined by comparing the actual net income to the Board approved budgeted net income. The Board reserves the right to make adjustments to net income so as not to penalize the employee for actions in the current year which will contribute to net income in future years and it reserves the right to modify or change the Net Income Targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition. The Board further reserves the right to adjust net income to reflect charges resulting from the vesting of incentive stock options.

The Health and Safety Incentive target is based upon the actual number of Worker’s Compensation Lost Time Accidents, as provided by the Company’s Worker’s Compensation carrier. The Corporate Treasurer will submit a report on a quarterly basis documenting and confirming the number of Worker’s Compensation Lost Time Accidents, supported by the AIG Worker’s Compensation Loss Report. Such claims will be identified on the loss report as “indemnity claims.” The following number of Worker’s Compensation Lost Time Accidents and corresponding Performance Target Thresholds has been established for the annual Incentive Compensation Plan calculation for 2009.

Permits or License Violations incentive is earned/determined according to the scale set forth below: An "official notice of non-compliance" is defined as an official communication from a local, state, or federal regulatory authority alleging one or more violations of an otherwise applicable Environmental, Health, or Safety requirements or permit provision, which results in a facility's implementation of corrective action(s).

5)	Unbilled trade receivables is the amount of unbilled reported per Form 10-Q or Form 10-K combining both the long term and current portion of unbilled. Unbilled trade receivable balances older than 12/31/06 should be reduced by $4 million from $5,109,963 as of 12/31/08 to $1,109,963 by 12/31/09.

The CFO’s performance compensation was based upon achievement of net income, administrative expense, financial oversight, centralization of accounting and information technology functions objectives, as well as the Company’s timely SEC filing of annual and quarterly reports and Form 8-Ks. Of the total potential performance compensation, 25% is based on net income goals, 15% on maintaining or reducing our budgeted administrative expense, 10% on the timeliness of the Company’s annual, quarterly, and Form 8-K report filings with the SEC, 10% on financial oversight, 10% on compliance with the requirements of the Sarbanes-Oxley Act of 2002, and 30% on accounting centralization and information technology objectives. The net income and administrative expense components were based on our board approved 2009 budget. The specific components of the MIP for our CFO are as follows:

Target Objectives
				Performance Target Thresholds
	Weights			100% or less			98%-99%		96-97%		94-95%		92-93%		90-91%		88-89%

Administrative Expenses		15	%		7,500		9,000		9,751		10,531		11,250		12,000		13,125
	Weights				85-100	%	101-120	%	121-130	%	131-140	%	141-150	%	151-160	%	161	%+
Net Income		25	%		12,500		15,000		16,252		17,551		18,749		20,000		21,875
Accounting		10	%		5,000		6,000		6,501		7,021		7,500		8,000		8,750
Accounts Receivable		10	%		5,000		6,000		6,501		7,021		7,500		8,000		8,750
SOX Compliance		10	%		5,000		6,000		6,501		7,021		7,500		8,000		8,750
Centralization & IT Objectives		30	%		15,000		18,000		19,503		21,062		22,499		24,000		26,250
Unbilled Receivables	* If criteria (Item #7) for reducing unbilled AR are not met bonus will be reduced by 15%.
					50,000		60,000		65,009		70,205		74,997		80,000		87,500

Administrative Expense is defined as the total consolidated administrative expenses applicable as publicly reported in the Company’s financial statements. Administrative expenses will be inclusive of all subsidiaries, and will exclude Marketing Expenses and Interest Expense. The Board reserves the right to make adjustments to administrative expenses so as not to penalize the employee for material unforeseen events outside of the employees responsibility and it reserves the right to modify or change the Administrative Expense Targets as defined herein in the event of the sale or disposition of any of the assets of the Company or in the event of an acquisition. The Board further reserves the right to adjust Administrative Expenses to reflect charges resulting from the vesting of incentive stock options.

SEC Filings	Performance Target

10K – filed timely or		3	%
10K – extension		1.5	%
1st quarter 10Q – filed timely or		2	%
1st quarter 10Q – extension		1	%
2nd quarter 10Q – filed timely or		2	%
2nd quarter 10Q – extension		1	%
3rd quarter 10Q – filed timely or		2	%
3rd quarter 10Q - extension		1	%
All 8K’s Filed		1	%
Total Achievable		10	%

6)	Accounting Centralization Objective - Completion of the following milestones related to the planned centralization of the accounting function to the Corporate office. Completion of each objective earns 3% with a maximum target achievable of 15%.

Accounting Centralization Objectives	Performance Target

Continue to centralize the accounting function at DSSI, M&EC, PFF, PFFL and PFO		3.0	%
Payroll consolidation is in process and will take affect beginning in January 2009.		3.0	%
We will reduce the number of bank accounts effective January 1st 2009 to one bank account and one lockbox.		3.0	%
A transition to centralized accounts payable will be implemented in the 1st quarter of 2 2009. All checks will be written and issued from corporate office.		3.0	%
A P.O. system (that communicates with our Solomon software) will be implemented in the first and second quarter of 2009.		3.0	%
The multi-company module of Solomon software will be implemented in first quarter of 2009 to simplify accounting of many facilities from a centralized location.		3.0	%

IT Objectives	Performance Target

Mixed Waste Tracking at PFNW		3.0	%
Accounting upgrades		3.0	%
System Security		3.0	%
System integration plan for the Southeast		3.0	%
IT oversight / corporate governance		3.0	%
Tele-Com Consolidation		3.0	%

7)	Unbilled trade receivables is the amount of unbilled reported per 10Q or 10K combining both the long term and current portion of unbilled. Unbilled trade receivable balances older than 12/31/06 should be reduced by $4 million from $5,109,963 as of 12/31/08 to $1,109,963 by 12/31/09.

The minimum performance compensation becomes payable upon achieving between 85% to 100% of corporate financial objectives, with the maximum performance compensation becoming payable upon achieving 161% of such objectives, except the CFO’s minimum performance compensation for achieving administrative expense goals is based on maintaining the Company’s administrative expense at 100% of the objective, with the maximum performance compensation payable if administrative expense is 88% of the objective.

If the MIP participant’s employment with the Company is voluntarily or involuntarily terminated prior to a regularly scheduled MIP compensation payment period, no MIP payment will be payable for and after such period. The Compensation Committee retains the right to modify, change or terminate each MIP at any time and for any reason.

In 2009, the CEO and CFO achieved above the minimum performance compensation level but below the maximum performance compensation level. No MIP was earned by the COO due to his resignation. In 2008 and 2007, none of the named executive officers met the minimum performance compensation level. The 2009 MIP compensation is calculated and prepaid on a quarterly basis. The following table sets forth the MIP compensation earned in fiscal year 2009 under the 2009 MIP:

	MIP			MIP		MIP		MIP
	Compensation			Compensation		Compensation		Compensation
Name	1st Qtr 2009			2nd Qtr 2009		3rd Qtr 2009		4th Qtr 2009			Total
Dr. Louis Centofanti	$	29,888		$	─	$	─	$	105,152		$	135,040	(3)
Larry McNamara (1)	$	26,567	(4)	$	─	$	─	$	(26,567	)(4)	$	─
Ben Naccarato (2)	$	8,775		$	─	$	2,025	$	44,258		$	55,058	(3)

(2)

Named as Chief Financial Officer and Secretary of the Board of Directors by the Company’s Board of Directors on February 26, 2009. Mr. Naccarato was named as Interim Chief Financial Officer and Secretary of the Board of Directors effective November 1, 2008 by the Company’s Board of Directors on October 24, 2008.

5. We note your disclosure that your chief executive and chief financial officers achieved above the minimum level of performance but below the maximum level of performance under your management incentive plan. However, it is unclear how such actual performance translated into the payouts ultimately made to these named executive officers under this compensation program. In future filings, please provide appropriate analytical disclosure clearly explaining the correlation between actual performance and the compensation amounts earned under each program.

Response: In future filings, the Company will ensure that the tabular equity compensation plan disclosure is current as of the most recent completed fiscal year. Please note that such information as presented in the Form 10-K is current, but the header to such presentation is inadvertently incorrect.

We appreciate your attention to this matter. If you have any questions or comments, please do not hesitate to contact our counsel, Irwin H. Steinhorn, Esquire, of the firm of Conner & Winters, LLP, 1700 One Leadership Square, 211 North Robinson Avenue, Oklahoma City, Oklahoma 73102, at (405) 272-5711, or the undersigned at (770) 587-9898, ext. 112.

Annualized Base Pay:	$	253,094
Performance Incentive Compensation Target (at 100% of Plan):	$	126,547
Total Annual Target Compensation (at 100% of Plan):	$	379,641

Work Comp. Claim Number		Performance Target

7		85% - 100%
6		101% - 120%
5		121% - 130%
4		131% - 140%
3		141% - 150%
2		151% - 160%
1		161% Plus

Permit and License Violations		Performance Target

7		85% - 100%
6		101% - 120%
5		121% - 130%
4		131% - 140%
3		141% - 150%
2		151% - 160%
1		161% Plus

Annualized Base Pay:	$	200,000
Performance Incentive Compensation Target (at 100% of Plan):		50,000
Total Annual Target Compensation (at 100% of Plan):	$	250,000

Accounts Receivable	Performance Target
25% or less of AR > than 60 days		5.0	%
30% or less of AR > than 60 days		2.5	%
9% or less of AR > than 120 days		5.0	%
10% or less of AR > than 120 days		2.5	%
Total Achievable		10.0	%

	Sincerely,

	/s/ Ben Naccarato

	Ben Naccarato
	Vice President
	Chief Financial Officer