Perma-Pipe International Holdings Announces Second Quarter Financial Results

  • Net sales of $26.9 million, up 17% from prior year
  • Loss from continuing operations of $1.7 million
  • Backlog increases by 27% in the quarter and by 40% year-to-date to $62.7 million as of July 31, 2017

NILES, Ill., Sept. 19, 2017 (GLOBE NEWSWIRE) — Perma-Pipe International Holdings, Inc. (NASDAQ:PPIH) announced today financial results for the second quarter ended July 31, 2017.

CEO David Mansfield commented, “For the second consecutive quarter this year the earnings from continuing operations reflect an improvement versus the prior-year period. While production volumes continue to be negatively impacted by the reduced market activity, we have experienced a more meaningful increase in revenues in the second quarter, up 17% versus the prior-year quarter.

“During the first quarter, we noted the increased levels of bid activity and this continued to gain momentum during the second quarter, with new bookings amounting to $42 million. Since the beginning of the fiscal year, our backlog has now increased by 40% to $62.7 million.

“In our earnings release for the fourth quarter, we anticipated that it would not be until mid-year before we saw the beginning of a recovery in our Middle East markets and that appears to have been validated after receiving over $20 million in new awards during the second quarter, with some sizeable projects still in the bidding phase. We continue to be mindful that our backlog includes projects that were bid under very competitive conditions, so we expect to continue to see gross margins pressured at least until the end of the year.

“We continue to maintain the reduction in our overhead burden and selling and general and administrative costs. On a year-to date basis, we have reduced comparable operating expenses by more than $1 million.”

Mr. Mansfield concluded, “So far this year, the market trends have been generally in line with our expectations, showing a modest recovery. The competitive environment is still very challenging though, and it will likely continue to be so for the remainder of this year. We will continue to optimize the use of our resources and to strengthen our processes to ensure we maintain the strong position we hold in our market while also seeking to pursue growth opportunities sensibly.”

BACKLOG

($ in thousands) July 31, 2017 April 30, 2017 January 31, 2017
Piping Systems $62,662 $49,365 $44,615

SECOND FISCAL QUARTER ENDED JULY 31, 2017

SALES – Net sales increased 17% to $26.9 million in the current quarter from $22.9 million in the prior-year quarter.  Higher revenues resulted from increased business with distributors of coated pipe in Canada and from a pick-up in general project activities in the Middle East.

GROSS PROFIT – Gross margin decreased to 11% of net sales in the current quarter from 13% of net sales in the prior-year quarter due to changes in the product mix.

EXPENSES – Operating expenses as reported remained level at $5.2 million.  The prior-year quarter included a one-time legal settlement accrual of $0.8 million while the current quarter included $0.4 million of professional service expenses related to Middle East executive management transition and operations. In the prior year quarter, operating expenses were reduced by $0.4 million on the gain on sale of the former corporate headquarters and a foreign currency exchange gain of $0.4 million

PRETAX LOSS FROM CONTINUING OPERATIONS – The pretax loss from continuing operations was level at $2.3 million due to:

  • increased volume from distributors in Canada;
  • increased sales in the Middle East;
  • increased professional services fees; and
  • the prior-year quarter included a one-time $0.8 million lawsuit settlement, offset by a gain from the sale of headquarters and by foreign currency exchange gains.

SIX MONTHS ENDED JULY 31, 2017

SALES – Net sales increased 10% to $50.4 million in the current year-to-date from $45.9 million in the prior-year-to-date.  Higher volumes resulted from increased project demand in the U.S. and from higher coating volumes for distributors in Canada.

GROSS PROFIT – Gross margin decreased to 10% of net sales in the current year-to-date from 11% of net sales in the prior-year-to-date due to changes in the product mix.

EXPENSES – Operating expenses decreased by $1.0 million to $10.8 million from $11.8 million. In the current year, the company recorded $0.4 million of professional service expenses related to Middle East executive management transition and operations in addition to a foreign exchange loss of $0.4 million on loan repayments. In the six months of the prior year, operating expenses were reduced by $0.3 million for the gain on sale of the former corporate headquarters, and by a reduction in executive incentives of $0.2 million. The prior-year expenses also included a one-time legal settlement expenses of $0.8 million.

PRETAX LOSS FROM CONTINUING OPERATIONS – The pretax loss from continuing operations was $6.2 million year-to-date versus $8.7 million in the prior-year-to-date.  The factors contributing to the 2017 results were:

  • increased volume from distributors in Canada;
  • increased professional services fees and a foreign exchange loss of $0.4 million on loan repayments; and
  • the prior-year-to-date included a one-time $0.8 million lawsuit settlement and a non-cash loss of $1.6 million from the consolidation of the joint venture.

TAXES – The Company’s worldwide effective income tax rates (“ETR”) on continuing operations for 2017 and 2016 were 16.8% and 15.3%, respectively.  The change in the ETR from the prior year to the current year was mainly due to the change in foreign income and loss activities.

NET LOSS – Net loss was $5.2 million compared to a net loss of $6.3 million in the prior-year’s period.

Perma-Pipe International Holdings, Inc. 
Perma-Pipe International Holdings is a global leader in pre-insulated piping and leak detection systems for oil and gas gathering, district heating and cooling, and other applications. It uses its extensive engineering and fabrication expertise to develop piping solutions that solve complex challenges regarding the safe and efficient transportation of many types of liquids.  In total, Perma-Pipe has operations at seven locations in five countries.

Forward-Looking Statements 
Statements and other information contained in this announcement that can be identified by the use of forward-looking terminology constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby, including, without limitation, statements regarding the expected future performance and operations of the Company. These statements should be considered as subject to the many risks and uncertainties that exist in the Company’s operations and business environment. Such risks and uncertainties include, but are not limited to, the project nature of the business, the increasing international nature of the business, economic conditions, market demand and pricing, competitive and cost factors, raw material availability and prices, global interest rates, currency exchange rates, labor relations and other risk factors.

Perma-Pipe’s Form 10-Q for the period ended July 31, 2017 will be accessible at www.sec.gov and www.permapipe.com.  For more information, visit the Company’s website or contact its investor relations representative, LHA.

 
Perma-Pipe International Holdings, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
       
  Three Months Ended
July 31
  Six Months Ended
July 31
    2017     2016       2017     2016  
Net sales $26,852   $22,859     $50,353   $45,928  
Cost of sales   23,794     19,879       45,510     40,956  
Gross profit   3,058     2,980       4,843     4,972  
           
Operating expenses:          
General and administrative expense   3,856     3,720       8,142     8,908  
Selling expense   1,307     1,450       2,623     2,854  
Total operating expenses   5,163     5,170       10,765     11,762  
           
Loss from operations (2,105 ) (2,190 )   (5,922 ) (6,790 )
           
Loss on consolidation of joint venture                 (1,620 )
           
Interest expense, net   157     97       314     323  
Loss from continuing operations before income taxes   (2,262 )   (2,287 )     (6,236 )   (8,733 )
           
Income tax benefit   (564 )   (1,077 )     (1,049 )   (1,334 )
           
Loss from continuing operations   (1,698 )   (1,210 )   (5,187 ) (7,399 )
           
Income from discontinued operations, net of tax       1,309           1,109  
           
Net (loss) income ($1,698 )   $99     ($5,187 ) ($6,290 )
Weighted average common shares outstanding          
Basic   7,679     7,481       7,645     7,416  
Diluted   7,679     7,603       7,645     7,416  
           
Loss per share from continuing operations          
Basic and diluted ($0.22 ) ($0.16 )   ($0.68 ) ($1.00 )
Earnings per share from discontinued operations          
Basic and diluted $0.00   $0.17     $0.00   $0.15  
(Loss) earnings per share          
Basic and diluted ($0.22 ) $0.01     ($0.68 ) ($0.85 )
Note: Earnings per share calculations could be impacted by rounding.  

            

Perma-Pipe International Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands) July 31, 2017
(Unaudited) 
January 31, 2017
ASSETS    
Current assets    
Cash, cash equivalents $8,546 $7,603
Restricted cash   893   1,098
Trade accounts receivable, net   26,583   31,271
Inventories, net   16,031   13,565
Prepaid expenses and other current assets   6,121   4,287
Total current assets   58,174   57,824
Property, plant and equipment, net of accumulated depreciation   35,995   36,275
Long-term assets    
Goodwill   2,388   2,279
Other assets   5,282   5,233
Total long-term assets   7,670   7,512
Total assets $101,839 $101,611
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current liabilities    
Trade accounts payable $10,695 $10,901
Accrued liabilities, compensation, incentives, and payroll taxes   5,124   6,081
Current maturities of long-term debt   8,515   4,471
Other current liabilities, including customer deposits   9,072   8,595
Total current liabilities   33,406   30,048
Long-term liabilities    
Long-term debt, less current maturities   7,792   7,258
Other long-term liabilities   5,000   4,892
Total long-term liabilities   12,792   12,150
Stockholders’ equity    
Total stockholders’ equity   55,641   59,413
Total liabilities and stockholders’ equity $101,839 $101,611

Perma-Pipe International Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
   
(In thousands) Six months ended July 31
    2017     2016  
Operating activities    
Net loss ($5,187 ) ($6,290 )
Adjustments to reconcile net loss to net cash flows used in operating activities    
Depreciation and amortization   2,509     2,830  
Loss on consolidation of joint venture       1,620  
Gain on disposal of subsidiaries       (867 )
Other, net   (35 )   (1,659 )
Changes in operating assets and liabilities    
Accounts receivable   5,355     16,277  
Accrued compensation and payroll taxes   (1,019 )   (5,884 )
Other assets and liabilities   (4,451 )   (6,928 )
Net cash used in operating activities   (2,828 )   (901 )
     
Investing activities    
Acquisition of interest in subsidiary, net of cash acquired       (4,672 )
Proceeds from surrender of corporate-owned life insurance policies       1,894  
Capital expenditures   (1,526 )   (994 )
Proceeds from sales of marketable securities   142      
Proceeds from sales of property and equipment   1     11,930  
Net cash (used in) provided by investing activities   (1,383 )   8,158  
     
Financing activities    
Proceeds from debt   16,936     27,260  
Payments of debt on revolving lines of credit, other   (12,790 )   (41,083 )
Other financing   199     61  
Net cash provided by (used in) financing activities   4,345     (13,762 )
     
Effect of exchange rate changes on cash, cash equivalents and restricted cash   604     104  
Net increase (decrease) in cash, cash equivalents and restricted cash   738     (6,401 )
Cash, cash equivalents and restricted cash – beginning of period   8,701     18,955  
Cash, cash equivalents and restricted cash – end of period $9,439   $12,554  

COMPANY:    Perma-Pipe International Holdings, Inc.
CONTACTS:   David Mansfield, President & CEO
  (847) 966-1000
   
  Harriet Fried / Jody Burfening
  LHA
  (212) 838-3777
  hfried@lhai.com