Perma-Pipe International Holdings, Inc. Announces its Third Quarter and Year-to-Date Fiscal 2021 Financial Results | Financial Buzz

Perma-Pipe International Holdings, Inc. Announces its Third Quarter and Year-to-Date Fiscal 2021 Financial Results

Perma-Pipe International Holdings, Inc. (NASDAQ: PPIH) announced today financial results for the third quarter ended October 31, 2021.

“Revenues for the third quarter of $35.2 million were well above the $20.3 million for the same quarter last year. The resulting pre-tax income from operations of $1.5 million was also substantially above the $2.9 million loss incurred in the same quarter of 2020,” noted President and CEO David Mansfield.

“As we continue to recover from the effects of the pandemic and business conditions continue to improve, we remain focused on implementing the growth plans that were delayed by COVID-19. Initiatives that were started in the second quarter are now well underway and will better position the Company to take advantage of more opportunities in the future.

“During the quarter we renewed our $18.0 million North American credit agreement for an extended term of five years. In addition, the Board authorized, and the Company commenced a $3.0 million share buyback program. This program does not materially affect the liquidity needed for investments in our growth plans.

“Our current backlog of $54.4 million continues to remain higher than our January 31, 2021 backlog, as new awards have continued to keep pace with the increasing revenues arising each quarter this year.

“As is the case across almost all industries, there continues to be increased challenges with supply chain issues and logistics. We are however taking active steps to minimize any adverse impacts to our business, including increasing our sources of supply and expanding our options for obtaining suitable materials,” Mr. Mansfield concluded.

Third Quarter Fiscal 2021 Results

Net sales were $35.2 million in the current quarter, an increase of $14.9 million, or 73%, from $20.3 million in the prior year quarter. The increase was a result of increased sales volumes in both North America and in the Middle East, North Africa and India region (“MENA”) due to recovery from the effects of the COVID-19 pandemic. In addition, the Company’s United Arab Emirates (“U.A.E.”) business benefitted from the introduction of a new product line subsequent to the third quarter of 2020.

Gross profit increased to $7.6 million, or 22% of net sales, in the current quarter from $2.9 million, or 14% of net sales, in the prior year quarter. This increase was driven by higher sales volumes and project and product mix.

General and administrative expenses were relatively consistent, increasing $0.1 million, or 2%, from the prior year quarter.

Selling expenses increased slightly to $1.3 million in the current quarter, compared to $1.2 million in the prior year quarter.

Net interest expense increased to $0.3 million in the current quarter from $0.1 million in the prior year quarter. This increase was primarily related to the sale leaseback transaction for our operating facility in Tennessee entered into in April 2021.

Other income, net remained relatively consistent, increasing to an income of $0.1 million in the current quarter, compared to approximately zero in the prior year quarter.

Income/(loss) from operations before income taxes increased by $4.4 million to income of $1.5 million in the current quarter from a loss of $(2.9) million in the prior year quarter. The increase was a result of increased sales volumes in both North America and MENA due to recovery from the effects of the COVID-19 pandemic. In addition, the Company’s U.A.E. business benefitted from the introduction of a new product line subsequent to the third quarter of 2020.

The Company’s worldwide effective tax rates (“ETR”) were 67.6% and 0.8% in the current quarter and the prior year quarter, respectively. The change in the ETR from the prior year quarter to the current year quarter is largely due to changes in the mix of income and loss in various jurisdictions and the absence of recognizing tax benefits on losses in the United States due to a full valuation allowance applied against its deferred tax assets.

The resulting net income of $0.5 million in the current quarter was an improvement of $3.4 million over the net loss of $(2.9) million in the prior year quarter. The increase was a result of increased sales volumes in both North America and MENA due to recovery from the effects of the COVID-19 pandemic. In addition, the Company’s U.A.E. business benefitted from the introduction of a new product line subsequent to the third quarter of 2020.

Year-to-Date October 31, 2021 Results

Net sales were $99.4 million in the current year-to-date, an increase of $36.0 million, or 57%, from $63.4 million in the prior year year-to-date. The increase was a result of increased sales volumes in both North America and MENA due to recovery from the effects of the COVID-19 pandemic. In addition, the Company’s U.A.E. business benefitted from the introduction of a new product line subsequent to the third quarter of 2020.

Gross profit increased to $22.9 million, or 23% of net sales, in the current year-to-date from $8.8 million, or 14% of net sales, in the prior year year-to-date. This increase was driven by higher sales volumes and project and product mix.

General and administrative expenses were $14.6 million in the current year-to-date, an increase of $1.3 million, or 10%, from $13.3 million in the prior year year-to-date. This increase was driven by an increase in personnel-related expenses corresponding to the increased business activity during the period.

Selling expenses decreased to $3.4 million in the current year-to-date, compared to $4.2 million in the prior year year-to-date due to organizational changes.

Net interest expense increased from $0.4 million in the prior year year-to-date to $0.7 million in the current year-to-date. This increase is primarily related to the sale leaseback transaction for our operating facility in Tennessee entered into in April 2021.

Other income, net decreased to $1.0 million in the current year-to-date, compared to $3.7 million in the prior year year-to-date. This decrease was primarily the result of income recorded in the prior year for funds received under the Small Business Administration’s Paycheck Protection Program of $3.2 million. Funds received under the Canadian Emergency Wage Subsidy and Canadian Emergency Rent Subsidy programs in Canada during the current year were also less than in the prior year. These decreases were offset by individually immaterial increases in our North American businesses.

Income/(loss) from operations before income taxes increased by $10.5 million to an income of $5.1 million in the current year-to-date from a loss of ($5.4 million) in the prior year year-to-date. The increase was a result of increased sales volumes in both North America and MENA due to recovery from the effects of the COVID-19 pandemic. In addition, the Company’s U.A.E. business benefitted from the introduction of a new product line subsequent to the third quarter of 2020.

The Company’s worldwide ETR’s were 40.0% and 6.2% in the current year-to-date and the prior year year-to-date, respectively. The change in the ETR from the prior year to the current year was largely due to changes in the mix of income and loss in various jurisdictions and the absence of recognizing tax benefits on losses in the United States due to a full valuation allowance applied against its deferred tax assets.

The resulting net income of $3.1 million in the current year-to-date was an improvement of approximately $8.2 million over the net loss of ($5.1 million) in the prior year year-to-date. The increase was a result of increased sales volumes in both North America and the MENA due to recovery from the effects of the COVID-19 pandemic. In addition, the Company’s U.A.E. business benefitted from the introduction of a new product line.

Percentages set forth above in this press release have been rounded to the nearest percentage point and may not exactly correspond to the comparative data presented.

Perma-Pipe International Holdings, Inc.

Perma-Pipe International Holdings, Inc. (the “Company”) 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, the Company has operations at thirteen locations in six countries.

Forward-Looking Statements

Certain statements and other information contained in this press release 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 following: (i) the impact of the coronavirus (“COVID-19”) on the Company’s results of operations, financial condition and cash flows; (ii) fluctuations in the price of oil and natural gas and its impact on the customer order volume for the Company’s products; (iii) the Company’s ability to comply with all covenants in its credit facilities; (iv) the Company’s ability to repay its debt and renew expiring international credit facilities; (v) the Company’s ability to effectively execute its strategic plan and achieve profitability and positive cash flows; (vi) the impact of global economic weakness and volatility; (vii) fluctuations in steel prices and the Company’s ability to offset increases in steel prices through price increases in its products; (viii) the timing of order receipt, execution, delivery and acceptance for the Company’s products; (ix) decreases in government spending on projects using the Company’s products, and challenges to the Company’s non-government customers’ liquidity and access to capital funds; (x) the Company’s ability to successfully negotiate progress-billing arrangements for its large contracts; (xi) aggressive pricing by existing competitors and the entrance of new competitors in the markets in which the Company operates; (xii) the Company’s ability to purchase raw materials at favorable prices and to maintain beneficial relationships with its suppliers; (xiii) the Company’s ability to manufacture products free of latent defects and to recover from suppliers who may provide defective materials to the Company; (xiv) reductions or cancellations of orders included in the Company’s backlog; (xv) the Company’s ability to collect an account receivable related to a project in the Middle East; (xvi) risks and uncertainties related to the Company’s international business operations; (xvii) the Company’s ability to attract and retain senior management and key personnel; (xviii) the Company’s ability to achieve the expected benefits of its growth initiatives; (xix) the Company’s ability to interpret changes in tax regulations and legislation; (xx) the Company’s ability to use its net operating loss carryforwards; (xxi) reversals of previously recorded revenue and profits resulting from inaccurate estimates made in connection with the Company’s over-time revenue recognition; (xxii) the Company’s failure to establish and maintain effective internal control over financial reporting; and (xxiii) the impact of cybersecurity threats on the Company’s information technology systems. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at https://www.sec.gov and under the Investor Center section of our website (http://investors.permapipe.com.)

The Company’s Form 10-Q for the quarter ended October 31, 2021 will be accessible at www.sec.gov and www.permapipe.com. For more information, visit the Company’s website.

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

October 31,

 

 

Nine Months Ended

October 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net sales

 

$

35,199

 

 

$

20,294

 

 

$

99,426

 

 

$

63,399

 

Cost of sales

 

 

27,570

 

 

 

17,356

 

 

 

76,549

 

 

 

54,630

 

Gross profit

 

 

7,629

 

 

 

2,938

 

 

 

22,877

 

 

 

8,769

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

4,635

 

 

 

4,528

 

 

 

14,643

 

 

 

13,320

 

Selling expenses

 

 

1,303

 

 

 

1,174

 

 

 

3,397

 

 

 

4,153

 

Total operating expenses

 

 

5,938

 

 

 

5,702

 

 

 

18,040

 

 

 

17,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income/(loss) from operations

 

 

1,691

 

 

 

(2,764

)

 

 

4,837

 

 

 

(8,704

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

270

 

 

 

107

 

 

 

717

 

 

 

411

 

Other income, net

 

 

98

 

 

 

(2

)

 

 

997

 

 

 

3,672

 

Income/(loss) from operations before income taxes

 

 

1,519

 

 

 

(2,873

)

 

 

5,117

 

 

 

(5,443

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense/(benefit)

 

 

1,024

 

 

 

(23

)

 

 

2,049

 

 

 

(339

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss)

 

$

495

 

 

$

(2,850

)

 

$

3,068

 

 

$

(5,104

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

8,126

 

 

 

8,165

 

 

 

8,148

 

 

 

8,113

 

Diluted

 

 

8,393

 

 

 

8,165

 

 

 

8,408

 

 

 

8,113

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings/(loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

0.06

 

 

 

(0.35

)

 

 

0.38

 

 

 

(0.63

)

Diluted

 

 

0.06

 

 

 

(0.35

)

 

 

0.36

 

 

 

(0.63

)

 

Note: Earnings per share calculations could be impacted by rounding.

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

 

October 31,

2021

 

 

January 31,

2021

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,018

 

 

$

7,174

 

Restricted cash

 

 

1,746

 

 

 

1,201

 

Trade accounts receivable, less allowance for doubtful accounts of $478 at October 31, 2021 and $474 at January 31, 2021

 

 

37,741

 

 

 

25,226

 

Inventories, net

 

 

15,431

 

 

 

12,157

 

Prepaid expenses and other current assets

 

 

4,996

 

 

 

3,863

 

Unbilled accounts receivable

 

 

3,415

 

 

 

247

 

Costs and estimated earnings in excess of billings on uncompleted contracts

 

 

2,322

 

 

 

4,007

 

Total current assets

 

 

75,669

 

 

 

53,875

 

Property, plant and equipment, net of accumulated depreciation

 

 

25,599

 

 

 

26,897

 

Other assets

 

 

 

 

 

 

 

 

Operating lease right-of-use asset

 

 

11,515

 

 

 

13,384

 

Deferred tax assets

 

 

858

 

 

 

823

 

Goodwill

 

 

2,406

 

 

 

2,332

 

Other assets

 

 

6,449

 

 

 

5,380

 

Total other assets

 

 

21,228

 

 

 

21,919

 

Total assets

 

$

122,496

 

 

$

102,691

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Trade accounts payable

 

$

16,216

 

 

$

10,365

 

Accrued compensation and payroll taxes

 

 

1,862

 

 

 

1,448

 

Commissions and management incentives payable

 

 

1,500

 

 

 

218

 

Revolving line – North America

 

 

 

 

 

2,826

 

Current maturities of long-term debt

 

 

4,822

 

 

 

3,941

 

Customers’ deposits

 

 

3,493

 

 

 

2,088

 

Outside commission liability

 

 

1,647

 

 

 

1,431

 

Operating lease liability short-term

 

 

1,427

 

 

 

1,402

 

Other accrued liabilities

 

 

3,793

 

 

 

2,616

 

Billings in excess of costs and estimated earnings on uncompleted contracts

 

 

871

 

 

 

762

 

Income taxes payable

 

 

1,802

 

 

 

1,155

 

Total current liabilities

 

 

37,433

 

 

 

28,252

 

Long-term liabilities

 

 

 

 

 

 

 

 

Long-term debt, less current maturities

 

 

5,342

 

 

 

6,268

 

Long-term finance obligation

 

 

9,349

 

 

 

 

Deferred compensation liabilities

 

 

4,224

 

 

 

4,120

 

Deferred tax liabilities

 

 

1,328

 

 

 

914

 

Operating lease liability long-term

 

 

11,586

 

 

 

13,174

 

Other long-term liabilities

 

 

852

 

 

 

650

 

Total long-term liabilities

 

$

32,681

 

 

$

25,126

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, $.01 par value, authorized 50,000 shares; 8,089 issued and outstanding at October 31, 2021 and 8,165 issued and outstanding at January 31, 2021

 

 

81

 

 

 

82

 

Additional paid-in capital

 

 

61,461

 

 

 

60,875

 

Treasury Stock, 58 shares at October 31, 2021 and no shares at January 31, 2021

 

 

(496

)

 

 

 

Accumulated deficit

 

 

(5,289

)

 

 

(8,357

)

Accumulated other comprehensive loss

 

 

(3,375

)

 

 

(3,287

)

Total stockholders’ equity

 

 

52,382

 

 

 

49,313

 

Total liabilities and stockholders’ equity

 

$

122,496

 

 

$

102,691

 

 

Contacts

David Mansfield, President and CEO

Perma-Pipe Investor Relations

(847) 929-1200

investor@permapipe.com

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