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 |
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