SOURCE: MFRI

MFRI

September 12, 2013 09:00 ET

MFRI Announces Record Second Quarter 2013 Earnings

NILES, IL--(Marketwired - Sep 12, 2013) - MFRI, Inc. (NASDAQ: MFRI) announced today financial results for the second quarter and six months ended July 31, 2013. Second quarter net sales were $62 million compared to $43 million in the prior-year quarter; net income in the quarter was a second quarter record of $4.4 million or $0.62 per diluted share compared to a net loss of $1.4 million or ($0.20) per diluted share in the prior-year quarter.

SECOND FISCAL QUARTER ENDED JULY 31, 2013

SALES - Sales increased 44% to $62 million in the current quarter from $43 million in the prior-year quarter. Piping systems sales increased 90% or $21 million in the quarter mainly due to sales growth in Saudi Arabia and the United Arab Emirates, ("U.A.E.") for major projects expanding the Grand Mosque in Mecca and the King Abdul-Aziz International Airport in Jeddah. Filtration products sales decreased by $2 million due primarily to reduced domestic demand for fabric filter bags.

GROSS PROFIT - Gross profit approximately doubled to $14 million in the current quarter from $8 million in the prior-year quarter mainly due to the sales increase in piping systems. Filtration products' gross profit increased 11.4% resulting from sales mix favoring cartridge filters versus fabric filter bags.

EXPENSES - Operating expenses as a percent of net sales decreased to 14.5% in the current quarter from 19.1% in the prior-year quarter. Operating expenses increased to $8.9 million in the current quarter from $8.2 million in the prior-year quarter. This dollar increase was due to management incentive compensation expense partially offset by reduced health insurance costs.

NET INCOME - Second quarter net income was $4.4 million compared to net loss of $1.4 million in the comparable prior-year's quarter. Income rose primarily due to the gross profit generated from increased piping system sales.

YEAR-TO-DATE SIX MONTHS ("YTD")

SALES - YTD net sales of $117.2 million increased 35% from $86.5 million for the prior-year YTD. Piping systems sales increased 86% or $37 million due to the aforementioned projects in the Middle East. Filtration products decreased by $6 million primarily due to reduced domestic demand for fabric filter bags.

GROSS PROFIT - Gross profit approximately doubled to $27 million from $14 million in the prior-year period due to the sales increase in piping systems.

EXPENSES - Operating expenses as a percent of sales decreased to 16% in the current year from 19% in the prior year. Operating expenses for the first half of the current year were $19 million, up from $17 million in the prior year. This dollar increase was due to management incentive compensation expense partially offset by reduced health insurance costs.

TAXES - The Company's consolidated effective tax rate from continuing operations was a negative 2.9% for the six months ended July 31, 2013, which was affected primarily by the release of the full valuation allowance related to the Company's deferred tax assets in Saudi Arabia.

NET INCOME - Net income was $15.5 million in 2013 compared to a net loss of $3.4 million in the comparable prior-year's period. Income rose due to the asset sale of Thermal Care, Inc., and the aforementioned improvement in sales and profit primarily related to piping systems growth.

BACKLOG - The Company's backlog from continuing operations has increased 61% or $46 million from July 31, 2012. The July 31, 2013 backlog rose $5 million or 4% to $121 million from January 31, 2013.

             
             
             
Backlog   July 31, 2013   January 31, 2013   July 31, 2012
  in millions            
Piping Systems   $100.7   $89.5   $63.4
Filtration Products   19.5   25.8   11.1
Corporate and Other   .3   .3   .4
    Total Backlog   $120.5   $115.6   $74.9
                 
                 
                 

Bradley Mautner, President and CEO, said, "The record second quarter results were led by the terrific performance of the Piping Systems business as the team continued delivery of products for the large scale projects in Saudi Arabia and the U.A.E. In addition, piping systems' bookings in the second quarter for offshore pre-insulated piping, sub-sea equipment and other activities increased the backlog $11 million from the beginning of this year. We expect our active marketing efforts continue to add to our project base for future quarters.

"As we have been reporting, the filtration products segment faces a very difficult market for fabric filters but with improved margins and cost controls, we were able to achieve a profit compared to a loss in the prior year's quarter. There are many initiatives under way to improve the Filtration segment, yet soft demand for fabric filters will continue to provide a headwind in the coming quarters.

"Finally, during the quarter we made the strategic decision to exit the HVAC business via the sale of substantially all of its assets, which consisted primarily of backlog on existing orders. The backlog for this business was previously reported in corporate and other. We believe the focus on major project driven needs for our piping systems and on consumables in filtration remain an excellent platform for our manufacturing activities going forward."

MFRI, Inc. is a company engaged in the manufacturing of pre-insulated specialty piping systems for oil and gas gathering, district heating and cooling as well as other applications and custom-designed industrial filtration products to remove particulates from dry gas streams.

Form 10-Q for the period ended July 31, 2013 will be accessible at www.sec.gov and www.mfri.com. For more information visit the Company's website or contact the Company directly.

Statements and other information contained in this announcement which can be identified by the use of forward-looking terminology such as "anticipate," "may," "will," "expect," "continue," "remain," "intend," "aim," "should," "prospects," "could," "position," "future," "potential," "believes," "plans," "likely," "seems," and "probable," or the negative thereof or other variations thereon or comparable 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. 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, 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.

                         
                         
                         
MFRI, INC. AND SUBSIDIARIES                        
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In 000's except per share data)
  Three Months Ended July 31,     Six Months Ended July 31,  
Operating Statement Information   2013     2012     2013     2012  
Net sales                                
Piping Systems   $ 43,478     $ 22,905     $ 79,536     $ 42,649  
Filtration Products     17,324       19,276       35,957       42,252  
Corporate and Other     863       701       1,756       1,603  
  Total   $ 61,665     $ 42,882     $ 117,249     $ 86,504  
Gross profit                                
Piping Systems   $ 10,590     $ 4,869     $ 21,034     $ 8,267  
Filtration Products     2,842       2,552       5,117       5,664  
Corporate and Other     261       162       509       398  
  Total   $ 13,693     $ 7,583     $ 26,660     $ 14,329  
Income (loss) from operations                                
Piping Systems   $ 6,493     $ 1,443     $ 11,873     $ 1,598  
Filtration Products     501       (292 )     18       (96 )
Corporate and Other     (2,224 )     (1,754 )     (4,231 )     (3,967 )
  Total   $ 4,770     $ (603 )   $ 7,660     $ (2,465 )
                                 
(Loss) income from joint venture     (172 )     69       (467 )     (177 )
Interest expense, net     403       353       840       658  
Income (loss) from continuing operations before income taxes     4,195       (887 )     6,353       (3,300 )
Income tax (benefit) expense     (241 )     350       (183 )     61  
                                 
Income (loss) from continuing operations     4,436       (1,237 )     6,536       (3,361 )
                                 
(Loss) income from discontinued operations, net of tax     (40 )     (120 )     8,941       (52 )
Net income (loss)   $ 4,396     $ (1,357 )   $ 15,477     $ (3,413 )
                                 
Weighted average number of common shares outstanding                                
  Basic     6,985       6,923       6,958       6,919  
  Diluted     7,054       6,923       6,985       6,919  
Earnings (loss) per share from continuing operations                                
  Basic   $ 0.64     $ (0.18 )   $ 0.94     $ (0.49 )
  Diluted   $ 0.63     $ (0.18 )   $ 0.94     $ (0.49 )
Earnings (loss) per share from discontinued operations                                
  Basic and diluted   $ (0.01 )   $ (0.02 )   $ 1.28     $ (0.01 )
Earnings (loss) per share                                
  Basic   $ 0.63     $ (0.20 )   $ 2.22     $ (0.49 )
  Diluted   $ 0.62     $ (0.20 )   $ 2.22     $ (0.49 )
                                   
                                   
                                   

See the Company's Form 10-Q for the period for notes to financial statements.
Note: Earnings per share calculations could be impacted by rounding.