SOURCE: MFRI

MFRI

December 09, 2013 08:00 ET

MFRI Announces Record Third-Quarter 2013 EPS of $0.95 From Continuing Operations

NILES, IL--(Marketwired - Dec 9, 2013) - MFRI, Inc. (NASDAQ: MFRI)

  • Net sales of $58 million rise 23% compared to 3Q12
  • Net income from continued operations rises to $6.8 million from
    $4.4 million in prior quarter 2Q13
  • Q3 EPS of $1.03 and YTD EPS of $3.25, including discontinued operations

MFRI, Inc. (NASDAQ: MFRI) announced today financial results for the third quarter and nine months ended October 31, 2013.

President and CEO Bradley Mautner commented, "MFRI turned in a strong year-over-year performance in the third quarter. Our sales and earnings increases were driven by Piping Systems, where our customers requested that we expedite orders in our backlog for key projects in Saudi Arabia and the United Arab Emirates ('U.A.E.'). The development work and start-up investments we made in 2011 and 2012 have proven very successful, demonstrating our ability to identify, win and effectively execute on major business opportunities worldwide and generate strong earnings for MFRI.

"The demand environment for Piping Systems remains active and we are now pursuing a wide variety of promising opportunities worldwide of varying size and duration with the aim of diversifying our business from a product, project and geographic point of view. We are also pursuing certain ventures that offer the potential over the long term to replicate the success we have had in the Middle East. In the near term, we do expect fourth-quarter revenue and earnings to be lower than the third quarter's as we fulfill orders at a moderated pace relative to the unusually fast pace of recent quarters. This trend illustrates the variability in the timing of the projects we win and execute."

Mr. Mautner continued, "As expected, the business environment for certain filtration products continues to be challenging. Over the past year, we have implemented many initiatives to resize our fabric filter business and lower manufacturing costs in all our plants, which enabled us to contain the quarterly operating loss for Filtration Products even as revenue declined. While maintaining margin and expense controls, we are also focused on developing sales opportunities that should strengthen this segment of our business."

THIRD FISCAL QUARTER ENDED OCTOBER 31, 2013

SALES - Net sales increased 23% to $58 million from $47.2 million in the 2012 quarter. Piping Systems sales increased 60% or $15.8 million mainly due to sales growth in Saudi Arabia and the U.A.E. for such major projects as expanding the Grand Mosque in Mecca and the King Abdul-Aziz International Airport in Jeddah. Filtration Products sales decreased by $5 million due primarily to reduced domestic demand for fabric filter bags.

GROSS PROFIT - Gross profit approximately doubled to $16.9 million from $8.7 million in the prior-year quarter mainly due to the sales increase in Piping Systems. Filtration Products' gross profit decreased 17.4%, resulting from a 24% decline in sales.

EXPENSES - Operating expenses of $10.5 million, compared to $8.5 million in the prior-year quarter, remained constant at approximately 18% of net sales.

NET INCOME - Third-quarter net income rose to $7.4 million compared to $0.5 million in the prior-year's quarter. Income rose primarily due to the gross profit generated from increased Piping System sales.

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

SALES - YTD net sales of $173.5 million increased 31% from $132.1 million for the prior-year period. Piping Systems sales increased 76%, or $53 million, due to the previously mentioned projects in Saudi Arabia. Filtration Products decreased by $11 million due primarily to reduced domestic demand for fabric filter bags.

GROSS PROFIT - Gross profit approximately doubled to $43 million from $23 million in the prior-year period due to increased Piping System sales.

EXPENSES - General and administrative expenses were $20.8 million or 12.0% of net sales versus $17.5 million or 13.2% of net sales in the prior-year period. Improved performance led to increased incentive compensation expense partially offset by reduced health insurance costs.

TAXES - The Company's consolidated effective tax rate from continuing operations was a negative 0.7% for the nine months ended October 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 $22.9 million in the nine months ended October 31, 2013 compared to a net loss of $3 million in the comparable prior-year's period. Income rose due to the asset sale of Thermal Care, Inc., and the previously mentioned improvement in gross profit primarily related to Piping Systems.

BACKLOG

The Company's backlog from continuing operations increased 9.3% or $8 million from October 31, 2012. The decrease in backlog between January 31, 2013 and October 31, 2013 primarily reflects the execution of the Company's large-scale Piping projects in Saudi Arabia and the U.A.E.

             
Backlog   October 31, 2013   January 31, 2013   October 31, 2012
in millions            
Piping Systems   $70.0   $89.5   $76.2
Filtration Products   24.0   25.8   9.8
  Total Backlog   $94.0   $115.3   $86.0
               

MFRI, Inc.

MFRI, Inc. manufactures pre-insulated specialty piping systems for oil and gas gathering, district heating and cooling as well as other applications. The Company also manufactures custom-designed industrial filtration products to remove particulates from air and other gas streams.

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

                         
MFRI, INC. AND SUBSIDIARIES                        
CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited) (In 000's except per share data)   Three Months Ended October 31,     Nine Months Ended October 31,  
Operating Statement Information   2013     2012     2013     2012  
Net sales                                
Piping Systems   $ 42,289     $ 26,498     $ 121,825     $ 69,147  
Filtration Products     15,678       20,738       51,635       62,990  
  Total   $ 57,967     $ 47,236     $ 173,460     $ 132,137  
Gross profit                                
Piping Systems   $ 14,726     $ 6,060     $ 35,760     $ 14,327  
Filtration Products     2,161       2,616       7,277       8,280  
  Total   $ 16,887     $ 8,676     $ 43,037     $ 22,607  
Income (loss) from operations                                
Piping Systems   $ 9,403     $ 2,585     $ 21,276     $ 4,184  
Filtration Products     (486 )     (410 )     (468 )     (505 )
Corporate     (2,537 )     (1,990 )     (6,715 )     (6,516 )
  Total   $ 6,380     $ 185     $ 14,093     $ (2,837 )
                                 
Income from joint venture     715       531       248       354  
Interest expense, net     190       513       1,082       1,148  
Income (loss) from continuing operations before income taxes     6,905       203       13,259       (3,631 )
                                 
Income tax expense (benefit)     92       74       (99 )     159  
                                 
Income (loss) from continuing operations     6,813       129       13,358       (3,790 )
                                 
Income from discontinued operations, net of tax     578       326       9,510       832  
Net income (loss)   $ 7,391     $ 455     $ 22,868     $ (2,958 )
                                 
Weighted average number of common shares outstanding                                
  Basic     7,068       6,924       6,995       6,921  
  Diluted     7,163       6,924       7,041       6,921  
Earnings (loss) per share from continuing operations                                
  Basic   $ 0.96     $ 0.02     $ 1.91     $ (0.55 )
  Diluted   $ 0.95     $ 0.02     $ 1.90     $ (0.55 )
Earnings per share from discontinued operations                                
  Basic   $ 0.08     $ 0.05     $ 1.36     $ 0.12  
  Diluted   $ 0.08     $ 0.05     $ 1.35     $ 0.12  
Earnings (loss) per share                                
  Basic   $ 1.05     $ 0.07     $ 3.27     $ (0.43 )
  Diluted   $ 1.03     $ 0.07     $ 3.25     $ (0.43 )
                                   

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.