NILES, IL--(Marketwire - Apr 14, 2011) - MFRI, Inc. (NASDAQ: MFRI) announced today sales and earnings for the fiscal year ended January 31, 2011 ("2010"). The Company's net sales in 2010 were $218.6 million, 5.1% less than $230.4 million for the prior year; net income in 2010 was $4.5 million or $0.66 per diluted share, compared to $4.7 million or 0.68 per diluted share, in the prior year.
The Company also announced that fourth quarter 2010 sales were $48.0 million, 2.2% less than $49.1 million for the prior-year's fourth quarter. Net loss for the fourth quarter was $1.5 million or $(0.21) per share, compared to a net loss of $5.8 million or $(0.85) per share, in the prior-year period.
FISCAL YEAR ENDED 1/31/2011
SALES -- Sales were $218.6 million, 5.1% less than $230.4 million for the prior year. Sales increased in the industrial process cooling and filtration products businesses while decreasing in the piping systems business. Corporate and other decreased in the current year; however, the backlog for this business increased by $9.0 million in the year.
GROSS PROFIT -- Gross profit of $44.5 million in 2010 decreased 14.4% from $51.9 million in 2009. Gross margin was 20.3% compared to 22.5% in 2009. Virtually the entire gross profit decline occurred in piping systems, which decreased to $27.3 million in 2010 from $38.0 million in 2009. The decrease in gross profit was attributed primarily to lower volume of the piping systems business in the United Arab Emirates ("U.A.E.") and the completion of the India pipeline project. The filtration products and industrial process cooling businesses each experienced an increase in their gross profit for the period. This increase in gross profit was primarily due to increased sales volume, margin improvements and benefits from previous expense reduction initiatives.
EXPENSES -- Operating expenses decreased to $41.6 million or 19.0% of sales from $44.7 million or 19.4% of sales in the prior year. The reduction was mainly due to lower profit-based management incentive compensation expense, lower legal expenses and reduced foreign exchange loss in the current year partially offset by an increase in deferred compensation expense.
NET INCOME -- Net income was level at $4.5 million. Included in 2010 results are pre-tax $1.1 million in operating losses and closing costs from our now closed filter bag operation in South Africa. The effective income tax rate was less than the statutory U. S. federal income tax rate mainly due to the impact of tax-free foreign income in the U.A.E.
FOURTH QUARTER
SALES -- Sales for the fourth quarter compared to the prior-year's quarter increased in the industrial process cooling and filtration products businesses while decreasing in the piping systems business. The piping systems business experienced dramatically weaker market conditions in Dubai.
GROSS PROFIT -- Gross profit for the quarter increased to $6.4 million or 13.3% of sales from $6.1 million or 12.4% in the prior-year's quarter. This increase in gross profit was due to cost containment efforts, improved product mix, lower warranty costs and the benefit of higher volume leveraged against reduced fixed costs in the industrial process cooling and filtration products businesses.
EXPENSES -- Operating expenses decreased to $9.2 million or 19.2% of sales in the fourth quarter of 2010 from $10.4 million or 21.2% of sales in the prior-year's quarter. The decrease was mainly due to lower profit-based management incentive compensation expense.
NET LOSS -- The fourth quarter produced a net loss of $1.5 million or $(0.21) per share, significantly better than the net loss of $5.8 million or $(0.85) per share, in the prior-year's quarter. The filtration products and industrial process cooling businesses and the piping systems joint venture drove this improvement.
CURRENT STATUS:
BACKLOG -- The Company's backlog on January 31, 2011 was $80.5 million, up $7.13 million or 9.7% from January 31, 2010. The rise in the backlog is the result of increased activity in the U.S.
PIPING SYSTEMS -- In the fall of 2009, the Company completed its work insulating a 600 kilometer (370 mile) heated oil pipeline project in India. The Company received an additional order in January 2010, to insulate and jacket approximately 150 kilometers (93 miles) of additional pipe for the same project. Production of this material began in the second quarter of 2010 and was completed by the end of 2010. A poor economic climate, particularly in Dubai, has been a major cause of our decreased business activity in the Gulf Cooperation Council countries ("GCC"). Domestic sales and earnings are seasonal, typically lower during the fourth and first quarters due to unfavorable weather for construction over much of North America and are correspondingly higher during the second and third quarters.
FILTRATION PRODUCTS -- Industrial markets show some improvement, which was indicated by a 10.3% increase in net sales and a 231.1% increase in gross profit from the prior-year's fourth quarter. The fourth quarter resulted in an operating loss of $422 thousand compared to an operating loss of $2.3 million in last year's fourth quarter. Year-to-date sales rose 5.3% and the operating loss was reduced by 74.8%. Excluding the South African operating losses and closing costs, the filtration products business full year's operating loss would have had been $313 thousand.
INDUSTRIAL PROCESS COOLING -- Market conditions for industrial process cooling also show some signs of improvement. Net sales grew 46% for the quarter and 20.2% for the full year versus last year. Gross profit grew 82.2% and the gross margin percentage improved 4.1 percentage points from last year. This improvement, coupled with expense control, resulted in a modest profit for the year. Quoting activity and recent orders show increased strength over the past several quarters, both domestically and internationally, but market conditions remain uncertain.
David Unger, CEO, commented, "We believe that maintaining our diversified product mix and geographic reach during the difficult economic climate of recent years has benefited our Company. In the first quarter of 2011, new orders in North America and Europe show improvement over prior periods. We will continue to make strategic investments to facilitate growth for the long term. One example is our recently announced initiative to establish a pipe insulation facility in Saudi Arabia. This new factory is now under construction and we expect operations to begin during the third or fourth quarter of 2011. We are already bidding work to be processed in this new facility. With this plant in place we expect to capture a greater share of the growing market in Saudi Arabia and other nearby GCC countries." The Company continues to make a focused and successful effort to maximize operating cash flow. Overall cash provided by operations was $8.7 million.
Brad Mautner, President and COO, said, "Consistent with our expectations, the fourth quarter was much improved compared to last year. In particular, there was continued year-over-year improvement in our filter and process cooling segments for both the fourth quarter and full year. These two units have worked hard during difficult times to get the most out of soft market conditions. The piping systems business delivered a strong operating profit during a year that contained significantly less large project revenue than 2009. A good part of 2011 will be dedicated to repositioning the piping business focus to capture the developing infrastructure needs of the Middle East outside of Dubai, while at the same time increasing participation in oil and gas development in the Americas. We believe our strategy of maintaining diversity in our products and markets is serving us well by helping to minimize the impact of slow economic recovery and unpredictable events around the world. Absent some large scale reversal in the current modest economic recovery, we continue to believe that 2011 will be better than 2010."
MFRI, Inc. is a multi-line company engaged in the following businesses: pre-insulated specialty piping systems for oil and gas gathering, district heating and cooling and other applications; custom-designed industrial filtration products to remove particulates from dry gas streams; industrial process cooling equipment to remove heat from molding, printing and other industrial processes; and installation of heating, ventilation and air conditioning for large buildings.
Form 10-K for the period ended January 31, 2011 will be accessible at http://www.sec.gov/. For more information visit the Company's website www.mfri.com 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
Condensed Statements of
Operations and Related Data
(Audited) (In 000's except per Three Months Ended Fiscal Year Ended
share data) January 31, January 31,
Operating Statement Information 2011 2010 2011 2010
--------- --------- --------- ---------
Net sales:
Piping Systems $ 15,110 $ 20,778 $ 104,559 $ 111,665
Filtration Products 23,815 21,598 85,133 80,819
Industrial Process Cooling
Equipment 7,690 5,268 26,220 21,818
Corporate and Other 1,409 1,466 2,686 16,079
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Total 48,024 49,110 218,598 230,381
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Gross profit:
Piping Systems 1,852 4,011 27,303 37,974
Filtration Products 2,404 726 10,394 6,733
Industrial Process Cooling
Equipment 2,146 1,178 7,044 4,977
Corporate and Other 6 185 (283) 2,262
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Total 6,408 6,100 44,458 51,946
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Income (loss) from operations
Piping Systems (693) 185 13,831 22,399
Filtration Products (422) (2,306) (1,335) (5,290)
Industrial Process Cooling
Equipment 167 (681) 295 (1,935)
Corporate and Other (1,836) (1,466) (9,893) (7,977)
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Total (2,784) (4,268) 2,898 7,197
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Income from joint venture 409 87 983 21
Interest expense - net 201 323 1,261 1,912
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(Loss) income before income
taxes (2,576) (4,504) 2,620 5,306
Income taxes (1,123) 1,277 (1,890) 635
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Net (loss) income $ (1,453) $ (5,781) $ 4,510 $ 4,671
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Weighted average common shares
outstanding
Basic 6,850 6,835 6,842 6,824
Diluted 6,850 6,835 6,850 6,855
Earnings per share:
Basic $ (0.21) $ (0.85) $ 0.66 $ 0.68
Diluted (0.21) (0.85) 0.66 0.68
Backlog: 1/31/11 10/31/10 1/31/10
-------- -------- --------
Piping Systems $ 46,452 $ 39,678 $ 48,770
Filtration Products 19,935 20,027 21,397
Industrial Process Cooling Equipment 4,332 4,306 2,377
Corporate and Other 9,751 11,089 788
-------- -------- --------
Total Backlog $ 80,470 $ 75,100 $ 73,332
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See the Company's Form 10-K for the period for notes to financial statements.