June 12, 2015 08:30 ET

MFRI Reports 1Q15 Results; Backlog as of May 31, 2015 More Than Doubles to $99.3 Million Since January 31, 2015

NILES, IL--(Marketwired - Jun 12, 2015) - MFRI, Inc. (NASDAQ: MFRI)

  • Pre-tax loss of $4.6 million as 1Q15 sales declined to $38 million from $60 million in 1Q14, primarily due to timing of project-related Perma-Pipe orders
  • Backlog growth from new awards positions MFRI for improved full year

MFRI, Inc. (NASDAQ: MFRI) announced today financial results for the quarter ended April 30, 2015. The Company also announced that its backlog of orders as of May 31, 2015 reached $99.3 million, its highest level since July 31, 2013.

CEO Bradley Mautner commented, "As expected, the low backlog position of $47.1 million with which we began fiscal 2015 resulted in a very challenging first quarter. In recent months, with the award of a diverse set of projects in different geographies and for various applications, we have more than doubled our January 31, 2015 backlog to $99.3 million as of May 31, 2015, our highest level in almost two years. In the process, we believe we have successfully positioned MFRI for strong results in the second half of fiscal 2015/16 and an improved full year relative to fiscal 2014/15.

"Our Perma-Pipe subsidiary recently captured several oil & gas and mining projects in North America that, combined with the awards we received earlier this year for large-scale infrastructure needs in the Middle East, illustrate the diversity of our business and the confidence our customers have in our technology and capabilities."

Commenting on the new project awards, Fati Elgendy, President of Perma-Pipe, Inc., said, "We are very pleased that our North American customers have selected our proven XTRU-THERM® and AUTO THERM® GSPU insulation products for challenging applications in both onshore and offshore oil & gas and mining projects. The new assignments are further testimony to the high-quality products, services and on-time delivery Perma-Pipe's accomplished team of engineers, material scientists, managers and manufacturing personnel provide to demanding industries around the world."

John Carusiello, Division President of Perma-Pipe Oil & Gas, added, "Included in the new awards are the following projects, each of which we expect to begin processing in the second half of fiscal 2015 and expect to be substantially complete by fiscal year end:

  • Onshore Oil Transportation Pipeline: To enable the flow of viscous gas/oil, Perma-Pipe will supply approximately 36 miles (58 km) of heat traced insulated piping to connect two refining facilities in Louisiana. The project will enable our customer to integrate and optimize the operation of its facilities.

  • Offshore Oil Subsea Transportation Pipeline: Awarded by a repeat customer, the project will tie into a production system that currently constitutes the largest single insulated pipeline project in the Gulf of Mexico. Perma Pipe will again supply our AUTO THERM® Glass Syntactic Polyurethane (GSPU) deep water insulated product for a flow line and riser pipe that will be approximately 13 miles (21 km) long.

  • Saskatchewan Mining Project: We will insulate and jacket 9.5 miles (15 km) of cement-lined steel pipe that will transport a potash solution for a mining operation in Canada's Saskatchewan province."

Mr. Mautner continued, "In MFRI's filtration segment, year over year volume was essentially unchanged, but the operating profit was approximately $0.7 million less than in last year's first quarter. This variation primarily reflects the unfavorable financial impact of shipments for the large multi-year, low-margin fabric filter OEM project we discussed in prior announcements, which were not in the sales numbers for the prior-year period. We expect the softness in end markets for fabric filters to continue in 2015. On the pleated filter side, although we incurred start-up costs for our manufacturing facility in the Middle East, we performed generally as expected. We believe the pleated market will continue to improve as we gain traction in the Middle East, where we just began our first full year of operations. I am pleased to report that we recently secured our first orders for shipment later this year from our new United Arab Emirates ("U.A.E.") facility.

"In summary, we are optimistic that the significant order momentum we have been generating in the first half of 2015 and the major increase in backlog will offset the year's slow start, driving increased revenue and profitability for fiscal 2015. With more than $30 million of unused credit facilities and a debt to equity ratio of 0.45, the Company is well positioned to support the backlog expansion."


    May 31,   April 30,   Jan. 31,   April 30,
Consolidated Backlog ($ in thousands):   2015   2015   2015   2014
Piping Systems   $ 85,583   $ 66,388   $ 30,715   $ 44,716
Filtration Products     13,761     13,671     16,383     22,817
Total   $ 99,344   $ 80,059   $ 47,098   $ 67,533


During the quarter, MFRI repurchased approximately 45,000 shares of its common stock under the $2 million share repurchase program authorized in February 2015. The shares were repurchased at an average cost of $6.50 per share.


SALES - Net sales decreased 37% to $37.7 million in the current quarter, from $59.5 million in the prior-year quarter. Piping Systems sales decreased 52% or $22.1 million compared to the prior-year quarter due to lower volume in Saudi Arabia and the U.A.E. and lower volume of domestic oil and gas projects. Filtration sales increased 1% compared to the prior-year quarter.

GROSS PROFIT - Gross profit decreased to $4.0 million in the current quarter from $16.0 million in the prior-year quarter, mainly due to the sales volume decrease in Piping Systems. The gross margin decreased to 10.7% of net sales in the current quarter from 26.9% in the prior-year quarter and was also impacted by Filtration Products' customer mix and start-up costs for the new production facility in the U.A.E.

EXPENSES - Operating expenses decreased to $8.8 million in the current quarter from $10.3 million in the prior-year quarter due to lower management incentive compensation expense, partially offset by higher stock compensation expense and increased professional expenses.

PIPING SYSTEMS - Net sales decreased 52% to $20.3 million in the current quarter from $42.4 million in the prior-year quarter. The decrease reflects lower global and domestic volume.

Gross margin decreased to 12% of net sales in the current quarter from 32% of net sales in the prior-year quarter. Gross profit decreased due to lower volume. Operating expenses decreased to $3.8 million from $5.4 million due to lower management incentive compensation expense and lower professional costs.

FILTRATION PRODUCTS - Net sales increased 1% to $17.4 million in the current quarter from $17.2 million in the prior-year quarter. Gross profit decreased to $1.7 million from $2.5 million. Gross margin decreased to 10% in the current quarter from 15% in the prior-year quarter due to customer mix and start-up costs for the new production facility in the U.A.E.

Operating expenses decreased to $2.9 million in the current quarter from $3.1 million in the prior-year quarter. Reduced sales staffing, less promotional activities and lower professional costs contributed to the net decrease in expenses.

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. In total, MFRI has operations at 10 locations in six 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.

MFRI's Form 10-Q for the period ended April 30, 2015 will be accessible at and For more information, visit the Company's website or contact its investor relations representative, LHA.

(In thousands, except per share data)
    Three Months Ended
April 30,
    2015     2014  
Net sales                
  Piping Systems   $ 20,277     $ 42,354  
  Filtration Products     17,397       17,170  
    Total   $ 37,674     $ 59,524  
Gross profit                
  Piping Systems   $ 2,355     $ 13,458  
  Filtration Products     1,686       2,531  
    Total   $ 4,041     $ 15,989  
(Loss) income from operations                
  Piping Systems   $ (1,426 )   $ 8,017  
  Filtration Products     (1,230 )     (544 )
  Corporate     (2,144 )     (1,764 )
    Total   $ (4,800 )   $ 5,709  
Income (loss) from joint venture     165       (8 )
Interest (income) expense, net     (6 )     237  
(Loss) income from continuing operations before income taxes     (4,629 )     5,464  
Income tax expense     26       1,266  
(Loss) income from continuing operations     (4,655 )     4,198  
Loss from discontinued operations, net of tax     0       (371 )
Net (loss) income   $ (4,655 )   $ 3,827  
Weighted average common shares outstanding                
  Basic     7,252       7,177  
  Diluted     7,252       7,315  
(Loss) earnings per share from continuing operations                
  Basic   $ (0.64 )   $ 0.58  
  Diluted   $ (0.64 )   $ 0.57  
Loss per share from discontinued operations                
  Basic and diluted   $ 0.00     $ (0.05 )
(Loss) earnings per share                
  Basic   $ (0.64 )   $ 0.53  
  Diluted   $ (0.64 )   $ 0.52  
 Note: Earnings per share calculations could be impacted by rounding.                
(In thousands)   April 30, 2015   January 31, 2015
ASSETS   Unaudited    
Current assets        
  Cash and cash equivalents     10,718     10,508
  Restricted cash     423     428
  Trade accounts receivable, net     38,190     41,847
  Inventories, net     29,765     29,770
  Prepaid expenses and other current assets     6,296     5,049
    Total current assets     85,392     87,602
Property, plant and equipment, net of accumulated depreciation     42,131     41,486
Long-term assets            
  Note receivable from joint venture     3,814     3,931
  Investment in joint venture     8,680     8,514
  Other assets     5,084     7,005
    Total long-term assets     17,578     19,450
Total assets   $ 145,101   $ 148,538
Current liabilities            
  Trade accounts payable     15,072     11,072
  Accrued liabilities, compensation, incentives, and payroll taxes     19,334     13,770
  Current maturities of long-term debt     16,989     17,033
  Other current liabilities, including customer deposits     7,949     9,875
    Total current liabilities     59,344     51,750
Long-term liabilities            
  Long-term debt, less current maturities     12,424     12,603
  Other long-term liabilities     4,269     10,662
    Total long-term liabilities     16,693     23,265
Stockholders' equity            
    Total stockholders' equity     69,064     73,523
Total liabilities and stockholders' equity   $ 145,101   $ 148,538
(In thousands)   Three Months Ended April 30,  
    2015     2014  
Operating activities                
  Net (loss) income   $ (4,655 )   $ 3,827  
Adjustments to reconcile net (loss) income to net cash flows used in operating activities                
  Depreciation and amortization     1,423       1,433  
  Loss (gain) on disposal of discontinued operations     --       12  
  Deferred tax expense     1       612  
  Other, net     20       (462 )
Changes in operating assets and liabilities                
  Accounts receivable     3,500       (1,726 )
  Costs and estimated earnings in excess of billings on uncompleted contracts     (1,681 )     (2,313 )
  Accrued compensation and payroll taxes     5,782       (4,598 )
  Other assets and liabilities     (5,232 )     1,899  
Net cash used in operating activities     (842 )     (1,316 )
Investing activities                
  Capital expenditures, other investing activities     (2,034 )     (773 )
  Payments on loan from joint venture     331       --  
Net cash used in investing activities     (1,703 )     (773 )
Financing activities                
  Proceeds from debt     24,907       20,407  
  Payments of debt on revolving lines of credit, other     (23,191 )     (19,644 )
  Payments for repurchase of common stock     (290 )     --  
  Other financing     933       596  
Net cash provided by financing activities     2,359       1,359  
Effect of exchange rate changes on cash and cash equivalents     396       173  
Net increase (decrease) in cash and cash equivalents     210       (557 )
Cash and cash equivalents - beginning of period     10,508       13,395  
Cash and cash equivalents - end of period   $ 10,718     $ 12,838