MFRI, INC. AND SUBSIDIARIES
Condensed Statements of Operations and Related Data (Unaudited)
Three Months Ended Nine Months Ended
(In 000's except per share data) October 31, October 31,
Operating Statement Information 2010 2009 2010 2009
-------- -------- -------- --------
Net sales
Piping Systems $ 31,073 $ 25,704 $ 89,449 $ 90,887
Filtration Products 21,159 17,481 61,318 59,221
Industrial Process Cooling 6,022 5,934 18,529 16,550
Corporate and Other 583 3,467 1,278 14,613
-------- -------- -------- --------
Total 58,837 52,586 170,574 181,271
-------- -------- -------- --------
Gross profit
Piping Systems 9,181 8,506 25,451 33,963
Filtration Products 2,912 2,147 7,990 6,007
Industrial Process Cooling 1,498 1,296 4,899 3,799
Corporate and Other (36) 541 (290) 2,077
-------- -------- -------- --------
Total 13,555 12,490 38,050 45,846
-------- -------- -------- --------
Income (loss) from operations
Piping Systems 5,601 5,398 14,524 22,214
Filtration Products 120 (889) (913) (2,984)
Industrial Process Cooling (53) (471) 128 (1,254)
Corporate and Other (2,650) (2,227) (8,058) (6,511)
-------- -------- -------- --------
Total 3,018 1,811 5,681 11,465
Income (loss) from joint venture 695 40 574 (66)
Interest expense, net 371 371 1,060 1,589
-------- -------- -------- --------
Income before income taxes 3,342 1,480 5,195 9,810
Income tax benefit (223) 785 (768) (642)
-------- -------- -------- --------
Net income $ 3,565 $ 695 $ 5,963 $ 10,452
======== ======== ======== ========
Weighted average common shares
outstanding
Basic 6,842 6,826 6,839 6,820
Diluted 6,842 6,856 6,865 6,852
Earnings per share:
Basic $ 0.52 $ 0.10 $ 0.87 $ 1.53
Diluted 0.52 0.10 0.87 1.53
October 31, January 31,
Backlog: 2010 2010
----------- -----------
Piping Systems $ 39,678 $ 48,770
Filtration Products 20,027 21,397
Industrial Process Cooling 4,306 2,377
Corporate and Other 11,089 788
----------- -----------
Total $ 75,100 $ 73,332
=========== ===========
See the Company's Form 10-Q for the period for notes to financial
statements.
MFRI Reports Third Quarter Sales Up 11.9% and Net Income Up Sharply From Corresponding Period Last Year
| Source: MFRI
NILES, IL--(Marketwire - December 10, 2010) - MFRI, Inc. (NASDAQ : MFRI ) announced today sales
and earnings for the quarter and nine months ended October 31, 2010. Third
quarter net sales increased 11.9% to $58.8 million, from $52.6 million in
the corresponding quarter of the prior year; net income was $3.6 million or
$0.52 per diluted share, compared to net income of $0.7 million or $0.10
per diluted share, in the prior-year's quarter.
THIRD QUARTER:
SALES -- Sales increased 11.9% to $58.8 million, from $52.6 million for the
prior-year's quarter. Sales increased in all reportable segments.
GROSS PROFIT -- Gross profit for the quarter increased to $13.6 million or
23.0% of sales from $12.5 million or 23.8% of sales in the corresponding
prior year's quarter. Gross profit increased in all reportable segments.
EXPENSES -- Operating expenses decreased to $10.5 million or 17.9% of sales
from $10.7 million or 20.3% of sales in the prior year's period. The
decrease in expenses was primarily due to staffing reductions and expense
control measures.
NET INCOME -- Net income rose to $3.6 million or $0.52 per diluted share,
compared to net income of $0.7 million or $0.10 per diluted share in the
prior-year's quarter, primarily due to the increase in sales and income
from the joint venture. The annual effective income tax rate was less than
the statutory U. S. federal income tax rate mainly due to the impact of
income tax free earnings in the United Arab Emirates ("U.A.E.").
YEAR-TO-DATE (NINE MONTHS):
SALES -- Sales for the nine months ended October 31, 2010 were $170.6
million, 5.9% less than the $181.3 million for the prior-year's first nine
months. Year-to-date sales increased in the industrial process cooling and
filtration products businesses while slightly decreasing (1.6%), in the
piping systems business. The prior year's period for the piping systems
business included higher sales related to the India pipeline project,
completed in the fall of 2009, and a stronger Dubai market. The heating,
ventilating and air conditioning ("HVAC") business, included in Corporate
and Other, decreased in the current year, primarily because new
construction activity was adversely affected by the soft economy.
GROSS PROFIT -- Year-to-date gross profit decreased to $38.1 million or
22.3% of sales from $45.8 million or 25.3% in the prior year. Gross profit
decline occurred in the piping systems business, due primarily to reduced
volume in the U.A.E. and the completion of the large project in India, and
in the HVAC business, due to the slowdown in local construction activity.
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 volume and margin
and contributed towards reversing the operating losses of recent years for
the continuing activities.
EXPENSES -- Year-to-date operating expenses decreased to $32.4 million, or
19.0% of sales, in 2010 from $34.4 million, also 19.0% of sales, in the
corresponding period in 2009, primarily due to lower profit-based
management incentives, lower legal expenses, reduced costs in connection
with staff reductions and an absence of foreign exchange losses, partially
offset by an increase in deferred compensation expense and South African
closing costs.
NET INCOME -- Net income was $6.0 million or $0.87 diluted earnings per
share, compared to $10.5 million or $1.53 diluted earnings per share in the
prior-year period. This decrease was primarily due to the lower volume of
the piping systems business related to reduced economic activity in the
U.A.E., the completion of the India pipeline project in 2009, and sharply
reduced profits from the HVAC activities because of the decline in
construction activity in the Chicago area. The annual effective income tax
rate was less than the statutory U. S. federal income tax rate mainly due
to the impact of income tax free earnings in the U.A.E.
CURRENT STATUS:
BACKLOG -- The Company's backlog on October 31, 2010 was $75.1 million, an
increase of 2.4% from January 31, 2010, principally the result of increased
activity in the U.S. Much of this backlog is not expected to result in
sales until the second or third quarter next year, postponing any profit
realization on those contracts until after the first quarter of 2011.
PIPING SYSTEMS -- In the fall of 2009, the Company completed its work
insulating a 600 kilometer (370 mile) hot 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 substantially completed by the end of the third quarter 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"). Piping systems' domestic sales and earnings are seasonal,
typically higher during the second and third quarters due to favorable
weather for construction over much of North America, and are
correspondingly lower during the first and fourth quarters.
FILTRATION PRODUCTS -- Industrial markets show some improvement, which was
indicated by a 21.0% increase in net sales and a 35.6% increase in gross
profit from the prior-year's third quarter. The third quarter resulted in
operating income of $120,000 compared to an operating loss of $889,000 in
last year's third quarter. Year-to-date sales rose 3.5%, and the operating
loss was reduced by 69.4%. Excluding the South African operating losses
and closing costs, the filtration products business year-to-date operating
loss would have had a small operating profit. The Company intends to
continue to invest in new product development and geographic expansion to
improve its competitive position in this very challenging climate.
INDUSTRIAL PROCESS COOLING -- Market conditions for industrial process
cooling also show some signs of improvement. Net sales grew 1.5% for the
quarter and 12.0% year-to-date versus last year. Gross profit grew 15.6%
and the gross margin percentage improved 3.1 percentage points from last
year's third quarter. This improvement, coupled with expense control,
resulted in a modest profit for the nine months. 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, "Maintaining our diversified product mix and
geographic view has helped mitigate some of the effects of a difficult
economic climate. We believe market conditions will remain challenging for
some time. We plan to 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, to capture a
greater share of the growing market in that country and nearby GCC."
Brad Mautner, President and COO, said, "We are happy to report that the
third quarter continued to deliver year-over-year operating profit
improvement in both the industrial process cooling and filtration segments.
The piping systems segment also showed modest operating profit growth even
though margins were lower than the prior year's quarter due to pricing
pressures in the U.A.E., U.S. and ongoing development expenses for
expansion into Saudi Arabia. The expected timing for work in the backlog
coupled with the usual winter slow period for piping systems is anticipated
to produce another difficult fourth quarter, but we expect results better
than last year. Given a slowly improving U.S. business climate and a
backlog with some large projects due for execution next year, 2011 shows
promise for improvement compared to 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-Q for the period ended October 31, 2010 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," "promise," 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.