Perma-Pipe International Holdings, Inc. (NASDAQ:PPIH) announced
today financial results for the third quarter ended October 31,
2017.
CEO David Mansfield commented, “Our third
quarter and year-to-date revenues both increased 9% from the levels
achieved in the corresponding periods last year. Although
relatively modest increases, they do provide us with further
confidence that the market is turning the corner in a positive
direction. It is notable that these increases occurred after
our revenues in the Middle East started to be negatively impacted
by the recent embargo of Qatar by the GCC countries, since this
prevented us from supplying to that market from our facilities in
the GCC.
“Earnings from continuing operations in the
quarter and year-to-date also reflect improvements versus the prior
year but we recognize that these are still not at a satisfactory
level, mostly due to the reduced levels of activity. In
addition, as we had advised last quarter, the operating results
continue to reflect reduced gross margins as we execute that part
of the backlog of projects that was secured under highly
competitive market conditions. We continue to drive down our
selling and general and administrative expenses, which over the
nine months are now at $15 million when excluding
non-recurring costs of $1.4 million for the current year.
“During the quarter, we secured new bookings at
a level close to our reported revenues, so the backlog remains near
the level at the prior quarter end. We continue to see that
there are positive indicators that the Middle East market is
gaining momentum and we secured meaningful contracts during the
quarter in that region while pursuing others of significance.”
Mr. Mansfield concluded, “Our positive outlook
for the trend of our markets remains unchanged and we expect the
continuation of a recovery. There has been a significant
increase in the level of activity in our production facility in the
UAE, where we have begun executing the large backlog of work, and
this should continue through the upcoming quarter. This is
despite recently experiencing client-driven delays in project
scheduling which will cause certain work to slip from Q4 this year
into Q1 next year.
“With a renewed customer-focused strategy we
have made positive gains in some of our markets, and we will
continue to build on these. We will also continue to strengthen our
processes to ensure that we further improve our competitive
position.”
BACKLOG($ in thousands)
October 31, 2017 |
July 31, 2017 |
January 31, 2017 |
$59,267 |
$62,662 |
$44,615 |
THIRD FISCAL QUARTER ENDED OCTOBER 31, 2017
SALES - Net sales increased 9% to $27.5 million
in the current quarter from $25.3 million in the prior-year
quarter. Higher revenues resulted from increased domestic oil
and gas business, an increase in district heating and cooling in
the U.S. educational sector and increased business with
distributors of coated pipe in Canada. Sales in the Middle
East were comparable to prior year, as fulfillment of higher order
volume in the backlog did not impact the current quarter due to
normal lead times for incoming pipe material.
GROSS PROFIT - Gross margin decreased to 12% of
net sales in the current quarter from 15% of net sales in the
prior-year quarter due to changes in the North American product mix
and competitive market conditions.
EXPENSES - Operating expenses increased by
$0.7 million in the current quarter from the prior-year
quarter. Excluding $0.8 million of one-time non-recurring
professional service expenses this quarter, operating expenses
decreased by $0.1 million.
PRETAX LOSS FROM CONTINUING OPERATIONS for the
current quarter increased to $2.5 million from
$1.3 million due to:
- lower gross profit due to changes in the product mix and
competitive market conditions;
- decreased sales in the Middle East; and
- one-time non-recurring professional services fees in this
quarter.
NINE MONTHS ENDED OCTOBER
31, 2017
SALES - Net sales increased 9%
to $77.9 million in the current year-to-date from
$71.2 million in the prior-year year-to-date. Higher
coating volumes for distributors in Canada and increased project
demand in the U.S. contributed to the increase.
GROSS PROFIT - Gross margin
decreased to 10% of net sales in the current year-to-date from 12%
of net sales in the prior-year year-to-date due to changes in the
product mix and executing lower margin projects in backlog.
EXPENSES - Operating expenses
decreased by $0.3 million in the current year-to-date from the
prior-year year-to-date. The prior-year year-to-date expenses
included one-time legal settlement expenses of
$0.8 million. The cumulative year-to-date expenses
include non-recurring expenses of approximately $1.1 million.
TAXES - The Company's worldwide
effective income tax rates (“ETR”) on continuing operations for
2017 and 2016 were 2.8% and (10.7)%, respectively. The change
in the ETR from the prior year to the current year was mainly due
to the change in foreign income and loss activities.
NET LOSS - Net loss decreased
to $8.5 million in the current year-to-date from $10.2 million in
the prior-year year-to-date. The contributing factors
were:
- increased coating volume from distributors in Canada;
- the prior-year year-to-date included a non-cash loss of $1.6
million from the consolidation of the Canadian joint venture;
- the prior-year year-to-date general and administrative expenses
included a one-time $0.8 million lawsuit settlement; and
- one-time non-recurring professional services fees in the
current year
Perma-Pipe International Holdings,
Inc. Perma-Pipe International Holdings is a global
leader in pre-insulated piping and leak detection systems for oil
and gas gathering, district heating and cooling, and other
applications. It uses its extensive engineering and fabrication
expertise to develop piping solutions that solve complex challenges
regarding the safe and efficient transportation of many types of
liquids. In total, Perma-Pipe has operations at seven
locations in five 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.
Perma-Pipe’s Form 10-Q for the period ended
October 31, 2017 will be accessible at
www.sec.gov and www.permapipe.com. For more information,
visit the Company's website or contact its investor relations
representative, LHA.
|
Perma-Pipe International Holdings, Inc. |
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) |
(In
thousands, except per share data) |
|
|
Three Months Ended October 31 |
|
Nine Months Ended October 31 |
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
|
Net sales |
$27,498 |
|
$25,302 |
|
|
$77,851 |
|
$71,230 |
|
Cost of sales |
|
24,178 |
|
|
21,605 |
|
|
|
69,688 |
|
|
62,561 |
|
Gross profit |
|
3,320 |
|
|
3,697 |
|
|
|
8,163 |
|
|
8,669 |
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
General and
administrative expense |
|
4,314 |
|
|
3,490 |
|
|
|
12,456 |
|
|
12,398 |
|
Selling expense |
|
1,297 |
|
|
1,382 |
|
|
|
3,920 |
|
|
4,236 |
|
Total operating
expenses |
|
5,611 |
|
|
4,872 |
|
|
|
16,376 |
|
|
16,634 |
|
|
|
|
|
|
|
Loss from
operations |
|
(2,291) |
|
|
(1,175) |
|
|
|
(8,213) |
|
|
(7,965) |
|
|
|
|
|
|
|
Loss on consolidation
of joint venture |
|
— |
|
|
— |
|
|
|
— |
|
|
(1,620) |
|
|
|
|
|
|
|
Interest expense,
net |
|
193 |
|
|
112 |
|
|
|
507 |
|
|
435 |
|
Loss from continuing
operations before income taxes |
|
(2,484) |
|
|
(1,287) |
|
|
|
(8,720) |
|
|
(10,020) |
|
|
|
|
|
|
|
Income tax expense
(benefit) |
|
808 |
|
|
2,411 |
|
|
|
(241) |
|
|
1,077 |
|
|
|
|
|
|
|
Loss from continuing
operations |
|
(3,292) |
|
|
(3,698) |
|
|
|
(8,479) |
|
|
(11,097) |
|
|
|
|
|
|
|
(Loss) income from
discontinued operations, net of tax |
|
— |
|
|
(203) |
|
|
|
— |
|
|
906 |
|
|
|
|
|
|
|
Net loss |
($3,292) |
|
($3,901) |
|
|
($8,479) |
|
($10,191) |
|
Weighted average common
shares outstanding |
|
|
|
|
|
Basic and
diluted |
|
7,714 |
|
|
7,541 |
|
|
|
7,668 |
|
|
7,457 |
|
|
|
|
|
|
|
Loss per share from
continuing operations |
|
|
|
|
|
Basic and
diluted |
($0.43) |
|
($0.49) |
|
|
($1.11) |
|
($1.49) |
|
Loss (earnings) per
share from discontinued operations |
|
|
|
|
|
Basic and
diluted |
$— |
|
($0.03) |
|
|
$— |
|
$0.12 |
|
Loss per share |
|
|
|
|
|
Basic and
diluted |
($0.43) |
|
($0.52) |
|
|
($1.11) |
|
($1.37) |
|
|
|
|
|
|
|
Note:
Earnings per share calculations could be impacted by rounding. |
|
|
|
|
|
Perma-Pipe International Holdings, Inc. |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
(In thousands) |
October 31,
2017(Unaudited) |
January 31, 2017 |
ASSETS |
|
|
Current
assets |
|
|
Cash,
cash equivalents |
$8,373 |
$7,603 |
Restricted cash |
|
898 |
|
1,098 |
Trade
accounts receivable, net |
|
28,884 |
|
31,271 |
Inventories, net |
|
14,005 |
|
13,565 |
Prepaid
expenses and other current assets |
|
5,474 |
|
4,287 |
Total current assets |
|
57,634 |
|
57,824 |
Property, plant and
equipment, net of accumulated depreciation |
|
34,882 |
|
36,275 |
Long-term
assets |
|
|
Goodwill |
|
2,317 |
|
2,279 |
Other
assets |
|
5,850 |
|
5,233 |
Total long-term assets |
|
8,167 |
|
7,512 |
Total
assets |
$100,683 |
$101,611 |
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
Current
liabilities |
|
|
Trade
accounts payable |
$9,462 |
$10,901 |
Accrued
compensation, incentives, and payroll taxes liabilities |
|
4,499 |
|
6,081 |
Current
maturities of long-term debt |
|
10,306 |
|
4,471 |
Other
current liabilities, including customer deposits |
|
11,412 |
|
8,595 |
Total current liabilities |
|
35,679 |
|
30,048 |
Long-term
liabilities |
|
|
Long-term
debt, less current maturities |
|
7,577 |
|
7,258 |
Other
long-term liabilities |
|
5,014 |
|
4,892 |
Total long-term liabilities |
|
12,591 |
|
12,150 |
Stockholders'
equity |
|
|
Total stockholders' equity |
|
52,413 |
|
59,413 |
Total
liabilities and stockholders' equity |
$100,683 |
$101,611 |
Perma-Pipe International Holdings, Inc. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited) |
|
(In thousands) |
Nine months ended October
31 |
|
|
2017 |
|
|
2016 |
Operating
activities |
|
|
Net
loss |
($8,479) |
|
($10,191) |
Adjustments to
reconcile net loss to net cash flows used in operating
activities |
|
|
Depreciation and amortization |
|
3,772 |
|
|
4,258 |
Loss on
consolidation of joint venture |
|
— |
|
|
1,620 |
Gain on
disposal of discontinued operations |
|
— |
|
|
(186) |
Other,
net |
|
(65) |
|
|
882 |
Changes in
operating assets and liabilities |
|
|
Accounts
receivable |
|
2,989 |
|
|
14,860 |
Accrued
compensation and payroll taxes |
|
(1,633) |
|
|
(9,047) |
Other
assets and liabilities |
|
(777) |
|
|
(8,374) |
Net cash used
in operating activities |
|
(4,193) |
|
|
(6,178) |
|
|
|
Investing
activities |
|
|
Acquisition of interest in subsidiary, net of cash acquired |
|
— |
|
|
(4,672) |
Proceeds
from surrender of corporate-owned life insurance policies |
|
— |
|
|
1,894 |
Capital
expenditures |
|
(2,082) |
|
|
(1,544) |
Proceeds
from sales of marketable securities |
|
142 |
|
|
— |
Proceeds
from sales of property and equipment |
|
1 |
|
|
13,962 |
Net cash (used in)
provided by investing activities |
|
(1,939) |
|
|
9,640 |
|
|
|
Financing
activities |
|
|
Proceeds
from debt |
|
31,652 |
|
|
38,956 |
Payments
of debt on revolving lines of credit, other |
|
(25,584) |
|
|
(51,313) |
Other
financing |
|
(50) |
|
|
179 |
Net cash
provided by (used in) financing activities |
|
6,018 |
|
|
(12,178) |
|
|
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash |
|
684 |
|
|
(285) |
Net increase
(decrease) in cash, cash equivalents and restricted
cash |
|
570 |
|
|
(9,001) |
Cash, cash equivalents
and restricted cash - beginning of period |
|
8,701 |
|
|
18,955 |
Cash, cash
equivalents and restricted cash - end of period |
$9,271 |
|
$9,954 |
COMPANY: Perma-Pipe International Holdings, Inc.
CONTACTS:
David Mansfield, President & CEO
(847) 966-1000
Harriet Fried / Jody Burfening
LHA
(212) 838-3777
hfried@lhai.com
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