Perma-Pipe International Holdings, Inc. Announces Fourth Quarter and Fiscal 2020 Financial Results

15 April 2021

Perma-Pipe International Holdings, Inc. Announces Fourth Quarter and Fiscal 2020 Financial Results

Company Release – 4/15/2021 4:15 PM ET

  • Net sales of $21.3 million for the quarter and $84.7 million for the year
  • Net loss of $2.5 million for the quarter and $7.6 million for the year
  • Backlog of $52.6 million at January 31, 2021

NILES, Ill.–(BUSINESS WIRE)– Perma-Pipe International Holdings, Inc. (NASDAQ: PPIH) announced today financial results for the fourth quarter and 2020 fiscal year ended January 31, 2021.

“Revenue for the fourth quarter was $21.3 million, $11.0 million below the same quarter last year, and net loss was $2.5 million compared to a net income of $1.5 million in the same quarter of 2019. For the year ended January 31, 2021, revenues of $84.7 million were $42.9 million below the prior year. The resulting net loss of $7.6 million compares to a prior year net income of $3.6 million,” noted President and CEO David Mansfield.

“The negative impact on the Company’s results due to the impact of the COVID-19 pandemic and the reduction in capital spending in the oil and gas industry continued into the fourth quarter. This past year has been an extremely challenging one, presenting many obstacles that were never anticipated. Most of the adverse conditions for the Company arose as a result of delays to clients’ construction schedules, which has resulted in the postponement of project executions into 2021. The effect of the pandemic on our markets has continued longer than we had hoped and it has been significant. Our revenues reduced by over 30% versus 2019. This required us to reconfigure our fixed cost base, which we did successfully, allowing us to retain our capabilities to be available for the expected recovery.

“The development and rapid distribution of vaccines is considered to indicate a major step in a ‘return to normal’. Indeed, the indications of a recovery appear to be reflected recently in an increased level of business development activity and an increase in our backlog. Numerous projects that have been delayed are now moving forward, and it is our expectation that we are commencing a period when we can finally resume execution on projects and begin recovering the position that has been lost. Our backlog currently stands at $52.6 million, which reflects an increase of $5.8 million from the backlog at January 31, 2020. The fourth quarter saw an increase in backlog of almost $8 million, including some large project awards in the UAE, India and Saudi Arabia,” Mr. Mansfield continued.

“Until our levels of activity fully resumes, we will continue to carefully manage costs and capital expenditures, while balancing the ability to be able to take advantage of the market opportunities we foresee,” concluded Mr. Mansfield.

Fourth Quarter Fiscal 2020 Results

Net sales decreased 34% to $21.3 million in the fourth quarter from $32.3 million in the prior year quarter. This decrease was a result of lower sales volumes driven by the impact of lower oil prices, combined with project delays arising as a result of the COVID-19 pandemic. The Company expects these delayed projects to commence in 2021.

Gross profit decreased to 11% of net sales, or $2.4 million in the fourth quarter, from 22% of net sales, or $7.0 million, in the prior year quarter. This decrease was driven primarily by lower sales volumes.

General and administrative expenses decreased to $3.9 million in the fourth quarter, compared to $5.0 million in the prior year quarter. This 22% decrease was due primarily to cost cutting measures enacted as a result of the COVID-19 pandemic.

Selling expenses were flat at $1.2 million in both the fourth quarter and prior year’s quarter.

Net interest expense decreased to income of less than $0.1 million in the fourth quarter, compared to expense of $0.3 million in the prior year quarter. This decrease was primarily the result of lower interest rates and income recognized for gains on our pension plan assets.

Net income/(loss) decreased to a loss of $2.5 million in the fourth quarter from income of $1.5 million in the prior year quarter. This decrease was a result of lower sales volumes driven by the impact of lower oil prices, combined with project delays arising as a result of the COVID-19 pandemic. The Company expects these delayed projects to commence in 2021.

2020 Results

Net sales were $84.7 million in fiscal 2020, a decrease of $42.9 million, or 33.7%, from $127.7 million in fiscal 2019. This decrease was a result of lower sales volumes driven by the impact of lower oil prices, combined with project delays arising as a result of the COVID-19 pandemic. The Company expects these delayed projects to commence in 2021.

Gross profit decreased to $11.2 million, or 13.2% of net sales, in fiscal 2020, a decrease of $17.8 million, or 61.5%, from $29.0 million, or 22.8% of net sales, in fiscal 2019. This decrease was primarily driven by lower sales volumes.

General and administrative expenses were $17.2 million in fiscal 2020 compared to $18.9 million in fiscal 2019, a decrease of $1.7 million, or 9.0%. This decrease was driven primarily by cost cutting measures enacted as a result of the COVID-19 pandemic.

Selling expenses increased by $0.1 million, from $5.2 million in 2019 to $5.3 million in 2020. This increase was primarily due the addition of new sales employees and severance for terminated employees in the current year, partially offset by lower overall personnel costs.

Interest expense decreased to $0.4 million in fiscal 2020 from $0.9 million in fiscal 2019 due to lower net borrowings during 2020.

Income tax expense decreased to a benefit of $0.1 million in fiscal 2020 compared to expense of $1.5 million in fiscal 2019. The decrease of $1.6 million was due primarily to changes to the mix of income in various jurisdictions.

The resulting net loss of $7.6 million in 2020 was an $11.2 million decrease from the net income of $3.6 million in 2019. This decrease was a result of lower sales volumes driven by the impact of lower oil prices, combined with project delays arising as a result of the COVID-19 pandemic. The Company expects these delayed projects to commence in 2021.

Percentages set forth above in this press release have been rounded to the nearest percentage point, and may not exactly correspond to the comparative data presented.

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

Certain statements and other information contained in this press release 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 following: (i) the impact of the coronavirus (“COVID-19”) on the Company’s results of operations, financial condition and cash flows; (ii) fluctuations in the price of oil and natural gas and its impact on the customer order volume for the Company’s products; (iii) the Company’s ability to comply with all covenants in its credit facilities; (iv) the Company’s ability to repay its debt and renew expiring international credit facilities; (v) the Company’s ability to obtain forgiveness of its loan under the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”); (vi) the Company’s ability to effectively execute its strategic plan and achieve profitability and positive cash flows; (vii) the impact of global economic weakness and volatility; (viii) fluctuations in steel prices and the Company’s ability to offset increases in steel prices through price increases in its products; (ix) the timing of order receipt, execution, delivery and acceptance for the Company’s products; (x) decreases in government spending on projects using the Company’s products, and challenges to the Company’s non-government customers’ liquidity and access to capital funds; (xi) the Company’s ability to successfully negotiate progress-billing arrangements for its large contracts; (xii) aggressive pricing by existing competitors and the entrance of new competitors in the markets in which the Company operates; (xiii) the Company’s ability to purchase raw materials at favorable prices and to maintain beneficial relationships with its suppliers; (xiv) the Company’s ability to manufacture products free of latent defects and to recover from suppliers who may provide defective materials to the Company; (xv) reductions or cancellations of orders included in the Company’s backlog; (xvi) the Company’s ability to collect an account receivable related to a project in the Middle East; (xvii) risks and uncertainties related to the Company’s international business operations; (xviii) the Company’s ability to attract and retain senior management and key personnel; (xix) the Company’s ability to achieve the expected benefits of its growth initiatives; (xx) the Company’s ability to interpret changes in tax regulations and legislation; (xxi) the Company’s ability to use its net operating loss carryforwards; (xxii) reversals of previously recorded revenue and profits resulting from inaccurate estimates made in connection with the Company’s percentage-of-completion revenue recognition; (xxiii) the Company’s failure to establish and maintain effective internal control over financial reporting; and (xiv) the impact of cybersecurity threats on the Company’s information technology systems. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at https://www.sec.gov and under the Investor Center section of our website (http://investors.permapipe.com.)

Perma-Pipe’s Form 10-Kfor the 2020 fiscal year ended January 31, 2021 will be accessible at www.sec.gov and www.permapipe.com. For more information, visit the Company’s website.

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three months ended January 31,

Twelve months ended January 31,

(In thousands, except per share data)

2021

2020

2021

2020

Net sales

$

21,295

$

32,262

$

84,694

$

127,663

Cost of sales

18,885

25,235

73,515

98,617

Gross profit

2,410

7,027

11,179

29,046

Operating expenses:

General and administrative expense

3,902

5,026

17,222

18,934

Selling expense

1,182

1,203

5,334

5,231

Total operating expenses

5,084

6,229

22,556

24,165

Income from operations

(2,674

)

798

(11,377

)

4,881

Interest expense, net

(30

)

292

381

905

Other income, net

311

708

3,983

1,059

Income from operations before income taxes

(2,333

)

1,214

(7,775

)

5,035

Income tax (benefit)/expense

206

(288

)

(133

)

1,459

Net income/(loss)

$

(2,539

)

$

1,502

$

(7,642

)

$

3,576

Weighted average common shares outstanding

Basic

8,165

8,046

8,126

7,989

Diluted

8,165

8,340

8,126

8,420

Income/(loss) per share

Basic

$

(0.31

)

$

0.19

$

(0.94

)

$

0.45

Diluted

$

(0.31

)

$

0.18

$

(0.94

)

$

0.42

Note: Earnings per share calculations could be impacted by rounding.

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

January 31,

(In thousands, except per share data)

2021

2020

ASSETS

Current assets

Cash and cash equivalents

$

7,174

$

13,371

Restricted cash

1,201

1,287

Trade accounts receivable, less allowance for doubtful accounts of $474 on January 31, 2021 and $407 on January 31, 2020

25,226

29,402

Inventories, net

12,157

14,498

Prepaid expenses and other current assets

4,110

3,531

Costs and estimated earnings in excess of billings on uncompleted contracts

4,007

2,166

Total current assets

53,875

64,255

Property, plant and equipment, net of accumulated depreciation

26,897

28,629

Other assets

Operating lease right-of-use assets

13,384

11,475

Deferred tax assets

823

293

Goodwill

2,332

2,254

Other assets

5,380

5,319

Total other assets

21,919

19,341

Total assets

$

102,691

$

112,225

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Trade accounts payable

$

10,365

$

9,577

Commissions and management incentives payable

218

1,759

Accrued compensation and payroll taxes

1,448

1,190

Revolving line – North America

2,826

8,577

Current maturities of long-term debt

3,941

1,458

Customers’ deposits

2,088

2,202

Outside commission liability

1,431

1,755

Operating lease liabilities short-term

1,402

1,040

Other accrued liabilities

2,616

3,444

Billings in excess of costs and estimated earnings on uncompleted contracts

762

1,173

Income tax payable

1,155

664

Total current liabilities

28,252

32,839

Long-term liabilities

Long-term debt, less current maturities

6,268

6,717

Deferred compensation liabilities

4,120

4,199

Deferred tax liabilities

914

1,052

Operating lease liabilities long-term

13,174

11,214

Other long-term liabilities

650

575

Total long-term liabilities

25,126

23,757

Stockholders’ equity

Common stock, $.01 par value, authorized 50,000 shares; 8,165 issued and outstanding January 31, 2021 and 8,048 issued and outstanding January 31, 2020

82

80

Additional paid-in capital

60,875

60,024

Accumulated deficit

(8,357

)

(715

)

Accumulated other comprehensive loss

(3,287

)

(3,760

)

Total stockholders’ equity

49,313

55,629

Total liabilities and stockholders’ equity

$

102,691

$

112,225

 

 

David Mansfield, President and CEO
Perma-Pipe Investor Relations
(847) 929-1200
investor@permapipe.com

Source: Perma-Pipe International Holdings, Inc.