Perma-Pipe International Holdings, Inc. (NASDAQ: PPIH) announced today financial results for the second quarter and six months ended July 31, 2019.
President and CEO David Mansfield commented, "The second quarter rebounded from the seasonally weak first quarter. Revenue was $12.4 million better than the first quarter of 2019 and income from operations before income taxes improved $4.7 million to $3.5 million."
"Despite flat revenues for the first six months of 2019 compared to the same period last year, notable improvements in our margins led to an increase of $3.1 million in income from operations before income taxes, from a loss of $0.8 million last year to $2.3 million for the year to date."
"Our backlog stands at $63.9 million, continuing at the strong levels previously achieved at the end of the same period in the prior year", continued Mr. Mansfield.
“It is encouraging to see the improving trend continuing to confirm our progress in returning the company to profitability” concluded Mr. Mansfield.
Second Quarter Fiscal 2019 Results
Net sales increased $4.3 million to $36.7 million in the current quarter, from $32.3 million in the prior year quarter. Higher revenues resulted from our North American region for both traditional insulation and leak detection products partially offset by lower revenue in the Middle East.
Gross profit increased to $9.7 million or 26.3% of net sales in the current quarter from $5.9 million, or 18.2% of net sales, in the prior year quarter. This 64% increase in gross profit was driven by improved pricing, product mix and cost reduction initiatives. The cost reduction initiatives include sourcing raw material at favorable prices and focusing efforts on quality improvements.
General and administrative expenses increased to $4.6 million in the current quarter, compared to $3.9 million in the prior year quarter. This was due primarily to increased compensation expenses. Selling expenses remained relatively flat at $1.4 million in the current quarter, compared to $1.3 million in the prior year quarter.
Net interest expense decreased to $0.2 million in the current quarter from $0.3 million in the prior-year quarter due to lower borrowings.
Income from operations before income taxes increased by $3.1 million to $3.5 million in the current quarter from $0.4 million in the prior year quarter. This increase was due to increased revenue and improved margins.
Year-to-Date July 31, 2019 Results
Net sales decreased $0.3 million to $60.9 million in the current year-to-date, from $61.2 million in the prior year year-to-date. The slight decrease resulted from lower revenue in the Middle East offset by increased revenue from our leak detection systems.
Gross profit increased to $14.4 million or 23.6% of net sales in the current year-to-date from $10.1 million or 16.5% of net sales, in the prior year year-to-date. This 42% increase in gross profit was driven by improved pricing, product mix and cost reduction initiatives. The cost reduction initiatives include sourcing raw material at favorable prices, and focusing efforts on quality improvements and safety education.
General and administrative expenses increased to $9.0 million in the current year-to-date, compared to $7.9 million in the prior year year-to-date. This was due to increased compensation expenses and loss on disposal of an asset, partially offset by collection of a previously reserved bad debt. Selling expenses remained relatively flat at $2.7 million in the current year-to-date, compared to $2.5 million in the prior year year-to-date.
Net interest expense decreased to $0.4 million in the current year-to-date from $0.6 million in the prior-year year-to-date due to lower borrowings.
Income from operations before income taxes increased $3.1 million to $2.3 million in the current year-to-date from a loss of $0.8 million in the prior year year-to-date. This increase was due primarily to increased sales of our leak detection systems.
Perma-Pipe International Holdings, Inc.
Perma-Pipe International Holdings, Inc. (the “Company”) 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, the Company has operations at eight locations in six 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 Company’s ability to effectively execute its strategic plan and achieve profitability and positive cash flows; (ii) the impact of global economic weakness and volatility; (iii) fluctuations in steel prices and the Company’s ability to offset increases in steel prices through price increases in its products; (iv) the timing of orders for the Company’s products; (v) decreases in United States government spending on projects using the Company’s products, and challenges to the Company’s non-government customers’ liquidity and access to capital funds; (vi) the Company’s ability to successfully negotiate progress-billing arrangements for its large contracts; (vii) fluctuations in crude oil and natural gas prices risks; (viii) risks and uncertainties related to the Company’s international business operations; (ix) the Company’s ability to repay its debt and renew expiring international credit facilities; (x) aggressive pricing by existing competitors and the entrance of new competitors in the markets in which the Company operates; (xi) the Company’s ability to purchase raw materials at favorable prices and to maintain beneficial relationships with its suppliers; (xii) the Company’s ability to manufacture products free of latent defects and to recover from suppliers who may provide defective materials to the Company; (xiii) reductions or cancellations of orders included in the Company’s backlog; (xiv) the Company’s ability to attract and retain senior management and key personnel; (xv) the Company’s ability to achieve the expected benefits of its growth initiatives; (xvi) the Company’s ability to interpret changes in tax regulations and legislation; (xvii) reversals of previously recorded revenue and profits resulting from inaccurate estimates made in connection with the Company’s percentage-of-completion revenue recognition; (xviii) the Company’s failure to establish and maintain effective internal control over financial reporting; and (xix) 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.)
The Company's Form 10-Q for the quarter ended July 31, 2019 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) | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Three Months Ended July 31, | Six Months Ended July 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net sales | $ | 36,667 | $ | 32,325 | $ | 60,943 | $ | 61,214 | ||||||||
Cost of sales | 27,014 | 26,432 | 46,568 | 51,096 | ||||||||||||
Gross profit | 9,653 | 5,893 | 14,375 | 10,118 | ||||||||||||
Operating expenses | ||||||||||||||||
General and administrative expenses | 4,573 | 3,924 | 9,015 | 7,906 | ||||||||||||
Selling expenses | 1,416 | 1,321 | 2,676 | 2,463 | ||||||||||||
Total operating expenses | 5,989 | 5,245 | 11,691 | 10,369 | ||||||||||||
Income/(loss) from operations | 3,664 | 648 | 2,684 | (251 | ) | |||||||||||
Interest expense, net | 209 | 284 | 419 | 550 | ||||||||||||
Income/(loss) from operations before income taxes | 3,455 | 364 | 2,265 | (801 | ) | |||||||||||
Income tax (benefit)/expense | (265 | ) | 639 | 47 | 591 | |||||||||||
Net income/(loss) | $ | 3,720 | $ | (275 | ) | $ | 2,218 | $ | (1,392 | ) | ||||||
Weighted average common shares outstanding | ||||||||||||||||
Basic | 7,987 | 7,820 | 7,937 | 7,769 | ||||||||||||
Diluted | 8,075 | 7,820 | 8,024 | 7,769 | ||||||||||||
Income/(loss) per share | ||||||||||||||||
Basic | 0.47 | (0.04 | ) | 0.28 | (0.18 | ) | ||||||||||
Diluted | 0.46 | (0.04 | ) | 0.28 | (0.18 | ) | ||||||||||
Note: Earnings per share calculations could be impacted by rounding. | ||||||||||||||||
PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(unaudited) | ||||||||
July 31, 2019 | January 31, 2019 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 8,052 | $ | 10,156 | ||||
Restricted cash | 1,167 | 2,581 | ||||||
Trade accounts receivable, less allowance for doubtful accounts of $227 at July 31, 2019 and $536 at January 31, 2019 | 30,384 | 32,508 | ||||||
Inventories, net | 16,555 | 12,289 | ||||||
Prepaid expenses and other current assets | 4,475 | 3,773 | ||||||
Contract assets | 3,474 | 1,653 | ||||||
Total current assets | 64,107 | 62,960 | ||||||
Property, plant and equipment, net of accumulated depreciation | 29,125 | 30,398 | ||||||
Other assets | ||||||||
Operating lease right-of-use asset | 11,453 | - | ||||||
Deferred tax assets - long-term | 404 | 458 | ||||||
Goodwill | 2,266 | 2,269 | ||||||
Other assets | 7,146 | 6,120 | ||||||
Total other assets | 21,269 | 8,847 | ||||||
Total assets | $ | 114,501 | $ | 102,205 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Trade accounts payable | $ | 11,084 | $ | 12,006 | ||||
Accrued compensation and payroll taxes | 1,605 | 1,544 | ||||||
Commissions and management incentives payable | 1,373 | 1,866 | ||||||
Revolving line North America | 6,776 | 8,890 | ||||||
Current maturities of long-term debt | 1,480 | 640 | ||||||
Customers' deposits | 3,601 | 3,708 | ||||||
Outside commissions payable | 2,138 | 1,743 | ||||||
Contract liability | 1,141 | 1,569 | ||||||
Operating lease liability short-term | 1,056 | - | ||||||
Other accrued liabilities | 4,959 | 3,856 | ||||||
Income taxes payable | 338 | 1,266 | ||||||
Total current liabilities | 35,551 | 37,088 | ||||||
Long-term liabilities | ||||||||
Long-term debt, less current maturities | 6,460 | 6,751 | ||||||
Deferred compensation liabilities | 3,667 | 3,883 | ||||||
Deferred tax liabilities long-term | 1,445 | 1,435 | ||||||
Operating lease liability long-term | 10,446 | - | ||||||
Other long-term liabilities | 1,630 | 688 | ||||||
Total long-term liabilities | 23,648 | 12,757 | ||||||
Stockholders' equity | ||||||||
Common stock, $.01 par value, authorized 50,000 shares; 8,026 issued and outstanding at July 31, 2019 and 7,854 issued and outstanding at January 31, 2019 | 80 | 79 | ||||||
Additional paid-in capital | 59,475 | 58,793 | ||||||
Accumulated deficit | (1,414 | ) | (3,632 | ) | ||||
Accumulated other comprehensive loss | (2,839 | ) | (2,880 | ) | ||||
Total stockholders' equity | 55,302 | 52,360 | ||||||
Total liabilities and stockholders' equity | $ | 114,501 | $ | 102,205 | ||||
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Contacts:
David Mansfield, President and CEO
