Perma-Pipe International Holdings, Inc. (NASDAQ: PPIH) announced today financial results for the fourth quarter and fiscal year ended January 31, 2019.
President and CEO David Mansfield commented, Fourth quarter revenues of $34.9 million were 28% higher than the same quarter last year. The resulting operating earnings of $1.9 million improved $3.2 million over the $1.3 million loss incurred in the fourth quarter of last year. For the year ended January 31, 2019, revenues were $129.0 million, a 23% increase over the prior year, and income from operations of $1.6 million increased $11.8 million from last year’s $10.2 million loss. Customer-driven delays to project schedules in the Middle East continued into the fourth quarter, and these projects are expected to be executed in the first quarter of fiscal 2019.
Backlog has continued to grow and stands at $61 million reflecting an increase of 31% above the level at the end of last year, continued Mr. Mansfield.
All operating areas of the Company achieved year-over-year increases in revenue, income from operations and backlog. The results of the fourth quarter and the full year continue to highlight the progress the company is making to return to acceptable levels of profitability and growth, concluded Mr. Mansfield.
Fourth Quarter 2019 Results
Net sales increased 28% to $34.9 million in the current quarter from $27.4 million in the prior year quarter. Higher revenues were driven by increased oil prices, favorable product mix and better sales and project execution which resulted in increased sales in the Middle East, U.S. and Canadian markets. We also experienced higher demand for leak detection products.
Gross profit increased to 18%, or $6.3 million of net sales, in the current quarter from 13%, or $3.6 million of net sales, in the prior year quarter. This 77% improvement was due to increased volumes and improved margins, which are a result of strategic initiative improvements.
General and administrative expenses were slightly lower at $3.2 million in the current quarter, compared to $3.8 million in the prior year quarter. Selling expenses were $1.2 million in the current quarter, compared to $1.1 million in the prior quarter. This increase is due to commissions related to increased sales.
Net interest expense increased to $0.3 million in the current quarter, from $0.2 million in the prior-year quarter due to higher borrowings and higher effective interest rates, both domestic and foreign.
Year-to-Date 2018 Results
Net sales were $129.0 million in 2018, an increase of 23% from $105.2 million in 2017. Higher revenues were driven by increased oil prices, favorable product mix and better sales and project execution which resulted in increased sales in the Middle East, U.S. and Canadian markets. We also experienced higher demand for leak detection products.
Gross profit increased to $23.3 million in 2018, an increase of 99% from 11.7 million in 2017. This increase is attributed to higher volumes, improved pricing and manufacturing efficiencies.
General and administrative expenses were $15.4 million in 2018 compared to $16.2 million in 2017, an improvement of $0.9 million or 5%. Excluding one-time charges in both periods, annually recurring general and administrative expenses were flat year over year at approximately $15.0 million. The one-time charges include $1.2 million in 2017 for internal control review fees incurred in the Middle East region and $0.4 million in 2018 primarily related to the retirement cost of our prior CFO.
Selling expenses increased to $5.2 million in 2018 from $5.0 million in 2017. Current year expenses included higher commissions related to increased sales.
Interest expense increased to $1.1 million in 2018 from $0.7 million in 2017 due to higher borrowings and increased interest rates.
Income tax expense was $2.2 million in 2018 compared to $0.2 million of income tax benefit in 2017. This change is largely due to the fact that the company is in a positive income position in certain high tax rate jurisdictions.
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.
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 Companys 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 Companys ability to offset increases in steel prices through price increases in its products; (iv) the timing of orders for the Companys products; (v) decreases in United States government spending on projects using the Companys products, and challenges to the Companys non-government customers liquidity and access to capital funds; (vi) the Companys 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 Companys international business operations; (ix) the Companys 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 Companys ability to purchase raw materials at favorable prices and to maintain beneficial relationships with its suppliers; (xii) the Companys 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 Companys backlog; (xiv) the Companys ability to attract and retain senior management and key personnel; (xv) the Companys ability to achieve the expected benefits of its growth initiatives; (xvi) the Companys 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 Companys percentage-of-completion revenue recognition; (xviii) the Companys failure to establish and maintain effective internal control over financial reporting; and (xix) the impact of cybersecurity threats on the Companys 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 (https://investors.permapipe.com.)
PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Three months ended
Twelve months ended
|(In thousands, except per share data)||2019||2018||2019||2018|
|Net sales||$ 34,945||$ 27,397||$ 128,965||$ 105,248|
|Cost of sales||28,607||23,818||105,626||93,506|
|General and administrative expense||3,204||3,758||15,357||16,214|
|Total operating expenses||4,426||4,878||20,596||21,254|
|Income/(loss) from operations||1,912||(1,299)||2,743||(9,512)|
|Interest expense, net||292||190||1,122||697|
|Income/(loss) from operations before income taxes||1,620||(1,489)||1,621||(10,209)|
|Income tax expense/(benefit)||625||8||2,150||(233)|
|Net income/(loss)||$ 995||$ (1,497)||$ (529)|
|Weighted average common shares outstanding|
|Income/(loss) per share|
|Basic||$ 0.13||$ (0.19)||$ (0.07)||$ (1.30)|
|Diluted||$ 0.12||$ (0.19)||$ (0.07)||$ (1.30)|
Note: Earnings per share calculations could be impacted by rounding.
PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|(In thousands, except per share data)||2019||2018|
|Cash and cash equivalents||$||10,156||$||7,084|
|Trade accounts receivable, less allowance for doubtful accounts of $536 on January 31, 2019 and $469 on January 31, 2018||32,508||32,936|
|Prepaid expenses and other current assets||3,773||2,703|
|Costs and estimated earnings in excess of billings on uncompleted contracts||1,653||1,502|
|Total current assets||62,960||62,318|
|Property, plant and equipment, net of accumulated depreciation||30,398||34,509|
|Deferred tax assets||458||391|
|Total other assets||8,847||7,757|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Trade accounts payable||$||12,006||$||14,186|
|Commissions and management incentives payable||1,866||787|
|Accrued compensation and payroll taxes||1,544||1,580|
|Revolving line North America||8,890||7,273|
|Current maturities of long-term debt||640||753|
|Liabilities of discontinued operations||137|
|Outside commission liability||1,743||1,800|
|Other accrued liabilities||3,856||4,122|
|Billings in excess of costs and estimated earnings on uncompleted contracts||1,569||1,967|
|Income tax payable||1,266||1,339|
|Total current liabilities||37,088||39,180|
|Long-term debt, less current maturities||6,751||7,728|
|Deferred compensation liabilities||3,883||4,098|
|Deferred tax liabilities||1,435||1,242|
|Other long-term liabilities||688||524|
|Total long-term liabilities||12,757||13,592|
|Common stock, $.01 par value, authorized 50,000 shares; 7,854 issued and outstanding January 31, 2019 and 7,717 issued and outstanding January 31, 2018||79||77|
|Additional paid-in capital||58,793||56,304|
|Accumulated deficit retained earnings||(3,632||)||(3,103||)|
|Accumulated other comprehensive loss||(2,880||)||(1,466||)|
|Total stockholders’ equity||52,360||51,812|
|Total liabilities and stockholders’ equity||$||102,205||$||104,584|
Perma-Pipe International Holdings, Inc.
President and CEO
Perma-Pipe Investor Relations