NILES, IL--(Marketwired - Jun 10, 2014) - MFRI, Inc. (
- Net sales increase 9% vs. 1Q13
- Net income from continuing operations increases to $4.2 million from $1.7 million
- EPS from continuing operations of $0.57 vs. $0.25 in 1Q13
MFRI, Inc. (
President and CEO Bradley Mautner commented, "MFRI turned in an excellent first-quarter performance, continuing to benefit from the many steps we took to build our business in prior years. Net sales from continuing operations rose 9%, driven by Piping Systems, which continued to fulfill orders for a significant domestic oil and gas project and for major projects in Saudi Arabia and the United Arab Emirates (U.A.E.). As a result, our EPS from continuing operations of $0.57 is more than double the EPS in the prior year's quarter.
"We continue to develop new products for use in the oil and gas industries and are actively pursuing many large projects in the Middle East and other geographies like Canada, Africa and South America. Even as we support project development with engineered solutions and budgets, it should be remembered that the length of the procurement cycle and unpredictability of customer schedules for large projects impact our ability to generate revenue quickly when we win business. Therefore, our focus for the remaining quarters of 2014 is to win our share of the 'mega projects' and to begin execution of some project elements later this year, setting the stage for a robust 2015."
Mr. Mautner continued, "Sales of Filtration Products were down year over year due to continued lower demand for fabric filter bag products, reflecting decreased domestic activity in coal-fired power plants and steel industries. Although we have been historically strong in both sectors, needs in the U.S. steel industry have been soft and coal now provides just 37% of the nation's electricity -- down from 52% in 2000. To offset these trends, we have intensified our efforts in other industries, like waste-to-energy, minerals and cement.
"On the positive side, even as volume has been under pressure, Filtration Products' gross profit rose more than 11% in the first quarter. With our focus on profitable growth in non-coal/steel end-use markets for both fabric and pleated filters, we are encouraged by the progress we have been making to improve this segment's operations. To capitalize on growing demand for filtration products in international markets, we have expanded our salesforce in Asia and expect to begin production in the U.A.E. by September. The Middle East facility will enable us to more effectively serve the region's growing gas turbine power generation market and, eventually, the dust collection market as well.
"With four quarters of year-over-year growth in earnings and cash flow, we have also improved the Company's balance sheet, with the leverage ratio of Debt/Equity down to 0.41 by quarter-end compared to 0.68 a year ago."
THREE MONTHS ENDED APRIL 30, 2014
In fiscal 2013 and 2014, the Company made several changes to its portfolio of businesses, including the sale of most of the domestic assets of its industrial process cooling subsidiary, Thermal Care, Inc., for $16.1 million in April 2013. In June 2013 the Company sold substantially all of the assets of its HVAC installation business, and in February 2014 it sold its remaining European industrial process cooling business. The results of these businesses and the gain from the disposition of Thermal Care's assets -- which together accounted for $9.4 million in income in the first quarter of fiscal 2013 -- are classified as discontinued operations in the Company's consolidated financial statements.
SALES - Net sales increased 9% to $59.5 million in the current quarter, from $54.7 million in the prior-year quarter. Piping Systems sales increased 17% or $6.3 million compared to the prior-year quarter, mainly due to a significant domestic oil and gas project and sales growth in Saudi Arabia and the U.A.E. Filtration Products sales decreased by $1.5 million from the prior-year quarter, due primarily to reduced domestic demand for fabric filter bags.
GROSS PROFIT - Gross profit rose 26% to $16.0 million in the current quarter, from $12.7 million in the prior-year quarter, mainly due to the sales increase in Piping Systems. Filtration Products' gross profit increased 11.3% from the prior-year quarter.
EXPENSES - Operating expenses as a percent of net sales decreased to 17.3%, from 18.6% in the prior-year quarter.
TAXES - The Company's consolidated effective tax rate from continuing operations was 23.2% for the three months ended April 30, 2014, which was affected primarily by the income earned in Saudi Arabia.
NET INCOME - First quarter net income was $3.8 million compared to $11.1 million in the prior-year quarter, which included $9.4 million income from discontinued operations, including the gain from the sale of Thermal Care's domestic assets.
BACKLOG
The Company's backlog decreased 19.1%, or $16.0 million, from January 31, 2014. This decrease primarily reflects the continued execution of large-scale Piping Systems projects in Saudi Arabia and the U.A.E. MFRI's Piping Systems business is based on large, discrete projects so backlog and revenues can vary significantly in both geographies and reporting periods. Both fiscal 2013 and the first quarter of fiscal 2014 were very active periods as major projects for various customers overlapped, which stimulated sales in the period. The Company continues to pursue, and expects to win, new Piping Systems and Filtration Products projects worldwide. However, due to the projects' many complex technical and commercial requirements, any success in winning major projects would most likely result in revenue in late 2014 or in 2015.
| Backlog ($ in thousands): | 4/30/2014 | 1/31/2014 | 4/30/2013 | ||||||
| Piping Systems | $ | 44,716 | $ | 60,555 | $ | 95,640 | |||
| Filtration Products | 22,817 | 22,938 | 22,232 | ||||||
| Total | $ | 67,533 | $ | 83,493 | $ | 117,872 | |||
MFRI, Inc.
MFRI, Inc. manufactures pre-insulated specialty piping systems for oil and gas gathering, district heating and cooling as well as other applications. The Company also manufactures custom-designed industrial filtration products to remove particulates from air and other gas streams. In total, MFRI has manufacturing operations at 10 locations in six 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.
MFRI's Form 10-Q for the period ended April 30, 2014 will be accessible at www.sec.gov and www.mfri.com. For more information, visit the Company's website or contact its investor relations representative, LHA.
| MFRI, INC. AND SUBSIDIARIES | ||||||||||
| CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) | ||||||||||
| (In thousands, except per share data) | ||||||||||
| Three Months Ended April 30, |
||||||||||
| 2014 | 2013 | |||||||||
| Net sales | ||||||||||
| Piping Systems | $ | 42,354 | $ | 36,058 | ||||||
| Filtration Products | 17,170 | 18,633 | ||||||||
| Total | $ | 59,524 | $ | 54,691 | ||||||
| Gross profit | ||||||||||
| Piping Systems | $ | 13,458 | $ | 10,444 | ||||||
| Filtration Products | 2,531 | 2,275 | ||||||||
| Total | $ | 15,989 | $ | 12,719 | ||||||
| Income (loss) from operations | ||||||||||
| Piping Systems | $ | 8,017 | $ | 5,380 | ||||||
| Filtration Products | (544 | ) | (483 | ) | ||||||
| Corporate | (1,764 | ) | (2,364 | ) | ||||||
| Total | $ | 5,709 | $ | 2,533 | ||||||
| Loss from joint venture | (8 | ) | (295 | ) | ||||||
| Interest expense, net | 237 | 421 | ||||||||
| Income from continuing operations before income taxes | 5,464 | 1,817 | ||||||||
| Income tax expense | 1,266 | 105 | ||||||||
| Income from continuing operations | 4,198 | 1,712 | ||||||||
| (Loss) income from discontinued operations, net of tax | (371 | ) | 9,369 | |||||||
| Net income | $ | 3,827 | $ | 11,081 | ||||||
| Weighted average common shares outstanding | ||||||||||
| Basic | 7,177 | 6,932 | ||||||||
| Diluted | 7,315 | 6,934 | ||||||||
| Earnings per share from continuing operations | ||||||||||
| Basic | $ | 0.58 | $ | 0.25 | ||||||
| Diluted | $ | 0.57 | $ | 0.25 | ||||||
| (Loss) earnings per share from discontinued operations | ||||||||||
| Basic and diluted | $ | (0.05 | ) | $ | 1.35 | |||||
| Earnings per share | ||||||||||
| Basic | $ | 0.53 | $ | 1.60 | ||||||
| Diluted | $ | 0.52 | $ | 1.60 | ||||||
See accompanying notes to consolidated financial statements.
Note: Earnings per share calculations could be impacted by rounding.
| MFRI, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands except per share data) | April 30, 2014 | January 31, 2014 | ||||||
| ASSETS | Unaudited | |||||||
| Current assets | ||||||||
| Cash, cash equivalents and restricted cash | 13,567 | 13,834 | ||||||
| Trade accounts receivable, less allowance for doubtful accounts | 47,568 | 45,659 | ||||||
| Inventories, net | 34,668 | 33,547 | ||||||
| Prepaid expenses and other current assets | 8,916 | 8,052 | ||||||
| Total current assets | 104,719 | 101,092 | ||||||
| Property, plant and equipment, net of accumulated depreciation | 42,000 | 42,541 | ||||||
| Long-term assets | ||||||||
| Note receivable | 4,566 | 4,659 | ||||||
| Investment in joint venture | 6,542 | 6,550 | ||||||
| Other assets | 7,118 | 8,427 | ||||||
| Total long-term assets | 18,226 | 19,636 | ||||||
| Total assets | $ | 164,945 | $ | 163,269 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
| Trade accounts payable | 17,188 | 15,276 | ||||||
| Accrued liabilities, compensation, incentives, and payroll taxes | 11,742 | 16,329 | ||||||
| Current maturities of long-term debt | 6,369 | 8,274 | ||||||
| Other current liabilities, including customer deposits | 14,224 | 13,603 | ||||||
| Total current liabilities | 49,523 | 53,482 | ||||||
| Long-term liabilities | ||||||||
| Long-term debt, less current maturities | 26,242 | 23,469 | ||||||
| Other long-term liabilities | 8,847 | 9,680 | ||||||
| Total long-term liabilities | 35,089 | 33,149 | ||||||
| Stockholders' equity | ||||||||
| Total stockholders' equity | 80,333 | 76,638 | ||||||
| Total liabilities and stockholders' equity | $ | 164,945 | $ | 163,269 | ||||
| MFRI, INC. AND SUBSIDIARIES | |||||||||
| CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) | |||||||||
| (In thousands) | Three Months Ended April 30, |
||||||||
| 2014 | 2013 | ||||||||
| Operating activities | |||||||||
| Net income | $ | 3,827 | $ | 11,081 | |||||
| Adjustments to reconcile net income to net cash flows used in operating activities | |||||||||
| Depreciation and amortization | 1,433 | 1,530 | |||||||
| Loss (gain) on disposal of discontinued operations | 12 | (11,401 | ) | ||||||
| Deferred tax expense | 612 | 2,667 | |||||||
| Other, net | (462 | ) | 209 | ||||||
| Changes in operating assets and liabilities | |||||||||
| Accounts receivable | (1,726 | ) | (14,534 | ) | |||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | (2,313 | ) | 149 | ||||||
| Accrued compensation and payroll taxes | (4,598 | ) | 1,340 | ||||||
| Other assets and liabilities | 1,899 | (5,104 | ) | ||||||
| Net cash used in operating activities | (1,316 | ) | (14,063 | ) | |||||
| Investing activities | |||||||||
| Net proceeds from sale of discontinued operations | -- | 16,123 | |||||||
| Capital expenditures, other investing activities | (773 | ) | (440 | ) | |||||
| Net cash (used in) provided by investing activities | (773 | ) | 15,683 | ||||||
| Financing activities | |||||||||
| Proceeds from debt | 17,412 | 40,813 | |||||||
| Payments of debt on revolving lines of credit, other | (15,738 | ) | (35,989 | ) | |||||
| Other financing | (315 | ) | (1,579 | ) | |||||
| Net cash provided by financing activities | 1,359 | 3,245 | |||||||
| Effect of exchange rate changes on cash and cash equivalents | 173 | (917 | ) | ||||||
| Net (decrease) increase in cash and cash equivalents | (557 | ) | 3,948 | ||||||
| Cash and cash equivalents - beginning of period | 13,395 | 7,035 | |||||||
| Cash and cash equivalents - end of period | $ | 12,838 | $ | 10,983 | |||||
See accompanying notes to consolidated financial statements.