NILES, IL -- (Marketwired) -- 05/01/13 -- MFRI, Inc. (NASDAQ: MFRI) announced today sales and earnings for the fiscal year ended January 31, 2013 ("2012"). The Company's sales in 2012 were $212 million, a decrease of 9% from $233 million last year; net loss in 2012 was $18.5 million or $2.67 per diluted share, compared to net loss of $5 million or $0.72 per diluted share, in 2011. In the fourth quarter of 2012, the Company recorded a full valuation allowance on domestic deferred tax assets. This resulted in a $12.5 million non-cash charge. The Company also recorded a non-cash $1.5 million asset impairment charge, together making up $2.03 of the loss per share in 2012. Before non-cash charges described above, the net loss was $4.5 million compared to net loss of $5 million in 2011. Increased professional costs and filtration products' decrease in gross profit contributed to the increased loss. This was partially offset by piping systems' increase in gross profit. Backlog, at the end of 2012, increased by 78% over prior year.
FISCAL YEAR ENDED 1/31/2013
SALES - Net sales were $212 million in 2012, a decrease of 9% from $233.5 million in 2011. Reduced market demand for fabric filters led to a decrease of $14.6 million in filtration products. Piping systems sales decreased $7.3 million, driven by a decline in U.S. sales in the second and third quarters partially offset by an increase in sales in the Middle East. Corporate and other sales decreased by $4.6 million due to customer decisions to extend project completion dates. Industrial process cooling sales increased $5 million as order intake continued to improve.
GROSS PROFIT - Despite the decrease in sales, gross margin improved by 2 percentage points to 18% of net sales compared to 16% of net sales in 2011. Gross profit of $38.1 million in 2012 increased 5% from $36.3 million in 2011. Gross profit increased significantly in piping systems due to higher volume from the plant in the United Arab Emirates and from strong sales in industrial process cooling while filtration products gross profit decreased due to lower demand.
EXPENSES - Operating expenses increased 9.6% to $45.4 million from $41.4 million. The primary increase was a $1.5 million non-cash charge related to the fixed asset impairment of an idle facility in the filtration products business. Strategic consulting, audit and tax consulting increased a total of $1.5 million. Start-up costs for the Saudi Arabia facility amounted to $0.9 million. Industrial process cooling added staff and increased management incentive compensation expense related to improved performance.
TAXES - The Company recorded non-cash tax expenses of $10.8 million, which included the full valuation allowance of $12.5 million on the domestic deferred tax assets. A portion of this valuation allowance will be reversed in 2013 when the sale of Thermal Care's assets has been recorded.
NET LOSS - Before non-cash charges described above, the net loss was $4.5 million compared to net loss of $5 million in 2011. Increased professional costs and filtration products' decrease in gross profit contributed to the loss. This was partially offset by piping systems' increase in gross profit.
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