NILES, IL -- (Marketwired) -- 06/11/13 -- MFRI, Inc. (NASDAQ: MFRI) announced today sales and record earnings for the first fiscal quarter ended April 30, 2013. Sales increased 30% in the quarter from the prior year quarter and net income was $1.60 per diluted share compared to the prior year quarter net loss of $(0.30) per diluted share. As previously reported on April 30, 2013, the Company sold most of the domestic assets of its subsidiary Thermal Care, Inc. This business is reported as discontinued operations in the consolidated financial statements, related prior period information and the notes to consolidated financial statements have been restated to conform to the current year reporting of this business.
QUARTER ENDED APRIL 30, 2013
SALES - The Company's sales from continuing operations for the quarter increased 30% to $57.7 million from $44.5 million in the prior-year quarter. Piping systems sales increased $16.3 million in the quarter due to the ramp up of sales in Saudi Arabia with deliveries to major projects including the expansion of the Grand Mosque in Mecca and King Abdul-Aziz International Airport in Jeddah. The increase is also due to domestic offshore oil and gas projects that were underway during the current quarter and which will continue into the second quarter. Filtration products decreased by $4.3 million due primarily to continued reduced demand for fabric filters.
GROSS PROFIT - Gross profit almost doubled to $13.1 million in the current quarter from $6.8 million in the prior-year quarter due to the sales increase in piping systems while filtration products gross profit decreased due to lower sales volume.
EXPENSES - Operating expenses increased to $10.3 million in the current quarter from $9.1 million in the prior-year quarter. The increase was primarily due to start-up costs for the Saudi Arabia facility and accrued commission and management incentive expense for better performance. Also, the Company recorded bad debt expense partially offset by reduced administrative costs from personnel savings in Corporate and Other. Operating expenses as a percent of net sales decreased to 17.9% in the current quarter from 20.5% in the prior-year quarter.
NET INCOME - Net income was $11 million or $1.60 per diluted share including $1.32 per diluted share from the sale of the subsidiary. In the prior year quarter the net loss was $2 million or $(0.30) per diluted share including an $.08 profit from the discontinued operation. Income from discontinued operations net of tax was $9.1 million including the gain on sale compared to $0.5 million for the three months ended April 30, 2013 and 2012, respectively.
BACKLOG - The Company's backlog on April 30, 2013 was approximately $145 million, a slight increase from the prior quarter but almost 80% higher than the backlog at the end of April last year.
Backlog ($ in thousands): 4/30/13 1/31/13 4/30/12 --------- --------- --------- Piping Systems $ 95,640 $ 89,508 $ 55,870 Filtration Products 22,232 25,834 12,329 Other 26,950 28,473 12,914 --------- --------- ---------Total $ 144,822 $ 143,815 $ 81,113 ========= ========= =========
PIPING SYSTEMS - Piping systems has been investing in its new plant in Saudi Arabia for the last two years. In April 2012, the Company opened the new factory in Dammam, Saudi Arabia. Since November 2012, the Company has announced receipt of several orders totaling approximately $50 million primarily for two landmark projects in Saudi Arabia: the Grand Mosque in Mecca and the King Abdul-Aziz International Airport in Jeddah. Additional marketing and sales activities in the Gulf Cooperation Council and U.S. offshore oil industry continue in an effort to further build the backlog for future periods.
FILTRATION PRODUCTS - U.S. environmental regulation uncertainty regarding technologies and timing of implementation continues to impact demand for fabric filters and therefore filtration product sales decreased. Filtration products gained some sizeable orders for the coming 24 months, resulting in a backlog increase of 80% over the prior year period. Of the $22 million in backlog, approximately $10 million of those orders are scheduled for delivery in 2014. Aggressive cost reduction and productivity improvement measures are underway in both domestic manufacturing plants to adjust to the market conditions. Also, realignment of sales efforts with an eye on efficiency and expansion are in progress.
Bradley Mautner, President and CEO, said, "We are certainly pleased with the first quarter results. In addition to the $11.4 million pre-tax gain from the previously announced sale of substantially all of the Industrial Process Cooling segment assets, we posted a pretax profit from continuing operations of about $2 million. The improvement in liquidity provides resources to fuel our strategic expansion and growth opportunities. Also, this demonstrates that the strategy to invest in the Saudi expansion initiative and other operational improvement efforts are producing favorable results. The team in the Middle East has done an excellent job to scale up production activities to support challenging project requirements. Major order booking success during the past year has resulted in a backlog nearly 80% greater than a year ago. Our efforts to improve operational efficiency, cost reductions and working capital utilization continue. This is especially important as we finance the needs that result from our significant growth in backlog. All of these elements should provide a solid base for continued revenue growth and profitable performance in the quarters to come."
MFRI, Inc. is a multi-line company engaged in the following businesses: pre-insulated specialty piping systems for oil and gas gathering, district heating and cooling and other applications; custom-designed industrial filtration products to remove particulates from dry gas streams; and installation of heating, ventilation and air conditioning for large buildings.
Form 10-K for the period ended January 31, 2013 will be accessible at www.sec.gov. For more information visit the Company's website www.mfri.com or contact the Company directly.
Statements and other information contained in this announcement which can be identified by the use of forward-looking terminology such as "anticipate," "may," "will," "expect," "continue," "remain," "intend," "aim," "should," "prospects," "could," " position," "future," "potential," "believes," "plans," "likely," " seems," and "probable," or the negative thereof or other variations thereon or comparable 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. 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, 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, INC. AND SUBSIDIARIESStatement of Operations (unaudited)($ in 000's except per share data) Three Months Ended April 30, 2013 2012 --------- ---------Net salesPiping Systems $ 36,058 $ 19,744Filtration Products 18,633 22,976Corporate and Other 3,053 1,779 --------- --------- Total $ 57,744 $ 44,499 --------- ---------Gross profitPiping Systems $ 10,444 $ 3,398Filtration Products 2,275 3,112Corporate and Other 413 322 --------- --------- Total $ 13,132 $ 6,832 --------- ---------Income (loss) from operationsPiping Systems $ 5,380 $ 155Filtration Products (483) 196Corporate and Other (2,092) (2,648) --------- --------- Total $ 2,805 $ (2,297) --------- ---------Loss from joint venture (295) (246)Interest expense, net 490 371 --------- ---------Income (loss) from continuing operations before income taxes 2,020 (2,914)Income tax expense (benefit) 58 (317) --------- ---------Income (loss) from continuing operations 1,962 (2,597)Income from discontinued operations, net of tax 9,119 541 --------- ---------Net income (loss) $ 11,081 $ (2,056) --------- ---------Weighted average common shares outstanding Basic 6,932 6,915 Diluted 6,934 6,915Earnings (loss) per share from continuing operations Basic and diluted $ 0.28 $ (0.38)Earnings per share from discontinued operations Basic and diluted $ 1.32 $ 0.08Earnings (loss) per share Basic and diluted $ 1.60 $ (0.30)