MFRI, INC. AND SUBSIDIARIES
Condensed Statements of
Operations and Related Data
(Audited) (In 000's except per Three Months Ended Fiscal Year Ended
share data) January 31, January 31,
Operating Statement Information 2010 2009 2010 2009
--------- --------- --------- ---------
Net sales:
Piping Systems $ 20,778 $ 44,725 $ 111,665 $ 151,792
Filtration Products 21,598 25,976 80,819 105,390
Industrial Process Cooling
Equipment 5,268 6,006 21,818 31,738
Corporate and Other (1) 1,466 5,916 16,079 14,146
--------- --------- --------- ---------
Total $ 49,110 $ 82,623 $ 230,381 $ 303,066
--------- --------- --------- ---------
Gross profit:
Piping Systems $ 4,011 $ 11,891 $ 37,974 $ 37,871
Filtration Products 726 1,325 6,733 11,424
Industrial Process Cooling
Equipment 1,178 1,321 4,977 7,919
Corporate and Other 185 768 2,262 1,734
--------- --------- --------- ---------
Total $ 6,100 $ 15,305 $ 51,946 $ 58,948
--------- --------- --------- ---------
Income (loss) from operations
Piping Systems $ 185 $ 7,570 $ 22,399 $ 24,037
Filtration Products (2,306) (3,694) (5,290) (2,936)
Industrial Process Cooling
Equipment (681) (1,784) (1,935) (1,765)
Corporate and Other (1,466) (1,881) (7,977) (8,544)
--------- --------- --------- ---------
Total $ (4,268) $ 211 $ 7,197 $ 10,792
--------- --------- --------- ---------
Income from joint venture 87 5 21 104
Interest expense - net 323 813 1,912 2,834
--------- --------- --------- ---------
(Loss) income before income
taxes (4,504) (597) 5,306 8,062
Income taxes 1,277 230 635 1,373
--------- --------- --------- ---------
Net (loss) income $ (5,781) $ (827) $ 4,671 $ 6,689
--------- --------- --------- ---------
Weighted average common shares
outstanding basic 6,835 6,808 6,824 6,797
(Loss) earnings per share basic $ (0.85) $ (0.12) $ 0.68 $ 0.98
Weighted average common shares
outstanding diluted 6,835 6,808 6,855 6,853
(Loss) earnings per share
diluted $ (0.85) $ (0.12) $ 0.68 $ 0.98
Backlog: 1/31/10 10/31/09 1/31/09
--------- --------- ---------
Piping Systems $ 48,770 $ 40,041 $ 52,385
Filtration Products 21,397 25,286 35,549
Industrial Process Cooling
Equipment 2,377 2,997 3,835
Corporate and Other 788 1,610 16,051
--------- --------- ---------
Total Backlog $ 73,332 $ 69,934 $ 107,820
========= ========= =========
(1) Corporate and Other includes activity for the installation of heating,
ventilation and air conditioning systems.
See the Company's Form 10-K for the period for notes to financial
statements.
MFRI Announces Results for Fiscal Year Ended January 31, 2010 and Expects New Opportunities in Current Year
| Source: MFRI
NILES, IL--(Marketwire - April 16, 2010) - MFRI, Inc. (NASDAQ : MFRI ) announced today sales
and earnings for the fiscal year ended January 31, 2010 ("2009"). The
Company's net sales in 2009 were $230.4 million, 24.0% less than $303.1
million for the prior year; net income in 2009 was $4.7 million or $0.68
per diluted share, compared to $6.7 million or $0.98 per diluted share, in
the prior year.
The Company also announced that fourth quarter 2009 sales were $49.1
million, 40.6% less than $82.6 million for the prior-year's fourth quarter.
Net loss for the fourth quarter was $5.8 million or ($0.85) per share,
compared to a net loss of $0.8 million or ($0.12) per share, in the
prior-year period.
FISCAL YEAR ENDED 1/31/2010
SALES -- Sales for the year ended January 31, 2010 were $230.4 million,
24.0% less than $303.1 million for the prior year. Sales decreased in all
of our businesses except for the heating, ventilation and air conditioning
("HVAC") business included in Corporate and Other. The lower market demand
across virtually all lines was a reflection of the economic recession.
GROSS PROFIT -- As a result of the volume decline described above, the
year's gross profit decreased to $51.9 million from $58.9 million in the
prior year. At the same time, gross profit as a percent of sales reached
22.5% up from last year's 19.5%. This increase in gross profit percentage
was primarily due to sales product mix and material costs savings in the
piping systems business and more effective cost controls across the piping
systems' product lines.
EXPENSES -- Operating expenses decreased to $44.7 million or 19.4% of sales
from $48.2 million or 15.9% of sales in the prior year. The prior year
included a non-cash goodwill impairment charge of $2.8 million. The
remaining decrease in expenses was primarily due to reduced staffing and
other operating expense reductions related to the lower volumes.
NET INCOME -- Net income declined to $4.7 million or $0.68 per diluted
share, compared to $6.7 million or $0.98 per diluted share in the prior
year. This decrease was due to the reduced volume primarily in the fourth
quarter of the piping systems business unit in Fujairah, United Arab
Emirates ("U.A.E."), the lack of oil and gas related pipe insulating
projects in the Gulf of Mexico and losses in the Filtration Products and
Industrial Process Cooling Equipment business segments. The effective
income tax rate was less than the statutory U. S. federal income tax rate
mainly due to the impact of tax-free foreign income in the U.A.E.
OPERATING CASH FLOW -- During 2009, the Company made a focused and
successful effort to maximize operating cash flow. Overall cash provided
by operations was $34.6 million compared to a negative cash flow from
operations of $2.2 million in the prior year. The major elements of the
increased operating cash flow were $24.3 million from a 39.5% reduction in
accounts receivable and $15.3 million from a 32.4% decrease in inventories.
These reductions in accounts receivables and inventories were in part a
result of the decrease in sales but still represented a significant
achievement.
FOURTH QUARTER
SALES -- Sales for the fourth quarter compared to prior-year's quarter
decreased in all segments and geographies. In the piping systems business,
district heating and cooling as well as oil and gas products experienced
softer market conditions. Other contributing factors were the completion
of the India pipeline project in the third quarter and the dramatically
weaker market conditions in Dubai. The HVAC business also showed decreased
sales as construction decisions for new projects have been deferred.
GROSS PROFIT -- Gross profit for the quarter decreased to $6.1 million or
12.4% of sales from $15.3 million or 18.5% in the prior-year's quarter.
This decrease in gross profit was due to the pressure on margins as the
segments competed for the lower available sales volume, partially offset by
reduced factory labor and increased production efficiencies.
EXPENSES -- Operating expenses decreased to $10.4 million or 21.2% of sales
in the fourth quarter of 2009 from $15.1 million or 18.3% of sales in the
prior-year's quarter. One major item that caused the higher expenses in
the prior-year's quarter was the non-cash goodwill impairment charge of
$2.8 million. The increase in expense as a percent of sales was primarily
due to the effect of lower sales. The decrease for expenses aside from the
goodwill impairment charge was the result of reduced personnel and program
reductions across the Company.
NET LOSS -- The fourth quarter produced a net loss of $5.8 million or
($0.85) per share, compared to a net loss of $0.8 million or ($0.12) per
share, in the prior-year's quarter. Net loss increased due to lower sales
in all segments and compressed margins due to competitive factors.
INDIA PIPELINE PROJECT -- In October 2009, the piping systems business
completed the insulating and jacketing services for the 600 kilometer (370
mile), 600 millimeter (24 inch) diameter heat-traced crude oil pipeline in
India, which was a significant contributor to prior sales and earnings. In
January 2010, we received an order to insulate and jacket at least an
additional 150 kilometer (93 mile) of pipeline for this project. This new
work will begin in May 2010 and is expected to be completed by the end of
the year. The work will be performed in our existing Mundra, India
facility.
BACKLOG AND RECENT SALES ACTIVITY -- The Company's backlog on January 31,
2010 was $73.3 million, down $34.5 million or 32.0% from January 31, 2009.
The principal factors of the backlog decline in recent quarters was the
completion of the heated oil pipeline in India, the severe drop in business
activity in the U.A.E., the low level of activity for oil and gas gathering
lines in the Gulf of Mexico and the completion of HVAC projects. Some more
recent developments with respect to new business are:
PIPING SYSTEMS -- In addition to the India Pipeline Project described
above, we expanded our selling presence into other suitable countries in
the region such as Saudi Arabia, Egypt, Kuwait, Qatar, Bahrain and Oman to
compensate for the economic conditions in Dubai. We added sales personnel
and representation in these areas which has resulted in several new orders.
In late 2009, we received several substantial orders of approximately $26.6
million for chilled and hot water distribution for the new Princess Noura
University in Saudi Arabia, the Muscat International Airport in Oman, the
South Utility Tunnel in Qatar and the Smart Village in Cairo, Egypt. Early
in 2010, we received a large order for the Fox Hills project in Qatar,
adding significantly to the backlog.
FILTRATION PRODUCTS -- Quotes and orders in 2009 were at low levels, as the
industrial markets we serve were under pressure. Early in 2010, there has
been some improvement in the economy that is reflected in higher filter
consumption by end users. We believe that our effort to generate business
in new markets is positively impacting our business. Pleated product sales
and bookings are up at our United States and European cartridge filter
plants. We believe that we are gaining market share through our sales
actions and that we will benefit from the economic upturn when it occurs.
INDUSTRIAL PROCESS COOLING -- Quoting activity and orders have shown
increased strength over the past several months, both domestically and
internationally. Several large orders were secured and the base business
seems to be solidifying.
HVAC CONTRACTING -- The market for new HVAC projects remained constrained
by economic conditions. Quoting activity for HVAC projects has maintained
reasonably high levels and in early 2010, an $8 million contract was
obtained for a Chicago project. We expect field work on this new project
to begin late in the second quarter of 2010.
David Unger, CEO said, "Our global expansion strategy of manufacturing
products in foreign countries to serve their local markets has resulted in
growth opportunities for our Company. We continue to seek market potential
around the world to grow our volume and profitability. This also helps us
to provide expanded economic opportunities for our people. When the
current economic recession ends, we believe the mix of domestic and global
sales should position the Company for further growth."
Brad Mautner, President and COO said, "The cumulative impact of the
economic storm that began in the fall of 2008, coupled with completion of
significant piping and HVAC projects led to the poor fourth quarter. Even
so, the Company was profitable for 2009 and our previously mentioned focus
on expense control and capital management contributed $34.6 million of
operating cash flow. While visibility on industrial demand remains
clouded, we will bring new products to market in 2010 and invest in new
opportunities for expansion, while at the same time maintaining our focus
on capital management and expense control. These efforts are targeted
towards increasing sales in certain strategic areas and to improving
margins."
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; industrial
process cooling equipment to remove heat from molding, printing and other
industrial processes; and installation of heating, ventilation and air
conditioning for large buildings.
Form 10-K for the period ended January 31, 2010 will be accessible at
http://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.