MFRI Announces Third Quarter 2012 Results and Significant

MFRI Announces Third Quarter 2012 Results and Significant Increase in
Order Backlog 
NILES, IL -- (Marketwire) -- 12/07/12 --   MFRI, Inc. (NASDAQ: MFRI)
announced today financial results for the third quarter and nine
months ended October 31, 2012. Third quarter net sales were $58
million compared to $71 million in the prior-year quarter; net income
in the quarter was $0.5 million or $0.07 per diluted share, compared
to net income of $0.7 million or $0.10 per diluted share, in the
prior-year quarter. 
FISCAL QUARTER ENDED OCTOBER 31, 2012  
SALES - Sales were $58 million in the current quarter down from $71
million in the prior-year quarter. Piping systems sales decreased
$8.9 million in the quarter driven by a decline in U.S. sales
partially offset by an increase in sales in the Middle East.
Filtration products' sales decreased by $3.3 million due primarily to
reduced demand for fabric filters. 
GROSS PROFIT - Gross profit was $11.4 million in the current quarter
down from $12.4 million in the prior-year quarter mainly due to the
sales decrease in filtration products. Even with 18% less sales than
the prior year quarter, gross margin increased 2 percentage points.
Higher volume for both piping systems delivered by the U.A.E.
facility and industrial process cooling led to the increased margin
result. In response to lower demand for fabric filters and domestic
piping systems, staff was reduced to match market needs. In addition,
the filtration group has replaced some key management, increased
marketing activities to drive sales growth and is actively sourcing
lower cost but high quality materials to improve margins. 
EXPENSES - Operating expenses increased 6% to $10.8 million in the
current quarter from $10.2 million in the prior-year quarter. This
increase was due to start-up costs of $209 thousand for the Saudi
Arabia facility, $170 thousand higher non-cash deferred compensation
expense, $97 thousand for audit, tax consulting and other
professional service expenses and one-time domestic severance
payments partially offset by a reduction in stock-based compensation
expense. 
NET INCOME - The third quarter produced net income of $0.5 million
compared to net income of $0.7 million in the comparable prior-year's
quarter. 
YEAR-TO-DATE NI
NE MONTHS ("YTD") 
SALES - YTD net sales of $163.3 million decreased 13.5% from $188.7
million in the prior year. Piping systems sales decreased $11.6
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.
Reduced market demand for fabric filters led to a decrease of $11.1
million in filtration products. Corporate and other decreased by $5.6
million mostly due to customer decisions to extend project completion
dates. Industrial process cooling sales increased $2.9 million as
order intake continued to improve.  
GROSS PROFIT - Despite the 13.5% decrease in sales, gross margin
improved by 2 percentage points to 19% of net sales from 17% of net
sales in the prior year. Gross profit increased significantly in
piping systems due to higher volume delivered by the U.A.E. and
strong sales in industrial process cooling while filtration products
gross profit decreased due to lower demand. 
EXPENSES - General and administrative expenses increased 7% to $20.9
million YTD from $19.5 million in the prior-year YTD. The increase
was due to start-up costs of $0.8 million for the Saudi Arabia
facility, $0.6 million for audit, tax consulting and other
professional service expenses, higher non-cash deferred compensation
expense partially offset by a reduction in stock-based compensation
expense. 
TAXES - The Company's consolidated effective tax rate was (8)% for
the nine months ended October 31, 2012, which was effected primarily
by the change in the mix of the projected tax-free earnings in the
U.A.E. versus total projected earnings and losses. 
NET LOSS - Net loss was $3 million in 2012 compared to a net loss of
$2.6 million in the comparable prior-year. 
CURRENT STATUS
 BACKLOG - The Company's backlog has increased
steadily over the past 14 quarters. The October 31, 2012 backlog rose
$19 million or 23% to $102 million from January 31, 2012. Strong
bookings during November in piping systems and filtration products
led to an estimated 31% increase in backlog from October to November.
November's backlog of $134 million is the highest since the fall of
2008. 


 
                                                                            
                         November 30,  October 31,  January 31,  October 31,
Backlog                      2012         2012         2012         2011    
                         ------------ ------------ ------------ ------------
  (in millions)            estimated     actual       actual       actual   
Piping Systems               $96.2        $76.2        $53.8        $68.6   
Filtration Products          22.5          9.8         14.5         12.1    
Industrial Process                                                          
 Cooling                      5.9          6.6          6.4          6.2    
Corporate and Other           9.2          9.7          8.5          1.3    
                         ------------ ------------ ------------ ------------
    Total Backlog           $133.8       $102.3        $83.2        $88.2   

 
RECENT DEVELOPMENTS - On November 26, 2012, the Company announced that
Perma-Pipe Saudi Arabia received orders totaling over $23 million to
supply engineered and insulated piping products for the chilled water
distribution system utilized for a major expansion of the Haram
Sharif in Mecca, Kingdom of Saudi Arabia. Production is expected to
begin in December 2012 and continue through mid-2013. In addition,
filtration products received major orders in November valued at
approximately $13 million. These filtration orders are expected to
commence production in the second quarter of 2013 and be complete by
the end of 2014. 
David Unger, CEO, commented, "I am very pleased with our success in
securing the opportunity to furnish our products in Saudi Arabia.
Expanding our focus to the Saudi Arabian infrastructure, industrial
and oil and gas markets fits well with the overall implementation of
our business strategy at Perma-Pipe. I am also pleased to note our
recent large order wins in filtration products which will give a
boost to this segment over time." 
Brad Mautner, President and COO, said, "Even with significant volume
declines from the prior year in both the quarter and year-to-date, we
still increased gross profit margin and were able to produce a
profitable quarter. In addition, we are focusing on cost control and
productivity improvement. Importantly, backlog is up 16% from a year
ago and 31% from October to November. Even given the uncertainty,
regarding the U.S. and European economic climate, the strong backlog
position should provide a foundation for improved results going
forward. We are also very pleased to now see the beginnings of
meaningful success from our Saudi Arabia initiative." 
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 proces
ses; and
installation of heating, ventilation and air conditioning for large
buildings. 
Form 10-Q for the period ended October 31, 2012 will be accessible at
www.sec.gov and www.mfri.com. For more information visit the
Company's website 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. 
This announcement may also contain certain non-GAAP financial
information that management believes is helpful in understanding our
business. This financial information should not be considered as an
alternative to net (loss) income or any other GAAP measurement of
performance. 


 
                                                                            
MFRI, INC. AND SUBSIDIARIES                                                 
CONSOLIDATED STATEMENTS OF                                                  
 OPERATIONS                                                                 
(Unaudited) (In 000's except per     Three Months Ended   Nine Months Ended 
 share data)                             October 31,         October 31,    
                                     ------------------  ------------------ 
Operating Statement Information        2012      2011      2012      2011   
                                     --------  --------  --------  -------- 
Net sales                                                                   
Piping Systems                       $ 26,498  $ 35,371  $ 69,147  $ 80,737 
Filtration Products                    20,738    24,000    62,990    74,122 
Industrial Process Cooling              9,199     8,948    27,225    24,334 
Corporate and Other                     1,890     3,011     3,952     9,528 
                                     --------  --------  --------  -------- 
  Total                              $ 58,325  $ 71,330  $163,314  $188,721 
Gross profit                                                                
Piping Systems                       $  6,060  $  6,222  $ 14,327  $ 13,666 
Filtration Products                     2,616     3,409     8,280    10,258 
Industrial Process Cooling              2,617     2,486     7,586     6,657 
Corporate and Other                       153       315       287       877 
                                     --------  --------  --------  -------- 
  Total                              $ 11,446  $ 12,432  $ 30,480  $ 31,458 
Income (loss) from operations                                               
Piping Systems                       $  2,585  $  3,026  $  4,183  $  3,730 
Filtration Products                      (410)      315      (506)    1,341 
Industrial Process Cooling                526       517     1,403     1,014 
Corporate and Other                    (2,020)   (1,626)   (6,789)   (5,409)
                                     --------  --------  --------  -------- 
  Total                              $    681  $  2,232  $ (1,709) $    676 
                                                                            
Income from joint venture                 531       683       354       584 
Interest expense, net                     594       395     1,385     1,014 
                                     --------  --------  --------  -------- 
Income (loss) before income taxes         618     2,520    (2,740)      246 
Income tax expense                        163     1,834       218     2,889 
                                     --------  --------  --------  -------- 
Net income (loss)                    $    455  $    686  $ (2,958) $ (2,643)
                                     ========  ========  ========  ======== 
                                                                            
Weighted average number of common                                           
 shares outstanding                                                         
  Basic and diluted                     6,924     6,881     6,921     6,866 
                                                                            
Earnings (loss) per share                                                   
  Basic and diluted                  $   0.07  $   0.10  $  (0.43) $  (0.38)

 
See the Company's Form 10-Q for the period for notes to financial
statements. 
CONTACT:
David Unger
Chairman and CEO
(847) 966-1000