MFRI Reports 1Q 2014 Net Sales of $59.5 Million and EPS of $0.57 From Continuing Operations

MFRI Reports 1Q 2014 Net Sales of $59.5 Million and EPS of $0.57 From 
Continuing Operations 
NILES, IL -- (Marketwired) -- 06/10/14 --  MFRI, Inc. (NASDAQ: MFRI) 

--  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. (NASDAQ: MFRI) announced today financial results for the
first quarter ended April 30, 2014. 
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
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
"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." 
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. 
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 and 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                                 
  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.
Earnings per share calculations could be impacted by rounding. 

MFRI, INC. AND SUBSIDIARIES                                                 
CONSOLIDATED BALANCE SHEETS                                                 
(In thousands except per share data)               April 30,    January 31, 
                                                      2014          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. 
Bradley Mautner
President & CEO 
(847) 966-1000 
Harriet Fried / Jody Burfening
(212) 838-3777 
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