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Perma-Pipe Announces its 3rd Quarter & Year-to-Date Fiscal 2020 Financial Results

Source: www.gulfoilandgas.com 12/21/2020, Location: North America

Perma-Pipe International Holdings, Inc. announced financial results for the third quarter ended October 31, 2020.

“Third quarter revenue was $20.3 million, $14.2 million below the same quarter last year, and net loss was $2.9 million compared to a net loss of $0.1 million in the same quarter of 2019,” noted President and CEO David Mansfield.

"During the quarter the impact of the COVID-19 pandemic has continued to negatively impact our revenues. In the current environment, capital spending in the oil and gas industry remains low, and project schedules in the construction industry continue to be delayed. These are important drivers of Perma-Pipe’s markets. The medium term view however remains the same, and many delayed projects are awaiting the recovery and the easing of restrictions brought about by the pandemic. In recent weeks, we have seen an increase in the level of bidding activity and project awards, and major projects that were stalled appear to now be reinvigorated. While there is news that an effective COVID-19 vaccine might be on the near horizon, it is difficult to determine the timing of any recovery of the global economy.” Mr. Mansfield continued.

"In response to these changing conditions, we have implemented and continue to maintain cost control measures which have helped partially offset the negative impact of the significant reductions in revenue. Our focus on cost control efforts will continue while market conditions remain depressed, and we will manage our business to the current activity level with a goal to be positioned to take advantage of the recovery.” Mr. Mansfield continued.

“Some positive news to report is that we continue with our longer term plans that are focused on future growth. We recently commissioned a new custom coating plant at our UAE facility that will serve the oil and gas and water industries with products and services not previously provided by Perma-Pipe. We have already secured our first contract, which should be executed during the forthcoming quarter, and which serves as confirmation that we are filling a needed gap in capabilities to serve those markets. We are also currently in the process of installing a similar plant at our facility in India.” added Mr. Mansfield

"Our backlog currently stands at $47.7 million, which reflects an increase of $1.0 million from the backlog at January 31. After a quarter of increased bidding activity, there has been a meaningful increase to the backlog for our MENA region, particularly at our recently established plant in Egypt.” Mr. Mansfield concluded.

Third Quarter Fiscal 2020 Results
Net sales were $20.3 million in the current quarter, a decrease of $14.2 million, or 41%, from $34.5 million in the prior year quarter. The decrease was a result of lower sales volumes in the Company's Canadian and offshore Gulf of Mexico businesses driven by the impact of lower oil prices, combined with a reduction in sales in the Company's U.S. and Middle East district heating and cooling businesses caused by project delays arising as a result of the COVID-19 pandemic.

Gross profit decreased to $2.9 million, or 14% of net sales, in the current quarter from $7.6 million, or 22% of net sales, in the prior year quarter. This decrease was driven primarily by lower sales volumes.

General and administrative expenses decreased to $4.5 million in the current quarter from $4.6 million in the prior year quarter. This decrease was driven primarily by cost cutting measures enacted as a result of the COVID-19 pandemic.

Selling expenses decreased to $1.2 million in the current quarter, compared to $1.4 million in the prior year quarter due primarily to lower personnel costs.

Net interest expense decreased to $0.1 million in the current quarter, compared to $0.2 million in the prior year quarter. This decrease was due to lower borrowings during the period.

Other income/(expense) decreased to an expense of less than $0.1 million in the current quarter, compared to income of $0.1 million in the prior year quarter. This decrease was driven by the encashment of a $0.6 million performance bond securing one of the Company's contracts with a customer in Qatar. The Company believes the customer's claims of non-performance under the contract are invalid and that the customer's actions were themselves a breach of the contract. The Company has engaged local counsel to seek reimbursement as well as additional compensation for lost profits suffered as a result of cancellation of certain work orders under the contract. This expense was partially offset by funds received under the CEWS program in Canada.

Income/(loss) from operations before income taxes decreased by $4.4 million to a loss of $2.9 million in the current quarter from income of $1.5 million in the prior year quarter. The decrease was a result of lower sales volumes in the Company's Canadian and offshore Gulf of Mexico businesses driven by the impact of lower oil prices, combined with a reduction in sales in the Company's U.S. and Middle East district heating and cooling businesses caused by project delays arising as a result of the COVID-19 pandemic.

The Company's worldwide effective tax rates ("ETR") were 0.8% and 127.8% in the current quarter and the prior year quarter, respectively. The change in the ETR from the prior year quarter to the current year quarter is due to the impact of tax rates in various jurisdictions and the changing mix of taxable income and loss in those jurisdictions, as well as the impact of the lower current quarter pre-tax income as compared to the prior year quarter.

The resulting net loss of $2.8 million in the current quarter was a decline of $2.7 million over the net loss of $0.1 million in the prior year quarter. The decrease was a result of lower sales volumes in the Company's Canadian and offshore Gulf of Mexico businesses driven by the impact of lower oil prices, combined with a reduction in sales in the Company's U.S. and Middle East district heating and cooling businesses caused by project delays arising as a result of the COVID-19 pandemic.

Year-to-Date October 31, 2020 Results
Net sales were $63.4 million in the current year-to-date, a decrease of $32.0 million, or 34%, from $95.4 million in the prior year year-to-date. The decrease was a result of lower sales volumes in the Company's Canadian and offshore Gulf of Mexico businesses driven by the impact of lower oil prices combined with project delays in the Company's U.S. and Middle East district heating and cooling businesses arising as a result of the COVID-19 pandemic.

Gross profit decreased to $8.8 million, or 14% of net sales, in the current year-to-date from $22.0 million, or 23% of net sales, in the prior year year-to-date. This decrease was driven primarily by lower sales volumes.

General and administrative expenses decreased to $13.3 million in the current year-to-date from $13.9 million in the prior year year-to-date. This decrease was driven primarily by cost cutting measures enacted as a result of the COVID-19 pandemic.

Selling expenses increased to $4.2 million in the current year-to-date, compared to $4.0 million in the prior year year-to-date, an increase of $0.2 million, or 3%. This increase was primarily due to the addition of new sales employees and severance payments for terminated employees.

Net interest expense decreased to $0.4 million in the current year-to-date, compared to $0.6 million in the prior year year-to-date. This decrease was due to lower borrowings during the period.

Other income/(expense) increased to income of $3.7 million in the current year-to-date, compared to income of $0.4 million in the prior year year-to-date, an increase of $3.3 million. This increase was primarily the result of recognition of the Company's reasonable expectation of forgiveness of its PPP loan proceeds during the period of $3.2 million, as well as funds received under the CEWS program in Canada. These amounts were offset partially by the encashment of a performance bond securing one of the Company's contracts with a customer in Qatar. The Company believes the customer's claims of non-performance under the contract are invalid and that the customer's actions were themselves a breach of the contract. The Company has engaged local counsel to seek reimbursement as well as additional compensation for lost profits suffered as a result of cancellation of certain work orders under the contract.

Income/(loss) from operations before income taxes decreased by $9.2 million to a loss of $5.4 million in the current year-to-date from income of $3.8 million in the prior year year-to-date. The decrease was a result of lower sales volumes in the Company's Canadian and offshore Gulf of Mexico businesses driven by the impact of lower oil prices, combined with a reduction in sales in the Company's U.S. and Middle East district heating and cooling businesses caused by project delays arising as a result of the COVID-19 pandemic.

The Company's worldwide ETRs were 6.2% and 48.6% in the current year-to-date and the prior year year-to-date, respectively. The change in the ETR from the prior year year-to-date to the current year year-to-date is due to the impact of tax rates in various jurisdictions and the changing mix of taxable income and loss in those jurisdictions.

The resulting net loss of $5.1 million in the current year-to-date was a decline of $7.2 million over the net income of $2.1 million in the prior year year-to-date. The decrease was a result of lower sales volumes in the Company's Canadian and offshore Gulf of Mexico businesses driven by the impact of lower oil prices, combined with a reduction in sales in the Company's U.S. and Middle East district heating and cooling businesses caused by project delays arising as a result of the COVID-19 pandemic.

Percentages set forth above in this press release have been rounded to the nearest percentage point and may not exactly correspond to the comparative data presented.

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