Perma-Pipe International Holdings, Inc. 10-K

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), which can be identified by the use of forward-looking terminology such as "may," "will," "expect," "continue," "remains," "intend," "aim," "should," "prospects," "could," "future," "potential," "believes," "plans," "likely," 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 Exchange Act 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 could cause actual results to differ materially from those projected as a result of many factors, including, but not limited to, those under the headings Cautionary Statements Regarding Forward Looking Information and Item 1A. Risk Factors. The Company is engaged in the manufacture and sale of products in one reportable segment: Piping Systems. Since the Company's revenues are significantly dependent upon large discrete projects, the Company's operating results in any reporting period could be negatively impacted as a result of variations in the level of the Company's large discrete project orders or delays in the timing of the specific project phases. COVID-19 and Depressed Oil and Gas Market The Company’s results of operations, financial condition, liquidity and cash flow in 2020 have been materially adversely affected by the COVID-19 pandemic and the current depressed market prices for oil and gas, and will likely continue to be materially adversely affected, the extent to which remains unclear at this time. See Item 1A. Risk Factors for additional information. As of the date of filing this Form 10-K, all of the Company’s plants are operating and, to date, the Company's global supply chains have not been materially affected by the global pandemic. Due to the unprecedented actions taken to stem the spread of the virus and the uncertainty of the duration and impact of additional actions that may be required, the resulting future disruptions to the Company’s operations are uncertain. In response to the extraordinary steps taken to combat the spread of COVID-19 and the impact of decreased oil prices, the Company has updated its forecasts more frequently during this period to determine the continuing financial impact of these events on the Company’s results of operations, financial condition and liquidity. As a result of these reforecasts, the Company reduced headcount, planned capital expenditures and non-essential operating expenses. Due to continued project delays as a result of the COVID-19 pandemic and related disruptions, as of January 31, 2021, the Company and its subsidiaries failed to achieve the necessary fixed charge coverage ratio of 1.10 to 1.00 for the three-month period ended January 31, 2021 under its Amendment and Waiver for the North American Loan Parties. Based upon the actions taken by the Company and expected future results, the Company believes it has alleviated any concerns about its ability to satisfy its obligations in the normal course of business for the next year after the date these financial statements are available to be issued. See further discussion below and in Note 5 - Debt, in the Notes to Consolidated Financial Statements. On May 1, 2020, the Company entered into a loan agreement under the PPP and received proceeds of approximately $3.2 million. Interest on the loan accrued at a fixed interest rate of 1.0%. Under Section 1106 of the CARES Act, borrowers are eligible for forgiveness of principal and accrued interest on the loans to the extent that the proceeds are used to cover eligible payroll costs, mortgage interest costs, rent and utility costs, otherwise described as qualified expenses. During the three months ended July 31, 2020, the Company used all of the PPP loan proceeds to pay for qualified expenses. 100% of the PPP loan proceeds were used for payroll related expenses. The Company believes the PPP loan proceeds will be forgiven under the terms of the CARES Act, although no assurance to that effect can be provided. Under the current provisions of the CARES Act, any recipient of a PPP loan may be subject to an audit by the SBA to confirm it qualifies for the loan and that the proceeds were used for qualified expenses as prescribed by the PPP rules. Based on the facts and circumstances of the Company's PPP loan and according to the applicable accounting guidance described herein, the Company has elected to account for the PPP loan proceeds as a grant that has reasonable assurance of being forgiven. As such, the Company recognized the proceeds in earnings during the year ended January 31, 2021. The amounts are recognized in other income in the consolidated statements of operations. The Company has submitted its application and supporting documentation for forgiveness to its bank, which has submitted the application and supporting documents to the SBA. We are currently awaiting approval of forgiveness from the SBA. Beginning in April 2020, the Company's subsidiary, Perma-Pipe Canada, Ltd. ("PPCA"), applied for relief in the form of grants from the Canadian government under the CEWS program. Based on the CEWS program rules, the grants are applied for each month and are granted based on the amount of eligible employee expenses incurred over the previous month. Beginning in October 2020, PPCA also applied for grants under the CERS program. PPCA was approved for and received approximately $1.9 million and $0.1 million in grants under the CEWS and CERS programs, respectively, during the year ended January 31, 2021. Both programs are scheduled to continue through June 2021. The proceeds from CEWS and CERS are recognized in other income in the consolidated statements of operations. Results of Operations The analysis presented below and discussed in more detail throughout this MD&A was organized to provide instructive information for better understanding the Company's results of operations, financial condition and cash flows. However, this MD&A should be read in conjunction with the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K, including the notes thereto and the risk factors contained herein. The Company's fiscal year ends on January 31. Years, results and balances described as 2020 and 2019 are for the fiscal years ended January 31, 2021 and 2020, respectively 12 Table of Contents Consolidated Results of Operations: % Favorable ($ in thousands) 2020 2019 (Unfavorable) Net sales $ 84,694 $ 127,663 (33.7 %) Gross profit 11,179 29,046 (61.5 %) Percentage of net sales 13.2 % 22.8 % General and administrative expenses 17,222 18,934 9.0 % Percentage of net sales 20.3 % 14.8 % Selling expense 5,334 5,231 (2.0 %) Percentage of net sales 6.3 % 4.1 % Interest expense, net 381 905 57.9 % Other income, net 3,983 1,059 276.1 % Income/(loss) from operations before income taxes (7,775 ) 5,035 (254.4 %) Income tax expense/(benefit) (133 ) 1,459 109.1 % Net income/(loss) (7,642 ) 3,576 (313.7 %) 2020 Compared to 2019 Net sales: Net sales were $ 84.7 million in 2020 , a decrease of $42.9 million, or 33.7% , from $ 127.7 million in 2019 . The decrease was a result of lower sales volumes driven by the impact of lower oil prices, combined with project delays arising as a result of the COVID-19 pandemic. The Company expects these delayed projects to commence in 2021. Gross profit: Gross profit decreased to $ 11.2 million, or 13.2% of net sales, in 2020 , a decrease of $17.8 million, or 61.5% , from $ 29.0 million, or 22.8% of net sales, in 2019 . This decrease was primarily driven by lower sales volumes. General and administrative expenses: General and administrative expenses were $ 17.2 million in 2020 compared to $ 18.9 million in 2019 , a decrease of $ 1.7 million, or 9.0% . This decrease was driven primarily by cost cutting measures enacted as a result of the COVID-19 pandemic. Selling expenses: Selling expenses increased by $0.1 million, from $5.2 million in 2019 to $ 5.3 million in 2020 . This increase was primarily due the addition of new sales employees and severance for terminated employees in the current year, partially offset by lower overall personnel costs. 13 Table of Contents Interest expense: Interest expense decreased to $ 0.4 million in 2020 from $ 0.9 million in 2019 due to lower net borrowings during 2020 . Other income, net: Other income was $4.0 million in 2020 compared to $1.1 million in 2019, an increase of $2.9 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 income recorded for 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 has recorded the expense related to this encashment of approximately $0.6 million in other income in the consolidated statement of operations. 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: Income from operations before income taxes decreased to a loss of $ (7.8) million in 2020 compared to income of $5.0 million in 2019 . The decrease was a result of lower sales volumes driven by the impact of lower oil prices, combined with project delays arising as a result of the COVID-19 pandemic. The Company expects these delayed projects to commence in 2021. Income taxes: The Company's worldwide effective tax rates ("ETR") were 1.7% and 29.0% in 2020 and 2019, respectively. The change in the ETR from the prior year to the current year is largely due to the Company’s valuation allowance against its domestic deferred tax asset and changes to the mix of income in various jurisdictions, including losses in the zero rate jurisdiction of the United Arab Emirates (the "U.A.E."). As a result of the one-time transition tax from the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Act”), the Company estimates that distributions from foreign subsidiaries will not be subject to incremental U.S. tax as they will either be remittances of previously taxed earnings and profits or eligible for a full dividends received deduction. Current and future earnings in the Company's subsidiaries in Canada and Egypt are not permanently reinvested, and earnings in its Indian subsidiary are partially permanently reinvested. Earnings from these subsidiaries are subject to tax in their local jurisdiction, and withholdings taxes in these jurisdictions are considered. As such, the Company has reduced the liability from $0.4 million as of January 31, 2020 to $0.2 million as of January 31, 2021 related to these taxes. For further information, see Note 7 - Income taxes, in the Notes to Consolidated Financial Statements. 14 Table of Contents Net income/(loss): The resulting net loss of $7.6 million in 2020 was an $11.2 million decrease from the net income of $3.6 million in 2019. The decrease was a result of lower sales volumes driven by the impact of lower oil prices, combined with project delays arising as a result of the COVID-19 pandemic. The Company expects these delayed projects to commence in 2021. Liquidity and capital resources Cash and cash equivalents as of January 31, 2021 and 2020 were $ 7.2 million and $ 13.4 million, respectively. On January 31, 2021 , $0.1 million was held in the United States and $7.1 million was held by the Company's foreign subsidiaries. The Company's working capital was $ 25.6 million on January 31, 2021 compared to $ 31.4 million on January 31, 2020 . Of the working capital components, cash decreased $6.2 millio n primarily as a result of the activity discussed below. Net cash provided by operating activities was $ 0.2 million in 2020 compared to $4.1 million in 2019. This decrease of $4.0 million was due primarily to the decrease in net income and increases in prepaid expenses and other current assets, partially offset by decreases in inventory and increases in accounts payable in the current period compared to the prior year period. Net cash used in investing activities during 2020 and 2019 was $2.0 million and $1.9 million, respectively. Net cash used in financing activities was $4.1 million in 2020 compared to $0.3 million in 2019. The primary reason for this change was that during the current period the Company had greater net repayments under its revolving credit facility of approximately $3.2 million, as compared to the prior year period where the Company had net borrowings under its revolving credit facility of approximately $0.3 million. Debt totaled $13.2 million and $16.9 million as of January 31, 2021 and January 31, 2020, respectively. For additional information , see Note 5 - Debt, in the Notes to Consolidated Financial Statements. There was no restricted cash held in the United States on January 31, 2021 or January 31, 2020. Restricted cash held by foreign subsidiaries was $1.2 million and $1.3 million as of January 31, 2021 and 2020, respectively. Restricted cash held by foreign subsidiaries related to fixed deposits that also serve as security deposits and guarantees. The following table summarizes the Company's estimated contractual obligations on January 31, 2021 . ($ in thousands) Year Ending January 31, Contractual obligations Total 2022 2023 2024 2025 2026 Thereafter Revolving line - North America (1) $ 2,826 $ 2,826 $ - $ - $ - $ - $ - Mortgages (2) 6,394 373 379 385 391 398 4,468 Revolving lines - foreign (3) 3,272 3,272 - - - - - Term loan - foreign 17 5 6 6 - - - Subtotal 12,509 6,476 385 391 391 398 4,468 Finance lease obligations 701 300 255 146 - - - Operating lease obligations (4) 24,622 2,348 2,406 2,392 1,662 1,475 14,339 Uncertain tax position obligations (5) 544 - - - - - 544 Total $ 38,376 $ 9,124 $ 3,046 $ 2,929 $ 2,053 $ 1,873 $ 19,351 (1) Interest obligations exclude floating rate interest on debt payable under the North American revolving line of credit. Based on the amount of such debt on January 31, 2021 , and the weighted average interest rate of 6.25% on that debt, such interest was being incurred at an annual rate of approximately $0.2 million. (2) Scheduled maturities, excluding interest. (3) Scheduled maturities of foreign revolver line, excluding interest. (4) Minimum contractual amounts, assuming no changes in variable expenses. (5) Refer to Note 7 - Income taxes, in the Notes to Consolidated Financial Statements for a description of the uncertain tax position obligations. 15 Table of Contents Financing Revolving line - North America . On September 20, 2018, the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the Company, the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association ("PNC"), as administrative agent and lender, providing for a three-year $18 million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”). The Company has used proceeds from the Senior Credit Facility to pay outstanding amounts under a prior credit facility, a cash collateralized letter of credit, and for on-going working capital needs, and expects to continue using this facility to fund future capital expenditures, working capital needs and other corporate purposes. Borrowings under the Senior Credit Facility bear interest at a rate equal to an alternate base rate or London Interbank Offered Rate ("LIBOR"), plus, in each case, an applicable margin. The applicable margin is based on average quarterly undrawn availability with respect to the Senior Credit Facility. Interest on alternate base rate borrowings are generally payable monthly in arrears and interest on LIBOR borrowings are generally payable in arrears on the last day of each interest period. Additionally, the Company is required to pay a 0.375% per annum facility fee on the unused portion of the Senior Credit Facility. The facility fee is payable quarterly in arrears. Subject to certain exceptions, borrowings under the Senior Credit Facility are secured by substantially all of the assets of the Company and certain assets of its North American subsidiaries. The North American Loan Parties’ obligations under the Senior Credit Facility are guaranteed by Perma-Pipe Canada, Inc. The Senior Credit Facility will mature on September 20, 2021. Subject to certain qualifications and exceptions, the Senior Credit Facility contains covenants that, among other things, restrict the North American Loan Parties’ ability to create liens, merge or consolidate, consummate acquisitions, make investments, dispose of assets, incur debt, and pay dividends and other distributions. In addition, the North American Loan Parties cannot allow capital expenditures to exceed $3.0 million annually (plus a limited carryover of unused amounts). The Senior Credit Facility also contains financial covenants requiring (i) the North America Loan Parties to achieve a ratio of their EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility (excluding from the calculation items related to the financial performance of the Company’s foreign subsidiaries not party to the Credit Agreement) to be not less than 1.10 to 1.00 at each quarter end on a trailing four-quarter basis; and (ii) the Company and its subsidiaries (including the Company’s foreign subsidiaries not party to the Credit Agreement) to achieve a ratio of their EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility of not less than 1.10 to 1.00 at each quarter end on a trailing four-quarter basis. Due to project delays as a result of the COVID-19 pandemic, as of October 31, 2020, the Company and its subsidiaries failed to achieve the necessary fixed charge coverage ratio of 1.10 to 1.00 for the trailing four-quarters ended October 31, 2020 under its Credit Agreement for both the North American Loan Parties and the Company and its subsidiaries. On December 18, 2020, the Company entered into the First Amendment and Waiver to the Revolving Credit and Security Agreement (“Amendment and Waiver”) with PNC, which (i) reflected PNC’s waiver of the Company’s failure to maintain a fixed charge coverage ratio of 1.10 to 1.00 as of October 31, 2020 on a trailing four quarter basis as required under the Company’s Credit Agreement and (ii) further amended certain future fixed charge coverage ratio covenants requirements under the Credit Agreement as described below. Additionally, the Company was also required to have received, and applied to reduce the outstanding balance under the Credit Agreement, $1 million from one of its foreign subsidiaries, Perma-Pipe Middle East FZC, in the U.A.E. The transfer and repayment occurred on December 17, 2020 and did not cause the Company to incur any additional fees or taxes, nor did it force the Company to change any of its assertions with regards to permanent reinvestment in any of its foreign subsidiaries. The Company will incur additional fees over the remainder of the Amendment and Waiver of approximately $0.2 million. The Amendment and Waiver also eliminated the Company’s ability to make LIBOR borrowings and reduced the overall availability by $2.0 million until maturity. The amended fixed charge coverage ratio requirements for the Company and its subsidiaries under the Amendment and Waiver are (i) 1.25 to 1.00 for the six-month period ending April 30, 2021 and (ii) 1.25 to 1.00 for the nine-month period ending July 31, 2021. The amended fixed charge coverage ratio requirements for the North American Loan Parties under the Amendment and Waiver are (i) 1.10 to 1.00 for the three-month period ending January 31, 2021; (ii) 1.10 to 1.00 for the six-month period ending April 30, 2021; and (iii) 1.10 to 1.00 for the nine-month period ending July 31, 2021. In order to cure any future breach of the fixed charge coverage ratio covenant by the North American Loan Parties, the Company may repatriate cash from any of its foreign subsidiaries that are otherwise not a party to the Credit Agreement in an amount which, when added to the amount of the Company’s Consolidated Adjusted EBITDA, would result in pro forma compliance with the covenant. Due to continued project delays as a result of the COVID-19 pandemic, as of January 31, 2021, the Company and its subsidiaries failed to achieve the necessary fixed charge coverage ratio of 1.10 to 1.00 for the three-month period ended January 31, 2021 under the Amendment and Waiver for the North American Loan Parties. Per the Amendment and Waiver, the Company will repatriate approximately $0.8 million in cash from its subsidiary in the United Arab Emirates in April 2021 to cure the breach. The repatriation will not cause the Company to incur any additional fees or taxes, nor did it force the Company to change any of its assertions with regards to permanent reinvestment in any of its foreign subsidiaries. As of January 31, 2021, the Company’s foreign subsidiaries that are not a party to the Credit Agreement had approximately $6.6 million of cash available to satisfy a future potential repatriation cure of any potential future breach of the fixed charge coverage ratio covenant. The Company estimates that it may need to repatriate cash of up to $0.1 million in the next six months. Any cash required to cure future covenant defaults would be repatriated through the Company’s subsidiaries in the United Arab Emirates, Saudi Arabia, Egypt and/or India. Most of this cash could be repatriated without any tax consequences, however, some repatriation would require payment of withholding taxes. The Company does not anticipate any material tax impacts of any potential future repatriation. The Company believes it has alleviated any concerns about its ability to satisfy its obligations in the normal course of business for the next year after the date these financial statements are available to be issued based on the following: ● The Company’s execution of the Amendment and Waiver described above; ● The Company’s ability to repatriate cash from its foreign subsidiaries to cure any future covenant defaults without any material cost or tax consequences; ● The Company expects an increase in business activity and cash flow from operations over the remaining term of the Amendment and Waiver; ● Management expects to be able to borrow within the reduced availability parameters noted above; and ● The Company’s flexibility in deciding when to incur its planned capital expenditures, allowing the Company to defer cash spending if necessary to ensure compliance with loan covenants in the future. As of January 31, 2021, the Company had borrowed an aggregate of $2.8 million at a rate of 6.25% and had $1.7 million available under the Senior Credit Facility. 16 Table of Contents Revolving lines - foreign . The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E. and Egypt as discussed further below. The Company has a revolving line for 8.0 million Dirhams (approximately $2.2 million at January 31, 2021) from a bank in the U.A.E. The facility has an interest rate of approximately 3.4% and was originally set to expire in November 2020. However, the expiration has been extended due to the COVID-19 pandemic and the inability to finalize renewal documentation prior to that time. The Company is awaiting final documentation to complete the renewal process, which is expected to occur in April 2021. The Company has a second revolving line for 19.5 million Dirhams (approximately $5.3 million at January 31, 2021) from a bank in the U.A.E. The facility was renewed in January 2021 under the same terms. It has an interest rate of approximately 3.9% and is set to expire in January 2022. These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates. The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt. In November 2019, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 200.0 million Egyptian Pounds (approximately $12.7 million at January 31, 2021). This credit arrangement was in the form of project financing at rates competitive in Egypt. The line was secured by certain assets (such as accounts receivable) of the Company's Egyptian subsidiary. Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricts the Company's Egyptian subsidiary's ability to undertake any additional debt. The facility was originally set to expire in June 2020, however, the expiration was extended to January 2021 due to the COVID-19 pandemic and the inability to finalize renewal documentation prior to that time. The Company has not made borrowings under this facility. The Company is currently negotiating the renewal of the facility under similar terms, with a revolving line of 100.0 million Egyptian Pounds and the renewal process is expected to be completed in April 2021. In January 2021, the Company entered into a second credit arrangement for project financing with a bank in Egypt for 46.2 million Egyptian Pounds (approximately $2.9 million at January 31, 2021). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by the contract for a project being financed by the Company's Egyptian subsidiary. The facility has an interest rate of approximately 8.0% and is expected to expire in August 2021 in connection with the completion of the project. The Company’s credit arrangements used by its Middle Eastern subsidiaries renew on an annual basis. The Company guarantees the subsidiaries' debt including all foreign debt. The Company was in compliance with the covenants under the credit arrangements in the U.A.E. and the 200.0 million Egyptian Pound facility in Egypt as of January 31, 2021. The Company was not in compliance with a covenant under its 46.2 million Egyptian Pound project financing in Egypt as of January 31, 2021. The Company did not have a share capital increase registered with the General Authority for Investment, as required by facility covenants, but is in the process of curing the breach and has received a waiver from the bank as of January 31, 2021. On January 31, 2021, interest rates were based on the Emirates Inter Bank Offered Rate plus 3.0% to 3.5% per annum for the U.A.E. credit arrangements, one of which has a minimum interest rate of 4.5% per annum, and based on the stated interest rate in the agreement for the Egypt credit arrangement. Based on these base rates, as of January 31, 2021, the Company's interest rates ranged from 3.4% to 8.0%, with a weighted average rate of 6.05%, and the Company could borrow $23.1 million under these credit arrangements. As of January 31, 2021, $5.8 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of January 31, 2021, the Company had borrowed $3.3 million, and had an additional $1.3 million of borrowing remaining available under the foreign revolving credit arrangements. The foreign revolving lines balances as of January 31, 2021 and 2020 were included as current maturities of long-term debt in the Company's consolidated balance sheets. Additional liquidity from the PPP On May 1, 2020, the Company entered into a loan agreement under the SBA's PPP and received proceeds of approximately $3.2 million. Interest on the loan accrued at a fixed interest rate of 1.0%, and the loan had a maturity date of April 28, 2022. Under Section 1106 of the CARES Act, borrowers are eligible for forgiveness of principal and accrued interest on the loans to the extent that the proceeds are used to cover eligible payroll costs, mortgage interest costs, rent and utility costs, otherwise described as qualified expenses. During the three months ended July 31, 2020, the Company used all of the PPP loan proceeds to pay for qualified expenses. 100% of the PPP loan proceeds were used for payroll related expenses. The Company believes the PPP loan proceeds will be forgiven under the terms of the CARES Act, although no assurance to such effect may be provided. Under the current provisions of the CARES Act, any recipients of a PPP loan may be subject to an audit by the SBA to confirm they qualify for the loan and that the proceeds were used for qualified expenses as prescribed by the program rules. Based on the facts and circumstances of the Company's loan and according to the applicable accounting guidance described herein, the Company has elected to account for the PPP proceeds as a grant that has reasonable assurance of being forgiven. As such, the Company recognized the proceeds in earnings during the year ended January 31, 2021. The amounts are recognized in other income in the consolidated statements of operations. Additional liquidity from the CEWS and CERS Programs Beginning in April 2020, the Company's subsidiary, PPCA, applied for relief in the form of grants from the Canadian government under the CEWS program. Based on the program rules, the grants are applied for each month and are granted based on the amount of eligible employee expenses incurred over the previous month. Beginning in October 2020, PPCA also applied for grants under the CERS program. PPCA was approved for and received approximately $1.9 million and $0.1 million in grants under the CEWS and CERS programs, respectively, during the year ended January 31, 2021. Both programs are scheduled to continue through June 2021. The proceeds from CEWS and CERS are recognized in other income in the consolidated statements of operations. 17 Table of Contents Accounts receivable: In 2013, the Company started a project in the Middle East as a sub-contractor, with billings in the aggregate amount of approximately $41.9 million. The Company completed all of its deliverables in 2015, and has since then collected approximately $38.1 million, with a remaining balance due in the amount of $3.8 million. Included in this balance is an amount of $3.4 million, which pertains to retention clauses within the agreements of the Company's customer (contractor), and which become payable by the customer when this project is fully tested and commissioned. In the absence of a firm date for the final commissioning of the project, and due to the long-term nature of this receivable, $2.4 million of this retention amount was reclassified to a long-term receivable account. The Company has been engaged in ongoing active efforts to collect the outstanding amount. During 2020, the Company received approximately $0.2 million from the customer. The Company has also received an updated acknowledgment of the outstanding balances and assurances of payment from the customer. As a result, the Company did not reserve any allowance against this amount as of January 31, 2021. However, if the Company’s efforts to collect on this account are not successful in fiscal 2021, then the Company may be required to recognize an allowance for all, or substantially all, of any such then uncollected amounts in the future. Critical accounting estimates and policies The Company's significant accounting policies are discussed in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. The application of certain of these policies requires significant judgments or a historical based estimation process that can affect the results of operations and financial position of the Company, as well as the related footnote disclosures. The Company bases its estimates on historical experience and other assumptions that it believes are reasonable. If actual amounts ultimately differ from previous estimates, the revisions are included in the Company's results of operations for the period in which the actual amounts become known. Revenue recognition. In accordance with Accounting Standards Update No. 2014-19, “Revenue from Contracts with Customers” (“ASC 606”), the Company recognizes revenue when a customer obtains control of promised goods or services. See Note 4 - Revenue recognition, in the Notes to Consolidated Financial Statements, for more detail. • Percentage of completion revenue recognition. Certain domestic divisions have contracts that recognize revenues using periodic recognition of income. For these contracts, the Company uses the "percentage of completion" accounting method. Under this approach, income is recognized in each reporting period based on the status of the uncompleted contracts and the current estimates of costs to complete. The choice of accounting method is made at the time the contract is received based on the expected length and complexity of the project. The percentage of completion is determined by the relationship of costs incurred to the total estimated costs of the contract. Provisions are made for estimated losses on uncompleted contracts in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income. Such revisions are recognized in the period in which they are determined. Claims for additional compensation due to the Company are recognized in contract revenues when realization is probable and the amount can be reliably estimated. Inventories. Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method for all inventories. Income taxes. Deferred income taxes have been provided for temporary differences arising from differences in the basis of assets and liabilities for tax and financial reporting purposes. Deferred income taxes on temporary differences have been recorded at the current tax rate. The Company assesses its deferred tax assets for realizability at each reporting period. The Company recognizes a tax position in its consolidated financial statements only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. For further information, See Note 7 - Income taxes, in the Notes to Consolidated Financial Statements. New accounting pronouncements. See Recent accounting pronouncements in Note 2 - Significant accounting policies, in the Notes to Consolidated Financial Statements. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - Not applicable. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of the Company for each of the two years in the periods ended as of January 31, 2021 and 2020 and the notes thereto are set forth as an exhibit hereto. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - None. 18 Table of Contents Item 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures. The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)) under the Exchange Act as of January 31, 2021 . This evaluation included consideration of the controls, processes and procedures that are designed to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company's management, including its Chief Executive Officer and Chief Financial Officer, have further concluded that the financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, the Company's financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States. Management's Annual Report on Internal Control Over Financial Reporting. The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. As required by Rule 13a-15(c) under the Exchange Act, the Company's management carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of its internal control over financial reporting as of January 31, 2021. The framework on which such evaluation was based is contained in the report entitled Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on this evaluation, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of January 31, 2021. Changes in Internal Control over Financial Reporting. Other than as set forth below, there were no changes in the Company's internal control over financial reporting during the Company's most recent year that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Management previously reported on a material weakness in the Company's internal control over financial reporting that resulted from an accounting error identified by the Company’s auditors during the audit of the Company’s financial statements for the fiscal year ended January 31, 2020 related to the Company’s revenue recognition under percentage of completion accounting. Specifically, the Company had improperly recognized revenue for an open project based on imputed sales amounts greater than the total contracted amount. This accounting error was attributable to the Company’s deviation from its standard contract accounting policies and failure to recognize the error during monthly revenue reviews and led management to conclude that a material weakness existed with respect to the Company’s internal control over financial reporting. The Company considered this material weakness fully remediated as of October 31, 2020, and such material weakness remained fully remediated as of January 31, 2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The Company has implemented the following changes in response to the material weakness described above: • Reinforced the importance of adherence to Company policies regarding entering into and subsequently modifying contracts with customers, and confirmed in monthly meetings with managers that no contracts have been entered into that deviate from the Company’s accounting policies; • Created additional reports to identify potential system errors and exceptions related to project revenues and costs where higher risk may exist for inappropriate revenue recognition; • Reviewed listing of material request invoices each month to identify if any significant items are included and reviewed with additional scrutiny for appropriate revenue recognition; • Ensured adherence to guidelines for preparation of the Company's monthly revenue and contribution margin presentation to include all components of a project in one line to provide full visibility of total job performance; and • Implemented a monthly meeting between accounting personnel to discuss and analyze the asset and liability work-in-process accounts to identify any specific projects that require further investigation. 19 Table of Contents Item 9B. OTHER INFORMATION On April 14, 2021, the Company’s Board of Directors approved a new form of Restricted Stock and Performance Award Agreement (the “Award Agreement”) for use in documenting grants under its 2017 Omnibus Stock Incentive Plan (the “Plan”). The Board also approved the use of the Award Agreement to formalize long-term incentive awards previously approved for the Company's named executive officers in June 2020. The Award Agreement consists of two components: (i) a grant of restricted stock that will vest ratably over three years, contingent on the grant holder’s continuous service until the applicable vesting date (the ”Restricted Stock Award”), and (ii) a grant of a performance-based cash award that will vest ratably over three years, the amount of which may vary, subject to a minimum threshold, based on the Company’s performance against pre-determined net income targets over a three-fiscal-year performance period (the “Performance Award”). Eighty percent (80%) of the target amount of the Performance Award is a minimum threshold amount that will be earned if the service requirements are satisfied. This minimum amount will be paid out in three equal installments over the three-year performance period. The amount earned under the Performance Award may increase, up to 150% of the target, if net income performance above the threshold level is achieved. The Restricted Stock Award and the Performance Award will generally be forfeited upon a termination of service prior to the date on which such awards are vested or earned, except that some or all of the Restricted Stock Award and the Performance Award may be eligible to be vested or earned following a termination of service as a result of death, disability, retirement or a termination without cause when retirement-eligible if the applicable requirements are met. The Restricted Stock Award and the Performance Award will be also be deemed vested or earned, as applicable, upon a change in control (as defined in the Plan). The foregoing description of the Award Agreement is not complete and is qualified in its entirety by the Award Agreement, a copy of which is filed herewith as Exhibit 10(l). The Company’s named executive officers received grants of Performance Awards in the following amounts pursuant to prior approval of the Board of Directors in June 2020: Named Executive Officer Executive officer of the Offices and Positions Target Value of Performance Award David J. Mansfield President and Chief Executive Officer $ 315,000 D. Bryan Norwood Vice President and Chief Financial Officer 59,242 Wayne Bosch Vice President and Chief Human Resources Officer 39,779 These award amounts are not new or additional grants of long-term incentive compensation in 2021; rather, they were previously approved in June 2020 as part of the 2020 long-term incentive awards and are now being formalized using the Award Agreement. PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information with respect to this item is incorporated herein by reference to the Company's definitive proxy statement for its 2021 annual meeting of stockholders. Information with respect to executive officers of the Company is included in Part I, Item 1, hereof under the caption "Executive Officers of the Registrant". Item 11. EXECUTIVE COMPENSATION Information with respect to this item is incorporated herein by reference to the Company's definitive proxy statement for its 2021 annual meeting of stockholders. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Equity Compensation Plan Information The following table provides information regarding the number of shares of common stock that may be issued upon exercise of outstanding options, warrants and rights under the Company's equity compensation plans and the weighted average exercise price and number of shares of common stock remaining available for issuance under those plans as of January 31, 2021 . Number of shares to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a)) Plan Category (a)(1) (b)(1) (c)(2) Equity compensation plans approved by stockholders 107,250 $9.24 - (1) The amounts shown in columns (a) and (b) of the above table do not include 373,059 outstanding shares of restricted stock granted under the Company's 2013 Omnibus Stock Incentive Plan as amended on June 14, 2013 or the 2017 Omnibus Stock Incentive Plan as amended on June 13, 2017 ("2017 Plan"). (2) The 2017 Plan expired in June 2020. Future grants will be made under a new plan once approved by the Company's Board of Directors and shareholders. The other information with respect to this item is incorporated herein by reference to the Company's definitive proxy statement for its 2021 annual meeting of stockholders. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information with respect to this item is incorporated herein by reference to the Company's definitive proxy statement for its 2021 annual meeting of stockholders. 20 Table of Contents Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information with respect to this item is incorporated herein by reference to the Company's definitive proxy statement for its 2021 annual meeting of stockholders. PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES a. List of documents filed as part of this report: (1) Financial Statements - Consolidated Financial Statements of the Company Refer to Part II, Item 8 of this report. (2) Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts b. Exhibits: The exhibits, as listed in the Exhibit Index included herein, are submitted as a separate section of this report. c. The response to this portion of Item 15 is submitted under 15a(2) above. 21 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Perma-Pipe International Holdings, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Perma-Pipe International Holdings, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of January 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income/(loss), stockholders’ equity, and cash flows for each of the two years in the period ended January 31, 2021, and the related notes and financial statement schedule (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended January 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue at U.S. operating entities for specialty piping systems and coating is recognized using the input method over time As described in Notes 2 and 4 to the consolidated financial statements, the Company’s U.S. operating entities records specialty piping and coating systems revenue over time based the costs incurred to date relative to the estimated total contract costs. Significant changes in estimates could have a material effect on the Company’s results of operations. We identified revenue being recognized using the input method over time as a critical audit matter. The principal considerations for our determination that revenue recognition using the input method over time is a critical audit matter are the Company’s estimates include all labor and materials necessary to complete the contract to arrive at the total contract costs. These estimates are based on management’s assessment of the current status of the contract and historical results. Our audit procedures included the following, among others. We obtained an understanding over the Company’s accounting for revenue recognition using the input method over time, including the design of internal controls. Additionally, we obtained supporting documentation for actual costs incurred to date and estimated costs to be incurred; we investigated significant cost changes by analyzing changes in estimates including those after fiscal year end; we performed a hindsight analysis of completed contracts to assess management's past cost estimates against actual results; and we obtained confirmations of significant contract terms and status for a sample of contracts. Goodwill annual impairment assessment The Company’s consolidated goodwill balance was $2.3 million as of January 31, 2021. As described further in Note 2 to the consolidated financial statements, the Company evaluates goodwill for impairment at the Canada reporting unit level annually. The quantitative impairment assessment involves the comparison of the fair value of the Canada reporting unit to its carrying amount. The Company used a weighting of the income and market approaches to determine the fair value of the reporting unit. We identified the goodwill impairment analysis as a critical audit matter because management’s quantitative goodwill impairment test involved a high degree of auditor judgment due to the significant estimation required to determine the fair value of the reporting unit. In particular, the fair value estimate was sensitive to significant assumptions, such as forecasted revenues, operating income margins and cash flows, discount rate, perpetual growth rate, and estimated valuation multiples. Our audit procedures related to the goodwill impairment analysis included the following, among others. We obtained an understanding over the Company’s annual assessment of goodwill for impairment, including the design of internal controls. We tested the significant assumptions discussed above by assessing the reasonableness of management’s forecasts compared to current results and whether such assumptions were consistent with the evidence obtained in other areas of the audit. We utilized a valuation specialist to assist in evaluating the appropriateness of the Company’s selection of the valuation methodology and the reasonableness of the significant assumptions used, including the discount rate, perpetual growth rate, weighting of income versus market approach and estimated valuation multiples. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2004. Chicago, Illinois April 15, 2021 22 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year ended January 31, (In thousands, except per share data) 2021 2020 Net sales $ 84,694 $ 127,663 Cost of sales 73,515 98,617 Gross profit 11,179 29,046 Operating expenses: General and administrative expense 17,222 18,934 Selling expense 5,334 5,231 Total operating expenses 22,556 24,165 Income/(loss) from operations (11,377 ) 4,881 Interest expense, net 381 905 Other income, net 3,983 1,059 Income/(loss) from operations before income taxes (7,775 ) 5,035 Income tax expense/(benefit) (133 ) 1,459 Net income/(loss) $ (7,642 ) $ 3,576 Weighted average common shares outstanding Basic 8,126 7,989 Diluted 8,126 8,420 Income/(loss) per share Basic $ (0.94 ) $ 0.45 Diluted $ (0.94 ) $ 0.42 See accompanying Notes to Consolidated Financial Statements. Note: Earnings per share calculations could be impacted by rounding. 23 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) Year ended January 31, (In thousands) 2021 2020 Net income/(loss) $ (7,642 ) $ 3,576 Other comprehensive income/(loss) Currency translation adjustments, net of tax 288 (441 ) Minimum pension liability adjustment, net of tax 185 (439 ) Other comprehensive income/(loss) 473 (880 ) Comprehensive income/(loss) $ (7,169 ) $ 2,696 See accompanying Notes to Consolidated Financial Statements. 24 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET January 31, (In thousands, except per share data) 2021 2020 ASSETS Current assets Cash and cash equivalents $ 7,174 $ 13,371 Restricted cash 1,201 1,287 Trade accounts receivable, less allowance for doubtful accounts of $474 on January 31, 2021 and $407 on January 31, 2020 25,226 29,402 Inventories, net 12,157 14,498 Prepaid expenses and other current assets 4,110 3,531 Costs and estimated earnings in excess of billings on uncompleted contracts 4,007 2,166 Total current assets 53,875 64,255 Property, plant and equipment, net of accumulated depreciation 26,897 28,629 Other assets Operating lease right-of-use assets 13,384 11,475 Deferred tax assets 823 293 Goodwill 2,332 2,254 Other assets 5,380 5,319 Total other assets 21,919 19,341 Total assets $ 102,691 $ 112,225 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Trade accounts payable $ 10,365 $ 9,577 Commissions and management incentives payable 218 1,759 Accrued compensation and payroll taxes 1,448 1,190 Revolving line - North America 2,826 8,577 Current maturities of long-term debt 3,941 1,458 Customers' deposits 2,088 2,202 Outside commission liability 1,431 1,755 Operating lease liabilities short-term 1,402 1,040 Other accrued liabilities 2,616 3,444 Billings in excess of costs and estimated earnings on uncompleted contracts 762 1,173 Income tax payable 1,155 664 Total current liabilities 28,252 32,839 Long-term liabilities Long-term debt, less current maturities 6,268 6,717 Deferred compensation liabilities 4,120 4,199 Deferred tax liabilities 914 1,052 Operating lease liabilities long-term 13,174 11,214 Other long-term liabilities 650 575 Total long-term liabilities 25,126 23,757 Stockholders' equity Common stock, $.01 par value, authorized 50,000 shares; 8,165 issued and outstanding January 31, 2021 and 8,048 issued and outstanding January 31, 2020 82 80 Additional paid-in capital 60,875 60,024 Accumulated deficit (8,357 ) (715 ) Accumulated other comprehensive loss (3,287 ) (3,760 ) Total stockholders' equity 49,313 55,629 Total liabilities and stockholders' equity $ 102,691 $ 112,225 See accompanying Notes to Consolidated Financial Statements. 25 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Accumulated Total Common Additional Accumulated Other Comprehensive Stockholders' (In thousands, except share data) Stock Paid-in Capital Deficit Loss Equity Total stockholders' equity on January 31, 2019 $ 79 $ 58,793 $ (4,291 ) $ (2,880 ) $ 51,701 Net income - - 3,576 - 3,576 Common stock issued under stock plans, net of shares used for tax withholding 1 220 - - 221 Stock-based compensation expense - 1,011 - - 1,011 Pension liability adjustment - - - (439 ) (439 ) Foreign currency translation adjustment - - - (441 ) (441 ) Total stockholders' equity on January 31, 2020 $ 80 $ 60,024 $ (715 ) $ (3,760 ) $ 55,629 Net loss - - (7,642 ) - (7,642 ) Common stock issued under stock plans, net of shares used for tax withholding 2 (193 ) - - (191 ) Stock-based compensation expense - 1,044 - - 1,044 Pension liability adjustment - - - 185 185 Foreign currency translation adjustment - - - 288 288 Total stockholders' equity on January 31, 2021 $ 82 $ 60,875 $ (8,357 ) $ (3,287 ) $ 49,313 Common stock shares 2020 2019 Balance beginning of year 8,048,006 7,854,322 Shares issued 116,983 193,684 Balance end of year 8,164,989 8,048,006 See accompanying Notes to Consolidated Financial Statements. 26 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended January 31, (In thousands) 2021 2020 Operating activities Net income/(loss) $ (7,642 ) $ 3,576 Adjustments to reconcile net income/(loss) to net cash flows provided by operating activities Depreciation and amortization 4,739 4,437 Deferred tax benefit (669 ) (213 ) Stock-based compensation expense 1,044 1,011 Provision on uncollectible accounts 72 101 Loss on disposal of fixed assets 58 318 Changes in operating assets and liabilities Accounts payable 730 (2,609 ) Accrued compensation and payroll taxes (1,597 ) (576 ) Inventories 2,418 (2,225 ) Customers' deposits (117 ) (1,507 ) Income taxes receivable and payable 213 (668 ) Prepaid expenses and other current assets (2,705 ) 1,749 Accounts receivable 3,394 1,749 Costs and estimated earnings in excess of billings on uncompleted contracts (2,252 ) (910 ) Other assets and liabilities 2,479 (143 ) Net cash provided by operating activities 165 4,090 Investing activities Capital expenditures (1,963 ) (1,902 ) Proceeds from sales of property and equipment 2 - Net cash used in investing activities (1,961 ) (1,902 ) Financing activities Proceeds from revolving lines 40,023 73,225 Payments of debt on revolving lines (43,192 ) (72,973 ) Proceeds from term loan 19 - Payments of other debt (371 ) (358 ) Decrease in drafts payable - (129 ) Payments on finance lease obligations (432 ) (287 ) Stock options exercised and taxes paid related to restricted shares vested (191 ) 221 Net cash used in financing activities (4,144 ) (301 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash (343 ) 34 Net increase/(decrease) in cash, cash equivalents and restricted cash (6,283 ) 1,921 Cash, cash equivalents and restricted cash - beginning of period 14,658 12,737 Cash, cash equivalents and restricted cash - end of period $ 8,375 $ 14,658 Supplemental cash flow information Interest paid $ 540 $ 902 Income taxes paid 107 2,107 Fixed assets acquired under finance leases - non-cash - 848 See accompanying Notes to Consolidated Financial Statements. 27 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED January 31, 2021 and 2020 (Tabular dollars in thousands, except per share data) Note 1 - Business information Perma-Pipe International Holdings, Inc. ("PPIH", the "Company", or the "Registrant") was incorporated in Delaware on October 12, 1993. The Company is engaged in the manufacture and sale of products in one distinct segment: Piping Systems. Fiscal year. The Company's fiscal year ends on January 31. Years, results and balances described as 2020 and 2019 are the fiscal years ended January 31, 2021 and 2020 , respectively. Nature of business. The Company engineers, designs, manufactures and sells specialty piping systems, and leak detection systems. Specialty piping systems include: (i) insulated and jacketed district heating and cooling ("DHC") piping systems for efficient energy distribution from central energy plants to multiple locations, (ii) primary and secondary containment piping systems for transporting chemicals, hazardous fluids and petroleum products, and (iii) the coating and/or insulation of oil and gas gathering and transmission pipelines. The Company's leak detection systems are sold with its piping systems or on a stand-alone basis, to monitor areas where fluid intrusion may contaminate the environment, endanger personal safety, cause a fire hazard, impair essential services or damage equipment or property. Geographic information. Net sales attributed to a geographic area are based on the destination of the product shipment. Sales to foreign customers were 49.8% in 2020 compared to 55.6% in 2019 . Long-lived assets are based on the physical location of the assets and consist of property, plant and equipment used in the generation of revenues in the geographic area. (In thousands) 2020 2019 Net sales United States $ 42,527 $ 56,702 Canada 12,367 22,203 Middle East 23,662 26,505 Europe 118 17,462 India 1,942 4,180 Other 4,078 611 Total net sales $ 84,694 $ 127,663 Property, plant and equipment, net of accumulated depreciation United States $ 7,672 $ 9,063 Canada 10,592 11,554 Middle East 7,854 7,815 India 779 197 Total property, plant and equipment, net of accumulated depreciation $ 26,897 $ 28,629 28 Table of Contents Note 2 - Significant accounting policies Use of estimates. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue recognition. During 2020 and 2019 and in accordance with Accounting Standards Update No. 2014-19, “Revenue from Contracts with Customers” (“ASC 606”), the Company recognizes revenue when a customer obtains control of promised goods or services. See Note 4 - Revenue Recognition for more detail. • Percentage of completion revenue recognition. Certain domestic divisions have contracts that recognize revenues using periodic recognition of income. For these contracts, the Company uses the "percentage of completion" accounting method. Under this approach, income is recognized in each reporting period based on the status of the uncompleted contracts and the current estimates of costs to complete. The choice of accounting method is made at the time the contract is received based on the expected length and complexity of the project. The percentage of completion is determined by the relationship of costs incurred to the total estimated costs of the contract. Provisions are made for estimated losses on uncompleted contracts in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income. Such revisions are recognized in the period in which they are determined. Claims for additional compensation due to the Company are recognized in contract revenues when realization is probable and the amount can be reliably estimated. Shipping and handling. Shipping and handling costs are included in cost of sales, and the amounts invoiced to customers relating to shipping and handling are included in net sales. Sales tax. Sales tax is reported on a net basis in the consolidated financial statements. Operating cycle. The length of contracts vary, but are typically less than one year. The Company includes in current assets and liabilities amounts realizable and payable in the normal course of contract completion unless completion of such contracts extends significantly beyond one year. Consolidation. The consolidated financial statements include the accounts of the Company and its domestic and foreign subsidiaries, all of which are wholly owned. All intercompany balances and transactions have been eliminated. Translation of foreign currency. Assets and liabilities of consolidated foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at year-end. Revenues and expenses are translated at average weighted exchange rates prevailing during the year. The resulting translation adjustments are included in stockholders' equity as part of accumulated other comprehensive income (loss). Gains or losses on foreign currency transactions and the related tax effects are reflected in net income. The aggregated foreign exchange transaction gain recognized in the income statement was less than $0.1 million in 2020 as compared to a gain of $0.4 million recognized in 2019 . Contingencies. The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, including those involving environmental, tax, product liability and general liability claims. The Company accrues for such liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, the Company's estimates of the outcomes of these matters, and its experience in contesting, litigating and settling other similar matters. The Company does not currently anticipate the amount of any ultimate liability with respect to these matters will materially affect the Company's financial position, liquidity or future operations. Cash and cash equivalents. All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. Cash and cash equivalents were $7.2 million and $13.4 million as of January 31, 2021 and 2020 , respectively. On January 31, 2021 , $0.1 million was held in the United States and $7.1 million was held by foreign subsidiaries . On January 31, 2020 , $0.3 million was held in the United States and $13.1 million was held by foreign subsidiaries. 29 Table of Contents Accounts payable included drafts payable of $0.1 million on both January 31, 2021 and 2020 . Restricted cash. There was no restricted cash held in the United States on January 31, 2021 or January 31, 2020 . Restricted cash held by foreign subsidiaries was $1.2 million and $1 .3 million as of January 31, 2021 and 2020 , respectively. Restricted cash held by foreign subsidiaries related to fixed deposits that also serve as security deposits and guarantees. (In thousands) 2020 2019 Cash and cash equivalents $ 7,174 $ 13,371 Restricted cash 1,201 1,287 Cash, cash equivalents and restricted cash shown in the statement of cash flows $ 8,375 $ 14,658 Accounts receivable. The majority of the Company's accounts receivable are due from geographically dispersed contractors and manufacturing companies. Credit is extended based on an evaluation of a customer's financial condition. In the United States, collateral is not generally required. In the U.A.E., Saudi Arabia, Egypt and India letters of credit are usually obtained for significant orders. Accounts receivable are due within various time periods specified in the terms applicable to the specific customer and are stated at amounts due from customers net of an allowance for claims and doubtful accounts. Standard payment terms are net 30 days. The allowance for doubtful accounts is based on specifically identified amounts in customers' accounts, where future collectability is deemed uncertain. Management may exercise its judgment in adjusting the provision as a consequence of known items, such as current economic factors and credit trends. Past due trade accounts receivable balances are written off when the Company's collection efforts have been unsuccessful in collecting the amount due and the amount is deemed uncollectible. The write off is recorded against the allowance for doubtful accounts. One of the Company’s accounts receivable in the total amount of $3.8 million and $4.1 million as of January 31, 2021 and January 31, 2020 , respectively, has been outstanding for several years. Included in this balance is a retention receivable that is payable upon commissioning of the system in the amount of $3.4 million , of which, due to the long-term nature of the receivable, $2.4 million and $2.1 million were included in the balance of other long-term assets in our consolidated balance sheets as of January 31, 2021 and January 31, 2020 , respectively. The Company completed all of its deliverables in 2015 under the related contract, but the system has not yet been commissioned by the customer. Nevertheless, the Company has been engaged in ongoing active efforts to collect this outstanding amount. During 2020 , the Company received payments of approximately $ 0.2 million. The Company continues to engage with the customer to ensure full payment of open balances, and during fiscal 2021 received an updated acknowledgment of the outstanding balances and assurances of payment from the customer. As a result, the Company did not reserve any allowance against this receivable as of January 31, 2021 . However, if the Company’s efforts to collect on this account are not successful, the Company may recognize an allowance for all, or substantially all, of any such then uncollected amounts. For the year ended January 31, 2021 , no one customer accounted for greater than 10% of the Company's consolidated net sales and for the year ended January 31, 2020 , one customer accounted for 11.5% of the Company's consolidated net sales. As of January 31, 2021 and 2020, no one customer accounted for greater than 10% and one customer accounted for 13.3% of accounts receivable, respectively. Concentration of credit risk. The Company maintains its U.S. cash in bank deposit accounts at financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC"). Cash balances are below FDIC limits. The Company has not experienced any losses in such accounts. The Company has a broad customer base doing business in all regions of the United States as well as other areas in the world. 30 Table of Contents Accumulated other comprehensive loss. Accumulated other comprehensive loss represents the change in equity from non-owner transactions and consisted of foreign currency translation, minimum pension liability and marketable securities. (In thousands) 2020 2019 Equity adjustment foreign currency, gross $ (1,590 ) $ (1,879 ) Minimum pension liability, gross (1,902 ) (2,087 ) Subtotal excluding tax effect (3,492 ) (3,966 ) Tax effect of equity adjustment foreign currency 91 91 Tax effect of minimum pension liability 114 115 Total accumulated other comprehensive loss $ (3,287 ) $ (3,760 ) Inventories. Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method for all inventories. (In thousands) 2020 2019 Raw materials $ 12,499 $ 13,859 Work in process 211 592 Finished goods 375 798 Subtotal 13,085 15,249 Less allowance 928 751 Inventories, net $ 12,157 $ 14,498 Long-lived assets. Property, plant and equipment are stated at cost. Interest is capitalized in connection with the construction of facilities and amortized over the asset's estimated useful life. Long-lived assets are reviewed for possible impairment whenever events indicate that the carrying amount of such assets may not be recoverable. If such a review indicates impairment, the carrying amount of such assets is reduced to an estimated fair value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from three to 30 years. Leasehold improvements are depreciated over the remaining life of the lease or its useful life, whichever is shorter. Amortization of assets under capital leases is included in depreciation. Depreciation expense was approximately $4.7 million in 2020 and $4.4 million in 2019 . (In thousands) 2020 2019 Land, buildings and improvements $ 22,713 $ 22,328 Machinery and equipment 49,406 47,409 Furniture, office equipment and computer systems 3,830 4,317 Transportation equipment 2,725 3,762 Subtotal 78,674 77,816 Less accumulated depreciation 51,777 49,187 Property, plant and equipment, net of accumulated depreciation $ 26,897 $ 28,629 Impairment of long-lived assets. The Company's assessment of long-lived assets, and other identifiable intangibles is based upon factors that market participants would use in accordance with the accounting guidance for the fair value measurement of assets. At January 31, 2021, the Company performed a qualitative analysis assessment to determine if it was more likely than not that the fair values of the Company's long-lived assets exceeded their carrying values. The Company assessed three asset groups as part of this analysis: United States, Canada and Middle East. The qualitative assessment indicated that it was more likely than not that the fair values of the Company's long-lived assets exceeded their carrying values for the United States and Middle East asset groups. However, triggering events were identified related to the Company's Canada asset group, indicating that further analysis was required in order to determine if it was more likely than not that the fair value of the asset group's long-lived assets exceeded their carrying values. Therefore, the Company performed a quantitative assessment to determine any potential impairment. After completion of this additional assessment, it was determined that there was no impairment of the Company's long-lived assets as of January 31, 2021 and 2020. The Company will continue testing for potential impairment at least annually or as otherwise required by applicable accounting standards. 31 Table of Contents Goodwill. The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. All identifiable goodwill as of January 31, 2021 and 2020 , is attributable to the purchase of Perma-Pipe Canada, Ltd. ("PPC"). Foreign exchange (In thousands) January 31, 2020 change effect January 31, 2021 Goodwill $ 2,254 $ 78 $ 2,332 The Company performs an impairment assessment of goodwill annually as of January 31, or more frequently if triggering events occur, based on the estimated fair value of the related reporting unit or intangible asset. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. At January 31, 2021, the Company elected to perform a Step 0 qualitative analysis assessment to determine if it was more likely than not that the fair value of the Company's Canadian reporting unit was less than its carrying amount, including goodwill. The qualitative assessment identified triggering events that indicated that further analysis was required in order to determine if it was more likely than not that the fair value of the Company's Canadian reporting unit exceeded its carrying value. Therefore, the Company proceeded to complete the Step 1 analysis to determine any potential impairment. The Step 1 analysis involved a quantitative fair valuation of the Company's Canadian reporting unit, including a market approach and discounted cash flow analysis. After completion of the Step 1 analysis, it was determined that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment for the years ended January 31, 2021 and 2020; however, if the reporting unit is unable to achieve its forecasted results, there can be no assurance that a future impairment charge will not be required. Other intangible assets with definite lives. The Company owns several patents including those covering features of its piping and electronic leak detection systems. Patents are capitalized and amortized on a straight-line basis over a period not to exceed the legal lives of the patents. The Company expenses costs incurred to renew or extend the term of intangible assets. Gross patents were $2.6 million and $2.7 million as of January 31, 2021 and 2020 , respectively. Accumulated amortization was approximately $2.5 million as of January 31, 2021 and 2020 . The Company expensed less than $0.1 million during the year ended January 31, 2021 for patents that were considered impaired as they are no longer expected to provide future benefits for the Company. Future amortization over the next five years ending January 31 will be less than $0.1 million in the years 2021 to 2025 and less than $0.1 million thereafter. Amortization expense is expected to be recognized over the weighted-average period of 2.8 years. Research and development . Research and development expenses consist of materials, salaries and related expenses of engineering personnel and outside services for product development projects. Research and development costs are expensed as incurred. Research and development expense was approximately $0.3 million in both 2020 and 2019 . Income taxes. Deferred income taxes have been provided for temporary differences arising from differences in the basis of assets and liabilities for tax and financial reporting purposes. Deferred income taxes on temporary differences have been recorded at the current tax rate. The Company assesses its deferred tax assets and liabilities for realizability at each reporting period. The Company recognizes a tax position in its consolidated financial statements only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. For further information, see Note 7 - Income taxes, in the Notes to Consolidated Financial Statements. Fair value of financial instruments . The carrying values of cash and cash equivalents, accounts receivable and accounts payable are based upon reasonable estimates of their fair value due to their short-term nature. The carrying amount of the Company's short-term debt, revolving line of credit and long-term debt approximate fair value because the majority of the amounts outstanding accrue interest at variable rates. Reclassifications. Certain reclassifications have been made to prior period financial statements to conform to current period presentation. These reclassifications have no effect on net income. Other income, net was reclassified from general and administrative expense on the consolidated statements of operations. Composition of deferred tax assets and liabilities were broken out to conform to current period presentation. 32 Table of Contents Net income/(loss) per common share. Earnings per share ("EPS") is computed by dividing net income/(loss) by the weighted average number of common shares outstanding (basic). The Company reported a net loss in 2020 and net income in 2019. Therefore, the Company adjusted for dilutive shares in 2019, while in 2020 the diluted loss per share was identical to the basic loss per share rather than assuming conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect on earnings per share. The dilutive shares are in the following table: Basic weighted average number of common shares outstanding (in thousands) 2020 2019 Basic weighted average number of common shares outstanding 8,126 7,989 Dilutive effect of stock options and restricted stock units - 431 Weighted average number of common shares outstanding assuming full dilution 8,126 8,420 Restricted Stock and Stock options not included in the computation of diluted EPS of common stock because the option exercise prices exceeded the average market prices 214 143 Canceled options during the year (25 ) (33 ) Restricted Stock and Stock options with an exercise price below the average stock price 168 431 Equity-based compensation. The Company issues various types of stock-based awards to employees and directors: restricted stock, deferred stock and stock options. Non-cash compensation expense associated with restricted stock is based on the fair value of the common stock at the date of grant, and amortized using the straight line method over the vesting period. Compensation expense associated with deferred stock which is awarded to the Board of Directors (non-employee) is based upon the fair value of the common stock at the date of grant, and since the grant vests immediately it is expensed on the date of the grant. Stock compensation expense for stock options is recognized ratably over the requisite service period of the award. The Black-Scholes option-pricing model is utilized to estimate the fair value of option awards. Segments. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker ("CODM") in making decisions regarding resource allocation and assessing performance The Company’s Chief Executive Officer is the CODM, and he uses a combination of several management reports, including the Company's financial information in determining how to allocate resources and assess performance. The Company has determined that it operates in one segment. Recent accounting pronouncements . In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848), which provides guidance designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements necessitated by the scheduled discontinuation of LIBOR on December 31, 2021. It also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform. The ASU provides the option to account for and present a modification that meets the scope of the standard as an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination required under the relevant topic or subtopic. This ASU is effective for all entities; however, application of the guidance is optional, is only available in certain situations and is only available for companies to apply from March 12, 2020 until December 31, 2022. The Company's Senior Credit Facility which matures on September 20, 2021 bears interest using an alternate base rate or LIBOR plus an applicable margin. Based on the maturity of the Senior Credit Facility prior to the discontinuation of LIBOR, the Company does not expect a material impact from the adoption of this standard on the financial statements of the Company. In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), which removes disclosures that are no longer considered cost beneficial, clarifies specific requirements of existing disclosures and adds disclosure requirements identified as relevant. This ASU is effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company has adopted this standard during the year ended January 31, 2021 and noted that there was no material impact on the financial statements of the Company. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. A recently adopted amendment has delayed the effective date until fiscal years beginning after December 15, 2022. The Company is currently evaluating this standard and the impact to the financial statements of the Company. In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740), which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the accounting for franchise taxes, enacts changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company has early adopted ASU 2019-12 in 2020, using a prospective application approach, and there was no material impact on the financial statements of the Company. The Company evaluated other recent accounting pronouncements and does not expect them to have a material impact on its consolidated financial statements. 33 Table of Contents Note 3 - Retention A retention receivable is a portion of an outstanding receivable balance amount withheld by a customer until a contract is fully completed as specified in the contractual agreement. Retention receivables of $2.7 million and $3.0 million were included in the balance of trade accounts receivable as of January 31, 2021 and 2020 , respectively. A retention receivable of $2.7 million and $2.6 million was included in the balance of other long-term assets as of January 31, 2021 and 2020 due to the long-term nature of the receivables. See Note 2 - Accounts receivable for further information regarding the future realization of these long-term balances. Note 4 - Revenue recognition The Company accounts for its revenues under Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers" ("Topic 606"). Revenue from contracts with customers: The Company defines a contract as an agreement that has approval and commitment from both parties, defined rights and identifiable payment terms, which ensures the contract has commercial substance and that collectability is reasonably assured. The Company’s standard revenue transactions are classified in to two main categories: 1) Systems and Coating - which include all bundled products in which Perma-Pipe designs, engineers, and manufactures pre-insulated specialty piping systems, insulates subsea flowline pipe, subsea oil production equipment, and land-lines. Additionally, this systems classification also includes coating applied to pipes and structures. 2) Products - which include cables, leak detection products, heat trace products, material/goods not bundled with piping or flowline systems, and field services not bundled into a project contract. In accordance with ASC 606-10-25-27 through 29, the Company recognizes specialty piping and coating systems revenue over time as the manufacturing process progresses because one of the following conditions exist: 1) the customer owns the material that is being insulated or coated, so the customer controls the asset and thus the work-in-process; or 2) the customer controls the work-in-process due to the custom nature of the pre-insulated, fabricated system being manufactured as evidenced by the Company’s right to payment for work performed to date plus seller’s profit margin for products that have no alternative use for the Company. Products revenue is recognized when goods are shipped or services are performed (ASC 606-10-25-30). 34 Table of Contents A breakdown of the Company's revenues by revenue class for 2020 and 2019 are as follows (in thousands): 2020 2019 Sales % to Total Sales % to Total Products $ 11,496 14 % $ 15,991 12 % Specialty Piping Systems and Coating Revenue recognized under input method 35,041 41 % 48,415 38 % Revenue recognized under output method 38,157 45 % 63,257 50 % Total $ 84,694 100 % $ 127,663 100 % The input method as noted in ASC 606-10-55-20 is used by the U.S. operating entities to measure revenue by the costs incurred to date relative to the estimated costs to satisfy the contract using the percentage-of-completion method. Generally, these contracts are considered a single performance obligation satisfied over time and due to the custom nature of the goods and services, the percentage-of-completion method is the most faithful depiction of the Company’s performance as it measures the value of the goods and services transferred to the customer. Costs include all material, labor, and direct costs incurred to satisfy the performance obligations of the contract. Revenue recognition begins when projects costs are incurred. The output method as noted in ASC 606-10-55-17 is used by all other operating entities to measure revenue by the direct measurement of the outputs produced relative to the remaining goods promised under the contract. Due to the types of end customers, generally these contracts require formal inspection protocols or specific export documentation for units produced, or produced and shipped, therefore, the output method is the most faithful depiction of the Company’s performance. Depending on the conditions of the contract, revenue may be recognized based on units produced, inspected and held by the Company prior to shipment or on units produced, inspected and shipped. Some of the Company’s operating entities invoice and collect milestones or other contractual obligations prior to the transfer of goods and services, but does not recognize revenue until the performance obligations are satisfied under the methods discussed above. Contract modifications that occur prior to the start of the manufacturing process will supersede the original contract and revenue is recognized using the modified contract value. Contract modifications that occur during the manufacturing process (changes in scope of work, job performance, material costs, and/or final contract settlements) are recognized in the period in which the revisions are known. Provisions for losses on uncompleted contracts are made in contract liabilities account in the period such losses are identified. Contract assets and liabilities: Contract assets represent revenue recognized in excess of amounts billed (unbilled receivables) for contract work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Contract liabilities represent billings in excess of costs (unearned revenue) for contract work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Both customer billings and the satisfaction (or partial satisfaction) of the performance obligation(s) occur throughout the manufacturing process and impacts the period end balances in these accounts. 35 Table of Contents The Company anticipates that substantially all costs incurred for uncompleted contracts as of January 31, 2021 will be billed and collected within one year. During the year ended January 31, 2021, one of the Company's customers in Qatar made a call on a performance bond held to secure one of the Company's contracts. 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. The Company has recorded the expense related to the encashment of approximately $0.6 million in other income in the consolidated statements of operations. No receivable has been recorded related to the potential reimbursement in the consolidated financial statements as of January 31, 2021. The following table shows the reconciliation of the cost in excess of billings: (In thousands) 2020 2019 Costs incurred on uncompleted contracts $ 17,543 $ 15,553 Estimated earnings 9,651 8,641 Earned revenue 27,194 24,194 Less billings to date 23,949 23,201 Costs in excess of billings, net $ 3,245 $ 993 Balance sheet classification Contract assets: Costs and estimated earnings in excess of billings on uncompleted contracts $ 4,007 $ 2,166 Contract liabilities: Billings in excess of costs and estimated earnings on uncompleted contracts (762 ) (1,173 ) Costs in excess of billings, net $ 3,245 $ 993 Substantially all of the $1.2 million and $1.6 million contract liabilities balances at January 31, 2020 and 2019, respectively, were recognized in revenues during 2020 and 2019, respectively. In addition to these amounts, the Company has recorded $0.2 million of unbilled receivables from its subsidiaries in the Middle East in prepaid expenses and other current assets on its consolidated balance sheet as of January 31, 2021. The Company had no unbilled receivables recorded as of January 31, 2020. Practical expedients: Costs to obtain a contract are not considered project costs as they are not usually incremental, nor does job duration span more than one year. The Company applies practical expedient for these types of costs and as such are expensed in the period incurred. As the Company's contracts are less than one year, the Company has applied the practical expedient regarding disclosure of the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period. 36 Table of Contents Note 5 - Debt (In thousands) 2020 2019 Revolving line - North America $ 2,826 $ 8,577 Mortgage notes 6,394 6,568 Revolving lines - foreign 3,272 691 Term loan - foreign 17 - Finance lease obligations 701 1,094 Total debt 13,210 16,930 Unamortized debt issuance costs (166 ) (169 ) Less current maturities 6,776 10,044 Total long-term debt $ 6,268 $ 6,717 Current portion of long-term debt $ 6,776 $ 10,044 Unamortized debt issuance costs (9 ) (9 ) Total short-term debt $ 6,767 $ 10,035 The following table summarizes the Company's scheduled maturities on January 31: (In thousands) Total 2022 2023 2024 2025 2026 Thereafter Revolving line - North America $ 2,826 $ 2,826 $ - $ - $ - $ - $ - Mortgages 6,394 373 379 385 391 398 4,468 Revolving lines - foreign 3,272 3,272 - - - - - Term loan - foreign 17 5 6 6 - - - Finance lease obligations 701 300 255 146 - - - Total $ 13,210 $ 6,776 $ 640 $ 537 $ 391 $ 398 $ 4,468 Paycheck Protection Program Loan. On May 1, 2020, the Company entered into a loan agreement under the Small Business Administration's Paycheck Protection Program ("PPP") and received proceeds of approximately $3.2 million. Interest on the loan accrued at a fixed interest rate of 1.0%, and the loan had a maturity date of April 28, 2022. Under Section 1106 of the CARES Act, borrowers are eligible for forgiveness of principal and accrued interest on the loans to the extent that the proceeds are used to cover eligible payroll costs, mortgage interest costs, rent and utility costs, otherwise described as qualified expenses. During the three months ended July 31, 2020, the Company used all of the PPP loan proceeds to pay for qualified expenses, 100% of which were used for payroll related expenses. The Company believes the PPP loan proceeds will be forgiven under the terms of the CARES Act program. Guidance from the American Institute of Certified Public Accountants' ("AICPA") Technical Question and Answer Section 3200.18 states that if a company expects to meet the PPP’s eligibility criteria and concludes that the PPP loan represents, in substance, a grant that is expected to be forgiven, it may analogize to International Accounting Standards ("IAS") 20 - Accounting for Government Grants and Disclosure of Government Assistance to account for the PPP loan. The Company believes the PPP loan proceeds will be forgiven under the terms of the CARES Act program, although no assurance to that effect can be provided. Therefore, the Company has recognized the earnings impact on a systematic basis over the periods in which the Company recognized as expenses the related costs for which the grants were intended to compensate. We noted that all of these expenses, and thus the related earnings impact, were incurred during the year ended January 31, 2021. The IAS 20 guidance allows for recognition in earnings either separately under a general heading such as other income, or as a reduction of the related expenses. The Company has elected the former option, to make a more clear distinction in its financial statements between its operating income and the amount of net income resulting from the PPP loan and subsequent expected forgiveness. As such, we have recognized the proceeds in earnings during the year ended January 31, 2021. The amounts are recognized in other income in the consolidated statements of operations. The Company has submitted its application and supporting documentation for forgiveness to its bank, which has submitted the application and supporting documents to the SBA. We are currently awaiting approval of forgiveness from the SBA. Revolving line - North America . On September 20, 2018, the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the Company, the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender, providing for a three-year $18 million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”). The Company has used proceeds from the Senior Credit Facility to pay outstanding amounts under a prior credit facility, a cash collateralized letter of credit, and for on-going working capital needs, and expects to continue using this facility to fund future capital expenditures, working capital needs and other corporate purposes. Borrowings under the Senior Credit Facility bear interest at a rate equal to an alternate base rate or LIBOR, plus, in each case, an applicable margin. The applicable margin is based on average quarterly undrawn availability with respect to the Senior Credit Facility. Interest on alternate base rate borrowings are generally payable monthly in arrears and interest on LIBOR borrowings are generally payable in arrears on the last day of each interest period. Additionally, the Company is required to pay a 0.375% per annum facility fee on the unused portion of the Senior Credit Facility. The facility fee is payable quarterly in arrears. 37 Table of Contents Subject to certain exceptions, borrowings under the Senior Credit Facility are secured by substantially all of the assets of the Company and certain of assets of its North American subsidiaries. The North American Loan Parties’ obligations under the Senior Credit Facility are guaranteed by Perma-Pipe Canada, Inc. The Senior Credit Facility will mature on September 20, 2021. Subject to certain qualifications and exceptions, the Senior Credit Facility contains covenants that, among other things, restrict the North American Loan Parties’ ability to create liens, merge or consolidate, consummate acquisitions, make investments, dispose of assets, incur debt, and pay dividends and other distributions. In addition, the North American Loan Parties cannot allow capital expenditures to exceed $3.0 million annually (plus a limited carryover of unused amounts). The Senior Credit Facility also contains financial covenants requiring (i) the North America Loan Parties to achieve a ratio of their EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility (excluding from the calculation items related to the financial performance of the Company’s foreign subsidiaries not party to the Credit Agreement) to be not less than 1.10 to 1.00 at each quarter end on a trailing four-quarter basis; and (ii) the Company and its subsidiaries (including the Company’s foreign subsidiaries not party to the Credit Agreement) to achieve a ratio of their EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility of not less than 1.10 to 1.00 at each quarter end on a trailing four-quarter basis. Due to project delays as a result of the COVID-19 pandemic, as of October 31, 2020, the Company and its subsidiaries failed to achieve the necessary fixed charge coverage ratio of 1.10 to 1.00 for the trailing four-quarters ended October 31, 2020 under its Credit Agreement for both the North American Loan Parties and the Company and its subsidiaries. On December 18, 2020, the Company entered into the First Amendment and Waiver to the Revolving Credit and Security Agreement (“Amendment and Waiver”) with PNC, which (i) reflected PNC’s waiver of the Company’s failure to maintain a fixed charge coverage ratio of 1.10 to 1.00 as of October 31, 2020 on a trailing four quarter basis as required under the Company’s Credit Agreement and (ii) further amended certain future fixed charge coverage ratio covenants requirements under the Credit Agreement as described below. Additionally, the Company was also required to have received, and applied to reduce the outstanding balance under the Credit Agreement, $1 million from one of its foreign subsidiaries, Perma-Pipe Middle East FZC, in the United Arab Emirates. The transfer and repayment occurred on December 17, 2020 and did not cause the Company to incur any additional fees or taxes, nor did it force the Company to change any of its assertions with regards to permanent reinvestment in any of its foreign subsidiaries. The Company will incur additional fees over the remainder of the Amendment and Waiver of approximately $0.2 million. The Amendment and Waiver also eliminated the Company’s ability to make LIBOR borrowings and reduces the overall availability by $2.0 million until maturity. The amended fixed charge coverage ratio requirements for the Company and its subsidiaries under the Amendment and Waiver are (i) 1.25 to 1.00 for the six-month period ending April 30, 2021 and (ii) 1.25 to 1.00 for the nine-month period ending July 31, 2021. The amended fixed charge coverage ratio requirements for the North American Loan Parties under the Amendment and Waiver are (i) 1.10 to 1.00 for the three-month period ending January 31, 2021; (ii) 1.10 to 1.00 for the six-month period ending April 30, 2021; and (iii) 1.10 to 1.00 for the nine-month period ending July 31, 2021. In order to cure any future breach of the fixed charge coverage ratio covenant by the North American Loan Parties, the Company may repatriate cash from any of its foreign subsidiaries that are otherwise not a party to the Credit Agreement in an amount which, when added to the amount of the Company’s Consolidated Adjusted EBITDA, would result in pro forma compliance with the covenant. Due to continued project delays as a result of the COVID-19 pandemic, as of January 31, 2021, the Company and its subsidiaries failed to achieve the necessary fixed charge coverage ratio of 1.10 to 1.00 for the three-month period ended January 31, 2021 under the Amendment and Waiver for the North American Loan Parties. Per the Amendment and Waiver, the Company will repatriate approximately $0.8 million in cash from its subsidiary in the United Arab Emirates in April 2021 to cure the breach. The repatriation will not cause the Company to incur any additional fees or taxes, nor did it force the Company to change any of its assertions with regards to permanent reinvestment in any of its foreign subsidiaries. As of January 31, 2021, the Company’s foreign subsidiaries that are not a party to the Credit Agreement had approximately $6.6 million of cash available to satisfy a future potential repatriation cure of any potential future breach of the fixed charge coverage ratio covenant. The Company estimates that it may need to repatriate cash of up to $0.1 million in the next six months. Any cash required to cure future covenant defaults would be repatriated through the Company’s subsidiaries in the United Arab Emirates, Saudi Arabia, Egypt and/or India. Most of this cash could be repatriated without any tax consequences, however, some repatriation would require payment of withholding taxes. The Company does not anticipate any material tax impacts of any potential future repatriation. The Company believes it has alleviated any concerns about its ability to satisfy its obligations in the normal course of business for the next year after the date these financial statements are available to be issued based on the following: ● The Company’s execution of the Amendment and Waiver described above, ● The Company’s ability to repatriate cash from its foreign subsidiaries to cure any future covenant defaults without any material cost or tax consequences, ● The Company expects an increase in business activity and cash flow from operations over the remaining term of the Amendment and Waiver, ● Management expects to be able to borrow within the reduced availability parameters noted above, and ● The Company’s flexibility in deciding when to incur its planned capital expenditures allows the Company to defer cash spending if necessary to ensure compliance with loan covenants in the future. As of January 31, 2021, the Company had borrowed an aggregate of $2.8 million at a rate of 6.25% and had $1.7 million available under the Senior Credit Facility. 38 Table of Contents Revolving lines - foreign. The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E. and Egypt as discussed further below. The Company has a revolving line for 8.0 million Dirhams (approximately $2.2 million at January 31, 2021) from a bank in the U.A.E. The facility has an interest rate of approximately 3.4% and was originally set to expire in November 2020. However, the expiration has been extended due to the COVID-19 pandemic and the inability to finalize renewal documentation prior to that time. The Company is awaiting final documentation to complete the renewal process, which is expected to occur in April 2021. The Company has a second revolving line for 19.5 million Dirhams (approximately $5.3 million at January 31, 2021) from a bank in the U.A.E. The facility was renewed in January 2021 under the same terms. It has an interest rate of approximately 3.9% and is set to expire in January 2022. These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates. The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt. In November 2019, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 200.0 million Egyptian Pounds (approximately $12.7 million at January 31, 2021). This credit arrangement was in the form of project financing at rates competitive in Egypt. The line was secured by certain assets (such as accounts receivable) of the Company's Egyptian subsidiary. Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricts the Company's Egyptian subsidiary's ability to undertake any additional debt. The facility was originally set to expire in June 2020, however, the expiration was extended to January 2021 due to the COVID-19 pandemic and the inability to finalize renewal documentation prior to that time. The Company has not made borrowings under this facility. The Company is currently negotiating the renewal of the facility under similar terms, with a revolving line of 100.0 million Egyptian Pounds and the renewal process is expected to be completed in April 2021. In January 2021, the Company entered into a second credit arrangement for project financing with a bank in Egypt for 46.2 million Egyptian Pounds (approximately $2.9 million at January 31, 2021). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by the contract for a project being financed by the Company's Egyptian subsidiary. The facility has an interest rate of approximately 8.0% and is expected to expire in August 2021 in connection with the completion of the project. The Company’s credit arrangements used by its Middle Eastern subsidiaries renew on an annual basis. The Company guarantees the subsidiaries' debt including all foreign debt. The Company was in compliance with the covenants under the credit arrangements in the U.A.E. and the 200.0 million Egyptian Pound facility in Egypt as of January 31, 2021. The Company was not in compliance with a covenant under its 46.2 million Egyptian Pound project financing in Egypt as of January 31, 2021. The Company did not have a share capital increase registered with the General Authority for Investment, as required by facility covenants, but is in the process of curing the breach and has received a waiver from the bank as of January 31, 2021. On January 31, 2021, interest rates were based on the Emirates Inter Bank Offered Rate plus 3.0% to 3.5% per annum for the U.A.E. credit arrangements, one of which has a minimum interest rate of 4.5% per annum, and based on the stated interest rate in the agreement for the Egypt credit arrangement. Based on these base rates, as of January 31, 2021, the Company's interest rates ranged from 3.4% to 8.0%, with a weighted average rate of 6.05%, and the Company could borrow $23.1 million under these credit arrangements. As of January 31, 2021, $5.8 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of January 31, 2021, the Company had borrowed $3.3 million, and had an additional $1.3 million of borrowing remaining available under the foreign revolving credit arrangements. The foreign revolving lines balances as of January 31, 2021 and January 31, 2020, were included as current maturities of long-term debt in the Company's consolidated balance sheets. Mortgages. On July 28, 2016, the Company borrowed CAD 8.0 million (approximately USD $6.1 million at the prevailing exchange rate on the transaction date) from a bank in Canada under a mortgage note secured by the manufacturing facility located in Alberta, Canada that matures on December 23, 2042. The interest rate is variable, currently at 4.55% , with monthly payments of CAD 37 thousand (approximately USD $28 thousand) for interest; and monthly payments of CAD 27 thousand (approximately USD $21 thousand) for principal. Principal payments began January 2018. On June 19, 2012, the Company borrowed $1.8 million under a mortgage note secured by its manufacturing facility in Lebanon, Tennessee. The proceeds were used for payment of amounts borrowed. The loan bears interest at 4.5% with monthly payments of $13 thousand for both principal and interest and matures July 1, 2027. On June 19, 2022, and on the same day of each year thereafter, the interest rate shall adjust to the prime rate, provided that the applicable interest rate shall not adjust more than 2.0% per annum and shall be subject to a ceiling of 18.0% and a floor of 4.5%. 39 Table of Contents Note 6 - Leases Effective February 1, 2019, the Company accounts for its leases under ASC 842, Leases . Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities short-term, and operating lease liabilities long-term in the Company's consolidated balance sheets. Finance leases are included in property, plant and equipment, current maturities of long-term debt, and long-term debt less current maturities in the Company's consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the ROU asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. In calculating the ROU asset and lease liability, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term. Finance Leases. In 2017, the Company obtained three finance leases for CAD 1.1 million (approximately USD $0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases range from 4.0% to 7.8% per annum with monthly principal and interest payments of less than $0.1 million. These leases mature between April 2021 to September 2022. In 2019, the Company obtained two finance leases for CAD 1.1 million (approximately USD $0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases were 8.0% per annum with monthly principal and interest payments of less than $0.1 million. These leases mature in August 2023. The Company has several significant operating lease agreements, with lease terms of one to 30 years, which consist of real estate, vehicles and office equipment leases. These leases do not require any contingent rental payments, impose any financial restrictions or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and ROU assets as the Company is not reasonably certain to exercise the options. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company does not have any arrangements where it acts as a lessor, other than one sub-lease arrangement. At January 31, 2021, the Company had operating lease liabilities of $14.6 million and operating ROU assets of $13.4 million, which are reflected in the consolidated balance sheet. At January 31, 2021, the Company also had finance lease liabilities of $0.7 million included in current maturities of long-term debt and long-term debt less current maturities, and finance ROU assets of $0.8 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheet. Supplemental balance sheet information related to leases follows (in thousands): Operating and Finance leases: January 31, 2021 January 31, 2020 Finance leases assets: Property and Equipment - gross $ 879 $ 1,696 Accumulated depreciation and amortization (96 ) (551 ) Property and Equipment - net $ 783 $ 1,145 Finance lease liabilities: Finance lease liability short-term $ 300 $ 417 Finance lease liability long-term 401 677 Total finance lease liabilities $ 701 $ 1,094 Operating lease assets: Operating lease ROU assets $ 13,384 $ 11,475 Operating lease liabilities: Operating lease liability short-term $ 1,402 $ 1,040 Operating lease liability long-term 13,174 11,214 Total operating lease liabilities $ 14,576 $ 12,254 40 Table of Contents Total lease costs consist of the following (in thousands): Lease costs Consolidated Statements of Operations Classification Year Ended January 31, 2021 Year Ended January 31, 2020 Finance Lease Costs Amortization of ROU assets Cost of sales $ 214 $ 208 Interest on lease liabilities Interest expense 69 58 Operating lease costs Cost of sales, SG&A expenses 2,570 2,326 Short-term lease costs (1) Cost of sales, SG&A expenses 398 425 Sub-lease income SG&A expenses (81 ) (81 ) Total Lease costs $ 3,170 $ 2,936 (1) Includes variable lease costs, which are immaterial Supplemental cash flow information related to leases is as follows (in thousands): Year Ended January 31, 2021 Year Ended January 31, 2020 Cash paid for amounts included in the measurement of lease liabilities: Financing cash flows from finance leases $ 432 $ 287 Operating cash flows from finance leases 69 58 Operating cash flows from operating leases 3,097 2,287 Year Ended January 31, 2021 ROU Assets obtained in exchange for new lease obligations: Finance leases liabilities $ - Operating leases liabilities 3,255 Weighted-average lease terms discount rates are as follows: January 31, 2021 Weighted-average remaining lease terms (in years): Finance leases 2.3 Operating leases 12.9 Weighted-average discount rates: Finance leases 7.7 % Operating leases 7.9 % 41 Table of Contents On January 31, 2021, future minimum annual rental commitments under non-cancelable lease obligations were as follows in thousands): Year: Operating Leases Finance Leases For the year ended January 31, 2022 $ 2,348 $ 342 For the year ended January 31, 2023 2,406 278 For the year ended January 31, 2024 2,392 150 For the year ended January 31, 2025 1,662 - For the year ended January 31, 2026 1,475 - Thereafter 14,339 - Total lease payments 24,622 770 Less: amount representing interest (10,046 ) (69 ) Total lease liabilities at January 31, 2021 $ 14,576 $ 701 Rental expense for operating leases was $3.0 million and $2.8 million in 2020 and 2019, respectively. The Company has several significant operating lease agreements as follows : • Office space of approximately 31,650 square feet in Niles, IL is leased until October 2023. • Five acres of land in Louisiana is leased through March 2022. • Twenty acres of land in Canada leased through December 2022. • Nine acres of land in the Kingdom of Saudi Arabia is leased through April 2030. • Production facilities in the U.A.E. of approximately 80,200 square feet on approximately 107,600 square feet of land is leased until June 2030. • Office space of approximately 21,500 square feet and open land for production facilities of approximately 423,000 square feet in the U.A.E. is leased until July 2032. • Production facilities in the U.A.E. of approximately 78,100 square feet is leased until December 2032. • Approximately fourteen acres of land in the U.A.E. is leased through August 2050. 42 Table of Contents Note 7 - Income taxes Income/(loss) from continuing operations before income taxes (in thousands) 2020 2019 Domestic $ (3,288 ) $ 400 Foreign (4,487 ) 4,635 Total $ (7,775 ) $ 5,035 Components of income tax expense/(benefit) (in thousands) 2020 2019 Current Federal $ 18 $ 34 Foreign 413 1,455 State and other 105 181 Total current income tax expense 536 1,670 Deferred Federal — — Foreign (669 ) (211 ) State and other — — Total deferred income tax expense/(benefit) (669 ) (211 ) Total income tax expense/(benefit) $ (133 ) $ 1,459 Repatriation of foreign earnings As a result of the onetime transition tax from the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Act”), the Company estimates that distributions from foreign subsidiaries will no longer be subject to incremental U.S. tax as they will either be remittances of previously taxed earnings and profits or eligible for a full dividends received deduction. Current and future earnings in the Company's subsidiaries in Canada and Egypt are not permanently reinvested, and earnings in its Indian subsidiary are partially permanently reinvested. Earnings from these subsidiaries are subject to tax in their local jurisdiction, and withholding taxes in these jurisdictions are considered. As such, the Company has reduced the liability from $0.4 million as of January 31, 2020 to $0.2 million as of January 31, 2021 related to these taxes. U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested outside the United States. The Company intends to permanently reinvest the undistributed earnings of its Middle Eastern subsidiaries. The Middle Eastern subsidiaries have unremitted earnings of $22.4 million as of January 31, 2021, all of which has been subject to the transition tax in the United States. Unremitted earnings of $15.7 million in the United Arab Emirates would not be subject to withholding tax in the event of a distribution, $6.8 million of unremitted earnings in Saudi Arabia would be subject to withholding tax of less than $0.1 million, and the $4.4 million of earnings permanently reinvested in India would be subject to withholding tax of $0.9 million. The Company has not recorded a deferred tax liability related to any financial reporting basis over tax basis related to the investment in these foreign subsidiaries as it is not practical to estimate. 43 Table of Contents The difference between the provision for income taxes and the amount computed by applying the U.S. Federal statutory rate of 21% was as follows: (In thousands) 2020 2019 Tax expense at federal statutory rate $ (1,633 ) $ 1,057 State expense, net of federal income tax effect (97 ) 147 Deferred balance adjustment (5 ) (212 ) Domestic valuation allowance 1,807 (337 ) Domestic return to provision (485 ) (172 ) Global Intangible Low Tax Income Inclusion - 703 Nontaxable Paycheck Protection Program Loan Forgiveness Proceeds (662 ) - Permanent differences other 282 (5 ) Valuation allowance for state NOLs 183 (2 ) Differences in foreign tax rate 527 (79 ) Foreign rate change 18 (63 ) Deferred tax on unremitted earnings (176 ) 183 Foreign withholding taxes 209 274 All other, net expense (101 ) (35 ) Total income tax expense/(benefit) $ (133 ) $ 1,459 The Company's worldwide effective tax rates ("ETR") were 1.7% and 29.0% in 2020 and 2019 , respectively. The change in the ETR from the prior year to the current year is largely due to the Company’s valuation allowance against its domestic deferred tax asset and changes to the mix of income in various jurisdictions, including losses in the zero rate jurisdiction of the United Arab Emirates. Components of deferred income tax assets (in thousands) 2020 2019 U.S. Federal NOL carryforward $ 8,626 $ 7,209 Deferred compensation 508 401 Research tax credit 2,686 2,686 Foreign NOL carryforward 543 223 Foreign tax credit 2,580 2,580 Stock compensation 442 429 Other accruals not yet deducted 245 267 State NOL carryforward 2,678 2,567 Accrued commissions and incentives 362 354 Inventory valuation allowance 106 75 Lease liability 541 604 Other 113 127 Deferred tax assets, gross 19,430 17,522 Valuation allowance (17,746 ) (15,937 ) Total deferred tax assets, net of valuation allowances $ 1,684 $ 1,585 Components of the deferred income tax liability Depreciation $ (981 ) $ (1,275 ) Foreign subsidiaries unremitted earnings (289 ) (470 ) Prepaid (21 ) (61 ) Right of use asset (484 ) (538 ) Total deferred tax liabilities $ (1,775 ) $ (2,344 ) Deferred tax liability, net $ (91 ) $ (759 ) Balance sheet classification Long-term assets $ 823 $ 293 Long-term liability (914 ) (1,052 ) Total deferred tax liabilities, net of valuation allowances $ (91 ) $ (759 ) 44 Table of Contents The Company has a gross U.S. Federal operating loss carryforward of $41.1 million that will begin to expire in the year ending January 31, 2031. The deferred tax asset ("DTA") for state net operating loss ("NOL") carryforwards of $2.7 million relates to amounts that expire at various times from 2022 to 2031. The Company has a DTA foreign NOL carryforward of $0.5 million for its subsidiaries in Saudi Arabia and India. The NOL in Saudi Arabia can be carried forward indefinitely and does not have a valuation allowance recorded against it while the NOL in India can be carried forward for eight years and does not have a valuation allowance recorded against it. The ultimate realization of this tax benefit is dependent upon the generation of enough operating income in the foreign tax jurisdictions. The Company periodically reviews the adequacy of its valuation allowance in all of the tax jurisdictions in which it operates, evaluates future sources of taxable income and tax planning strategies and may make further adjustments based on management's outlook for continued profits in each jurisdiction. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the domestic cumulative loss incurred leading up to the period ended January 31, 2013. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of December 31, 2013, a full valuation allowance was recorded against the domestic deferred tax assets as the Company has determined that they are not more likely than not to be realized based upon the available evidence. As of January 31, 2021, the Company has not released the valuation allowance as the objective negative evidence in the form of cumulative losses continues to exist. The amount of the domestic deferred tax assets considered realizable, however, could be increased if objective negative evidence in the form of cumulative losses is no longer present. The Company has a deferred tax asset of $2.6 million for U.S. foreign tax credits after considering the impact of the repatriated foreign earnings and the one-time transition tax. The foreign tax credit deferred tax asset is fully offset with a valuation allowance. The excess foreign tax credits are subject to a ten-year carryforward and will begin to expire on January 31, 2026. The following table summarizes uncertain tax position ("UTP") activity, excluding the related accrual for interest and penalties: (In thousands) 2020 2019 Balance at beginning of the year $ 1,545 $ 1,447 Increases in positions taken in a prior period 2 (26 ) Increases in positions taken in a current period 65 132 Decreases due to lapse of statute of limitations (21 ) (8 ) Balance at end of the year $ 1,591 $ 1,545 Included in the total UTP liability were estimated accrued interest and penalties of $0.2 million and less than $0.1 million in January 31, 2021 and 2020, respectively. These non-current income tax liabilities are recorded in other long-term liabilities in the consolidated balance sheet and recognized as an expense during the period. The Company's policy is to include interest and penalties in income tax expense. On January 31, 2021 , the Company did not anticipate any significant adjustments to its unrecognized tax benefits within the next twelve months. Included in the balance on January 31, 2021 were amounts offset by deferred taxes (i.e. temporary differences) or amounts that could be offset by refunds in other taxing jurisdictions (i.e., corollary adjustments). Upon reversal, $0.5 million of the amount accrued on January 31, 2021 would impact the future ETR. The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Tax years related to January 31, 2018, 2019 and 2020 are open for federal and state tax purposes. In addition, federal and state tax years January 31, 2002 through January 31, 2009 are subject to adjustment on audit, up to the amount of research tax credit generated in those years. Any NOL carryover can still be adjusted by the Internal Revenue Service in future year audits. The Company's management periodically estimates the probable tax obligations of the Company using historical experience in tax jurisdictions and informed judgments. There are inherent uncertainties related to the interpretation of tax regulations in the jurisdictions in which the Company transacts business. The judgments and estimates made at a point in time may change based on the outcome of tax audits, as well as changes to or further interpretations of regulations. If such changes take place, there is a risk that the tax rate may increase or decrease in any period. Tax accruals for tax liabilities related to potential changes in judgments and estimates for federal, foreign and state tax issues are included in other long-term liabilities on the consolidated balance sheet. 45 Table of Contents Note 8 - Retirement plans Pension plan The defined benefit plan that covered the hourly rate employees of a non-operating filtration business unit, previously located in Winchester, Virginia, was frozen on June 30, 2013 per the third Amendment to the Plan dated May 15, 2013. The accrued benefit of each participant was frozen as of the freeze date, and no further benefits shall accrue with respect to any service or hours of service after the freeze date. The benefits are based on fixed amounts multiplied by years of service of participants. The Company engages outside actuaries to calculate its obligations and costs. The funding policy is to contribute such amounts as are necessary to provide for benefits attributed to service to date. The amounts contributed to the plan are sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974. Asset allocation The pension plan holds no securities of Perma-Pipe International Holdings, Inc.; 100% of the assets are held for benefits under the plan. The fair value of the major categories of the pension plan's investments are presented below. The FASB has established a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 - Inputs that are both significant to the fair value measurement and unobservable. (In thousands) 2020 2019 Level 1 market value of plan assets Equity securities $ 4,112 $ 3,139 U.S. bond market 1,716 2,134 Real estate securities 198 369 Subtotal 6,026 5,642 Level 2 significant other observable inputs Money market fund $ 139 $ 169 Subtotal 139 169 Investments measured at net asset value* $ 851 $ 739 Total $ 7,016 $ 6,550 * Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the reconciliation of benefit obligations, plan assets and funded status of plan. 46 Table of Contents On January 31, 2021 , plan assets were held 72% in equity, 26% in debt and 2% in other. The investment policy is to invest all funds not needed to pay benefits and investment expenses for the year, with target asset allocations of approximately 60% equities, 30% fixed income and 10% alternative investments, diversified across a variety of sub-asset classes and investment styles, following a flexible asset allocation approach that will allow the plan to participate in market opportunities as they become available. The expected long-term rate of return on assets is based on historical long-term rates of equity and fixed income investments and the asset mix objective of the funds. Investment market conditions in 2020 resulted in $0.3 million gain on plan assets, computed as the actual return as presented below less the expected return, which increased the fair value of plan assets at year end. The Company kept its expected return on plan assets used in determining cost and benefit obligations consistent at 7.5%, based on long-term market expectations that were relatively unchanged from the prior year. The plan's investments are intended to earn long-term returns to fund long-term obligations, and investment portfolios with asset allocations similar to those of the plan's investment policy have attained such returns over several decades. Future contributions that may be necessary to maintain funding requirements are not expected to materially affect the Company's liquidity. Reconciliation of benefit obligations, plan assets and funded status of plan (in thousands) 2020 2019 Accumulated benefit obligations Vested benefits $ 7,090 $ 6,959 Accumulated benefits $ 7,090 $ 6,959 Change in benefit obligation Benefit obligation - beginning of year $ 6,959 $ 6,258 Interest cost 190 237 Actuarial loss 256 788 Benefits paid (315 ) (324 ) Benefit obligation - end of year $ 7,090 $ 6,959 Change in plan assets Fair value of plan assets - beginning of year $ 6,550 $ 6,179 Actual gain on plan assets 781 695 Benefits paid (315 ) (324 ) Fair value of plan assets - end of year $ 7,016 $ 6,550 Unfunded status $ (74 ) $ (409 ) Balance sheet classification Prepaid expenses and other current assets $ 332 $ 325 Other assets 1,828 1,679 Deferred compensation liabilities (2,234 ) (2,413 ) Net amount recognized $ (74 ) $ (409 ) Amounts recognized in accumulated other comprehensive loss Unrecognized actuarial loss $ 1,902 $ 2,087 Net amount recognized $ 1,902 $ 2,087 Weighted-average assumptions used to determine net cost and benefit obligations 2020 2019 End of year benefit obligation discount rate 2.50 % 2.80 % End of year net periodic benefit cost discount rate 2.80 % 3.90 % Expected return on plan assets 7.50 % 7.50 % The discount rate was based on the FTSE pension discount curve of high quality fixed income investments with cash flows matching the plan's expected benefit payments, consistent with prior years. The Company determines the expected long-term rate of return on plan assets by performing a detailed analysis of historical and expected returns based on the strategic asset allocation approved by the Board of Directors and the underlying return fundamentals of each asset class. The Company's historical experience with the pension fund asset performance is also considered. 47 Table of Contents Components of net periodic benefit cost (in thousands) 2020 2019 Interest cost $ 190 $ 237 Expected return on plan assets (479 ) (450 ) Recognized actuarial loss 139 102 Net periodic benefit income $ (150 ) $ (111 ) Amounts recognized in other comprehensive income (in thousands) Actuarial loss on obligation $ (256 ) $ (787 ) Actual gain on plan assets 302 246 Amounts recognized in current year 139 102 Total in other comprehensive income $ 185 $ (439 ) Other comprehensive income is also affected by the tax effect of the valuation allowance recorded on the domestic deferred tax assets. During the year ended January 31, 2021, there was an actuarial gain of less than $0.1 million. This is comprised of an asset gain of $0.3 million and liability loss of $0.3 million. The liability loss is the combination of: (i) a loss due to a 30 basis point decrease in the discount rate, (ii) a gain resulting from an update to the mortality improvement assumption and (iii) other demographic losses. During the year ended January 31, 2020, there was an actuarial loss of $0.5 million. This was comprised of an asset gain of $0.3 million and liability loss of $0.8 million. The liability loss was a combination of: (i) a loss due to a 110 basis point decrease in the discount rate, (ii) a gain resulting from an update to the mortality assumption and (iii) other demographic losses. Cash flows (in thousands) Expected employer contributions for the fiscal year ending January 31, 2022 $ — Expected employee contributions for the fiscal year ending January 31, 2022 — Estimated future plan benefit payments reflecting expected future service for the fiscal year(s) ending January 31,: 2022 $ 332 2023 332 2024 327 2025 328 2026 327 2027 - 2031 1,637 401(k) plan The domestic employees of the Company participate in the PPIH 401(k) Employee Savings Plan, which is applicable to all employees except employees covered by collective bargaining agreement benefits. The plan allows employee pretax payroll contributions from 1% to 16% of total compensation. The Company matches 100% of each participant's payroll deferral contributions up to 1% of their compensation, plus 50% of each participant's payroll deferral contributions on the next 5% of compensation. Contributions to the 401(k) plan were $0.3 million each in the years ended January 31, 2021 and 2020 . Multi-employer plans The Company contributes to a multi-employer plan for certain collective bargaining U.S. employees. The risks of participating in this multi-employer plan are different from a single employer plan in the following aspects: • Assets contributed to the multi-employer plans by one employer may be used to provide benefits to employees of other participating employers. • If a participating employer ceases contributing to the plan, the unfunded obligations of the plan may be inherited by the remaining participating employers. • If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. 48 Table of Contents The Company has assessed and determined that the multi-employer plans to which it contributes are not significant to the Company's consolidated financial statements. The Company does not expect to incur a withdrawal liability or expect to significantly increase its contribution over the remainder of the contract period. The Company made contributions to the bargaining unit supported multi-employer pension plans (in thousands): Collective Funded FIP/RP Status 2020 2019 Surcharge Bargaining Plan Name EIN Plan # Zone Status Pending/Implemented Contribution Contribution Imposed Expiration Date Plumbers & Pipefitters Local 572 Pension Fund 626102837 001 Green No $206 $239 No 3/31/2022 Note 9 - Stock-based compensation The Company’s 2017 Omnibus Stock Incentive Plan dated June 13, 2017, as amended, which the Company's stockholders approved in June 2017 ("2017 Plan"), expired in June 2020. Prior to the 2017 Plan's expiration, grants were made to the Company's employees, officers and independent directors, as described below. The Company has prior incentive plans under which previously granted awards remain outstanding, but under which no new awards may be granted. At January 31, 2021 , the Company had reserved a total of 522,970 shares for grants and issuances under these incentive stock plans, which includes a reserve for issuances pursuant to unvested or unexercised prior awards. While the 2017 Plan provided for the grant of deferred shares, non-qualified stock options, incentive stock options, restricted shares, restricted stock units, and performance-based restricted stock units intended to qualify under section 422 of the Internal Revenue Code, the Company issued only restricted shares and restricted stock units under the 2017 Plan. The 2017 Plan authorized awards to officers, employees, consultants, and directors. Stock compensation expense The Company has granted stock-based compensation awards to eligible employees, officers or independent directors. The Company recognized the following stock-based compensation expense for the periods presented: (In thousands) 2020 2019 Stock-based compensation expense $ 3 $ 12 Restricted stock based compensation expense 1,041 999 Total stock-based compensation expense $ 1,044 $ 1,011 49 Table of Contents Stock options The Company did not grant any stock options during the years ended January 31, 2021 or 2020. The following tables summarizes the Company's stock option activity: (Shares in thousands) Options Weighted average exercise price Weighted average remaining contractual term Aggregate intrinsic value Outstanding on January 31, 2019 218 $ 8.60 3.8 $ 257 Exercised (53 ) 6.91 162 Expired or forfeited (33 ) 7.10 Outstanding on January 31, 2020 132 8.98 3.2 160 Options exercisable on January 31, 2020 129 $ 9.01 3.1 155 Exercised - Expired or forfeited (25 ) 7.85 Outstanding on January 31, 2021 107 9.24 2.5 5 Options exercisable on January 31, 2021 107 $ 9.24 2.5 $ 5 No stock options were exercised during the years ended January 31, 2021 or 2020. Unvested options outstanding (shares in thousands) Options Weighted-average grant date fair value Aggregate intrinsic value Outstanding on January 31, 2020 3 $ 7.33 $ 4 Granted - - Vested (3 ) Expired or forfeited - Outstanding on January 31, 2021 - $ - $ - As of January 31, 2021, there were no remaining unvested stock options outstanding, and therefore no unrecognized compensation expense related to unvested stock options. 50 Table of Contents Deferred stock As part of their compensation, each year the Company grants deferred stock units to each non-employee director, equal to the result of dividing the award amount by the fair market value of the common stock on the date of grant. The stock vests on the date of grant; however, it is only distributed to the directors upon their separation from service. In June 2019, the Company granted 23,104 deferred stock units from the 2017 Plan, and as of January 31, 2021 , there were approximately 97,799 deferred stock units outstanding included in the restricted stock activity shown below. Restricted stock The Company has granted restricted stock to executive officers, independent directors and employees. The restricted stock vest ratably over one to four years. The Company calculates restricted stock compensation expense based on the grant date fair value and recognizes expense on a straight-line basis over the vesting period. The following table summarizes restricted stock activity for the years ended January 31, 2021 and 2020, respectively: (Shares in thousands) Restricted shares Weighted average price Aggregate intrinsic value Outstanding on January 31, 2019 274 $ 8.74 $ 2,392 Granted 152 9.09 Issued (79 ) Forfeited (26 ) 8.79 Outstanding on January 31, 2020 321 $ 9.03 $ 2,902 Granted 156 5.88 Issued (64 ) Forfeited (41 ) 8.31 Outstanding on January 31, 2021 372 $ 7.62 $ 2,843 The fair value of restricted stock vested was $ 0.5 million and $ 0.8 million in 2020 and 2019 , respectively. As of January 31, 2021 , there was $1.3 million of unrecognized compensation cost related to unvested restricted stock granted under the plans. That cost is expected to be recognized over the weighted-average period of 1.8 years. Note 10 - Interest expense, net (In thousands) 2020 2019 Interest expense $ 649 $ 1,106 Interest income (268 ) (201 ) Interest expense, net $ 381 $ 905 51 Table of Contents Schedule II Perma-Pipe International Holdings, Inc. and Subsidiaries VALUATION AND QUALIFYING ACCOUNTS For the Years Ended January 31, 2021 and 2020 (In thousands) Balance at beginning of period Charges to expenses Write-offs (1) Other charges (2) Balance at end of period Year Ended January 31, 2021 Allowance for possible losses in collection of trade receivables $ 407 $ 72 $ (7 ) $ 2 $ 474 Year Ended January 31, 2020 Allowance for possible losses in collection of trade receivables $ 536 $ 123 $ (254 ) $ 2 $ 407 (1) Uncollectible accounts charged off. (2) Primarily related to recoveries from accounts previously charged off and currency translation. 52 Table of Contents EXHIBIT INDEX The exhibits listed below are filed herewith except the exhibits described below as incorporated by reference. Exhibits not filed herewith are incorporated by reference to such exhibits filed by the Company under the location set forth under the caption "Description and Location" below. The Commission file number for the Company's Exchange Act filings referenced below is 001-32530. Exhibit No. Description and Location 3(i) Certificate of Incorporation of Perma-Pipe International Holdings, Inc. [Incorporated by reference to Exhibit 3.3 to Registration Statement No. 33-70298] 3(ii) Certificate of Amendment to Certificate of Incorporation of Perma-Pipe International Holdings, Inc. [Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on March 20, 2017] 3(iii) Fifth Amended and Restated By-Laws of Perma-Pipe International Holdings, Inc. [Incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on May 6, 2019] 4(a) Specimen Common Stock Certificate [Incorporated by reference to Exhibit 4 to Registration Statement No. 33-70794] 4(b) Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 [Incorporated by reference to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2020 filed on April 21, 2020] 10(a) Form of Directors and Officers Indemnification Agreement [Incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2006 filed on May 15, 2006] * 10(b) MFRI 2004 Stock Incentive Plan [Incorporated by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K/A for the fiscal year ended January 31, 2004 filed on June 1, 2004] * 10(c) 2009 Non-Employee Directors Stock Option Plan [Incorporated by reference to Exhibit 10(k) to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2010 filed on April 19, 2010]* 10(d) 2013 Omnibus Stock Incentive Plan as Amended June 14, 2013 [Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 17, 2013] * 10(e) Executive Employment Agreement with David J. Mansfield dated October 19, 2016 [Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on December 13, 2016]* 10(f) 2017 Omnibus Stock Incentive Plan as Amended June 13, 2017 [Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on September 19, 2017] * 10(g) Form of Restricted Stock Unit Agreement under the 2017 Omnibus Stock Incentive Plan as Amended June 13, 2017 [Incorporated by reference to Exhibit 10(b) to the Company ’ s Quarterly Report on Form 10-Q filed on September 11, 2018]* 10(h) Revolving Credit and Security Agreement, dated September 20, 2018, by and among the Company, PNC Bank, National Association, and the other parties thereto [Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on September 24, 2018] 10(i) Executive Employment Agreement, dated October 1, 2018, by and between the Company and D. Bryan Norwood [Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 1, 2018]* 10(j) Form of Restricted Stock Agreement under the 2017 Omnibus Stock Incentive Plan as Amended June 13, 2017* [Incorporated by reference to Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2020 filed on April 21, 2020] 10(k) Executive Employment Agreement, dated January 31, 2020 by and between the Company and Wayne Bosch* [Incorporated by reference to Exhibit 10(aa) to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2020 filed on April 21, 2020] 10(l) Form of Restricted Stock and Performance Award Agreement under the 2017 Omnibus Stock Incentive Plan as Amended June 13, 2017* 14 Code of Conduct [Incorporated by reference to Exhibit 14 of the Company's Annual Report on Form 10-K/A for the fiscal year ended January 31, 2004 filed on June 1, 2004] 21 Subsidiaries of Perma-Pipe International Holdings, Inc. 23 Consent of Independent Registered Public Accounting Firm - Grant Thornton LLP 24 Power of Attorney executed by directors and officers of the Company 31 Rule 13a - 14(a)/15d - 14(a) Certifications (1) Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2) Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Section 1350 Certifications(1) Chief Executive Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(2) Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation 101.DEF XBRL Taxonomy Extension Definition 101.LAB XBRL Taxonomy Extension Labels 101.PRE XBRL Taxonomy Extension Presentation *Management contracts and compensatory plans or agreements Item 16. FORM 10-K SUMMARY - None. 53 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Perma-Pipe International Holdings, Inc. Date: April 15, 2021 /s/ David J. Mansfield David J. Mansfield Director, President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. DAVID J. MANSFIELD Director, President and Chief Executive Officer (Principal Executive Officer) ) ) D. BRYAN NORWOOD* Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) ) April 15 , 2021 ) DAVID S. BARRIE* Director and Chairman of the Board of Directors DAVID B. BROWN* Director ) JEROME T. WALKER* Director ) CYNTHIA BOITER* Director ) *By: /s/ David J. Mansfield Individually and as Attorney in Fact David J. Mansfield 54