What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-12-08 compared with 2021-09-08 · 277 added, 134 removed, 571 unchanged (42% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

$ 35,199  

$ 20,294  

$ 99,426  

$ 63,399  

Cost of sales

27,570  

17,356  

76,549  

54,630  

22,877  

Operating expenses

General and administrative expenses

14,643  

13,320  

Selling expenses

Total operating expenses

18,040  

17,473  

Income/(loss) from operations

( 2,764 )  

Interest expense, net

1 unchanged sentence

Income/(loss) from operations before income taxes

( 2,873 )  

Income tax expense/(benefit)

( 23 )  

Net income/(loss)

$ ( 2,850 )  

$ 3,068  

Weighted average common shares outstanding

Earnings/(loss) per share

( 0.35 )  

See accompanying notes to consolidated financial statements.

3 unchanged sentences

(In thousands)

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

Net income/(loss)

4 unchanged sentences

( 88 )  

( 110 )  

Other comprehensive income/(loss)

( 88 )  

( 110 )  

Comprehensive income/(loss)

5 unchanged sentences

(In thousands, except per share data)

July 31, 2021

October 31, 2021

January 31, 2021

5 unchanged sentences

Restricted cash

Trade accounts receivable, less allowance for doubtful accounts of $ 497 at July 31, 2021 and $ 474 at January 31, 2021

Trade accounts receivable, less allowance for doubtful accounts of $478 at October 31, 2021 and $474 at January 31, 2021

37,741  

4 unchanged sentences

Prepaid expenses and other current assets

Unbilled accounts receivable

Costs and estimated earnings in excess of billings on uncompleted contracts

46 unchanged sentences

Common stock, $.01 par value, authorized 50,000 shares;

8,144 issued and outstanding at July 31, 2021 and 8,165 issued and outstanding at January 31, 2021

8,089 issued and outstanding at October 31, 2021 and 8,165 issued and outstanding at January 31, 2021

Additional paid-in capital

1 unchanged sentence

60,875  

Treasury Stock, 58 shares at October 31, 2021 and no shares at January 31, 2021

( 496 )  

Accumulated deficit

14 unchanged sentences

Accumulated Deficit

Treasury Stock

Accumulated Other Comprehensive Loss

1 unchanged sentence

Total stockholders' equity at January 31, 2021

$ 60,875  

$ ( 8,357 )  

$ ( 3,287 )  

$ 49,313  

( 843 )  

Stock-based compensation expense

1 unchanged sentence

Total stockholders' equity at April 30, 2021

$ 61,147  

$ ( 9,200 )  

$ ( 3,247 )  

$ 48,782  

Common stock issued under stock plans, net of shares used for tax withholding

( 254 )  

Stock-based compensation expense

Foreign currency translation adjustment

( 150 )  

Total stockholders' equity at July 31, 2021

$ 61,169  

$ ( 5,784 )  

$ ( 3,397 )  

$ 52,069  

Common stock issued under stock plans, net of shares used for tax withholding

Repurchase of common stock

( 496 )  

Stock-based compensation expense

Foreign currency translation adjustment

Total stockholders' equity at October 31, 2021

$ 61,461  

$ ( 5,289 )  

$ ( 496 )  

$ ( 3,375 )  

$ 52,382  

Additional Paid-in Capital

Accumulated Deficit

Treasury Stock

Accumulated Other Comprehensive Loss

1 unchanged sentence

Total stockholders' equity at January 31, 2020

$ 60,024  

$ ( 715 )  

$ ( 3,760 )  

$ 55,629  

( 2,521 )  

Stock-based compensation expense

Foreign currency translation adjustment

( 367 )  

Total stockholders' equity at April 30, 2020

$ 60,243  

$ ( 3,236 )  

$ ( 4,127 )  

$ 52,960  

Common stock issued under stock plans, net of shares used for tax withholding

( 193 )  

Stock-based compensation expense

1 unchanged sentence

Total stockholders' equity at July 31, 2020

$ 60,310  

$ ( 2,969 )  

$ ( 3,974 )  

$ 53,449  

( 2,850 )  

Common stock issued under stock plans, net of shares used for tax withholding

Stock-based compensation expense

Foreign currency translation adjustment

Total stockholders' equity at October 31, 2020

$ 60,595  

$ ( 5,819 )  

$ ( 3,864 )  

$ 50,994  

Balances at beginning of year

8,164,989  

8,048,006  

Treasury stock purchased

( 58,528 )  

Shares issued, net of shares used for tax withholding

( 17,235 )  

116,983  

Balances at period end

8,089,226  

8,164,989  

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended July 31,

Nine Months Ended October 31,

Operating activities

6 unchanged sentences

Provision on uncollectible accounts

Loss on disposal of fixed assets

Loss/(gain) on disposal of fixed assets

Changes in operating assets and liabilities

10 unchanged sentences

( 1,011 )  

Unbilled accounts receivable

( 3,167 )  

Other assets and liabilities

( 658 )  

Net cash (used in)/provided by operating activities

9 unchanged sentences

13,289  

36,563  

Payments of debt on revolving lines

( 11,436 )  

Proceeds from term loan

Payments of debt on mortgage

5 unchanged sentences

( 174 )  

Increase/(decrease) in drafts payable

Decrease in drafts payable

Payments on finance lease obligations, net

( 291 )  

Repurchase of common stock

( 496 )  

Stock options exercised and taxes paid related to restricted shares vested

2 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

( 1,649 )  

Net increase/(decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash - beginning of period

6 unchanged sentences

Income taxes paid

Fixed assets acquired under capital leases - non-cash

See accompanying notes to consolidated financial statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

July 31, 2021

October 31, 2021

(Tabular amounts presented in thousands, except per share amounts)

10 unchanged sentences

2021 and 

2020 are for the three and six months ended July 31, 2021 and 2020 , and for the fiscal years ended January 31, 2022 and 2021 , respectively.

2020 are for the three and nine months ended October 31, 2021 and 2020 , and for the fiscal years ended January 31, 2022 and 2021 , respectively.

Significant New Accounting Policies

Refer to the Company's Annual Report on Form 10 -K for the year ended January 31, 2021 as filed with the SEC on April 15, 2021 for discussion of the Company's significant accounting policies.

During the three months ended October 31, 2021, the following accounting policy was adopted. 

Treasury Stock

In accordance with Accounting Standards Codification ("ASC") Topic 505, "Equity", the Company has accounted for the share repurchases under the cost method, as the Company has not elected to retire the repurchased shares at this time.

This results in recognizing the shares as treasury stock, a reduction of stockholders' equity on the Company's consolidated balance sheets as of October 

31, 2021 and on the Company's consolidated statements of stockholders' equity for the three and nine month period ended October 31, 2021.

The amounts recognized as treasury stock in the consolidated balance sheets and consolidated statements of stockholders' equity include costs associated with the acquisition of the shares.

Reclassifications  

Certain reclassifications have been made to prior period financial statements to conform to current period presentation.

Unbilled accounts receivable was segregated from prepaid expenses and other current assets and reclassified into its own line on the consolidated balance sheets and consolidated statements of cash flows. 

Subsequent Events

The Company has evaluated subsequent events through December 8, 2021, the date the financial statements were issued.

No  material subsequent events occurred during this time that would require recongition or disclosure in thse financial statements. 

Note 2 - Business segment reporting

14 unchanged sentences

The write-off is recorded against the allowance for doubtful accounts. 

One of the Company’s accounts receivable in the total amount of $ 3.7 million as of July 31, 2021 and January 31, 2021 , respectively, has been outstanding for several years.

Included in this balance is a retention receivable that is payable upon the commissioning of the system in the amount of $ 3.4 million, of which, due to the long-term nature of the receivable, $ 2.1  million was included in the balance of other long-term assets as of July 31, 2021 and January 31, 2021 , respectively.

One of the Company’s accounts receivable in the total amount of $ 3.6 million as of October 31, 2021 and January 31, 2021 , respectively, has been outstanding for several years.

Included in this balance is a retention receivable that is payable upon the 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 was included in the balance of other long-term assets as of October 31, 2021 and January 31, 2021 , 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 the first quarter of 2021, the Company received approximately $ 0.1 million from the customer and additional receipts are expected throughout the rest of 2021.

2021, the Company received approximately $ 0.1 million from the customer and additional receipts are expected throughout the rest of 2021.

The Company continues to engage with the customer to ensure full payment of open balances, and during August 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 July 31, 2021 .

As a result, the Company did not reserve any allowance against this receivable as of October 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 three months ended 

July 31, 2021 , 

one individual customer accounted for 

12 % of the Company’s consolidated net sales, and during the same period in 

2020, no individual customer accounted for greater than 10% of the Company's consolidated net sales. For the six months ended July 31, 2021 

and 2020, no individual customer accounted for more than 10% of the Company's consolidated net sales.

July 31, 2021  and January 31, 2021, 

two customers accounted for 22 % and 

October 31, 2021  and 2020,  

no individual customer accounted for greater than 

10% of the Company’s consolidated net sales. For the nine  months ended October 

31, 2021  and 2020, no individual customer accounted for greater than 10% of the Company's consolidated net sales.

October 31, 2021  and January 31, 2021, 

one customer accounted for 11 % and 

no one customer accounted for greater than 10% of the Company's accounts receivable, respectively. 

Note 4 - Revenue recognition 

The Company accounts for its revenues under Accounting Standards Codification ("ASC") Topic 606, "Revenue from Contracts with Customers".

The Company accounts for its revenues under ASC Topic 606, "Revenue from Contracts with Customers".

Revenue from contracts with customers:

9 unchanged sentences

A breakdown of the Company's revenues by revenue class for the 

three and six months ended July 31, 2021 and 2020  are as follows (in thousands):

Three Months Ended July 31,

Six Months Ended July 31,

$ 4,548  

three and nine months ended October 31, 2021 and 2020  are as follows (in thousands):

Three Months Ended October 31,

Nine Months Ended October 31,

$ 2,435  

5 unchanged sentences

26,597  

18,346  

Revenue recognized under output method

10 unchanged sentences

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. 

Revenue recognition begins when project 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.

11 unchanged sentences

The Company anticipates that substantially all costs incurred for uncompleted contracts as of 

July 31, 2021 will be billed and collected within one year.

October 31, 2021 will be billed and collected within one year.

During the year ended 

2 unchanged sentences

The Company has recorded the expense related to the encashment of approximately $ 0.6 million in other income in the consolidated statement of operations for the year ended January 31, 2021.

No receivable has been recorded related to the potential reimbursement in the consolidated financial statements as of July 31, 2021.

No receivable has been recorded related to the potential reimbursement in the consolidated financial statements as of October 

The following table shows the reconciliation of the cost in excess of billings: 

(In thousands)

July 31, 2021

October 31, 2021

January 31, 2021

Costs incurred on uncompleted contracts

$ 19,077  

$ 17,543  

Estimated earnings

11,359  

Earned revenue

30,436  

27,194  

Less billings to date

28,985  

23,949  

Costs in excess of billings, net

$ 1,451  

$ 3,245  

Balance sheet classification

1 unchanged sentence

Costs and estimated earnings in excess of billings on uncompleted contracts

$ 2,322  

$ 4,007  

Contract liabilities:

Billings in excess of costs and estimated earnings on uncompleted contracts

( 871 )  

Costs in excess of billings, net

$ 1,451  

$ 3,245  

Substantially all of the $ 1.2 million contract liabilities balance as of January 31, 2020 was recognized in revenues during 2020 and substantially all of the $ 0.8 million contract liabilities balance as of January 31, 2021 is expected to be recognized in revenues during 2021.

Additionally, included in prepaid expenses and other current assets on the consolidated balance sheet, the Company has recorded $3 .4  million and $ 0.2 million of unbilled receivables as of July 31, 2021  and January 31, 2021, respectively, from revenues generated by its Middle East subsidiaries.

Unbilled accounts receivable:

The Company has recorded $3 .4  million and $ 0.2 million of unbilled accounts receivable on the consolidated balance sheets as of October 31, 2021  and January 31, 2021, respectively, from revenues generated by its subsidiaries in the Middle East, North Africa and India ("MENA").

The Company has fulfilled all performance obligations and has recorded revenue under the respective contracts.

The deliverables under these contracts have been accepted by the customer and await customer to pick up or arrange shipping for the product before billing can be made.

All of the amounts included in unbilled accounts receivable as of October 31, 2021 are expected to be billed before January 31, 2022.

Practical expedients:

5 unchanged sentences

As a company with subsidiaries in foreign jurisdictions, the process of calculating income taxes involves estimating current tax obligations and exposures in each jurisdiction as well as making judgments regarding the future recoverability of deferred tax assets.

Income earned in the UAE is not subject to local country income tax.

Income earned in the U.A.E.

is not subject to local country income tax.

Additionally, the relative proportion of taxable income earned domestically versus internationally can fluctuate significantly from period to period.

3 unchanged sentences

The Company's effective tax rate ("ETR") from operations in the 

second quarter in fiscal 

2021 was 20.1 % compared to ( 56.8 %) during the prior year quarter.

third quarter in fiscal 

2021 was 67.6 % compared to 0.8 % during the prior year quarter.

The Company's worldwide ETR's were 40.0 % and 6.2 % in the current year-to-date and the prior year year-to-date, respectively.

The change in the ETR from the prior year to the current year is largely due to changes in the mix of income and loss in various jurisdictions.

The amount of unrecognized tax benefits, including interest and penalties at July 31, 2021 , recorded in other long-term liabilities was $ 0.1  million, all of which would impact the Company’s ETR if recognized.

The change in the ETR from the prior year to the current year is largely due to changes in the mix of income and loss in various jurisdictions and the absence of recognizing tax benefits on losses in the United States due to a full valuation allowance applied against its deferred tax assets.

The amount of unrecognized tax benefits, including interest and penalties at October 31, 2021 , recorded in other long-term liabilities was $ 0.1  million, all of which would impact the Company’s ETR if recognized.

Note 6 - 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 July 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'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 October 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:

1 unchanged sentence

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 all three  asset groups. Therefore, it was determined that there was 

no impairment of the Company's long-lived assets for the three and six months ended July 31, 2021 and 2020 .

no impairment of the Company's long-lived assets for the three and nine months ended October 31, 2021 and 2020 .

The Company will continue testing for potential impairment at least annually or as otherwise required by applicable accounting standards.

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 July 31, 2021 and January 31, 2021 was attributable to the purchase of Perma-Pipe Canada, Ltd., which occurred in 2016.

All identifiable goodwill as of October 31, 2021 and January 31, 2021 was attributable to the purchase of Perma-Pipe Canada, Ltd., which occurred in 2016.

(In thousands)

1 unchanged sentence

Foreign exchange change effect  

July 31, 2021  

October 31, 2021  

$ 2,332  

2 unchanged sentences

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 July 31, 2021 , the Company elected to perform a qualitative analysis assessment to determine if it was more likely than not that the fair value of the Company's Canadian reporting unit exceeded its carrying value, including goodwill.

At October 31, 2021 , the Company elected to perform a qualitative analysis assessment to determine if it was more likely than not that the fair value of the Company's Canadian reporting unit exceeded its carrying value, including goodwill.

The qualitative assessment did not  identify any triggering events that would indicate potential impairment of the Company's Canadian reporting unit. Therefore, it was determined that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment for the 

three and six months ended July 31, 2021 and 2020 .

three and nine months ended October 31, 2021 and 2020 .

The Company will continue testing for potential impairment at least annually or as otherwise required by applicable accounting standards.

2 unchanged sentences

The Company has prior incentive plans under which previously granted awards remain outstanding, including the 2017 Plan, but under which no new awards may be granted.

At July 31, 2021 the Company had reserved a total of 433,119  shares for grants and issuances under these incentive stock plans, which includes a reserve for issuances pursuant to unvested or unexercised prior awards.

At October 31, 2021 the Company had reserved a total of 424,194 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.

8 unchanged sentences

The following were the Company's stock-based compensation expenses for the periods presented:

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

(In thousands)

3 unchanged sentences

Stock Options

The Company did not grant any stock options during the three or six months ended July 31, 2021 .

The Company did not grant any stock options during the three or nine months ended October 31, 2021 .

The following tables summarizes the Company's stock option activity:

6 unchanged sentences

$ 9.24  

$ 5.00  

Expired or forfeited

( 20 )  

Outstanding at July 31, 2021

Options exercisable at July 31, 2021

Outstanding at October 31, 2021

Options exercisable at October 31, 2021

$ 9.63  

No stock options were exercised during the 

six months ended July 31, 2021 . 

There was no vesting, expiration or forfeiture of previously unvested stock options during the six  months ended July 31, 2021.

As of July 31, 2021, there were no remaining unvested stock options outstanding, and therefore no unrecognized compensation expense related to unvested stock options.

Three thousand stock options were exercised during the 

nine months ended October 31, 2021 . 

There was no vesting, expiration or forfeiture of previously unvested stock options during the nine  months ended October 31, 2021.

As of October 

31, 2021, there were no remaining unvested stock options outstanding, and therefore no unrecognized compensation expense related to unvested stock options.

Restricted stock

The following table summarizes the Company's restricted stock activity for the 

six months ended July 31, 2021 :

nine months ended October 31, 2021 :

(Shares in thousands)

9 unchanged sentences

( 40 )  

Outstanding at July 31, 2021

Outstanding at October 31, 2021

$ 7.50  

$ 2,550  

As of July 31, 2021 , there was $ 1.6  million of unrecognized compensation expense related to unvested restricted stock granted under the plans.

As of October 31, 2021 , there was $ 1.3  million of unrecognized compensation expense related to unvested restricted stock granted under the plans.

That cost is expected to be recognized over a weighted average period of 1.8  years.

Note 8 - Earnings/(loss) per share

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

(In thousands, except per share data)

8 unchanged sentences

Earnings/(loss) per share

( 0.35 )  

Note 9 - Debt

Debt totaled $ 8.6 million and $ 13.2 million at July 31, 2021  and January 31, 2021 , respectively.

Debt totaled $ 10.2 million and $ 13.2 million at October 31, 2021  and January 31, 2021 , respectively.

Paycheck Protection Program Loan.

16 unchanged sentences

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 $ 18.0 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 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 of the 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.

The Company has engaged a consultant to assist with the search for, communication with and selection of a new lender or a replacement facility with PNC.

We have been in communications and shared data with PNC and others.

The Company expects to negotiate a renewal to or replacement for its existing credit facility prior to maturity.

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 its 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) ("fixed charge coverage ratio") 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 fixed charge coverage ratio of not less than 1.10 to 1.00 at each quarter end on a trailing four -quarter basis.

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, $ 1.0 million from one of its foreign subsidiaries, Perma-Pipe Middle East FZC, in the UAE.

The Company used proceeds from the Senior Credit Facility for on-going working capital needs and to fund capital expenditures, working capital needs and other corporate purposes. Borrowings under the Senior Credit Facility bore 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 was based on average quarterly undrawn availability with respect to the Senior Credit Facility. Additionally, the Company was required to pay a 0.375 % per annum facility fee on the unused portion of the Senior Credit Facility. 

As of October 31, 2020, the Company and its subsidiaries failed to achieve the necessary fixed charge coverage ratio ("FCCR") 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 FCCR 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. 

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 $ 0.1 million.

The Amendment and Waiver also eliminates 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 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 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 EBITDA, would result in pro forma compliance with the covenant.

The Company was in compliance with these covenants as of July 31, 2021.

As of July 31, 2021, 

the Company had $ 3 thousand in borrowings and had $ 10.3  million available under the Senior Credit Facility, before application of the $2.0 million availability block noted above in connection with the Amendment and Waiver.

The Company incurred additional fees over the remainder of the Amendment and Waiver of approximately $ 0.1 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. 

On September 17, 2021, 

the North American Loan Parties executed an extension of the Credit Agreement with PNC, providing for a new five -year $ 18.0 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the “Renewed Senior Credit Facility”).

The Company's obligations under the Renewed Senior Credit Facility are currently guaranteed by Perma-Pipe Canada, Inc.

Each of the North American Loan Parties other than Perma-Pipe Canada, Inc.

is a borrower under the Renewed Senior Credit Facility (collectively, the “Borrowers”).

The Borrowers will use borrowings under the Renewed Senior Credit Facility (i) to fund future capital expenditures;

(ii) to fund on-going working capital needs;

and (iii) for other corporate purposes, including potentially additional share repurchases.

Borrowings under the Renewed Senior Credit Facility bears interest at a rate equal to an alternate base rate, the London Inter-Bank Offered Rate (“LIBOR”) or a LIBOR successor rate index, plus, in each case, an applicable margin.

The applicable margin will be based on an FCCR range.

Interest on alternate base rate borrowings will be the alternate base rate as defined in the Renewed Senior Credit Facility plus an applicable margin ranging from 1.00 % to 1.50 %, based on the FCCR in the most recently reported period.

Interest on LIBOR or LIBOR successor rate borrowings will be the LIBOR rate as defined in the Renewed Senior Credit Facility plus an applicable margin ranging from 2.00 % to 2.50 %, based on the FCCR in the most recently reported period. Additionally, the Borrowers will pay a 0.25 % per annum facility fee on the unused portion of the Renewed Senior Credit Facility. 

Subject to certain exceptions, borrowings under the Renewed Senior Credit Facility will be secured by substantially all of the North American Loan Parties’

The Renewed Senior Credit Facility will mature on September 20, 2026.

Subject to certain qualifications and exceptions, the Renewed 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 may not make capital expenditures in excess of $ 5.0 million annually, plus a limited carryover of unused amounts. 

The Renewed Senior Credit Facility also contains financial covenants requiring the North American Loan Parties to achieve a ratio of its EBITDA to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Renewed Senior Credit Facility to be not less than 1.10 to 1.00 if for any five consecutive days the undrawn availability is less than $ 3.0 million or any day in which the undrawn availability is less than $ 2.0 million.

If the covenant is triggered it will be tested for the nine -month period ending October 31, 2021 and the twelve -month period ending January 31, 2022 and thereafter on a trailing twelve -month basis.

As of the most recent reporting date, the calculated ratio was substantially greater than 1.10  to 1.00.

The Company was in compliance with these covenants as of October 31, 2021.

The Renewed Senior Credit Facility contains customary events of default.

If an event of default occurs and is continuing, then PNC may terminate all commitments to extend further credit and declare all amounts outstanding under the Renewed Senior Credit Facility due and payable immediately.

In addition, if any of the North American Loan Parties or certain of their subsidiaries become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Renewed Senior Credit Facility will automatically become immediately due and payable.

Loans outstanding under the Renewed Senior Credit Facility will bear interest at a rate of 2.00 % per annum in excess of the otherwise applicable rate (i) while a bankruptcy event of default exists or (ii) upon the lender's request, during the continuance of any other event of default.

As of October 31, 2021, 

the Company had no borrowings and had $ 5.9  million available under the Renewed Senior Credit Facility, before application of a $ 3.0 million availability block that can be reduced by the Company's financial performance.

As of January 31, 2021, the Company had borrowed an aggregate of $ 2.8 million and had $ 1.7 million available under the Senior Credit Facility.

12 unchanged sentences

In accordance with ASC Topic 842, "Leases", this transaction was recorded as a failed sale and leaseback as the present value of lease payments exceeded substantially all of the fair value of the underlying asset.

The Company utilized an incremental borrowing rate of 8.0 % to determine the finance obligation to record for the amounts received and will continue to depreciate the assets. The current portion of the finance obligation of $ 0.1  million is recognized in current maturities of long-term debt and the long-term portion of $ 9.4  million is recognized in long-term finance obligation on the Company's consolidated balance sheet as of July 31, 2021. 

The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.

The Company utilized an incremental borrowing rate of 8.0 % to determine the finance obligation to record for the amounts received and will continue to depreciate the assets. The current portion of the finance obligation of $ 0.1  million is recognized in current maturities of long-term debt and the long-term portion of $ 9.3  million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of October 

 The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.

Concurrently with the sale, the Company paid off the approximately $ 0.9 million mortgage note on the Property to its lender.

4 unchanged sentences

and Egypt as discussed further below.

The Company has a revolving line for 8.0  million Dirhams (approximately $ 2.2  million at July 31, 2021 ) from a bank in the U.A.E.

The Company has a revolving line for 8.0  million U.A.E.

Dirhams (approximately $ 2.2  million at October 31, 2021 ) from a bank in the U.A.E.

The facility has an interest rate of approximately 3.46 % and was originally set to expire in 

1 unchanged sentence

The Company has submitted final documentation to complete the renewal process, and is awaiting official notification from the bank of the renewal completion.

This process is expected to be completed in September 2021.

The Company has a second revolving line for 19.5  million Dirhams (approximately $ 5.3  million at July 31, 2021 ) from a bank in the U.A.E.

This process is expected to be completed in December 2021.

The Company has a second revolving line for 19.5  million U.A.E.

Dirhams (approximately $ 5.3  million at October 31, 2021 ) from a bank in the U.A.E.

The facility has an interest rate of approximately 4.5 % and is set to expire in 

January 2022.

The Company has a third  revolving line for 3.0  million Dirhams (approximately $ 0.8  million at July 31, 2021 ) from a bank in the U.A.E.

The Company has a third  revolving line for 3.0  million U.A.E.

Dirhams (approximately $ 0.8  million at October 31, 2021 ) from a bank in the U.A.E.

The facility has an interest rate of approximately 4.5 % and is set to expire in 

4 unchanged sentences

In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt.

In June 2021, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 100.0 million Egyptian Pounds (approximately $ 6.2  million at July 31, 2021 ).

In June 2021, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 100.0 million Egyptian Pounds (approximately $ 6.4  million at October 31, 2021 ).

This credit arrangement is in the form of project financing at rates competitive in Egypt.

1 unchanged sentence

Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricted the Company's Egyptian subsidiary's ability to undertake any additional debt. The facility has an interest rate of approximately 10.8 % and is set to expire in August 

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 July 31, 2021).

In January 2021, the Company entered into a credit arrangement for project financing with a bank in Egypt for 46.2 million Egyptian Pounds (approximately $ 2.9 million at October 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 September 2021 in connection with the completion of the project.

The facility has an interest rate of approximately 8.0 % and is expected to expire in December 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.

1 unchanged sentence

The Company was in compliance with the covenants under the credit arrangements in the U.A.E.

and Egypt as of July 31, 2021 . On July 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.

and Egypt as of October 31, 2021 . On October 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, two  of which have 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 July 31, 2021 , the Company's interest rates ranged from 3.57 % to 8.0 %, with a weighted average rate of 5.89 %, and the Company had facility limits totaling $ 17.6  million under these credit arrangements.

As of July 31, 2021 , $ 5.1  million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees.

Additionally, as of July 31, 2021 , the Company had borrowed $ 2.5  million, and had an additional $ 10.1  million of borrowing remaining available under the foreign revolving credit arrangements.

The foreign revolving lines balances as of July 31, 2021 and January 31, 2021 , were included as current maturities of long-term debt in the Company's consolidated balance sheets. 

Based on these base rates, as of October 31, 2021 , the Company's interest rates ranged from 3.46 % to 10.8 %, with a weighted average rate of 6.51 %, and the Company had facility limits totaling $ 17.6  million under these credit arrangements.

As of October 31, 2021 , $ 2.9  million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees.

Additionally, as of October 31, 2021 , the Company had borrowed $ 4.1  million, and had an additional $ 9.4  million of borrowing remaining available under the foreign revolving credit arrangements.

The foreign revolving lines balances as of October 31, 2021 and January 31, 2021 , were included as current maturities of long-term debt in the Company's consolidated balance sheets. 

On July 

1 unchanged sentence

The interest rate is variable, and was 

4.55 % at July 31, 2021 . Principal payments began in January 2018.

4.55 % at October 31, 2021 . Principal payments began in 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 repayment of amounts borrowed. O n April 14, 2021, the Company entered into the Purchase and Sale Agreement, discussed further in Note 9 - Debt, above. Concurrently with the sale, the Company paid off the approximately $ 0.9 million remaining on the mortgage note on the Property to its lender.

The proceeds were used for repayment of amounts borrowed. O n April 14, 2021, the Company entered into the Purchase and Sale Agreement, discussed further above. Concurrently with the sale, the Company paid off the approximately $ 0.9 million remaining on the mortgage note on the Property to its lender.

Note 10 - Leases

1 unchanged sentence

In August 2020, the Company entered into a new lease in Abu Dhabi for land upon which the Company intends to build a facility.

The annual payments are initially expected to be approximately 1.2 million Dirhams (approximately $ 0.3 million at October 31, 2020), inclusive of rent and common charges, with escalation clauses in the agreement. Rent payments are deferred until August 2022. 

The annual payments are initially expected to be approximately 1.2 million U.A.E.

Dirhams (approximately $ 0.3 million at October 31, 2020), inclusive of rent and common charges, with escalation clauses in the agreement. Rent payments are deferred until August 2022. 

The lease expires in August 2050.

15 unchanged sentences

The Company does not have any arrangements where it acts as a lessor, other than one sub-lease arrangement. 

At July 31, 2021 , the Company had total operating lease liabilities of $ 13.3  million and total operating ROU assets of $ 11.8  million, which are reflected in the consolidated balance sheet.

At July 31, 2021 , the Company also had total finance lease liabilities of $ 0.7 million included in current maturities of long-term debt and long-term debt less current maturities, and total finance ROU assets of $ 0.9 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheet.

At October 31, 2021 , the Company had total operating lease liabilities of $ 13.0  million and total operating ROU assets of $ 11.5  million, which are reflected in the consolidated balance sheets.

At October 31, 2021 , the Company also had total finance lease liabilities of $ 0.6 million included in current maturities of long-term debt and long-term debt less current maturities, and total finance ROU assets of $ 0.8 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheets.

Supplemental balance sheet information related to leases is as follows (in thousands): 

Operating and Finance leases:

July 31, 2021

October 31, 2021

January 31, 2021

25 unchanged sentences

Consolidated Statements of Operations Classification

Three Months Ended July 31, 2021

Three Months Ended July 31, 2020

Six Months Ended July 31, 2021

Six Months Ended July 31, 2020

Three Months Ended October 31, 2021

Three Months Ended October 31, 2020

Nine Months Ended October 31, 2021

Nine Months Ended October 31, 2020

Finance Lease Costs

17 unchanged sentences

Supplemental cash flow information related to leases is as follows (in thousands):

Six Months Ended July 31, 2021

Six Months Ended July 31, 2020

Nine Months Ended October 31, 2021

Nine Months Ended October 31, 2020

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Operating cash outflows from operating leases

Six Months Ended July 31, 2021

Six Months Ended July 31, 2020

Nine Months Ended October 31, 2021

Nine Months Ended October 31, 2020

ROU Assets obtained in exchange for new lease obligations:

2 unchanged sentences

Weighted-average lease terms and discount rates are as follows: 

July 31, 2021

October 31, 2021

Weighted-average remaining lease terms (in years):

4 unchanged sentences

Operating leases

Maturities of lease liabilities as of July 31, 2021 , are as follows (in thousands):

Maturities of lease liabilities as of October 31, 2021 , are as follows (in thousands):

Operating Leases

Finance Leases

For the six months ended January 31, 2022

$ 1,210  

For the three months ended January 31, 2022

For the year ended January 31, 2023

8 unchanged sentences

( 8,845 )  

Total lease liabilities at July 31, 2021

Total lease liabilities at October 31, 2021

$ 13,013  

Rent expense on operating leases, which is recorded on straight-line basis, was $ 0.7 million for the three months ended 

July 31, 2021  and 2020 , respectively. 

Rent expense on operating leases, which is recorded on straight-line basis, was $ 0.9  million for the three months ended 

October 31, 2021  and 2020 , respectively. 

Note 11  - Restricted cash

Restricted cash held by foreign subsidiaries was $ 1.2  million as of July 31, 2021 and 2020 , respectively, and is related to fixed deposits that also serve as security deposits and guarantees. 

Restricted cash held by foreign subsidiaries was $ 1.7  million as of October 31, 2021 and 2020 , respectively, and is related to fixed deposits that also serve as security deposits and guarantees. 

(In thousands)

July 31, 2021  

July 31, 2020  

October 31, 2021  

October 31, 2020  

Cash and cash equivalents

15 unchanged sentences

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.

The Company's Renewed Senior Credit Facility, which matures on September 20, 2026, 

bears interest at a rate equal to an alternate base rate, the London Inter-Bank Offered Rate (“LIBOR”) or a LIBOR successor rate index, plus, in each case, an applicable margin. Based on the inclusion of the LIBOR successor rate index in the Renewed Senior Credit Facility, the Company does not expect a material impact from the adoption of this standard on the financial statements of the Company.

In June 2016, the FASB issued ASU No.

5 unchanged sentences

The Company evaluated other recent accounting pronouncements and does not expect them to have a material impact on its consolidated financial statements or related disclosures.

Note 14 - Treasury stock

October 4, 2021, the Company's Board of Directors approved a share repurchase program, which authorizes the Company to use up to $ 3.0  million for the purchase of its outstanding shares of common stock.

Share repurchases are permitted to be executed through open market or privately negotiated transactions over the course of 12  months, depending upon current market conditions and other factors. 

The following table sets forth information with respect to repurchases by the Company of its shares of common stock during the third quarter of 2021:

Total number of shares purchased

Average price paid per share

Total number of shares purchased as part of publicly announced plans or programs

Approximate dollar value of shares that may yet be purchased under the plans or programs

August 1, 2021 - August 31, 2021

September 1, 2021 - September 30, 2021

October 1, 2021 - October 31, 2021

58,528  

2,505,216  

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements