What changed in this filing

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Item 1. Financial Statements

2022-09-07 compared with 2022-06-07 · 299 added, 186 removed, 540 unchanged (47% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

Three Months Ended April 30,

Three Months Ended July 31,

Six Months Ended July 31,

$ 37,003  

$ 39,804  

$ 68,225  

$ 64,227  

Cost of sales

1 unchanged sentence

29,061  

51,290  

48,979  

10,743  

16,935  

15,248  

Operating expenses

General and administrative expenses

10,897  

10,008  

Selling expenses

Total operating expenses

Income/(loss) from operations

13,451  

12,102  

Income from operations

Interest expense, net

Other income, net

Loss from operations before income taxes

Other (expense)/income

( 64 )  

( 14 )  

Income from operations before income taxes

Income tax expense

$ 1,868  

Weighted average common shares outstanding

Loss per share

$ 3,416  

$ 2,573  

Weighted average common shares outstanding

Earnings per share

See accompanying notes to consolidated financial statements.

1 unchanged sentence

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (Unaudited)

(In thousands)

Three Months Ended April 30,

Three Months Ended July 31,

Six Months Ended July 31,

$ 1,868  

Other comprehensive (loss)/income

$ 3,416  

$ 2,573  

Other comprehensive loss

Foreign currency translation adjustments, net of tax

( 455 )  

Other comprehensive (loss)/income

( 150 )  

Comprehensive loss

( 1,387 )  

Other comprehensive loss

( 455 )  

( 150 )  

( 1,387 )  

Comprehensive income/(loss)

$ 1,413  

$ 3,266  

$ ( 404 )  

$ 2,463  

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(In thousands, except per share data)

April 30, 2022

July 31, 2022

January 31, 2022

5 unchanged sentences

Restricted cash

Trade accounts receivable, less allowance for doubtful accounts of $ 461 at April 30, 2022 and $ 486 at January 31, 2022

Trade accounts receivable, less allowance for doubtful accounts of $ 500 at July 31, 2022 and $ 486 at January 31, 2022

47,749  

9 unchanged sentences

78,389  

Long-term assets

Property, plant and equipment, net of accumulated depreciation

4 unchanged sentences

Deferred tax assets

Total other assets

Other long-term assets

Total long-term assets

39,022  

33 unchanged sentences

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

8,154 issued and outstanding at April 30, 2022 and 8,152 issued and outstanding at January 31, 2022

8,003 issued and outstanding at July 31, 2022 and 8,152 issued and outstanding at January 31, 2022

Additional paid-in capital

1 unchanged sentence

61,766  

Treasury Stock, 234 shares at April 30, 2022 and January 31, 2022

( 1,992 )  

Treasury Stock, no shares at July 31, 2022 and 234 shares at January 31, 2022

Accumulated deficit

18 unchanged sentences

Total stockholders' equity at January 31, 2022

$ 61,766  

$ ( 2,295 )  

$ ( 1,992 )  

$ ( 3,104 )  

$ 54,457  

( 885 )  

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

1 unchanged sentence

Foreign currency translation adjustment

( 932 )  

Total stockholders' equity at April 30, 2022

$ 62,018  

$ ( 3,180 )  

$ ( 1,992 )  

$ ( 4,036 )  

$ 52,892  

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

( 247 )  

Repurchase of common stock

( 43 )  

Retirement of treasury stock

( 2,033 )  

Stock-based compensation expense

Foreign currency translation adjustment

( 455 )  

Total stockholders' equity at July 31, 2022

$ 62,055  

$ ( 3,345 )  

$ ( 4,491 )  

$ 54,299  

Additional Paid-in Capital

4 unchanged sentences

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  

Balances at beginning of year

2 unchanged sentences

Treasury stock purchased

( 4,887 )  

Shares issued, net of shares used for tax withholding

90,816  

221,046  

Prior period adjustments

( 234,281 )  

Balances at period end

5 unchanged sentences

(In thousands)

Three Months Ended April 30,

Six Months Ended July 31,

Operating activities

Adjustments to reconcile net loss to net cash flows used in operating activities

Adjustments to reconcile net income to net cash flows used in operating activities

Depreciation and amortization

Deferred tax expense/(benefit)

Deferred tax expense

Stock-based compensation expense

Provision on uncollectible accounts

Gain on disposal of fixed assets

Loss on disposal of fixed assets

Changes in operating assets and liabilities

21 unchanged sentences

Payments of other debt

Decrease in drafts payable

Increase/(decrease) in drafts payable

Payments on finance lease obligations, net

Repurchase of common stock

Stock options exercised and taxes paid related to restricted shares vested

1 unchanged sentence

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

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

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash - beginning of period

3 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)

April 30, 2022

July 31, 2022

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

15 unchanged sentences

for discussion of the Company's significant accounting policies.

During the three months ended April 30, 2022, the following accounting policy was adopted. 

During the six months ended July 31, 2022, the following accounting policies were 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 April 30, 2022 

and on the Company's consolidated statements of stockholders' equity for the three month period ended April 30, 2022.

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.

In accordance with Accounting Standards Codification ("ASC") Topic 505, "Equity", the Company has accounted for the share repurchases under the cost method.

This resulted in recognizing the shares as treasury stock, a reduction of stockholders' equity on the Company's consolidated balance sheets and on the Company's consolidated statements of stockholders' equity.

These amounts included costs associated with the acqu isition of the shares.

July 26, 2022, the Company retired all treasury stock previously repurchased under this stock repurchase program.

The retirement was recorded as a reduction to common stock based on the par value of the shares, and the excess over par value was recorded as an increase to accumulated deficit in accordance with ASC 505 - 30, Equity -Treasury Stock.

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 June 7, 2022, the date the financial statements were issued.

Any material subsequent events that occurred during this time have been properly recognized and/or disclosed in these financial statements. 

The Company has evaluated subsequent events through September 7, 2022, the date the financial statements were issued.

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

Note 2 - Business segment reporting

6 unchanged sentences

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, including the availability of credit insurance.

Credit is extended based on evaluations of customers' financial condition, including the availability of credit insurance.

In the United States, collateral is not generally required.

In the United Arab Emirates (the "U.A.E.") and Saudi Arabia, 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.

Accounts receivable are due within various time periods specified in the terms applicable to each customer and are presented net of any allowance for claims and doubtful accounts.

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.

Management exercises judgment in adjusting the allowance as a consequence of known events, 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 $ 3.6 million as of April 30, 2022 and January 31, 2022 , 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, $ 1.4  million and $ 2.0 million were included in the balance of other long-term assets as of April 30, 2022 and January 31, 2022 , respectively.

One of the Company’s accounts receivable in the total amount of $ 2.7 million and $ 3.6 million as of July 31, 2022 and January 31, 2022 , respectively, has been outstanding for several years.

As of July 31, 2022, the entire balance represents a retention receivable that is payable upon the commissioning of the system. Due to the long-term nature of the receivable, $ 1.1  million and $ 2.0 million were included other long-term assets as of July 31, 2022 and January 31, 2022 , 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 as additional activities must be completed prior to the overall system completion and commissioning.

1 unchanged sentence

The Company continues to engage with the customer to ensure full payment of open balances, and during April 2022 received an updated acknowledgment of the outstanding balances and assurances of payment from the customer.

In June 2022, the Company received a partial payment to settle $ 0.9 million of the customer's outstanding balance.

Further, the Company has been engaged by the customer to perform additional work in 2022 under customary trade credit terms that supports the continued cooperation between the Company and the customer.

As a result, the Company did not reserve any allowance against this receivable as of April 30, 2022 .

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. 

As a result, the Company did not reserve any allowance against this outstanding receivable as of July 31, 2022. 

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 

April 30, 2022  and 2021,  

July 31, 2022 , 

no individual customer accounted for greater than 

10% of the Company’s consolidated net sales. 

April 30, 2022  and January 31, 2022, 

two customers collectively accounted for 22.9 % and 

one customer accounted for 11.9 % of the Company's accounts receivable, respectively. 

10% of the Company’s consolidated net sales. During the three months ended July 31, 2021, one individual customer accounted for 12 % of the Company's consolidated net sales. 

For the six months ended July 31, 2022 and 2021, no individual customer accounted for more than 10% of the Company's consolidated net sales.

July 31, 2022, 

no individual customer accounted for 10%  of the Company's accounts receivable.

January 31, 2022 

one customer accounted for 11.9 % of the Company's accounts receivable. 

Note 4 - Revenue recognition 

4 unchanged sentences

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. 

Additionally, this systems classification includes coating applied to pipes and structures. 

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.

4 unchanged sentences

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

three months ended April 30, 2022  and 2021 are as follows (in thousands):

Three Months Ended April 30,

three and six months ended July 31, 2022 and 2021  are as follows (in thousands):

Three Months Ended July 31,

Six Months Ended July 31,

$ 4,548  

$ 7,135  

Specialty Piping Systems and Coating

1 unchanged sentence

12,707  

13,999  

23,325  

23,952  

Revenue recognized under output method

3 unchanged sentences

33,140  

$ 37,003  

$ 39,804  

$ 68,225  

$ 64,227  

The input method, as noted in ASC 606 - 10 - 55 - 20, is used by the U.S.

14 unchanged sentences

Contract liabilities represent billings in excess of costs 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.

Both customer billings and the satisfaction (or partial satisfaction) of the performance obligation(s) occur throughout the manufacturing process and impact the period end balances in these accounts.

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

April 30, 2022 will be billed and collected within one year.

July 31, 2022 will be billed and collected within one year.

During the year ended 

1 unchanged sentence

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, net 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 April 30, 2022.

The Company has recorded the expense related to the encashment of approximately $ 0.6 million in other (expense)/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, 2022.

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

(In thousands)

April 30, 2022

July 31, 2022

January 31, 2022

29 unchanged sentences

Unbilled accounts receivable:

The Company has recorded $ 6.7  million and $ 2.7  million of unbilled accounts receivable on the consolidated balance sheets as of April 30, 2022  and January 31, 2022, respectively, from revenues generated by its subsidiaries in the Middle East, North Africa and India ("MENA").

The Company has recorded $ 8.0  million and $ 2.7  million of unbilled accounts receivable on the consolidated balance sheets as of July 31, 2022  and January 31, 2022, respectively, from revenues generated by its subsidiaries in the Middle East, North Africa and India.

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 April 30, 2022 are expected to be billed before July 

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

Practical expedients:

11 unchanged sentences

therefore, actual results could differ materially from projections. 

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

first quarter in fiscal 

2022 was ( 455.9 %) compared to ( 24.3 %) during the prior year period.

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

The Company's worldwide effective tax rate ("ETR") from operations for the three months ended July 31, 2022 and 2021 was 32 %  and 20 %, respectively.

The Company's worldwide ETR was 62 % and 29 % for the six months ended July 31, 2022 and 2021, respectively.

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

The Company expects that future distributions from foreign subsidiaries will not be subject to incremental U.S.

federal 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.

The earnings from these subsidiaries are subject to tax in their local jurisdiction, including withholding taxes. As such, the Company has accrued a liability of $ 0.5  million as of July 31, 2022 related to these taxes.

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 April 30, 2022 , 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 July 31, 2022 , 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 months ended April 30, 2022 .

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

no impairment of the Company's long-lived assets for the three and six months ended July 31, 2022 and 2021 .

During July 2022, severe flooding in the United Arab Emirates negatively impacted the Company's facility in Fujairah.

The Company is currently assessing the damage to the facility, equipment, inventory and the impact of time lost due to business interruption.

As additional information becomes available, the Company will recognize any impact to the financial statements, including any potential impairment to long-lived assets.

The Company expects that any losses will be recovered as a result of its pending insurance claim.

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 April 30, 2022 and January 31, 2022 was attributable to the purchase of Perma-Pipe Canada, Ltd., which occurred in 2016.

All identifiable goodwill as of July 31, 2022 and January 31, 2022 was attributable to the purchase of Perma-Pipe Canada, Ltd., which occurred in 2016.

(In thousands)

1 unchanged sentence

Foreign exchange change effect  

April 30, 2022  

July 31, 2022  

$ 2,342  

3 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 April 30, 2022 , 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 July 31, 2022 , 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 months ended April 30, 2022 .

three and six months ended July 31, 2022 and 2021 .

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

Note 7 - 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. 

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 April 30, 2022 the Company had reserved a total of 415,973  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 independent directors.

The Company's 2021 Omnibus Stock Incentive Plan dated May 26, 2021 

3 unchanged sentences

Grants were made to the Company's employees, officers and independent directors under the 2021 Plan, as described below.

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.

The 2017 Plan authorized awards to officers, employees, consultants and independent directors.

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.

July 31, 2022 the Company had reserved a total of

 shares for grants and issuances under these incentive stock plans, which includes a reserve for issuances pursuant to unvested or unexercised prior awards.

Stock-based compensation expense

1 unchanged sentence

The Company recognized the following stock-based compensation expense for the periods presented:

Three Months Ended April 30,

Three Months Ended July 31,

Six Months Ended July 31,

(In thousands)

Stock-based compensation expense

Restricted stock-based compensation expense

1 unchanged sentence

Stock Options

The Company did not grant any stock options during the three months ended April 30, 2022 .

The Company did not grant any stock options during the three or six months ended July 31, 2022 .

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

6 unchanged sentences

$ 9.51  

( 12 )  

Expired or forfeited

Outstanding at April 30, 2022

Options exercisable at April 30, 2022

Outstanding at July 31, 2022

Options exercisable at July 31, 2022

$ 10.62  

Two thousand stock options were exercised during the 

three months ended April 30, 2022 . 

There was no vesting, expiration or forfeiture of previously unvested stock options during the three months ended April 30, 2022.

As of April 30, 2022, there were no remaining unvested stock options outstanding, and therefore no unrecognized compensation expense related to unvested stock options.

There was no vesting, expiration or forfeiture of previously unvested stock options during the si x months ended July 31 , 2022.

As of July 31 , 2022, 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 

three months ended April 30, 2022 :

six months ended July 31, 2022 :

(Shares in thousands)

5 unchanged sentences

$ 2,652  

Vested and issued

( 147 )  

Forfeited or retired for taxes

Outstanding at April 30, 2022

( 42 )  

Outstanding at July 31, 2022

$ 8.38  

The Company did not grant any restricted stock, nor were any shares of restricted stock vested and issued, during the three months ended April 30, 2022.

As of April 30, 2022 , there was $ 0.8  million of unrecognized compensation expense related to unvested restricted stock granted under the plans.

$ 2,074  

As of July 31, 2022 , there was $ 1.4  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 2.0  years .

Note 8 - Earnings/(loss) per share

Three Months Ended April 30,

Note 8 - Earnings per share

Three Months Ended July 31,

Six Months Ended July 31,

(In thousands, except per share data)

5 unchanged sentences

$ 1,868  

Loss per share

$ 3,416  

$ 2,573  

Income per share

Note 9 - Debt

Debt totaled $ 26.3 million and $ 21.9 million at April 30, 2022  and January 31, 2022 , respectively.

Debt totaled $ 32.1 million and $ 21.9 million at July 31, 2022  and January 31, 2022 , respectively.

Revolving lines - North America . 

1 unchanged sentence

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”).

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 ("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 FCCR covenants requirements under the Credit Agreement. 

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 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 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 London Inter-Bank Offered Rate ("LIBOR") borrowings and reduced the overall availability by $ 2.0  million until maturity.

On September 17, 2021, 

3 unchanged sentences

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;

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

(ii) to fund ongoing working capital needs;

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

Borrowings under the Renewed Senior Credit Facility bears interest at a rate equal to an alternate base 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.

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

The applicable margin is based on a fixed charge coverage ratio ("FCCR") range.

Interest on alternate base rate borrowings is 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 is 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 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 are secured by substantially all of the North American Loan Parties’

The Renewed Senior Credit Facility matures 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’

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Further, the North American Loan Parties may not make repurchases of the Company's common stock in excess of $ 3.0 million. 

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.

As of April 30, 2022, the calculated ratio was greater than 1.10 to 1.00.

In order to cure any future breach of the FCCR 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 Renewed Senior Credit Facility 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 April 30, 2022.

The Renewed Senior Credit Facility also contains a free cash flow financial covenant (the "FCCR covenant") 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 for any five consecutive days in which the undrawn availability is less than $ 3.0 million or any day in which the undrawn availability is less than $ 2.0 million.

As of July 31, 2022, the calculated ratio was greater than 1.10 to 1.00.

The Company was in compliance with these covenants as of July 31, 2022.

The Renewed Senior Credit Facility contains customary events of default.

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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 April 30, 2022, 

As of July 31, 2022, 

the Company had borrowed an aggregate of $ 8.6  million at a rate of 6.50 % and had $ 5 .9  million available under the Renewed Senior Credit Facility.

As of January 31, 2022, the Company had borrowed an aggregate of $ 0.6  million and had $ 8.5  million available under the Renewed Senior Credit Facility, before application of a $ 2.5 million availability block that has subsequently been removed completely based on the Company's financial performance.

As of January 31, 2022, the Company had borrowed an aggregate of $ 0.6  million and had $ 8.5  million available under the Renewed Senior Credit Facility.

Finance obligation - buildings and land.

On April 14, 2021, the Company entered into a purchase and sale agreement (the "Purchase and Sale Agreement").

Pursuant to the terms of the Purchase and Sale Agreement, the Company sold its land and buildings in Lebanon, Tennessee (the "Property") for a purchase price of $ 10.4 million.

The transaction generated net cash proceeds of $ 9.1  million, following the release of the escrowed amount in June 2021 

discussed below.

The Company used a portion of the proceeds to repay its borrowings under the Senior Credit Facility and the remaining proceeds for strategic investments, and for general corporate needs.

Pursuant to the terms of the Purchase and Sale Agreement, the Company sold its land and buildings in Lebanon, Tennessee (the "Property") for $ 10.4 million.

The transaction generated net cash proceeds of $ 9.1  million.

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

The Company used the remaining proceeds to repay its borrowings under the Senior Credit Facility, for strategic investments, and for general corporate needs.

Concurrent with the sale of the Property, the Company entered into a 

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five years for each such option.

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

At closing, $ 0.4 million was placed in a short-term escrow account to cover certain post-closing contingencies that may arise.

The contingencies were resolved in May 2021 and the Company received the escrowed funds in June 2021.

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 $ 9.3  million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of April 30, 2022. 

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

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.

, Egypt and Saudi Arabia as discussed further below.

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

Dirhams (approximately $ 2.2  million at April 30, 2022 ) from a bank in the U.A.E.

Dirhams (approximately $ 2.2  million at July 31, 2022 ) from a bank in the U.A.E.

The facility has an interest rate of approximately 5.05 % and was originally set to expire in 

November 2020, however, the expiration was extended due to the COVID- 19 pandemic.

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 June 

The Company has a second revolving line for 17.5  million U.A.E.

Dirhams (approximately $ 4.8  million at April 30, 2022 ) from a bank in the U.A.E.

The facility was renewed in July 2022 and is now set to expire in July 2025.

The Company has a revolving line for 17.5  million U.A.E.

Dirhams (approximately $ 4.8  million at July 31, 2022 ) from a bank in the U.A.E.

The facility has an interest rate of approximately 5.78 % and is set to expire in 

January 2023.

The Company has a third credit agreement for project financing with a bank in the U.A.E.

The Company has a credit agreement for project financing with a bank in the U.A.E.

for 1.0  million U.A.E.

Dirhams (approximately $ 0.8  million at April 30, 2022 ).

Dirhams (approximately $ 0.3  million at July 31, 2022 ).

This credit arrangement is in the form of project financing at rates competitive in the U.A.E.

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June 2023 in connection with the completion of the project.

The Company has a credit agreement for project financing with a bank in the U.A.E.

for 2.0  million U.A.E.

Dirhams (approximately $ 0.5  million at July 31, 2022 ).

This credit arrangement is in the form of project financing at rates competitive in the U.A.E.

The line is secured by the contract for a project being financed by the Company's U.A.E.

The facility has an interest rate of approximately 6.53% and is expected to expire in 

May 2024 in connection with the completion of the project.

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 $5.

3  million at July 31, 2022 ).

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

The line is 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 restricted the Company's Egyptian subsidiary's ability to undertake any additional debt. The facility has an interest rate of approximately 8.00 % and expired in June 2022, however t he Company has started the renewal process for this credit arrangement.

In December 2021, the Company entered into a credit arrangement for project financing with a bank in Egypt for 28.2  million Egyptian Pounds.

As this project has progressed and the Company has made collections, the facility has decreased to a current amount of 22.7 million Egyptian Pounds (approximatel y $1.

2  mi llion at July 31, 2022).

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 8.00 % and is expected to expire in November 2022 in connection with the completion of the project.

In March 2022, the Company's Saudi Arabian subsidiary entered into a credit arrangement with a bank in Saudi Arabia for a revolving line of 20.0 million Saudi Riyal (approximately $ 5.3 million at July 31, 2022).

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

The line is secured by certain assets (such as accounts receivable) of the Company's Saudi Arabian subsidiary.

The facility has an interest rate of approximately 6.5 % and is set to expire in April 2023.

These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates.

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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 $ 5.4  million at April 30, 2022 ).

This credit arrangement is 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.

In December 2021, the Company entered into a credit arrangement for project financing with a bank in Egypt for 28.2  million Egyptian Pounds (approximately $ 1.5  million at April 30, 2022).

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 8.00 % and is expected to expire in June 2022 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 only a portion of the subsidiaries' debt, including foreign debt.

As of April 30, 2022, the amount of foreign subsidiary debt guaranteed by the Company was approximately $ 0.1  million. 

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

and Egypt as of April 30, 2022 . On April 30, 2022 , 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 April 30, 2022 , the Company's interest rates ranged from 4.50 % to 8.0 %, with a weighted average rate of 7.63 %, and the Company had facility limits totaling $ 14.9  million under these credit arrangements.

As of April 30, 2022 , 

As of July 31, 2022, the amount of foreign subsidiary debt guaranteed by the Company was approxim ately $ 0.6  million. 

The Company was in compliance with the covenants under the credit arrangements in the U.A.E., Egypt and Saudi Arabia as of July 31, 2022 . On July 31, 2022 , 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, based on the stated interest rate in the agreement for the Egypt credit arrangement, and based on the Saudi Inter Bank Offered Rate plus 3.5 % for the Saudi Arabia credit arrangement.

Based on these base rates, as of July 31, 2022 , the Company's interest rates ranged from 5.05 % to 8.0 %, with a weighted average rate of 7.21 %, and the Company had facility limits totaling $ 19.6  million under these credit arrangements.

As of July 31, 2022 , 

$ 2.6  million o f availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees.

Additionally, as of April 30, 2022 , the Company had borrow ed $ 6.1  million, and had an additional $ 6.5  million of borrowing remaining available under the foreign revolving credit arrangements.

The foreign revolving lines balances as of April 30, 2022 and January 31, 2022 , were included as current maturities of long-term debt in the Company's consolidated balance sheets. 

Additionally, as of July 31, 2022 , the Company had borrow ed $ 8.7  million  and had an additional $ 8.2  million of borrowing remaining available under the foreign revolving credit arrangements.

The foreign revolving lines balances as of July 31, 2022 and January 31, 2022 , were included as current maturities of long-term debt in the Company's consolidated balance sheets. 

On July 

28, 2016, the Company borrowed CAD 8.0 million (approximately $ 6.1 million at the prevailing exchange rate on the transaction date) from a bank in Canada under a mortgage note secured by the Company's manufacturing facility located in Alberta, Canada that matures on December 

The interest rate is variable, and was 5.05 % at April 30, 2022 . Principal payments began in January 2018.

28, 2016, the Company entered into a mortgage agreement secured by the Company's manufacturing facility located in Alberta, Canada that matures on December 

As of July 31, 2022, the remaining balance on the mortgage in Canada is approximately CAD 6.5 million (approximately $ 5.1 million at July 31, 2022). 

The interest rate is variable, and was 6.55 % at July 31, 2022 . Principal payments began in January 2018.

On June 

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

Dirhams (approximately $ 0.3 million at April 30, 2022), 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. 

In March 2022, the Company served a Notice of Termination to its lessor for a portion of the Company's lease of certain land and buildings in Fujairah in the U.A.E. The partial termination will take effect in September 2022.

Dirhams (approximately $ 0.3 million at July 31 , 2022 ), inclusive of rent and common charges, with escalation clauses in the agreement. Rent payments were deferred until August 2022 and have now commenced. The lease expires in August 2050. 

In March 2022, the Company served a Notice of Termination to its lessor for a portion of the Company's lease of certain land and buildings in Fujairah in the U.A.E. The termination will take effect in September 2022.

The Company served the Notice of Termination in connection with the Company's intended relocation to a different facility under a new lease in Abu Dhabi.

The Company is required to pay an additional amount equal to three months' rent after the partial termination to enable the lessor to prepare the assets for lease by another party.

As a result of the partial termination, the Company has recognized adjustments to the amounts recorded in the consolidated financial statements as of April 30, 2022.

The partial termination resulted in decreases of $ 0.3 million, $ 4.0 million and $ 3.6 million to operating lease liability short-term, operating lease liability long-term and operating lease right-of-use asset, respectively, in the consolidated balance sheets as of April 30, 2022.

The partial termination also resulted in a decrease in rent expense of $ 0.8 million in the consolidated statement of operations for the three months ended April 30, 2022.

The Company is required to pay an additional amount equal to three months' rent after the termination to enable the lessor to prepare the assets for lease by another party.

As a result of the termination, the Company has recognized adjustments to the amounts recorded in the consolidated financial statements as of July 31, 2022.

The termination resulted in decreases of $ 0.3 million, $ 4.0 million and $ 3.6 million to operating lease liability short-term, operating lease liability long-term and operating lease right-of-use asset, respectively, in the consolidated balance sheets as of April 30, 2022.

The termination also resulted in a decrease in rent expense of $ 0.8 million i n the consolidated statement of operations for the three months ended April 30, 2022.

The Company will continue to lease the remaining land and buildings under the Fujairah lease until 2032.

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The remaining lease matures in September 

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.

The Company has several significant operating lease agreements, with lease terms of one to thirty  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. 

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renewal options have not been included in the calculation of the lease liabilities and right-of-use ("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 April 30, 2022 , the Company had total operating lease liabilities of $ 8.6  million and operating ROU assets of $ 7.7  million, which are reflected in the consolidated balance sheets.

At April 30, 2022 , the Company also had total finance lease liabilities of $ 0.4 million included in current maturities of long-term debt and long-term debt less current maturities, and total finance ROU assets of $ 0.7 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheets.

At July 31, 2022 , the Company had total operating lease liabilities of $ 8.1  

million and operating ROU assets of $7.

2  million , which are reflected in the consolidated balance sheets.

At July 31, 2022 , the Company also had total finance lease liabilities of $ 0.3 million included in current maturities of long-term debt and long-term debt less current maturities, and total finance ROU assets of $ 0.6 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:

April 30, 2022

July 31, 2022

January 31, 2022

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Consolidated Statements of Operations Classification

Three Months Ended April 30, 2022

Three Months Ended April 30, 2021

Three Months Ended July 31, 2022

Three Months Ended July 31, 2021

Six Months Ended July 31, 2022

Six Months Ended July 31, 2021

Finance Lease Costs

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Cost of sales, SG&A expenses

( 107 )  

Short-term lease costs (1)

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( 27 )  

( 20 )  

( 40 )  

Total Lease costs

$ 1,575  

( 1 ) Includes variable lease costs, which are immaterial.

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

Three Months Ended April 30, 2021

Three Months Ended April 30, 2020

Six Months Ended July 31, 2022

Six Months Ended July 31, 2021

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

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Operating cash outflows from operating leases

Three Months Ended April 30, 2021

Three Months Ended April 30, 2020

Six Months Ended July 31, 2022

Six Months Ended July 31, 2021

ROU Assets obtained in exchange for new lease obligations:

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

April 30, 2022

July 31, 2022

Weighted-average remaining lease terms (in years):

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Operating leases

Maturities of lease liabilities as of April 30, 2022 , are as follows (in thousands):

Maturities of lease liabilities as of July 31, 2022 , are as follows (in thousands):

Operating Leases

Finance Leases

For the nine months ended January 31, 2023

For the six months ended January 31, 2023

$ 1,639  

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( 7,358 )  

Total lease liabilities at April 30, 2022

Total lease liabilities at July 31, 2022

$ 8,091  

Rent expense on operating leases, which is recorded on straight-line basis, was $ 0.1  million for the three months ended 

April 30, 2022  and 2021 , respectively. 

Rent expense on operating leases, which is recorded on straight-line basis, was $ 0.

7  million for the three months ended 

July 31, 2022  and 2021 . 

Note 11  - Restricted cash

Restricted cash held by foreign subsidiaries was $ 1.5  million and $ 1.2 million as of April 30, 2022 and 2021 , respectively, and is related to fixed deposits that also serve as security deposits and guarantees. 

Restricted cash held by foreign subsidiaries was $ 1.5  million and $ 1.2 million as of July 31, 2022 and 2021 , respectively, and is related to fixed deposits that also serve as security deposits and guarantees. 

(In thousands)

April 30, 2022  

April 30, 2021  

July 31, 2022  

July 31, 2021  

Cash and cash equivalents

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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. 

In April 2022, 

the FASB proposed to extend the effective date through December 31, 2024;

however, a final ruling has not been issued. 

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

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Note 14 - Treasury stock

There were no purchases of shares of the Company's common stock made by or on behalf of the Company during the three months ended April 30, 2022.

October 4, 2021, 

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12  months, depending upon current market conditions and other factors.

As of April 30, 2022, the Company has used $ 2.0 million of the $3.0 million authorized to repurchase its outstanding shares of common stock.

Note 15 - Subsequent Events

In June 2022, the Company received a partial payment to settle $ 0.9 million of the outstanding $ 3.6 million accounts receivable balance discussed in Note 3 - Accounts receivable, in the Notes to the Consolidated Financial Statements.

As of July 31, 2022, the Company has used $ 2.0 million of the $3.0 million authorized to repurchase its outstanding shares of common stock.

The following table sets forth information with respect to repurchases by the Company of its shares of common stock during the three months ended July 31, 2022:

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

May 1, 2022 - May 31, 2022

1,008,444  

June 1, 2022 - June 30, 2022

1,008,444  

July 1, 2022 - July 31, 2022

964,496  

July 26, 2022, the Company retired all treasury stock previously repurchased under this stock repurchase program.

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