What changed in this filing

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Item 1. Financial Statements

2023-09-14 compared with 2023-06-14 · 234 added, 175 removed, 510 unchanged (45% of the section changed)

1 unchanged sentence

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Three Months Ended April 30,

$ 29,657  

$ 31,222  

Three Months Ended July 31,

Six Months Ended July 31,

Cost of sales

22,883  

24,173  

Operating expenses

3 unchanged sentences

Income from operations

Interest expense, net

Loss before income taxes

( 365 )  

Interest expense

Other income (expense)

Income before income taxes

Income tax expense

$ ( 1,123 )  

Net income attributable to non-controlling interests

Net income (loss) attributable to common stock

Weighted average common shares outstanding

Loss per share

$ ( 0.14 )  

Earnings (loss) per share attributable to common stock

See accompanying notes to consolidated financial statements.

Per share calculations could be impacted by rounding.

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Three Months Ended April 30,

Other comprehensive loss

 (Unaudited)

Three Months Ended July 31,

Six Months Ended July 31,

Other comprehensive income (loss)

Foreign currency translation adjustments, net of tax

Comprehensive loss

Comprehensive income (loss)

Comprehensive income attributable to non-controlling interests

Total comprehensive income (loss) attributable to common stock

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(In thousands, except per share data)

April 30, 2023

July 31, 2023

January 31, 2023

5 unchanged sentences

Restricted cash

Trade accounts receivable, less allowance for credit losses of $ 676 at April 30, 2023 and $ 612 at January 31, 2023

Trade accounts receivable, less allowance for credit losses of $ 620 at July 31, 2023 and $ 612 at January 31, 2023

51,844  

42,010  

Inventories, net

13,877  

48 unchanged sentences

21,392  

Non-controlling interests

Stockholders' equity

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

8,004 issued and outstanding at April 30, 2023 and January 31, 2023

8,024 issued and outstanding at July 31, 2023 and 8,004 at January 31, 2023

Additional paid-in capital

1 unchanged sentence

62,562  

Treasury stock, 3 shares at April 30, 2023 and January 31, 2023

Treasury stock, 37 shares at July 31, 2023 and 3 shares at January 31, 2023

( 338 )  

18 unchanged sentences

Total stockholders' equity at January 31, 2023

$ 62,562  

$ 1,617  

$ (26)  

$ (6,449)  

$ 57,784  

( 1,123 )  

Stock-based compensation expense

1 unchanged sentence

Total stockholders' equity at April 30, 2023

$ 62,791  

$ (26)  

$ (6,886)  

$ 56,453  

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

Repurchase of common stock

Stock-based compensation expense

Foreign currency translation adjustment

Total stockholders' equity at July 31, 2023

Additional Paid-in Capital

Accumulated Deficit

Treasury Stock

Accumulated Other Comprehensive Loss

5 unchanged sentences

Total stockholders' equity at April 30, 2022

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

Repurchase of common stock

Retirement of treasury stock

Stock-based compensation expense

Foreign currency translation adjustment

Total stockholders' equity at July 31, 2022

Balances at beginning of year

5 unchanged sentences

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Three Months Ended April 30,

(In thousands)

Six Months Ended July 31,

Operating activities

Adjustments to reconcile net loss to net cash provided by/(used in) operating activities

Adjustments to reconcile net income to net cash provided by (used in) operating activities

Depreciation and amortization

2 unchanged sentences

Provision on uncollectible accounts

Gain from disposal of fixed assets

Gain (loss) from disposal of fixed assets

Changes in operating assets and liabilities

Accounts receivable

Inventories, net

Costs and estimated earnings in excess of billings on uncompleted contracts

13 unchanged sentences

Financing activities

Proceeds from revolving lines

Payments of debt on revolving lines

Proceeds from revolving credit lines

Payments of debt on revolving credit lines

Payments of principal on finance obligation

Payments of other debt

Decrease in drafts payable

Payments on finance lease obligations, net

(Decrease) increase in drafts payable

Payments on finance lease obligations

Repurchase of common stock

Stock options exercised and taxes paid related to restricted shares vested

5 unchanged sentences

Supplemental cash flow information

Interest paid

Income taxes paid

Cash interest paid

Cash income taxes paid

Fixed assets acquired under finance leases - non-cash

Fixed assets acquired from non affiliates - non-cash

See accompanying notes to consolidated financial statements.

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

April 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2023

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

11 unchanged sentences

2022 are for the fiscal year ending January 31, 

2024  and the fiscal year ended 

2024  and for the fiscal year ended 

January 31, 2023 , respectively.

2 unchanged sentences

for discussion of the Company's significant accounting policies.

During the three months ended April 30, 2023 , the following accounting policy was adopted: 

During the six months ended July 31, 2023 , the following accounting policy was adopted: 

Current Expected Credit Loss

4 unchanged sentences

This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. 

The Company adopted this guidance effective February 1, 2023, which was not material to the consolidated financial statements for the three months ended April 30, 2023 .

The Company adopted this guidance effective February 1, 2023, which was not material to the consolidated financial statements for the six months ended July 31, 2023 .

Subsequent Events

The Company has evaluated subsequent events through June 14, 2023, the date the financial statements were issued.

The Company has evaluated subsequent events through September 14 , 2023, 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 consolidated financial statements.

5 unchanged sentences

Note 3 - Accounts receivable

The majority of the Company's accounts receivable are due from geographically dispersed contractors and manufacturing companies.

The majority of the Company's accounts receivable consist of geographically dispersed contractors and manufacturing companies.

Credit is extended based on an evaluation of a customer's financial condition.

In the United States, collateral is not generally required.

In the United Arab Emirates ("U.A.E."), Saudi Arabia, Egypt and India, letters of credit are usually obtained for significant orders.

In the United Arab Emirates ("U.A.E."), Saudi Arabia, Egypt and India, letters of credit are obtained for significant orders.

Accounts receivable are due within various time periods specified in the terms applicable to the specific contract and are stated at amounts due from customers net of any allowance for claims and credit losses. The allowance for credit losses is based on specifically identified amounts in customers' accounts, where future collectability is deemed uncertain.

Management exercises its judgment in adjusting the provision as a consequence of known items, such as current economic factors and credit trends.

Past due trade accounts receivable balances are written off when an amount is deemed uncollectible.

Past due trade accounts receivable balances are written off when an amount is deemed uncollectible and all attempts to collect have been exhausted.

The write-off is recorded against the allowance for credit losses. 

1 unchanged sentence

The system has not yet been commissioned by the customer.

Nevertheless, the Company has settled approximately $ 39.1 million as of April 30, 2023 , with a remaining balance due in the amount of $ 2.7 million, all of which pertains to retention clauses within the agreements with the Company's customer, and which become payable by the customer when this project is fully tested and commissioned.

Nevertheless, the Company has settled approximately $ 39.1 million as of July 31, 2023 , with a remaining balance due in the amount of $ 2.8 million, all of which pertains to retention clauses within the agreements with the Company's customer, and which become payable by the customer when this project is fully tested and commissioned.

Of this amount, $ 1.6 million is classified in other  long-term assets on the Company's consolidated balance sheets.

The Company has been engaged in ongoing active efforts to collect this outstanding amount.

The Company continues to engage with the customer to ensure full payment of open balances, and during June 

2022  received a partial payment to settle $ 0.9 million of the customer's outstanding balances.

Regardless of the contractual due date for payment, the Company has been actively engaged in ongoing efforts to collect this outstanding balance.

The Company continues to engage with the customer to ensure full payment of the open balances, and during 

2022, a partial payment was received to settle $ 0.9 million of the customer's outstanding balances.

Further, the Company has been engaged by the customer to perform additional work in 2022 and 2023  under customary trade terms that supports the continued cooperation between the Company and the customer.

As a result, the Company did not reserve any allowance against the remaining outstanding balances as of April 30, 2023 .

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, 2023 , 

As a result, the Company did not reserve any allowance against the remaining outstanding balances as of July 31, 2023 .

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 uncollected amounts.

For the three months ended July 31, 2023 , 

one  customer accounted for 

2 unchanged sentences

10%  of the Company’s consolidated net sales. 

April 30, 2023 and January 31, 2023 , 

July 31, 2023 and January 31, 2023 , 

one  customer accounted for 14.2 %  and 

1 unchanged sentence

Note 4 - Revenue recognition 

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

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

Revenue from contracts with customers

1 unchanged sentence

The Company’s standard revenue transactions are classified into two main categories:

Systems and Coating - which include all bundled products in which PPIH engineers and manufactures pre-insulated specialty piping systems, provides insulation and anti-corrosion coatings to pipes used in land-lines and subsea flowlines, and to subsea oil production equipment. 

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.

Systems and Coating - Includes all bundled products in which PPIH engineers and manufactures pre-insulated specialty piping systems, provides insulation and anti-corrosion coatings to pipes used in land-lines and subsea flowlines, and to subsea oil production equipment. 

Products - Includes cables, leak detection products, heat trace products, material/goods not bundled with piping or flowline systems, and field services not bundled into a project contract.

In accordance with ASC 606 - 10 - 25 - 27 through 29, the Company recognizes specialty piping and coating systems revenue over time as the manufacturing process progresses because one of the following conditions exist:

3 unchanged sentences

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

three months ended April 30, 2023  and 2022  are as follows (in thousands):

Three Months Ended April 30,

three and six months ended July 31, 2023 and 2022  are as follows (in thousands):

Three Months Ended July 31,

Six Months Ended July 31,

$ 2,146  

$ 3,869  

$ 4,988  

$ 6,780  

Specialty Piping Systems and Coating

2 unchanged sentences

12,707  

23,139  

23,325  

Revenue recognized under output method

3 unchanged sentences

38,120  

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

operating entities to measure revenue by the costs incurred to date relative to the estimated costs to satisfy the contract over time.

$ 35,141  

$ 37,003  

$ 64,798  

$ 68,225  

The input method as noted in ASC 606 - 10 - 55 - 20 is used by certain operating entities to measure revenue by the costs incurred to date relative to the estimated costs to satisfy the contract over time.

Generally, these contracts are considered a single performance obligation satisfied over time and due to the custom nature of the goods and services, the "over time" method is the most faithful depiction of the Company’s performance as it measures the value of the goods and services transferred to the customer.

13 unchanged sentences

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

The following table shows the reconciliation of costs in excess of billings and billings in excess of costs: 

(In thousands)

April 30, 2023

July 31, 2023

January 31, 2023

3 unchanged sentences

Estimated earnings

12,366  

Earned revenue

4 unchanged sentences

26,329  

(Billings in excess of cost)/costs in excess of billings, net

(Billings in excess of costs) costs in excess of billings, net

$ ( 1,112 )  

8 unchanged sentences

( 2,968 )  

(Billings in excess of cost)/costs in excess of billings, net

(Billings in excess of costs) costs in excess of billings, net

$ ( 1,112 )  

$ 1,383  

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

April 30, 2023 will be billed and collected within one year and that substantially all billings made for uncompleted contracts as of April 30, 2023 will be billed and collected within one year. 

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

July 31, 2023  will be billed and collected within one year, and all billings on uncompleted contracts as of 

July 31, 2023  will 

be satisfied and collected within one year. 

Unbilled accounts receivable

The Company has recorded $ 11.9  million and $ 11.6  million of unbilled accounts receivable on the consolidated balance sheet s as of April 30, 2023 and January 31, 2023 , res pectively, from revenues generated by its subsidiaries in the Middle East, North Africa and India.

The Company has recorded $ 11.6  million of unbilled accounts receivable on the consolidated balance sheet s as of July 31, 2023 and January 31, 2023 ,  from revenues generated by certain of its subsidiaries.

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 billing will be made once the customer takes possession of or arranges shipping for the products.

The deliverables under these contracts have been accepted by the customer and billing will be made once the customer takes possession of or arranges shipping for the products over time.

The Company anticipates that substantially all of the amounts included in unbilled accounts receivable as of 

April 30, 2023  will be billed within one year.

July 31, 2023  will be billed within one year.

Practical expedients

12 unchanged sentences

The Company's worldwide effective tax rates ("ETR") for the 

three months ended April 30, 2023 and 2022  were ( 207.7 %) and ( 455.9 %), respectively.

The change in the ETR is due to the inability to recognize tax benefits on losses in the United States due to a full valuation allowance and changes in the mix of income and loss in various jurisdictions.

three months ended July 31, 2023 and 2022  were 

45.2 %  and 32.2 % , respectively.

The change in the ETR is due primarily to the inability to recognize tax benefits on losses in the United States due to a full valuation allowance and 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.

1 unchanged sentence

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, and withholding taxes in these jurisdictions are considered. The Company's liability was $ 0.6 million as of April 30, 2023 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, 2023 , the Company performed a qualitative analysis assessment to determine if it was more likely than not that the fair values of the Company's long-lived assets exceeded their carrying values.

The Company assessed three asset groups as part of this analysis:

United States, Canada and Middle East.

The qualitative assessment indicated that it was more likely than not that the fair values of the Company's long-lived assets exceeded their carrying values for 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, 2023 .

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, 2023 , the Company assessed whether there were any triggering events that may have occurred which could indicate that more likely than not that the fair values of the Company's long-lived assets exceeded their carrying values, and an impairment may exist.

Based on this assessment, the Company determined that it was more likely than not that the fair values of the Company's long-lived assets exceeded their carrying values, and no impairment indicator exists with respect to the Company's long-lived assets for the three and six months ended July 31, 2023 and 2022 .

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, 2023 and January 31, 2023 was attributable to the purchase of the remaining 50 % interest in Perma-Pipe Canada, Ltd., which occurred in 2016.

All identifiable goodwill as of July 31, 2023 and January 31, 2023 was attributable to the purchase of the remaining 50 % interest in Perma-Pipe Canada, Ltd., which occurred in 2016.

(In thousands)

January 31, 2023  

Foreign exchange change effect  

April 30, 2023  

$ 2,227  

January 31, 2023

Foreign exchange change effect

July 31, 2023

$ 2,227  

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 April 30, 2023 , 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, 2023 .

At July 31, 2023 , the Company assessed potential triggering events that may have occurred which could indicate that more likely than not that the fair value of recognized goodwill exceeded its carrying value, and an impairment may exist.

In performing this assessment, the Company determined that the fair value exceeded its carrying value, and no potential impairment exists with respect to the Company's goodwill for the 

three or six months ended July 31, 2023 .

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

1 unchanged sentence

The Company has prior incentive plans under which previously granted awards remain outstanding but under which no new awards may be granted.

At April 30, 2023 the Company had reserved a total of 307,446  shares for grants and issuances under these incentive stock plans, which includes a reserve for issuances pursuant to unvested or unexercised prior awards.

At July 31, 2023 the Company had reserved a total of 307,446  shares for grants and issuances under these incentive stock plans, which includes a reserve for issuances pursuant to unvested or unexercised prior awards.

The Company's prior incentive plans 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.

13 unchanged sentences

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)

1 unchanged sentence

Stock Options

The Company did not grant any stock options during the three months ended April 30, 2023 .

The Company did not grant any stock options during the three or six months ended July 31, 2023 .

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

6 unchanged sentences

$ 10.85  

Outstanding at April 30, 2023

Options exercisable at April 30, 2023

Expired or forfeited

( 17 )  

There was no vesting, expiration or forfeiture of previously unvested stock options during the three months ended April 30, 2023 .

As of April 30, 2023 , there were no remaining unvested stock options outstanding, and therefore no unrecognized compensation expense related to unvested stock options.

Outstanding and exercisable at July 31, 2023

$ 11.15  

There was no vesting, expiration or forfeiture of previously unvested stock options during the six months ended July 31, 2023 .

As of July 31, 2023 , 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, 2023 :

six months ended July 31, 2023 :

(Shares in thousands)

5 unchanged sentences

$ 2,286  

Vested and issued

( 84 )  

Forfeited or retired for taxes

Outstanding at April 30, 2023

( 47 )  

Outstanding at July 31, 2023

$ 9.35  

As of April 30, 2023 , there was $ 0.9  million of unrecognized compensation expense related to unvested restricted stock granted under the plans.

$ 2,133  

As of July 31, 2023 , there was $ 1.5  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 2.1  years .

Note 8  - Loss per share

Three Months Ended April 30,

Note 8  - Earnings (loss) per share

Three Months Ended July 31,

Six Months Ended July 31,

(In thousands, except per share data)

Basic weighted average common shares outstanding

Basic weighted average common shares outstanding at July 31, 2023

Dilutive effect of equity compensation plans

2 unchanged sentences

Stock options and restricted stock with exercise prices or grant date prices below the average market prices

Net income (loss) attributable to common stock

$ 1,022  

Loss per share

$ 1,870  

$ ( 100 )  

Earnings (loss) per share attributable to common stock

$ 0.13  

$ 0.23  

$ ( 0.01 )  

$ 0.12  

$ 0.13  

$ 0.23  

$ ( 0.01 )  

$ 0.12  

Note 9  - Debt

Debt totaled $ 27.0 million and $ 24.3 million at April 30, 2023  and January 31, 2023 , respectively.

Debt totaled $ 29.2 million and $ 24.3 million at July 31, 2023  and January 31, 2023 , respectively.

Revolving lines - North America . 

5 unchanged sentences

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”).

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

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

1 unchanged sentence

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

Borrowings under the Renewed Senior Credit Facility bear interest at a rate equal to an alternate base rate or the Secured Overnight Financing Rate ("SOFR"), plus, in each case, an applicable margin.

Borrowings under the Renewed Senior Credit Facility bear interest at a rate equal to an alternate base rate or the Secured Overnight Financing Rate (as defined in the Renewed Senior Credit Facility, "SOFR"), 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 SOFR borrowings is the SOFR 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, as well as an additional SOFR adjustment ranging from 0.10 % to 0.25 %, based on the term of the interest period. Additionally, the Borrowers pay a 0.25 % per annum facility fee on the unused portion of the Renewed Senior Credit Facility. 

Interest on SOFR borrowings is SOFR plus an applicable margin ranging from 2.00 % to 2.50 % , based on the FCCR in the most recently reported pe riod, as well as an additional SOFR adjustment ranging from 0.10 % to 0.25 %, based on the term of the interest 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’

2 unchanged sentences

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.

In addition, the North American Loan Parties may not make capital expenditures in excess of $ 5.0 million annually, plus a limited carryover of any unused amounts.

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 a free cash flow financial covenant (the "FCF 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 April 30, 2023 , the calculated ratio was greater than 1.10 to 1.00.

In order to cure any future breach of the FCF 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 North American Loan Parties' EBITDA (as defined in the Renewed Senior Credit Facility), would result in pro forma compliance with the FCF covenant.

The Company was in compliance with these covenants as of 

April 30, 2023 .

The Renewed Senior Credit Facility also contains financial covenants requiring the North American Loan Parties to achieve a ratio of its EBITDA (as defined in the Renewed Senior Credit Facility) 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 of 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, 2023 , the calculated ratio was less than 1.10  to 1.00.

In order to cure any future breach of these covenants 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 North American Loan Parties' EBITDA, would result in compliance on a pro forma basis.

The Company was in compliance with respect to these covenants as of 

July 31, 2023 .

The Renewed Senior Credit Facility contains customary events of default.

2 unchanged sentences

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, 2023 , the Company had borrowed an aggregate of $ 4.1  million at a rate of 9.0 %  and had $ 7.5  million available under the Renewed Senior Credit Facility.

As of July 31, 2023 , the Company had borrowed an aggregate of $ 7.2  million at a rate of 10.0 %  and had $ 5.3  million available under the Renewed Senior Credit Facility.

As of January 31, 2023 , the Company had borrowed an aggregate of $ 4.4  million and had $ 9.9  million available under the Renewed Senior Credit Facility.

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

fifteen -year lease agreement (the “Lease Agreement”), whereby the Company will lease back the Property at an annual rental rate of approximately $ 0.8 million, subject to annual rent increases of 

fifteen -year lease agreement (the “Lease Agreement”), whereby the Company leases back the Property at an annual rental rate of approximately $ 0.8 million, subject to annual rent increases of 

Under the Lease Agreement, the Company has 

3 unchanged sentences

842, Leases , this transaction was recorded as a failed sale and leaseback as the present value of lease payments exceeded substantially the fair value of the underlying assets.

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 $ 9.2  million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of April 30, 2023 . 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 $ 9.1  million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of July 31, 2023 . The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.

Revolving lines - foreign .

3 unchanged sentences

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

Dirhams (approximately $ 2.2  million at April 30, 2023 ) from a bank in the U.A.E.

As of April 30, 2023  the facility has an interest rate of approximately 

Dirhams (approximately $ 2.2  million at July 31, 2023 ) from a bank in the U.A.E.

As of July 31, 2023  the facility has an interest rate of approximately 

8.4 % and is set to expire in May 2024.

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

Dirhams (approximately $ 4.8  million at April 30, 2023 ) from a bank in the U.A.E.

As of April 30, 2023  the facility has an interest rate of approximately 

Dirhams (approximately $ 4.8  million at July 31, 2023 ) from a bank in the U.A.E.

As of July 31, 2023  the facility has an interest rate of approximately 

8.5 % and is set to expire in May 2024.

1 unchanged sentence

for 2.0  million U.A.E.

Dirhams (approximately $ 0.5  million at April 30, 2023 ).

As of April 30, 2023  the facility has an interest rate of approximately 

8.7 % and is expected to expire in July 2023.

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 $ 3.2  million at April 30, 2023 ).

Dirhams (approximately $ 0.5  million at July 31, 2023 ).

As of July 31, 2023  the facility has an interest rate of approximately 

8.5 % and is expected to expire in October 

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. As of April 30, 2023  the facility has an interest rate of approximately 8.0 %  and expired in June 2022 , however the Company has started the renewal process for this credit arrangement. The Company is in regular communication with the bank throughout the renewal process and the facility has continued without interruption or penalty.

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. As of July 31, 2023  the facility has an interest rate of approximately 8.0 %  and expired in June 2022 , however the Company has started the renewal process for this credit arrangement. The Company is in regular communication with the bank throughout the renewal process and the facility has continued without interruption or penalty.

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 8.9  million Egyptian Pounds (approximatel y $ 0.3  mi llion at April 30, 2023 ).

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

6 unchanged sentences

100.0 million Egyptian Pounds (approximately $ 3.2  

million at April 30, 2023 ).

million at July 31, 2023 ).

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, to be tested annually at fiscal year-end. As of April 30, 2023  the facility has an interest rate of approximately 

Among other covenants, the credit arrangement established a maximum leverage ratio allowable, to be tested annually at fiscal year-end. As of July 31, 2023  the facility has an interest rate of approximately 

20.8 %  and is set to expire in August 2023 .

1 unchanged sentence

37.0  million Saudi Riyal (approximately $ 9.9  million at 

April 30, 2023 ).

July 31, 2023 ).

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 was set to expire in April 2023.

Upon renewal of the credit arrangement in May 2023, the line was increased to 37.0 million Saudi Riyal (approximately $ 9.9  million at April 30, 2023 ).

April 30, 2023 ), the facility has an interest rate of approximately 

The facility was renewed in May 2023, and the line was increased to 37.0 million Saudi Riyal (approximately $ 9.9  million at July 31, 2023 ).

July 31, 2023 , the facility has an interest rate of approximately 

9.3 % and is set to expire in May 2024.

4 unchanged sentences

The Company guarantees only a portion of the subsidiaries' debt, including foreign debt.

As of April 30, 2023 , the amount of foreign subsidiary debt guaranteed by the Company was approxim ately $ 1.2  million. 

The Company was in compliance with the covenants under the credit arrangements in the U.A.E., Egypt and Saudi Arabia as of April 30, 2023 , with the exception of those arrangements that have expired and have not yet been renewed. Although certain of the arrangements have expired and the borrowings could be required to be repaid immediately by the banks, the Company is in regular communication with the respective banks throughout the renewal process and all of the arrangements have continued without interruption or penalty.

On April 30, 2023 , interest rates were based on (i) the Emirates Inter Bank Offered Rate plus 3.0 % to 3.5 % per annum for the U.A.E.

As of July 31, 2023 , the amount of foreign subsidiary debt guaranteed by the Company was approxim ately $ 0.7  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, 2023 , with the exception of those arrangements that have expired and have not yet been renewed. Although certain of the arrangements have expired and the borrowings could be required to be repaid immediately by the banks, the Company is in regular communication with the respective banks throughout the renewal process and all of the arrangements have continued without interruption or penalty.

On July 31, 2023 , interest rates were based on (i) 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;

(ii) either the Central Bank of Egypt corporate loan rate plus 3.5 % per annum or the stated interest rate in the agreements for the Egypt credit arrangements; and (iii) the Saudi Inter Bank Offered Rate plus 3.5 % for the Saudi Arabia credit arrangement.

Based on these base rates, as of April 30, 2023 , the Company's interest rates ranged from 

(ii) either the Central Bank of Egypt corporate loan rate plus 1.5 % to 3.5 % per annum or the stated interest rate in the agreements for the Egypt credit arrangements; and (iii) the Saudi Inter Bank Offered Rate plus 3.5 % for the Saudi Arabia credit arrangement.

Based on these base rates, as of July 31, 2023 , the Company's interest rates ranged from 

8.0 % to 20.8 %, with a weighted average rate of 12.3 %, and the Company had facility limits totaling $ 24.4  million under these credit arrangements.

As of April 30, 2023 , 

As of July 31, 2023 , 

$ 2.9  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, 2023 , the Company had borrow ed $ 8.9  million  and had an additional $ 10.0  million of borrowing remaining available under the foreign revolving credit arrangements.

The foreign revolving lines balances as of April 30, 2023 and January 31, 2023 , were included as current maturities of long-term debt in the Company's consolidated balance sheets. 

Additionally, as of July 31, 2023 , the Company had borrow ed $ 8.1  million  and had an additional $ 13.7  million of borrowing remaining available under the foreign revolving credit arrangements.

The foreign revolving lines balances as of July 31, 2023 and January 31, 2023 , were included as current maturities of long-term debt in the Company's consolidated balance sheets. 

On July 

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 April 30, 2023 , the remaining balance on the mortgage in Canada is approximately CAD 6.3  million (approximately $ 4.6  million at April 30, 2023 ). The interest rate is variable, and was 8.6 %  

at April 30, 2023 . Principal payments began in January 2018.

As of July 31, 2023 , the remaining balance on the mortgage in Canada is approximately CAD 6.2  million (approximately $ 4.7  million at July 31, 2023 ). The interest rate is variable, and was 9.1 %  

at July 31, 2023 . Principal payments began in January 2018.

Note 10  - Leases

Operating Leases.

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 were initially approximately 1.2  million U.A.E.

Dirhams (approximately $ 0.8  million at April 30, 2023 ), 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. 

The initial annual payments were approximately 1.2 million U.A.E.

Dirhams (approximately $ 0.8  million at 

July 31, 2023 ), inclusive of rent, escalation clauses, and other common charges contained in the agreement.

Rent payments previously deferred until August 2022 

have commenced, and the lease expires in August 2050. 

In March and December 2022, the Company served Notices of Termination to its lessor for the Company's lease of land and buildings in Fujairah in the U.A.E. The Company served the Notices of Termination in connection with the Company's intended relocation to a different facility in Abu Dhabi.

The Company vacated portions of the leased space in December 2022 and is expected to vacate the remaining space in 2023.

The first Notice of Termination required that the Company pay an additional amount equal to three months' rent after that 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 April 30, 2023 .

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, 2023 .

The Company vacated portions of the leased space in December 2022 and expects to vacate the remaining space in 2023.

The termination also resulted in a decrease in rent expense of $ 1.1  million in the consolidated statement of operations for the year ended January 31, 2023. 

Finance Leases.

In 2019,  the Company obtained two finance leases for a total of CAD 1.1 million (approximately $ 0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment.

The interest rates for these finance leases were 8.0 % per annum with monthly principal and interest payments of less than $ 0.1 million.

These leases mature in August 2023.  

Finance 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.

3 unchanged sentences

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

At April 30, 2023 , the Company had total operating lease liabilities of $ 5  

At July 31, 2023 , the Company had total operating lease liabilities of $ 8.1  

million and operating ROU assets of $ 7.4  million , which are reflected in the consolidated balance sheets.

At April 30, 2023 , the Company also had total finance lease liabilities of $ 0.1  million included in current maturities of long-term debt, and total finance ROU assets of $ 0.4  million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheets.

At July 31, 2023 , the Company also had total finance lease liabilities of $ 0.2  million included in current maturities of long-term debt, and total finance ROU assets of $ 0.5  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, 2023

July 31, 2023

January 31, 2023

14 unchanged sentences

Operating lease liability short-term

$ 1,148  

Operating lease liability long-term

3 unchanged sentences

Total lease costs consist of the following (in thousands): 

Three Months Ended April 30,

Three Months Ended July 31,

Six Months Ended July 31,

Consolidated Statements of Operations Classification

11 unchanged sentences

( 20 )  

( 27 )  

( 40 )  

Total Lease costs

$ 1,179  

( 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,

Six Months Ended July 31,

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

2 unchanged sentences

Operating cash outflows from operating leases

ROU Assets obtained in exchange for new lease obligations:

ROU liabilities obtained in exchange for new lease obligations:

Operating leases liabilities

Three Months Ended April 30,

ROU Assets obtained in exchange for new lease obligations:

$ 3,484  

Six Months Ended July 31,

ROU liabilities obtained in exchange for new lease obligations:

Finance leases liabilities

Operating leases liabilities

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

April 30, 2023

July 31, 2023

Weighted-average remaining lease terms (in years):

4 unchanged sentences

Operating leases

Maturities of lease liabilities as of April 30, 2023 , are as follows (in thousands):

Maturities of lease liabilities as of July 31, 2023 , are as follows (in thousands):

Operating Leases

Finance Leases

For the nine months ending January 31, 2024

For the six months ending January 31, 2024

$ 1,054  

8 unchanged sentences

( 6,344 )  

Total lease liabilities at April 30, 2023

Total lease liabilities at July 31, 2023

$ 8,100  

Rent expense on operating leases, which is recorded on straight-line basis, was $ 0.7  million and $ 0.9 million for the three months ended 

April 30, 2023  and 2022 , respectively.

July 31, 2023  and 2022 , respectively.

Note 11  - Restricted cash

1 unchanged sentence

(In thousands)

April 30, 2023

July 31, 2023

January 31, 2023

8 unchanged sentences

The carrying values of cash and cash equivalents, accounts receivable and accounts payable are reasonable estimates of their fair value due to their short-term nature.

The carrying amount of the Company's short-term debt, revolving line of credit and long-term debt approximate fair value because the majority of the amounts outstanding accrue interest at variable market rates.

The carrying amount of the Company's short-term debt, revolving lines of credit and long-term debt approximate fair value because the majority of the amounts outstanding accrue interest at variable market rates.

Note 13  - Recent accounting pronouncements

1 unchanged sentence

Note 14  - Treasury stock

On December 7, 2022 the Board of Directors authorized the use of $ 1.0 million remaining under the share repurchase program previously approved on October 4, 2021 that expired on October 3, 2022.

Share repurchases may be executed through open market or in privately negotiated transactions over the course of the 12 months following the Board of Directors authorization. The repurchase program approved on October 4, 2021 authorized the Company to use up to $ 3.0  million for the purchase of its outstanding shares of common stock.

The repurchase program approved on October 4, 2021 authorized the Company to use up to $ 3.0  million for the purchase of its outstanding shares of common stock.

Stock repurchases were permitted to be executed through open market or privately negotiated transactions, depending upon current market conditions and other factors.

On December 7, 2022 the Board of Directors authorized the use of $ 1.0 million remaining under the share repurchase program previously approved on October 4, 2021 that expired on October 3, 2022.

Share repurchases may be executed through open market or in privately negotiated transactions over the course of the 12 months following the Board of Directors authorization.

During the three months ended 

April 30, 2023 , the Company has not made any repurchases of its outstanding shares of common stock.

July 31, 2023  the Company used $ 0.3 million of the $ 1.0 million authorized to repurchase its outstanding shares of common stock.

The following table sets forth the repurchase activity with respect to the Company's shares of common stock during the three months ended July 31, 2023 ( in thousands, except per share information):

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, 2023 - May 31, 2023

June 1, 2023 - June 30, 2023

July 1, 2023 - July 31, 2023

July 26, 2022, the Company retired 239,168 shares of treasury stock previously repurchased under the 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 a decrease to retained earnings in accordance with ASC 505 - 30, Equity - Treasury Stock.

Note 15  - Noncontrolling interests

The Company has a controlling financial interest in certain investments which are not considered wholly owned subsidiaries.

Accordingly, there remains a minority portion of the equity interest that is owned by a third party.

Pursuant to the applicable guidance contained in ASC 810,  

Consolidations , the balance sheet and operating activities of these investments are included in the Company's consolidated financial statements.

The Company adjusts the net income in the consolidated statements of operations to exclude the proportionate share of results that is attributable to non-controlling interests. Additionally, the Company presents the proportionate share that is attributable to redeemable non-controlling interests as temporary equity within our consolidated balance sheet.

This mezzanine presentation is the result of the non-controlling interests being subject to a put option that is not solely within the Company's control and in connection with the equity shares of the business arrangement that is redeemable any time after five years following the date of incorporation.

Further, the put option did not meet the definition of a derivative due to not containing a net settlement provision and the shares not being readily convertible to cash, thereby being considered embedded with respect to the non-controlling interests. 

On June 1, 2023, the Company closed on its formation of the joint venture ("The JV Agreement") with Gulf Insulation Group ("GIG") a leading provider of pre-insulated piping systems, leak detection systems, and pipe fabrication, in which the Company acquired a 60 % controlling interest in exchange for consideration of $ 2.7  million in the form of land and equipment.

The Company expects this collaborative business arrangement to result in expanding its market presence in Saudi Arabia, Kuwait, and Bahrain.

Pursuant to the applicable guidance in ASC 805, Business Combinations and Noncontrolling Interests , the Company determined that the transaction did not meet the necessary conditions to be considered a business combination.

As such, the assets transferred by the Company were recorded at historical cost, and no gain was recognized as a result of this exchange.

Further, the other party to this business arrangement acquired a 40 % non-controlling interest by contributing assets of approximately $ 2.7  million, mainly consisting of land and equipment.

The non-controlling interests attributable to the other party was recorded at its estimated fair value as of the investment date, and no gain was recognized as a result of this exchange.

The Company had non-controlling interests of $ 1.7  million and $ 0.0 million recorded within temporary equity as of July 31, 2023 and January 31, 2023 , respectively. The proportionate share of net income was accounted for as a reduction in deriving net income attributable to common stock in the Company's consolidated statements of operations.

Net income attributable to GIG was $ 0.1  million and $ 0.0  million for the three months ended July 31, 2023 and 2022 , respectively. 

In connection with the joint venture, at the formation of the JV Agreement, the Company agreed to a promissory note in the principal amount $ 2.7 million payable to the related party contained in this agreement.

The principal amount is presented within the other long-term liabilities caption in the Company's consolidated balance sheet. 

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