Perma-Pipe International Holdings Inc

Previous wording

Net sales were $ 34.3 million and $ 29.7 million in the three months ended April 30, 2024 and 2023, respectively. The increase of $4.6 million, or 15% , was a result of increased sales volumes in the Middle East and India.

Current wording

Net sales were $ 37.5 million and $ 35.1 million in the three months ended July 31, 2024 and 2023, respectively. The increase of $2.4 million, or 7%, was a result of increased sales volumes.

Previous wording

Gross profit was $10.5 million, or 31% of net sales, and $6.8 million, or 23% of net sales, in the three months ended April 30, 2024 and 2023, respectively. The increase of $3.7 million was primarily driven by increased sales volumes in the Middle East and India.

Current wording

Gross profit was $13.5 million, or 36% of net sales, and $9.5 million, or 27% of net sales, in the three months ended July 31, 2024 and 2023, respectively. The increase of $4.0 million, was primarily driven by increased sales volumes and better margins due to product mix.

Previous wording

General and administrative expenses were $6.1 million and $5.5 million in the three months ended April 30, 2024 and 2023, respectively. The increase of $0.6 million, or 11%, was due to higher professional service fees in the quarter.

Current wording

General and administrative expenses were $6.0 million and $5.3 million in the three months ended July 31, 2024 and 2023, respectively. The increase of $0.7 million, was due to higher payroll expenses and professional service fees in the quarter.

Previous wording

Selling expenses remained consistent and were $ 1.2 million in the three months ended April 30, 2024 and 2023, respectively.

Current wording

Selling expenses remained consistent and were $ 1.4 million and $ 1.5 million in the three months ended July 31, 2024 and 2023, respectively.

Previous wording

Net interest expense remained consistent and was $0.5 million in the three months ended April 30, 2024 and 2023, respectively.

Current wording

Net interest expense remained consistent and was $0.5 million and $0.6 million in the three months ended July 31, 2024 and 2023, respectively.

Previous wording

The Company's worldwide effective tax rate ("ETR") was 30% and (208%) in the three months ended April 30, 2024 and 2023, respectively. The change in the ETR is due to the inability to recognize tax benefits and losses in the United States due to a partial valuation allowance in the prior period and changes in the mix of income and loss in various jurisdictions.

Current wording

The Company's ETR was 23% and 45% in the three months ended July 31, 2024 and 2023, respectively. The change in the ETR is due to the ability to recognize tax benefits on losses in the United States in the current year whereas the prior year had a full valuation allowance and changes in the mix of income and loss in various jurisdictions.

Previous wording

Net income (loss) attributable to common stock was $1.4 million and $(1.1) million in thethree months ended April 30, 2024 and 2023, respectively. Theincrease of $2.5 million was mainly due to increased sales activity in the quarter, and better project execution.

Current wording

Net income attributable to common stock was $3.3 million and $1.0 million in thethree months ended July 31, 2024 and 2023, respectively. Theincrease of $2.3 million was mainly due to increased sales activity and better margin performance in the quarter.

Previous wording

Other (expense) income was $(0.1) million and $0.1 million for thethree months ended April 30, 2024 and 2023, respectively. The change was primarily due to exchange rate fluctuations in foreign currency transactions.

Current wording

Other (expense) income resulted in expense of $(0.1) million and income of $0.2 million in the six months ended July 31, 2024 and 2023, respectively. The change was primarily due to exchange rate fluctuations in foreign currency transactions.

Previous wording

Cash and cash equivalents as of April 30, 2024 were $7.7 million compared to $5.8 million on January 31, 2024. On April 30, 2024, $0.3 million was held in the United States, and $7.4 million was held at the Company's foreign subsidiaries. The Company's working capital was $39.6 million on April 30, 2024 compared to $41.1 million on January 31, 2024. Of the working capital components, accounts receivable decreased by $2.3 million and cash and cash equivalents increased by $1.9 million as the result of the movements discussed below. As of April 30, 2024, the Company had $5.0 million of borrowing capacity under the Renewed Senior Credit Facility in North America and $13.0 million of borrowing capacity under its foreign revolving credit agreements. The Company had $5.3 million borrowed under the Renewed Senior Credit Facility and $8.4 million borrowed under its foreign revolving credit agreements at April 30, 2024.

Current wording

Cash and cash equivalents as of July 31, 2024 were $9.5 million compared to $5.8 million on January 31, 2024. On July 31, 2024, $0.5 million was held in the United States, and $9.0 million was held at the Company's foreign subsidiaries. The Company's working capital was $44.3 million on July 31, 2024 compared to $41.1 million on January 31, 2024. Of the working capital components, accounts receivable decreased by $6.7 million and cash and cash equivalents increased by $3.7 million as the result of the movements discussed below. As of July 31, 2024, the Company had $4.7 million of borrowing capacity under the Renewed Senior Credit Facility in North America and $12.6 million of borrowing capacity under its foreign revolving credit agreements. The Company had $6.7 million borrowed under the Renewed Senior Credit Facility and $7.8 million borrowed under its foreign revolving credit agreements at July 31, 2024.

Previous wording

Net cash from operating activities was $1.4 million and $3.8 million in the three months ended April 30, 2024 and 2023, respectively. Thedecrease of $2.5 million was due primarily attributable to increases in prepaid expenses and other current assets and inventory, partially offset by changes to accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts.

Current wording

Net cash from operating activities was $3.8 million and $3.5 million in the six months ended July 31, 2024 and 2023, respectively. Theincrease of $0.3 million was primarily attributable to changes in accounts receivable and customer deposits, partially offset by changes to accounts payable and prepaids expenses and other current assets.

Previous wording

Net cash from investing activities in thethree months ended April 30, 2024 and 2023 was $2.0 million and $3.2 million, respectively. Thedecrease of $1.2 million was due primarily to fewer investments in the United States and Canada.

Current wording

Net cash from investing activities in thesix months ended July 31, 2024 and 2023 was $(3.2) million and $(6.8) million, respectively. Thedecrease of $(3.6) million was due primarily to fewer capital expenditures in the United States and Canada.

Previous wording

Net cash from financing activities in thethree months ended April 30, 2024 and 2023 was $2.6 million and $2.5 million, respectively. The main source of cash from financing activities during thethree months ended April 30, 2024 consisted of net proceeds from borrowings of approximately $1.9 million under the Company's credit facilities, an increase in drafts payable of $0.9 million, and approximately $0.1 million attributable to fewer payments on finance lease obligations, as compared to net proceeds of approximately $2.8 million during thethree months ended April 30, 2023. Debt totaled $27.3 million and $25.7 million as of April 30, 2024 and January 31, 2024, respectively. See Note 9 - Debt, in the Notes to Consolidated Financial Statements for further discussion relating to this topic.

Current wording

Net cash from financing activities in thesix months ended July 31, 2024 and 2023 was $2.2 million and $3.7 million, respectively. The main source of cash from financing activities in thesix months ended July 31, 2024, consisted of net proceeds from borrowings of approximately $2.7 million under the Company's credit facilities, as compared to net proceeds of approximately $4.8 million in thesix months ended July 31, 2023. Debt totaled $27.9 million and $25.7 million as of July 31, 2024 and January 31, 2024, respectively. See Note 10 - Debt, in the Notes to Consolidated Financial Statements for further discussion relating to this topic.

Previous wording

As of April 30, 2024, the Company had borrowed an aggregate of$5.3 million at a rate of 10.0% and had $5.0 million available under the Renewed Senior Credit Facility. As of January 31, 2024, the Company had borrowed an aggregate of $5.5 million and had $4.0 million available under the Renewed Senior Credit Facility.

Current wording

As of July 31, 2024, the Company had borrowed an aggregate of$6.7 million at a rate of 10.0% and had $4.7 million available under the Renewed Senior Credit Facility. As of January 31, 2024, the Company had borrowed an aggregate of $5.5 million and had $4.0 million available under the Renewed Senior Credit Facility.

Previous wording

The Company has a revolving line for 8.0 million U.A.E. Dirhams (approximately $2.2 million at April 30, 2024) from a bank in the U.A.E. As of April 30, 2024 the facility has an interest rate of approximately 8.8%, and is set to expire in July 2024, with intentions to be subsequently renewed and extended thereafter. The Company had borrowed an aggregate of $0.2 million as of April 30, 2024 and January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. The Company had unused borrowing availability of approximately $1.9 million as of April 30, 2024 and January 31, 2024, respectively.

Current wording

The Company has a revolving line for 8.0 million U.A.E. Dirhams (approximately $ 2.2 million at July 31, 2024) from a bank in the U.A.E. As of July 31, 2024 the facility has an interest rate of approximately 8.6%, and expired in July 2024, however, the Company has started the process to renew and extend this credit arrangement and the credit facility has continued without interruption and penalty. The Company had borrowed an aggregate of$1.2 million as of July 31, 2024 and $0.2 million as of January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. As of July 31, 2024 and January 31, 2024, the Company had unused borrowing availability of approximately $1.0 million and $1.9 million, respectively.

Previous wording

The Company has a revolving line for 20.5 million U.A.E. Dirhams (approximately $5.6 million at April 30, 2024) from a bank in the U.A.E. As of April 30, 2024 the facility has an interest rate of approximately 8.7%, and is set to expire in August 2024, with intentions to be subsequently renewed and extended thereafter. The Company had borrowed an aggregate of $0.1 million as of April 30, 2024 and January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. As of April 30, 2024 and January 31, 2024, the Company had unused borrowing availability of approximately $1.6 million and $1.0 million, respectively.

Current wording

The Company has a revolving line for 20.5 million U.A.E. Dirhams (approximately $ 5.6 million at July 31, 2024) from a bank in the U.A.E. As of July 31, 2024 the facility has an interest rate of approximately 8.7%. The facility expired in August 2024, however, the Company has started the process to renew and extend this credit arrangement and the credit facility has continued without interruption or penalty. The Company had borrowed an aggregate of $1.0 million as of July 31, 2024 and $0.1 million as of January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. As of July 31, 2024 and January 31, 2024, the Company had unused borrowing availability of approximately$1.2 million and $1.0 million, respectively.

Previous wording

In June 2021, and as renewed or amended subsequently thereafter, 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$2.1 million at April 30, 2024). 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, 2024 the facility has an interest rate of approximately 9.5% and expired in June 2022. This credit arrangement was subsequently renewed in August 2023 with substantially the same terms and conditions, except for the facility interest rate which increased to 20.8%, and expires in August 2024. This credit arrangement was subsequently renewed in November 2023 with substantially the same terms and conditions and expires in November 2024. As of April 30, 2024, the Company had substantially nothing outstanding with respect to this credit arrangement, and approximately $1.4 million outstanding at January 31, 2024, which is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. Further, as of April 30, 2024 and January 31, 2024, the Company had unused borrowing capacity of $2.1 million and $3.2 million, respectively.

Current wording

In June 2021, and as renewed or amended subsequently thereafter, 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$2.1 million at July 31, 2024). 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 July 31, 2024, the facility has an interest rate of approximately 20.8% and expires in November 2024. As of July 31, 2024, the Company had substantially nothing outstanding with respect to this credit arrangement, and approximately $1.4 million outstanding at January 31, 2024, which is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. Further, as of July 31, 2024 and January 31, 2024, the Company had unused borrowing capacityof $2.1 million and $3.2 million, respectively.

Previous wording

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 37.0 million Saudi Riyals (approximately $ 9.9 million at April 30, 2024). 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 renewed in May 2024 with substantially the same terms and conditions and expires in May 2025. As of April 30, 2024, the facility has an interest rate of approximately 9.5%. The Company had borrowed an aggregate of $4.1 million and $3.2 million as of April 30, 2024 and January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. The unused borrowing availability attributable to this credit arrangement at April 30, 2024 and January 31, 2024, was $5.4 million and $6.1 million, respectively.

Current wording

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 37.0 million Saudi Riyals (approximately $ 9.9 million at July 31, 2024). 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 renewed in May 2024 with substantially the same terms and conditions and expires in May 2025. As of July 31, 2024, the facility has an interest rate of approximately 9.7%. The Company had borrowed an aggregate of $2.6 million and $3.2 million as of July 31, 2024 and January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. The unused borrowing availability attributable to this credit arrangement at July 31, 2024 and January 31, 2024, was$6.3 million and $6.1 million, respectively.

Previous wording

These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates. The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt. The Company guarantees only a portion of the subsidiaries' debt, including foreign debt. The amount of foreign subsidiary debt guaranteed by the Company was approxim ately $0.3 million and $0.1 million at April 30, 2024 and January 31, 2024, respectively.

Current wording

These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates. The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt. The Company guarantees only a portion of the subsidiaries' debt, including foreign debt. The amount of foreign subsidiary debt guaranteed by the Company was approxim ately $1.1 million and $0.1 million at July 31, 2024 and January 31, 2024, respectively.

Previous wording

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, 2024, with the exception of those arrangements that have expired or are set to expire 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, 2024, 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 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 April 30, 2024, the Company's interest rates ranged from 8.7% to 20.8%, with a weighted average rate of 11.5%, and the Company had facility limits totaling$24.7 million under these credit arrangements. As of April 30, 2024,$6.7 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of April 30, 2024, the Company had borrowed$8.4 million and had an additional$13.0 million ofborrowing remaining available under the foreign revolving credit arrangements. The foreign revolving lines balances were included as a component of current maturities of long-term debt in the Company's consolidated balance sheets as of April 30, 2024 and January 31, 2024.

Current wording

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, 2024, with the exception of those arrangements that have expired or are set to expire 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, 2024, 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 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, 2024, the Company's interest rates ranged from 8.6% to 20.8%, with a weighted average rate of 11.5%, and the Company had facility limits totaling$24.7 million under these credit arrangements. As of July 31, 2024, $7.1 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 July 31, 2024, the Company had borrow ed $7.8 million and had an additional$12.6 million ofborrowing remaining available under the foreign revolving credit arrangements. The foreign revolving lines balances were included as a component of current maturities of long-term debt in the Company's consolidated balance sheets as of July 31, 2024 and January 31, 2024.

Previous wording

In accordance with ASC 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 $0.2 million is recognized in current maturities of long-term debt and the long-term portion of $9.0 million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of April 30, 2024 . The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.

Current wording

In accordance with ASC 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 $0.2 million is recognized in current maturities of long-term debt and the long-term portion of $8.9 million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of July 31, 2024 . The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.

Previous wording

In 2015, the Company completed a project in the Middle East with billings in the aggregate amount of approximately $41.9 million. The system has not yet been commissioned by the customer. Nevertheless, the Company has settled approximately $ 40.1 million as of April 30, 2024, with a remaining balance due in the amount of $ 1.8 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, $ 1.0 million is classified in other long-term assets on the Company's consolidated balance sheets.

Current wording

In 2015, the Company completed a project in the Middle East with billings in the aggregate amount of approximately $41.9 million. The system has not yet been commissioned by the customer. Nevertheless, the Company has received approximately $ 40.1 million as of July 31, 2024, with a remaining balance due in the amount of $ 1.8 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, $ 1.3 million is classified in other long-term assets on the Company's consolidated balance sheets.

Previous wording

The Company has been actively involved 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 the three months ended April 30, 2024, and at various times throughout 2023, the Company received partial payments to settle $ 0.3 million and $ 0.6 million, respectively, of the customer's outstanding balances. Further, the Company has been engaged by the customer to perform additional work in 2024 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, 2024. 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.

Current wording

The Company has been actively involved 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 the six months ended July 31, 2024, and at various times throughout 2023, the Company received partial payments to settle $ 0.3 million and $ 0.6 million, respectively, of the customer's outstanding balances. Further, the Company has been engaged by the customer to perform additional work in 2024 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 July 31, 2024. 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.