Perma-Pipe International Holdings, Inc. Annual Report 2016

FY2016 Annual Report · Perma-Pipe International Holdings, Inc.

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2016
Annual Report

Building on our Strengths

MESSAGE TO SHAREHOLDERS

POSITIONING FOR THE FUTURE

THE FINANCIAL RESULTS FOR PPIH IN 2016/17 WERE IMPACTED ADVERSELY BY A CONTRACTION IN THE
VOLUMES OF BUSINESS THAT RESULTED FROM THE CONTINUED DOWNTURN IN THE ENERGY INDUSTRY
AND THE IMPACT THAT HAS ON SPENDING ON INFRASTRUCTURE DEVELOPMENT. THE COMPANY HAS
FACED SIGNIFICANT HEADWINDS WITH THIS MARKET DOWNTURN AND HAS FOCUSED ON
RESTRUCTURING TO BETTER POSITION ITSELF FOR THE FUTURE.

The financial results for the year are of course disappointing but it is a testament to the resilience of the
Company and its employees that the storm is being weathered and we believe that in the forthcoming
year the market conditions should improve and that we will be in a good position to respond and begin a
period of growth. We have recently begun to see a recovery of oil prices and the general outlook is for
this to continue. This not only has a significant impact on the oil and gas pipeline construction industry in
which PPIH participates, but it also has a very meaningful impact on the district energy market. This is
particularly the case, in the Gulf Cooperation Council (“GCC”) where the overall economic climate, and
therefore spending on infrastructure development, is driven primarily by the oil price.

The 2016/17 year was challenging not only from the perspective of the market conditions, but also
because it has been a time of profound changes within the Company. The exit from the Filtration
businesses was completed in the first half of the year and we executed numerous cost-saving initiatives
in order to reduce costs to better enable the Company to manage the downturn in volumes. This is a
difficult balance to achieve when the expectation is that the markets will return to their previous levels,
since the Company must be in a position to respond positively to the upturn when it arrives and we must
ensure that we retain our key competencies. We believe we have achieved a level where we have
maintained our capability to be able to respond in this way, but we continually look for any cost reductions
that will not put at risk our ability to maximize our future growth.

Further developments in our strategy to focus on the Perma-Pipe business was the recent change in the
name of the Company, from MFRI to Perma-Pipe International Holdings (PPIH). We will continue to
organize ourselves to operate as a single and cohesive group of companies with a worldwide reach. Some
organizational changes have already occurred, notably at a senior level. Three of our most senior
executives – each with more than 30 years tenure with the Company – retired during the past year.
Bradley Mautner, the former CEO; Fati Elgendy, former President of Perma-Pipe; and Bob Maffei, former
VP Business Development for Perma-Pipe. Each of them will surely be missed, but I am very pleased to
still be able to call on their valued counsel in the future. I am also honored to have the opportunity to
replace Bradley and Fati and to be trusted to lead the Company into the future. In my first months with
Perma-Pipe I have come to know many good and loyal people that are truly an asset to the Company and
I look forward to helping them grow the business and create new opportunities.

MESSAGE TO SHAREHOLDERS

During the early months of the current fiscal year we have seen some positive indications that the industry
is commencing a recovery period. Order enquiries in the Americas during the first quarter have shown an
upturn in activity and we expect this to continue, albeit at a modest pace. In the Middle East, our
expectation is that the upturn will likely begin during the latter half of the year. In Saudi Arabia in
particular, numerous important projects have stalled during the last year and these will need to
recommence once the economy is in a better state of recovery. The GCC is considered to still present a
promising future for the district cooling industry and analysts estimate it will show compound annual
growth rates of 15% over the coming years. This is driven by large-scale developments in the real estate
and commercial sectors, including residential buildings, offices, hotels, hospitals and shopping malls. The
hosting of the Expo 2020 in the UAE and the FIFA World Cup in Qatar in 2022 are expected to be a further
boost to infrastructure development in the region.

We are also increasing our efforts to identify and expand into new markets. We have recently had some
success in securing new projects for South America and we are actively assessing prospects in other
geographic areas where the Company is not currently present.

Finally, I would like to thank our Board of Directors who have consistently supported us and provided
useful guidance. I would also like to thank all of our employees who have shown extraordinary dedication
during a very difficult and demanding year. I am confident that with partners like these, the Company will
be in a very good position to capitalize on the opportunities that arise as the industry transitions to a
growth period.

Sincerely,

DAVID J. MANSFIELD
Chief Executive Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 2017
Commission File No. 0-18370
Perma-Pipe International Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

6410 W. Howard Avenue, Niles, Illinois
(Address of principal executive offices)

36-3922969
(I.R.S. Employer Identification No.)
60714
(Zip Code)

(847) 966-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, $.01 per share

Name of each exchange on which registered
The NASDAQ Stock Market LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90 days. Yes

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained
herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller
reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller
reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer
Accelerated
Emerging growth
filer
company

(Do not check if a smaller reporting company) Smaller reporting company

Non-accelerated filer

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (the exclusion of
the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an
affiliate of the registrant) was $49,044,548 based on the closing sale price of $7.65 per share as reported on the NASDAQ Global
Market on July 31, 2016.
The number of shares of the registrant's common stock outstanding at April 7, 2017 was 7,615,954.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the 2017 Annual Meeting of Stockholders are incorporated by reference in Part III.

Perma-Pipe International Holdings, Inc.

FORM 10-K

For the fiscal period ended January 31, 2017

TABLE OF CONTENTS

Item
Part I
1.

1A.
1B.
2.
3.
4.

Part II
5.

6.
7.

7A.

8.
9.

9A.

9B.

Part III
10.
11.
12.

13.
14.

Part IV
15.

Business
Piping Systems
Filtration Products
Employees
International
Executive Officers of the Registrant
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures About Market Risk

Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures

Other Information

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services

Exhibits and Financial Statement Schedules

Report of Independent Registered Public Accounting Firm
Signatures

Page

1
2
4
4
4
5
5
9
9
9
9

11
11

18
18

19
19
19

19
19

21
52

Forward Looking Statements

PART I

Statements in this Annual Report on Form 10-K that are not historical facts, so-called "forward-looking statements,"
are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in Perma-
Pipe International Holdings, Inc.'s filings with the Securities and Exchange Commission ("SEC"). See "Risk
Factors" in Item 1A.

Available Information

The Company files with and furnishes to the SEC, reports including annual meeting materials, Annual Reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as amendments thereto. The
Company maintains a website, www.permapipe.com, where these reports and related materials are available free of
charge as soon as reasonably practicable after the Company electronically delivers such material to the SEC. The
information on the Company's website is not part of this Annual Report on Form 10-K and is not incorporated into
this or any other filings by the Company with the SEC.

Item 1. BUSINESS

As of January 31, 2017, Perma-Pipe International Holdings, Inc., collectively with its subsidiaries ("PPIH",
"Company" or "Registrant"), is engaged in the manufacture and sale of products in one reportable segment: Piping
Systems. In February 2017, the Company announced that the board of directors had authorized Company
management to move forward with the re-naming and re-branding of MFRI, Inc. under the Perma-Pipe name now
that the Company operates in a single business segment under the Perma-Pipe brand, and the Company believes this
decision will better serve its strategy, position it well in the industry and global market,and better reflect the
Company’s mission and strategy, and positions it to leverage the strong reputation Perma-Pipe has established since
beginning operations. The name change to Perma-Pipe International Holdings, Inc. was effective March 20, 2017.
The Company's common stock has been and will continue to be reported under its new ticker symbol “PPIH” since
March 21, 2017. Outstanding stock certificates are not affected by the symbol change and will not need to be
exchanged. The Company's fiscal year ends on January 31. Years and balances described as 2016 and 2015 are the
fiscal years ended January 31, 2017 and 2016, respectively.

On January 29, 2016, the Company sold certain assets and liabilities of its TDC Filter business based in
Bolingbrook, Illinois to the Industrial Air division of CLARCOR, Inc. On January 29, 2016, the Company also sold
its Nordic Air Filtration, Denmark and Nordic Air Filtration, Middle East businesses to Hengst Holding GmbH.
The aggregated sales price of these filtration businesses was $22.0 million, including cash proceeds of $18.4
million, of which $0.5 million is held in escrow until July 2017. In 2016, the Company sold the remaining assets of
the facilities for $3.7 million in cash after expenses and mortgage payoffs.

In addition to paying down debt, the sale of the filtration business gave the Company the opportunity to focus
resources on new Piping Systems growth opportunities such as the recent acquisition of 100% ownership of Perma-
Pipe Canada, Ltd. ("PPC"), which the Company believes creates a strong platform to diversify and expand Perma-
Pipe Inc.’s ("Perma-Pipe") business into new markets and geographies.

In connection with its strategic repositioning, the Company has reorganized the Company’s corporate staff and
reducing expenses to reflect its new strategic focus and structure. Changes to several senior executive positions
went into effect in the fourth quarter of 2016, as previously disclosed. The Company believes these changes may
yield annualized savings of approximately $1.2 million.

On January 31, 2017, no one customer accounted for more than 10% of the Company's net sales. On
January 31, 2016, one customer accounted for 10.3% of the Company's net sales.

Two customers accounted for 33.2% of accounts receivable on January 31, 2017, and two customers accounted for
46.5% of accounts receivable at January 31, 2016. As of April 1, 2017, these customers have paid 35.4% of their
receivables outstanding on January 31, 2017.

Perma-Pipe International Holdings, Inc.'s Operating Units

Perma-Pipe, Inc.

Niles, IL

New Iberia, LA
Lebanon, TN

Perma-Pipe Middle East FZC

Fujairah, United Arab Emirates

Perma-Pipe Saudi Arabia, LLC

Dammam, Kingdom of Saudi Arabia

Perma-Pipe Canada, Ltd.

Camrose, Alberta, Canada

Perma-Pipe India Pvt. Ltd

Gandhidham, India

All operating units shown are, directly or indirectly, wholly owned by PPIH. PPC was owned 49% by
PPIH and 51% by an unrelated party until February 4, 2016 when PPIH purchased the remaining shares and
became the sole owner.

Piping Systems

Products and services. The Company engineers, designs, manufactures and sells specialty piping and leak
detection and location systems. Piping Systems include (i) industrial and secondary containment piping systems for
transporting chemicals, hazardous fluids and petroleum products, (ii) insulated and jacketed piping systems for
district heating and cooling ("DHC"), Municipal Freeze Protection, Oil & Gas, Mining and Industrial applications,
(iii) insulation for subsea oil and gas gathering flowlines and equipment, (iv) above and below ground long lines for
oil and mineral transportation and (v) anti-corrosion coatings for oil and gas distribution and gathering pipelines.
The leak detection and location systems are sold with some of its piping systems and also on a stand-alone basis to
monitor areas where fluid intrusion may contaminate the environment, endanger personal safety, cause a fire
hazard, impair essential services or damage equipment or property.

Piping Systems frequently engineers and custom fabricates to job site dimensions and incorporates provisions for
thermal expansion due to varying temperatures. This custom fabrication helps to minimize the amount of field
labor required by the installation contractor. Most of the piping systems are produced for underground installations
and, therefore, require trenching, which is the responsibility of the general contractor, and done by unaffiliated
installation contractors.

The Piping Systems segment is based on large discrete projects, and domestic Piping Systems is seasonal. See
"Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") - Piping
Systems."

Recent developments. In February 2017, the Company announced that a Perma-Pipe subsidiary has formed a
consortium with Danish company LOGSTOR, A/S to bid the East Africa Crude Oil Pipeline ("EACOP") project.
This consortium joins the leading pre-insulated piping manufacturers in North America and Europe to take
advantage of their combined fabrication, engineering and material science expertise.

The EACOP project is a 1450 Km (900 mile) long heavy crude oil pipeline from the Lake Albert Basin in Uganda
to the Tanga port in Tanzania being developed by French oil company Total E&P, China National Offshore Oil

Corporation (CNOOC) and London-based Tullow Oil. The pipeline is 24 inches in diameter, and is electrically heat
traced. It will be the longest insulated and heat traced pipeline in the world. There can be no assurance that the
Company will be successful in its bid for this project, or the terms of any such potential engagement.

Customers. The customer base is industrially and geographically diverse. In the United States of America ("U.S."),
the Company employs national and regional sales managers who use and assist a network of independent
manufacturers' representatives, none of whom sells products that are competitive with the Company's Piping
Systems. The Company employs a direct sales force as well as an exclusive agent network in Canada, the U.S. and
for several countries in the Middle and Far East to market and sell products and services.

Intellectual property. The Company owns several patents covering its piping and electronic leak detection systems.
The patents are not material either individually or in the aggregate overall, because the Company believes sales
would not be materially reduced if patent protection were not available. The Company owns numerous trademarks
connected with its piping and leak detection systems including the following U.S. trademarks: Perma-Pipe®, Chil-
Gard®, Double Quik®, Escon-A®, FluidWatch®, Galva-Gard®, Polytherm®, Pal-AT®, Stereo-Heat®,
LiquidWatch®, PalCom®, Xtru-therm®, Auto-Therm®, Pex-Gard®, Multi-Therm®, Ultra-Therm®, Cryo-Gard®,
Sleeve-Gard®, Electro-Gard® and Sulphur-Therm®. The Company also owns a number of trademarks throughout
the world. Some of the Company's more significant trademarks include: Auto-Therm®, Cryo-Gard®, Electro-
Gard®, Sleeve-Gard®, Permalert®, Pal-AT®, Perma-Pipe®, Polytherm®, Ric-Wil®, and Xtru-therm®.

Raw materials. Basic raw materials used in production are pipes and tubes made of carbon steel, alloy, copper,
ductile iron, plastics and various chemicals such as polyols, isocyanate, urethane resin, polyethylene and fiberglass,
mostly purchased in bulk quantities. The Company believes there are currently adequate supplies and sources of
availability of these needed raw materials.

The sensor cables used in the leak detection and location systems are manufactured to the Company's specifications
by companies regularly engaged in manufacturing such cables. The Company owns patents for some of the features
of its sensor cables. The Company assembles the monitoring component of the leak detection and location systems
from components purchased from many sources.

Competition. Piping Systems is highly competitive, and the Company believes its principal competition consists of
between ten and twenty major competitors and more small competitors. The Company believes quality, service,
engineering design and support, a comprehensive product line and price are key competitive factors. The Company
also believes it has a more comprehensive line for DHC than any competitor. Some competitors have greater
financial resources and cost advantages as a result of manufacturing a limited range of products.

Government regulation. The demand for the Company's leak detection and location systems and secondary
containment piping systems, a small percentage of the total annual piping sales, is driven by federal and state
environmental regulation with respect to hazardous waste. The Federal Resource Conservation and Recovery Act
requires, in some cases, that the storage, handling and transportation of fluids through underground pipelines feature
secondary containment and leak detection. The National Emission Standard for hydrocarbon airborne particulates
requires reduction of airborne volatile organic compounds and fugitive emissions. Under this regulation, many
major refineries are required to recover fugitive vapors and dispose of the recovered material in a process sewer
system, which then becomes a hazardous secondary waste system that must be contained. Although there can be no
assurances as to the ultimate effects of these governmental regulations, the Company believes such regulations may
increase the demand for its Piping Systems products.

Filtration Products

Products and services. Prior to January 29, 2016, the Company manufactured and sold a wide variety of filter
elements for cartridge collectors and baghouse air filtration and particulate collection systems. The principal types
of industrial air filtration and particulate collection systems in use are baghouses, cartridge collectors, electrostatic
precipitators, scrubbers and mechanical collectors. This equipment was used to eliminate particulates from the air
by passing particulate laden gases through fabric filters (filter bags) or pleated media filter elements, in the case of
baghouses or cartridge collectors. The Company manufactured filter elements in standard industry sizes, shapes
and filtration media and to custom specifications, maintaining manufacturing standards for more than 10,000 styles
of filter elements to suit substantially all industrial applications. Filter elements were manufactured from industrial
yarn, fabric and paper purchased in bulk. Most filter elements were produced from cellulose, acrylic, fiberglass,
polyester, aramid, laminated membranes, or polypropylene fibers.

The Company marketed numerous filter related products and accessories used during the installation, operation and
maintenance of cartridge collectors and baghouses, including wire cages used to support filter bags, spring
assemblies for proper tensioning of filter bags and clamps and hanger assemblies for attaching filter elements. In
addition, the Company marketed hardware items used in the operation and maintenance of cartridge collectors and
baghouses. The Company also provided maintenance services, consisting primarily of air filtration system
inspection and filter element replacement, using a network of independent contractors.

Customers. The customer base was industrially and geographically diverse. These products and services were used
primarily by operators of utility and industrial coal-fired boilers, incinerators and cogeneration plants and by
producers of metals, cement, chemicals and other industrial products.

Filtration Products were marketed domestically under the names Midwesco Filter and TDC Filter Manufacturing.
The Denmark filtration facility marketed pleated filter elements under the name Nordic Filtration throughout
Europe, Asia and the Middle East, primarily to original equipment manufacturers.

Employees

As of January 31, 2017, the Company had 710 employees, of whom 72% worked outside the U.S.

International

The Company's international operations as of January 31, 2017 include subsidiaries in four foreign countries on two
continents. The Company's international operations contributed approximately 55.1% of revenue in 2016 and
48.4% of revenue in 2015.

Refer to the Business descriptions on pages 1 through 4 above and Note 1 - Business and segment information in
the Notes to Consolidated Financial Statements for additional information on international activities. International
operations are subject to risks inherent in conducting business in foreign countries, including price controls,
exchange controls, limitations on participation in local enterprises, nationalization, expropriation and other
governmental action, and changes in currency exchange rates.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information regarding the executive officers of the Company as of April 1, 2017:

Name
David J. Mansfield Director, President and Chief Executive Officer; Age 56

Offices and positions, if any, held with the Company; age

Karl J. Schmidt

Vice President and Chief Financial Officer; Age 63

Wayne Bosch

Vice President, Chief Human Resources Officer; Age 60

All of the executive officers serve at the discretion of the Board of Directors.

Executive officer of
the Company or its
predecessor since
2016

2013

David J. Mansfield, President and Chief Executive Officer, ("CEO"), since November 2016. From 2015 to 2016,
Mr. Mansfield served as Chief Financial Officer, ("CFO"), of Compressor Engineering Corp. & CECO Pipeline
Services Co., which provides products and services to the gas transmission, midstream, gas processing, and
petrochemical industries. In this position, he had overall responsibility for the group’s financial affairs, including
the development and execution of turnaround plans and the successful negotiation of a corporate refinancing. From
2009 to 2014, Mr. Mansfield served as CFO and as Acting CEO of Pipestream, Inc. a venture capital-owned
technology development company providing a suite of products to the oil and gas pipeline industry. From 1992 to
2009, Mr. Mansfield was employed with Bredero Shaw, the world’s largest provider of protective coatings for the
oil and gas pipeline industry, most recently as Vice President Strategic Planning. During his tenure with Bredero
Shaw, Mr. Mansfield served in numerous roles including Vice President Controller and Commercial General
manager, Europe, Africa & FSU, and played a key role in strategy development and merger and acquisition
activities as the company grew from annual revenues of $100 million to over $900 million.

Karl J. Schmidt, Appointed Vice President and CFO in January 2013. From 2010 to 2012, Mr. Schmidt served as
the CFO of Atkore International (previously Tyco Electrical and Metal Products), a manufacturer of steel pipe and
tube products, electrical conduits, cable, and cable management systems. From 2002 to 2009, Mr. Schmidt served
as the Executive Vice President and CFO of Sauer-Danfoss, Inc., a global manufacturer of hydraulic, electrical, and
electronic components and solutions for off-road vehicles. In this role he had global responsibility for the
accounting and finance, treasury, IT and legal functions of the company, which was listed at the New York Stock
Exchange.

Wayne Bosch, Appointed Vice President and Chief Human Resources Officer in December 2013. From 2010 to
2012, Mr. Bosch was Vice President of Human Resources at Pactiv, a $4 billion global manufacturer and distributor
of food packaging products. Prior to Pactiv, he led the human resource activities at the North American segment of
Barilla America, a $6.3 billion global pasta, sauces and bakery manufacturer and was the Chief Human Resources
Officer for water filtration leader Culligan International. Mr. Bosch's background spans the entire spectrum of
human resources competencies, including mergers and acquisition and business integration, in start-up, turnaround
and high-growth businesses. His scope also includes communications, legal, occupational health services, health
safety environment, risk management, payroll, facilities and general administrative services.

Item 1A. RISK FACTORS

The Company's business, financial condition, results of operations and cash flows are subject to various risks,
including, but not limited to, those set forth below, which could cause actual results to vary materially from recent
results or from anticipated future results. These risk factors should be considered together with information
included elsewhere in this Annual Report on Form 10-K.

Economic factors. If the economy experienced a severe and prolonged downturn, it could adversely impact all of
the Company's businesses, directly or indirectly. Downturns in such general economic conditions can significantly

affect the business of our customers, which in turn affects demand, volume, pricing, and operating margin for our
services and products. A downturn in one or more of our significant markets could have a material adverse effect
on the Company's business, results of operations or financial condition. Because economic and market conditions
vary within the Company's segment, the Company's performance will also vary. In addition, the Company is
exposed to fluctuations in currency exchange rates and commodity prices. Failure to successfully manage any of
these risks could have an adverse impact on the Company's financial position, results of operations and cash flow.

Project cycles. Since Piping Systems is based on large discrete projects, operating results could be negatively
impacted in the future as a result of large variations in the level of market demand in both geographies and reporting
periods.

Customer access to capital funds. Uncertainty about economic market conditions poses risks that the Company's
customers may postpone spending for capital improvement and maintenance projects in response to tighter credit
markets or negative financial news, which could have a material negative effect on the demand for the Company's
products. The continuing decrease in federal and state spending on projects using the Company's products has
significantly decelerated government funded construction activity in the U.S., negatively impacting sales volume at
the Company's domestic facilities.

Changes in billing terms can increase exposure to working capital and credit risk. The Company sells systems
and products under contracts that allow the Company to either bill upon the completion of certain agreed upon
milestones, or upon actual shipment of the system or product. The Company attempts to negotiate progress-billing
milestones on large contracts to help manage working capital and to reduce the credit risk associated with these
large contracts. Consequently, shifts in the billing terms of the contracts in the backlog from period to period can
increase the requirement for working capital and can increase exposure to credit risk.

Crude oil and natural gas prices are volatile, and the substantial and extended decline in commodity prices has
had, and may continue to have, a material and adverse effect on demand and pricing in the Company's business.
Prices for crude oil and natural gas fluctuate widely. Among the factors that can or could cause these price
fluctuations are:

• the level of consumer demand;
• domestic and worldwide supplies of crude oil and natural gas;
• domestic and international drilling activity;
• the actions of other crude oil exporting nations and the Organization of Petroleum Exporting Countries;
• worldwide economic and political conditions, including political instability or armed conflict in oil and gas
producing regions; and
• the price and availability of, and demand for, competing energy sources, including alternative energy sources.

Beginning in the fourth quarter of 2014 and continuing through 2015 and into 2016, crude oil prices have
substantially declined and remained depressed relative to historical pricing levels. In addition, natural gas prices
began to decline substantially in the second quarter of 2014, and such declines continued during 2015 and into
2016. The above described factors and the volatility of commodity prices make it difficult to predict future crude oil
and natural gas prices. As a result, the Company cannot predict how long these lower prices will continue, and
there can be no assurance that the prices for crude oil and natural gas will not decline further. Additionally, the
decline in oil prices has had budgetary impact on the governments of key Gulf Cooperation Council ("GCC")
countries, delaying or canceling major planned infrastructure projects unrelated to oil and gas production. It is
impossible to predict when and in what volume these planned projects will be implemented. The GCC is a political
and economic alliance of six Middle Eastern countries—Saudi Arabia, Kuwait, the United Arab Emirates
("U.A.E."), Qatar, Bahrain, and Oman. Now that the Company's focus is only on Piping Systems, the Company is
more concentrated, and these risk factors could potentially have a greater effect on the Company.

Risks related to international business. International sales represent a significant portion of the Company's total
sales. During 2016, the Company's international sales increased from 48.4% to 55.1%. The Company's anticipated
growth and profitability may require maintaining current international sales volume and may necessitate further

international expansion. The Company's financial results could be affected by changes in trade, monetary and fiscal
policies, laws and regulations, or other activities of U.S. and non U.S. governments, agencies and similar
organizations. These conditions include, but are not limited to, changes in a country's or region's economic or
political conditions, trade regulations affecting production, pricing and marketing of products, local labor conditions
and regulations, reduced protection of intellectual property rights in some countries, changes in the regulatory or
legal environment, restrictions on currency exchange activities, burdensome taxes and tariffs and other trade
barriers. International risks and uncertainties, including changing social and economic conditions as well as
terrorism, political hostilities and war, could lead to reduced international sales and reduced profitability associated
with such sales. In addition these risks can include extraordinarily delayed collections of accounts receivable.
Because the Company conducts a significant portion of its business activities in the Middle East, the political and
economic events of the countries that comprise the GCC can have a material effect on the Company’s business.

Financing. If there were an event of default under the Company's current revolving credit facilities, the holders of
the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately.
The Company cannot assure that cash flow would be sufficient to fully repay amounts due under any of the
financing arrangements, if accelerated upon an event of default, or, that the Company would be able to repay,
refinance or restructure the payments under any such arrangements. Complying with the covenants under the
Company's domestic and/or foreign revolving credit facilities may limit management's discretion by restricting
options such as:

incurring additional debt;
entering into transactions with affiliates;

·
·
· making investments or other restricted payments;
·
·

repurchase of Company's shares;
payment of dividends, capital returns, repayment of intercompany obligations and other forms of
repatriation; and
creating liens.

Expiring credit agreements may not renew at similar capacity or similar terms. Future foreign credit agreements
may further limit the ability to repatriate funds from abroad. Repatriation of funds from certain countries may
become limited based on regulatory restrictions or economically unfeasible because of the taxation of funds when
moved to another subsidiary or to the parent company.

Any additional financing the Company may obtain could contain similar or more restrictive covenants. The
Company's ability to comply with any covenants may be adversely affected by general economic conditions,
political decisions, industry conditions and other events beyond management's control.

Competition. The business in which the Company is engaged is highly competitive. Many of the competitors are
larger and have more resources than the Company. Additionally, many of the Company's products are also subject
to competition from alternative technologies and alternative products. In periods of declining demand, the
Company's fixed cost structure may limit ability to cut costs, which may be a competitive disadvantage compared to
firms with lower cost structures, or may result in reduced operating margins and operating losses.

Suppliers. To the extent the Company relies upon a single source for key components of several of its products, the
Company believes there are alternate sources available for such components; however, there can be no assurance
that the interruption of supplies of such components would not have an adverse effect on the financial condition of
the Company and that the Company, if required to do so, would be able to negotiate agreements with alternative
sources on acceptable terms.

Backlog. The Company defines backlog as the revenue value in dollars resulting from confirmed customer
purchase orders that have not yet been recognized as revenue. However, by industry practice, orders may be
canceled or modified at any time. If a customer cancels an order, the customer is normally responsible for all
finished goods, all direct and indirect costs incurred and also for a reasonable allowance for anticipated profits. No
assurance can be given that these amounts will be recovered after cancellation. Any cancellation or delay in orders
may result in lower than expected revenue.

Attracting and retaining senior management and key personnel. The Company's ability to meet strategic and
financial goals will depend to a significant extent on the continued contributions of senior management. Future
success will also depend in large part on the ability to identify, attract, motivate, effectively utilize and retain highly
qualified managerial, sales, marketing and technical personnel. The loss of senior management or other key
personnel or the inability to identify, attract and retain qualified personnel in the future could make it more difficult
to manage the business and could adversely affect operations and financial results.

Rapid growth of business. Expansion may result in unanticipated adverse consequences, including significant
strain on management, operations and financial systems as well as on the Company's ability to attract and retain
competent employees. In the future, the Company may seek to grow the business by investing in new or existing
facilities, making acquisitions, entering into partnerships and joint ventures, or constructing new facilities, which
could entail a number of additional risks, including:

•
•
•
•
•
•
•

strain on working capital;
diversion of management from other activities, which could impair the operation of existing businesses;
failure to successfully integrate the acquired businesses or facilities into existing operations;
inability to maintain key pre-acquisition business relationships;
loss of key personnel of the acquired business or facility;
exposure to unanticipated liabilities; and
failure to realize efficiencies, synergies and cost savings.

As a result of these and other factors, including the general economic risk, the Company may not be able to realize
the expected benefits from any recent or future acquisitions, new facility developments, partnerships, joint ventures
or other investments.

Percentage-of-completion revenue recognition. All divisions recognize revenues under the stated revenue
recognition policy except for sizable domestic complex contracts that require periodic recognition of income. For
these contracts, the Company uses the "percentage of completion" accounting method. This methodology allows
revenue and profits to be recognized proportionally over the life of a contract by comparing the amount of the cost
incurred to date against the total amount of cost expected to be incurred. The effect of revisions to revenue and
total estimated cost is recorded when the amounts are known or can be reasonably estimated. These revisions can
occur at any time and could be material. On a historical basis, management believes that reasonably reliable
estimates of the progress towards completion on long-term contracts have been made. However, given the
uncertainties associated with these types of contracts, it is possible for actual cost to vary from estimates previously
made, which may result in reductions or reversals of previously recorded revenue and profits.

Income Taxes. Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax
rates. The Company is a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax
jurisdictions. A significant portion of earnings for the current fiscal year were earned by foreign subsidiaries. In
addition to providing for U.S. income taxes on earnings from the U.S., the Company provides for U.S. income taxes
on the earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered permanently reinvested
outside the U.S. If certain foreign earnings previously treated as permanently reinvested are repatriated, the related
U.S. tax liability may be reduced by any foreign income taxes paid on these earnings.

Regulatory and legal requirements. As a public company, the Company is required to comply with the reporting
obligations of the Securities Exchange Act of 1934, as amended ("Exchange Act"). Keeping informed of and in
compliance with, changing laws, regulations and standards relating to corporate governance, public disclosure and
accounting standards, including the Sarbanes-Oxley Act, Dodd-Frank Act, as well as new and proposed SEC
regulations and accounting standards, has required an increased amount of management attention and external
resources. Compliance with such requirements has resulted in increased general and administrative expenses and
an increased allocation of management time and attention to compliance activities.

Effective internal control over financial reporting. As a public reporting company, the Company is continually
developing, establishing, and maintaining internal controls and procedures. Management is required to report on
internal controls over financial reporting under Section 404 Sarbanes-Oxley Act of 2002. If the Company fails to
achieve and maintain adequate internal controls, management would not be able to conclude on an ongoing basis
that the Company has effective internal controls over financial reporting in accordance with Section 404. If
material weaknesses are identified in the future, the reported financial results of the Company could be materially
misstated or could subsequently require restatement, which would require additional financial and management
resources, and the market price of our stock could decline.

Item 1B. UNRESOLVED STAFF COMMENTS - None.

Item 2. PROPERTIES Principal properties at January 31, 2017:

Illinois
Louisiana
Tennessee
Canada

India

Kingdom of
Saudi Arabia
United Arab
Emirates

Leased production facilities and office space
Owned production facilities and leased land
Owned production facilities and office space
Owned production facilities, office space and
leased land and office space
Leased production facilities, office space and
land
Owned production facilities on leased land

31,650 square feet
30,000 square feet on approximately 7 acres
131,800 square feet on approximately 23.5 acres
102,980 square feet on approximately 138 acres

33,700 square feet on approximately 1.2 acres

89,000 square feet on approximately 11 acres

Leased office space and production facilities on
leased land

186,400 square feet on approximately 16 acres

The Company has several significant operating lease agreements as follows:
• Office Space of approximately 31,650 square feet in Niles, IL is leased until October, 2023.
• Nine acres of land in the Kingdom of Saudi Arabia is leased through 2030.
• Production facilities in the U.A.E. of approximately 80,200 square feet on approximately 107,600 square feet of

land is leased until June, 2030.

• Office space of approximately 21,500 square feet and open land for production facilities of approximately

423,000 square feet in the U.A.E. is leased until July, 2032.

• Production facilities in the U.A.E. of approximately 78,100 square feet is leased until December, 2032.

For further information, see Note 8 - Lease information, in the Notes to Consolidated Financial Statements.

Item 3. LEGAL PROCEEDINGS - The Company had no material pending litigation.

Item 4. MINE SAFETY DISCLOSURES - Not applicable.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company's fiscal year ends on January 31. Years and balances described as 2016 and 2015 are the fiscal years
ended January 31, 2017 and 2016, respectively.

As of March 21, 2017, the Company's Common Stock is traded on the Nasdaq Global Market under the symbol
"PPIH". Previously the Company's Common Stock was traded on the Nasdaq Global Market under the symbol
"MFRI".

The following table sets forth, for the periods indicated, the high and low Common Stock sale prices as reported by
the Nasdaq Global Market for 2016 and 2015.

Fiscal 2016
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fiscal 2015
Fourth Quarter
Third Quarter
Second Quarter
First Quarter

High

Low

$9.23
8.15
7.90
7.74

6.88
5.68
6.40
6.83

$7.65
7.42
6.70
6.98

5.17
4.52
5.56
5.60

As of April 1, 2017, there were 69 stockholders of record and other additional stockholders for whom securities
firms acted as nominees.

The Company has never declared or paid a cash dividend and does not anticipate paying cash dividends on its
Common Stock in the foreseeable future. Management presently intends to retain all available funds for the
development of the business and for use as working capital. Future dividend policy will depend upon the
Company's earnings, capital requirements, financial condition and other relevant factors. For further information,
see "Financing" in Item 7 and Note 7 - Debt, in the Notes to Consolidated Financial Statements.

The Company has not made any sale of unregistered securities during the preceding three years.

The Transfer Agent and Registrar for the Common Shares is Broadridge Corporate Issuer Solutions, Inc., P.O. Box
1342 Brentwood, NY 11717, (877) 830-4936 or (720) 378-5591.

Equity Compensation Plan Information

The following table provides information regarding the number of shares of Common Stock that may be issued
upon exercise of outstanding options, warrants and rights under the Company's equity compensation plans and the
weighted average exercise price and number of shares of Common Stock remaining available for issuance under
those plans as of January 31, 2017.

Number of shares to be
issued upon exercise of
outstanding options,
warrants and rights
(a)(1)

Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)(1)

Number of shares
remaining available for
future issuance under
equity compensation
plans (excluding shares
reflected in column (a))
(c)

524,200

$11.55

96,857

Plan Category
Equity compensation plans approved
by stockholders

(1) The amounts shown in columns (a) and (b) of the above table do not include 290,305 outstanding restricted stock
granted under the Company's 2013 Omnibus Stock Incentive Plan as amended June 14, 2013 ("Omnibus Plan").

Item 6. SELECTED FINANCIAL DATA - Not applicable.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The statements contained under the caption MD&A and other information contained elsewhere in this Annual
Report on Form 10-K, which can be identified by the use of forward-looking terminology such as "may," "will,"
"expect," "continue," "remains," "intend," "aim," "should," "prospects," "could," "future," "potential," "believes,"
"plans," "likely" and "probable" or the negative thereof or other variations thereon or comparable terminology,
constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Exchange Act and are subject to the safe harbors created thereby. These
statements should be considered as subject to the many risks and uncertainties that exist in the Company's
operations and business environment. Such risks and uncertainties could cause actual results to differ materially
from those projected as a result of many factors, including, but not limited to, those under the heading Item 1A.
Risk Factors.

CONSOLIDATED RESULTS OF OPERATIONS

($ in thousands)
Backlog

January 31,
2017
$44,615

2016
$47,937

Perma-Pipe International Holdings, Inc. is engaged in the manufacture and sale of products in one reportable
segment: Piping Systems. The Company's website is www.permapipe.com. Since Piping Systems is based on large
discrete projects, operating results could be negatively impacted in the future as a result of large variations in the
level of market demand in both geographies and reporting periods.

The analysis presented below and discussed in more detail throughout the MD&A was organized to provide
instructive information for understanding the business going forward. However, this discussion should be read in
conjunction with the Consolidated Financial Statements in Item 8 of this report, including the notes thereto and the
risk factors contained herein. An overview of the segment results is provided in Note 1 - Business and segment
information, in the Notes to Consolidated Financial Statements.

Piping Systems

($ in thousands)
Net sales

Gross profit
Percentage of net sales

General and administrative expenses
Percentage of net sales

Selling expense
Percentage of net sales

(Loss) income from operations
Percentage of net sales

Income from joint venture
Loss on consolidation of joint venture

2016 Compared to 2015

2016
$98,845

2015
$122,696

11,716
12 %

8,430
8.5 %

5,721
5.8 %

(2,435)
(2.5)%

—
(1,620)

26,741
22%

11,211
9.1%

4,994
4.1%

10,537
8.6%

602
—

% Increase
(Decrease)
(19.4)%

(56.2)%

(24.8)%

14.6 %

(123.1)%

(100.0)%
(100.0)%

On December 31, 2015, PPIH entered into a purchase agreement with its joint venture partner Aegion Corporation
to acquire the remaining 51% ownership of PPC, a coating and insulation company in Camrose, Alberta, which
acquisition closed on February 4, 2016.

The purchase price was $13.1 million CAD ($9.6 million USD) in cash and debt at closing and is subject to certain
post-closing adjustments. The accounting for this acquisition has been completed.

The acquisition has resulted in $2.3 million of goodwill. In the first quarter of 2016, the Company recorded a one-
time non-cash loss of $1.6 million from the consolidation of the joint venture. The Company incurred legal,
professional and other costs related to this acquisition. These one-time costs of $0.2 million were recognized as
general and administrative expenses.

Net sales were $98.8 million in 2016, a decrease of 19% from $122.7 million in 2015. Various economic factors
substantially reduced demand in the markets the Company serves during this fiscal year. Since the Company serves
oil and gas customers, the low price of oil has had a significant dampening effect on new exploration projects in the
Gulf of Mexico and Canada. Restrained domestic federal and state infrastructure spending, combined with the oil-
price induced recession in the Gulf Cooperation Council region, combined to weaken demand for district heating
and cooling projects. Saudi Arabia has slowed down spending and the start-up of new infrastructure projects
outlined in its Vision 2030 plan, although the Saudi government appears to be taking steps to raise capital for such
projects.

Gross profit decreased 56% to $11.7 million in 2016 from $26.7 million in 2015 due to lower volume. Gross
margin decreased to 12% of net sales from 22% of net sales in the prior year. Despite having reduced
manufacturing plant expenses in the U.S. and Middle East facilities, the resulting lower production levels led to a
reduced absorption of manufacturing plant costs. Underutilization in the industry in the Middle East continued with
resulting pressure on project pricing, all contributing to a reduction in gross margins versus the prior year.

General and administrative expenses decreased to $8.4 million in 2016 from $11.2 million in 2015. General and
administrative expenses decreased by $3.8 million partially offset by a one-time legal settlement of $0.8 million and
the addition of $0.2 million related to the Canadian general and administrative expenses in the period. The decrease

was due to staffing reductions in the U.S. and the Middle East as well as lower management incentive compensation
expense. General and administrative expenses as a percentage of net sales decreased to 8.5% in 2016 from 9.1% in
the prior year.

Selling expenses increased to $5.7 million from $5.0 million in the prior year due to the additional Canadian
activity. As a percentage of net sales, selling expenses increased to 5.8% in 2016 from 4.1% in the prior year.

Corporate

Corporate expenses include interest expense and general and administrative expenses that are not allocated to the
segment. General and administrative expenses increased 9% to $8.4 million in 2016 from $7.7 million in 2015. As
a percentage of sales, expenses increased to 8.5% from 6.2%. Changes in the senior executive positions of the
Company went into effect in the fourth quarter with related hiring and separation costs of $1.1 million. The
increase was partially offset by lower management incentive compensation expense and lower deferred
compensation expense.

Interest expense decreased to $0.7 million in 2016 from $1.0 million in 2015 due to lower borrowings, both
domestic and foreign.

Income taxes

The Company's worldwide effective tax rates ("ETR") were 4.7% and 45.7% in 2016 and 2015, respectively. The
ETR in 2016 has been significantly impacted by the Company reporting a pre-tax loss for the year, a portion of
which was generated by the subsidiary in the U.A.E., which receives no tax benefit due to a zero tax rate in that
country and due to the impact of the full valuation allowance maintained against domestic deferred tax assets.
Other changes in the ETR from the prior year-to-date to the current year-to-date are due to the Canadian acquisition
and the allocation of tax expense between continuing operations, other comprehensive income and discontinued
operations when applying intraperiod allocation rules. The Company remains in an net operating loss ("NOL")
carryforward position.

The Company has not provided Federal tax on remaining unremitted earnings of its Middle East subsidiaries. The
Company does not believe that it will be necessary to repatriate earnings from these subsidiaries. The Company
intends and has the ability to reinvest these earnings for the foreseeable future outside the U.S. If these amounts
were distributed to the U.S., in the form of dividends or otherwise, the Company could be subject to additional U.S.
income taxes. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not
practicable, because such liability, if any, is dependent on circumstances existing if and when remittance occurs.

During the fourth quarter of 2014, the Company concluded that not all of the undistributed earnings of Perma-Pipe
India Ltd, will remain permanently reinvested outside the U.S. and are available for use in the U.S. or in entities in
other foreign countries. As such, the Company recorded a deferred tax liability of $0.1 million and $0.2 million for
the periods ending January 31, 2017 and 2016, respectively, related to the U.S. federal and state income taxes and
foreign withholding taxes on approximately $0.5 million and $2.8 million of undistributed earnings. The decrease
in deferred tax liability relates to a net decrease in the earnings and profits of Perma-Pipe India. Future earnings
related to this subsidiary and the Canadian and Denmark subsidiaries are not deemed permanently reinvested. No
U.S. cash tax payments will be made upon distribution of these foreign earnings as long as the Company has
sufficient tax attributes in the U.S. to reduce the cash tax consequences of potential repatriation.

A reconciliation of the ETR to the U.S. Statutory tax rate is as follows:

Statutory tax rate
Repatriation
Valuation allowance for domestic deferred tax assets
Permanent difference management fee allocation
Permanent differences other
Foreign tax credit
Differences in foreign tax rate
Domestic deferred tax true ups
Nontaxable income related to the Canadian joint venture
Research tax credit
Valuation allowance for state NOLs
Valuation allowance for foreign NOLs
Nondeductible Interest
State taxes, net of federal benefit
All other, net expense
Effective income tax rate

2016
34.0 %
(10.3)%
(4.4)%
— %
(1.6)%
9.6 %
(16.4)%
— %
(4.2)%
— %
(0.9)%
0.3 %
(1.9)%
0.8 %
(0.3)%
4.7 %

2015
34.0 %
30.2 %
29.6 %
22.8 %
7.9 %
(28.0)%
(29.9)%
(12.7)%
(7.5)%
(2.0)%
3.2 %
1.2 %
— %
(2.1)%
(1.0)%
45.7 %

For further information, see Note 9 - Income taxes, in the Notes to Consolidated Financial Statements.

Net loss from continuing operations was $12.4 million in 2016 compared to net income from continuing operations
of $1.6 million in 2015.

Other

On January 31, 2017, no customer accounted for more than 10% of the Company's net sales. On January 31, 2016,
one customer accounted for 10.3% of the Company's net sales.

Two customers accounted for 33.2% of accounts receivable on January 31, 2017, and two customers accounted for
46.5% of accounts receivable on January 31, 2016. As of April 1, 2017, these customers have paid 35.4% of their
receivables outstanding on January 31, 2017.

Discontinued operations

Prior to January 29, 2016, the Company was also engaged in the manufacture and sale of products in the Filtration
Products segment. On January 29, 2016, the Company sold certain assets and liabilities of its TDC Filter business
based in Bolingbrook, Illinois and its Nordic Air Filtration subsidiaries in Denmark and the U.A.E. The Company
also liquidated the remaining assets of the Filtration bag business in Winchester, Virginia during the year ended
January 31, 2017. The Filtration business segment is reported as discontinued operations in the consolidated
financial statements, and the notes to consolidated financial statements have been revised to conform to the current
year reporting. There was $1.0 million of tax expense attributed to Discontinued Operations for the year ended
January 31, 2017. For further information, see "Notes to Consolidated Financial Statements, Note 4 Discontinued
operations"

Liquidity and capital resources

Cash and cash equivalents as of January 31, 2017 were $7.6 million, compared to $16.6 million on
January 31, 2016. On January 31, 2017, $0.2 million was held in the U.S. and $7.4 million was held in the foreign
subsidiaries. The Company's working capital was $27.8 million on January 31, 2017 compared to $31.8 million on
January 31, 2016. Cash used in operations in 2016 was $4.2 million compared to $2.9 million in 2015.

The Company has paid out $6.4 million in 2016 under its terminated deferred compensation plans. $3.2 million of
these payments were funded by the liquidation of life insurance contracts previously purchased by the Company.

Foreign earnings in the Middle East are considered to be indefinitely reinvested outside the U.S. The Company has
not provided Federal tax on unremitted earnings of its Middle East subsidiaries. The Company does not believe
that it will be necessary to repatriate investments from these subsidiaries.

Net cash provided by investing activities in 2016 was $10.2 million, compared to $13.9 million in 2015, as a result
of the Filtration divestitures partially offset by $4.7 million related to the acquisition of PPC. The Company
estimates that capital expenditures for 2017 could be $3.5 million, and the Company may finance capital
expenditures through real estate mortgages, term loans, equipment financing loans, internally generated funds and
its revolving line of credit. The majority of such expenditures relates to diversification and expansion of business in
the U.S. and Canada.

In May 2016, the Company completed the sale of its former corporate headquarters, land and building, to a third
party at a purchase price of $4.4 million. The sale generated approximately $0.4 million in cash after expenses and
mortgage payoff.

In May 2016, the Company also completed the sale of its Bolingbrook Filtration facility to a third party at a
purchase price of $7.1 million. The sale generated approximately $1.9 million in cash after expenses and mortgage
payoff.

In September 2016, the Company completed the sale of its Cicero Filtration facility to a third party at a price of
$0.5 million. The sale generated approximately $0.4 million in cash after expenses.

In October 2016, the Company completed the sale of its Virginia Filtration facility to a third party at a price of
$1.5 million. The sale generated approximately $1.4 million in cash after expenses.

Debt totaled $11.7 million on January 31, 2017. Net cash used in financing activities was $14.9 million in 2016
compared to $3.0 million in 2015. The domestic revolver decreased $1.4 million mainly due to proceeds from the
domestic sale of the remaining Filtration business. For additional information, see Note 7 - Debt, in the Notes to
Consolidated Financial Statements. Other long-term liabilities of $0.5 million were composed primarily of deferred
rent.

The following table summarizes the Company's estimated contractual obligations on January 31, 2017.

($ in thousands)

Contractual obligations

Revolving line North America (1)
Mortgages (2)
Revolving line foreign (3)

Term loans (2)
Subtotal

Capitalized lease obligations
Operating lease obligations (4)

Projected pension contributions (5)
Employment agreements (6)

Contractual obligations of
discontinued operations (7)

Total

$3,813

9,739
319

85
13,956

295
18,099

3,462
1,085

199

2018

$3,813

471
319

66
4,669

231
2,199

348
605

199

Year Ending January 31,

2019

2020

2021

2022 Thereafter

$—

687
—

19
706

63
1,705

345
154

—

$—

676
—

—
676

1
1,536

347
—

—

$—

664
—

—
664

—
1,475

342
—

—

$—

653
—

—
653

—
1,477

347
—

—

$—

6,588
—

—
6,588

—
9,707

1,733
326

—

Uncertain tax position obligations (8)
Total

159
$37,255

—
$8,251

—
$2,973

—
$2,560

—
$2,481

—
$2,477

159
$18,513

Notes to contractual obligations table
(1) Interest obligations exclude floating rate interest on debt payable under the domestic revolving line of credit.

Based on the amount of such debt on January 31, 2017, and the weighted average interest rate of 3.83% on that
debt, such interest was being incurred at an annual rate of approximately $0.1 million.

(2) Scheduled maturities, including interest.
(3) Scheduled maturities of foreign revolver line, including interest.
(4) Minimum contractual amounts, assuming no changes in variable expenses.
(5) Includes estimated future benefit payments.
(6) Refer to the index for a description of compensation and separation plans.
(7) Included payments for other liabilities included in discontinued operations.
(8) Refer to Note 9 - Income taxes, in the Notes to Consolidated Financial Statements for a description of the

uncertain tax position obligations.

Financing

Revolving line North America. On September 24, 2014, the Company entered into a Credit and Security agreement
with a financial institution (as amended, "Credit Agreement"). Under the terms of the Credit Agreement, which
matures on September 24, 2018, the Company can borrow up to a combined $15.0 million in the U.S. and Canada,
subject to borrowing base availability from secured domestic and certain Canadian assets, such as accounts
receivable and inventory, and other requirements, under a revolving line of credit. The Credit Agreement covenants
restrict debt, liens, and investments, and require attainment of specific levels of profitability and cash flows. On
January 31, 2017, the Company was in compliance with all covenants under the Credit Agreement. The domestic
revolving line balances as of January 31, 2017 and 2016 were included as current liabilities in the consolidated
balance sheets, because the Credit Agreement has a subjective acceleration clause.

Interest rates vary based on the average availability in the preceding fiscal quarter and are: (a) a margin in effect
plus a base rate, if below certain availability limits; or (b) a margin in effect plus the Eurodollar rate for the
corresponding interest period. On January 31, 2017, the Company had borrowed $3.8 million at 5%, 3.77% and
3.95% and had $5.8 million available to it under the revolving line of credit. In addition, $0.2 million of
availability was used under the Credit Agreement primarily to support letters of credit to guarantee amounts
committed for inventory purchases. Cash required for operations is provided by draw-downs on the line of credit.

in which the Company operates. Some credit arrangement covenants requires a minimum tangible net worth to be
maintained, including intercompany subordinated debt. In addition, some of the revolving credit facilities restrict
payment of dividends. On January 31, 2017, the Company was in compliance with the covenants under the credit
arrangements. Interest rates are 4.0% per annum below National Bank of Fujairah Base Rate, minimum 3.5% per
annum, and Emirates Inter Bank Offered Rate (EIBOR) plus 3.50% per annum. The Company's interest rates range
from 3.5% to 6.0%. On January 31, 2017, the Company can borrow $26.0 million under these credit arrangements.
The Company borrowed $0.3 million and had $20.8 million available under these credit arrangements as of
January 31, 2017. In addition, $4.9 million of availability was used to support letters of credit to guarantee amounts
committed for inventory purchases. For further information, see Note 7 - Debt, in the Notes to Consolidated
Financial Statements.

The Company believes its current cash and cash flow from operations, together with borrowing capacity under the
revolving credit facilities, will be sufficient to fund anticipated operations, working capital and capital spending
needs for at least the next 12 months.

On February 1, 2016, the Company executed a promissory note in favor of United Pipeline Systems Limited, an
affiliate of Aegion, Inc. for $2.0 million. The promissory note was paid on July 28, 2016. In addition, the
Company on July 28, 2016 paid off the balance of $2.2 million in previously affiliated debt to Aegion in its
Canadian subsidiary which was acquired in the purchase of PPC.

On July 28, 2016, the Company borrowed $8.0 million CAD (approximately $6.1 million USD at the prevailing
exchange rate on the transaction date) from a bank in Canada under a mortgage note secured by the manufacturing
facility located in Alberta, Canada that matures on December 23, 2042. The interest rate is variable, currently at
4.7%, with monthly payments of $31 thousand CAD (approximately $24 thousand USD) for interest; and monthly
payments of $27 thousand CAD (approximately $20 thousand USD) for principal. Principal payments begin
January 2018.

Critical accounting estimates and policies

The Company's significant accounting policies are discussed in the Notes to Consolidated Financial Statements
included in Item 8 of this Annual Report on Form 10-K. The application of certain of these policies requires
significant judgments or a historical based estimation process that can affect the results of operations and financial
position of the Company as well as the related footnote disclosures. The Company bases its estimates on historical
experience and other assumptions that it believes are reasonable. If actual amounts ultimately differ from previous
estimates, the revisions are included in the Company's results of operations for the period in which the actual
amounts become known.

Revenue recognition. The Company recognizes revenues, including shipping and handling charges billed to
customers, when all the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has
occurred or services have been rendered, (iii) the seller's price to the buyer is fixed or determinable, and (iv)
collectability is reasonably assured. All subsidiaries of the Company, except as noted below, recognize revenues
upon shipment or delivery of goods or services when title and risk of loss pass to customers.

Percentage of completion revenue recognition. All divisions recognize revenues under the above stated revenue
recognition policy except for domestic complex contracts that require periodic recognition of income. For these
contracts, the Company uses the "percentage of completion" accounting method. Under this approach, income is
recognized in each reporting period based on the status of the uncompleted contracts and the current estimates of
costs to complete. The choice of accounting method is made at the time the contract is received based on the
expected length and complexity of the project. The percentage of completion is determined by the relationship of
costs incurred to the total estimated costs of the contract. Provisions are made for estimated losses on uncompleted
contracts in the period in which such losses are determined. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract penalty provisions and final contract settlements, may
result in revisions to costs and income. Such revisions are recognized in the period in which they are determined.

Claims for additional compensation due to the Company are recognized in contract revenues when realization is
probable and the amount can be reliably estimated.

Inventories. Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out
method for all inventories.

Income taxes. Deferred income taxes have been provided for temporary differences arising from differences in the
basis of assets and liabilities for tax and financial reporting purposes. Deferred income taxes on temporary
differences have been recorded at the current tax rate. The Company assesses its deferred tax assets for realizability
at each reporting period.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant
tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more
likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater
than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Equity-based compensation. Stock compensation expense for employee equity awards is recognized ratably over
the requisite service period of the award. The Black-Scholes option-pricing model is utilized to estimate the fair
value of option awards. Determining the fair value of stock options using the Black-Scholes model requires
judgment, including estimates for (1) risk-free interest rate - an estimate based on the yield of zero-coupon treasury
securities with a maturity equal to the expected life of the option; (2) expected volatility - an estimate based on the
historical volatility of the Company's Common Stock; and (3) expected life of the option - an estimate based on
historical experience including the effect of employee terminations.

Fair value of financial instruments. The carrying values of cash and cash equivalents, accounts receivable and
accounts payable are based upon reasonable estimates of their fair value due to their short-term nature. The
carrying value of the cash surrender value of life insurance policies approximated fair value and was based on the
market value of the underlying investments, which may increase or decrease due to fluctuations in the overall
financial markets. The carrying amount of the Company's short-term debt, revolving line of credit and long-term
debt approximate fair value because the majority of the amounts outstanding accrue interest at variable rates.

New accounting pronouncements. See Recent accounting pronouncements in Note 2 - Significant accounting
policies, in the Notes to Consolidated Financial Statements.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - Not

applicable.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the Company for each of the two years in the periods ended as of
January 31, 2017 and 2016 and the notes thereto are set forth as an exhibit hereto.

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE - None.

Item 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. The Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) under the Exchange Act as of January 31, 2017. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of
January 31, 2017 to ensure that information required to be disclosed in the reports that are filed or submitted under
the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's

rules and forms and is accumulated and communicated to the issuer's management, including the principal
executive and financial officers, to allow timely decisions regarding required disclosure.

Management's Report on Internal Control Over Financial Reporting. The Company's management is responsible
for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule
13a-15(f) under the Exchange Act. As required by Rule 13a-15(c) under the Exchange Act, PPIH's management
carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of its internal control over financial reporting as of the end of the last fiscal year. The framework on
which such evaluation was based is contained in the report entitled "Internal Control-Integrated Framework" issued
by the Committee of Sponsoring Organizations of the Treadway Commission (the "2013 COSO Report").

The Company's system of internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.

Based on its assessment, management has concluded that the Company has maintained effective internal control
over financial reporting as of January 31, 2017, based on criteria in the 2013 COSO Report.

Item 9B.

OTHER INFORMATION - None.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE