Table of Contents
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, 2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File No. 001-32530
Perma-Pipe International Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
36-3922969
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
25025 I-45, Suite 200, The Woodlands, Texas
77380
(Address of principal executive offices)
(Zip Code)
(281) 598-6222
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which registered
Common Stock, $.01 par value per share
PPIH
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
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 ☐ No ☒
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth
company ☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒
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 $71,626,601 based on the closing
sale price of $9.49 per share as reported on the Nasdaq Global Market on July 31, 2024.
The number of shares of the registrant's common stock outstanding at April 21, 2025 was 7,982,568.
Table of Contents
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for its 2025 annual meeting of stockholders, which will be filed with the Securities and Exchange
Commission within 120 days after January 31, 2025, are incorporated by reference in Part III of this Annual Report on Form 10-K.
Table of Contents
Perma-Pipe International Holdings, Inc.
FORM 10-K
For the fiscal year ended January 31, 2025
TABLE OF CONTENTS
Page
PART I
ITEM 1.
Business
2
ITEM 1A.
Risk Factors
5
ITEM 1B.
Unresolved Staff Comments
9
ITEM 1C.
Cybersecurity
10
ITEM 2.
Properties
11
ITEM 3.
Legal Proceedings
11
ITEM 4.
Mine Safety Disclosures
11
PART II
ITEM 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
12
ITEM 6.
[Reserved]
13
ITEM 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
13
ITEM 7A.
Quantitative and Qualitative Disclosures About Market Risk
20
ITEM 8.
Financial Statements and Supplementary Data
20
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
20
ITEM 9A.
Controls and Procedures
21
ITEM 9B.
Other Information
22
ITEM 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
22
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance
23
ITEM 11.
Executive Compensation
23
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
23
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
23
ITEM 14.
Principal Accountant Fees and Services
23
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules
23
ITEM 16.
Form 10-K Summary
57
Signatures
58
Table of Contents
PART I
Cautionary Statements Regarding Forward Looking Information
Certain statements contained 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 Securities Exchange Act of 1934, as amended ("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, the following:
Market Condition Risks
•
fluctuations in the price of oil and natural gas and its impact on customer order volume for the Company's products;
•
the Company’s ability to purchase raw materials at favorable prices and to maintain beneficial relationships with its suppliers, which could result in a
shortage of supply, or increased pricing;
•
decreases in government spending on projects using the Company’s products, and challenges to the Company’s customers’ liquidity and access to
capital funds;
Financial Risks
•
the Company’s ability to maintain compliance with debt covenants, repay its debt and renew expiring credit facilities;
•
the Company's ability to maintain sustained levels of profitability or positive cash flows in the future;
•
the Company’s ability to effectively execute its strategic plan and achieve sustained profitability and positive cash flows;
•
the Company's ability to collect a long-term account receivable related to a project in the Middle East;
•
the Company's ability to interpret and adapt to changes in tax regulations and legislation;
•
the Company’s ability to use its net operating loss carryforwards;
•
the Company's inability to establish and maintain effective internal control over financial reporting;
•
changes in estimates which could result in a reduction or elimination of previously recorded revenues and profit in connection with "over time"
revenue recognition;
Business Condition Risks
•
the timing of order receipt, execution, delivery and acceptance for the Company’s products;
•
the Company’s ability to successfully negotiate progress-billing arrangements for its large contracts;
•
aggressive pricing by existing competitors and the entrance of new competitors in the markets in which the Company operates;
•
the Company’s ability to manufacture products free of latent defects and to recover from suppliers who may provide defective materials to the
Company;
•
reductions or cancellations of orders included in the Company’s backlog;
•
risks and uncertainties specific to the Company's international business operations;
General Risks
•
the Company’s ability to attract and retain senior management and key personnel;
•
the Company’s ability to achieve the expected benefits of its growth initiatives; and
•
the impact of cybersecurity threats on the Company’s information technology systems.
1
Table of Contents
ITEM 1. BUSINESS
Perma-Pipe International Holdings, Inc., collectively with its subsidiaries ("PPIH", the "Company", "we", "our" or the "Registrant"), is engaged in the
manufacture and sale of products in one reportable segment: Piping Systems. The Company was incorporated in Delaware on October 12, 1993. The
Company's common stock is traded on the Nasdaq Global Market and reported under the ticker symbol "PPIH". The Company's fiscal year ends on January 31.
Years, results and balances described as 2025, 2024 and 2023 are for the fiscal year ending January 31, 2026 and the fiscal years ended January
31, 2025 and 2024, respectively.
PRODUCTS AND SERVICES
The Company engineers, designs, manufactures and sells specialty piping systems and leak detection systems. Specialty piping systems include: (i) insulated
and jacketed district heating and cooling piping systems for efficient energy distribution from central energy plants to multiple locations, (ii) primary and
secondary containment piping systems for transporting chemicals, hazardous fluids and petroleum products, (iii) the coating and/or insulation of oil and gas
gathering and transmission pipelines, and (iv) liquid and powder based anti-corrosion coatings applied both to the external and internal surfaces of steel pipe,
including shapes such as bends, reducers, tees, and other spools/fittings used in pipelines for the transportation of oil and gas products and potable water. The
Company's leak detection systems are sold with its piping systems or 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.
The Company frequently engineers and custom fabricates to job site dimensions and incorporates provisions for thermal expansion due to cycling
temperatures. Most of the Company's piping systems are produced for underground installations and, therefore, require trenching, which is the responsibility of
the general contractor, and completed by unaffiliated installation contractors.
The Company’s piping systems are typically sold as a part of discrete projects, and customer demand can vary by reporting period. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Operating Facilities. The Company operates its business from the following locations:
Perma-Pipe, Inc.
Perma-Pipe Middle East LLC
Rolling Meadows, IL
Abu Dhabi, United Arab Emirates
New Iberia, LA
Perma-Pipe Middle East FZC
Lebanon, TN
Fujairah, United Arab Emirates
Perma-Pipe Canada, Ltd.
Perma-Pipe Saudi Arabia, LLC
Camrose, Alberta, Canada
Perma-Pipe Gulf Arabia, LLC
Vars, Ontario, Canada
Dammam, Kingdom of Saudi Arabia
Perma-Pipe Egypt for Metal Fabrication and Insulation Industries (Perma-Pipe Egypt) S.A.E.
Riyadh, Kingdom of Saudi Arabia
Beni Suef, Egypt
Medina, Kingdom of Saudi Arabia
Perma-Pipe India Pvt. Ltd
Gandhidham, India
Customers and sales channels. The Company's customer base is industrially and geographically diverse. In the United States, the Company employs inside
and outside sales managers who use and assist a network of independent manufacturers' representatives, none of whom sell products that are competitive with
the Company's piping systems. The Company employs a direct sales force to market and sell products and services in Canada, India, Egypt, and across several
countries in the Middle East. On a country-by-country basis, and where advantageous, the Company uses an agent network to assist in marketing and selling
the Company's products and services.
For the years ended January 31, 2025 and 2024, no one customer accounted for greater than 10% of the Company's consolidated net sales.
As of January 31, 2025 and 2024, no one customer accounted for greater than 10% of accounts receivable.
Backlog. The Company’s backlog on January 31, 2025 was $138.1 million, compared to $68.4 million on January 31, 2024, most of which is expected to be
completed within the year ending January 31, 2026. The increase in the backlog was the result of new awards year-over-year in excess of completed projects
during the year in North America and the Middle East. The Company defines backlog as the expected total revenue value 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. In the event of a
cancellation, the customer is normally responsible for all finished goods produced or shipped, 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 revenues from the Company's reported backlog. Additionally, as a result of the Company's contracts having a duration of less than
one year, a practical expedient was applied regarding disclosure of the aggregate amount and future timing of performance obligations that are unsatisfied or
partially satisfied as of the end of the reporting period.
Intellectual property. The Company owns various patents covering its piping and electronic leak detection systems, as well as for some of the features of its
sensor cables. These patents are not material to the Company either individually or in the aggregate because the Company believes its sales would not be
materially reduced if patent protection was not available. The Company owns numerous trademarks connected with its piping and leak detection systems
throughout the world.
2
Table of Contents
Suppliers. The basic raw materials used in production are pipes and tubes made of carbon steel, steel alloys, copper, ductile iron, or polymers and various
chemicals such as polyols, isocyanate, urethane resin, polyethylene, and fiberglass, which are 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 Company's leak detection and location systems are manufactured to the Company's specifications by companies regularly
engaged in manufacturing such cables. The Company assembles the monitoring component of its leak detection and location systems from components
purchased from many sources.
Due to the current inflationary environment, raw material supply shortages and transportation delays, the Company routinely experiences delays and increased
prices for raw materials used in the Company's production processes. To mitigate these impacts, the Company has implemented several strategies,
including purchasing from alternative suppliers and planning for material purchases further in advance to ensure the Company has materials when needed. The
Company also adjusts its pricing to customers to offset the impacts of the raw material price increases. These impacts are expected to continue
throughout 2025, and the resulting future disruptions to the Company’s operations are uncertain.
Competition. The piping systems market is highly competitive. The Company believes that quality, service, engineering design capabilities and support, a
comprehensive product line, timely execution, plant location and price are key competitive factors in the industry. The Company also believes it has a more
comprehensive product line than any competitor.
Research and Development. The Company's research and development efforts primarily focus on activities and development to meet product specifications
mandated by its customers and the industry.
Environmental impacts. The Company provides insulated pipe for district energy systems. A district energy system is a highly efficient way to provide heating
or cooling to buildings. A central plant produces steam or chilled water that flows through insulated pipes to buildings. The goal of a district energy system is to
centralize production to deliver energy efficiency, reduce operating costs, and use less equipment compared to individual buildings with their own boilers and
chillers. In addition, district heating and cooling plants can provide better pollution control than localized boilers and cooling equipment.
EMPLOYEES
As of January 31, 2025, the Company had approximately 175 full-time employees working in the United States, of which approximately 79 were under two
collective bargaining agreements expiring on April 30, 2027 and May 5, 2025. As of January 31, 2025, there were approximately 575 full-time employees
working at the Company's international locations. The Company considers its relationship with its employees to be good.
3
Table of Contents
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following table sets forth information regarding the executive officers of the Company as of May 1, 2025:
Executive officer of the
Name
Offices and Positions; Age
Company since
David J. Mansfield
Director, Chief Executive Officer; Age 65
2016
Saleh Sagr
President; Age 55
2025
Matthew E. Lewicki
Vice President and Chief Financial Officer; Age 42
2023
David J. Mansfield: Chief Executive Officer ("CEO") and member of the Board of Directors 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 & the former Soviet Union region, 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. He is a Fellow member of the Association
of Chartered Certified Accountants.
Saleh Sagr: Appointed President in April 2025 and has previously served as the Company’s Senior Vice President of the MENA region since June 2021, where
he was responsible for overseeing operations in the U.A.E., Saudi Arabia, India, and Egypt. He joined the Company in May 2019 as Vice President of the
MENA region. Prior to joining Perma-Pipe, Mr. Sagr served as General Manager for Global Anti Corrosion Techniques Co. Ltd, in Saudi Arabia, a Saudi
pipeline company he co-founded in 2005. From 1995 to 2005, Mr. Sagr held various positions for BrederoShaw, such as engineering, startups, and operations
management.
Matthew E. Lewicki: Vice President and CFO since October 2023 and previously served as Chief Accounting Officer from May 2023 to October 2023. From
2019 to 2023, Mr. Lewicki served as Corporate Controller of HMT Holdings Corp, Inc., a global oil and gas manufacturing and infrastructure services
company, consisting of the manufacturing of above-ground storage tanks and associated materials, oilfield maintenance and repair services, and inspection
services. In this position, Mr. Lewicki was responsible for the consolidated financial affairs of the worldwide organization, including financial strategy, mergers
and acquisitions, and treasury management. From 2013 to 2019, Mr. Lewicki served as Senior Manager of Financial Planning and Reporting for Quanta
Services, Inc., a Fortune 300 electric, oil and gas, and telecommunications infrastructure services company. In this role, Mr. Lewicki was responsible for
overseeing financial reporting and SEC compliance, and financial planning and analysis, which consisted of strategic planning, budgeting, forecasting, mergers
and acquisition integration, and investment strategy. He began his career in public accounting at Deloitte and is a Certified Public Accountant in the State of
Texas.
AVAILABLE INFORMATION
The Company files with, and furnishes to, the Securities and Exchange Commission ("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
files with, or furnishes 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.
4
Table of Contents
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.
Market Condition Risks
The Company's operations and earnings may be significantly affected by changes in oil and gas prices. Oil and gas prices depend on local, regional, and
global events or conditions that affect supply and demand. Any material decline in oil or gas prices could have a material adverse effect on the demand for the
Company's products, its operations and financial condition.
The Company may be unable to purchase raw materials at favorable prices, or maintain beneficial relationships with its suppliers, which could result in a
shortage of supply, or increased pricing . There can be no assurance regarding the availability of supply for key components of the Company's products. The
lack of supply of these components could result in an adverse effect on the financial condition of the Company. The steel industry in particular is highly
cyclical in nature, and at times, pricing can be highly volatile due to a number of factors beyond the Company's control. The Company utilizes escalation
clauses and bid expiration dates to mitigate the impact of this volatility on its earnings. This volatility may negatively impact market conditions thus reducing
project activity and the Company's results of operations. If the United States or other countries in which the Company operates impose tariffs on imports of raw
materials, including steel, used in the Company's operations, could have an adverse impact on the Company's business.
The Company regularly updates its quoting system for the movements in raw material prices and seeks to recover price differentials through increases in the
selling price of the Company's products; however, the Company may not always be successful, and any increase in raw material prices that is not offset by an
increase in the Company's prices that is accepted by customers could have an adverse effect on the Company's business, results of operations, financial position
and cash flows. In addition, if the Company is unable to acquire timely raw material supplies, it may need to decline opportunities, which could also have an
adverse effect on the Company's business, results of operations, financial position and cash flows.
Due to the current inflationary environment, raw material supply shortages and transportation delays, the Company could experience delays and increased
prices for raw materials used in production processes. To mitigate these impacts, the Company has implemented several strategies, including purchasing from
alternative suppliers and planning for material purchases farther in advance to ensure the Company has materials when needed. The Company also adjusts its
pricing to customers to offset the impacts of the raw material price increases. The Company is unable to predict the duration of the current inflationary
environment, raw material supply shortages and transportation delays, and the resulting future disruptions to the Company’s operations are uncertain.
Decreases in government spending on projects using the Company’s products, and challenges to the Company’s customers’ liquidity and availability of
capital funds, may adversely impact demand for the Company’s products. Decreases in government spending on projects using the Company's products can
have a negative impact on the Company's sales volumes. 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 adverse effect on the demand for the Company's products.
5
Table of Contents
Financial Risks
The Company may be unable to maintain compliance with existing debt covenants, repay its debt or renew its expiring international credit facilities. There
is a risk that the Company may not be able to remain in compliance with its credit agreement covenants. If there were an event of default under the Company's
current revolving credit facilities, the lenders could cause all amounts outstanding with respect to that debt to be due and payable immediately. The Company
cannot assure that its cash flow will 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;
•
paying dividends, capital returns, intercompany obligations and other forms of repatriation; and
•
creating liens.
The Company has approximately $2.0 million becoming due in the year ending January 31, 2026 under its various foreign revolving lines of credit. The
Company’s credit arrangements used by its Middle Eastern subsidiaries are renewed on an annual basis. In addition to these credit arrangements, the Company
also obtains financing in the Middle East on a project-by-project basis. The Company has insignificant borrowings becoming due in the year ending January
31, 2026 under its project financing agreements. While the Company believes that it will be able to renew its Middle East credit arrangements and will have
continued access to individual project financing, there is no assurance that such arrangements will be renewed or made available in similar amounts or on
similar terms and conditions as the current arrangements, or that such individual project financing will be available for projects that the Company is interested
in pursuing in the future.
Any replacement credit arrangements outside of the United States may further limit the Company’s ability to repatriate funds from abroad. Repatriation of
funds from certain countries may become limited based upon regulatory restrictions or unfeasible economically because of the taxation of funds when moved
to another subsidiary or to the parent company. In addition, any refinancing, replacement or additional financing the Company may obtain could contain similar
or more restrictive covenants than those currently applicable to the Company. 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.
The Company may be unable to maintain sustained levels of profitability or positive cash flows in the future. There is no guarantee that the Company will be
able to maintain profitability or positive cash flows in the future. The Company’s inability to successfully maintain profitability and positive cash flows may
result in it experiencing a serious liquidity deficiency resulting in material adverse consequences that could threaten its viability.
The Company extended credit to a customer for a project in the Middle East in 2013 and, if the Company is unable to collect this account receivable, its
future profitability could be adversely impacted. One of the Company’s accounts receivable in the total amount of $1.8 million and $2.2 million as of January
31, 2025 and 2024, respectively, has been outstanding for several years. As of January 31, 2025, the entire balance represents a retention asset that is payable
upon the commissioning of the system. Due to the long-term nature of the receivable, $1.2 million and $1.4 million were included in other long-term assets as
of January 31, 2025 and 2024, respectively. The Company completed all of its deliverables in 2015 under the related contract, but the system has not yet been
commissioned by the customer as additional activities must be completed prior to the overall system completion and commissioning. Nevertheless, the
Company continues to actively engage in ongoing collection efforts with the customer to ensure full payment of open balances, and at various times
throughout 2024 and 2023, the Company received a partial payment to settle $0.4 million and $0.6 million of the customer's outstanding balances, respectively,
including an additional $0.5 million that was received subsequent to the end of the year. Additionally, the Company has been engaged by the customer to
perform additional work in 2025 under customary trade credit terms that support the continued cooperation between the Company and the customer. As a
result, the Company did not reserve any allowance against this outstanding receivable as of January 31, 2025. However, if the Company’s efforts to collect on
this account are not successful, the Company may recognize an allowance for all, or substantially all, of any such uncollected amounts.
The Company may be impacted by interpretations and changes in tax regulations and legislation which could adversely affect the Company's results of
operations. Tax interpretations, regulations, and legislation in the various jurisdictions in which the Company operates are subject to measurement uncertainty
and the interpretations can impact net income, income tax expense or benefit, and income tax assets or liabilities. Tax rules and regulations, including those
relating to foreign jurisdictions, are subject to interpretation and require judgment by the Company that may be challenged by the applicable taxation
authorities upon audit. Although the Company believes its assumptions, judgements and estimates are reasonable, changes in tax laws or the Company's
interpretation of tax laws and the resolution of any tax audits could significantly impact the amounts provided for income taxes in the Company's consolidated
financial statements.
6
Table of Contents
The Company’s ability to use its net operating loss carryforwards and certain other tax attributes may be limited. The Company’s net operating loss
carryforwards (“NOLs”) in the U.S. could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because
of restrictions under U.S. tax law. As of January 31, 2025, the Company had $23.8 million of gross federal NOLs and $21.9 million of gross state NOLs
available to offset the Company’s future taxable income. Of the gross federal NOL amount, $16.4 million will begin to expire between tax years 2036 and 2037
and the remainder has an indefinite carryforward. The state NOLs expire at various dates from 2025 to 2044. In addition, the Company's ability to use its NOLs
may be limited in the event of future changes in its stock ownership. As a result, if the Company earns net taxable income, the Company’s ability to use its pre-
change NOLs to offset U.S. federal taxable income may be subject to limitations, which could potentially result in a future tax liability of the Company. In
addition, at the state level, there may be periods in the future during which the use of NOLs is suspended or otherwise limited, which could result in a state tax
liability which would otherwise not arise.
The Company’s inability to establish and maintain effective internal control over financial reporting could harm its business and financial results. The
Company’s management is responsible for establishing and maintaining effective internal control over financial reporting. However, there are material
weaknesses in internal controls such that our internal control over financial reporting has been determined not to be effective. Internal control over financial
reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting
principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting is not intended to provide
absolute assurance that the Company would prevent or detect a misstatement of its financial statements or fraud. If we are not able to remediate the material
weaknesses and maintain effective internal control over financial reporting, our business and financial results could be harmed.
The Company may experience changes in estimates which could result in a reduction or elimination of previously recorded revenues and profit in
connection with "over time" revenue recognition. Certain of the Company's contracts recognize revenues using periodic recognition of income. For these
contracts, the Company uses the "over time" 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 amounts are known or can be reasonably estimated. 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.
7
Table of Contents
Business Condition Risks
Delays in the timing of order receipt, execution, delivery and acceptance for the Company’s products generally negatively impact the Company’s operating
results. The Company's operating results in any reporting period could be negatively impacted as a result of delays in the timing of project execution.
The Company may not be able to successfully negotiate progress-billing arrangements for its large contracts, which could adversely impact the Company’s
working capital needs, cash flows 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 its working capital and cash flows, and to reduce the credit risk associated with these large
contracts. Consequently, changes in accepted billing terms of contracts could impact the Company's requirements for working capital and cash flows.
Aggressive pricing by existing competitors and the entrance of new competitors in the markets in which the Company operates could drive down the
Company's profits and reduce the Company's revenue. The Company's business is highly competitive. Some of the Company's competitors are large
organizations with access to considerable financial resources. 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 its ability to cut costs, which may be a
competitive disadvantage compared to companies with more flexible cost structures, or may result in reduced operating margins, operating losses and negative
cash flows.
The Company may be subject to claims for damages for defective products. The Company warrants its products to be free of certain defects. The Company
has, from time to time, had claims alleging defects in its products. The Company may experience material product liability claims in the future and it could
incur significant costs to defend such claims. While the Company currently has product liability insurance that it believes to be sufficient, the Company cannot
be certain that its product liability insurance coverage will be adequate for liabilities that may be incurred in the future or that such coverage will continue to be
available to the Company on commercially reasonable terms. Any claims relating to defective products that result in liabilities exceeding the Company's
insurance coverage could have a material adverse effect on the Company's business, results of operations, financial position and cash flows.
The Company may not be able to recover costs and damages from vendors that supply defective materials. The Company may receive defective materials
from its vendors that are incorporated into the Company's products during the manufacturing process. While the Company mitigates this risk through contract
terms, traceability and specifications, and has recourse to recover from vendors the costs to repair, remake or replace defective products, such costs could be
greater than the amount that can be recovered. Such excess costs could have an adverse effect on the Company's business, results of operations, financial
position and cash flows.
Product and service orders included in the Company’s backlog may be reduced or cancelled. The Company defines backlog as the revenue value resulting
from confirmed customer purchase orders that have not yet been recognized as revenue. Orders may be canceled or modified at any time. In the event of a
cancellation, the customer is normally responsible for all finished goods produced or shipped, 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 reduction or cancellation of orders
may result in revenues that are lower than expected.
The Company's results of operations could be adversely affected by changes in international regulations and other activities of government agencies
related to the Company’s operations. International sales represent a significant portion of the Company's total sales. The Company's sales to foreign customers
were 66.6% and 65.6% in the years ended January 31, 2025 and 2024, respectively. The Company's anticipated growth and profitability may require
increasing foreign sales volume and may necessitate further international expansion. The Company's results of operations could be adversely affected by
changes in trade, monetary and fiscal policies, laws and regulations, other activities of governments, agencies and similar organizations, and other factors.
These factors 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, changes in the regulatory or legal
environment, restrictions on currency exchange activities, burdensome taxes and tariffs and other trade barriers. We cannot predict the impact of changes in
foreign policies adopted by the current U.S. administration will have on our business. 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 delays in collection of accounts receivable. Because the Company conducts a significant portion of its business
activities in the Gulf Cooperation Council ("GCC"), the political and economic events of the countries that comprise the GCC can have a material effect on the
Company’s business, results of operations, financial condition, and cash flows.
Due to the international scope of the Company’s operations, it is subject to a complex system of commercial and trade regulations around the world. The
Company’s foreign subsidiaries are governed by laws, rules and business practices that differ from those of the United States. If the activities of these entities
do not comply with U.S. laws or business practices or the Company’s Code of Business Conduct, then violations of these laws may result in severe criminal or
civil sanctions, which could disrupt the Company’s business, and result in an adverse effect on the Company’s reputation, business and results of operations or
financial condition. The Company cannot predict the nature, scope, or effect of future regulatory requirements to which its operations might be subject or the
manner in which existing laws might be administered or interpreted.
8
Table of Contents
General Risks
The Company may be unable to retain its senior management and key personnel. The Company's ability to meet its strategic and financial goals will depend
to a significant extent on the continued contributions of its senior management and key personnel, or the successful transition of responsibilities of departing
senior management and key personnel. Future success will also depend in large part on the Company's 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 Company's business and could adversely affect
operations and financial results.
The Company may not be able to achieve the expected benefits from its growth initiatives. The Company's cyclical or general 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 its business by investing in new or existing facilities, making
acquisitions, entering partnerships and joint ventures, or constructing new facilities, which could introduce additional risks, including:
•
strain on working capital;
•
diversion of management's attention away from other activities, which could impair the operation of existing businesses;
•
failure to successfully integrate an acquired business or facility into existing operations;
•
inability to maintain key pre-acquisition business relationships;
•
loss of key personnel of an 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 general economic risks, the Company may not be able to realize the expected benefits from future acquisitions,
new facility developments, partnerships, joint ventures or other investments.
The Company's information technology systems may be negatively affected by cybersecurity threats. The Company faces risks relating to cybersecurity
attacks that could cause the loss of confidential information and other business disruptions. The Company relies extensively on computer systems to process
transactions and manage its business, and its business is at risk from and may be impacted by cybersecurity attacks. The Company employs a number of
measures to prevent, detect and mitigate these threats, which include data and email encryption, strong password management policy, firewall systems, anti-
virus software, and frequent backups. However, there is no guarantee such efforts will be successful in preventing a cyber-attack. A successful attack could
adversely affect the Company's reputation and results of operations, including through lawsuits by third parties.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
9
Table of Contents
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
The Company's policies and practices are based on frameworks and standards that address risks through a comprehensive, cross-functional approach that
assess, identify, monitor, and mitigate material risks from cybersecurity threats as part of the overall enterprise risk management ("ERM") process. This
includes the collection and storage of data and being responsive to incidents as they occur. Further, the Company's processes and technology are utilized to
develop, implement, and maintain appropriate measures to safeguard information systems in protecting the integrity, availability, and confidentiality of data.
Additionally, the Company engages certain third parties to assist in network monitoring and control testing, among other functions of similar capacity.
The Company's cybersecurity program focuses on the following areas:
•
Technological safeguards that are designed to protect the Company's information systems from cybersecurity threats, including the prevention and
detection of system applications, access controls, and firewalls, which the Company assesses the vulnerability and severity of potential cybersecurity
threats and makes necessary improvements.
•
Utilization of third parties as part of the Company's risk-based approach in identifying and overseeing cybersecurity risks.
•
The Company maintains an incident plan that addresses the Company's response to a cybersecurity event, which is periodically reviewed and updated.
While the Company is working to adopt the National Institute of Standards and Technology ("NIST") cybersecurity framework, the Company's on-going
investment in information systems and utilization of external 3rd parties represents the best means for extensively testing both the design and operational
effectiveness of cybersecurity controls, and to ensure continuity and functionality of the Company's operating systems.
As of the date of this report, the Company has not experienced any material cybersecurity events. However, the presence of new or more advanced forms of
cybersecurity threats could have a material and adverse impact on the business, results of operations, and financial position. For further discussion relating to
this topic, see Item 1A. Risk Factors "The Company's information technology systems may be negatively affected by cybersecurity threats."
Governance
The Audit Committee of the Board of Directors has the responsibility of overseeing the Company's cybersecurity risks. The Director of Information
Technology provides periodic updates to the Board of Directors regarding actions taken to mitigate the Company's exposure and protection from cybersecurity
risks. Management routinely evaluates the Company's security processes, procedures, and systems to determine if enhancements are needed to reduce the
possibility of a future cybersecurity event. This includes safeguards implemented by the Company, such as a multi-factor authentication process; restricted
firewall settings; network monitoring, email phishing tests, and enhancing the Company's backup recovery strategy, among others.
The Director of Information Technology is responsible for assessing, monitoring, and managing the Company's cybersecurity risks. The Director of
Information Technology has extensive experience in leading the Company's information systems and has previously led cybersecurity teams for several large
global organizations prior to joining the Company.
The Director of Information Technology, along with members of management, inform the Audit Committee on cybersecurity risks by providing periodic
updates regarding (i) Status of ongoing cybersecurity initiatives and strategies, (ii) The overall state of the Company's security program and potential exposure
to risks, and (iii) Incident reports and learning from any cybersecurity events. Further, the Director of Information Technology maintains an open dialogue
regarding any significant developments in cybersecurity risks, ensuring the Audit Committee's oversight is proactive and responsive.
In addition to periodic updates to the Audit Committee, the Director of Information Technology, in his capacity, regularly informs the Chief Executive Officer
("CEO") and the Chief Financial Officer ("CFO") regarding matters related to cybersecurity risks and incidents. This ensures the highest level of management
are informed of potential risks associated with cybersecurity that could have a material and adverse effect on the Company.
10
Table of Contents
ITEM 2. PROPERTIES
Location
Leased and/or Owned
Illinois
Leased building and office space
Louisiana
Owned building and leased land
Tennessee
Leased building, office space, and land
Texas
Leased office space
Camrose, Alberta, Canada
Owned building with office space on owned land; leased land and leased office space
Vars, Ontario, Canada
Leased building, office space, and land
India
Leased building, office space, and land
Dammam, Kingdom of Saudi Arabia Owned building and office space on leased land
Riyadh, Kingdom of Saudi Arabia
Leased building and office space
United Arab Emirates
Leased office space and building on leased land; owned building with office space on leased land
Egypt
Leased building and office space on leased land
For further information, see Note 6 - Leases, in the Notes to Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, including those involving environmental, tax,
product liability, and general liability claims. The Company accrues a liability for these matters when it is considered probable that future costs will be
incurred, and the amount can be reasonably estimated. Such accruals are based on developments to date, the Company's estimates of the outcomes with respect
to any legal proceedings, and its experience in contesting, litigating, and settling other similar matters.
As of January 31, 2025, the Company had no material pending litigation.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
11
Table of Contents
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
The Company's common stock is traded on the Nasdaq Global Market under the symbol "PPIH".
As of April 21, 2025, there were approximately 44 stockholders of record and other additional stockholders for whom securities firms or banks acted as
nominees.
The Company has never declared or paid a cash dividend and does not anticipate paying any cash dividends on its common stock in the foreseeable future.
Management presently intends to retain all available funds for the development of the Company's business and for use as working capital, including potentially
repurchasing its common stock. The Company's credit facilities also restrict dividend payments. Future dividend policy will depend upon the Company's
earnings, capital requirements, financial condition, credit agreement restrictions and other relevant factors. For further information, see "Financing" in Item 7
and Note 5 - Debt, in the Notes to Consolidated Financial Statements.
The Transfer Agent and Registrar for the Company's common stock is Broadridge Corporate Issuer Solutions, Inc., P.O. Box 1342 Brentwood, NY
11717, (877) 830-4936 or (720) 378-5591.
Unregistered Sales of Equity Securities and Use of Proceeds
The Company has not made any sale of unregistered securities during the preceding three fiscal years.
Issuer Purchases of Equity Securities
The Company did not make any purchases of its common stock during fiscal 2024.
12
Table of Contents
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), 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 headings Cautionary Statements Regarding Forward Looking Information and Item 1A. Risk Factors.
The analysis presented below and discussed in more detail throughout this MD&A was organized to provide instructive information for better understanding
the Company's results of operations, financial condition and cash flows. However, this MD&A should be read in conjunction with the Consolidated Financial
Statements in Item 8 of this Annual Report on Form 10-K, including the notes thereto and the risk factors contained herein. The Company's fiscal year ends on
January 31. Years, results and balances described as 2024 and 2023 are for the fiscal years ended January 31, 2025 and 2024, respectively.
The Company is engaged in the manufacture and sale of products in one reportable segment: Piping Systems. Since the Company's revenues are significantly
dependent upon discrete projects, the Company's operating results in any reporting period could be negatively impacted as a result of variations in the level of
the Company's discrete project orders or delays in the timing of the specific project phases.
The tabular information presented throughout this MD&A is in thousands, except per share data, or unless otherwise specified.
13
Table of Contents
Results of Operations
Consolidated Results of Operations
Year Ended January 31,
2025
2024
Change
favorable
(unfavorable)
Amount
Percent of Net
Sales
Amount
Percent of Net
Sales
Amount
Net sales
$
158,384
$
150,668
$
7,716
Gross profit
53,248
34%
41,458
28%
11,790
General and administrative expenses
28,000
18%
22,591
15%
(5,409)
Selling expense
4,947
3%
5,508
4%
561
Interest expense
1,940
2,266
326
Other income (expense)
107
(1,202)
1,309
Income before income tax
18,468
9,891
8,577
Income tax expense (benefit)
5,377
(3,320)
(8,697)
Net income
13,091
13,211
(120)
Less: Net income attributable to non-controlling interest
4,108
2,740
1,368
Net income attributable to common stock
8,983
10,471
(1,488)
Year ended January 31, 2025 Compared to year ended January 31, 2024
Net sales
Net sales were $158.4 million and $150.7 million in the years ended January 31, 2025 and 2024, respectively. The increase of $7.7 million was primarily a
result of higher sales volumes in the Middle East and Canada.
Gross profit
Gross profit was $53.2 million, or 34% of net sales and $41.5 million, or 28% of net sales, in the years ended January 31, 2025 and 2024, respectively.
The increase of $11.7 million was driven by higher sales volumes and improved gross margins in the Middle East and Canada.
General and administrative expense
General and administrative expenses were $28.0 million and $22.6 million in the years ended January 31, 2025 and 2024, respectively. The increase of $5.4
million was primarily related to higher compensation costs and professional fees.
Selling expenses
Selling expenses were $4.9 million and $5.5 million in the years ended January 31, 2025 and 2024, respectively. The decrease of $0.6 million was driven by
lower payroll expenses during the year.
14
Table of Contents
Interest expense
Interest expense was $1.9 million and $2.3 million in the years ended January 31, 2025 and 2024, respectively. The decrease of $0.4 million was related to
decreased borrowings and, to a lesser extent, lower interest rates.
Other income (expense)
Other income was $0.1 million, as compared to other expense of $(1.2) million in the years ended January 31, 2025 and 2024, respectively. The change relates
mainly to a certain one-time non-recurring charge in connection with a non-cash pre-tax settlement resulting from the termination of the Company's pension
plan.
Income taxes
The Company's worldwide effective tax rates ("ETR") were 29.1% and (33.6%) in the years ended January 31, 2025 and 2024, respectively. The change in
ETR was largely due to changes in the mix of income and loss in various tax jurisdictions and the release of the partial domestic valuation allowance in the
prior year. For further information, see Note 7 - Income taxes, in the Notes to Consolidated Financial Statements.
Net income attributable to common stock
Net income attributable to common stock was $9.0 million and $10.5 million in the years ended January 31, 2025 and 2024, respectively. The decrease in net
income was a result of the changes discussed above, less amounts attributable to non-controlling interest.
Liquidity and capital resources
Cash and cash equivalents were $15.7 million and $5.8 million as of January 31, 2025 and January 31, 2024, respectively. On January 31, 2025, approximately
$0.3 million was held in the United States, and $15.4 million was held by the Company's foreign subsidiaries. The Company's working capital was
$54.7 million on January 31, 2025 compared to $41.1 million on January 31, 2024. As of January 31, 2025, the Company had $3.7 million of borrowing
capacity under the Renewed Senior Credit Facility (as defined below) in North America and $15.6 million of borrowing capacity under its foreign revolving
credit agreements. The Company had $6.8 million borrowed under the Renewed Senior Credit Facility and $4.8 million borrowed under its foreign revolving
credit agreements at January 31, 2025.
Net cash provided by operating activities in the years ended January 31, 2025 and 2024 was $13.9 million and $14.7 million, respectively. The current
year decrease of $0.8 million was due primarily to a decrease in accounts payable and customer deposits, partially offset by a reduction in receivables, prepaid
expenses and other current assets, as compared to the prior year.
Net cash used in investing activities in the years ended January 31, 2025 and 2024 was $2.8 million and $11.1 million, respectively. The decrease of
$8.3 million was due to less investment activity in capital assets during the year, mainly in the United States and Canada.
Net cash used in financing activities in the years ended January 31, 2025 and 2024 was $0.9 million and $3.3 million, respectively. The decrease of
$2.4 million during the year ended January 31, 2025 consisted, in part, from no share repurchase activity as compared to the use of the remaining $1.0 million
authorized as part of the Company's share repurchase program during the year ended January 31, 2024. Additionally, a net repayment was made of borrowings
under the Company's credit facilities of approximately $0.2 million, as compared to a net repayment of approximately $1.3 million during the year
ended January 31, 2024. Further, debt totaled $24.5 million and $25.7 million as of January 31, 2025 and 2024, respectively. For additional information, see
Note 5 - Debt, in the Notes to Consolidated Financial Statements.
15
Table of Contents
The Company believes it will have the ability to satisfy all working capital needs and any planned capital expenditures for the twelve months following the
issuance of the Consolidated Financial Statements, based on its existing cash on hand, cash flows from operations, and available credit facilities.
There was no restricted cash held in the United States on January 31, 2025 or January 31, 2024. Restricted cash held by foreign subsidiaries was $1.4 million as
of January 31, 2025 and 2024, respectively. Restricted cash held by foreign subsidiaries related to fixed deposits that also serve as security deposits and
guarantees.
The following table summarizes the Company's estimated contractual obligations on January 31, 2025:
Year Ending January 31,
Contractual obligations
Total
2025
2026
2027
2028
2029
Thereafter
Revolving line - North America (1)
$
6,765 $
6,765 $
- $
- $
- $
- $
-
Mortgage note (2)
3,956
221
221
221
221
221
2,853
Revolving lines - foreign (3)
2,010
2,010
-
-
-
-
-
Long-term finance obligation (4)
9,023
225
263
305
349
400
7,481
Subtotal
21,754
9,221
484
526
570
621
10,334
Finance lease obligations
75
32
34
9
-
-
(0)
Operating lease obligations (5)
15,966
1,900
2,094
2,120
1,791
899
7,162
Uncertain tax position obligations (6)
1,225
-
-
-
-
-
1,225
Loan payable to GIG (7)
2,753
-
-
-
-
-
2,753
Total
$
41,773 $
11,153 $
2,612 $
2,655 $
2,361 $
1,520 $
21,474
(1) Interest obligations exclude floating rate interest on debt payable under the North American revolving line of credit. Based on the amount of such debt on
January 31, 2025, and the weighted average interest rate of 9.0% on that debt, such interest was being incurred at an annual rate of approximately $0.6
million.
(2) Scheduled maturities, excluding interest.
(3) Scheduled maturities of foreign revolver line, excluding interest.
(4) This schedule represents the cash payments to be made under the lease agreement for the land and buildings sold by the Company in Lebanon, Tennessee
and leased back from the purchaser in April 2021. These amounts differ from the liabilities presented as debt in the consolidated balance sheets as the debt
amount represents future payments discounted to the present date. Refer to Note 5 - Debt, in the Notes to the Consolidated Financial Statements for further
discussion of the transaction.
(5) Minimum contractual amounts, assuming no changes in variable expenses.
(6) Refer to Note 7 - Income taxes, in the Notes to Consolidated Financial Statements for a description of the uncertain tax position obligations.
(7) Refer to Note 12 - Non-controlling interest, in the Notes to Consolidated Financial Statements for further discussion regarding the loan payable to Gulf
Insulation Group ("GIG").
Financing
Revolving lines - North America.
On September 20, 2018, the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the Company, the “North American Loan
Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association ("PNC"), as administrative
agent and lender, providing for a three-year $18 million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the
“Senior Credit Facility”).
On September 17, 2021, the North American Loan Parties executed an extension of the Credit Agreement with PNC, providing for a new five-year $18 million
senior secured revolving credit facility, subject to a borrowing base including various reserves (the “Renewed Senior Credit Facility”). The
Company's obligations under the Renewed Senior Credit Facility are currently guaranteed by Perma-Pipe Canada, Inc. Each of the North American Loan
Parties other than Perma-Pipe Canada, Inc. is a borrower under the Renewed Senior Credit Facility (collectively, the “Borrowers”).
The Borrowers have used and will continue to use borrowings under the Renewed Senior Credit Facility (i) to fund future capital expenditures; (ii) to fund
ongoing working capital needs; and (iii) for other corporate purposes, including potentially additional stock repurchases. Borrowings under the Renewed
Senior Credit Facility bear interest at a rate equal to an alternate base rate, SOFR rate index, plus, in each case, an applicable margin. The applicable margin is
based on a fixed charge coverage ratio ("FCCR") range. Interest on alternate base rate borrowings is the alternate base rate (as defined in the Renewed Senior
Credit Facility) plus an applicable margin ranging from 1.00% to 1.50%, based on the FCCR in the most recently reported period. Interest on SOFR rate
borrowings is the SOFR rate (as defined in the Renewed Senior Credit Facility) plus an applicable margin ranging from 2.00% to 2.50%, based on the FCCR in
the most recently reported period, as well as an additional SOFR adjustment ranging from 0.10% to 0.25%, based on the term of the interest period.
Additionally, the Borrowers pay a 0.25% per annum facility fee on the unused portion of the Renewed Senior Credit Facility.
Subject to certain exceptions, borrowings under the Renewed Senior Credit Facility are secured by substantially all of the North American Loan Parties’ assets.
The Renewed Senior Credit Facility matures on September 20, 2026. Subject to certain qualifications and exceptions, the Renewed Senior Credit Facility
contains covenants that, among other things, restrict the North American Loan Parties’ ability to create liens, merge or consolidate, consummate acquisitions,
make investments, dispose of assets, incur debt, and pay dividends and other distributions. In addition, the North American Loan Parties may not make capital
expenditures in excess of $5.0 million annually, plus a limited carryover of unused amounts. Further, the North American Loan Parties may not make
repurchases of the Company's common stock in excess of $3.0 million.
16
Table of Contents
The Renewed Senior Credit Facility also contains financial covenants requiring the North American Loan Parties to achieve a ratio of its EBITDA (as defined
in the Renewed Senior Credit Facility) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the
advances under the Renewed Senior Credit Facility to be not less than 1.10 to 1.00 for any five consecutive days in which the undrawn availability is less than
$3.0 million or any day in which the undrawn availability is less than $2.0 million. As of January 31, 2025, the calculated ratio was greater than 1.10 to 1.00. In
order to cure any future breach of these covenants by the North American Loan Parties, the Company may repatriate cash from any of its foreign subsidiaries
that are otherwise not a party to the Renewed Senior Credit Facility in an amount which, when added to the amount of the Company’s Consolidated EBITDA,
would result in compliance on a pro forma basis. The Company was in compliance with respect to these covenants as of January 31, 2025.
The Renewed Senior Credit Facility contains customary events of default. If an event of default occurs and is continuing, then PNC may terminate all
commitments to extend further credit and declare all amounts outstanding under the Renewed Senior Credit Facility due and payable immediately. In addition,
if any of the North American Loan Parties or certain of their subsidiaries become the subject of voluntary or involuntary proceedings under any bankruptcy,
insolvency or similar law, then any outstanding obligations under the Renewed Senior Credit Facility will automatically become immediately due and payable.
Loans outstanding under the Renewed Senior Credit Facility will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate (i) while
a bankruptcy event of default exists or (ii) upon the lender's request, during the continuance of any other event of default.
As of January 31, 2025, the Company had borrowed an aggregate of $ 6.8 million at a rate of 9.0% and had $ 3.7 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.
Revolving lines - foreign . The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E., Egypt, and Saudi Arabia as
further described below:
United Arab Emirates
The Company has a revolving line for 8.0 million U.A.E. Dirhams (approximately $ 2.2 million at January 31, 2025) from a bank in the U.A.E. As of January
31, 2025, the facility has an interest rate of approximately 7.9% and expires in July 2025. The Company had borrowed an aggregate of $0.4 million and
$0.2 million as of January 31, 2025 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 January 31, 2025 and January 31, 2024, the Company had unused borrowing availability of approximately
$1.6 million and $1.9 million, respectively.
The Company has a revolving line for 65.2 million U.A.E. Dirhams (approximately $ 17.7 million at January 31, 2025) from a bank in the U.A.E. As of
January 31, 2025, the facility has an interest rate of approximately 7.9% and expires in August 2025. The Company had borrowed an aggregate of
$0.1 million as of January 31, 2025 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 January 31, 2025 and January 31, 2024, the Company had unused borrowing availability of approximately
$9.0 million and $1.0 million, respectively.
17
Table of Contents
Egypt
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 $2.0 million at January 31, 2025). 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 January 31, 2025, the facility has an interest rate of approximately 20.8%. Additionally, this credit arrangement was renewed in
November 2024 with substantially the same terms and conditions and expires in November 2025. As of January 31, 2025, the Company had an immaterial
amount outstanding with respect to this credit arrangement, and approximately $1.4 million outstanding at January 31, 2024, respectively, and is presented as a
component of current maturities of long-term debt in the Company's consolidated balance sheets. Further, as of January 31, 2025 and January 31, 2024, the
Company had unused borrowing capacity of $2.0 million and $3.2 million, respectively.
In December 2021, the Company entered into a credit arrangement for project financing with a bank of Egypt for 28.2 million Egyptian Pounds. As this project
has progressed and the Company received collections, the facility has decreased to a current amount of 2.1 million Egyptian Pounds (approximately $0.1
million at January 31, 2025). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by the contract for a
project being financed by the Company's Egyptian subsidiary. The facility has an interest rate of approximately 20.8% and, as of November 2022, is no longer
available for borrowings by the Company. The facility will expire in connection with final customer balance collections and the completion of the project. As
of January 31, 2025, the Company had an insignificant amount outstanding, and approximately $ 0.1 million outstanding at January 31, 2024, respectively,
and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.
Saudi Arabia
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 Riyal (approximately $ 9.9 million at January 31, 2025 ). 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 January 31, 2025 , the facility has an interest rate of approximately 9.0% . The
Company had borrowed an aggregate of $1.5 million and $3.2 million as of January 31, 2025 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 January 31, 2025 and January 31, 2024, was $3.0 million and $6.1 million, respectively.
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 approximately $10 million at January 31, 2025 and January
31, 2024.
The Company was in compliance with the covenants under the credit arrangements in the U.A.E., Egypt and Saudi Arabia as of January 31, 2025 . 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
rates, as of January 31, 2025, the Company's interest rates ranged from 7.9% to 20.8%, with a weighted average rate of 11.6%, and the Company had facility
limits totaling $ 34.6 million under these credit arrangements. As of January 31, 2025, $ 16.9 million of availability was used to support letters of credit to
guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, the Company had borrowed approximately $2.1 million
and had an additional $ 15.6 million of remaining borrowing capacity available under the foreign revolving credit arrangements. The foreign revolving line
balances were included as current maturities of long-term debt in the Company's consolidated balance sheets as of January 31, 2025 and January 31, 2024.
In June 2023, the Company assumed a promissory note of approximately $ 2.8 million in connection with the formation of the joint venture with GIG.
In accordance with the promissory note, all principal is due and payable on the maturity date of April 9, 2026, with the option to prepay, in whole or in part, at
any time prior to the maturity date, without premium or penalty.
Mortgages. On July 28, 2016, the Company entered into a mortgage agreement secured by the Company's manufacturing facility located in Alberta,
Canada that matures on December 23, 2042. As of January 31, 2025, the remaining balance on the mortgage in Canada is approximately 5.7 million Canadian
Dollars ("CAD") (approximately $4.0 million at January 31, 2025). The interest rate is variable, and was 7.1% at January 31, 2025. The principal balance is
included as a component of long-term debt, less current maturities in the Company's consolidated balance sheets and is presented net of issuance costs of $0.1
million as of January 31, 2025 and January 31, 2024.
18
Table of Contents
Finance obligation - buildings and land.
On April 14, 2021, the Company entered into a purchase and sale agreement (the "Purchase and Sale Agreement") to sell its land and buildings in Lebanon,
Tennessee (the "Property"). Pursuant to the terms of the Purchase and Sale Agreement, the Company sold the Property for $10.4 million. The transaction
generated net cash proceeds of $9.1 million. Concurrently with the sale of the Property, the Company paid off the approximately $0.9 million remaining on the
mortgage note on the Property to its lender. The Company used the remaining proceeds to repay its borrowings under the Senior Credit Facility, for strategic
investments, and for general corporate needs. Concurrent with the sale of the Property, the Company entered into a fifteen-year lease agreement (the “Lease
Agreement”), whereby the Company is leasing back the Property at an annual rental rate of approximately $0.8 million, subject to annual rent increases
of 2.0%. Under the Lease Agreement, the Company has four consecutive options to extend the term of the lease by five years for each such option. As of
January 31, 2025 and 2024, the Company had a net book value relating to this asset of $1.8 million and $1.9 million, respectively.
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 all of the fair value of the underlying asset. The Company utilized an incremental borrowing rate of 8.0% to determine the finance
obligation to record for the amounts received and will continue to depreciate the assets. The current portion of the finance obligation of $ 0.2 million is
recognized in current maturities of long-term debt and the long-term portion of $ 8.8 million is recognized in long-term finance obligation on the Company's
consolidated balance sheets as of January 31, 2025 . The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease
term.
Accounts receivable
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 January 31, 2025, 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 retention amount, $1.2 million is classified in a long-term asset account.
The Company continues to actively engage in ongoing collection efforts with the customer to ensure full payment of open balances, and at various times
throughout 2024 and 2023, the Company received a partial payment to settle $ 0.4 million and $0.6 million of the customer's outstanding balances,
respectively. Additionally, the Company has been engaged by the customer to perform additional work in 2025 under customary trade terms that support 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 January 31, 2025 . 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.
Stock repurchase plan
The repurchase program approved on October 4, 2021, authorized the Company to use up to $3.0 million for the purchase of its outstanding shares of common
stock. Stock repurchases were permitted to be executed through open market or privately negotiated transactions, depending upon current market conditions
and other factors. On December 7, 2022, the Board of Directors authorized the use of $1.0 million remaining under the share repurchase program previously
approved on October 4, 2021 that expired on October 3, 2022. During the twelve months ended January 31, 2024, the Company used the remaining $1.0
million of the $3.0 million authorized to repurchase its outstanding shares of common stock. Accordingly, there was no repurchase activity with respect to the
Company's shares of common stock during the twelve months ended January 31, 2025.
On August 29, 2024, the Company retired all remaining treasury stock previously acquired under the stock repurchase program. The retirement was recorded as
a reduction to common stock based on the par value of the shares, and the excess over par value was recorded as a decrease in retained earnings in accordance
with ASC 505-30, Equity - Treasury Stock.
19
Table of Contents
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. In accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, the Company recognizes
revenue for certain contracts when a customer obtains control of promised goods or services. Other contracts recognize revenues using periodic recognition of
income. For these contracts, the Company uses the "over time" 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 amount of revenue recognized 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, the amount can be reliably estimated, and the
amount is not subject to reversal. See Note 4 - Revenue recognition, in the Notes to Consolidated Financial Statements, for further information relating to input
and output accounting methods.
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 maintains a partial valuation allowance in the United States against certain deferred tax assets.
The Company recognizes a tax position in its consolidated financial statements 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% likelihood of being realized upon ultimate settlement with the relevant tax authority. For further information, See
Note 7 - Income taxes, in the Notes to Consolidated Financial Statements.
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 years ended January 31, 2025 and 2024 and the notes thereto are set
forth beginning on page 23.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
20
Table of Contents
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
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of January 31, 2025. The Company's disclosure controls and
procedures are designed to provide reasonable assurance that information required to be disclosed by the Company in the reports the Company files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide
reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that, as of January 31, 2025, our disclosure controls and procedures were not effective because of the material weaknesses in
internal control over financial reporting, as described below.
Management's Annual 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, the Company's management carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the Company's internal control over financial reporting as of January 31, 2025 . The framework on which such evaluation was based is
contained in the report entitled "Internal Control-Integrated Framework" (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
The Company's 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 management's evaluation, management has concluded that we did not maintain effective internal control over financial reporting as of January 31,
2025, due to the material weaknesses identified below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that
a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses are as follows:
•
We did not design and maintain effective controls in response ot the risks of material misstatement. Specifically, changes to existing controls or the
implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement in financial reporting. This
contributed to the following material weaknesses;
•
We did not design and maintain effective certain controls over financial reporting relating to the review and approval of manual journal entries, review
of the financial close process, including the statement of cash flows, and review of certain financial policies and procedures;
•
We did not design and maintain effective controls at operating locations in the Middle East and North Africa ("MENA"), including not maintaining
sufficient documentation to support an evaluation that controls over business processes were designed and operating effectively.
These material weaknesses resulted in adjustments to property, plant, and equipment, net of accumulated depreciation, trade accounts payable, trade accounts
receivable, and the statement of cash flows. These adjustments resulted in a revision of the unaudited consolidated financial statements as of and for the period
ended April 30, 2024, a restatement as of and for the period ended July 31, 2024 and material adjustments as of and for the period ended October 31, 2024.
•
We did not design and maintain effective controls over information technology general controls ("ITGCs"), specifically controls over the timely
review of user access and administrative access to adequately restrict access, program change management, computer operations, and program
development;
•
We did not design and maintain effective controls over managements review of the completeness and accuracy of certain system-generated reports.
These material weaknesses did not result in a misstatement to the Company's annual or interim financial statements.
Each of these material weaknesses could result in a material misstatement of substantially all accounts and disclosures in the Company's annual or interim
financial statements that would not be prevented or detected on a timely basis.
21
Table of Contents
Remediation Plan for the Material Weaknesses in Internal Control over Financial Reporting
To address these matters, the Company has begun implementing its remediation plan. Our ongoing remediation plans include the following:
(i) performing an entity wide risk assessment to identify relevant risks and changes to those relevant risks to our financial reporting; ii) designing and
implementing controls to identify and evaluate changes in our business and the impact on our internal control over financial reporting; (iii) engaging outside
consultants with expertise relating to ITGCs to document processes, assist in addressing the design and operating ITGCs, monitoring and testing reviews
focusing on systems supporting our financial reporting process (iv) designing and maintaining controls and documentation evidencing those ITGCs for
knowledge transfer and function changes, including access and program control and change management, computer operations, and program development, (v)
designing and maintaining effective controls to review the completeness and accuracy of certain system-generated reports; and (vi) outsourcing certain
functions to third-party providers, specifically relating to servers and firewalls, and managed detection and response.
Our remediation plans related to entity level controls, financial reporting controls, and business process controls include:
(i) enhancing the design of controls for the review of and posting of journal entries; (ii) evaluating and updating documented formal accounting policies,
financial reporting, processes and procedures; and overall internal control procedures; and (iii) updating the design of controls for the preparation and review of
the financial close process, including the statement of cash flows.
In addition to the items noted above, our remediation plans related to our MENA locations include: (i) evaluating and updating the Company's evidence of
internal control policies and procedures; (ii) enhancing the design of controls over business processes that are relevant to our MENA locations; and (iii)
formalizing our financial reporting processes and procedures.
The Company anticipates the actions described above will strengthen the Company's internal control over financial reporting and will address the related
material weaknesses described above. However, the material weaknesses cannot be considered fully remediated until the necessary controls have been
appropriately designed and implemented. The remediation processes and procedures will also need to be in operation for a period of time and
management conclude through testing, that these controls are operating effectively.
Changes in Internal Control over Financial Reporting. There were no changes to our internal control over financial reporting which were identified in
connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) under the Exchange during the fourth quarter of the fiscal year ended January 31,
2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report of Registered Public Accounting Firm. This Annual Report does not contain an attestation report of our independent registered public
accounting firm related to internal control over financial reporting because the rules for smaller reporting companies provide an exemption from the attestation
requirement.
ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
22
Table of Contents
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to this item is incorporated herein by reference to the Company's definitive proxy statement for its 2025 annual meeting of
stockholders.
Information with respect to executive officers of the Company is included in Part I, Item 1, hereof under the caption "Information about our Executive
Officers".
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated herein by reference to the Company's definitive proxy statement for its 2025 annual meeting of
stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
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, 2025.
Number of shares to be issued upon
exercise of outstanding options,
warrants and rights
Weighted-average exercise price of
outstanding options, warrants and
rights
Number of shares remaining
available for future issuance under
equity compensation plans
(excluding shares reflected in column
(a))
Plan Category
(a)(1)
(b)(1)
(c)(2)
Equity compensation plans approved
by stockholders
600
$6.85
422,445
(1) The amounts shown in columns (a) and (b) of the above table do not include 229,771 outstanding shares of restricted stock granted under the
Company's previous stock incentive plans, including the 2021 Omnibus Stock Incentive Plant dated May 26, 2021 ("2021 Plan") and the
2024 Omnibus Stock Incentive Plan dated July 2024 ("2024 Plan").
(2) The 2021 Plan expired on May 26, 2024. The 2024 Plan will expire in July 2027.
The other information with respect to this item is incorporated herein by reference to the Company's definitive proxy statement for its 2025 annual meeting of
stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information with respect to this item is incorporated herein by reference to the Company's definitive proxy statement for its 2025 annual meeting of
stockholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to this item is incorporated herein by reference to the Company's definitive proxy statement for its 2025 annual meeting of
stockholders.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a.
List of documents filed as part of this report:
(1) Financial Statements - Consolidated Financial Statements of the Company
Refer to Part II, Item 8 of this report.
(2) Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts
(3) Report of Registered Public Accounting Firm (PricewaterhouseCoopers LLP, Houston, Texas, Auditor Firm ID 238)
(4) Report of Registered Public Accounting Firm (Grant Thornton LLP, Houston, Texas, Auditor Firm ID 248)
b.
Exhibits: The exhibits, as listed in the Exhibit Index included herein, are submitted as a separate section of this report.
c.
The response to this portion of Item 15 is submitted under 15a(2) above.
23
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Perma-Pipe International Holdings, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheet of Perma-Pipe International Holdings, Inc. and its subsidiaries (the "Company") as of
January 31, 2025, and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity and of cash flows for the year then
ended, including the related notes and schedule of valuation and qualifying accounts for the year then ended appearing under Item 15, (collectively referred to
as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
the Company as of January 31, 2025, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we
are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated
or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements
and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Specialty Piping Systems and Coating Revenue Recognition under the Input Method
As described in Notes 2 and 4 to the consolidated financial statements, approximately $46 million of the Company’s revenue for year ended January 31, 2025
relates to specialty piping systems and coating revenue recognized over time under the input 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 amount of revenue recognized is
determined by the relationship of costs incurred to the total estimated costs of the contract. Generally, these contracts are considered a single performance
obligation satisfied over time and due to the custom nature of the goods and services, the "over time" method is the most accurate depiction of the Company’s
performance as it measures the value of the goods and services transferred to the customer. Costs include material, labor, and direct costs incurred to satisfy the
performance obligations of the contract. Revenue recognition begins when project costs are incurred.
The principal considerations for our determination that performing procedures relating to specialty piping systems and coating revenue recognition under the
input method is a critical audit matter are (i) the significant judgment by management when developing the estimated total costs to complete the contracts and
(ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the
total costs to complete.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included, among others, for certain open contracts (i) testing management’s process for developing the estimated total
costs to complete and (ii) evaluating the reasonableness of the significant assumptions used by management related to the estimated total costs to complete.
Evaluating the reasonableness of the significant assumptions related to the estimated total costs to complete involved considering (i) the terms of the contracts
and other documents that support those estimates ; (ii) using actual costs to date to assess the reasonableness of the estimate of the remaining costs to complete
the contract; and (iii) performing a retrospective review of certain open contracts as of January 31, 2024 to evaluate actual costs incurred to estimated costs.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
May 1, 2025
We have served as the Company’s auditor since 2024.
24
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Perma-Pipe International Holdings, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheet of Perma-Pipe International Holdings, Inc. (a Delaware corporation) and subsidiaries (the
“Company”) as of January 31, 2024, the related consolidated statement
of operations, comprehensive income, stockholders’ equity, and cash flows for the period ended January 31, 2024, and the related notes and financial statement
schedule included in Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of January 31, 2024, and the results of its operations and its cash flow for the
period ended January 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor from 2004 to 2024.
Houston, Texas
April 26, 2024 (except for Note 13, as to which the date is May 1, 2025)
25
Table of Contents
PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year ended January 31,
2025
2024
Net sales
$
158,384 $
150,668
Cost of sales
105,136
109,210
Gross profit
53,248
41,458
Operating expenses
General and administrative expenses
28,000
22,591
Selling expense
4,947
5,508
Total operating expenses
32,947
28,099
Income from operations
20,301
13,359
Interest expense
1,940
2,266
Other income (expense)
107
(1,202)
Income before income tax
18,468
9,891
Income tax expense (benefit)
5,377
(3,320)
Net income
13,091
13,211
Less: Net income attributable to non-controlling interest
4,108
2,740
Net income attributable to common stock
$
8,983 $
10,471
Weighted average common shares outstanding
Basic
7,956
7,977
Diluted
8,015
8,073
Earnings per share attributable to common stock
Basic
$
1.13 $
1.31
Diluted
$
1.12 $
1.30
See accompanying notes to consolidated financial statements.
26
Table of Contents
PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Year ended January 31,
2025
2024
Net income
$
13,091 $
13,211
Other comprehensive income
Currency translation adjustments, net of tax
(2,646)
898
Comprehensive income
$
10,445 $
14,109
Less: Comprehensive income attributable to non-controlling interest
4,108
2,740
Total comprehensive income attributable to common stock
$
6,337 $
11,369
See accompanying Notes to Consolidated Financial Statements.
27
Table of Contents
PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
January 31,
2025
2024
ASSETS
Current assets
Cash and cash equivalents
$
15,716 $
5,845
Restricted cash
1,401
1,395
Trade accounts receivable, less allowance for doubtful accounts of $703 at January 31, 2025 and $699 at
January 31, 2024
43,148
46,646
Inventories
16,622
15,541
Prepaid expenses and other current assets
10,045
9,697
Unbilled accounts receivable
18,936
16,597
Costs and estimated earnings in excess of billings on uncompleted contracts
2,934
3,097
Total current assets
108,802
98,818
Long-term assets
Property, plant and equipment, net of accumulated depreciation
35,365
37,620
Operating lease right-of-use asset
8,199
6,467
Deferred tax assets
6,639
7,919
Goodwill
2,057
2,222
Other long-term assets
4,179
2,665
Total long-term assets
56,439
56,893
Total assets
$
165,241 $
155,711
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable
$
23,691 $
25,323
Accrued compensation and payroll taxes
1,388
1,214
Commissions and management incentives payable
5,840
4,523
Revolving line - North America
6,765
5,519
Current maturities of long-term debt
2,481
4,071
Customers' deposits
2,506
4,264
Operating lease liability short-term
1,071
914
Other accrued liabilities
6,697
9,039
Billings in excess of costs and estimated earnings on uncompleted contracts
1,249
495
Income taxes payable
2,375
2,380
Total current liabilities
54,063
57,742
Long-term liabilities
Long-term debt, less current maturities
3,669
4,229
Long-term finance obligation
11,551
11,788
Deferred compensation liabilities
1,689
1,212
Deferred tax liabilities
1,320
1,217
Operating lease liability long-term
7,713
6,270
Other long-term liabilities
2,131
1,275
Total long-term liabilities
28,073
25,991
Non-controlling interest
10,967
6,266
Commitments and contingencies
Stockholders' equity
Common stock, $.01 par value, authorized 50,000 shares; 7,983 issued and outstanding at January 31, 2025
and 8,017 issued and outstanding at January 31, 2024
80
80
Additional paid-in capital
60,151
60,063
Treasury stock, no shares at January 31, 2025 and 112 shares at January 31, 2024
-
(968)
Retained earnings
20,104
12,088
Accumulated other comprehensive loss
(8,197)
(5,551)
Total stockholders' equity
72,138
65,712
Total liabilities and stockholders' equity
$
165,241 $
155,711
See accompanying notes to consolidated financial statements.
28
Table of Contents
PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
Total stockholders' equity on January 31,
2023
$
80 $
62,562 $
1,617 $
(26) $
(6,449) $
57,784
Net income
-
-
10,471
-
-
10,471
Common stock issued under stock plans,
net of shares used for tax withholding
-
(274)
-
-
-
(274)
Repurchase of common stock
-
-
-
(942)
-
(942)
Stock-based compensation expense
-
913
-
-
-
913
Acquisition-related adjustment
-
(3,138)
-
-
-
(3,138)
Foreign currency translation adjustment
-
-
-
-
898
898
Total stockholders' equity on January 31,
2024
$
80 $
60,063 $
12,088 $
(968) $
(5,551) $
65,712
Net income
-
-
8,983
-
-
8,983
Common stock issued under stock plans,
net of shares used for tax withholding
1
(126)
-
-
-
(125)
Retirement of treasury stock
(1)
-
(967)
968
-
-
Stock-based compensation expense
-
860
-
-
-
860
Amount attributable to non-controlling
interest
-
(646)
-
-
-
(646)
Foreign currency translation adjustment
-
-
-
-
(2,646)
(2,646)
Total stockholders' equity on January 31,
2025
$
80 $
60,151 $
20,104 $
- $
(8,197) $
72,138
Shares
2024
2023
Balances at beginning of year
8,016,781
8,007,002
Treasury stock retired
(112,015)
-
Shares issued, net of shares used for tax withholding
77,802
66,726
Prior year adjustments
-
(56,947)
Balance end of year
7,982,568
8,016,781
See accompanying notes to consolidated financial statements.
29
Table of Contents
PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended January 31,
2025
2024
Operating activities
Net income
$
13,091 $
13,211
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
3,629
3,830
Deferred tax expense (benefit)
1,617
(6,920)
Stock-based compensation expense
860
913
Provision on uncollectible accounts
4
89
(Gain) loss on disposal of fixed assets
292
(6)
Changes in operating assets and liabilities
Accounts payable
(1,169)
8,814
Accrued compensation and payroll taxes
1,530
(1,144)
Inventories
(1,817)
(830)
Customers' deposits
(1,637)
2,315
Income taxes receivable and payable
-
144
Prepaid expenses and other current assets
(447)
(2,849)
Accounts receivable
2,465
(4,859)
Costs and estimated earnings in excess of billings on uncompleted contracts
916
(1,218)
Unbilled accounts receivable
(2,987)
(5,053)
Other assets and liabilities
(2,419)
8,294
Net cash provided by operating activities
13,928
14,731
Investing activities
Capital expenditures
(2,875)
(11,106)
Proceeds from insurance recovery for property and equipment
-
5
Proceeds from sales of property and equipment
27
3
Net cash used in investing activities
(2,848)
(11,098)
Financing activities
Proceeds from revolving lines
76,344
155,706
Payments of debt on revolving lines
(76,540)
(156,996)
Payments of principal on finance obligation
(360)
(118)
Payments of other debt
-
(243)
Decrease in drafts payable
46
(197)
Payments on finance lease obligations, net
(218)
(193)
Repurchase of common stock
-
(942)
Stock options exercised and taxes paid related to restricted shares vested
(179)
(273)
Net cash used in financing activities
(907)
(3,256)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(296)
70
Net increase in cash, cash equivalents and restricted cash
9,877
447
Cash, cash equivalents and restricted cash - beginning of period
7,240
6,793
Cash, cash equivalents and restricted cash - end of period
$
17,117 $
7,240
Supplemental cash flow information
Interest paid
$
1,928 $
2,285
Income taxes paid
3,714
3,283
Fixed assets acquired under financing leases - non-cash
-
139
Fixed assets acquired - non-cash
$
21 $
-
See accompanying notes to consolidated financial statements.
30
Table of Contents
PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2025 AND 2024
(Tabular amounts in thousands, except per share data, or unless otherwise specified)
Note 1 - Business information
Perma-Pipe International Holdings, Inc. ("PPIH", the "Company", "we", "our" or the "Registrant") was incorporated in Delaware on October 12, 1993. The
Company is engaged in the manufacture and sale of products in one distinct segment: Piping Systems.
Fiscal year. The Company's fiscal year ends on January 31. Years, results and balances described as 2024 and 2023 are for the fiscal years ended January 31,
2025 and 2024, respectively.
Nature of business. The Company engineers, designs, manufactures and sells specialty piping systems, and leak detection systems. Specialty piping systems
include: (i) insulated and jacketed district heating and cooling ("DHC") piping systems for efficient energy distribution from central energy plants to multiple
locations, (ii) primary and secondary containment piping systems for transporting chemicals, hazardous fluids and petroleum products, and (iii) the coating
and/or insulation of oil and gas gathering and transmission pipelines. The Company's leak detection systems are sold with its piping systems or 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.
Geographic information. Net sales attributed to a geographic area are based on the destination of the product shipment. Sales to foreign customers were
66.6% in 2024 compared to 65.6% in 2023. Long-lived assets are based on the physical location of the assets and consist of property, plant and equipment.
2024
2023
Net sales
United States
$
52,956 $
51,893
Canada
31,002
31,351
Middle East/North Africa/India
74,014
63,880
Europe
333
559
Other
79
2,985
Total net sales
$
158,384 $
150,668
Property, plant and equipment, net of accumulated depreciation
United States
$
4,650 $
5,600
Canada
9,622
10,775
Middle East/North Africa/India
21,093
21,245
Total property, plant and equipment, net of accumulated depreciation
$
35,365 $
37,620
31
Table of Contents
Note 2 - Significant accounting policies
Use of estimates. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue recognition. During 2024 and 2023 and in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with
Customers, the Company recognizes revenue for certain contracts when a customer obtains control of promised goods or services. Other contracts recognize
revenues using periodic recognition of income. For these contracts, the Company uses the "over time" 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 amount of revenue
recognized 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,
the amount can be reliably estimated, and the amount is not subject to reversal. See Note 4 - Revenue recognition, in the Notes to Consolidated Financial
Statements, for further information relating to input and output accounting methods.
Shipping and handling. Shipping and handling costs are included in cost of sales, and the amounts invoiced to customers relating to shipping and handling are
included in net sales.
Operating cycle. The length of contracts varies but are typically less than one year. The Company includes in current assets and liabilities amounts realizable
and payable in the normal course of contract completion unless completion of such contracts extends significantly beyond one year.
Consolidation. The consolidated financial statements include the accounts of the Company and its subsidiaries. This includes all wholly owned subsidiaries as
well as certain joint ventures in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated.
Translation of foreign currency. Assets and liabilities of consolidated foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at year-
end. Revenues and expenses are translated at average exchange rates prevailing during the year. The resulting translation adjustments are included in
stockholders' equity as part of accumulated other comprehensive loss. Gains or losses on foreign currency transactions and the related tax effects are reflected
in net income. The aggregate foreign exchange transaction loss recognized in the income statement was $0.3 million and $0.1 million in 2024 and 2023,
respectively. Additionally, translation adjustments attributable to intercompany transactions, such as loans and receivables, are included in stockholders' equity
as part of accumulated other comprehensive loss.
Contingencies. The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, including those involving
environmental, tax, product liability and general liability claims. The Company accrues for such liabilities when it is probable that future costs will be incurred,
and the amount can be reasonably estimated. Such accruals are based on developments to date, the Company's estimates of the outcomes of these matters, and
its experience in contesting, litigating and settling other similar matters. The Company does not currently anticipate the amount of any ultimate liability with
respect to these matters will materially affect the Company's financial position, liquidity, or future operations.
Cash and cash equivalents. All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. Cash
and cash equivalents was $15.7 million and $5.8 million as of January 31, 2025 and 2024, respectively. On January 31, 2025, $0.3 million was held in the
United States and $15.4 million was held by foreign subsidiaries. On January 31, 2024, less than $0.1 million was held in the United States and $5.7 million
was held by foreign subsidiaries.
32
Table of Contents
Restricted cash. There was no restricted cash held in the United States on January 31, 2025 or 2024. Restricted cash held by foreign subsidiaries was $1.4
million and $1.4 million as of January 31, 2025 and 2024, respectively. Restricted cash held by foreign subsidiaries related to fixed deposits that also serve as
security deposits and guarantees.
2024
2023
Cash and cash equivalents
$
15,716 $
5,845
Restricted cash
1,401
1,395
Cash, cash equivalents and restricted cash as presented in the statement of cash flows
$
17,117 $
7,240
Accounts receivable. The majority of the Company's accounts receivable are due from geographically dispersed contractors and manufacturing companies.
Credit is extended based on an evaluation of a customer's financial condition. In the United States, collateral is not generally required. In the United Arab
Emirates ("U.A.E."), Saudi Arabia, Egypt and India letters of credit are usually obtained for significant orders. Accounts receivable are due within various time
periods specified in the terms applicable to the specific customer and are stated as amounts due from customers net of an allowance for claims and doubtful
accounts. Standard payment terms are generally net 30 to 60 days. The Company maintains an allowance for credit losses for accounts receivable. The
assessment of the allowance for credit losses involves certain judgments and estimates. Management estimates the allowance balance using relevant available
information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The Company may also
establish an allowance for credit losses for specific receivables when it is probable that a specific receivable will not be collected and the loss can be reasonably
estimated. Past due trade accounts receivable balances are written off when the Company's collection efforts have been unsuccessful in collecting the amount
due and the amount is deemed uncollectible. The write off is recorded against the allowance for credit losses.
For the years ended January 31, 2025 and 2024, respectively, no one customer accounted for greater than 10% of the Company's consolidated net sales.
As of January 31, 2025 and 2024, respectively, no one customer accounted for greater than 10% of accounts receivable.
Concentration of credit risk. The Company maintains its U.S. cash in bank deposit accounts at financial institutions that are insured by the Federal Deposit
Insurance Corporation ("FDIC"). Cash balances are below FDIC limits. The Company has not experienced any losses in such accounts. The Company's foreign
cash is held in accounts at multiple institutions in the various countries in which the Company operates, limiting the concentration of risk internationally. The
Company has a broad customer base doing business in all regions of the United States as well as other areas in the world.
33
Table of Contents
Accumulated other comprehensive loss. Accumulated other comprehensive loss represents the change in equity from non-owner transactions and consists of
foreign currency translation.
2024
2023
Equity adjustment foreign currency, gross
$
(8,522) $
(5,804)
Tax effect of equity adjustment foreign currency
325
253
Total accumulated other comprehensive loss
$
(8,197) $
(5,551)
Inventories. Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method for all inventories.
2024
2023
Raw materials
$
16,374 $
13,787
Work in process
745
611
Finished goods
366
2,022
Subtotal
17,485
16,420
Less allowance
863
879
Inventories
$
16,622 $
15,541
Long-lived assets. Property, plant and equipment are stated at cost. Interest is capitalized in connection with the construction of facilities and amortized over
the estimated useful life of the asset. Long-lived assets are reviewed for possible impairment whenever events indicate that the carrying amount of such assets
may not be recoverable. If such a review indicates impairment, the carrying amount of such assets is reduced to an estimated fair value.
Depreciation is computed using the straight-line method over the estimated useful lives of assets, as presented in the following table. Leasehold improvements
are depreciated over the remaining life of the lease or its useful life, whichever is shorter. Amortization of finance lease assets is included in depreciation.
Depreciation expense was approximately $3.6 million and $3.8 million in the years ended January 31, 2025 and 2024, respectively.
Useful Life (Years)
2024
2023
Land, buildings and improvements
3 - 30
$
26,276 $
25,620
Machinery and equipment
3 - 10
50,360
56,411
Furniture, office equipment and computer systems
3 - 7
3,218
3,169
Transportation equipment
3
1,184
2,293
Subtotal
81,038
87,493
Less accumulated depreciation
45,673
49,873
Property, plant and equipment, net of accumulated depreciation
$
35,365 $
37,620
Impairment of long-lived assets. The Company's assessment of long-lived assets and other identifiable intangibles is based upon factors that market
participants would use in accordance with the accounting guidance for the fair value measurement of assets. At January 31, 2025, the Company performed
an assessment to determine whether there were any triggering events that may have occurred which could indicate that the carrying value of the Company's
long-lived assets are not recoverable. Based on this assessment, the Company did not identify any triggering events that would indicate that the carrying
amounts may not be recoverable with respect to long-lived assets. Accordingly, there was no impairment charge for the year ended January 31, 2025.
34
Table of Contents
Goodwill. The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the
residual of the purchase price recorded as goodwill. All identifiable goodwill as of January 31, 2025 and 2024, is attributable to the purchase of the remaining
50% interest in Perma-Pipe Canada, Ltd., which occurred in 2016.
The following table provides a reconciliation of changes in the carrying amount of goodwill:
2024
2023
Balance at beginning of year
$
2,222 $
2,227
Foreign exchange adjustment
(165)
(5)
Balance at end of year
$
2,057 $
2,222
The Company performs an impairment assessment of goodwill annually as of January 31, or more frequently if triggering events occur, based on the estimated
fair value of the related reporting unit or intangible asset. At January 31, 2025, the Company performed a qualitative assessment to determine whether there
were any triggering events that may have occurred which could indicate that more likely than not that the fair value of the reporting unit did not exceed its
carrying amount. Based on this assessment, the Company did not identify any triggering events that would indicate that the fair value is less than the carrying
value of the reporting unit for the year ended January 31, 2025. Accordingly, performing a quantitative goodwill impairment test was not required.
Other intangible assets with definite lives. The Company owns several patents including those covering features of its piping and electronic leak detection
systems. Patents are capitalized and amortized on a straight-line basis over a period not to exceed the legal lives of the patents. The Company expenses costs
incurred to renew or extend the term of intangible assets. Gross patents were $2.7 million as of January 31, 2025 and 2024. Accumulated amortization was
approximately $2.6 million as of January 31, 2025 and 2024. Amortization over the next five fiscal years will be less than $0.1 million and an insignificant
amount thereafter. Amortization expense is expected to be recognized over the weighted-average period of 9.1 years.
Research and development. Research and development expenses consist of materials, salaries and related expenses of engineering personnel and outside
services for product development projects. Research and development costs are expensed as incurred. Research and development expense was approximately
$0.1 million and $0.5 million in the years ended January 31, 2025 and 2024, respectively.
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 and liabilities for realizability at each reporting period. A valuation allowance is recorded to reduce deferred tax assets when it is more likely than not
that a tax benefit will not be realized.
The Company recognizes a tax position in its consolidated financial statements 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% likelihood of being realized upon ultimate settlement with the relevant tax authority. For further information, see
Note 7 - Income taxes.
One of the base broadening provisions of the U.S. Tax Cuts and Jobs Act of 2017 ("Tax Act") is the Global Intangible Low-Taxed Income provisions
("GILTI"). In accordance with guidance issued by the Financial Accounting Standards Board ("FASB") staff, the Company has adopted an accounting policy to
treat any GILTI inclusions as a period cost if and when incurred. Thus, for the years ended January 31, 2025 and 2024, deferred taxes were computed without
consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax
expense.
Fair value of financial instruments. The Company classifies cash and cash equivalents, accounts receivable, and accounts payable based on carrying values
that approximate their fair value due to the short-term nature of these instruments. 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.
35
Table of Contents
Net income per common share. Earnings per share ("EPS") is computed by dividing net income by the weighted average number of common shares
outstanding (basic). The Company reported net income in 2024 and 2023. The Company adjusted for dilutive shares in 2024 and 2023, assuming conversion,
exercise, or contingent issuance of securities that would have an anti-dilutive effect on earnings per share. The dilutive shares are in the following table:
Basic weighted average number of common shares outstanding
2024
2023
Basic weighted average number of common shares outstanding
7,956
7,977
Dilutive effect of stock options and restricted stock units
59
96
Weighted average number of common shares outstanding assuming full dilution
8,015
8,073
Restricted stock and stock options not included in the computation of diluted EPS of common stock because the
option exercise prices exceeded the average market prices
1
87
Canceled options during the year
-
(17)
Restricted stock and stock options with an exercise price below the average stock price
59
96
Equity-based compensation. The Company issues or has issued various types of stock-based awards to employees and directors: restricted stock, deferred
stock and stock options. Non-cash compensation expense associated with restricted stock is based on the fair value of the common stock at the grant date, and
amortized using the straight line method over a vesting period range of one to four years. Compensation expense associated with deferred stock which has
been awarded to the Board of Directors (non-employee) is based upon the fair value of the common stock at the date of grant, and since the grant vests
immediately it is expensed on the date of the grant. Stock compensation expense for stock options 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.
Treasury Stock. In accordance with ASC 505, Equity, the Company accounts for share repurchases pursuant to the repurchase program under the cost method.
This results in recognizing the shares as treasury stock, a reduction of stockholders' equity on the Company's consolidated balance sheets and on the Company's
consolidated statements of stockholders' equity. These amounts include costs associated with the acquisition of the shares. See Note 11 - Treasury stock for
further detail.
Segments. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by
the chief operating decision maker ("CODM") in making decisions regarding resource allocation and assessing performance. The Company’s Chief Executive
Officer is the CODM, and he uses the Company's consolidated financial information in determining how to allocate resources and assess performance. The
Company has determined that it operates as one segment.
Recent accounting pronouncements. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures. The standard update requires additional disclosures, including further details about segment expenses regarding a public entity's
reportable segments on an annual and interim basis. The additional segment disclosures are effective for fiscal years beginning after December 15, 2023, and
interim periods within fiscal years beginning after December 15, 2024. The Company adopted this standard update in fiscal 2024. The standard adoption
resulted in additional disclosures but did not have a material impact on the consolidated financial statements. See Note 13 - Segment reporting, in the Notes to
Consolidated Financial Statements for related disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Pursuant to this standard update,
companies are required to provide additional information, which is primarily attributable to the rate reconciliation and income taxes paid. The standard
update is to be applied prospectively, with retrospective application permitted. The new income tax disclosures are effective for fiscal years beginning after
December 15, 2024, with early adoption permitted. The Company is still evaluating this standard update but does not expect it to have a material impact on its
consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Disaggregation of Income Statement Expenses (Subtopic 220-40). The standard
update requires additional disclosures related to the disaggregation of income statement expenses. The disaggregation of income statement expense disclosures
set forth in this standard update is effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after
December 15, 2027, with early adoption permitted. The Company is still evaluating the impact this standard update but does not expect it to have a material
impact on its consolidated financial statements.
36
Table of Contents
Note 3 - Retention
A retention receivable is a portion of an outstanding receivable balance amount withheld by a customer until a contract is fully completed as specified in the
contract. As of January 31, 2025 and 2024, the Company had short-term retention receivables of $3.3 million and $2.4 million, respectively, which were
included as a component of trade accounts receivable. Additionally, the Company had long-term retention receivables of $2.6 million and $1.7 million as of
January 31, 2025 and 2024, respectively. The long-term retention receivable balances were included as a component of other long-term assets in the Company's
consolidated balance sheets. See Note 2 - Accounts receivable for further information regarding the future realization of these long-term balances.
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 January 31, 2025, 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 retention amount, $ 1.2 million is classified as a long-term asset.
The Company has been actively engaged in ongoing collection efforts with the customer to ensure full payment of open balances, and at various times
throughout 2025 and 2024, the Company received a partial payment to settle $0.4 million and $0.6 million of the customer's outstanding balances, respectively,
including an additional $0.6 million that was received subsequent to the end of the year. Additionally, the Company has been engaged by the customer to
perform additional work in 2025 under customary trade credit terms that support the continued cooperation between the Company and the customer. As a
result, the Company did not reserve any allowance against this outstanding receivable as of January 31, 2025. However, if the Company's efforts to collect on
this account are not successful, the Company may recognize an allowance for all, or substantial all, of any such uncollected amounts.
For further information regarding accounts receivable, see Note 2 - Significant accounting policies, in the Notes to Consolidated Financial Statements.
Note 4 - Revenue recognition
The Company accounts for its revenues under ASC 606, Revenue from Contracts with Customers.
Revenue from contracts with customers
The Company defines a contract as an agreement that has approval and commitment from both parties, defined rights and identifiable payment terms, which
ensures the contract has commercial substance and that collectability is reasonably assured.
The Company’s standard revenue transactions are classified into two main categories:
1)
Systems and Coating - which include all bundled products in which Perma-Pipe engineers, and manufactures pre-insulated specialty
piping systems mainly relating to the district heating and cooling and oil & gas markets.
2)
Products - which include cables, leak detection products, heat trace products, material/goods not bundled with piping or flowline
systems, and field services not bundled into a project contract.
In accordance with ASC 606-10-25-27 through 29, the Company recognizes specialty piping and coating systems revenue over time as the manufacturing
process progresses because one of the following conditions exist:
1)
The customer owns the material that is being insulated or coated, so the customer controls the asset and thus the work-in-process; or
2)
The customer controls the work-in-process due to the custom nature of the pre-insulated, fabricated system being manufactured, which
has no alternative future use, and there is a right to payment for work performed to date plus profit margin.
Products revenue is recognized when goods are shipped or services are performed (ASC 606-10-25-30).
37
Table of Contents
A breakdown of the Company's revenues by revenue class for the years ended January 31, 2025 and 2024 are as follows:
2024
2023
Sales
% to Total
Sales
% to Total
Products
$
12,801
8% $
10,368
7%
Specialty Piping Systems and Coating
Revenue recognized under input method
45,606
29%
51,977
34%
Revenue recognized under output method
99,977
63%
88,323
59%
Total
$
158,384
100% $
150,668
100%
The input method is used by certain operating entities to measure revenue by the costs incurred to date relative to the estimated costs to satisfy the contract over
time. Generally, these contracts are considered a single performance obligation satisfied over time and due to the custom nature of the goods and services, the
"over time" method is the most accurate depiction of the Company’s performance as it measures the value of the goods and services transferred to the customer.
Costs include all material, labor, and direct costs incurred to satisfy the performance obligations of the contract. Revenue recognition begins when projects
costs are incurred.
The output method is used by all other operating entities to measure revenue by the direct measurement of the outputs produced relative to the remaining goods
promised under the contract. Due to the types of end customers, generally these contracts require formal inspection protocols or specific export documentation
for units produced, or produced and shipped, therefore, the output method is the most faithful depiction of the Company’s performance. Depending on the
conditions of the contract, revenue may be recognized based on units produced, inspected and held by the Company prior to shipment or on units produced,
inspected and shipped.
Some of the Company’s operating entities invoice and collect milestones or other contractual obligations prior to the transfer of goods and services, but do not
recognize revenue until the performance obligations are satisfied under the methods discussed above.
Contract modifications that occur prior to the start of the manufacturing process will supersede the original contract and revenue is recognized using the
modified contract value. Contract modifications that occur during the manufacturing process (changes in scope of work, job performance, material costs, and/or
final contract settlements) are recognized in the period in which the revisions are known. Provisions are made for estimated losses on uncompleted contracts in
the contract liabilities account in the period in which such losses are determined.
The transaction price associated with the Company's contracts with customers are generally determined based on the fixed amount of consideration as
specified in a contract that is generally not subject to change. Additionally, from time to time the transaction price may also include variable consideration in
certain instances where it is deemed probable that a significant reversal of cumulative revenue recognized will not occur. The aggregate of these amounts
represents the total transaction price, which excludes amounts that are attributable to sales and value added taxes, or amounts collected on behalf of third
parties. The total transaction price is then allocated to the performance obligations that is eventually recognized as revenue based on the project type and the
method that is used to measure the transfer of promised goods and services to customers. Additionally, transaction prices relating to cost-plus contracts are
determined by applying the applicable profit margin to costs incurred on contracts, whereas transaction prices relating to fixed price contracts are determined
on a lump-sum basis. Further, standard payment terms are generally net 30 to 60 days, which is customer specific.
Contract assets and liabilities
Contract assets represent revenue recognized in excess of amounts billed for contract work in progress for which the Company has a valid contract and an
enforceable right to payment for work completed. Contract liabilities represent billings in excess of costs for contract work in progress for which the Company
has a valid contract and an enforceable right to payment for work completed. Both customer billings and the satisfaction (or partial satisfaction) of the
performance obligation(s) occur throughout the manufacturing process and impact the period end balances in these accounts. In addition, contract assets
include receivables or amounts that are billable beyond the passage of time. For additional information, see Note 3 - Retention, in the Notes to Consolidated
Financial Statements, and Unbilled accounts receivable, as further described below.
38
Table of Contents
The Company anticipates that substantially all costs incurred on uncompleted contracts as of January 31, 2025 will be billed and collected within one year.
The following table shows the reconciliation of the cost in excess of billings and billings in excess of costs:
2024
2023
Costs incurred on uncompleted contracts
$
11,621 $
21,912
Estimated earnings
9,366
11,270
Earned revenue
20,987
33,182
Less billings to date
19,302
30,580
Costs in excess of billings, net
$
1,685 $
2,602
Balance sheet classification
Contract assets: Costs and estimated earnings in excess of billings on uncompleted contracts
$
2,934 $
3,097
Contract liabilities: Billings in excess of costs and estimated earnings on uncompleted contracts
(1,249)
(495)
Costs in excess of billings, net
$
1,685 $
2,602
Substantially all of the $0.5 million and $1.3 million contract liabilities balances at January 31, 2024 and 2023, respectively, were recognized in revenues
during 2024 and 2023, respectively.
Unbilled accounts receivable
The Company has recorded $18.9 million and $16.6 million of unbilled accounts receivable on the consolidated balance sheets as of January 31, 2025 and
2024, respectively, from revenues generated by certain of its subsidiaries. The Company has fulfilled all performance obligations and has recorded revenue
under the respective contracts. The deliverables under these contracts have been accepted by the customer and billings will be made once the customer takes
possession of or arranges shipping for the products. The Company anticipates that substantially all of the amounts included in unbilled accounts receivable as
of January 31, 2025 will be billed within one year.
Practical expedients
Costs to obtain a contract are not considered to be incremental or material, and project duration generally does not span more than one year. Accordingly, the
Company applies a practical expedient for these types of costs and as such, are expensed in the period incurred.
As a result of the Company's contracts having a duration of less than one year, a practical expedient was applied regarding disclosure of the aggregate amount
and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period.
39
Table of Contents
Note 5 - Debt
2024
2023
Revolving line - North America
$
6,765 $
5,519
Mortgage note
3,956
4,512
Revolving lines - foreign
2,010
3,632
Loan payable to GIG
2,753
2,753
Finance lease obligations
9,098
9,316
Total debt
24,582
25,732
Unamortized debt issuance costs
(116)
(125)
Less current maturities
9,253
9,590
Total long-term debt
$
15,213 $
16,017
Current portion of long-term debt
$
9,253 $
9,590
Total short-term debt
$
9,253 $
9,590
The following table summarizes the Company's scheduled maturities in each of the next five fiscal years:
Total
2025
2026
2027
2028
2029
Thereafter
Revolving line - North America
$
6,765 $
6,765 $
- $
- $
- $
-
-
Mortgage note
3,956
221
221
221
221
221
2,853
Revolving lines - foreign
2,010
2,010
-
-
-
-
-
Long-term finance obligation
9,023
225
263
305
349
400
7,481
Loan payable to GIG
2,753
-
-
-
-
-
2,753
Finance lease obligations
75
32
34
9
-
-
(0)
Total
$
24,582 $
9,253 $
518 $
535 $
570 $
621 $
13,087
Revolving lines - North America. On September 20, 2018, the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the
Company, the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National
Association ("PNC"), as administrative agent and lender, providing for a three-year $18 million Senior Secured Revolving Credit Facility, subject to a
borrowing base including various reserves (the “Senior Credit Facility”).
On September 17, 2021, the North American Loan Parties executed an extension of the Credit Agreement with PNC, providing for a new five-year $18 million
senior secured revolving credit facility, subject to a borrowing base including various reserves (the “Renewed Senior Credit Facility”). The
Company's obligations under the Renewed Senior Credit Facility are currently guaranteed by Perma-Pipe Canada, Inc. Each of the North American Loan
Parties other than Perma-Pipe Canada, Inc. is a borrower under the Renewed Senior Credit Facility (collectively, the “Borrowers”).
The Borrowers have used and will continue to use borrowings under the Renewed Senior Credit Facility (i) to fund future capital expenditures; (ii) to fund
ongoing working capital needs; and (iii) for other corporate purposes, including potentially additional stock repurchases. Borrowings under the Renewed
Senior Credit Facility bear interest at a rate equal to an alternate base rate, SOFR rate index, plus, in each case, an applicable margin. The applicable margin is
based on a fixed charge coverage ratio ("FCCR") range. Interest on alternate base rate borrowings is the alternate base rate (as defined in the Renewed Senior
Credit Facility) plus an applicable margin ranging from 1.00% to 1.50%, based on the FCCR in the most recently reported period. Interest on SOFR rate
borrowings is the SOFR rate (as defined in the Renewed Senior Credit Facility) plus an applicable margin ranging from 2.00% to 2.50%, based on the FCCR in
the most recently reported period, as well as an additional SOFR adjustment ranging from 0.10% to 0.25%, based on the term of the interest period.
Additionally, the Borrowers pay a 0.25% per annum facility fee on the unused portion of the Renewed Senior Credit Facility.
Subject to certain exceptions, borrowings under the Renewed Senior Credit Facility are secured by substantially all of the North American Loan Parties’ assets.
The Renewed Senior Credit Facility matures on September 20, 2026. Subject to certain qualifications and exceptions, the Renewed Senior Credit Facility
contains covenants that, among other things, restrict the North American Loan Parties’ ability to create liens, merge or consolidate, consummate acquisitions,
make investments, dispose of assets, incur debt, and pay dividends and other distributions. In addition, the North American Loan Parties may not make capital
expenditures in excess of $5.0 million annually, plus a limited carryover of unused amounts. Further, the North American Loan Parties may not make
repurchases of the Company's common stock in excess of $3.0 million.
40
Table of Contents
The Renewed Senior Credit Facility also contains financial covenants requiring the North American Loan Parties to achieve a ratio of its EBITDA (as defined
in the Renewed Senior Credit Facility) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the
advances under the Renewed Senior Credit Facility to be not less than 1.10 to 1.00 for any five consecutive days in which the undrawn availability is less than
$3.0 million or any day in which the undrawn availability is less than $2.0 million. As of January 31, 2025, the calculated ratio was greater than 1.10 to 1.00. In
order to cure any future breach of these covenants by the North American Loan Parties, the Company may repatriate cash from any of its foreign subsidiaries
that are otherwise not a party to the Renewed Senior Credit Facility in an amount which, when added to the amount of the Company’s Consolidated EBITDA,
would result in compliance on a pro forma basis. The Company was in compliance with respect to these covenants as of January 31, 2025.
The Renewed Senior Credit Facility contains customary events of default. If an event of default occurs and is continuing, then PNC may terminate all
commitments to extend further credit and declare all amounts outstanding under the Renewed Senior Credit Facility due and payable immediately. In addition,
if any of the North American Loan Parties or certain of their subsidiaries become the subject of voluntary or involuntary proceedings under any bankruptcy,
insolvency or similar law, then any outstanding obligations under the Renewed Senior Credit Facility will automatically become immediately due and payable.
Loans outstanding under the Renewed Senior Credit Facility will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate (i) while
a bankruptcy event of default exists or (ii) upon the lender's request, during the continuance of any other event of default.
As of January 31, 2025, the Company had borrowed an aggregate of $6.8 million at a rate of 9.0% and had $3.7 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.
Finance obligation - buildings and land. On April 14, 2021, the Company entered into a purchase and sale agreement (the "Purchase and Sale Agreement") to
sell its land and building in Lebanon, Tennessee (the "Property"). Pursuant to the terms of the Purchase and Sale Agreement, the Company sold the Property for
$10.4 million. The transaction generated net cash proceeds of $9.1 million. Concurrently with the sale of the Property, the Company paid off the approximately
$0.9 million remaining on the mortgage note on the Property to its lender. The Company used the remaining proceeds to repay its borrowings under the Senior
Credit Facility, for strategic investments, and for general corporate needs. Concurrent with the sale of the Property, the Company entered into a fifteen-year
lease agreement (the “Lease Agreement”), whereby the Company is leasing back the Property at an annual rental rate of approximately $0.8 million, subject to
annual rent increases of 2.0%. Under the Lease Agreement, the Company has four consecutive options to extend the term of the lease by five years for each
such option. As of January 31, 2025 and 2024, the Company had a net book value relating to this asset of $1.8 million and $1.9 million, respectively.
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 all of the fair value of the underlying asset. The Company utilized an incremental borrowing rate of 8.0% to determine the finance
obligation to record for the amounts received and will continue to depreciate the assets. The current portion of the finance obligation of $0.2 million is
recognized in current maturities of long-term debt and the long-term portion of $8.8 million is recognized in long-term finance obligation on the Company's
consolidated balance sheets as of January 31, 2025. The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease
term.
Revolving lines - foreign . The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E., Egypt, and Saudi Arabia as
further described below:
United Arab Emirates
The Company has a revolving line for 8.0 million U.A.E. Dirhams (approximately $ 2.2 million at January 31, 2025) from a bank in the U.A.E. As of January
31, 2025, the facility has an interest rate of approximately 7.9% and expires in July 2025. The Company had borrowed an aggregate of $0.4 million and
$0.2 million as of January 31, 2025 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 January 31, 2025 and January 31, 2024, the Company had unused borrowing availability of approximately
$1.6 million and $1.9 million, respectively.
The Company has a revolving line for 65.2 million U.A.E. Dirhams (approximately $ 17.7 million at January 31, 2025) from a bank in the U.A.E. As of
January 31, 2025, the facility has an interest rate of approximately 7.9% and expires in August 2025. The Company had borrowed an aggregate of
$0.1 million as of January 31, 2025 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 January 31, 2025 and January 31, 2024, the Company had unused borrowing availability of approximately
$9.0 million and $1.0 million, respectively.
41
Table of Contents
Egypt
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 $ 2.0 million at January 31, 2025). 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 January 31, 2025, the facility has an interest rate of approximately 20.8%. Additionally, this credit arrangement was renewed in
November 2024 with substantially the same terms and conditions and expires in November 2025. As of January 31, 2025, the Company had an immaterial
amount outstanding with respect to this credit arrangement, and approximately $1.4 million outstanding at January 31, 2024, respectively, and is presented as a
component of current maturities of long-term debt in the Company's consolidated balance sheets. Further, as of January 31, 2025 and January 31, 2024 , the
Company had unused borrowing capacity of $2.0 million and $3.2 million, respectively.
In December 2021, the Company entered into a credit arrangement for project financing with a bank of Egypt for 28.2 million Egyptian Pounds. As this project
has progressed and the Company received collections, the facility has decreased to a current amount of 2.1 million Egyptian Pounds (approximately $0.1
million at January 31, 2025). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by the contract for a
project being financed by the Company's Egyptian subsidiary. The facility has an interest rate of approximately 20.8% and, as of November 2022, is no longer
available for borrowings by the Company. The facility will expire in connection with final customer balance collections and the completion of the project. As
of January 31, 2025, the Company had an insignificant amount outstanding, and approximately $ 0.1 million outstanding at January 31, 2024, respectively,
and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.
Saudi Arabia
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 Riyal (approximately $ 9.9 million at January 31, 2025 ). 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 January 31, 2025 , the facility has an interest rate of approximately 9.0% . The
Company had borrowed an aggregate of $1.5 million and $3.2 million as of January 31, 2025 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 January 31, 2025 and January 31, 2024, was $3.0 million and $6.1 million, respectively.
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 approximately $10 million at January 31, 2025 and January
31, 2024.
The Company was in compliance with the covenants under the credit arrangements in the U.A.E., Egypt and Saudi Arabia as of January 31, 2025 . 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
rates, as of January 31, 2025, the Company's interest rates ranged from 7.9% to 20.8%, with a weighted average rate of 11.6%, and the Company had facility
limits totaling $ 34.6 million under these credit arrangements. As of January 31, 2025, $ 16.9 million of availability was used to support letters of credit to
guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, the Company had borrowed approximately $ 2.1 million
and had an additional $ 15.6 million of remaining borrowing capacity available under the foreign revolving credit arrangements. The foreign revolving line
balances were included as current maturities of long-term debt in the Company's consolidated balance sheets as of January 31, 2025 and January 31, 2024.
In June 2023, the Company assumed a promissory note of approximately $ 2.8 million in connection with the formation of the joint venture with GIG.
In accordance with the promissory note, all principal is due and payable on the maturity date of April 9, 2026, with the option to prepay, in whole or in part, at
any time prior to the maturity date, without premium or penalty.
Mortgages. On July 28, 2016, the Company entered into a mortgage agreement secured by the Company's manufacturing facility located in Alberta,
Canada that matures on December 23, 2042. As of January 31, 2025, the remaining balance on the mortgage in Canada is approximately 5.7 million Canadian
Dollars ("CAD") (approximately $4.0 million at January 31, 2025). The interest rate is variable, and was 7.1% at January 31, 2025. The principal balance is
included as a component of long-term debt, less current maturities in the Company's consolidated balance sheets and is presented net of issuance costs of $0.1
million as of January 31, 2025 and January 31, 2024.
42
Table of Contents
Note 6 - Leases
The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or
financing leases, and are recorded on the consolidated balance sheets. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating
lease liabilities short-term, and operating lease liabilities long-term in the Company's consolidated balance sheets. Finance leases are included in property, plant
and equipment, current maturities of long-term debt, and long-term debt less current maturities in the Company's consolidated balance sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease
payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s
incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease
term. For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense over the lease term. For
finance leases, interest on the lease liability and the amortization of the ROU asset results in front-loaded expense over the lease term. Variable lease expenses
are recorded when incurred. ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over
the lease term.
As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the
commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to
pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment.
In calculating the ROU asset and lease liability, the Company elects to combine lease and non-lease components. Additionally, the Company excludes short-
term leases having an initial term of 12 months or less in accordance with the new guidance as an accounting policy election, and recognizes rent expense on a
straight-line basis over the lease term.
Operating Leases. In August 2020, the Company entered into a new lease in Abu Dhabi for land upon which the Company has built a production facility.
The annual payments are approximately 1.2 million U.A.E. Dirhams (approximately $0.3 million at January 31, 2025), inclusive of rent and common charges,
with escalation clauses in the agreement. Rent payments were deferred until August 2022 and have now commenced. The lease expires in August 2050.
In March and December 2022, the Company served Notices of Termination to its lessor for the Company's lease of the land and buildings in Fujairah in the
U.A.E. The Company served the Notices of Termination in connection with the Company's intended relocation to a different facility in Abu Dhabi. The
Company vacated portions of the leased space in December 2022 and the remaining space was vacated in December 2024. The first Notice of Termination
required that the Company pay an additional amount equal to three months' rent after that termination to enable the lessor to prepare the assets for lease by
another party. As a result of the termination, the Company has recognized adjustments to the amounts recorded in the consolidated financial statements as of
January 31, 2024. The termination resulted in decreases of $0.4 million, $6.0 million and $5.5 million to operating lease liability short-term, operating lease
liability long-term and operating lease right-of-use asset, respectively, in the consolidated balance sheets as of January 31, 2024. The termination also resulted
in a decrease in rent expense of $1.1 million in the consolidated statement of operations for the year ended January 31, 2024. There were no other adjustments
in connection with these terminations for the year ended January 31, 2025.
At January 31, 2025, the Company had total operating lease liabilities of $8.8 million and operating ROU assets of $8.2 million, which are reflected in the
consolidated balance sheets.
Finance Leases. The Company has several lease agreements, with lease terms of one to fifteen years, which consist of real estate, vehicles and office
equipment leases. These leases do not require any contingent rental payments, impose any financial restrictions or contain any residual value guarantees.
Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease
liabilities and ROU assets as the Company is not reasonably certain to exercise the options. Variable expenses generally represent the Company’s share of the
landlord’s operating expenses. The Company does not have any arrangements where it acts as a lessor, other than one sub-lease arrangement.
At January 31, 2025, the Company also had finance lease liabilities of $0.1 million included in current maturities of long-term debt and long-term debt less
current maturities, and finance ROU assets of $0.3 million which were included in property plant and equipment, net of accumulated depreciation in the
consolidated balance sheets.
43
Table of Contents
Supplemental balance sheet information related to leases is as follows:
Operating and Finance leases
January 31, 2025
January 31, 2024
Finance lease assets
Property and Equipment - gross
$
899 $
970
Accumulated depreciation and amortization
(626)
(536)
Property and Equipment - net
$
273 $
434
Finance lease liabilities
Finance lease liability short-term
$
75 $
113
Total finance lease liabilities
$
75 $
113
Operating lease assets
Operating lease ROU assets
$
8,199 $
6,467
Operating lease liabilities
Operating lease liability short-term
$
1,071 $
914
Operating lease liability long-term
7,713
6,270
Total operating lease liabilities
$
8,784 $
7,184
Total lease costs consist of the following:
Lease costs
Consolidated Statements of Operations Classification
Year Ended
January 31, 2025
Year Ended
January 31, 2024
Finance Lease Costs
Amortization of ROU assets
Cost of sales
$
131 $
162
Interest on lease liabilities
Interest expense
6
9
Operating lease costs
Cost of sales, SG&A expenses
1,873
1,888
Short-term lease costs (1)
Cost of sales, SG&A expenses
667
530
Sub-lease income
SG&A expenses
-
(61)
Total Lease costs
$
2,677 $
2,528
(1) Includes variable lease costs, which are not material
Supplemental cash flow information related to leases is as follows:
Year Ended January 31,
2025
2024
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flows from finance leases
$
31 $
193
Operating cash flows from finance leases
6
9
Operating cash flows from operating leases
2,031
1,789
ROU Assets obtained in exchange for new lease obligations
Finance leases liabilities
$
- $
139
Operating leases liabilities
2,767
4,988
44
Table of Contents
Weighted-average lease terms and discount rates are as follows:
January 31, 2025
January 31, 2024
Weighted-average remaining lease terms (in years)
Finance leases
2.3
3.3
Operating leases
11.5
13.7
Weighted-average discount rates
Finance leases
6.4%
6.8%
Operating leases
10.0%
9.3%
Maturities of lease liabilities as of January 31, 2025, are as follows:
Year
Operating Leases
Finance Leases
For the year ended January 31, 2026
$
1,900 $
36
For the year ended January 31, 2027
2,094
36
For the year ended January 31, 2028
2,120
9
For the year ended January 31, 2029
1,791
-
For the year ended January 31, 2030
899
-
Thereafter
7,162
-
Total lease payments
15,966
81
Less: amount representing interest
(7,182)
(6)
Total lease liabilities at January 31, 2025
$
8,784 $
75
Rent expense on operating leases, which is recorded on a straight-line basis, was $2.5 million and $2.4 million for the years ended January 31, 2025 and 2024,
respectively.
45
Table of Contents
Note 7 - Income taxes
Income from continuing operations before income taxes
2024
2023
Domestic (1)
$
(4,682) $
(8,541)
Foreign
23,150
18,432
Total
$
18,468 $
9,891
(1) The domestic loss from continuing operations before income taxes includes corporate overhead costs.
Components of income tax expense (benefit)
2024
2023
Current
Federal
$
(4) $
(21)
Foreign
3,614
3,351
State and other
150
270
Total current income tax expense
3,760
3,600
Deferred
Federal
1,048
(7,311)
Foreign
569
391
Total deferred income tax expense (benefit)
1,617
(6,920)
Total income tax expense
$
5,377 $
(3,320)
As a result of the one-time transition tax from the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Act”), the Company estimates that distributions from foreign
subsidiaries will no longer be subject to incremental U.S. federal income tax as they will either be remittances of previously taxed earnings and profits or
eligible for a full dividends received deduction to offset any U.S. federal income tax liability on the undistributed earnings. However, upon repatriation, various
state taxes and foreign withholding taxes may be levied on such amounts. Determination of the amount of unrecognized state and local tax liability is not
practicable due to the complexities associated with its hypothetical calculation. Current and future earnings in the Company's subsidiaries in Canada and Egypt
are not permanently reinvested. Earnings from these subsidiaries are subject to tax in their local jurisdiction, and withholding taxes in these jurisdictions
are considered. The Company's liability was $0.8 million as of January 31, 2025 and 2024, related to these taxes.
U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments in
foreign subsidiaries that is indefinitely reinvested outside the United States. The Company intends to permanently reinvest the undistributed earnings of its
Middle Eastern and Indian subsidiaries. The Middle Eastern and Indian subsidiaries have unremitted earnings of $50.6 million and $13.3 million, respectively,
as of January 31, 2025. Unremitted earnings of $25.9 million in the United Arab Emirates would not be subject to withholding tax in the event of a distribution,
and $24.7 million of unremitted earnings in Saudi Arabia would be subject to withholding tax of $1.2 million. The Company has not recorded a deferred tax
liability related to any financial reporting basis over tax basis in connection with the Company's investment in these foreign subsidiaries as it is not practical to
estimate.
46
Table of Contents
The difference between the provision for income taxes and the amount computed by applying the U.S. Federal statutory rate of 21% was as follows:
2024
2023
Tax expense at federal statutory rate
$
3,882 $
2,083
State expense, net of federal income tax effect
68
159
Domestic return to provision
(82)
247
Domestic valuation allowance
(468)
(8,065)
Global Intangible Low-Taxed Income inclusion
2,201
2,202
State NOL expirations
-
1,375
Permanent differences other
176
258
Valuation allowance for state NOLs
56
(1,314)
Differences in foreign tax rate
(796)
(598)
Reductions of uncertain tax positions of prior years
-
(239)
Deferred tax on unremitted earnings
152
195
Foreign withholding taxes
31
135
Research tax credit
265
247
All other, net expense
(108)
(5)
Total income tax (benefit) expense
$
5,377 $
(3,320)
The Company's worldwide effective tax rates ("ETR") were 29.1% and (33.6%) in the year ended January 31, 2025 and 2024, respectively. The change in the
ETR was largely due to changes in the mix of income and loss in various tax jurisdictions, and the release of the partial domestic valuation allowance in the
prior year.
Components of deferred income tax assets
2024
2023
U.S. Federal NOL carryforward
$
4,870 $
6,173
Deferred compensation
222
241
Research tax credit
1,240
1,505
Foreign NOL carryforward
255
258
Foreign tax credit
2,580
2,580
Stock compensation
-
21
Other accruals not yet deducted
202
500
State NOL carryforward
1,544
1,495
Accrued commissions and incentives
1020
845
Inventory reserve
118
70
Lease liability
1034
878
Deferred tax assets, gross
13,085
14,566
Valuation allowance
(5,277)
(5,689)
Total deferred tax assets, net of valuation allowances
$
7,808 $
8,877
Components of the deferred income tax liability
Depreciation
$
(530) $
(370)
Foreign subsidiaries unremitted earnings
(813)
(783)
Prepaid
(77)
(94)
Right of use asset
(999)
(855)
Other
(70)
(73)
Total deferred tax liabilities
$
(2,489) $
(2,175)
Deferred tax assets, net
$
5,319 $
6,702
Balance sheet classification
Long-term assets
$
6,639 $
7,919
Long-term liability
(1,320)
(1,217)
Total deferred tax assets, net of valuation allowances
$
5,319 $
6,702
47
Table of Contents
As of January 31, 2025 and 2024, the Company had deferred tax assets of $4.9 million and $6.2 million, respectively, related to gross U.S. Federal net
operating loss ("NOL") carryforwards of $23.8 million and $30.1 million, respectively. Of this amount, $16.4 million will begin to expire between tax
years 2036 and 2037, with the remainder not subject to expiration. As of January 31, 2025 and 2024, the Company had deferred tax assets of $1.5 million
related to gross state NOLs of $21.9 million and $21.0 million, respectively, that expire between 2025 and 2044. The Company has released the valuation
allowance recorded against U.S. Federal NOLs during the year ended January 31, 2024, and continues to maintain a valuation allowance against its state
NOLs. As of January 31, 2025 and 2024, the Company had deferred tax assets of $0.3 million related to gross foreign NOLs of $1.3 million for its subsidiary in
Saudi Arabia, which can be carried forward indefinitely and does not have a valuation allowance recorded against it. The ultimate realization of the tax benefit
is dependent upon the future generation of taxable income in the respective tax jurisdictions.
The Company periodically reviews the adequacy of its valuation allowance in all of the tax jurisdictions in which it operates, evaluates future sources of
taxable income and tax planning strategies and may make further adjustments based on management's outlook for continued profits in each jurisdiction.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of
the existing deferred tax assets. A significant piece of objective negative evidence previously evaluated was the domestic cumulative loss incurred over a three-
year period. The Company achieved three years of cumulative income in the U.S. federal tax jurisdiction as of the period ended January 31, 2024. As such,
management determined that the domestic deferred tax assets are more likely than not to be realized and have released the valuation allowance accordingly
during the period ended January 31, 2024. The Company continues to maintain a valuation allowance against certain domestic deferred tax assets including its
foreign tax credit carryovers, R&D credit carryovers, and state deferred tax assets. Management has released $0.2 million of valuation allowance related to
R&D credit carryovers in the period ending January 31, 2025 based upon expectations of future taxable income. The amount of the domestic deferred tax assets
considered realizable, however, could be increased if there are changes to the objective positive and negative evidence considered.
The Company has a deferred tax asset of $2.6 million for U.S. foreign tax credits after considering the impact of the repatriated foreign earnings and the one-
time transition tax. The foreign tax credit deferred tax asset is fully offset with a valuation allowance. The excess foreign tax credits are subject to a ten-year
carryforward and will begin to expire on January 31, 2026.
The following table summarizes uncertain tax position ("UTP") activity, excluding the related accrual for interest and penalties:
2024
2023
Balance at beginning of year
$
1,433 $
1,673
Decreases in positions taken in a prior period
(3)
(256)
Increases in positions taken in a current period
224
143
Decreases due to lapse of statute of limitations
(131)
(21)
Decreases due to settlements
(114)
(106)
Balance at end of year
$
1,409 $
1,433
Included in the total UTP liability were estimated accrued interest and penalties of $0.4 million as of each of January 31, 2025 and 2024. These non-current
income tax liabilities are recorded in other long-term liabilities in the consolidated balance sheets and recognized as an expense during the period. The
Company's policy is to include interest and penalties in income tax expense. On January 31, 2025, the Company did not anticipate any significant adjustments
to its unrecognized tax benefits within the next twelve months. Included in the balance on January 31, 2025 were amounts offset by deferred taxes (i.e.
temporary differences) or amounts that could be offset by refunds in other taxing jurisdictions (i.e., corollary adjustments). Upon reversal, $1.2 million of the
amount accrued on January 31, 2025 would impact the future ETR.
The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction
are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Tax years related to January 31, 2022, 2023,
and 2024 are open for federal and state tax purposes. In addition, federal and state tax years related to January 31, 2005 through January 31, 2010, are subject
to adjustment on audit, up to the amount of research tax credit generated in those years. Any NOL carryover can still be adjusted by the Internal Revenue
Service in future year audits.
The Company's management periodically estimates the probable tax obligations of the Company using historical experience in tax jurisdictions and informed
judgments. There are inherent uncertainties related to the interpretation of tax regulations in the jurisdictions in which the Company transacts business. The
judgments and estimates made at a point in time may change based on the outcome of tax audits, as well as changes to or further interpretations of regulations.
If such changes take place, there is a risk that the tax rate may increase or decrease in any period. Tax accruals for tax liabilities related to potential changes in
judgments and estimates for federal, foreign and state tax issues are included in other long-term liabilities on the consolidated balance sheets.
48
Table of Contents
Note 8 - Retirement plans
401(k) plan
The domestic employees of the Company participate in the PPIH 401(k) Employee Savings Plan, which is applicable to all employees except employees
covered by collective bargaining agreement benefits. The plan allows employee pretax payroll contributions from 1% to 16% of total compensation. The
Company matches 100% of each participant's payroll deferral contributions up to 1% of their compensation, plus 50% of each participant's payroll deferral
contributions on the next 5% of compensation.
Contributions to the 401(k) plan were $0.4 million in the years ended January 31, 2025 and 2024, respectively.
Multi-employer plans
The Company contributes to a multi-employer plan for certain collective bargaining U.S. employees. The risks of participating in this multi-employer plan are
different from a single employer plan in the following aspects:
•
Assets contributed to the multi-employer plans by one employer may be used to provide benefits to employees of other participating employers.
•
If a participating employer ceases contributing to the plan, the unfunded obligations of the plan may be inherited by the remaining participating
employers.
•
If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay those plans an amount based on the
underfunded status of the plan, referred to as a withdrawal liability.
The Company has assessed and determined that the multi-employer plans to which it contributes are not significant to the Company's consolidated financial
statements. The Company does not expect to incur a withdrawal liability or expect to significantly increase its contribution over the remainder of the contract
period. The Company made contributions to the bargaining unit supported multi-employer pension plans (in thousands):
(In
thousands)
(In
thousands)
FIP/RP Status
2024
2023
Surcharge
Plan Name
EIN
Plan #
Funded
Zone
Status
Pending/Implemented Contribution Contribution
Imposed
Collective
Bargaining
Expiration Date
Plumbers & Pipefitters Local 572
Pension Fund
62-6102837
001
Yellow
No
$189
$161
No
5/5/2025
49
Table of Contents
Note 9 - Stock-based compensation
The Company has prior incentive plans under which previously granted awards remain outstanding, but under which no new awards may be granted, including
the Company's 2021 Omnibus Stock Incentive Plan, which expired in May 2024. At January 31, 2025, the Company had reserved a total of 122,814 shares for
grants and issuances under these incentive plans, including issuances pursuant to unvested or unexercised prior awards.
The Company's 2024 Omnibus Stock Incentive Plan dated May 28, 2024 was approved by the Company's stockholders in July 2024 ("2024 Plan").
The 2024 Plan will expire in July 2027. The 2024 Plan authorizes awards to officers, employees, consultants and independent directors. The 2024 Plan
provides for the grant of deferred shares, non-qualified stock options, incentive stock options, restricted shares, restricted stock units, and performance-based
restricted stock units intended to qualify under section 422 of the Internal Revenue Code.
Grants were made in connection with the 2024 Plan and the prior incentive plans to employees, officers, and independent directors, as further described below:
Stock compensation expense
The Company has granted stock-based compensation awards to eligible employees, officers or independent directors. The Company recognized the following
stock-based compensation expense for the periods presented:
2024
2023
Restricted stock based compensation expense
$
860 $
913
Total stock-based compensation expense
$
860 $
913
50
Table of Contents
Stock options
The Company did not grant any stock options during the years ended January 31, 2025 or 2024. The following table summarizes the Company's stock option
activity:
Options
Weighted
average
exercise price
Weighted
average
remaining
contractual
term
Weighted
average grant
date fair value
Outstanding on January 31, 2023
40 $
10.85
1.12 $
19
Exercised
(1)
6.85
Expired or forfeited
(17)
11.15
Outstanding on January 31, 2024
22
11.15
0.7
6
Options exercisable on January 31, 2024
22 $
11.15
0.7
6
Exercised
(4)
6.89
Expired or forfeited
(17)
12.41
Outstanding on January 31, 2025
1
6.85
0.8
4
Options exercisable on January 31, 2025
1 $
6.85
0.8 $
4
There was no vesting, expiration or forfeiture of previously unvested stock options during the year ended January 31, 2025. In addition, there were no
remaining unvested stock options outstanding, and therefore no unrecognized compensation expense related to unvested stock options during the year ended
January 31, 2025.
Deferred stock
As part of their compensation, in previous years the Company granted deferred stock units to each non-employee director, equal to the result of dividing the
award amount by the fair market value of the common stock on the date of grant. The stock vests on the date of grant; however, it is distributed to the directors
only upon their separation from service. During the year ended January 31, 2025, no deferred stock units were distributed. There were approximately 62,926
deferred stock units outstanding included in the restricted stock activity shown below as of January 31, 2025 and 2024.
Restricted stock
The Company has granted restricted stock to executive officers, independent directors, and employees. The restricted stock vests ratably over one to four years.
The Company calculates restricted stock compensation expense based on the grant date fair value and recognizes expense on a straight-line basis over the
vesting period. The following table summarizes the Company's restricted stock activity:
Restricted shares
Weighted average
price per share
Weighted average
grant date fair
value
Outstanding on January 31, 2023
266 $
8.55 $
2,286
Granted
92
10.26
Issued / vested
(84)
Forfeited
(52)
9.59
Outstanding on January 31, 2024
222 $
9.33 $
2,078
Granted
111
8.93
Issued / vested
(73)
Forfeited
(29)
9.59
Outstanding on January 31, 2025
230 $
9.05 $
2,080
The fair value of vested restricted stock was $0.9 million and $1.1 million in the year ended January 31, 2025 and 2024 respectively. Additionally, there was
$1.0 million of unrecognized compensation cost related to unvested restricted stock granted under the plans as of January 31, 2025 and 2024. These costs
are expected to be recognized over the weighted-average period of 1.7 years and 1.8 years, respectively. Further, the Company had approximately 0.2 million
of non-vested restricted stock granted under the plan as of January 31, 2025. The remaining amount of non-vested restricted stock is expected to vest over
the weighted-average period of 1.7 years.
51
Table of Contents
Note 10 - Interest expense
2024
2023
Interest expense
2,224
2,429
Interest income
284
163
Interest expense
1,940
2,266
Note 11 - Treasury stock
The repurchase program approved on October 4, 2021, authorized the Company to use up to $3.0 million for the purchase of its outstanding shares of common
stock. Stock repurchases were permitted to be executed through open market or privately negotiated transactions, depending upon current market conditions
and other factors. On December 7, 2022, the Board of Directors authorized the use of $1.0 million remaining under the share repurchase program previously
approved on October 4, 2021 that expired on October 3, 2022. During the 12 months ended January 31, 2024, the Company used the remaining $1.0 million of
the $3.0 million authorized to repurchase its outstanding shares of common stock. Accordingly, there was no repurchase activity with respect to the Company's
shares of common stock during the twelve months ended January 31, 2025.
The following table sets forth information with respect to repurchases by the Company of its shares of common stock during 2023:
Period
Total number
of shares
purchased
Average price
paid per share
Total number
of shares
purchased as
part of
publicly
announced
plans or
programs
Approximate
dollar value of
shares that
may yet be
purchased
under the
plans or
programs
July 1, 2023 - July 31, 2023
37
8.51
37
628
August 1, 2023 - August 31, 2023
62
8.67
62
92
September 1, 2023 - September 30, 2023
10
8.95
10
-
Total
109
109
On August 29, 2024, the Company retired all remaining treasury stock previously acquired under the stock repurchase program. The retirement was recorded as
a reduction to common stock based on the par value of the shares, and the excess over par value was recorded as a decrease in retained earnings in accordance
with ASC 505- 30, Equity - Treasury Stock.
52
Table of Contents
Note 12 - Joint venture and non-controlling interest
On June 1, 2023, the Company closed on its formation of the joint venture (the "JV Agreement" or "JV") with Gulf Insulation Group ("GIG") a leading
provider of pre-insulated piping systems and pipe fabrication, in which the Company acquired a 60% financial controlling interest and contributed assets
consisting of a building and equipment. The JV is a limited liability company named Perma Pipe Gulf Arabia Industry and is a closed joint stock company
established under laws of the Kingdom of Saudi Arabia. The JV's capital is comprised of ordinary shares with 60% owned by the Company and the remaining
40% owned by GIG. The Company expects this collaborative business arrangement to result in expanding its market presence in Saudi Arabia, Kuwait, and
Bahrain. The primary business activities of the JV include the manufacture and sale of the pre-insulated piping systems and pipe coating services. The other
party to this business arrangement acquired a 40% non-controlling interest in the JV by contributing assets (i.e. acquired by the JV) of approximately
$6.8 million in fair value, mainly consisting of an idle building and equipment. The fair value of the net assets contributed was determined through the use of a
third-party appraiser using the indirect cost method.
Pursuant to the applicable guidance in ASC 805, Business Combinations and Noncontrolling Interests, the Company determined that the transaction did not
meet the necessary conditions to be considered a business as the set of assets acquired did not contain an organized workforce and therefore was recorded as an
asset acquisition. The assets transferred by the Company to the JV were recorded at historical cost, and no gain was recognized as a result of this exchange
since the Company has a controlling interest in the JV. The Company’s measurement of the acquired assets is comprised of the fair value of the contributed net
assets given up by the Company and the fair value of the non-controlling interest, excluding the contributed assets. The non-controlling interest attributable to
the other party was recorded as of the investment date and was measured as part of the carrying amount of the ownership interest in the net assets given up by
the Company plus the fair value of the non-controlling interest, excluding the contributed assets. No gain or loss was recognized as a result of this exchange. In
connection with the joint venture, the Company also assumed a promissory note issued as part of the formation of the JV in the principal amount of
$2.8 million payable to GIG. The principal amount is presented within the Long-term debt, less current maturities caption in the Company's consolidated
balance sheets. The Company also has a promissory note due from the JV that was issued as part of the formation of the JV in the amount of approximately
$4.2 million, which is eliminated in consolidation.
The Company has a 60% controlling financial interest in the joint venture which is not considered a wholly owned subsidiary. Accordingly, there remains a
minority portion of the equity interest that is owned by a third party, GIG. Pursuant to the applicable guidance contained in ASC 810, Consolidations, the
balance sheets and operating activities of this investment are included in the Company's consolidated financial statements. As of January 31, 2025, the carrying
amount of the assets and liabilities of the JV that are consolidated by the Company totaled $39.1 million and $22.1 million, respectively.
The Company adjusts net income in the consolidated statements of operations to exclude the proportionate share of results that is attributable to the non-
controlling interest. Additionally, the Company presents the proportionate share that is attributable to redeemable non-controlling interest as temporary equity
within the consolidated balance sheets. This mezzanine presentation is the result of the non-controlling interest being subject to a put option that is not solely
within the Company's control and in connection with the equity shares of the business arrangement that is redeemable any time after five years following the
date of incorporation. The redemption amount per the JV Agreement is at fair value of the non-controlling interest which is the fair value of ordinary shares of
the JV owned by GIG. Further, neither the call option nor put option contained in the JV Agreement met the definition of a derivative as a result of not
containing a net settlement provision and the shares not being readily convertible to cash, thereby being considered embedded with respect to non-controlling
interest and not a freestanding instrument.
As a result of the non-controlling interest being subject to redemption rights that are not entirely within the Company's control, it was concluded that the
necessary conditions were met to be accounted for in accordance with ASC 480, Distinguishing Liabilities from Equity. Pursuant to this accounting standard,
the Company determined that the only criteria for the security to become redeemable is the passage of time and, therefore, is considered probable of
redemption. The Company made a policy election to measure changes in the non-controlling interest immediately as they occur and adjust the carrying amount
of non-controlling interest equal to its redemption amount as the non-controlling interest has no stated fixed price or fixed date. As such, at each subsequent
balance sheet date following the formation of this business arrangement, the Company must determine whether further adjustment is required to increase the
carrying value of the redeemable non-controlling interest. If the Company determines that the fair value of the redeemable non-controlling interest exceeds its
carrying value, an adjustment is made to reflect this change. However, if the value is determined to be less than its carrying value, such adjustment is limited to
its original carrying value at the formation of the business arrangement. Additionally, adjustments made to reflect the change in the value of the redeemable
non-controlling interest are offset against permanent equity within the Company's consolidated balance sheets.
Net income attributable to GIG was $4.1 million and $2.7 million for the twelve months ended January 31, 2025 and 2024, respectively. The proportionate
share of net income was accounted for as a reduction in deriving net income attributable to common stock in the Company's consolidated statements of
operations.
The Company is the ultimate parent of the JV through its 60% financial control and as part of the JV Agreement has majority control of the operational
activities of the JV and no joint control exists. The JV Agreement has no veto or kickout rights and board voting is proportional to the ownership interest.
Certain activities do include a two-third majority affirmative vote of shareholders of the JV and include acquiring another company, establishing new
subsidiaries, entering another partnership or joint venture, any merger or material change to the business of the JV. These are considered protective rights. The
60% equity ownership of the JV by the Company allows it to receive its proportionate share of losses and residual returns.
The non-controlling interest is measured at fair value and was $11.0 million and $6.3 million recorded within temporary equity at January 31, 2025 and 2024,
respectively. The change in non-controlling interest consists of approximately $4.1 million in current year net income attributable to non-controlling interest,
and approximately $0.6 million as an adjustment in the carrying value of the redeemable non-controlling interest pertaining to the business arrangement. In
addition, there were no dividends or any other form of distributions from non-controlling interest for the year ended January 31, 2025 and 2024, respectively.
53
Table of Contents
Note 13 - Segment reporting
The Company operates under one segment: Piping Systems. The results are presented on an consolidated basis to the Chief Executive Officer who serves as the
chief operating decision maker ("CODM"). The accounting policies of the Company's segment are the same as those described in the summary of significant
accounting policies. For further information, see Note 2 - Significant accounting policies, in the Notes to Consolidated Financial Statements.
The CODM regularly reviews consolidated revenues, significant expenses, and consolidated net income attributable to common stock to make operating
decisions and assess performance. The CODM uses this information in making company-wide decisions when determining how to allocate resources.
Significant expenses represent amounts that are regularly provided to the CODM and included in consolidated net income attributable to common
stock. Additionally, the CODM regularly reviews asset information by our reporting segment in a manner that is consistent with the presentation on the
Company's accompanying consolidated balance sheets.
The following table summarizes the Company's revenues, net income attributable to common stock, and significant expenses:
Year ended January 31,
2025
2024
Net sales
$
158,384 $
150,668
Cost of sales
Labor
23,109
19,048
Materials
59,036
64,973
Depreciation and amortization
3,104
3,562
Other costs of sales
19,887
21,627
Total Cost of sales
105,136
109,210
Operating expenses
Salaries and wages
16,295
14,043
Depreciation and amortization
516
196
Other general and administrative expense
11,189
8,352
General and administrative expenses
28,000
22,591
Selling expense
4,947
5,508
Total operating expenses
32,947
28,099
Income from operations
20,301
13,359
Interest expense
1,940
2,266
Other income (expense)
107
(1,202)
Income before income tax
18,468
9,891
Income tax expense (benefit)
5,377
(3,320)
Net income
13,091
13,211
Less: Net income attributable to non-controlling interest
4,108
2,740
Net income attributable to common stock
$
8,983 $
10,471
54
Table of Contents
Schedule II
Perma-Pipe International Holdings, Inc. and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended January 31, 2025 and 2024
Balance at
beginning of
period
Charges to
expenses
Write-offs (1)
Other charges
(2)(3)
Balance at end
of period
Year Ended January 31, 2025
Valuation allowance for deferred tax assets
$
5,689 $
(412) $
- $
- $
5,277
Allowance for possible losses in collection of trade receivables
699
36
(25)
(7)
703
Year Ended January 31, 2024
Valuation allowance for deferred tax assets
$
15,993 $
(208) $
- $
(10,096) $
5,689
Allowance for possible losses in collection of trade receivables
612
123
(36)
-
699
(1) Uncollectible accounts written off.
(2) Impact on allowance due to foreign currency translation for the year ended January 31, 2025.
(3) The release of valuation allowances related to deferred tax assets for the year ended January 31, 2024.
55
Table of Contents
EXHIBIT INDEX
The exhibits listed below are filed herewith except the exhibits described below as incorporated by reference. Exhibits not filed herewith are incorporated by
reference to such exhibits filed by the Company under the location set forth under the caption "Description and Location" below. The Commission file number
for the Company's Exchange Act filings referenced below is 001-32530.
Exhibit No.
Description and Location
3.1
Certificate of Incorporation of Perma-Pipe International Holdings, Inc. [Incorporated by reference to Exhibit 3.3 to Registration Statement No.
33-70298]
3.2
Certificate of Amendment to Certificate of Incorporation of Perma-Pipe International Holdings, Inc. [Incorporated by reference to Exhibit 3.1
to the Company's Current Report on Form 8-K filed on March 20, 2017]
3.3
Seventh Amended and Restated By-Laws of Perma-Pipe International Holdings, Inc. [Incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K filed on April 4, 2025]
4.1
Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 [Incorporated by reference
to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2020 filed on April 21, 2020]
10.1
Form of Directors and Officers Indemnification Agreement [Incorporated by reference to Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 2006 filed on May 15, 2006] *
10.2
Executive Employment Agreement with David J. Mansfield dated October 19, 2016 [Incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q filed on December 13, 2016]*
10.3
Revolving Credit and Security Agreement, dated September 20, 2018, by and among the Company, PNC Bank, National Association, and the
other parties thereto [Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on September 24, 2018]
10.4
Second Amendment and Waiver to Revolving Credit and Security Agreement, dated September 17, 2021, by and among the Company, PNC
Bank, National Association, and other parties thereto [Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
filed on September 21, 2021]
10.5
Executive Employment Agreement, dated October 2, 2023, by and between the Company and Matthew E. Lewicki [Incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 2, 2023]*
10.6
Perma-Pipe International Holdings, Inc. 2024 Omnibus Stock Incentive Plan [Incorporated by reference to Appendix A to the Company's
Definitive Proxy Statement on Schedule 14A filed on June 21, 2024]*
10.7
Lease dated March 15, 2021, between the Company and Nash88 [Incorporated by reference to Exhibit 10.4 to the Company's Current Report
on Form 8-K/A filed on April 22, 2021]
10.8
Form of Restricted Stock and Performance Award Agreement under the 2024 Omnibus Stock Incentive Plan*
10.9
Form of Non-Employee Director Restricted Stock Unit Agreement under the 2024 Omnibus Stock Incentive Plan*
10.10
Executive Employment Agreement, dated March 31, 2025, by and between the Company and Saleh Sagr [Incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K filed on April 4, 2025]*
14.1
Code of Conduct [Incorporated by reference to Exhibit 14 of the Company's Annual Report on Form 10-K/A for the fiscal year ended January
31, 2004 filed on June 1, 2004]
19.1
Insider Trading Policy
21.1
Subsidiaries of Perma-Pipe International Holdings, Inc.
23.1
Consent of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP
23.2
Consent of Independent Registered Public Accounting Firm - Grant Thornton LLP
24.1
Power of Attorney executed by directors and officers of the Company
31.1
Rule 13a - 14(a)/15d - 14(a) Certification
(1) Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Rule 13a - 14(a)/15d - 14(a) Certification
(2) Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Section 1350 Certifications (1) Chief Executive Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and (2) Chief
Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1
Recoupment of Incentive Compensation Following a Restatement [Incorporated by reference to Exhibit 97 to the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 2024 filed on April 26, 2024]
101.INS
Inline XBRL Instance
101.SCH
Inline XBRL Taxonomy Extension Schema
101.CAL
Inline XBRL Taxonomy Extension Calculation
101.DEF
Inline XBRL Taxonomy Extension Definition
101.LAB
Inline XBRL Taxonomy Extension Labels
101.PRE
Inline XBRL Taxonomy Extension Presentation
104
Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)
*Management contracts and compensatory plans or agreements
56
Table of Contents
ITEM 16. FORM 10-K SUMMARY
None.
57
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Perma-Pipe International Holdings, Inc.
Date: May 1, 2025
/s/ David J. Mansfield
David J. Mansfield
Director, and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
DAVID J. MANSFIELD
Director, and Chief Executive Officer (Principal Executive Officer)
MATTHEW E. LEWICKI*
Vice President and Chief Financial Officer (Principal Financial and Accounting
Officer)
May 1, 2025
CYNTHIA BOITER*
Director
DAVID B. BROWN*
Director
ROBERT MCNALLY*
Director
IBRAHIM JAHAM AL KUWARI*
Director
JON C. BIRO*
Director
JEROME T. WALKER*
Director and Chairman of the Board of Directors
*By: /s/ David J. Mansfield
Individually and as Attorney in Fact
David J. Mansfield
58
Exhibit 10.8
2024 PPIH Long-Term Incentive Program
Restricted Stock Unit and Performance Award Grant
Restricted Stock Unit and Performance Award Agreement
under the
2024 Omnibus Stock Incentive Plan
Grantee:
No. of Restricted Stock Units:
This Agreement (the “Agreement”) evidences the award of (i) XXXX restricted stock units of Common Stock (each, a “RSU” and, collectively, the “RSUs”)
subject to a vesting schedule, and (ii) a performance award (the “Performance Award”) relating to the performance period of the Company’s fiscal years
2024-2026 (the “Performance Period”) with a target dollar amount of XXXXX (the “Target Amount”), that Perma-Pipe International Holdings, Inc., a
Delaware corporation (the “Company”), has granted to you, XXXXX, effective as of XXXXX (the “Grant Date”), pursuant to the 2024 Omnibus Stock
Incentive Plan (the “Plan”) and conditioned upon your agreement to the terms described below. All of the provisions of the Plan are expressly incorporated
into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:
1.
Terminology. Unless otherwise provided in this Agreement, capitalized words used herein are defined in the Glossary at the end of this Agreement,
or, if no definition is provided in this Agreement or the Glossary, such capitalized words shall have the same definitions as in the Plan.
2.
Vesting of Restricted Stock Units.
a.
All of the RSUs are nonvested and forfeitable as of the Grant Date.
b.
So long as your Service is continuous from the Grant Date through the applicable date upon which vesting is scheduled to occur,
■
XXXXX of the RSUs will vest and become nonforfeitable on XXXXX, 2025 (the “First Vesting Date”),
■
XXXXX of the RSUs will vest and become nonforfeitable on XXXXX, 2026 (the “Second Vesting Date”),
■
XXXXX of the RSUs will vest and become nonforfeitable on XXXXX, 2027 (the “Third Vesting Date” and, together with the
First Vesting Date and the Second Vesting Date, the “Vesting Dates”).
c.
Notwithstanding Section 2(b), one hundred percent of the RSUs will become vested and nonforfeitable as of immediately before and
contingent upon the occurrence of a Change in Control, so long as your Service is continuous from the Grant Date, through the date of the
Change in Control. In addition, if you are in Retirement (as defined below) then, upon a Change in Control, any RSUs that had remained
eligible for vesting following your Retirement, but that have not yet become vested, shall be vested and nonforfeitable as of immediately
before and contingent upon the occurrence of such Change in Control. “Retirement” shall mean the effective date of your resignation or
other termination of employment after your attainment of age 55 and at least 5 years of service (or such shorter period of service as may
be determined by the Administrator); provided that, for a resignation to be treated as a Retirement, you must provide at least 6
months’ advance written notice of such Retirement to the Company, and, for the avoidance of doubt, your Retirement will be effective
upon your actual retirement date rather than upon the date of such notice. You will continue working diligently to satisfy our business
obligations as well as assist the Company during a transition. The treatment of the RSUs upon Retirement is intended to recognize your
contributions to the Company prior to your Retirement and it is not intended to apply if you will continue working in the Company’s
industry following your Retirement. Therefore, as a condition of receiving the award set forth in this Agreement under the conditions of
Retirement, you will be required to enter into and comply with an extension of your current Confidentiality Agreement and Non-
Solicitation/Non-Competition Agreement term for three years following the effective date of your retirement.
3.
Terms of Performance Award. The Performance Award entitles you, subject to Section 4 and the other terms and conditions of this Agreement, to
receive (a) a cash payment equal to one-third of eighty percent of the Target Amount (the “Threshold Amount”) on each Vesting Date (each, an
“Annual Payment”) and (b) an additional cash amount, payable on the Third Vesting Date equal to (i) the excess, if any, of the percentage of the
Target Amount indicated below corresponding to the actual achievement of the performance goals set forth below (the “Performance Goals”)
during the Performance Period over (ii) the sum of the Annual Payments. The additional amount payable shall be interpolated for performance
between the specified levels and the sum of the Annual Payments shall not be less than eighty percent of the Target Amount. The Performance
Goals and corresponding percentages of the Target Amount are the following:
Fiscal Years
Net Income Threshold $
(Payout = 80% of Target Amount)
Net Income Target
(Payout = 100% of Target Amount)
Net Income Maximum
(Payout = 150% of Target Amount)
2024-2026
XXXXX
XXXXX
XXXX
The Performance Goals and the Company’s achievement of the Performance Goals shall be calculated by the Company in its sole and absolute discretion.
Notwithstanding the foregoing, the Performance Award will be deemed earned and shall be paid as of immediately before and contingent upon the occurrence
of a Change in Control, at the level indicated in the most recent forecast prepared by the Company, so long as your Service is continuous from the Grant Date
through the date of the Change in Control. In addition, if you are in Retirement, then, upon a Change in Control, any portion of the Performance Award that
had remained eligible to be paid following your Retirement, but that has not yet been paid, shall be paid as of immediately before and contingent upon the
occurrence of such Change in Control in an amount based on the performance level indicated in the most recent forecast prepared by the Company.
4.
Effect of Termination of Employment or Service.
a.
If your Service ceases by reason of your permanent disability (as defined in Section 22(e)(3) of the Code), then the RSUs that would have
vested on the schedule set forth in Section 2(b), and the portion of the Performance Award that would have been paid on the schedule set
forth in Section 3, if your Service had continued through the one-year anniversary of your date of disability shall, in the case of the RSUs,
become nonforfeitable and shall be released to you on the date such RSUs would have vested as set forth in Section 2(b), and in the case
of the Performance Award, be paid to you on the date such amount would have been paid as set forth in Section 3, if your Service had
been continuous through the one year anniversary of your date of disability, and any RSUs or portion of your Performance Award that do
not vest in accordance with this subsection shall be forfeited; provided, however, if the Company (or an Affiliate) reasonably determines
following your termination due to disability that you could have been terminated for Cause had all the facts been known to the Company
(or an Affiliate) at the time of your disability, then you shall forfeit all rights with respect to any unvested RSUs and any unpaid
Performance Award.
b.
If your Service ceases by reason of your Retirement, by reason of your termination without Cause when you had met the age and service
requirements for Retirement or by reason of your death, then:
i.
If your RSUs and Performance Award were granted prior to the 12-month period ending on the effective date of your Retirement
or death, (A) one hundred percent of the RSUs will continue to vest and become nonforfeitable as set forth in Section 2(b), and
(B) your Performance Award will be paid as set forth in Section 3, as though your Service was continuous, or
ii.
If your RSUs and Performance Award were granted in the 12-month period ending on the effective date of your Retirement or
death, a pro rata amount of the first tranche of your RSUs and your Performance Award (based on the number of days between
the grant date and your Retirement divided by 365) respectively will continue to vest and become nonforfeitable as follows: (A)
In the case of your RSUs as set forth in Section 2(b), and (B) In the case of your Performance Award as set forth in Section 3.
Any portion of the Award that does not remain eligible for continued vesting or to be deemed earned upon the cessation of your Service shall be immediately
forfeited. If you die following your separation under this Section 4(b), then your estate will receive any RSUs and Performance Awards that would have
continued to vest in accordance with the foregoing.
c.
Notwithstanding the foregoing, if:
i.
You work in the Company’s industry or with a competitor of the Company (in each case as determined by the Company in its
sole and absolute discretion) during the three years following the effective date of your Retirement or
(ii) The Company (or an Affiliate) reasonably determines following your Retirement that you could have been terminated for Cause had all the facts been
known to the Company (or an Affiliate) at the time of your Retirement,
then you shall forfeit any unearned RSUs and unpaid Performance Award amounts and be required to repay in cash the gross amount of any RSUs that vested
or Performance Award amounts that were paid to you under this Agreement in connection with or following the effective date of your Retirement.
In the case of RSUs, the amount required to be repaid shall be the Fair Market Value of such RSUs at the time such RSUs became vested and nonforfeitable,
provided that you may, rather than paying cash, repay a number of shares of Common Stock equal to the number of RSUs that became vested and
nonforfeitable.
d.
If your Service ceases for any reason except as otherwise specified above, all RSUs that are not then vested, and any portion of your
Performance Award that has not been earned, will be immediately forfeited by you. Except as otherwise specified above, unless otherwise
determined by the Administrator in its sole discretion, none of the RSUs, and no portion of the Performance Award, will vest after your
Service ceases.
5.
Restrictions on Transfer.
a.
Prior to vesting, your RSUs may not be sold, assigned, transferred, pledged, hypothecated or disposed of in any way (whether by
operation of law or otherwise), except by will or the laws of descent and distribution, and shall not be subject to execution, attachment or
similar process, Any attempt to transfer your RSUs that is in violation of this Section 5(a) shall be wholly ineffective and, if any such
attempt is made, the Company may cause you to immediately forfeit any unvested RSUs without any payment or consideration by the
Company. The Company is authorized to take appropriate measures to prevent any such transfer, including, but not limited to, having its
Transfer Agent hold all unvested shares in a designated nominee account until vesting and maintaining stop transfer instructions in regard
to such RSUs, or placing appropriate legends on any certificates that are issued with respect to the RSUs.
b.
You hereby represent and warrant to the Company as follows:
i.
You will hold any Shares received under this Agreement for your own account for investment only and not with a view to, or for
resale in connection with, any “distribution” of the Shares within the meaning of the Securities Act.
ii.
You understand that the Company may, in its discretion, continue to impose restrictions on the sale, pledge or other transfer of
your Shares after they vest (including the placement of appropriate legends on stock certificates and the issue of stop transfer
instructions to the Company’s Transfer Agents) if, in the judgment of the Company, such restrictions are necessary or desirable to
comply with the Securities Act, the securities laws of any State or any other law.
iii. You are aware that your investment in the Company is a speculative investment that has limited liquidity and is subject to the risk
of complete loss.
c.
Any attempt to dispose of the Shares received under this Agreement in contravention of the restrictions set forth in this Section 5 shall be
null and void and without effect. The Company shall not be required to (i) transfer on its books any Shares that have been sold or
transferred in contravention of this Agreement or (ii) treat as the owner of the Shares, or otherwise accord voting, dividend, or liquidation
rights to any transferee to whom the Shares have been transferred in contravention of this Agreement.
6.
Stockholder Rights. You are considered the record owner of the RSUs immediately upon the Grant Date; however, you shall not be entitled to vote
such Shares and you shall authorize and, by this Agreement, provide an irrevocable proxy coupled with an interest to the Company to vote such
shares in its discretion until they are vested. Any cash dividends will accrue and be paid to you at the same time, and to the same extent, that the
RSUs vest, and any dividends paid in Shares or other securities shall be subject to the same vesting schedule, risk of forfeiture, and restrictions on
transferability as the RSUs with respect to which they were paid. For clarity, if you forfeit any RSUs, then you will also forfeit any dividends or
other distributions paid with respect to such RSUs.
7.
Tax Withholding.
a.
You hereby agree to make adequate provision for foreign, federal, state and local taxes required by law to be withheld, if any, which arise
in connection with the grant, vesting or other event relating to the RSUs or in connection with the grant, vesting, earning or payment of
the Performance Award. To enable the satisfaction of your tax withholding obligations with respect to the RSUs through the delivery of
proceeds from the sale of Shares that are issued under this Agreement on the market, you should execute Exhibit A to this Agreement and
return it to the Company by the deadline set forth therein; provided that such sale of Shares shall occur only if the Company or its
Affiliates do not satisfy applicable tax withholding obligations by withholding the issuance or delivery of Shares hereunder. If you have
not timely executed Exhibit A to this Agreement, then you shall, immediately upon notification of the amount of withholding taxes due, if
any, in connection with the RSUs, pay to the Company in cash or by check the amount necessary to satisfy any withholding
obligations. The Company (and its Affiliates) shall also have the right to deduct from any compensation or any other payment of any kind
due you (including withholding the issuance or delivery of Shares hereunder) the amount of any federal, state, local or foreign taxes
required by law to be withheld in connection with this Agreement; provided, however, that the value of the Shares withheld or redeemed
for taxes may not exceed the maximum statutory rate associated with the transaction with respect to which Shares are being withheld or
redeemed to the extent necessary for the Company to avoid an accounting charge.
b.
You hereby acknowledge that you have been advised by the Company to seek independent tax advice from your own advisors regarding
the tax consequences of this Award. You may not rely on the Company, its Affiliates, or any of their officers, directors or employees for
tax or legal advice regarding this Award. You acknowledge that you have sought tax and legal advice from your own advisors regarding
this Award or have voluntarily and knowingly foregone such consultation.
8.
Adjustments for Corporate Transactions and Other Events.
a.
Stock Dividend, Stock Split and Reverse Stock Split. Upon a stock dividend of, or stock split or reverse stock split affecting, the
Common Stock, the number of outstanding RSUs shall, without further action of the Administrator, be adjusted to reflect such event. The
Administrator shall make adjustments, in its discretion, to address the treatment of fractional RSUs with respect to the Award as a result
of the stock dividend, stock split or reverse stock split; provided that such adjustments do not result in the issuance of fractional
Shares. Adjustments under this Section 8 will be made by the Administrator, whose determination as to what adjustments, if any, will be
made and the extent thereof will be final, binding and conclusive.
b.
Non-Change in Control Transactions. Upon any change affecting the Common Stock, the Company or its capitalization, by reason of a
spin-off, split-up, dividend, recapitalization, merger, consolidation or share exchange, other than any such change that is part of a
transaction resulting in a Change in Control, the Administrator shall make any adjustments with respect to the Award as the Administrator
determines to be appropriate and equitable. The Administrator’s determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive.
c.
Unusual or Nonrecurring Events. The Administrator shall make, in its discretion, adjustments in the terms and conditions of, and the
criteria included in, the Award in recognition of unusual or nonrecurring events affecting the Company, or the financial statements of the
Company or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the Administrator determines
that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made
available under the Plan. The Administrator may make, in its discretion, adjustments in the terms and conditions of, and the criteria
included in, the Performance Award in recognition of unusual, unanticipated or nonrecurring events affecting the Company, or the
financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the
Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan.
d.
Binding Nature of Agreement. The terms and conditions of this Agreement shall apply with equal force to any additional and/or substitute
securities received by you in exchange for, or by virtue of your ownership of, the RSUs, to the same extent as the RSUs with respect to
which such additional and/or substitute securities are distributed, whether as a result of any spin-off, stock split-up, stock dividend, stock
distribution, other reclassification of the Common Stock of the Company, or similar event, except as otherwise determined by the
Administrator. If the RSUs are converted into or exchanged for, or stockholders of the Company receive by reason of any distribution in
total or partial liquidation or pursuant to any merger of the Company or acquisition of its assets, securities of another entity, or other
property (including cash), then the rights of the Company under this Agreement shall inure to the benefit of the Company’s successor, and
this Agreement shall apply to the securities or other property (including cash) received upon such conversion, exchange or distribution in
the same manner and to the same extent as the RSUs.
9.
Non-Guarantee of Employment or Service Relationship. Nothing in the Plan or this Agreement shall alter your at-will or other employment status
or other service relationship with the Company (or an Affiliate), nor be construed as a contract of employment or service relationship between the
Company (or an Affiliate) and you, or as a contractual right of you to continue in the employ of, or in a service relationship with, the Company (or
an Affiliate) for any period of time, or as a limitation of the right of the Company (or an Affiliate) to discharge you at any time with or without
cause or notice and whether or not such discharge results in the forfeiture of any RSUs or all or any portion of the Performance Award or any other
adverse effect on your interests under the Plan.
10. The Company’s Rights. The existence of this Award or the RSUs shall not affect in any way the right or power of the Company or its stockholders
to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or
any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or other stocks with preference ahead of or convertible
into, or otherwise affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of the Company’s assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
11. Notices. All notices and other communications made or given pursuant to this Agreement shall be in writing and shall be sufficiently made or given
if hand delivered or mailed by certified mail, addressed to you at the address contained in the records of the Company, or addressed to the
Administrator, care of the Company for the attention of its Corporate Secretary at its principal executive office or, if the receiving party consents in
advance, transmitted and received via telecopy or via such other electronic transmission mechanism as may be available to the parties.
12. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the RSUs and the Performance Award granted
hereunder. Any oral or written agreements, representations, warranties, written inducements, or other communications made prior to the execution
of this Agreement with respect to the RSUs or the Performance Award granted hereunder shall be void and ineffective for all purposes. In the event a
court of competent jurisdiction deems any provision hereof to be unreasonable, void, or unenforceable, such provision(s) shall be deemed severed
from the remainder of the Agreement, which shall continue in all other respects to be valid and enforceable. It is the intent of the parties that any
such provision(s) of this Agreement declared void, unreasonable, or unenforceable shall be deemed by a court of competent jurisdiction revised to
the minimum amount necessary in order to be valid and enforceable.
13. Amendment. This Agreement may be amended from time to time by the Administrator in its discretion; provided, however, that this Agreement
may not be modified in a manner that would have a material adverse effect on your rights with respect to the RSUs or the Performance Award as
determined in the discretion of the Administrator, except as otherwise provided in (a) Section 8 of this Agreement, (b) the Plan or (c) a written
document signed by each of the parties hereto.
14. Conformity with Plan. This Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the
Plan. Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. In the event of any
ambiguity in this Agreement or any matters as to which this Agreement is silent, the Plan shall govern. A copy of the Plan is provided to you with
this Agreement.
15. Governing Law. The validity, construction and effect of this Agreement, and of any determinations or decisions made by the Administrator relating
to this Agreement, and the rights of any and all persons having or claiming to have any interest under this Agreement, shall be determined
exclusively in accordance with the laws of the State of Delaware, without regard to its provisions concerning the applicability of laws of other
jurisdictions. As a condition of this Agreement, you agree that you will not bring any action arising under, as a result of, pursuant to or relating to,
this Agreement in any court other than a federal or state court in the districts which include Niles, Illinois, and you hereby agree and submit to the
personal jurisdiction of any federal court located in the district which includes Niles, Illinois or any state court in the district which includes Niles,
Illinois. You further agree that you will not deny or attempt to defeat such personal jurisdiction or object to venue by motion or other request for
leave from any such court.
16. Resolution of Disputes. Any dispute or disagreement which shall arise under, or as a result of, or pursuant to or relating to, this Agreement shall be
determined by the Administrator in good faith in its absolute and uncontrolled discretion, and any such determination or any other determination by
the Administrator under or pursuant to this Agreement and any interpretation by the Administrator of the terms of this Agreement, will be final,
binding and conclusive on all persons affected thereby. You agree that before you may bring any legal action arising under, as a result of, pursuant
to or relating to, this Agreement you will first exhaust your administrative remedies before the Administrator. You further agree that in the event that
the Administrator does not resolve any dispute or disagreement arising under, as a result of, pursuant to or relating to, this Agreement to your
satisfaction, no legal action may be commenced or maintained relating to this Agreement more than twenty-four (24) months after the
Administrator’s decision.
17. Headings. The headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
18. Counterparts. This Agreement may be executed in multiple counterparts, each of which is deemed to be an original, but all of which taken together
constitute one and the same Agreement and shall become effective when all counterparts have been executed by each of the parties hereto and
delivered to the other. Facsimile and other electronic transmissions (including in portable document format) of any originally executed document
(including this Agreement) shall be deemed to be the same as a delivered, executed original.
19. Electronic Delivery of Documents. By your signing this Agreement, you (i) consent to the electronic delivery of this Agreement, all information
with respect to the Plan and the RSUs and any reports of the Company provided generally to the Company’s stockholders; (ii) acknowledge that you
may receive from the Company a paper copy of any documents delivered electronically at no cost to you by contacting the Company by telephone
or in writing; (iii) further acknowledge that you may revoke your consent to the electronic delivery of documents at any time by notifying the
Company of such revoked consent by telephone, postal service or electronic mail; and (iv) further acknowledge that you understand that you are not
required to consent to electronic delivery of documents.
20. No Future Entitlement. By your signing this Agreement, you acknowledge and agree that: (i) the grant of the RSUs and the Performance Award is a
one-time benefit which does not create any contractual or other right to receive future grants of stock, or compensation in lieu of stock grants, even
if stock grants have been granted repeatedly in the past; (ii) all determinations with respect to any such future grants, including, but not limited to,
the times when stock grants shall be granted, the maximum number of Shares subject to each stock grant, and the times or conditions under which
restrictions on such stock grants shall lapse, will be at the sole discretion of the Administrator; (iii) the value of this stock grant is an extraordinary
item of compensation which is outside the scope of your employment contract, if any; (iv) the value of this stock grant is not part of normal or
expected compensation or salary for any purpose, including, but not limited to, calculating any termination, severance, resignation, redundancy, end
of service payments or similar payments, or bonuses, long-service awards, pension or retirement benefits; (v) the vesting of RSUs ceases upon
termination of employment with the Company or transfer of employment from the Company, or other cessation of eligibility for any reason, except
as may otherwise be explicitly provided in this Agreement; (vi) the Company does not guarantee any future value of these RSUs; and (vii) no claim
or entitlement to compensation or damages arises if these RSUs do not increase in value and you irrevocably release the Company from any such
claim that does arise.
21. Personal Data. For purposes of the implementation, administration and management of this Award or the effectuation of any acquisition, equity or
debt financing, joint venture, merger, reorganization, consolidation, recapitalization, business combination, liquidation, dissolution, share exchange,
sale of stock, sale of material assets or other similar corporate transaction involving the Company (a “Corporate Transaction”), you consent, by
execution of this Agreement, to the collection, receipt, use, retention and transfer, in electronic or other form, of your personal data by and among
the Company and its third party vendors or any potential party to a potential Corporate Transaction. You understand that personal data (including
but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number,
date of birth, nationality, job and payroll location, data for tax withholding purposes and Shares awarded, cancelled, vested and unvested) may be
transferred to third parties assisting in the implementation, administration and management of the stock grant or the effectuation of a Corporate
Transaction and you expressly authorize such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). You
understand that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws
and protections than your country. You understand that data will be held only as long as is necessary to implement, administer and manage the stock
grant or effect a Corporate Transaction. You understand that you may, at any time, request a list with the names and addresses of any potential
recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary
amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s Secretary. You
understand, however, that refusing or withdrawing your consent may affect your ability to accept a stock grant.
22. Consideration for Shares. To ensure compliance with applicable state corporate law, the Company may require you to furnish consideration in the
form of cash or cash equivalents equal to the par value of the Shares issued to you hereunder, and you hereby authorize the Company to withhold
such amount from remuneration otherwise due you from the Company.
23. Recoupment. The RSUs and the Performance Award are subject to recoupment in accordance with the Dodd-Frank Wall Street Reform and
Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation
recovery policy or practice otherwise required by applicable law.
GLOSSARY
a.
“Administrator” means the Board of Directors of Perma-Pipe International Holdings, Inc. and/or the committee(s) or officer(s) appointed by the
Board that have authority to administer the Plan.
b.
“Affiliate” means any entity, whether now or hereafter existing, which controls, is controlled by, or is under common control with the Company
(including but not limited to joint ventures, limited liability companies and partnerships). For this purpose, “control” shall mean ownership of 25%
or more of the total combined voting power or value of all classes of stock or interests of the entity, or the power to direct the management and
policies of the entity, by contract or otherwise.
c.
“Cause” means termination in whole or substantial part, for gross negligence or willful misconduct in the execution of your duties, for conviction
of, or entry of a plea of guilty or nolo contendere to, any felony or any act of fraud, embezzlement, misappropriation, or a crime involving moral
turpitude, or for commission of any act which causes or may reasonably be expected to cause substantial damage to the Company.
d.
“Company” means Perma-Pipe International Holdings, Inc.
e.
“Securities Act” means the Securities Act of 1933, as amended.
f.
“Service” means your employment or other service relationship with the Company and its Affiliates. Your Service will be considered to have
ceased with the Company and its Affiliates if, immediately after a sale, merger or other corporate transaction, the trade, business or entity with
which you are employed or otherwise have a service relationship is not Perma-Pipe International Holdings, Inc. or its successor, or an Affiliate of
Perma-Pipe International Holdings, Inc. or its successor.
g.
“You”; “Your”; “Employee”, means the recipient of this Award as reflected in the first paragraph of this Agreement. Whenever the word
“Employee”, “you” or “your” is used in any provision of this Agreement under circumstances where the provision should logically be construed, as
determined by the Administrator, to apply to the estate, personal representative, or beneficiary to whom the RSUs or this Award may be transferred
by will or by the laws of descent and distribution, the words “Employee”, “you” and “your” shall be deemed to include such person.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer.
Perma-Pipe International Holdings, Inc.
By: David Mansfield
Date: XXXXXXX
The undersigned hereby acknowledges that he/she has carefully read this Agreement and agrees to be bound by all of the provisions set forth herein. The
undersigned also consents to electronic delivery of all notices or other information with respect to this Award or the Company.
WITNESS:
GRANTEE
Date:
Exhibit A
Standing Order Election
By executing this Irrevocable Standing Order Election (this “Standing Order”), I wish to notify the Company of my election to satisfy any withholding taxes
due in connection with each and every vesting date for the RSUs by applying proceeds from a market sale of Company securities issuable as a result of such
vesting date, except to the extent the Company satisfies such withholding taxes by withholding Company securities otherwise issuable as a result of such
vesting date. I understand that if I do not execute this Standing Order, then the Company will require that I pay my withholding obligations by cash
or check, or the Company will deduct the amount of any withholding obligations from other payments due to me.
IMPORTANT NOTES:
● You may not enter into this Standing Order if you are in possession of material non-public information. If you are in possession of material
non-public information, then you must wait to complete this Standing Order until such time as you no longer possess material non-public
information.
● No sales may be made pursuant to this Standing Order for 30 calendar days following its execution. To ensure that you can satisfy your
withholding obligations by selling Shares in the market, you should return this form to the Company as soon as possible, but in no event later than
30 days before the first vesting date of your RSUs listed in the Agreement.
By signing below, I understand that I am agreeing to the following provisions:
1.
I am executing this Standing Order to authorize the Company and any broker the Company designates (the “Broker”) to take the actions described
in this Paragraph 1. I authorize the Company to transfer any Shares issued to me in connection with my award of RSUs to the Broker to be held in
an account for my benefit (the “Brokerage Account”), and I irrevocably authorize the Broker to sell, at the market price and on the date the RSUs
vest for tax purposes (or, if all or a portion of the sale cannot be completed on such date because of insufficient demand or a market disruption,
then on the next following business day on which the sale can be made) the number of Shares necessary to obtain proceeds sufficient to satisfy the
amount of any withholding obligations associated with my RSUs indicated by the Company to the Broker. I understand and agree that the number
of Shares that the Broker will sell will be based on the Company’s estimate (or Broker’s estimate if it provides such service) of the Shares required
to satisfy the withholding obligations, using the closing price of a Share of the Company’s common stock on the trading day immediately prior to
the vesting date (or such other date as any withholding obligations become due). I agree to execute and deliver such documents, instruments and
certificates as may reasonably be required in connection with the sale of the Shares pursuant to this Standing Order.
2.
I agree that the proceeds received from the sale of Shares pursuant to Paragraph 1 will be used to satisfy any withholding obligations associated
with my RSUs and, accordingly, I hereby authorize the Broker to pay such proceeds to the Company for such purpose. I understand that, to the
extent that the proceeds obtained by such sale exceed the amount necessary to satisfy the withholding obligations, such excess proceeds shall be
deposited into the Brokerage Account and, if a shortfall occurs, the Broker may sell additional Shares held in my Brokerage Account, the Company
may deduct any remaining withholding obligations from any compensation or other payment of any kind due to me, or the Company may require
that I pay any remaining withholding obligations to by cash or check. I further understand that any Shares that are not sold to satisfy withholding
obligations will remain deposited in the Brokerage Account.
3.
I have reviewed with my own tax advisors the federal, state, local and foreign tax consequences of this grant and the actions contemplated by the
Agreement and this Standing Order. I am relying solely on such advisors and not on any statements or representations of the Company or any of its
agents. I understand that I (and not the Company) will be responsible for my own tax liability that may arise as a result of this Standing Order.
4.
I represent to the Company that, as of the date hereof, (i) I am not aware of any material nonpublic information about the Company or its Common
Stock, (ii) the Company is not in a black out period (as defined in the Company’s Insider Trading Policy), (iii) sales will not be commenced within
30 calendar days of adoption of this Standing Order, (iv) I am not subject to any legal, regulatory or contractual restriction or undertaking that
would prevent the sales of Shares contemplated by this Standing Order, and (v) I am entering into this Standing Order in good faith and not as part
of a plan or scheme to evade the prohibitions of Rule 10b5-1. The Company and I have structured this Agreement to comply with the affirmative
defense to liability under Section 10(b) of the Securities Exchange Act of 1934, as amended, under Rule 10b5-1(c)(1) issued under such Act, and
this Standing Order shall be interpreted to comply with such requirements.
IN WITNESS WHEREOF, the parties hereto have executed this Standing Order as of the last date indicated below.
Date: XXXXX
Perma-Pipe International Holdings, Inc.
By:
Date:
GRANTEE
Exhibit 10.9
2024 PPIH Non-Employee Director Compensation Program
Restricted Stock Unit Grant
Restricted Stock Unit Agreement
under the
2024 Omnibus Stock Incentive Plan
Grantee:
No. of Restricted Stock Units: XXX
Dollar Amount of Grant: $XXXX
30 Day Average Price on Grant Date: XXXX
Grant Date: XXXXXX
This Agreement (the “Agreement”) evidences the award of the number of restricted stock units (each, an “RSU,” and collectively, the “RSUs”), each
entitling the grantee to receive one share of Common Stock (a “Share”) subject to a vesting schedule, that Perma-Pipe International Holdings, Inc., a
Delaware corporation (the “Company”), has granted to the grantee set forth above (“Grantee” or “you”), effective as of the grant date set forth above (the
“Grant Date”), pursuant to the 2021 Omnibus Stock Incentive Plan (the “Plan”) and conditioned upon your agreement to the terms described below. All of
the provisions of the Plan are expressly incorporated into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:
1.
Terminology. Unless otherwise provided in this Agreement, capitalized words used herein are defined in the Glossary at the end of this Agreement,
or, if no definition is provided in this Agreement or the Glossary, such capitalized words shall have the same definitions as in the Plan.
2.
Vesting and Settlement of Restricted Stock Units.
a.
All of the RSUs are nonvested and forfeitable as of the Grant Date.
b.
All of the RSUs will vest and become nonforfeitable on the first anniversary of the Grant Date (the “Vesting Date”), so long as your
Service is continuous from the Grant Date through the Vesting Date.
c.
Notwithstanding Section 2(b), one hundred percent of the RSUs will become vested and nonforfeitable as of immediately before and
contingent upon the occurrence of a Change in Control, so long as your Service is continuous from the Grant Date, through the date of the
Change in Control.
d.
If your Service ceases for any reason prior to the Vesting Date, then, on the date on which your Service ceases, all of the unvested RSUs
will become nonforfeitable and vest on the Vesting Date.
e.
The number of RSUs indicated in Section 2(b) will be settled by payment of one Share per vested RSU on or within two and one-half
months after the Vesting Date; provided that all of the then-vested RSUs will be settled by payment of one Share per vested RSU upon an
earlier Change in Control.
3.
Restrictions on Transfer.
a.
Your RSUs may not be sold, assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or
otherwise) (a “Transfer”), except by will or the laws of descent and distribution, and shall not be subject to execution, attachment or
similar process. Any attempt to Transfer your RSUs that is in violation of this Section 3(a) shall be wholly ineffective and, if any such
attempt is made, the Company may cause you to immediately forfeit any unvested RSUs without any payment or consideration by the
Company. The Company is authorized to take appropriate measures to prevent any such Transfer, including, but not limited to, placing
appropriate legends on any certificates that are issued with respect to the RSUs.
b.
You hereby represent and warrant to the Company as follows:
i.
You will hold any Shares received under this Agreement for your own account for investment only and not with a view to, or for
resale in connection with, any “distribution” of the Shares within the meaning of the Securities Act.
ii.
You understand that the Company may, in its discretion, continue to impose restrictions on the Transfer of your Shares after they
vest (including the placement of appropriate legends on stock certificates and the issue of stop transfer instructions to the
Company’s Transfer Agents) if, in the judgment of the Company, such restrictions are necessary or desirable to comply with the
Securities Act, the securities laws of any State or any other law.
iii. You are aware that your investment in the Company is a speculative investment that has limited liquidity and is subject to the risk
of complete loss.
c.
Any attempt to Transfer the Shares received under this Agreement in contravention of the restrictions set forth in this Section 3 shall be
null and void and without effect. The Company shall not be required to (i) Transfer on its books any Shares that have been Transferred in
contravention of this Agreement or (ii) treat as the owner of the Shares, or otherwise accord voting, dividend, or liquidation rights to any
transferee to whom the Shares have been Transferred in contravention of this Agreement.
4.
Stockholder Rights. You are not considered the record owner of the Shares subject to the RSUs until such Shares are issued following vesting and
you shall not be entitled to any of the rights of a shareholder of the Company including, without limitation, the right to vote such Shares and
receive all dividends or other distributions paid with respect to such Shares, until such Shares are issued to you. Notwithstanding the foregoing, if
any cash dividends or other distributions are paid with respect to the Shares before Shares are issued in settlement of RSUs, then dividend
equivalents or other distribution equivalents will be credited with respect to your RSUs and will be subject to the same terms and conditions, and
shall be paid at the time as, the RSUs to which they relate. For clarity, if you forfeit any RSUs, then you will also forfeit any dividend equivalents
or other distribution equivalents credited with respect to dividends on the Shares subject to such RSUs.
5.
Taxes.
a.
You hereby agree to make adequate provision for foreign, federal, state and local taxes required by law to be withheld, if any, which arise
in connection with the grant, vesting or other event relating to the RSUs or the Shares. If taxes are required to be withheld, then the
Company may require you to, immediately upon notification of the amount of withholding taxes due, if any, pay to the Company in cash
or by check the amount necessary to satisfy any withholding obligations. The Company (and its Affiliates) shall also have the right to
deduct from any compensation or any other payment of any kind due you (including withholding the issuance or delivery of Shares
hereunder) the amount of any federal, state, local or foreign taxes required by law to be withheld as a result of the grant, vesting or other
event with respect to the RSUs in whole or in part; provided, however, that the value of the Shares withheld or redeemed may not exceed
the maximum statutory rate associated with the transaction to the extent necessary for the Company to avoid an accounting charge.
b.
You hereby acknowledge that you have been advised by the Company to seek independent tax advice from your own advisors regarding
the tax consequences of this Award. You may not rely on the Company, its Affiliates, or any of their officers, directors or employees for
tax or legal advice regarding this Award. You acknowledge that you have sought tax and legal advice from your own advisors regarding
this Award or have voluntarily and knowingly foregone such consultation.
6.
Adjustments for Corporate Transactions and Other Events.
a.
Stock Dividend, Stock Split and Reverse Stock Split. Upon a stock dividend of, or stock split or reverse stock split affecting, the
Common Stock, the number of RSUs shall, without further action of the Administrator, be adjusted to reflect such event. The
Administrator shall make adjustments, in its discretion, to address the treatment of fractional RSUs with respect to the Award as a result
of the stock dividend, stock split or reverse stock split; provided that such adjustments do not result in the issuance of fractional
Shares. Adjustments under this Section 6 will be made by the Administrator, whose determination as to what adjustments, if any, will be
made and the extent thereof will be final, binding and conclusive.
b.
Non-Change in Control Transactions. Upon any change affecting the Common Stock, the Company or its capitalization, by reason of a
spin-off, split-up, dividend, recapitalization, merger, consolidation or share exchange, other than any such change that is part of a
transaction resulting in a Change in Control, the Administrator shall make any adjustments with respect to the Award as the Administrator
determines to be appropriate and equitable. The Administrator’s determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive.
c.
Unusual or Nonrecurring Events. The Administrator shall make, in its discretion, adjustments in the terms and conditions of, and the
criteria included in, the Award in recognition of unusual or nonrecurring events affecting the Company, or the financial statements of the
Company or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the Administrator determines
that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made
available under the Plan.
d.
Binding Nature of Agreement. The terms and conditions of this Agreement shall apply with equal force to any additional and/or substitute
securities received by you in exchange for, or by virtue of your ownership of, the RSUs or the Shares, to the same extent as the RSUs or
Shares with respect to which such additional and/or substitute securities are distributed, whether as a result of any spin-off, stock split-up,
stock dividend, stock distribution, other reclassification of the Common Stock of the Company, or similar event, except as otherwise
determined by the Administrator. If the RSUs or Shares are converted into or exchanged for, or stockholders of the Company receive by
reason of any distribution in total or partial liquidation or pursuant to any merger of the Company or acquisition of its assets, securities of
another entity, or other property (including cash), then the rights of the Company under this Agreement shall inure to the benefit of the
Company’s successor, and this Agreement shall apply to the securities or other property (including cash) received upon such conversion,
exchange or distribution in the same manner and to the same extent as the RSUs or Shares.
7.
Non-Guarantee of Service Relationship. Nothing in the Plan or this Agreement shall alter your service relationship with the Company (or an
Affiliate), nor be construed as a contract of your service relationship between the Company (or an Affiliate) and you, or as a contractual right of
you to continue in a service relationship with the Company (or an Affiliate) for any period of time, or as a limitation of the right of the Company
(or an Affiliate) to discharge you at any time with or without cause or notice and whether or not such discharge results in the forfeiture of any
RSUs or any other adverse effect on your interests under the Plan.
8.
The Company’s Rights. The existence of the RSUs shall not affect in any way the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any
merger or consolidation of the Company, or any issue of bonds, debentures, preferred or other stocks with preference ahead of or convertible into,
or otherwise affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any
part of the Company’s assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
9.
Notices. All notices and other communications made or given pursuant to this Agreement shall be in writing and shall be sufficiently made or
given if hand delivered or mailed by certified mail, addressed to you at the address contained in the records of the Company, or addressed to the
Administrator, care of the Company for the attention of its Corporate Secretary at its principal executive office or, if the receiving party consents in
advance, transmitted and received via telecopy or via such other electronic transmission mechanism as may be available to the parties.
10. Entire Agreement. This Agreement (together with the Plan contains the entire agreement between the parties with respect to the RSUs granted
hereunder. Any oral or written agreements, representations, warranties, written inducements, or other communications made prior to the execution
of this Agreement with respect to the RSUs granted hereunder shall be void and ineffective for all purposes. In the event a court of competent
jurisdiction deems any provision hereof to be unreasonable, void, or unenforceable, such provision(s) shall be deemed severed from the remainder
of the Agreement, which shall continue in all other respects to be valid and enforceable. It is the intent of the parties that any such provision(s) of
this Agreement declared void, unreasonable, or unenforceable shall be deemed by a court of competent jurisdiction revised to the minimum amount
necessary in order to be valid and enforceable.
11. Amendment. This Agreement may be amended from time to time by the Administrator in its discretion; provided, however, that this Agreement
may not be modified in a manner that would have a material adverse effect on your rights with respect to the RSUs as determined in the discretion
of the Administrator, except as otherwise provided in (a) Section 6 of this Agreement, (b) the Plan or (c) a written document signed by each of the
parties hereto.
12. Conformity with Plan. This Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the
Plan. Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. In the event of any
ambiguity in this Agreement or any matters as to which this Agreement is silent, the Plan shall govern. A copy of the Plan is provided to you with
this Agreement.
13. Governing Law. The validity, construction and effect of this Agreement, and of any determinations or decisions made by the Administrator relating
to this Agreement, and the rights of any and all persons having or claiming to have any interest under this Agreement, shall be determined
exclusively in accordance with the laws of the State of Delaware, without regard to its provisions concerning the applicability of laws of other
jurisdictions. As a condition of this Agreement, you agree that you will not bring any action arising under, as a result of, pursuant to or relating to,
this Agreement in any court other than a federal or state court in the districts which include Niles, Illinois, and you hereby agree and submit to the
personal jurisdiction of any federal court located in the district which includes Niles, Illinois or any state court in the district which includes Niles,
Illinois. You further agree that you will not deny or attempt to defeat such personal jurisdiction or object to venue by motion or other request for
leave from any such court.
14. Resolution of Disputes. Any dispute or disagreement which shall arise under, or as a result of, or pursuant to or relating to, this Agreement shall be
determined by the Administrator in good faith in its absolute and uncontrolled discretion, and any such determination or any other determination by
the Administrator under or pursuant to this Agreement and any interpretation by the Administrator of the terms of this Agreement, will be final,
binding and conclusive on all persons affected thereby. You agree that before you may bring any legal action arising under, as a result of, pursuant
to or relating to, this Agreement you will first exhaust your administrative remedies before the Administrator. You further agree that in the event that
the Administrator does not resolve any dispute or disagreement arising under, as a result of, pursuant to or relating to, this Agreement to your
satisfaction, no legal action may be commenced or maintained relating to this Agreement more than twenty-four (24) months after the
Administrator’s decision.
15. Headings. The headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
16. Counterparts. This Agreement may be executed in multiple counterparts, each of which is deemed to be an original, but all of which taken together
constitute one and the same Agreement and shall become effective when all counterparts have been executed by each of the parties hereto and
delivered to the other. Facsimile and other electronic transmissions (including in portable document format) of any originally executed document
(including this Agreement) shall be deemed to be the same as a delivered, executed original.
17. Electronic Delivery of Documents. By your signing this Agreement, you (i) consent to the electronic delivery of this Agreement, all information
with respect to the Plan and the RSUs and any reports of the Company provided generally to the Company’s stockholders; (ii) acknowledge that you
may receive from the Company a paper copy of any documents delivered electronically at no cost to you by contacting the Company by telephone
or in writing; (iii) further acknowledge that you may revoke your consent to the electronic delivery of documents at any time by notifying the
Company of such revoked consent by telephone, postal service or electronic mail; and (iv) further acknowledge that you understand that you are not
required to consent to electronic delivery of documents.
18. No Future Entitlement. By your signing this Agreement, you acknowledge and agree that: (i) the grant of these RSUs is a one-time benefit which
does not create any contractual or other right to receive future grants of stock, or compensation in lieu of stock grants, even if stock grants have been
granted repeatedly in the past; (ii) all determinations with respect to any such future grants, including, but not limited to, the times when stock grants
shall be granted, the maximum number of Shares subject to each stock grant, and the times or conditions under which restrictions on such stock
grants shall lapse, will be at the sole discretion of the Administrator; (iii) the vesting of RSUs ceases upon termination of service with the Company,
or other cessation of eligibility for any reason, except as may otherwise be explicitly provided in this Agreement; (iv) the Company does not
guarantee any future value of these RSUs or the Shares; and (v) no claim or entitlement to compensation or damages arises if these RSUs or the
Shares do not increase in value and you irrevocably release the Company from any such claim that does arise.
19. Personal Data. For purposes of the implementation, administration and management of this Award or the effectuation of any acquisition, equity or
debt financing, joint venture, merger, reorganization, consolidation, recapitalization, business combination, liquidation, dissolution, share exchange,
sale of stock, sale of material assets or other similar corporate transaction involving the Company (a “Corporate Transaction”), you consent, by
execution of this Agreement, to the collection, receipt, use, retention and transfer, in electronic or other form, of your personal data by and among
the Company and its third party vendors or any potential party to a potential Corporate Transaction. You understand that personal data (including
but not limited to, name, home address, telephone number, employee number, employment status, social security number, tax identification number,
date of birth, nationality, job and payroll location, data for tax withholding purposes and Shares awarded, cancelled, vested and unvested) may be
transferred to third parties assisting in the implementation, administration and management of the stock grant or the effectuation of a Corporate
Transaction and you expressly authorize such transfer as well as the retention, use, and the subsequent transfer of the data by the recipient(s). You
understand that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws
and protections than your country. You understand that data will be held only as long as is necessary to implement, administer and manage the stock
grant or effect a Corporate Transaction. You understand that you may, at any time, request a list with the names and addresses of any potential
recipients of the personal data, view data, request additional information about the storage and processing of data, require any necessary
amendments to data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s Secretary. You
understand, however, that refusing or withdrawing your consent may affect your ability to accept a stock grant.
20. Consideration for Shares. To ensure compliance with applicable state corporate law, the Company may require you to furnish consideration in the
form of cash or cash equivalents equal to the par value of the Shares issued to you hereunder, and you hereby authorize the Company to withhold
such amount from remuneration otherwise due you from the Company.
21. Recoupment. The RSUs and the Shares are subject to recoupment in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection
Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation recovery policy or practice
otherwise required by applicable law.
GLOSSARY
a.
“Administrator” means the Board of Directors of Perma-Pipe International Holdings, Inc. and/or the committee(s) or officer(s) appointed by the
Board that have authority to administer the Plan.
b.
“Affiliate” means any entity, whether now or hereafter existing, which controls, is controlled by, or is under common control with the Company
(including but not limited to joint ventures, limited liability companies and partnerships). For this purpose, “control” shall mean ownership of 25%
or more of the total combined voting power or value of all classes of stock or interests of the entity, or the power to direct the management and
policies of the entity, by contract or otherwise.
c.
“Company” means Perma-Pipe International Holdings, Inc.
d.
“Securities Act” means the Securities Act of 1933, as amended.
e.
“Service” means your Board of Directors service relationship with the Company and its Affiliates. Your Service will be considered to have ceased
with the Company and its Affiliates if, immediately after a sale, merger or other corporate transaction, the trade, business or entity with which you
have a service relationship is not Perma-Pipe International Holdings, Inc. or its successor, or an Affiliate of Perma-Pipe International Holdings,
Inc. or its successor.
f.
“You” or “Your” means the recipient of the RSUs as reflected in the first paragraph of this Agreement. Whenever the word “you” or “your” is
used in any provision of this Agreement under circumstances where the provision should logically be construed, as determined by the
Administrator, to apply to the estate, personal representative, or beneficiary to whom the RSUs may be transferred by will or by the laws of
descent and distribution, the words “you” and “your” shall be deemed to include such person.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer as of the Grant Date.
Perma-Pipe International Holdings, Inc.
By:
Name:
Title:
The undersigned hereby acknowledges that he/she has carefully read this Agreement and agrees to be bound by all of the provisions set forth herein as of the
Grant Date. The undersigned also consents to electronic delivery of all notices or other information with respect to the RSUs, the Shares or the Company.
GRANTEE
Exhibit 19.1
INSIDER TRADING POLICY
POLICY SUMMARY / PURPOSE
The purpose of this Policy is to provide procedures and guidelines with respect to transactions in the securities of Perma-Pipe International Holdings, Inc. (the
“Company”), the protection of material, non-public information and the standard of conduct expected of the Company’s employees in this highly sensitive area.
It is the personal obligation and responsibility of each employee to act in a manner consistent with this Policy.
SCOPE
As a public company, the Company is subject to various federal and state laws and regulations governing trading in its securities. It is the policy of the
Company to comply fully, and assist its employees in complying fully, with these laws and regulations.
This Policy applies to ALL members of the Company’s Board of Directors, Named Executive Officers (“NEOs”), employees, and certain consultants specified
by the Company, as well as members of such persons’ immediate families and households. All references in this Policy to “employees” of the Company should
be read to include all such persons listed in the preceding sentence.
The Company depends upon the conduct and diligence of its employees, in both their professional and personal capacities, to ensure full compliance with this
Policy
DEFINITIONS AND TERMS
Background
What is insider trading? “Insider trading” is a top enforcement priority of the Securities and Exchange Commission (“SEC”), the NASDAQ Global Market
(“NASDAQ”) and the Department of Justice. Criminal prosecutions for insider trading are commonplace and may result in fines and/or imprisonment.
The prohibition against such trading generally is understood to prohibit the following:
1.
trading on the basis of material, non-public information,
2.
disclosing or “tipping” material, non-public information to others or recommending the purchase or sale of securities on the basis of such
information, or
3.
assisting someone who is engaged in any of the above activities.
Who is an insider? The term “insider” applies to anyone who, by virtue of a special relationship with the Company, possesses material, non-public information
regarding the business of the Company.
An individual can be considered an insider for a limited time with respect to certain material, non-public information even though he or she is not a director or
officer. For example, an assistant who knows that an acquisition is about to occur may be regarded as an insider with respect to that information until the news
of such acquisition has been fully disclosed to the public.
An employee who departs from the Company is still considered an insider from the date of their departure to the opening of the next trading window dictated
by the release of a 10-Q or 10-K (Ex: Term date July 31, insider status through September 15). This is further clarified on Page 5 - No Trading During Black-
Out Periods.
What is material, non-public information? Information is generally deemed to be “material” if there is a substantial likelihood a “reasonable investor” would
rely on it in deciding to purchase, sell or hold a security to which the information relates. As a practical matter, materiality often is determined after the fact,
when it is known that someone has traded on the information and after the information itself has been made public and its effects upon the market are more
certain. Examples of information that is generally regarded as material are:
●
Financial results;
●
Projections of future results or other guidance;
●
Major proposed or pending acquisitions, investments or divestitures;
●
Significant project or product developments;
●
Changes in key personnel;
●
Changes in dividends;
●
Stock splits;
●
Stock buy-backs;
●
New equity or debt offerings;
●
Positive or negative developments in outstanding significant litigation;
●
Events that may result in the creation of a significant reserve or write-off or other significant adjustments to the financial statements;
●
Actual or threatened significant litigation or inquiry by a governmental or regulatory authority; and
●
Any other facts which might cause the Company’s financial results to be substantially affected.
“Non-public” information is any information that has not been previously disclosed and is not otherwise available to investors generally. Filings with the SEC
and press releases are generally regarded as public information. Information about undisclosed financial results or a possible merger, acquisition or other
material development, whether concerning the Company or otherwise, and obtained in the normal course of employment or through a rumor, tip or just “loose
talk”, is not public information. Information should be considered “non-public” until the beginning of the third (3rd) Trading Day (as defined below) after such
information has been disseminated widely to the general public through press releases, news tickers, publication in a widely available newspaper, SEC filings
or other widely disseminated means.
For purposes of this Policy, a “Trading Day” shall mean a day on which the NASDAQ is open for trading.
Potential Criminal and Civil Liability and/or Disciplinary Action. Individuals found liable for insider trading can face penalties, criminal fines and possible
jail-time.
Violation of this Policy and its guidelines may subject an individual to Company-imposed discipline, including dismissal.
The procedures regarding securities trading outlined below are designed to deter and, where possible, to prevent such improper trading.
POLICY GUIDELINES
Guidelines Regarding Transactions in the Company's Securities
The following guidelines apply to all transactions, direct or indirect, in all of the Company’s securities, including, but not limited to, the Company’s common
stock (including those shares of common stock that may be held in any retirement plan, pension plan, other such similar plans that the Company may adopt in
the future).
●
PROHIBITION AND PROCEDURES FOR ALL EMPLOYEES
●
No Trading on Material, Non-Public Information: No employee who is aware of any material, non-public information concerning the
Company or a third-party with whom the Company does business, shall engage in any transaction in the Company’s or such third-party’s
securities, including any offer to purchase or sell, during any period commencing with the date that he or she obtains such material, non-public
information and ending at the beginning of the third (3rd) Trading Day following the date of public disclosure of that information. After
termination of employment, any employee who is in possession of material, nonpublic information is prohibited from trading in Company
securities until that information has become public or is no longer material.
●
No Tipping: No employee shall disclose (“tip”) material, non-public information to any other person where such information may be used by
such person to his or her benefit by trading in the securities of the company to which such information relates, nor shall an employee make any
recommendations or express any opinions as to trading in the Company’s securities to any other person on the basis of material, non-public
information.
●
No Short Sales: No employee shall engage in the short sale of the Company’s securities. A short sale is a sale of securities not owned by the
seller or, if owned, not delivered against such sale within twenty (20) days thereafter (a “short against the box”). Short sales of the Company’s
securities evidence an expectation on the part of the seller that the securities will decline in value, and, therefore, signal to the market that the
seller has no confidence in the Company or its short-term prospects. In addition, short sales may reduce the seller’s incentive to improve the
Company’s performance.
●
No Investments in Derivatives of the Company’s Securities: No employee shall invest in Company-based derivative securities. “Derivative
Securities” are options, warrants, stock appreciation rights or similar rights whose value is derived from the value of an equity security, such as
the Company’s common stock. This prohibition includes, but is not limited to, trading in Company-based put or call option contracts, trading in
straddles and the like. However, holding and exercising stock options, restricted stock units or other derivative securities granted under the
Company’s equity compensation plans is not prohibited by this Policy.
●
No Hedging or Pledging: Our NEOs and Board of Directors are prohibited from hedging or pledging any Company securities that they hold
directly. In addition, our NEOs and Board of Directors are prohibited from engaging in short sales of our stock and may not hedge or pledge
equity compensation.
●
No Margin Purchases: No employee shall purchase the Company’s securities on margin. This means such persons are prohibited from
borrowing from a brokerage firm, bank or other entity in order to purchase the Company’s securities (other than in connection with
“cashless” exercises of stock options under the Company’s equity compensation plans).
●
No Trading During Black-Out Periods: Employees as defined in the scope are subject to black-out periods during which they are prohibited
from conducting any transactions involving the Company’s securities. Each black-out period begins at the close of the market on the fourteenth
(14th) day prior to the close of any fiscal quarter and ends at the open of the market on the third (3rd) Trading Day following the release of the
Company’s quarterly or annual financial results for that particular quarter (the “Black-Out Period”). The prohibition against trading during the
Black-Out Period also prohibits the fulfillment of “limit orders”, and the brokers with whom any such “limit order” is placed must be informed
of such prohibition at the time such “limit order” is placed.
●
Additional black-out periods may be implemented with regard to certain employees or groups from time to time who are in possession of non-
public information regarding potentially significant matters.
Example of Black-Out Periods:
Black-Out
Trading Window
Fiscal Period
Fiscal End Date
SEC Filing date
From
To
From
To
Quarter 4/ Year End
Jan 31st
Apr 15th
Jan 15th
Jun 15th
N/A
N/A
Quarter 1
Apr 30th
Jun 12th
Jan 15th
Jun 15th
Jun 16th
July
14th
Quarter 2
Jul 31st
Sep 11th
Jul 15th
Sep 15th
Sep 16th
Oct
14th
Quarter 3
Oct 31st
Dec 11th
Oct 15th
Dec 15th
Dec 16th
Jan
14th
●
Note: The above table is just a guide. Employees should anticipate an email from Corporate finance to get the exact trading and black-out dates.
In light of these restrictions, if you expect a need or have a desire to sell Company securities at a specific time in the future, you may wish to consider entering
into a prearranged Rule 10b5‑1 trading plan, as discussed below.
No Trading in the Company’s Securities on a Short-Term Basis: Any Company securities purchased on the open market by an employee must be held for a
minimum of six (6) months. Note that the SEC’s short swing profit rules already penalize individuals who sell any Company securities within six (6) months of
a purchase by requiring such person to disgorge all profits to the Company whether or not such person had knowledge of any material, non-public information.
Same day “cashless” exercises of stock options are not subject to this prohibition, provided that there were no previous purchase transactions on the open
market within six (6) months of the exercise date.
Precautions to Prevent Misuse or Unauthorized Disclosure of Sensitive Information: When an employee is involved in a matter or transaction which is
sensitive and, if disclosed, could reasonably be expected to have an effect on the market price of the securities of the Company or any other company involved
in the transaction, that individual should consider taking extraordinary precautions to prevent misuse or unauthorized disclosure of such information. Such
measures include the following:
1.
Maintaining files securely and avoiding storing information on computer systems that can be accessed by other individuals;
2.
Avoiding the discussion of confidential matters in areas where the conversation could possibly be overheard;
3.
Not gossiping about Company affairs; and
4.
Restricting the copying and distribution of sensitive documents within the Company.
Internet: Any written or verbal statement that would be prohibited under the law or under this Policy is equally prohibited if made on the Internet or by social
media.
Inadvertent Disclosure of Material, Non-Public Information: If material, non-public information regarding the Company is inadvertently disclosed, no matter
what the circumstances, by any employee, the person making or discovering that disclosure should immediately report the facts to the Chief Compliance
Officer (“CCO”).
Inquiries Regarding Material, Non-Public Information: When an inquiry is received regarding information that may be material, it should be referred,
without comment, to the Company’s Investor Relations Department.
PRE-CLEARANCE OF TRADING (Applies only to BOD and NEOs)
If a member of the Board of Directors or an NEO is contemplating a transaction in the Company’s securities, the proposed transaction must be pre-cleared via
email with either the CCO, Chief Executive Officer (“CEO”), or Chief Financial Officer (“CFO”) of the Company, even if the proposed transaction is to take
place within a Company authorized Trading Window. If the transaction is cleared to proceed, the Company will assist a Section 16 Reporting Person in
complying with Section 16 and, where applicable, Rule 144 under the Securities Act of 1933, as amended.
IT SHOULD BE NOTED THAT ANY PERSON WHO POSSESSES MATERIAL, NON-PUBLIC INFORMATION, REGARDLESS OF WHETHER OR
NOT IT IS WITHIN THE BLACK-OUT PERIOD OR NOT, SHOULD NOT ENGAGE IN ANY TRANSACTION INVOLVING THE COMPANY’S
SECURITIES, UNLESS UNDER A RULE 10b5-1 PLAN.
Any transaction under a Rule 10b5-1 trading plan (discussed below) will not require pre-clearance at the time of the transaction.
EXCEPTIONS TO THE PROHIBITIONS ON TRADING FOR ALL EMPLOYEES
The only exceptions to this Policy’s prohibitions of trading in the Company’s securities as outlined above are the following:
Transactions under Company Plans: Exercises of stock options granted under the Company’s equity compensation plans for cash; however, this exception
does not include the subsequent sale of the shares acquired pursuant to the exercise of a stock option. In addition, the exercise of a tax withholding right under
any equity awards under the Company’s equity compensation plans pursuant to which an employee has the Company withhold securities to satisfy tax
withholding requirements is not covered by the prohibitions of this Policy.
Bona Fide Gifts: Bona fide gifts of securities are not deemed to be transactions for the purposes of this Policy. Whether a gift is truly bona fide will depend on
the circumstances surrounding a specific gift. The more unrelated the donee is to the donor, the more likely the gift would be considered “bona fide” and not a
“transaction.” For example, gifts to charities, churches or non-profit organizations would not be deemed to be “transactions.” However, gifts to dependent
children followed by a sale of the “gifted securities” in close proximity to the time of the gift may imply some economic benefit to the donor and, therefore,
may be deemed to be a “transaction” and not a “bona fide gift.”
While these transactions are exceptions to this Policy’s prohibitions on trading in the Company’s securities, an employee contemplating such a transaction
should still pre-clear the proposed transaction with either the CCO, CEO, or CFO of the Company.
RULE 10b5-1 TRADING PLANS
Rule 10b5-1 provides a defense from insider trading liability if trades occur pursuant to a pre-arranged trading plan that meets specified conditions. It is
possible to pre-arrange trades in Company securities by entering into a written trading plan. Trading plans can be established for a single trade or a series of
trades. A plan must either specify the number of securities to be bought or sold, along with the price and the date, or provide a written formula for determining
this information. Alternatively, a trading plan can delegate investment discretion to a third party, such as a broker, who then makes trading decisions without
further input from the person implementing the plan. Because the SEC rules on trading plans are complex, you should consult with your broker and be sure
you fully understand the limitations and conditions of the rules before you establish a trading plan.
All Rule 10b5-1 trading plans and any amendments thereto and terminations thereof must be reviewed and approved in advance by the Company’s CCO, CFO,
and VP of Human Resources.
ENFORCEMENT AND COMPLIANCE
All employees of the Company have ethical and legal responsibilities to maintain the confidentiality of material, non-public information. Any person who
believes that a violation of this policy has taken place shall report it promptly to the CCO, VP of Human Resources and the Corporate Controller.
Individuals found liable for insider trading can face penalties, criminal fines, and possible jail-time.
Violation of this Policy and its guidelines may subject an individual to Company-imposed discipline, including dismissal.
Any questions concerning this Policy should be addressed to the CCO, VP of Human Resources, or the Corporate Controller of the Company.
COMMUNICATION AND TRAINING
This policy will be distributed to all BOD members, Executives and members of management who are classified as “insiders” with Perma-Pipe, Inc. before
each trading window is open
REVIEW AND REVISIONS
This policy should be reviewed every 2 years by the Nomination/Governance Committee.
CONTACT INFORMATION
Any questions concerning this Policy should be addressed with the CCO, VP of Human Resources or the Corporate Controller of the Company.
Exhibit 21.1
SUBSIDIARIES OF REGISTRANT
MFRI Holdings (B.V.I) Ltd (British Virgin Islands)
Midwesco Filter Resources, Inc. (Delaware corporation)
MM Niles, Inc. (Delaware corporation)
Perma-Pipe, Inc. (Delaware corporation)
Perma-Pipe Canada, Inc. (Delaware corporation)
Perma-Pipe Canada, LTD. (Canada)
Perma-Pipe India Pvt. Ltd. (India)
Perma-Pipe International Co. LLC (Delaware corporation)
Perma-Pipe Middle East FZC (United Arab Emirates)
Perma-Pipe Egypt for Metal Fabrication and Insulation Industries (Perma-Pipe Egypt) S.A.E. (Egypt)
Perma-Pipe Oil Field Services LLC (United Arab Emirates)
Perma-Pipe Saudi Arabia, LLC (Kingdom of Saudi Arabia)
Perma-Pipe Gulf Arabia Industry LLC (Kingdom of Saudi Arabia)
Perma-Pipe Arabia Contracting Co. LLC (Kingdom of Saudi Arabia)
Perma-Pipe QA Limited Liability Company (LLC) (Qatar)
Perma-Pipe Middle East LLC (United Arab Emirates)
PPEG for Construction & Building, LLC (Perma-Pipe Egypt) S.A.E. (Egypt)
Khalaq Trading, LLC (United Arab Emirates)
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-263913, 333-230895) and Form S-8 (Nos. 333-
282410, 333-256981, 333-224642, 333-190241, 333-186055, 333-182144, and 333-130517 ) of Perma-Pipe International Holdings, Inc. of our report
dated May 1, 2025 relating to the financial statements and financial statement schedule, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
May 1, 2025
EXHIBIT 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated April 26, 2024 (except for Note 13, as to which the date is May 1, 2025), with respect to the consolidated financial
statements and the related financial statement schedule included in the Annual Report of Perma-Pipe International Holdings, Inc. on Form 10-K for the year
ended January 31, 2024. We consent to the incorporation by reference of said report in the Registration Statements of Perma-Pipe International Holdings,
Inc. on Forms S-3 (File No. 333-264913, effective May 20, 2022; and File No. 333-230895, effective May 14, 2019) and on Forms S-8 (File No. 333-
130517, effective December 20, 2005; File No. 333-182144, effective June 15, 2012; File No. 333-186055, effective January 16, 2013; File No. 333-190241,
effective July 30, 2013; File No. 333-224642, effective May 3, 2018; File No. 333-256981, effective June 10, 2021; and File No. 333-282410).
/s/ GRANT THORNTON LLP
Houston, Texas
May 1, 2025
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned, being a director or officer, or both, of Perma-Pipe International Holdings,
Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint DAVID J. MANSFIELD and/or MATTHEW E. LEWICKI, with full power
to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said
attorneys to execute, file or deliver any and all instruments and to do all acts and things which said attorneys and agents, or any of them, deem advisable to
enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements or regulations of the Securities and Exchange
Commission in respect thereof, in connection with the Company's filing of an annual report on Form 10-K for the Company's fiscal year 2024, including
specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name as a director or officer, or both, of
the Company, as indicated below his or her signature, to the Form 10-K, and any amendment thereto; and each of the undersigned does hereby fully ratify and
confirm all that said attorneys and agents, or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of this 1st day of May 2025.
/s/ David J. Mansfield
David J. Mansfield, Director and Chief Executive Officer (Principal Executive
Officer)
/s/ David B. Brown
David B. Brown, Director
/s/ Matthew E. Lewicki
Matthew E. Lewicki, Vice President and Chief Financial Officer (Principal Financial
and Accounting Officer)
/s/ Jerome T. Walker
Jerome T. Walker, Director, Chairman of the Board of Directors
/s/ Robert McNally
Robert McNally, Director
/s/ Cynthia Boiter
Cynthia Boiter, Director
/s/ Ibrahim Jaham Al Kuwari
Ibrahim Jaham Al Kuwari, Director
/s/ Jon C. Biro
Jon C. Biro, Director
Exhibit 31.1
CERTIFICATION
I, David J. Mansfield, certify that:
1.
I have reviewed this annual report on Form 10-K of Perma-Pipe International Holdings, Inc.
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
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;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: May 1, 2025
/s/ David J. Mansfield
David J. Mansfield
Director and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION
I, Matthew E. Lewicki, certify that:
1.
I have reviewed this annual report on Form 10-K of Perma-Pipe International Holdings, Inc.
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
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;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: May 1, 2025
/s/ Matthew E. Lewicki
Matthew E. Lewicki
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 32
Certification of Principal Executive Officers
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
The undersigned in their capacities as Chief Executive Officer and Chief Financial Officer of Perma-Pipe International Holdings, Inc. (the “Registrant'), certify
that, to the best of their knowledge, based upon a review of the Annual Report on Form 10-K for the period ended January 31, 2025 of the Registrant, (the
“Report”):
(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
/s/ David J. Mansfield
David J. Mansfield
Director and Chief Executive Officer
(Principal Executive Officer)
May 1, 2025
/s/ Matthew E. Lewicki
Matthew E. Lewicki
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
May 1, 2025
A signed original of this written statement required by Section 906 has been provided by Perma-Pipe International Holdings, Inc. and will be retained by
Perma-Pipe International Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.