10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended October 31, 2013

Commission File No. 0-18370

MFRI, 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.)
7720 N. Lehigh Avenue, Niles, Illinois	60714
(Address of principal executive offices)	(Zip Code)

(847) 966-1000

(Registrant's telephone number, including area code)

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 x No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

On December 5, 2013, there were 7,085,237 shares of the registrant's common stock outstanding.

MFRI, Inc.

FORM 10-Q

For the fiscal quarter ended October 31, 2013

TABLE OF CONTENTS

Item		Page
Part I	Financial Information
1.	Financial Statements
	Consolidated Statement of Operations for the Three and Nine Months Ended October 31, 2013 and 2012	1
	Consolidated Statement of Comprehensive Income (Loss) for the Three and Nine Months Ended October 31, 2013 and 2012	2
	Consolidated Balance Sheets as of October 31, 2013 and January 31, 2013	3
	Consolidated Statement of Stockholders' Equity as of October 31, 2013 and January 31, 2013	4
	Consolidated Statement of Cash Flows for the Nine Months Ended October 31, 2013 and 2012	5
	Notes to Consolidated Financial Statements	6
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
4.	Controls and Procedures	16
Part II	Other Information
6.	Exhibits	16
Signatures		17

PART I FINANCIAL INFORMATION

Item 1.    Financial Statements

MFRI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands, except per share data)

	Three Months Ended October 31,				Nine Months Ended October 31,
	2013		2012		2013			2012
Net sales		$57,967		$47,236		$173,460			$132,137
Cost of sales	41,080		38,560		130,423			109,530
Gross profit	16,887		8,676		43,037			22,607
Operating expenses
General and administrative expenses	7,953		5,760		20,760			17,466
Selling expenses	2,554		2,731		8,184			7,978
Total operating expenses	10,507		8,491		28,944			25,444
Income (loss) from operations	6,380		185		14,093			(2,837		)
Income from joint venture	715		531		248			354
Interest expense, net	190		513		1,082			1,148
Income (loss) from continuing operations before income taxes	6,905		203		13,259			(3,631		)
Income tax expense (benefit)	92		74		(99		)	159
Income (loss) from continuing operations	6,813		129		13,358			(3,790		)
Income from discontinued operations, net of tax	578		326		9,510			832
Net income (loss)		$7,391		$455		$22,868		($2,958)
Weighted average common shares outstanding
Basic	7,068		6,924		6,995			6,921
Diluted	7,163		6,924		7,041			6,921
Earnings (loss) per share from continuing operations
Basic	$0.96			$0.02	$1.91			($0.55)
Diluted	$0.95			$0.02	$1.90			($0.55)
Earnings per share from discontinued operations
Basic	$0.08			$0.05	$1.36				$0.12
Diluted	$0.08			$0.05	$1.35			$0.12
Earnings (loss) per share
Basic	$1.05			$0.07		$3.27			($0.43	)
Diluted	$1.03			$0.07	$3.25				($0.43	)

See accompanying notes to consolidated financial statements.

Note: Earnings per share calculations could be impacted by rounding.

1

MFRI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In thousands)

	Three Months Ended October 31,					Nine Months Ended October 31,
	2013			2012		2013			2012
Net income (loss)		$7,391			$455		$22,868			($2,958	)
Other comprehensive (loss) income
Foreign currency translation adjustments	(58		)	328		(778		)	(505		)
Interest rate swap, net of tax	(4		)	33		155			15
Other comprehensive (loss) income	(62		)	361		(623		)	(490		)
Comprehensive income (loss)		$7,329			$816		$22,245			($3,448	)

See accompanying notes to consolidated financial statements.

2

MFRI, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except per share data)	October 31, 2013			January 31, 2013
ASSETS	Unaudited
Current assets
Cash and cash equivalents		$10,522			$7,034
Restricted cash	2,362			725
Trade accounts receivable, less allowance for doubtful accounts of $238 at October 31, 2013 and $290 at January 31, 2013	51,691			23,278
Inventories, net	39,140			37,529
Assets held for sale	1,235			10,218
Prepaid expenses and other current assets	5,701			3,932
Costs and estimated earnings in excess of billings on uncompleted contracts	2,099			1,630
Total current assets	112,750			84,346
Property, plant and equipment, net of accumulated depreciation	43,021			45,582
Long-term assets
Deferred tax assets	1,535			1,349
Note receivable	4,971			5,200
Investment in joint venture	6,270			6,022
Cash surrender value of deferred compensation plan	3,077			2,946
Other assets	2,882			2,408
Assets held for sale long-term	985			1,253
Patents, net of accumulated amortization	361			373
Total long-term assets	20,081			19,551
Total assets		$175,852			$149,479
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable		$15,679			$18,740
Accrued compensation and payroll taxes	4,362			4,361
Commissions and management incentives payable	8,436			2,723
Current maturities of long-term debt	11,963			5,384
Customers' deposits	9,239			7,030
Liabilities held for sale	650			7,531
Billings in excess of costs and estimated earnings on uncompleted contracts	2,962			985
Other accrued liabilities	2,391			1,735
Deferred tax liabilities	578			678
Income taxes payable	2,268			34
Total current liabilities	58,528			49,201
Long-term liabilities
Long-term debt, less current maturities	28,917			35,579
Deferred compensation liabilities	6,356			5,670
Liabilities held for sale long-term	1,074			1,485
Other long-term liabilities	3,455			3,289
Total long-term liabilities	39,802			46,023
Stockholders' equity
Common stock, $.01 par value, authorized 50,000 shares; 7,080 issued and outstanding at October 31, 2013 and 6,924 issued and outstanding at January 31, 2013	71			69
Additional paid-in capital	51,363			50,358
Retained earnings	27,436			4,553
Accumulated other comprehensive loss	(1,348		)	(725		)
Total stockholders' equity	77,522			54,255
Total liabilities and stockholders' equity		$175,852			$149,479

See accompanying notes to consolidated financial statements.

3

MFRI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

($ in thousands, except share data)		Additional Paid-in Capital	Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
	Common Stock
Total stockholders' equity at January 31, 2012	$69	$49,828	$23,038			($580)		$72,355
Net loss			(18,485		)			(18,485	)
Stock options exercised	—	35						35
Stock-based compensation		484						484
Excess tax benefit from stock options exercised		11						11
Interest rate swap						97		97
Pension liability adjustment						466		466
Foreign currency translation adjustment						(263	)	(263	)
Tax benefit on above items						(445	)	(445	)
Total stockholders' equity at January 31, 2013	$69	$50,358	$4,553			($725)		$54,255
Net income				$22,868				22,868
Stock options exercised	2	909						911
Stock-based compensation expense		96						96
Interest rate swap						155		155
Foreign currency translation adjustment			15			(778	)	(763	)
Total stockholders' equity at October 31, 2013	$71	$51,363	$27,436			($1,348)		$77,522

Shares	2013	2012
Balances at beginning of year	6,924,084	6,912,771
Shares issued	156,003	11,313
Balances at October 31, 2013	7,080,087	6,924,084

4

MFRI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

(In thousands)	Nine Months Ended October 31,
	2013			2012
Operating activities
Net income (loss)		$22,868			($2,958	)
Adjustments to reconcile net income (loss) to net cash flows used in operating activities
Depreciation and amortization	4,465			4,373
Gain on disposal of discontinued operations	(9,762		)	—
Deferred tax expense	93			353
Stock-based compensation expense	95			366
Income from joint venture	(248		)	(354		)
Cash surrender value of deferred compensation plan	(131		)	(121		)
Loss on disposal of fixed assets	305			57
(Gain) on disposal of subsidiary	(349		)	—
Provision for uncollectible accounts	(114		)	129
Changes in operating assets and liabilities
Accounts receivable	(24,049		)	(6,512		)
Inventories	3,044			1,302
Costs and estimated earnings in excess of billings on uncompleted contracts	1,227			(231		)
Accounts payable	(7,052		)	(522		)
Accrued compensation and payroll taxes	4,329			(592		)
Customers' deposits	1,669			1,870
Income taxes receivable and payable	2,220			(539		)
Prepaid expenses and other current assets	(3,736		)	64
Other assets and liabilities	(5,079		)	1,693
Net cash used in operating activities	(10,205		)	(1,622		)
Investing activities
Net proceeds from sale of discontinued operations	15,253			—
Capital expenditures	(1,817		)	(5,316		)
Loan to joint venture	—			(989		)
Proceeds from sales of property and equipment	8			94
Net cash provided by (used in) investing activities	13,444			(6,211		)
Financing activities
Proceeds from debt	76,633			157,554
Payments of debt on revolving lines of credit	(70,446		)	(143,820		)
Payments of other debt	(6,817		)	(3,292		)
Decrease in drafts payable	(118		)	(789		)
Payments on capitalized lease obligations	(453		)	(432		)
Stock options exercised	911			35
Tax benefit of stock options exercised	—			15
Net cash (used in) provided by financing activities	(290		)	9,271
Effect of exchange rate changes on cash and cash equivalents	539			(56		)
Net increase in cash and cash equivalents	3,488			1,382
Cash and cash equivalents - beginning of period	7,034			4,209
Cash and cash equivalents - end of period		$10,522			$5,591
Supplemental cash flow information
Interest paid		$1,694			$1,718
Income taxes paid	396			133
Funds held in escrow related to the sale of Thermal Care, Inc. assets	1,125			—

See accompanying notes to consolidated financial statements.

5

MFRI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

OCTOBER 31, 2013

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

1. Basis of presentation. The interim consolidated financial statements of MFRI, Inc. and subsidiaries ("MFRI," "Company," or "Registrant") are unaudited, but include all adjustments which the Company's management considers necessary to present fairly the financial position and results of operations for the periods presented. These adjustments consist of normal recurring adjustments. Information and footnote disclosures have been omitted pursuant to Securities and Exchange Commission ("SEC") rules and regulations. The consolidated balance sheet as of January 31, 2013 is derived from the audited consolidated balance sheet as of that date. The results of operations for any interim period are not necessarily indicative of future or annual results. Interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. The Company's fiscal year ends on January 31. Years and balances described as 2013 and 2012 are for the nine months ended October 31,2013 and 2012, respectively.

Reclassifications. Reclassifications were made to prior-year financial statements to conform to the current-year presentations.

2. Business segment reporting. The Company has two reportable segments. Piping Systems engineers, designs, manufactures and sells specialty piping and leak detection and location systems. Filtration Products manufactures custom-designed industrial filtration products to remove particulates from air and other gas streams. Effective May 1, 2013, industrial process cooling ceased to be a reportable segment of the Company. For additional information, see "Notes to Consolidated Financial Statements, Note 3 Discontinued operations".

	Three Months Ended October 31,						Nine Months Ended October 31,
	2013			2012			2013			2012
Net sales
Piping Systems		$42,289			$26,498			$121,825			$69,147
Filtration Products	15,678			20,738			51,635			62,990
Total		$57,967			$47,236			$173,460			$132,137
Gross profit
Piping Systems		$14,726			$6,060			$35,760			$14,327
Filtration Products	2,161			2,616			7,277			8,280
Total		$16,887			$8,676			$43,037			$22,607
Income (loss) from operations
Piping Systems		$9,403			$2,585			$21,276			$4,184
Filtration Products	(486		)	(410		)	(468		)	(505		)
Corporate	(2,537		)	(1,990		)	(6,715		)	(6,516		)
Total		$6,380			$185			$14,093			($2,837	)

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3. Discontinued operations. On April 30, 2013, the Company sold most of the domestic assets of its subsidiary Thermal Care, Inc. to a subsidiary of IPEG, Inc. for $15 million cash and a deferred payment of $1.1 million, which is held in escrow until May 1, 2014 and included in other assets on the balance sheet. On June 26, 2013, the Company sold substantially all of the assets of the HVAC business previously included in Corporate and Other. In October 2013, the Company decided to sell its remaining industrial process business. These businesses are reported as discontinued operations in the consolidated financial statements and the notes to consolidated financial statements have been revised to conform to the current year reporting. The January 31, 2013 Balance Sheet has been revised to reflect the separate amounts for assets and liabilities that were sold. Results of the discontinued operations for the three and nine months ended October 31,2013 and 2012 were as follows:

	Three Months Ended October 31,					Nine Months Ended October 31,
	2013			2012		2013			2012
Net sales		$874			$11,089		$13,049			$31,177
Gain on disposal of discontinued operations		$—			$—		$11,665			$—
(Loss) income from discontinued operations	(211		)	415		(288		)	891
(Loss) income from discontinued operations before income taxes	(211		)	415		11,377			891
Income tax (benefit) expense	(789		)	89		1,867			59
Income from discontinued operations, net of tax		$578			$326		$9,510			$832

4. Income taxes. Income tax expense (or benefit) for each year is allocated to continuing operations, discontinued operations, extraordinary items, other comprehensive income, and other charges or credits recorded directly to stockholders’ equity. This allocation is commonly referred to as intra-period tax allocation as outlined in ASC 740, Income Taxes ("ASC 740"). When considering intra-period tax allocations, a company also should consider the accounting for income taxes in interim periods. ASC 740-20-45-7 requires that the tax effect of pretax income from continuing operations be determined without regard to the tax effects of items not included in continuing operations. This is commonly referred to as the "incremental approach" where the tax provision is generally calculated for continuing operations without regard to other items.

ASC 740 also includes an exception to the general principle of intra-period tax allocation discussed above. This exception requires that all items (i.e., extraordinary items, discontinued operations, and so forth, including items charged or credited directly to other comprehensive income) be considered in determining the amount of tax benefit that results from a loss from continuing operations. That is, when a company has a current period loss from continuing operations, management must consider income recorded in other categories in determining the tax benefit that is allocated to continuing operations.

The exception in ASC 740 applies in all situations in which there is a loss from continuing operations and income from other items outside of continuing operations. This would include situations in which a company has recorded a full valuation allowance at the beginning and end of the period and the overall tax provision for the year is zero (i.e., a benefit would be recognized in continuing operations even though the loss from continuing operations does not provide a current year incremental tax benefit). The ASC 740 exception, however, only relates to the allocation of the current year tax provision (which may be zero) and does not change a company’s overall tax provision. While intra-period tax allocation in general does not change the overall tax provision, it may result in a gross-up of the individual components, thereby changing the amount of tax provision included in each category.

The determination of the consolidated provision for income taxes, deferred tax assets and liabilities and related valuation allowances requires management to make judgments and estimates. As a company with subsidiaries in foreign jurisdictions, the process of calculating income taxes involves estimating current tax obligations and

7

exposures in each jurisdiction as well as making judgments regarding the future recoverability of deferred tax assets. Income earned in the United Arab Emirates ("U.A.E.") is not subject to local country income tax. Additionally, the relative proportion of taxable income earned domestically versus internationally can fluctuate significantly from period to period. Changes in the estimated level of annual pre-tax income, tax laws and the results of tax audits can affect the overall effective income tax rate, which impacts the level of income tax expense and net income. Judgments and estimates related to the Company's projections and assumptions are inherently uncertain; therefore, actual results could differ materially from projections.

Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and the Company's effective tax rate in the future. On September 19, 2013, the U.S. Department of Treasury finalized tangible property regulations and reissued in proposed form the regulations addressing accounting for the disposal of components of tangible property. These proposed regulations generally apply to taxable years beginning in 2014, with the option for early adoption. Because changes in tax law are accounted for in the period of enactment, certain provisions of the legislation could impact the Company’s classification of its deferred tax assets and liabilities on the balance sheet but are not expected to have a material effect on the Company’s effective tax rate. The adoption of the regulations is expected to primarily affect timing and is not likely to have a material impact on the financial statements.

The Company periodically reviews the adequacy of its valuation allowance in all of the tax jurisdictions in which it operates and may make further adjustments based on management's outlook for continued profits in each jurisdiction.

The Company's consolidated effective tax rate ("ETR") from continuing operations was (0.7)% and (4.4)% for the nine months ended October 31,2013 and 2012, respectively. The October 31, 2013 computation of the ETR was affected primarily by the $0.7 million release of the full valuation allowance related to the Company's deferred tax assets in Saudi Arabia. As a result of two quarters of positive operating income as well as management's expectations of this subsidiary's profitability for the fiscal year 2013, the Company believes the second quarter was the appropriate time to release the valuation allowance. These foreign earnings are considered to be indefinitely reinvested outside the U.S. The Company does not believe that it will be necessary to repatriate equity investments in subsidiaries held outside of the U.S.

At January 31, 2013, the Company established a full valuation allowance on domestic deferred tax assets. A portion was released in the first quarter of 2013 related to the tax on the asset sale of Thermal Care, Inc., a subsidiary. For additional information, see "Notes to Consolidated Financial Statements, Note 3 Discontinued operations".

The Company files income tax returns in U.S. federal and state jurisdictions. The IRS began an audit of the fiscal year ended January 31, 2012 in the third quarter of 2013. As of October 31, 2013, open tax years in federal and some state jurisdictions date back to 2010. In addition, federal and state tax years January 31, 2002 through January 31, 2009 are subject to adjustment on audit, up to the amount of research tax credits generated in those years. As of January 31, 2013, the Company had net operating loss carryforwards of $7.8 million expiring in various years beginning in January 31, 2030. Additionally, the Company files income tax returns in Denmark, India and Saudi Arabia. As of October 31, 2013, open tax years in foreign jurisdictions vary from three to seven years from the date of filing the income tax returns.

5. Other intangible assets with definite lives. The Company owns several patents, including those covering features of its piping and electronic leak detection systems. The patents are not material either individually, or in the aggregate, because the Company believes sales would not be materially reduced if patent protection were not available. 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 $2.58 million and $2.55 million as of October 31, 2013 and January 31, 2013, respectively. Accumulated amortization was approximately $2.22 million and $2.18 million as of October 31, 2013 and

8

January 31, 2013, respectively. Future amortizations over the next five years ending January 31 will be $12,400 in 2014, $47,300 in 2015, $44,100 in 2016, $40,300 in 2017, $37,200 in 2018, and $179,400 thereafter.

6. Investment in joint venture. In October 2009 the Company invested $5.9 million, which consisted of $2 million for a 49% interest and $3.9 million for a note receivable, in a Canadian joint venture with The Bayou Companies, Inc., a subsidiary of Aegion Corporation. The joint venture completed an acquisition of Garneau, Inc.'s pipe coating and insulation facility and associated assets located in Camrose, Alberta, Canada, which provides the Company the opportunity to participate in the growing oil sands market. In February 2012, the Company loaned $1 million to the joint venture to be used for capital expenditures.

The Company accounts for the investment in the joint venture using the equity method. The financial results are included in the Company's consolidated financial statements.

	Nine Months Ended October 31,
	2013	2012
Income from joint venture	$248	$354

The following information summarizes the joint venture financial data as of October 31, 2013 and January 31, 2013, respectively:

	October 31, 2013	January 31, 2013
Current assets	$12,312	$14,058
Noncurrent assets	18,613	19,442
Current liabilities	2,306	2,703
Noncurrent liabilities	15,989	18,274
Equity	$12,630	$12,524

	Nine Months Ended October 31,
	2013		2012
Revenue		$19,913		$19,389
Gross profit	3,157		3,616
Income from continuing operations	1,570		1,827
Net income	$516		$726

7. Stock-basedcompensation. The Company has stock-based compensation awards that can be granted to eligible employees, officers or directors.

	Three Months Ended October 31,				Nine Months Ended October 31,
	2013		2012		2013		2012
Stock-based compensation expense		$27		$106		$95		$366

The fair value of the outstanding option awards was estimated on the grant dates using the Black-Scholes option pricing model.

9

	Nine Months Ended October 31,
Fair value assumptions	2013	2012
Expected volatility	49.65% - 65.54%	58.12% - 66.82%
Risk free interest rate	.74% - 2.82%	.74% - 2.82%
Dividend yield	none	none
Expected life	4.9 - 5.7 years	4.9 - 5.7 years

Option activity	Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Outstanding at January 31, 2013	969			$10.77	6.6		$40
Granted	102		10.50
Exercised	(135	)	6.72			506
Expired or forfeited	(55	)	12.64
Outstanding end of period	881		11.25		6.3	2,770
Exercisable end of period	602			$12.67	5.1		$1,748

Unvested option activity	Unvested Options Outstanding		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Outstanding at January 31, 2013	383			$6.91		$4
Granted	102		10.50
Vested	(181	)
Expired or forfeited	(25	)	6.96
Outstanding end of period	279			$8.18		$1,022

As of October 31, 2013, there was $966 thousand of total unrecognized compensation expense related to unvested stock options. The expense is expected to be recognized over a period of 2.6 years.

8. Earnings per share.

	Three Months Ended October 31,		Nine Months Ended October 31,
	2013	2012	2013	2012
Basic weighted average common shares outstanding	7,068	6,924	6,995	6,921
Dilutive effect of equity incentive plans	95	—	46	—
Weighted average common shares outstanding assuming full dilution	7,163	6,924	7,041	6,921
Stock options not included in the computation of diluted earnings per share of common stock because the option exercise prices exceeded the average market prices of the common shares	216	785	362	494
Stock options with an exercise price below the average market price	665	172	519	463

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9. Interest expense, net.

	Three Months Ended October 31,						Nine Months Ended October 31,
	2013			2012			2013			2012
Interest expense		$332			$592			$1,504			$1,520
Interest income	(142		)	(79		)	(422		)	(372		)
Interest expense, net		$190			$513			$1,082			$1,148

10. Debt. Debt totaled $40.9 million at October 31, 2013, a net decrease of $1.1 million for the fiscal year.

On July 11, 2002, the Company entered into a secured loan and security agreement with a financial institution ("Loan Agreement"). Under the terms of the Loan Agreement as amended, which matures on November 30, 2016, the Company can borrow up to $25 million, subject to borrowing base and other requirements, under a revolving line of credit. The Loan Agreement covenants restrict debt, liens, investments, do not permit payment of dividends and require attainment of specific levels of profitability and cash flows. At October 31, 2013, the Company was in compliance with all covenants under the Loan Agreement. Interest rates are based on options selected by the Company as follows: (a) a margin of 0.50 in effect plus prime rate; or (b) a margin of 2.75 in effect plus the LIBOR rate for the corresponding interest period. As of October 31, 2013, the Company had borrowed $11.7 million at prime and LIBOR rates and had $8.7 million available to it under the revolving line of credit. In addition, $0.3 million of availability was used under the Loan Agreement primarily to support letters of credit to guarantee amounts committed for inventory purchases. The Loan Agreement provides that all domestic receipts are deposited in a bank account from which all funds may only be used to pay the debt under the Loan Agreement. At October 31, 2013, the amount of such restricted cash was $2 million. Cash required for operations is provided by draw downs on the line of credit.

Revolving lines foreign. The Company also has credit arrangements used by its Danish and Middle Eastern subsidiaries. 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 credit arrangement covenant requires a minimum tangible net worth to be maintained. At October 31, 2013, the Company was in compliance with the covenant under the credit arrangement.Interest rates are as follows 4.00% per annum below National Bank of Fujairah Base Rate, minimum 3.50% per annum and Emirates Inter Bank Offered Rate (EIBOR) plus 3.50% per annum. The Company's interest rates range from 3.5% to 6%. At October 31, 2013, borrowings under these credit arrangements totaled $9 million; an additional $17.4 million remained unused.

On April 27, 2010, the Company obtained a loan with no maturity date in the amount of $2 million collateralized by the cash surrender value of insurance policies on the lives of key executive officers. The loans carried interest at a rate of 4.25% and required interest only payments annually. At January 31, 2013, the balance was $1.8 million. In October 2013, the loan was paid down, and the remaining loan balance of $64 thousand was paid in November 2013.

11. Fair value of financial instruments. At October 31, 2013, an interest rate swap agreement that relates to a mortgage note in Denmark was in effect with a notional value of $1.3 million that matures December 2021. The swap agreement, which reduces the exposure to market risks from changing interest rates, exchanges the variable rate to fixed interest rate payments of 2.47%. The exchange traded swap is valued on a recurring basis using quoted market prices and was classified within Level 2 of the fair value hierarchy, which includes significant other observable inputs because the exchange is not deemed an active market. The derivative mark to market of $57 thousand was included in other long-term liabilities on the consolidated balance sheet.

12. Recent accounting pronouncements. The Company evaluated recent accounting pronouncements and does not expect them to have a material impact on the consolidated financial statements.

11

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")

The statements contained under the caption MD&A and other information contained elsewhere in this quarterly report, 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, and are subject to the safe harbors created thereby. These statements should be considered as subject to the many risks and uncertainties that exist in the Company's operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected as a result of many factors, including but not limited to those under the heading Item 1A. Risk Factors included in the Company's latest Annual Report on Form 10-K.

RESULTS OF OPERATIONS

Consolidated MFRI, Inc.

MFRI, Inc. is engaged in the manufacture and sale of products in two reportable segments: Piping Systems and Filtration Products. The Company website is www.mfri.com.

This discussion should be read in conjunction with the consolidated financial statements, including the notes thereto, contained elsewhere in this report. An overview of the segment results is provided in "Notes to Consolidated Financial Statements, Note 2 Business segment reporting" contained in Item 1 of this report.

On April 30, 2013, the Company sold most of the domestic assets of its subsidiary Thermal Care, Inc. to a subsidiary of IPEG, Inc. for $15 million cash and $1.1 million, which is held in escrow until May 1, 2014. The acquiring company has signed a three-year lease for the office space and production facilities occupied by Thermal Care. On June 26, 2013, the Company sold substantially all of the assets of the HVAC business previously included in Corporate and Other. In October 2013, the Company decided to plan to sell its remaining industrial process business. These businesses are reported as discontinued operations in the consolidated financial statements and the notes to consolidated financial statements have been revised to conform to the current year reporting. Income from discontinued operations net of tax was $9.5 million and $0.8 million for the nine months ended October 31,2013 and 2012, respectively.

Three months endedOctober 31, 2013 ("current quarter") vs. Three months endedOctober 31, 2012 ("prior-year quarter")

Net sales increased23% to $58 million in the current quarter from $47.2 million in the prior-year quarter. Piping Systems sales increased60% or $15.8 million compared to the prior-year quarter mainly due to sales growth in Saudi Arabia and the United Arab Emirates, ("U.A.E.") for such major projects as expanding the Grand Mosque in Mecca and the King Abdul-Aziz International Airport in Jeddah. Filtration Products sales decreased by $5 million due primarily to reduced domestic demand for fabric filter bags.

Gross profit approximately doubled to $16.9 million in the current quarter from $8.7 million in the prior-year quarter mainly due to the sales increase in Piping Systems. Filtration Products' gross profit decreased17.4% resulting from a 24% decline in sales.

Operating expenses as a percent of net sales remained constant. Operating expenses increased to $10.5 million in the current quarter from $8.5 million in the prior-year quarter, driven by incentive compensation expense.

Third quarter net income rose to $7.4 million compared to $0.5 million in the comparable prior-year's quarter. Income rose primarily due to the gross profit generated from increased Piping Systems sales.

12

Nine months endedOctober 31, 2013 (“YTD”) vs. Nine months endedOctober 31, 2012(“prior-year YTD”)

YTD net sales of $173.5 millionincreased31% from $132.1 million for the prior-year YTD. Piping Systems sales increased76% or $53 million due to the previously mentioned projects in Saudi Arabia. Filtration Products decreased by $11 million due primarily to reduced domestic demand for fabric filter bags. In the near term, the Company expects fourth quarter revenue to be lower than the third quarter as orders are filled at a moderated pace relative to the unusually fast pace of recent quarters.

Gross profit approximately doubled to $43 million YTD from $23 million in the prior-year YTD due to increased sales in Piping Systems.

General and administrative expenses increased19% to $20.8 million YTD from $17.5 million in the prior-year YTD. Improved performance led to increased incentive compensation expense partially offset by reduced health insurance costs.

Net income was $22.9 million YTD compared to a net loss of $3 million in the prior-year YTD. Income rose due to the asset sale of Thermal Care, Inc., and the previously mentioned improvement in gross profit primarily related to Piping Systems.

Piping Systems

Current quarter vs. prior-year quarter

As the Piping Systems segment is based on large discrete projects, revenues can be subject to large swings in both geographies and reporting periods.

Net sales increased60% to $42.3 million in the current quarter from $26.5 million in the prior-year quarter. The increase was attributed to the previously mentioned projects in Saudi Arabia and domestic oil and gas projects underway during the quarter.

Gross margin increased to 35% of net sales in the current quarter from 23% of net sales in the prior-year quarter. Gross profit increased due to higher volume produced at the Saudi Arabian and U.A.E. piping facilities.

Operating expenses increased to $5.3 million in the current quarter from $3.5 million in the prior-year quarter. General and administrative expense increased to $4.2 million or 10% of net sales in the current quarter from $2.5 million or 9% of net sales in the prior-year quarter due to incentive compensation expense rising in connection with increased profits.

YTD vs. prior-year YTD

The manufacturing facility in Dammam, Saudi Arabia was established in April 2012. YTD net sales of $121.8 millionincreased76% from $69.1 million in the prior-year YTD. The increase was attributed to the projects in Saudi Arabia and a rise in sales of domestic oil and gas products.

Gross margin rose to 29% of net sales YTD from 21% of net sales in the prior-year YTD. Gross profit increased due to higher volume produced at the Middle East facilities. Additionally domestic activities in the first quarter had favorable product mix resulting in improved margins.

General and administrative expenses decreased as a percentage of net sales to 8.8% YTD from 10.5% for in the prior-year YTD. The dollar increase to $10.7 million from $7.3 million was related to incentive compensation expense associated with improved earnings partially offset by reduced health insurance costs.

13

Selling expenses as a percentage of net sales decreased to 3% YTD from 4.1% for in the prior-year YTD. The dollar increase to $3.8 million from $2.8 million was due to higher commission expense as a result of additional sales.

Filtration Products

Current quarter vs. prior-year quarter

Net sales decreased24% to $15.7 million in the current quarter from $20.7 million in the prior-year quarter primarily due to reduced domestic demand for fabric filter bags. Gross profit decreased15.4% to $2.2 million from $2.6 million due to product mix as the market is shifting to cartridge filters instead of fabric filter bags. In response to lower demand for fabric filter bags, the Company has reduced its workforce. Over the past year, the Company has implemented many initiatives to resize the fabric filter business and lower manufacturing costs in all plants, which contained the quarterly operating loss for Filtration Products even as revenue declined. The Company continues to work hard on margin and expense controls to -strengthen this segment.

Operating expenses decreased to $2.6 million in the current quarter from $3 million in the prior-year quarter. The decrease was due to expense reduction initiatives implemented in the previous quarter.

YTD vs. prior-year YTD

YTD net sales decreased 18% to $51.6 million from $63 million in the prior-year YTD. Sales declines were the result of lower market demand for domestic fabric filter bag products. YTD gross profit decreased slightly to $7.3 million from $8.3 million in the prior-year YTD due to lower sales volume offset by the aforementioned product mix. Gross profit as a percent of sales increased to 14.1% YTD from 13.2% in the prior-year YTD as a result of product mix, overhead reductions and productivity improvements.

Operating expenses decreased12.5% to $7.7 million YTD from $8.8 million in the prior-year YTD. The decrease was due to reduced health insurance costs, decreased commission expense due to lower sales and staffing reductions. This decrease was partially offset by a one-time pension expense resulting from the freezing of the defined benefit pension plan.

Corporate

Current quarter vs. prior-year quarter

Corporate operating expenses include interest expense and general and administrative expenses that are not allocated to the segments. General and administrative expenses increased to $2.5 million in the current quarter from $2 million in the prior-year quarter due to an increase in incentive compensation expense in connection with improved earnings in the current quarter.

Net interest expense was $0.2 million in the current quarter versus $0.5 million in the prior-year quarter due to a reduction in borrowings relative to the prior-year quarter.

YTD vs. prior-year YTD

General and administrative expenses decreased to $6.7 million or 4% of consolidated net sales YTD from $6.5 million or 4.9% of consolidated net sales in the prior-year YTD. This decrease was due to lower audit, tax consulting and other professional service expenses and reduced health insurance costs partially offset by increased incentive compensation expense.

YTD net interest expense remained constant at $1.1 million.

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INCOME TAXES

The Company's consolidated effective tax rate from continuing operations was (0.7)% for the nine months ended October 31,2013, which was affected primarily by the $0.7 million release of the full valuation allowance related to the Company's deferred tax assets in Saudi Arabia. Discontinued operations included $1.9 million in tax expense related to the asset sale of Thermal Care, Inc., a subsidiary. Under GAAP accounting, this reflects the reduction of the valuation allowance related to the deferred tax asset established from the net operating loss ("NOL") carryforward. The Company remains in an NOL carryforward position. The year-to-date tax benefit from continuing operations reflects a $1.6 million domestic benefit from certain intra-period tax allocation requirements. For additional information, see "Notes to Consolidated Financial Statements, Note 3 Discontinued operations and Note 4 Income taxes".

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents as of October 31, 2013 were $11 million compared to $7 million at January 31, 2013. At October 31, 2013, $2.3 million was held in the U.S. and $8.2 million was held at the foreign subsidiaries. The Company's working capital was $54 million on October 31, 2013 compared to $35 million on January 31, 2013. Piping Systems' net sales more than doubled from the fourth quarter in 2012, causing the Saudi Arabian subsidiary's accounts receivable to increase $24 million. Net cash used in operating activities during the first nine months of 2013 was $10 million compared to $1.6 million during the first nine months of 2012. The Company does not believe that it will be necessary to repatriate investments in subsidiaries held outside of the U.S.

Net cash provided by investing activities for the nine months ended October 31, 2013 was $13.4 million. On April 30, 2013, the Company completed an asset sale of Thermal Care, Inc., a subsidiary, for $15 million cash and $1.1 million, which is held in escrow until May 1, 2014. This subsidiary and others included in discontinued operations did not have a significant impact on cashflow. The proceeds from the sale paid down a portion of the debt under the Loan Agreement.

Debt totaled $40.9 million at October 31, 2013, a net decrease of $1.1 million compared to the beginning of the current fiscal year. For additional information, see "Notes to Consolidated Financial Statements, Note 10 Debt". Net cash used in financing activities was $0.3 million for the nine months ended October 31, 2013.

On July 11, 2002, the Company entered into a secured loan and security agreement with a financial institution ("Loan Agreement"). Under the terms of the Loan Agreement as amended, which matures on November 30, 2016, the Company can borrow up to $25 million, subject to borrowing base and other requirements, under a revolving line of credit. The Loan Agreement covenants restrict debt, liens, investments, do not permit payment of dividends and require attainment of specific levels of profitability and cash flows. At October 31, 2013, the Company was in compliance with all covenants under the Loan Agreement. Interest rates are based on options selected by the Company as follows: (a) a margin of 0.50 in effect plus prime rate; or (b) a margin of 2.75 in effect plus the LIBOR rate for the corresponding interest period. As of October 31, 2013, the Company had borrowed $12 million at prime and LIBOR rates and had $9 million available to it under the revolving line of credit. In addition, $0.3 million of availability was used under the Loan Agreement primarily to support letters of credit to guarantee amounts committed for inventory purchases. The Loan Agreement provides that all domestic receipts are deposited in a bank account from which all funds may only be used to pay the debt under the Loan Agreement. At October 31, 2013, the amount of such restricted cash was $2.0 million. Cash required for operations is provided by draw downs on the line of credit.

Revolving lines foreign. The Company also has credit arrangements used by its Danish and Middle Eastern subsidiaries. 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 credit arrangement covenant requires a minimum tangible net worth to be maintained. At October 31, 2013, the Company was in compliance with the covenant under the credit arrangement. Interest rates are as follows 4.00% per annum below National Bank of Fujairah Base Rate, minimum 3.50% per annum and Emirates Inter Bank Offered Rate (EIBOR) plus 3.50% per annum. The Company

15

's interest rates range from 3.5% to 6%. At October 31, 2013, borrowings under these credit arrangements totaled $9 million; an additional $17.4 million remained unused.

On April 27, 2010, the Company obtained a loan with no maturity date in the amount of $2 million collateralized by the cash surrender value of insurance policies on the lives of key executive officers. The loans carried interest at a rate of 4.25% and required interest only payments annually. At January 31, 2013, the balance was $1.8 million. In October 2013, the loan was paid down, and the remaining loan balance of $64 thousand was paid in November 2013.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies are described in Item 7. MD&A and in the Notes to the Consolidated Financial Statements for the year ended January 31, 2013 contained in the Company's most recent annual report on Form 10-K. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The application of critical accounting policies may require management to make assumptions, judgments and estimates about the amounts reflected in the Consolidated Financial Statements. Management uses historical experience and all available information to make these estimates and judgments and different amounts could be reported using different assumptions and estimates.

Item 4.Controls and Procedures

The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of October 31, 2013. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of October 31, 2013 to ensure that information required to be disclosed in the reports that are filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and is accumulated and communicated to the issuer's management, including the principal executive and financial officers, to allow timely decisions regarding required disclosure.

There has been no change in internal control over financial reporting during the quarter ended October 31, 2013 that has materially affected or is reasonably likely to materially affect, internal control over financial reporting.

PART II OTHER INFORMATION

Item 6. Exhibits

31	Rule 13a - 14(a)/15d - 14(a) Certifications (1) Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2) Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Section 1350 Certifications (Chief Executive Officer and Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
101.INS	XBRL Instance
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation
101.DEF	XBRL Taxonomy Extension Definition
101.LAB	XBRL Taxonomy Extension Labels
101.PRE	XBRL Taxonomy Extension Presentation

16

SIGNATURES

Pursuant to the requirements 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.

MFRI, INC.

Date:	December 9, 2013	/s/ Bradley E. Mautner
		Bradley E. Mautner
		Director, President and
		Chief Executive Officer
		(Principal Executive Officer)
Date:	December 9, 2013	/s/ Karl J. Schmidt
		Karl J. Schmidt
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

17

EX-31.1

Exhibit 31.1

I, Bradley E. Mautner, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MFRI, 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 the 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 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: December 9, 2013

/s/ Bradley E. Mautner

Bradley E. Mautner

Director, President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

I, Karl J. Schmidt, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MFRI, 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 the 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 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: December 9, 2013

/s/ Karl J. Schmidt

Karl J. Schmidt

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32

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 MFRI, Inc. (the “Registrant’), certify that, to the best of their knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended October 31, 2013 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/ Bradley E. Mautner

Bradley E. Mautner

Director, President and Chief Executive Officer

(Principal Executive Officer)

December 9, 2013

/s/ Karl J. Schmidt

Karl J. Schmidt

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

December 9, 2013

A signed original of     this written statement required by Section 906 has been provided by MFRI, Inc. and will be retained by MFRI, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Debt

9 Months Ended

Oct. 31, 2013

Debt [Abstract]

Debt Disclosure [Text Block]

Debt. Debt totaled $40.9 million at October 31, 2013, a net decrease of $1.1 million for the fiscal year.

On July 11, 2002, the Company entered into a secured loan and security agreement with a financial institution ("Loan Agreement"). Under the terms of the Loan Agreement as amended, which matures on November 30, 2016, the Company can borrow up to $25 million, subject to borrowing base and other requirements, under a revolving line of credit. The Loan Agreement covenants restrict debt, liens, investments, do not permit payment of dividends and require attainment of specific levels of profitability and cash flows. At October 31, 2013, the Company was in compliance with all covenants under the Loan Agreement. Interest rates are based on options selected by the Company as follows: (a) a margin of 0.50 in effect plus prime rate; or (b) a margin of 2.75 in effect plus the LIBOR rate for the corresponding interest period. As of October 31, 2013, the Company had borrowed $11.7 million at prime and LIBOR rates and had $8.7 million available to it under the revolving line of credit. In addition, $0.3 million of availability was used under the Loan Agreement primarily to support letters of credit to guarantee amounts committed for inventory purchases. The Loan Agreement provides that all domestic receipts are deposited in a bank account from which all funds may only be used to pay the debt under the Loan Agreement. At October 31, 2013, the amount of such restricted cash was $2 million. Cash required for operations is provided by draw downs on the line of credit.

Revolving lines foreign. The Company also has credit arrangements used by its Danish and Middle Eastern subsidiaries. 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 credit arrangement covenant requires a minimum tangible net worth to be maintained. At October 31, 2013, the Company was in compliance with the covenant under the credit arrangement.Interest rates are as follows 4.00% per annum below National Bank of Fujairah Base Rate, minimum 3.50% per annum and Emirates Inter Bank Offered Rate (EIBOR) plus 3.50% per annum. The Company's interest rates range from 3.5% to 6%. At October 31, 2013, borrowings under these credit arrangements totaled $9 million; an additional $17.4 million remained unused.

On April 27, 2010, the Company obtained a loan with no maturity date in the amount of $2 million collateralized by the cash surrender value of insurance policies on the lives of key executive officers. The loans carried interest at a rate of 4.25% and required interest only payments annually. At January 31, 2013, the balance was $1.8 million. In October 2013, the loan was paid down, and the remaining loan balance of $64 thousand was paid in November 2013.

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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Oct. 31, 2013	Jan. 31, 2013
Current assets
Cash and cash equivalents	$ 10,522	$ 7,034
Restricted cash	2,362	725
Trade accounts receivable, less allowance for doubtful accounts of $238 at October 31, 2013 and $290 at January 31, 2013	51,691	23,278
Inventories, net	39,140	37,529
Assets held-for-sale	1,235	10,218
Prepaid expenses and other current assets	5,701	3,932
Costs and estimated earnings in excess of billings on uncompleted contracts	2,099	1,630
Total current assets	112,750	84,346
Property, plant and equipment, net of accumulated depreciation	43,021	45,582
Long-term assets
Deferred tax assets	1,535	1,349
Note receivable	4,971	5,200
Investment in joint venture	6,270	6,022
Cash surrender value of deferred compensation plan	3,077	2,946
Other assets	2,882	2,408
Assets held for sale long-term	985	1,253
Patents, net of accumulated amortization	361	373
Total long-term assets	20,081	19,551
Total assets	175,852	149,479
Current liabilities
Trade accounts payable	15,679	18,740
Accrued compensation and payroll taxes	4,362	4,361
Commissions and management incentives payable	8,436	2,723
Current maturities of long-term debt	11,963	5,384
Customers' deposits	9,239	7,030
Liabilities held for sale	650	7,531
Billings in excess of costs and estimated earnings on uncompleted contracts	2,962	985
Other accrued liabilities	2,391	1,735
Deferred tax liabilities	578	678
Income taxes payable	2,268	34
Total current liabilities	58,528	49,201
Long-term liabilities
Long-term debt, less current maturities	28,917	35,579
Deferred compensation liabilities	6,356	5,670
Liabilities held for sale long-term	1,074	1,485
Other long-term liabilities	3,455	3,289
Total long-term liabilities	39,802	46,023
Stockholders' equity
Common stock, $.01 par value, authorized 50,000 shares; 7,080 issued and outstanding at October 31, 2013 and 6,924 issued and outstanding at January 31, 2013	71	69
Additional paid-in capital	51,363	50,358
Retained earnings	27,436	4,553
Accumulated other comprehensive loss	(1,348)	(725)
Total stockholders' equity	77,522	54,255
Total liabilities and stockholders' equity	$ 175,852	$ 149,479

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Discontinued operations (Notes)

9 Months Ended

Oct. 31, 2013

Discontinued operations

Discontinued Operations [Text Block]

Discontinued operations. On April 30, 2013, the Company sold most of the domestic assets of its subsidiary Thermal Care, Inc. to a subsidiary of IPEG, Inc. for $15 million cash and a deferred payment of $1.1 million, which is held in escrow until May 1, 2014 and included in other assets on the balance sheet. On June 26, 2013, the Company sold substantially all of the assets of the HVAC business previously included in Corporate and Other. In October 2013, the Company decided to sell its remaining industrial process business. These businesses are reported as discontinued operations in the consolidated financial statements and the notes to consolidated financial statements have been revised to conform to the current year reporting. The January 31, 2013 Balance Sheet has been revised to reflect the separate amounts for assets and liabilities that were sold. Results of the discontinued operations for the three and nine months ended October 31,2013 and 2012 were as follows:

	Three Months Ended October 31,					Nine Months Ended October 31,
	2013			2012		2013			2012
Net sales		$874			$11,089		$13,049			$31,177
Gain on disposal of discontinued operations		$—			$—		$11,665			$—
(Loss) income from discontinued operations	(211		)	415		(288		)	891
(Loss) income from discontinued operations before income taxes	(211		)	415		11,377			891
Income tax (benefit) expense	(789		)	89		1,867			59
Income from discontinued operations, net of tax		$578			$326		$9,510			$832

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Interest expense, net (Tables)

9 Months Ended

Oct. 31, 2013

Interest expense, net [Abstract]

Interest income and interest expense [Table Text Block]

	Three Months Ended October 31,						Nine Months Ended October 31,
	2013			2012			2013			2012
Interest expense		$332			$592			$1,504			$1,520
Interest income	(142		)	(79		)	(422		)	(372		)
Interest expense, net		$190			$513			$1,082			$1,148

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Fair value of financial instruments

9 Months Ended

Oct. 31, 2013

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value Disclosures [Text Block]

Fair value of financial instruments. At October 31, 2013, an interest rate swap agreement that relates to a mortgage note in Denmark was in effect with a notional value of $1.3 million that matures December 2021. The swap agreement, which reduces the exposure to market risks from changing interest rates, exchanges the variable rate to fixed interest rate payments of 2.47%. The exchange traded swap is valued on a recurring basis using quoted market prices and was classified within Level 2 of the fair value hierarchy, which includes significant other observable inputs because the exchange is not deemed an active market. The derivative mark to market of $57 thousand was included in other long-term liabilities on the consolidated balance sheet.

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Income taxes Income taxes (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Oct. 31, 2013 Rate	Oct. 31, 2012 Rate	Jan. 31, 2013
Income tax [Abstract]
effective income tax rate from continuing operations	(0.70%)	(4.40%)
Valuation allowance release	$ 0.7
Income tax examination, description	IRS began an audit of the fiscal year ended January 31, 2012
Open tax year	2010
Open tax years up to the amount of research tax credit generated	January 31, 2002 through January 31, 2009
Operating loss carryforwards			$ 7.8
Operating loss carryforwards, expiration dates	Jan. 31, 2030

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Discontinued operations (Details) (USD $)	3 Months Ended		9 Months Ended
	Oct. 31, 2013	Oct. 31, 2012	Oct. 31, 2013	Oct. 31, 2012
Discontinued operations
Net proceeds from sale of discontinued operations			$ 15,253,000	$ 0
Proceeds held in escrow			1,100,000
escrow released date			May 01, 2014
Disposal date HVAC subsidiary			Jun. 26, 2013
Net sales	874,000	11,089,000	13,049,000	31,177,000
Gain on disposal of discontinued operations	0	0	11,665,000	0
(Loss) income from discontinued operations	(211,000)	415,000	(288,000)	891,000
(Loss) income from discontinued operations before income taxes	(211,000)	415,000	11,377,000	891,000
Income tax (benefit) expense	(789,000)	89,000	1,867,000	59,000
Income from discontinued operations, net of tax	$ 578,000	$ 326,000	$ 9,510,000	$ 832,000

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Interest expense, net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 31, 2013	Oct. 31, 2012	Oct. 31, 2013	Oct. 31, 2012
Interest expense, net [Abstract]
Interest expense	$ 332	$ 592	$ 1,504	$ 1,520
Interest income	(142)	(79)	(422)	(372)
Interest expense, net	$ 190	$ 513	$ 1,082	$ 1,148

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Stock-based compensation Fair value assumptions (Details)	9 Months Ended
	Oct. 31, 2013	Oct. 31, 2012
Minimum [Member]
Fair value assumptions [Line Items]
Expected volatility	49.65%	58.12%
Risk free interest rate	0.74%	0.74%
Dividend yield	0.00%	0.00%
Expected life	4 years 10 months 24 days	4 years 10 months 24 days
Maximum [Member]
Fair value assumptions [Line Items]
Expected volatility	65.54%	66.82%
Risk free interest rate	2.82%	2.82%
Dividend yield	0.00%	0.00%
Expected life	5 years 8 months 12 days	5 years 8 months 12 days

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Business segment reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 31, 2013	Oct. 31, 2012	Oct. 31, 2013 Segments	Oct. 31, 2012
Segment reporting
Number of reportable segments			2
Net sales	$ 57,967	$ 47,236	$ 173,460	$ 132,137
Gross profit	16,887	8,676	43,037	22,607
Income (loss) from operations	6,380	185	14,093	(2,837)
Piping Systems [Member]
Segment reporting
Net sales	42,289	26,498	121,825	69,147
Gross profit	14,726	6,060	35,760	14,327
Income (loss) from operations	9,403	2,585	21,276	4,184
Filtration Products [Member]
Segment reporting
Net sales	15,678	20,738	51,635	62,990
Gross profit	2,161	2,616	7,277	8,280
Income (loss) from operations	(486)	(410)	(468)	(505)
Corporate Segment [Member]
Segment reporting
Income (loss) from operations	$ (2,537)	$ (1,990)	$ (6,715)	$ (6,516)

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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Statement (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	9 Months Ended	12 Months Ended
	Oct. 31, 2013	Oct. 31, 2013	Jan. 31, 2013	Jan. 31, 2012
Stockholders' equity	$ 77,522	$ 77,522	$ 54,255	$ 72,355
Net income (loss)	7,391	22,868	(18,485)
Stock options exercised		911	35
Stock-based compensation expense		96	484
Excess tax benefit from stock options exercised			11
Interest rate swap		155	97
Pension liability adjustment			466
Foreign currency translation adjustment	(58)	(778)	(263)
Total foreign currency transaction and translation		(763)
Tax benefit on above items			(445)
Common Stock [Member]
Shares, Outstanding	7,080,087	7,080,087	6,924,084	6,912,771
Stockholders' equity	71	71	69	69
Stock options exercised		2	0
Shares issued		156,003	11,313
Additional Paid-in Capital [Member]
Stockholders' equity	51,363	51,363	50,358	49,828
Stock options exercised		909	35
Stock-based compensation expense		96	484
Excess tax benefit from stock options exercised			11
Retained Earnings [Member]
Stockholders' equity	27,436	27,436	4,553	23,038
Net income (loss)		22,868	(18,485)
Foreign currency translation adjustment		15
Accumulated Other Comprehensive Income (Loss) [Member]
Stockholders' equity	(1,348)	(1,348)	(725)	(580)
Interest rate swap		155	97
Pension liability adjustment			466
Foreign currency translation adjustment		(778)	(263)
Tax benefit on above items			$ (445)

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Basis of presentation

9 Months Ended

Oct. 31, 2013

Basis of presentation [Abstract]

Basis of presentation [Text Block]

Basis of presentation. The interim consolidated financial statements of MFRI, Inc. and subsidiaries ("MFRI," "Company," or "Registrant") are unaudited, but include all adjustments which the Company's management considers necessary to present fairly the financial position and results of operations for the periods presented. These adjustments consist of normal recurring adjustments. Information and footnote disclosures have been omitted pursuant to Securities and Exchange Commission ("SEC") rules and regulations. The consolidated balance sheet as of January 31, 2013 is derived from the audited consolidated balance sheet as of that date. The results of operations for any interim period are not necessarily indicative of future or annual results. Interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. The Company's fiscal year ends on January 31. Years and balances described as 2013 and 2012 are for the nine months ended October 31,2013 and 2012, respectively.

Reclassifications. Reclassifications were made to prior-year financial statements to conform to the current-year presentations.

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Income taxes

9 Months Ended

Oct. 31, 2013

Income taxes [Abstract]

Income taxes [Text Block]

4. Income taxes. Income tax expense (or benefit) for each year is allocated to continuing operations, discontinued operations, extraordinary items, other comprehensive income, and other charges or credits recorded directly to stockholders’ equity. This allocation is commonly referred to as intra-period tax allocation as outlined in ASC 740, Income Taxes ("ASC 740"). When considering intra-period tax allocations, a company also should consider the accounting for income taxes in interim periods. ASC 740-20-45-7 requires that the tax effect of pretax income from continuing operations be determined without regard to the tax effects of items not included in continuing operations. This is commonly referred to as the "incremental approach" where the tax provision is generally calculated for continuing operations without regard to other items.

ASC 740 also includes an exception to the general principle of intra-period tax allocation discussed above. This exception requires that all items (i.e., extraordinary items, discontinued operations, and so forth, including items charged or credited directly to other comprehensive income) be considered in determining the amount of tax benefit that results from a loss from continuing operations. That is, when a company has a current period loss from continuing operations, management must consider income recorded in other categories in determining the tax benefit that is allocated to continuing operations.

The exception in ASC 740 applies in all situations in which there is a loss from continuing operations and income from other items outside of continuing operations. This would include situations in which a company has recorded a full valuation allowance at the beginning and end of the period and the overall tax provision for the year is zero (i.e., a benefit would be recognized in continuing operations even though the loss from continuing operations does not provide a current year incremental tax benefit). The ASC 740 exception, however, only relates to the allocation of the current year tax provision (which may be zero) and does not change a company’s overall tax provision. While intra-period tax allocation in general does not change the overall tax provision, it may result in a gross-up of the individual components, thereby changing the amount of tax provision included in each category.

The determination of the consolidated provision for income taxes, deferred tax assets and liabilities and related valuation allowances requires management to make judgments and estimates. As a company with subsidiaries in foreign jurisdictions, the process of calculating income taxes involves estimating current tax obligations and exposures in each jurisdiction as well as making judgments regarding the future recoverability of deferred tax assets. Income earned in the United Arab Emirates ("U.A.E.") is not subject to local country income tax. Additionally, the relative proportion of taxable income earned domestically versus internationally can fluctuate significantly from period to period. Changes in the estimated level of annual pre-tax income, tax laws and the results of tax audits can affect the overall effective income tax rate, which impacts the level of income tax expense and net income. Judgments and estimates related to the Company's projections and assumptions are inherently uncertain; therefore, actual results could differ materially from projections.

Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and the Company's effective tax rate in the future. On September 19, 2013, the U.S. Department of Treasury finalized tangible property regulations and reissued in proposed form the regulations addressing accounting for the disposal of components of tangible property. These proposed regulations generally apply to taxable years beginning in 2014, with the option for early adoption. Because changes in tax law are accounted for in the period of enactment, certain provisions of the legislation could impact the Company’s classification of its deferred tax assets and liabilities on the balance sheet but are not expected to have a material effect on the Company’s effective tax rate. The adoption of the regulations is expected to primarily affect timing and is not likely to have a material impact on the financial statements.

The Company periodically reviews the adequacy of its valuation allowance in all of the tax jurisdictions in which it operates and may make further adjustments based on management's outlook for continued profits in each jurisdiction.

The Company's consolidated effective tax rate ("ETR") from continuing operations was (0.7)% and (4.4)% for the nine months ended October 31,2013 and 2012, respectively. The October 31, 2013 computation of the ETR was affected primarily by the $0.7 million release of the full valuation allowance related to the Company's deferred tax assets in Saudi Arabia. As a result of two quarters of positive operating income as well as management's expectations of this subsidiary's profitability for the fiscal year 2013, the Company believes the second quarter was the appropriate time to release the valuation allowance. These foreign earnings are considered to be indefinitely reinvested outside the U.S. The Company does not believe that it will be necessary to repatriate equity investments in subsidiaries held outside of the U.S.

At January 31, 2013, the Company established a full valuation allowance on domestic deferred tax assets. A portion was released in the first quarter of 2013 related to the tax on the asset sale of Thermal Care, Inc., a subsidiary. For additional information, see "Notes to Consolidated Financial Statements, Note 3 Discontinued operations".

The Company files income tax returns in U.S. federal and state jurisdictions. The IRS began an audit of the fiscal year ended January 31, 2012 in the third quarter of 2013. As of October 31, 2013, open tax years in federal and some state jurisdictions date back to 2010. In addition, federal and state tax years January 31, 2002 through January 31, 2009 are subject to adjustment on audit, up to the amount of research tax credits generated in those years. As of January 31, 2013, the Company had net operating loss carryforwards of $7.8 million expiring in various years beginning in January 31, 2030. Additionally, the Company files income tax returns in Denmark, India and Saudi Arabia. As of October 31, 2013, open tax years in foreign jurisdictions vary from three to seven years from the date of filing the income tax returns.

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Business segment reporting

9 Months Ended

Oct. 31, 2013

Segment reporting [Line Items]

Segment Reporting Disclosure [Text Block]

Business segment reporting. The Company has two reportable segments. Piping Systems engineers, designs, manufactures and sells specialty piping and leak detection and location systems. Filtration Products manufactures custom-designed industrial filtration products to remove particulates from air and other gas streams. Effective May 1, 2013, industrial process cooling ceased to be a reportable segment of the Company. For additional information, see "Notes to Consolidated Financial Statements, Note 3 Discontinued operations".

	Three Months Ended October 31,						Nine Months Ended October 31,
	2013			2012			2013			2012
Net sales
Piping Systems		$42,289			$26,498			$121,825			$69,147
Filtration Products	15,678			20,738			51,635			62,990
Total		$57,967			$47,236			$173,460			$132,137
Gross profit
Piping Systems		$14,726			$6,060			$35,760			$14,327
Filtration Products	2,161			2,616			7,277			8,280
Total		$16,887			$8,676			$43,037			$22,607
Income (loss) from operations
Piping Systems		$9,403			$2,585			$21,276			$4,184
Filtration Products	(486		)	(410		)	(468		)	(505		)
Corporate	(2,537		)	(1,990		)	(6,715		)	(6,516		)
Total		$6,380			$185			$14,093			($2,837	)

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Other intangible assets with definite lives (Details) (USD $)	Oct. 31, 2013	Jan. 31, 2013
Other intangible assets with definite lives [Abstract]
Gross patents	$ 2,580,000	$ 2,550,000
Accumulated amortization	2,220,000	2,180,000
Amortization expense, next twelve months	12,400
Amortization expense, year two	47,300
Amortization expense, year three	44,100
Amortization expense, year four	40,300
Amortization expense, year five	37,200
Amortization expense, thereafter	$ 179,400

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Stock-based compensation (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended	12 Months Ended
	Oct. 31, 2013	Jan. 31, 2013
Stock Option [Member]
Option activity [Line Items]
Outstanding at beginning of year		969
Weighted Average Exercise Price Per Share		$ 10.77
Weighted Average Remaining Contractual Term		6 years 7 months 24 days
Options Outstanding Aggregate Intrinsic Value	$ 2,770	$ 40
Granted	102
Granted Weighted average exercise price	$ 10.50
Exercised	(135)
Exercised Weighted Average Exercise Price Per Share	$ 6.72
Exercised Aggregate Intrinsic Value	506
Expired or forfeited	(55)
Expired or Forfeited Weighted Average Exercise Price Per Share	$ 12.64
Outstanding end of period	881
Outstanding Weighted Average Exercise Price Per Share	$ 11.25
Outstanding Weighted Average Remaining Contractual Term	6 years 3 months 24 days
Exercisable end of period	602
Exercisable Weighted Average Remaining Contractual Term	5 years 1 month 24 days
Exercisable Weighted Average Exercise Price Per Share	$ 12.67
Exercisable Aggregate Intrinsic Value	1,748
unvested option [Member]
Option activity [Line Items]
Outstanding at beginning of year	279	383
Weighted Average Exercise Price Per Share	$ 8.18	$ 6.91
Options Outstanding Aggregate Intrinsic Value	$ 1,022	$ 4
Vested	(181)
Expired or forfeited	(25)
Expired or Forfeited Weighted Average Exercise Price Per Share	$ 6.96

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 31, 2013	Oct. 31, 2012	Oct. 31, 2013	Oct. 31, 2012
Net income (loss)	$ 7,391	$ 455	$ 22,868	$ (2,958)
Other comprehensive (loss) income
Foreign currency translation adjustment	(58)	328	(778)	(505)
Interest rate swap, net of tax	(4)	33	155	15
Other comprehensive (loss) income	(62)	361	(623)	(490)
Comprehensive income (loss)	$ 7,329	$ 816	$ 22,245	$ (3,448)

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Stock-based compensation

9 Months Ended

Oct. 31, 2013

Stock-based compensation [Abstract]

Stock-based compensation [Text Block]

Stock-basedcompensation. The Company has stock-based compensation awards that can be granted to eligible employees, officers or directors.

	Three Months Ended October 31,				Nine Months Ended October 31,
	2013		2012		2013		2012
Stock-based compensation expense		$27		$106		$95		$366

The fair value of the outstanding option awards was estimated on the grant dates using the Black-Scholes option pricing model.

	Nine Months Ended October 31,
Fair value assumptions	2013	2012
Expected volatility	49.65% - 65.54%	58.12% - 66.82%
Risk free interest rate	.74% - 2.82%	.74% - 2.82%
Dividend yield	none	none
Expected life	4.9 - 5.7 years	4.9 - 5.7 years

Option activity	Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Outstanding at January 31, 2013	969			$10.77	6.6		$40
Granted	102		10.50
Exercised	(135	)	6.72			506
Expired or forfeited	(55	)	12.64
Outstanding end of period	881		11.25		6.3	2,770
Exercisable end of period	602			$12.67	5.1		$1,748

Unvested option activity	Unvested Options Outstanding		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Outstanding at January 31, 2013	383			$6.91		$4
Granted	102		10.50
Vested	(181	)
Expired or forfeited	(25	)	6.96
Outstanding end of period	279			$8.18		$1,022

As of October 31, 2013, there was $966 thousand of total unrecognized compensation expense related to unvested stock options. The expense is expected to be recognized over a period of 2.6 years.

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Balance Sheet parenthetical (Parentheticals) (USD $) In Thousands, except Per Share data, unless otherwise specified	Oct. 31, 2013	Jan. 31, 2013
Allowance for Doubtful Accounts Receivable, Current	$ 238	$ 290
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	50,000	50,000
Common Stock, Shares, Issued	7,080	6,924
Common Stock, Shares, Outstanding	7,080	6,924

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CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 31, 2013	Oct. 31, 2012	Oct. 31, 2013	Oct. 31, 2012
Net sales	$ 57,967	$ 47,236	$ 173,460	$ 132,137
Cost of sales	41,080	38,560	130,423	109,530
Gross profit	16,887	8,676	43,037	22,607
Operating expenses
General and administrative expenses	7,953	5,760	20,760	17,466
Selling expenses	2,554	2,731	8,184	7,978
Total operating expenses	10,507	8,491	28,944	25,444
Income (loss) from operations	6,380	185	14,093	(2,837)
Income from joint venture	715	531	248	354
Interest expense, net	190	513	1,082	1,148
Income (loss) from continuing operations before income taxes	6,905	203	13,259	(3,631)
Income tax expense (benefit)	92	74	(99)	159
Income (loss) from continuing operations	6,813	129	13,358	(3,790)
Income from discontinued operations, net of tax	578	326	9,510	832
Net income (loss)	$ 7,391	$ 455	$ 22,868	$ (2,958)
Weighted average number of shares outstanding
Basic	7,068	6,924	6,995	6,921
Diluted	7,163	6,924	7,041	6,921
Earnings (loss) per share from continuing operations
Basic	$ 0.96	$ 0.02	$ 1.91	$ (0.55)
Diluted	$ 0.95	$ 0.02	$ 1.90	$ (0.55)
Earnings per share discontinued operations
Basic	$ 0.08	$ 0.05	$ 1.36	$ 0.12
Diluted	$ 0.08	$ 0.05	$ 1.35	$ 0.12
Earnings (loss) per share
Basic	$ 1.05	$ 0.07	$ 3.27	$ (0.43)
Diluted	$ 1.03	$ 0.07	$ 3.25	$ (0.43)

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Investment in joint venture (Details) (USD $)	3 Months Ended		9 Months Ended
	Oct. 31, 2013	Oct. 31, 2012	Oct. 31, 2013	Oct. 31, 2012	Jan. 31, 2013
Investment in joint venture [Line Items]
date of investment in joint venture			Oct. 18, 2009
initial investment in joint venture			$ 5,900,000
Payment to acquire interest in joint venture			2,000,000
Joint venture ownership percentage	49.00%		49.00%
Advance to joint venture			3,900,000
Loan to joint venture	1,000,000		1,000,000
Income from joint venture	715,000	531,000	248,000	354,000
Current assets	12,312,000		12,312,000		14,058,000
Noncurrent assets	18,613,000		18,613,000		19,442,000
Current liabilities	2,306,000		2,306,000		2,703,000
Noncurrent liabilities	15,989,000		15,989,000		18,274,000
Equity	12,630,000		12,630,000		12,524,000
Revenue			19,913,000	19,389,000
Gross profit			3,157,000	3,616,000
Income from continuing operations			1,570,000	1,827,000
Net income			$ 516,000	$ 726,000

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Earnings per share (Tables)

9 Months Ended

Oct. 31, 2013

Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended October 31,		Nine Months Ended October 31,
	2013	2012	2013	2012
Basic weighted average common shares outstanding	7,068	6,924	6,995	6,921
Dilutive effect of equity incentive plans	95	—	46	—
Weighted average common shares outstanding assuming full dilution	7,163	6,924	7,041	6,921
Stock options not included in the computation of diluted earnings per share of common stock because the option exercise prices exceeded the average market prices of the common shares	216	785	362	494
Stock options with an exercise price below the average market price	665	172	519	463

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Debt (Details) (USD $)	9 Months Ended
	Oct. 31, 2013	Jan. 31, 2013
Debt [Line Items]
Debt	$ 40,900,000
Debt, net change	(1,100,000)
UNITED STATES
Debt [Line Items]
Maturity date	Nov. 30, 2016
Line of Credit Facility, Maximum Borrowing Capacity	25,000,000
Line of Credit Facility, Dividend Restrictions	do not permit payment of dividends
Line of Credit Facility, Covenant Terms	require attainment of specific levels of profitability and cash flows
Line of Credit Facility, Covenant Compliance	in compliance with all covenants under the Loan Agreement
Line of Credit Facility, Interest Rate Description	(a) a margin of 0.50 in effect plus prime rate; or (b) a margin of 2.75 in effect plus the LIBOR rate for the corresponding interest period.
Letters of Credit Outstanding, Amount	300,000
Restricted Cash and Cash Equivalents, Current	2,000,000
Revolving line, amount outstanding	11,700,000
Revolving line, remaining borrowing capacity	8,700,000
Foreign Line of Credit [Member]
Debt [Line Items]
Line of Credit Facility, Covenant Terms	The credit arrangement covenant requires a minimum tangible net worth to be maintained.
Line of Credit Facility, Covenant Compliance	in compliance with the covenant under the credit arrangement.
Line of Credit Facility, Interest Rate Description	Interest rates are as follows 4.00% per annum below National Bank of Fujairah Base Rate, minimum 3.50% per annum and Emirates Inter Bank Offered Rate (EIBOR) plus 3.50% per annum. The Company's interest rates range from 3.5% to 6%
Revolving line, amount outstanding	9,000,000
Revolving line, remaining borrowing capacity	17,400,000
Cash Surrender Value [Member]
Debt [Line Items]
Debt Instrument, Issuance Date	Apr. 27, 2010
Debt Instrument, Face Amount	2,000,000
Debt Instrument, Interest Rate During Period	4.25%
Loans Payable	$ 64,000	$ 1,800,000

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Fair value of financial instruments (Details) (USD $)	116 Months Ended
	Dec. 31, 2021	Oct. 31, 2013 Rate
Fair Value of Financial Instruments [Abstract]
Notional value Denmark swap		$ 1,300,000
Interest rate swap, maturity date	Dec. 31, 2021
swap fixed interest rate		2.47%
Swap mark to market other long-term liability		$ 57,000

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Investment in joint venture (Notes)

9 Months Ended

Oct. 31, 2013

Investment in joint venture [Abstract]

Equity Method Investments [Table Text Block]

Investment in joint venture. In October 2009 the Company invested $5.9 million, which consisted of $2 million for a 49% interest and $3.9 million for a note receivable, in a Canadian joint venture with The Bayou Companies, Inc., a subsidiary of Aegion Corporation. The joint venture completed an acquisition of Garneau, Inc.'s pipe coating and insulation facility and associated assets located in Camrose, Alberta, Canada, which provides the Company the opportunity to participate in the growing oil sands market. In February 2012, the Company loaned $1 million to the joint venture to be used for capital expenditures.

The Company accounts for the investment in the joint venture using the equity method. The financial results are included in the Company's consolidated financial statements.

	Nine Months Ended October 31,
	2013	2012
Income from joint venture	$248	$354

The following information summarizes the joint venture financial data as of October 31, 2013 and January 31, 2013, respectively:

	October 31, 2013	January 31, 2013
Current assets	$12,312	$14,058
Noncurrent assets	18,613	19,442
Current liabilities	2,306	2,703
Noncurrent liabilities	15,989	18,274
Equity	$12,630	$12,524

	Nine Months Ended October 31,
	2013		2012
Revenue		$19,913		$19,389
Gross profit	3,157		3,616
Income from continuing operations	1,570		1,827
Net income	$516		$726

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Stock-based compensation Stock-based compensation expense (Details) (USD $)	3 Months Ended		9 Months Ended
	Oct. 31, 2013	Oct. 31, 2012	Oct. 31, 2013	Oct. 31, 2012
Stock-based compensation expense [Abstract]
Stock-based compensation expense	$ 27,000	$ 106,000	$ 95,000	$ 366,000
unrecognized compensation expense	$ 1,000,000		$ 1,000,000
expense expected to be recognized over a period			2 years 6 months 20 days

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Interest expense, net

9 Months Ended

Oct. 31, 2013

Interest expense, net [Abstract]

Interest Income and Interest Expense Disclosure [Text Block]

Interest expense, net.

	Three Months Ended October 31,						Nine Months Ended October 31,
	2013			2012			2013			2012
Interest expense		$332			$592			$1,504			$1,520
Interest income	(142		)	(79		)	(422		)	(372		)
Interest expense, net		$190			$513			$1,082			$1,148

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Other intangible assets with definite lives (Notes)

9 Months Ended

Oct. 31, 2013

Other intangible assets with definite lives [Abstract]

Schedule of Indefinite-Lived Intangible Assets [Table Text Block]

Other intangible assets with definite lives. The Company owns several patents, including those covering features of its piping and electronic leak detection systems. The patents are not material either individually, or in the aggregate, because the Company believes sales would not be materially reduced if patent protection were not available. 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 $2.58 million and $2.55 million as of October 31, 2013 and January 31, 2013, respectively. Accumulated amortization was approximately $2.22 million and $2.18 million as of October 31, 2013 and January 31, 2013, respectively. Future amortizations over the next five years ending January 31 will be $12,400 in 2014, $47,300 in 2015, $44,100 in 2016, $40,300 in 2017, $37,200 in 2018, and $179,400 thereafter.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Oct. 31, 2013	Oct. 31, 2012
Operating activities
Net income (loss)	$ 22,868	$ (2,958)
Adjustments to reconcile net income (loss) to net cash flows used in operating activities
Depreciation and amortization	4,465	4,373
Gain on disposal of discontinued operations	(9,762)	0
Deferred tax expense	93	353
Stock-based compensation expense	95	366
Income from joint venture	(248)	(354)
Cash surrender value of deferred compensation plan	(131)	(121)
Loss on disposal of fixed assets	305	57
Gain on disposal of subsidiary	(349)	0
Provision for uncollectible accounts	(114)	129
Changes in operating assets and liabilities
Accounts receivable	(24,049)	(6,512)
Inventories	3,044	1,302
Costs and estimated earnings in excess of billings on uncompleted contracts	1,227	(231)
Accounts payable	(7,052)	(522)
Accrued compensation and payroll taxes	4,329	(592)
Customers' deposits	1,669	1,870
Income taxes receivable and payable	2,220	(539)
Prepaid expenses and other current assets	(3,736)	64
Other assets and liabilities	(5,079)	1,693
Net cash used in operating activities	(10,205)	(1,622)
Investing activities
Net proceeds from sale of discontinued operations	15,253	0
Capital expenditures	(1,817)	(5,316)
Loan to joint venture	0	(989)
Proceeds from sales of property and equipment	8	94
Net cash provided by (used in) investing activities	13,444	(6,211)
Financing activities
Proceeds from debt	76,633	157,554
Payments of debt on revolving lines of credit	(70,446)	(143,820)
Payments of other debt	(6,817)	(3,292)
Decrease in drafts payable	(118)	(789)
Payments on capitalized lease obligations	(453)	(432)
Stock options exercised	911	35
Tax benefit of stock options exercised	0	15
Net cash (used in) provided by financing activities	(290)	9,271
Effect of exchange rate changes on cash and cash equivalents	539	(56)
Net increase in cash and cash equivalents	3,488	1,382
Cash and cash equivalents - beginning of period	7,034	4,209
Cash and cash equivalents - end of period	10,522	5,591
Supplemental cash flow information
Interest paid	1,694	1,718
Income taxes paid	396	133
Funds held in escrow related to the sale of Thermal Care, Inc. assets	$ 1,125	$ 0

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Earnings per share (Details) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 31, 2013	Oct. 31, 2012	Oct. 31, 2013	Oct. 31, 2012
Earnings per share [Line Items]
Basic weighted average common shares outstanding	7,068	6,924	6,995	6,921
Dilutive effect of equity incentive plans	95	0	46	0
Weighted average common shares outstanding assuming full dilution	7,163	6,924	7,041	6,921
Stock options not included in the computation of diluted earnings per share of common stock because the option exercise prices exceeded the average market prices of the common shares	216	785	362	494
Stock options with an exercise price below the average market price	665	172	519	463

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Recent accounting pronouncements

9 Months Ended

Oct. 31, 2013

Recent accounting pronouncements [Abstract]

Recent accounting pronouncements [Text Block]

Recent accounting pronouncements. The Company evaluated recent accounting pronouncements and does not expect them to have a material impact on the consolidated financial statements.

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Earnings per share

9 Months Ended

Oct. 31, 2013

Earnings Per Share [Abstract]

Earnings per share [Text Block]

Earnings per share.

	Three Months Ended October 31,		Nine Months Ended October 31,
	2013	2012	2013	2012
Basic weighted average common shares outstanding	7,068	6,924	6,995	6,921
Dilutive effect of equity incentive plans	95	—	46	—
Weighted average common shares outstanding assuming full dilution	7,163	6,924	7,041	6,921
Stock options not included in the computation of diluted earnings per share of common stock because the option exercise prices exceeded the average market prices of the common shares	216	785	362	494
Stock options with an exercise price below the average market price	665	172	519	463

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Stock-based compensation (Tables)

9 Months Ended

Oct. 31, 2013

Stock-based compensation [Abstract]

Stock-based compensation expense [Table Text Block]

	Three Months Ended October 31,				Nine Months Ended October 31,
	2013		2012		2013		2012
Stock-based compensation expense		$27		$106		$95		$366

Fair value assumptions [Table Text Block]

	Nine Months Ended October 31,
Fair value assumptions	2013	2012
Expected volatility	49.65% - 65.54%	58.12% - 66.82%
Risk free interest rate	.74% - 2.82%	.74% - 2.82%
Dividend yield	none	none
Expected life	4.9 - 5.7 years	4.9 - 5.7 years

Option activity [Table Text Block]

Option activity	Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Outstanding at January 31, 2013	969			$10.77	6.6		$40
Granted	102		10.50
Exercised	(135	)	6.72			506
Expired or forfeited	(55	)	12.64
Outstanding end of period	881		11.25		6.3	2,770
Exercisable end of period	602			$12.67	5.1		$1,748

Nonvested option activity [Table Text Block]

Unvested option activity	Unvested Options Outstanding		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Outstanding at January 31, 2013	383			$6.91		$4
Granted	102		10.50
Vested	(181	)
Expired or forfeited	(25	)	6.96
Outstanding end of period	279			$8.18		$1,022

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(Tables)

9 Months Ended

Oct. 31, 2013

Business segment reporting [Abstract]

Business segment reporting [Table Text Block]

	Three Months Ended October 31,						Nine Months Ended October 31,
	2013			2012			2013			2012
Net sales
Piping Systems		$42,289			$26,498			$121,825			$69,147
Filtration Products	15,678			20,738			51,635			62,990
Total		$57,967			$47,236			$173,460			$132,137
Gross profit
Piping Systems		$14,726			$6,060			$35,760			$14,327
Filtration Products	2,161			2,616			7,277			8,280
Total		$16,887			$8,676			$43,037			$22,607
Income (loss) from operations
Piping Systems		$9,403			$2,585			$21,276			$4,184
Filtration Products	(486		)	(410		)	(468		)	(505		)
Corporate	(2,537		)	(1,990		)	(6,715		)	(6,516		)
Total		$6,380			$185			$14,093			($2,837	)

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Entity information Document (USD $)	9 Months Ended
	Oct. 31, 2013	Dec. 05, 2013	Jul. 31, 2012
Document Information
Entity Registrant Name	MFRI INC.
Entity Central Index Key	0000914122
Current Fiscal Year End Date	--01-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Oct. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		7,085,237
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 41,911,558

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Discontinued operations (Tables)

9 Months Ended

Oct. 31, 2013

Discontinued operations

Discontinued Operations [Text Block]

Discontinued operations. On April 30, 2013, the Company sold most of the domestic assets of its subsidiary Thermal Care, Inc. to a subsidiary of IPEG, Inc. for $15 million cash and a deferred payment of $1.1 million, which is held in escrow until May 1, 2014 and included in other assets on the balance sheet. On June 26, 2013, the Company sold substantially all of the assets of the HVAC business previously included in Corporate and Other. In October 2013, the Company decided to sell its remaining industrial process business. These businesses are reported as discontinued operations in the consolidated financial statements and the notes to consolidated financial statements have been revised to conform to the current year reporting. The January 31, 2013 Balance Sheet has been revised to reflect the separate amounts for assets and liabilities that were sold. Results of the discontinued operations for the three and nine months ended October 31,2013 and 2012 were as follows:

	Three Months Ended October 31,					Nine Months Ended October 31,
	2013			2012		2013			2012
Net sales		$874			$11,089		$13,049			$31,177
Gain on disposal of discontinued operations		$—			$—		$11,665			$—
(Loss) income from discontinued operations	(211		)	415		(288		)	891
(Loss) income from discontinued operations before income taxes	(211		)	415		11,377			891
Income tax (benefit) expense	(789		)	89		1,867			59
Income from discontinued operations, net of tax		$578			$326		$9,510			$832