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 April 30, 2015

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 June 5, 2015, there were 7,246,010 shares of the registrant's common stock outstanding.

MFRI, Inc.

FORM 10-Q

For the fiscal quarter ended April 30, 2015

TABLE OF CONTENTS

Item		Page
Part I	Financial Information
1.	Financial Statements
	Consolidated Statements of Operations for the Three Months Ended April 30, 2015 and 2014	1
	Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended April 30, 2015 and 2014	2
	Consolidated Balance Sheets as of April 30, 2015 and January 31, 2015	3
	Consolidated Statements of Stockholders' Equity as of April 30, 2015 and January 31, 2015	4
	Consolidated Statements of Cash Flows for the Three Months Ended April30, 2015 and 2014	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
2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
6.	Exhibits	17
Signatures		18

PART I FINANCIAL INFORMATION

Item 1.    Financial Statements

MFRI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share data)

	Three Months Ended April 30,
	2015			2014
Net sales		$37,674			$59,524
Cost of sales	33,633			43,535
Gross profit	4,041			15,989
Operating expenses
General and administrative expenses	6,140			7,417
Selling expenses	2,701			2,863
Total operating expenses	8,841			10,280
(Loss) income from operations	(4,800		)	5,709
Income (loss) from joint venture	165			(8		)
Interest (income) expense, net	(6		)	237
(Loss) income from continuing operations before income taxes	(4,629		)	5,464
Income tax expense	26			1,266
(Loss) income from continuing operations	(4,655		)	4,198
Loss from discontinued operations, net of tax	—			(371		)
Net (loss) income		($4,655	)		$3,827
Weighted average common shares outstanding
Basic	7,252			7,177
Diluted	7,252			7,315
(Loss) earnings per share from continuing operations
Basic	($0.64)				$0.58
Diluted	($0.64)				$0.57
Loss per share from discontinued operations
Basic and diluted	—				($0.05	)
(Loss) earnings per share
Basic	($0.64)				$0.53
Diluted	($0.64)				$0.52

See accompanying notes to consolidated financial statements.

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

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MFRI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

(In thousands)

	Three Months Ended April 30,
	2015			2014
Net (loss) income		($4,655	)		$3,827
Other comprehensive (loss) income
Foreign currency translation adjustments, net of tax	342			70
Interest rate swap, net of tax	5			(10		)
Other comprehensive income	347			60
Comprehensive (loss) income		($4,308	)		$3,887

See accompanying notes to consolidated financial statements.

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MFRI, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except per share data)	April 30, 2015			January 31, 2015
ASSETS	Unaudited
Current assets
Cash and cash equivalents		$10,718			$10,508
Restricted cash	423			428
Trade accounts receivable, less allowance for doubtful accounts of $225 at April 30, 2015 and $110 at January 31, 2015	38,190			41,847
Inventories, net	29,765			29,770
Prepaid expenses and other current assets	3,854			4,349
Costs and estimated earnings in excess of billings on uncompleted contracts	2,442			700
Total current assets	85,392			87,602
Property, plant and equipment, net of accumulated depreciation	42,131			41,486
Other assets
Note receivable from joint venture	3,814			3,931
Investment in joint venture	8,680			8,514
Cash surrender value on life insurance policies, net	1,406			3,256
Other assets	3,175			3,215
Assets held for sale long-term	503			534
Total other assets	17,578			19,450
Total assets		$145,101			$148,538
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable		$15,072			$11,072
Accrued compensation and payroll taxes	11,933			5,551
Commissions and management incentives payable	5,131			5,734
Revolving line domestic	11,954			11,353
Current maturities of long-term debt	5,035			5,679
Customers' deposits	6,064			7,341
Billings in excess of costs and estimated earnings on uncompleted contracts	742			681
Other accrued liabilities	2,270			2,486
Deferred tax liabilities - current	166			165
Income taxes payable	977			1,688
Total current liabilities	59,344			51,750
Long-term liabilities
Long-term debt, less current maturities	12,424			12,603
Deferred compensation liabilities	198			6,560
Deferred tax liabilities - long-term	294			309
Other long-term liabilities	3,777			3,793
Total long-term liabilities	16,693			23,265
Stockholders' equity
Common stock, $.01 par value, authorized 50,000 shares; 7,246 issued and outstanding at April 30, 2015 and 7,291 issued and outstanding at January 31, 2015	73			73
Additional paid-in capital	52,792			52,655
Treasury Stock 45 shares at April 30, 2015 and none at January 31, 2015	(290		)	—
Retained earnings	20,671			25,324
Accumulated other comprehensive loss	(4,182		)	(4,529		)
Total stockholders' equity	69,064			73,523
Total liabilities and stockholders' equity		$145,101			$148,538

See accompanying notes to consolidated financial statements.

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MFRI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

($ in thousands, except share data)		Additional Paid-in Capital	Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
	Common Stock
Total stockholders' equity at January 31, 2014	$72	$52,144	$25,580				$—		($1,160)		$76,636
Net loss			(256		)						(256	)
Stock options exercised		330									330
Stock-based compensation expense		124									124
Deferred shares converted to common stock	1	57									58
Interest rate swap									(51	)	(51	)
Pension liability adjustment									(1,611	)	(1,611	)
Foreign currency translation adjustments			2						(1,631	)	(1,629	)
Tax benefit on above items									(76	)	(76	)
Total stockholders' equity at January 31, 2015	$73	$52,655	$25,324				$—		($4,529)		$73,523
Net loss				($4,655	)						(4,655	)
Repurchase of common stock						(290		)			(290	)
Stock-based compensation expense		137									137
Interest rate swap									6		6
Foreign currency translation adjustments			2						378		380
Tax benefit on above items									(37	)	(37	)
Total stockholders' equity at April 30, 2015	$73	$52,792	$20,671			($290)			($4,182)		$69,064

Shares	2015		2014
Balances at beginning of year	7,290,576		7,168,537
Shares issued (repurchased)	(44,566	)	122,039
Balances at period end	7,246,010		7,290,576

See accompanying notes to consolidated financial statements.

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MFRI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)	Three Months Ended April 30,
	2015			2014
Operating activities
Net (loss) income		($4,655	)		$3,827
Adjustments to reconcile net (loss) income to net cash flows used in operating activities
Depreciation and amortization	1,423			1,433
Loss (gain) on disposal of discontinued operations	—			12
Deferred tax expense	1			612
Stock-based compensation expense (benefit)	137			(352		)
(Income) loss from joint venture	(165		)	8
Cash surrender value on life insurance policies	(66		)	(58		)
Loss on disposal of fixed assets	—			4
Provision on uncollectible accounts	115			(64		)
Changes in operating assets and liabilities
Accounts receivable	3,500			(1,726		)
Inventories	(34		)	(1,027		)
Costs and estimated earnings in excess of billings on uncompleted contracts	(1,681		)	(2,313		)
Accounts payable	3,081			1,439
Accrued compensation and payroll taxes	5,782			(4,598		)
Customers' deposits	(1,280		)	1,283
Income taxes receivable and payable	(699		)	947
Prepaid expenses and other current assets	268			(1,023		)
Other assets and liabilities	(6,569		)	280
Net cash used in operating activities	(842		)	(1,316		)
Investing activities
Capital expenditures	(2,034		)	(776		)
Payments on loan from joint venture	331			—
Proceeds from sales of property and equipment	—			3
Net cash used in investing activities	(1,703		)	(773		)
Financing activities
Proceeds from revolving lines	22,394			20,359
Proceeds from debt	597			48
Proceeds from borrowing against life insurance policies	1,916			—
Payments of debt on revolving lines of credit	(22,482		)	(18,733		)
Payments of other debt	(539		)	(766		)
Increase (decrease) in drafts payable	933			435
Payments on capitalized lease obligations	(170		)	(145		)
Payments for repurchase of common stock	(290		)	—
Stock options exercised and restricted shares issued	—			161
Net cash provided by financing activities	2,359			1,359
Effect of exchange rate changes on cash and cash equivalents	396			173
Net increase (decrease) in cash and cash equivalents	210			(557		)
Cash and cash equivalents - beginning of period	10,508			13,395
Cash and cash equivalents - end of period		$10,718			$12,838
Supplemental cash flow information
Interest paid		$272			$369
Income taxes paid	715			7
Fixed assets acquired under capital leases	732			—
Funds held in escrow related to the sale of Thermal Care, Inc. assets	—			1,125

See accompanying notes to consolidated financial statements.

MFRI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

APRIL 30, 2015

(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, 2015 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 2015 and 2014 are for the three months ended April 30,2015 and 2014, respectively.

2. Business segment reporting. The Company has two reportable segments: Piping Systems, which engineers, designs, manufactures and sells specialty piping, leak detection and location systems, and Filtration Products, which manufactures custom-designed industrial filtration products to remove particulates from air and other gas streams.

For the three months ended April 30, 2015, no customer accounted for 10% of the Company's consolidated net sales. For the three months ended April 30, 2014, one customer in Piping Systems accounted for 21% of the Company's consolidated net sales.

At April 30, 2015, one customer in Piping Systems accounted for 28% of accounts receivable. At January 31, 2015, one customer in Piping Systems accounted for 31% of accounts receivable.

	Three Months Ended April 30,
	2015			2014
Net sales
Piping Systems		$20,277			$42,354
Filtration Products	17,397			17,170
Total		$37,674			$59,524
Gross profit
Piping Systems		$2,355			$13,458
Filtration Products	1,686			2,531
Total		$4,041			$15,989
(Loss) income from operations
Piping Systems		($1,426	)		$8,017
Filtration Products	(1,230		)	(544		)
Corporate	(2,144		)	(1,764		)
Total		($4,800	)		$5,709

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3. Income taxes.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. 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 a negative 0.6% and a positive 23.2% for the three months ended April 30,2015 and 2014, respectively. The change in the ETR for the two periods relates to the mix of income earned in zero rate jurisdictions.

The amount of unrecognized tax benefits, including interest and penalties, at April 30, 2015, recorded in other long-term liabilities was $0.1 million of which $0.1 million would impact the Company’s effective tax rate if recognized.  The Company includes accrued interest and penalties related to uncertain tax positions in income tax expense, with $2 thousand included in expense for the current quarter.  The amount of accrued interest and penalties at April 30, 2015, associated with unrecognized tax benefits was $40 thousand.

As of April 30, 2015, open tax years in federal and some state jurisdictions date back to 2012. In addition, federal and state tax years January 31, 2002 through January 31, 2012 are subject to adjustment on audit, up to the amount of research tax credits generated in those years. The Company has net operating loss carryforwards expiring in various years beginning January 31, 2030. Additionally, the Company files income tax returns in Denmark, India and Saudi Arabia. As of April 30, 2015, open tax years in foreign jurisdictions vary from three to seven years from the date of filing the income tax returns.

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

4. Impairment of long-lived assets. The Company evaluates long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.

The Company has an idle facility in Cicero, Illinois is presented as held for sale as of April 30, 2015. In 2014, management performed the required impairment analysis on the idle facility to determine if its carrying value was recoverable. Management determined that the carrying value of the idle facility was fully recoverable.

5. Other intangible assets with definite lives. The Company owns several patents, including those covering features of its piping and electronic leak detection systems. Patents are capitalized and amortized on a straight-line basis over a period not to exceed the legal lives of the patents.The Company expenses costs incurred to

7

renew or extend the term of intangible assets. Gross patents were $2.69 million and $2.68 million as of April 30, 2015 and January 31, 2015, respectively. Accumulated amortization was approximately $2.29 million and $2.28 million as of April 30, 2015 and January 31, 2015, respectively. Future amortizations over the next five years ending January 31 will be $39,400 in 2016, $49,000 in 2017, $46,000 in 2018, $37,000 in 2019, $34,000 in 2020, and $191,715 thereafter. Patents are included in other assets in the balance sheet.

	Three Months Ended April 30,
	2015		2014
Patent amortization expense		$13		$13

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 operates in Camrose, Alberta, Canada, which provides the Company the opportunity to participate in the growing oil sands market.

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.

	Three Months Ended April 30,
	2015		2014
Share of income (loss) from joint venture		$165		($8	)

The following information summarizes the joint venture financial data as of April 30, 2015 and January 31, 2015, respectively:

	April 30, 2015	January 31, 2015
Current assets	$9,588	$13,820
Noncurrent assets	12,217	14,023
Current liabilities	2,529	4,499
Noncurrent liabilities	6,825	9,013
Equity	12,451	14,331

	Three Months Ended April 30,
	2015		2014
Revenue		$6,267		$8,937
Gross profit	1,167		725
Income from continuing operations	685		213
Net income (loss)	337		(16		)

7. Cash surrender value on life insurance policies. The Company has life insurance policies on members of management and other key employees to indemnify itself against the loss of talent, expertise, and knowledge. These life insurance contracts may be used to fund the Company's obligation under a deferred compensation agreement plan.

On April 1, 2015, the Company obtained a loan in the amount of $1.9 million, sourced from the cash surrender value of certain life insurance policies. This loan was repaid in May 2015. The net cash surrender value of these policies was $1.4 million at April 30, 2015 and was included in long-term assets on the balance sheet.

8

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

	Three Months Ended April 30,
	2015		2014
Stock-based compensation expense (benefit)		$59		($381	)
Restricted stock based compensation expense (benefit)		$89		($69	)

Stock-based compensation for 2014 was a benefit year-to-date due to cancellations. Most of these cancellations related to former employees from the discontinued operations.

Stock Options

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

	Three Months Ended April 30,
Fair value assumptions	2015	2014
Risk free interest rate	.74% - 1.77%	.74% - 2.19%
Expected volatility	40.88% - 59.39%	42.12% - 60.26%
Expected life	4.9 - 5.1 years	4.9 - 5.7 years
Dividend yield	none	none

Option activity	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 31, 2015	764			$11.45	5.7		$—
Expired or forfeited	(15	)	12.95
Outstanding end of period	749		11.42		5.4	4
Exercisable end of period	527			$11.98	4.3		$2

Unvested option activity	Options		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at January 31, 2015	232			$10.11		$—
Vested	(3	)
Expired or forfeited	(7	)	10.24
Outstanding end of period	222			$10.10		$2

As of April 30, 2015, there was $0.7 million of total unrecognized compensation expense related to unvested stock options. The expense is expected to be recognized over a period of 2.1 years.

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Restricted stock

The following table summarizes restricted stock activity for the year:

Restricted stock activity	Restricted Shares	Weighted Average Grant Price Per Share		Aggregate Intrinsic Value
Outstanding at January 31, 2015	33		$11.53		$186
Granted	—
Issued	—
Outstanding end of period	33		$11.53		$198

As of April 30, 2015, there was $0.4 million of unrecognized compensation expense related to unvested restricted stock granted under the plans. The cost is expected to be recognized over the weighted-average period of 1.5 years.

9. Treasury stock / share repurchase program. On February 5, 2015, the Company's Board of Directors approved a share repurchase program, which authorizes the Company to use up to $2 million for the purchase of its outstanding shares of common stock. Share repurchases may be executed through open market or privately negotiated transactions on or prior to December 31, 2015.

The following table sets forth information with respect to repurchases by the Company of its shares of common stock during the first quarter of 2015:

Period	Total number of shares purchased	Average price paid per share
February	28	$6.64
March	17	6.27
April	—	—

For additional information, see "Part II, Item 2".

10. Earnings per share.

	Three Months Ended April 30,
	2015	2014
Basic weighted average common shares outstanding	7,252	7,177
Dilutive effect of equity compensation plans	—	138
Weighted average common shares outstanding assuming full dilution	7,252	7,315
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	643	160
Stock options with an exercise price below the average market price	106	547

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11. Interest expense, net.

	Three Months Ended April 30,
	2015			2014
Interest expense		$268			$352
Interest income	(274		)	(115		)
Interest expense, net		($6	)		$237

12. Debt. Debt totaled $29.4 million at April 30, 2015, a net decrease of $0.2 million since January 31, 2015.

Revolving lines domestic. On September 24, 2014, the Company entered into a Credit and Security Agreement with a financial institution ("Credit Agreement"). Under the terms of the Credit Agreement, which matures on September 24, 2019, the Company can borrow up to $25 million, subject to borrowing base availability from secured domestic assets and other requirements, under a revolving line of credit. The Loan Agreement covenants restrict debt, liens, and investments, and require attainment of specific levels of profitability and cash flows. At April 30, 2015, the Company was not in compliance with the specific level of Borrowing Base availability for the period ended March 31, 2015. While not a covenant violation, the financial institution has the right in the Credit Agreement to have all domestic receipts deposited in a bank account from which all funds may only be used to serve the revolving line of credit under the Credit Agreement. The domestic revolving line balance as of January 31, 2015 has been classified as a current liability in the accompanying financial statements.

On April 30, 2015, the Company completed the second amendment to the Credit Agreement. The second amendment increases the borrowing base by adding the cash surrender value of assigned life insurance policies multiplied by ninety percent.

Interest rates vary based on the average availability in the preceding fiscal quarter and are: (a) a margin in effect plus a base rate, if below certain availability limits; or (b) a margin in effect plus the Eurodollar rate for the corresponding interest period. As of April 30, 2015, the Company had borrowed $12.0 million at 3.25% and 1.71% and had $6.5 million available to it under the revolving line of credit. In addition, $0.1 million of availability was used under the Credit Agreement primarily to support letters of credit to guarantee amounts committed for inventory purchases. Cash required for operations is provided by draw downs on the line of credit.

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 lines are secured by certain equipment, certain assets, such as accounts receivable and inventory, and a guarantee by the Company. Some credit arrangement covenants requires a minimum tangible net worth to be maintained. At April 30, 2015, the Company was in compliance with the covenants under the credit arrangements. At April 30, 2015, interest rates were 4.0% per annum below National Bank of Fujairah Base Rate, minimum 3.5% per annum, and Emirates Inter Bank Offered Rate (EIBOR) plus 3.5% per annum. At April 30, 2015, the Company's interest rates range from 3.5% to 6.0%. At April 30, 2015, the Company could have borrowed $36.3 million under these credit arrangements. In addition, $9.5 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases. At April 30, 2015, borrowings under these credit arrangements totaled $1.5 million; an additional $25.6 million remained unused.

13. Fair value of financial instruments. At April 30, 2015, 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 Company entered into an interest swap agreement in 2012 to reduce its exposure to market risks from changing interest rates and exchange 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

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fair value hierarchy, which includes significant other observable inputs because the exchange is not deemed an active market. The swap agreement is a fair value hedge. The derivative mark to market was $0.1 million at both April 30, 2015 and January 31, 2015. This was included in other long-term liabilities on the consolidated balance sheets.

14. Recent accounting pronouncements. In August 2014, the Financial Accounting Standards Board, ("FASB"), issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 is not expected to have an impact on the Company’s consolidated financial statements.

In May 2014, the FASB, issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. This new standard provides for a single comprehensive model and supersedes most current revenue recognition guidance, including industry specific guidance, and provides for enhanced disclosure requirements. The objective of the new guidance is to improve the consistency, comparability and usefulness to users of financial statements. On April 1, 2015, FASB decided to defer the effective date of the new revenue standard by one year. As a result, public entities would apply the new revenue standard for fiscal years, and interim periods within those years, beginning after December 15, 2017. ASU 2014-09 provides for two implementation methods (1) full retrospective application to each prior period or (2) modified retrospective application with the cumulative effect as of the date of adoption. Early application is not permitted. The Company is evaluating the financial statement impacts of the guidance in this ASU and determining which transition method will be utilized.

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

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

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.

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For the three months ended April 30, 2015, no customer accounted for 10% of the Company's consolidated net sales. For the three months ended April 30, 2014, one customer in Piping Systems accounted for 21% of the Company's consolidated net sales.

At April 30, 2015, one customer in Piping Systems accounted for 28% of accounts receivable. At January 31, 2015, one customer in Piping Systems accounted for 31% of accounts receivable.

Three months endedApril 30, 2015 ("current quarter") vs. Three months endedApril 30, 2014 ("prior-year quarter")

Net sales decreased37% to $37.7 million in the current quarter, from $59.5 million in the prior-year quarter. Piping Systems sales decreased52% or $22.1 million compared to the prior-year quarter due to lower volume in Saudi Arabia and the United Arab Emirates ("U.A.E.") and lower volume of domestic oil and gas projects.

Gross profit decreased to $4.0 million in the current quarter from $16.0 million in the prior-year quarter, mainly due to the sales volume decrease in Piping Systems. The gross margin decreased to 10.7% of net sales in the current quarter from 26.9% in the prior-year quarter, and was also impacted by Filtration Products' customer mix and startup costs for the new production facility in the U.A.E.

Operating expenses decreased to $8.8 million in the current quarter from $10.3 million in the prior-year quarter due to lower management incentive compensation expense, partially offset by higher stock compensation expense and increased professional expenses.

Pretax loss from continuing operations was $4.6 million in the current quarter versus income of $5.5 million in the prior-year quarter. Factors contributing to the 2015 results were lower volume in the Middle East partially offset by a profitable performance by the Canadian joint venture and lower interest expense.

The Company's worldwide effective income tax rate from continuing operations was a negative 0.6% and a positive 23.2% for the three months ended April 30,2015 and 2014, respectively. The change in the ETR for the two periods relates to the mix of income earned in zero rate jurisdictions. See the Income Taxes paragraphs on the following page.

The current quarter net loss was $4.7 million compared to net income of $3.8 million in the prior-year quarter. The decrease was due to the lower sales volume and gross profit in Piping Systems.

Piping Systems

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

	Three Months Ended April 30,
($ in thousands)	2015		%	2014		%	% Decrease
Net sales	$20,277			$42,354			(52)%
Gross profit	2,355		12%	13,458		32%	(83)%
(Loss) income from operations	(1,426	)	(7)%	8,017		19%	(118)%
Income (loss) from joint venture	165			(8	)

Current quarter vs. prior-year quarter

Net sales decreased52% to $20.3 million in the current quarter from $42.4 million in the prior-year quarter. The decrease was attributed to lower global and domestic volume.

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Gross margin decreased to 12% of net sales in the current quarter from 32% of net sales in the prior-year quarter. Gross profit decreased due to lower volume. Operating expenses decreased to $3.8 million from $5.4 million due to lower management incentive compensation expense and lower professional costs.

Filtration Products

	Three Months Ended April 30,
($ in thousands)	2015		%	2014		%	% Increase (Decrease)
Net sales	$17,397			$17,170			1%
Gross profit	1,686		10%	2,531		15%	(33)%
Loss from operations	(1,230	)	(7)%	(544	)	(3)%	(126)%

Current quarter vs. prior-year quarter

Net sales increased1% to $17.4 million in the current quarter from $17.2 million in the prior-year quarter. Gross profit decreased to $1.7 million from $2.5 million. Gross margin decreased to 10% in the current quarter from 15% in the prior-year quarter due to customer mix and startup costs for the new production facility in the U.A.E. The Company continues to expand its geographic market coverage and improve its margin through expense controls to strengthen this segment.

Operating expenses decreased to $2.9 million in the current quarter from $3.1 million in the prior-year quarter. Reduced sales staffing, less promotional activities and lower professional costs contributed to the net decrease in expenses.

Corporate

Current quarter vs. prior-year quarter

Corporate operating expenses include general and administrative expenses that are not allocated to the segments. General and administrative expenses increased to $2.1 million in the current quarter from $1.8 million in the prior-year quarter. This increase was due to increased stock compensation expenses, increased professional service expenses and increased compensation for the board of directors.

Net interest expense decreased to income of $6 thousand in the current quarter from $0.2 million in the prior-year quarter due to increased interest income in cash at foreign subsidiary.

INCOME TAXES

The Company's consolidated effective tax rate from continuing operations was a negative 0.6% for the three months ended April 30,2015, which was affected primarily by income earned overseas in lower tax jurisdictions and the impact of the full valuation allowance maintained against domestic deferred tax assets. Specifically, the Company projects significantly more income to be generated in the U.A.E. this year, which has a zero tax rate.  This is causing the current year projected overall tax rate to be lower as a result. The Company remains in an NOL carryforward position. For additional information, see "Notes to Consolidated Financial Statements, Note 3 Income taxes".

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LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents as of April 30, 2015 were $10.7 million compared to $10.5 million at January 31, 2015. At April 30, 2015, $0.4 million was held in the U.S., and $10.3 million was held at the foreign subsidiaries. The Company's working capital was $26.0 million on April 30, 2015 compared to $35.9 million on January 31, 2015. Net cash used in operating activities during the first three months of 2015 was $0.8 million compared to $1.3 million of net cash used during the first three months of 2014.

The Company had a Supplemental Retirement and Deferred Compensation Plan ("Supplemental Plan"), pursuant to which key employees deferred compensation. Life insurance contracts have been purchased which may be used to fund the Company's obligation under these agreements. On April 10, 2014, the Company's Board of Directors terminated the Supplemental Plan and its Deferred Stock Purchase Plan, adopted on December 5, 2012, effective April 10, 2014. All funds and Company stock remaining in participant accounts will be distributed not later than April 2016. This is shown on the Statements of Cashflow as a movement from Other assets and liabilities to Accrued compensation and payroll taxes.

The Company has not provided Federal tax on unremitted earnings of its Denmark and Middle East subsidiaries. The Company does not believe that it will be necessary to repatriate investments from these subsidiaries.

Net cash used in investing activities for the three months ended April 30, 2015 was $1.7 million.

On February 5, 2015, the Board of Directors authorized a $2 million share repurchase program.  Share repurchases may be executed through open market or in privately negotiated transactions on or prior to December 31, 2015. The specific number of shares that the Company will ultimately repurchase, and the actual timing and amount of share repurchases, will be dependent on then current market conditions and other business-related factors, as well as the applicable requirements of federal securities law. As of April 30, 2015, the Company has repurchased 45 thousand shares. For additional information, see "Notes to Consolidated Financial Statements, Note 9 "Treasury stock/share repurchase program" contained in Item 1 of this report and Item 2 of Part II.

Debt totaled $29.4 million at April 30, 2015, a net decrease of $0.2 million compared to the beginning of the current fiscal year. Debt decreased $3.2 million from April 30, 2014. Stockholders' equity decreased to $69.1 million at April 30, 2015 from $80.3 million at April 30, 2014. The leverage ratio of debt/equity was 0.43 at April 30, 2015 compared to 0.41 at April 30, 2014. For additional information, see "Notes to Consolidated Financial Statements, Note 12 Debt" contained in Item 1 of this report. Net cash provided by financing activities was $2.4 million for the three months ended April 30, 2015.

On September 24, 2014, the Company entered into a Credit and Security Agreement with a financial institution ("Credit Agreement"). Under the terms of the Credit Agreement, which matures on September 24, 2019, the Company can borrow up to $25 million, subject to borrowing base availability from secured domestic assets and other requirements, under a revolving line of credit. The Loan Agreement covenants restrict debt, liens, and investments, and require attainment of specific levels of profitability and cash flows. At April 30, 2015, the Company was not in compliance with the specific level of Borrowing Base availability for the period ended March 31, 2015. While not a covenant violation, the financial institution has the right in the Credit Agreement to have all domestic receipts deposited in a bank account from which all funds may only be used to serve the revolving line of credit under the Credit Agreement.. The domestic revolving line balance as of January 31, 2015 has been classified as a current liability in the accompanying financial statements.

On April 30, 2015, the Company completed the second amendment to the Credit Agreement. The second amendment increases the borrowing base by adding the cash surrender value of assigned life insurance policies multiplied by ninety percent.

Interest rates vary based on the average availability in the preceding fiscal quarter and are: (a) a margin in effect plus a base rate, if below certain availability limits; or (b) a margin in effect plus the Eurodollar rate for the

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corresponding interest period. As of April 30, 2015, the Company had borrowed $12.0 million at 3.25% and 1.71% and had $6.5 million available to it under the revolving line of credit. In addition, $0.1 million of availability was used under the Credit Agreement primarily to support letters of credit to guarantee amounts committed for inventory purchases. Cash required for operations is provided by draw downs on the line of credit.

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 lines are secured by certain equipment, certain assets, such as accounts receivable and inventory, and a guarantee by the Company. Some credit arrangement covenants requires a minimum tangible net worth to be maintained. At April 30, 2015, the Company was in compliance with the covenants under the credit arrangements. At April 30, 2015, interest rates were 4.0% per annum below National Bank of Fujairah Base Rate, minimum 3.5% per annum, and Emirates Inter Bank Offered Rate (EIBOR) plus 3.5% per annum. At April 30, 2015, the Company's interest rates range from 3.5% to 6.0%. At April 30, 2015, the Company could have borrowed $36.3 million under these credit arrangements. In addition, $9.5 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases. At April 30, 2015, borrowings under these credit arrangements totaled $1.5 million; an additional $25.6 million remained unused.

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, 2015 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 April 30, 2015. 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 April 30, 2015 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 April 30, 2015 that has materially affected or is reasonably likely to materially affect, internal control over financial reporting.

PART II OTHER INFORMATION

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Item 2. Unregistered sales of equity securities and use of proceeds.

On February 5, 2015, the Company's Board of Directors approved a share repurchase program, which authorizes the Company to use up to $2 million for the purchase of its outstanding shares of common stock. Share repurchases may be executed through open market or privately negotiated transactions on or prior to December 31, 2015.

The following table sets forth information with respect to repurchases by the Company of its shares of common stock during the first quarter of 2015:

Period	Total number of shares purchased	Average price paid per share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
February	28	$6.64	28	$1,814
March	17	6.27	17	1,710
April	—	—	—	1,710
Total	45	$6.50	45

Item 6. Exhibits

10	Limited Waiver and Second Amendment to Credit and Security Agreement between the Company and BMO Harris Bank, N.A. dated April 30, 2015
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

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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:	June 12, 2015	/s/ Bradley E. Mautner
		Bradley E. Mautner
		Director, President and
		Chief Executive Officer
		(Principal Executive Officer)
Date:	June 12, 2015	/s/ Karl J. Schmidt
		Karl J. Schmidt
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EX-10

Exhibit 10

LIMITED WAIVER AND SECOND AMENDMENT TO

CREDIT AND SECURITY AGREEMENT

This LIMITED WAIVER AND SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this "Second Amendment") is entered into as of April 30, 2015, among MFRI, INC., a Delaware corporation (the "Company"), MIDWESCO FILTER RESOURCES, INC., a Delaware corporation ("Midwesco"), PERMA-PIPE, INC., a Delaware corporation ("Perma-Pipe"), TC NILES CORPORATION, a Delaware corporation ("TC Niles"), TDC FILTER MANUFACTURING, INC., a Delaware corporation ("TDC"), MM NILES CORPORATION, a Delaware corporation ("MM Niles"), and PERMA-PIPE CANADA, INC., a Delaware corporation ("Perma-Pipe Canada") (each of the Company, Midwesco, Perma-Pipe, TC Niles, TDC, MM Niles, and Perma-Pipe Canada may be referred to herein individually, as a "Borrower" and collectively, as "Borrowers"), and BMO HARRIS BANK N.A., as lender ("Lender").

WHEREAS, Lender and Borrowers entered into a certain Credit and Security Agreement dated September 24, 2014 (as amended by that certain Consent and First Amendment to Credit and Security Agreement, dated as of February 5, 2015, and as hereby and further amended, restated, supplemented, and/or modified from time to time, the "Credit Agreement"); and

WHEREAS, Lender and Borrowers desire to amend certain provisions of the Credit Agreement pursuant to the terms hereof.

NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained, and any extension of credit heretofore, now or hereafter made Lender to Borrower, the parties hereto agree as follows:

1.Definitions. All capitalized terms used herein without definition shall have the meanings contained in the Credit Agreement.

2.Amendments to Credit Agreement.

(A)    Amended Definition. The definition of “Borrowing Base” set forth in Section 1.01 of the Credit Agreement is hereby amended in its entirety and restated as follows:

"Borrowing Base" means, at any time of calculation, an amount equal to:

(a)    the Value of Eligible Accounts (less all cash received but not yet applied in respect of such Eligible Accounts) multiplied by eighty-five percent (85%); plus

(b)    the Value of Eligible Supported Accounts (less all cash received but not yet applied in respect of such Eligible Supported Accounts) multiplied by ninety percent (90%); plus

(c)    the lesser of (i) the Cost of Eligible Inventory other than work in progress multiplied by sixty percent (60%) and (ii) $16,000,000; plus

(d)    the lesser of (i) the Cost of Eligible Inventory constituting work in progress multiplied by fifty-five percent (55%) and (ii) $2,500,000; plus

(e)    the cash surrender value of Assigned Life Insurance Policies multiplied by ninety percent (90%); minus

(f)    the amount of all Availability Reserves.

The term "Borrowing Base" and the calculation thereof shall not include any assets or property acquired in an Acquisition unless the Lender has conducted Field Exams and appraisals reasonably required by it (with results reasonably satisfactory to the Lender) and the Person owning such assets or property shall be a (directly or indirectly) wholly-owned Domestic Subsidiary of the Company and shall have become a Borrower.

(B)    New Definitions. The definitions of "Assigned Life Insurance Policies" and "Second Amendment" are hereby inserted in Section 1.01 of the Credit Agreement in appropriate alphabetical order as follows:

"Assigned Life Insurance Policies" means those certain life insurance policies on the lives of certain employees or former employees of the Company as set forth on Schedule  1 to the Second Amendment, as amended from time to time pursuant to Section 7.02(g), that (x) have been issued by an insurance carrier acceptable to Lender in its reasonable credit judgment and (y)  have been pledged to Lender for the benefit of the Credit Parties pursuant to collateral assignment(s) in form and substance acceptable to Lender in its reasonable credit judgment.

"Second Amendment" means that certain Second Amendment to Loan and Security Agreement dated as of April 30, 2015 by and among Borrowers and Lender.

(C)    An additional clause (g) is hereby added to Section 7.02 of the Credit Agreement as follows:

(g) within fifteen (15) days following the end of each fiscal quarter of Borrowers (which will be on April 30th, July 31st, October 31st and January 31st), current statements from the applicable insurance carrier showing the cash surrender values of each Assigned Life Insurance Policy.

(D)    "and" is hereby deleted from the end of clause (e) of Section 7.02 of the Credit Agreement and "and" is added to the end of clause (f) of Section 7.02 of the Credit Agreement.

3.Limited Waiver. In reliance upon the representations and warranties of the Borrowers set forth in this Second Amendment and subject to the post-closing matters set forth in Section 5, notwithstanding anything to the contrary in the Credit Agreement, Lender hereby waives the following Event of Default resulting from the Company incurring Indebtedness from Pacific Life Insurance Company in the aggregate principal amount of $1,928,832 (the "Life Insurance Indebtedness"), which Indebtedness was not permitted pursuant to Section 8.01 of the Credit Agreement (the "Life Insurance Event of Default"). This limited waiver only pertains to the Life Insurance Event of Default and shall not be deemed to constitute a waiver or consent to any other matter except as specifically set forth herein.

4.Condition Precedent. This Second Amendment shall become effective upon Lender (or its counsel) receiving from the Borrowers and executed counterpart of this Second Amendment on behalf of such party in form and substance acceptable to it.

5.Post-Closing Matters. On or before May 20, 2015, Borrowers shall provide the Lenders (or its counsel) evidence in form and substance satisfactory to the Lender of repayment in full of the Life Insurance Indebtedness. Such evidence, at Borrower’s option, may include a payoff statement or equivalent from the holder of such Life Insurance Indebtedness and a direction from Borrowers for the Lender to repay such Life

Insurance Indebtedness. Prior to the time on which the Lender receives evidence of such repayment (or direction to make such repayment) as provided in the previous sentence or otherwise, the Assigned Life Insurance Policies shall not be included in the Borrowing Base. Within five (5) Business Days after receipt of evidence of such repayment, Lender (or its counsel) shall receive from the Borrowers collateral assignment(s) in favor of Lender with respect to the Assigned Life Insurance Policies in form and substance acceptable to the Lender. During such five (5) Business Day period, such Assigned Life Insurance Policies shall be included within the Borrowing Base even though such Assigned Life Insurance Policies have not been pledged to the Lender. Thereafter, the Assigned Life Insurance Policies shall be excluded from the Borrowing Base, until such time as the Lender receives such collateral assignment(s).

6.Confirmation of Obligations; Release.

(A)The Borrowers hereby confirm that the Borrowers are indebted to Lender for the Loan Obligations, Letter of Credit Obligations and other Obligations as set forth in the Credit Agreement and the other Loan Documents. Each Borrower further acknowledges and agrees that as of the date hereof, it has no claim, defense or set-off right against Lender of any nature whatsoever, whether sounding in tort, contract or otherwise, and has no claim, defense or set-off of any nature whatsoever to the enforcement by Lender of the full amount of the Loans and other Obligations of the Loan Parties under the Credit Agreement and the other Loan Documents.

(B)Notwithstanding the foregoing, to the extent that any claim, cause of action, defense or set-off against Lender or its enforcement of the Credit Agreement, the Revolving Loan Note, or any other Loan Document, of any nature whatsoever, known or unknown, fixed or contingent, does nonetheless exist or may exist on the date hereof, in consideration of Lender’s entering into this Second Amendment, each Borrower irrevocably and unconditionally waives and releases fully each and every such claim, cause of action, defense and set-off which exists or may exist on the date hereof.

7.Governing Law. This Second Amendment shall be governed by, and construed in accordance with, the laws of the State of Illinois, without regard to the principles thereof relating to conflict of laws.

8.Execution in Counterparts. This Second Amendment may be executed in any number of separate counterparts, each of which shall, collectively and separately, constitute one agreement. Delivery of an executed counterpart of a signature page of this Second Amendment by telecopy or electronically (such as PDF) shall be effective as delivery of a manually executed counterpart of this Second Amendment.

9.Continuing Effect. Except as otherwise specifically set out herein, the provisions of the Credit Agreement shall remain in full force and effect.

(Signature Pages Follow)

(Signature Page to Second Amendment to Credit and Security Agreement)

IN WITNESS WHEREOF,the parties hereto have caused this Second Amendment to be duly executed as of the date first above written.

BORROWERS:

MFRI, INC., MIDWESCO FILTER RESOURCES, INC., PERMA-PIPE, INC., TC NILES CORPORATION, TDC FILTER MANUFACTURING, INC., MM NILES CORPORATION and PERMA-PIPE CANADA, INC.

By: /s/ Karl S. Schmidt

Name: Karl J. Schmidt

Title: Vice President and Chief Financial Officer

LENDER:

BMO HARRIS BANK, N.A.

By: /s/ Terrence McKenna, Jr.

Name: Terrence McKenna, Jr.

Title: Vice President

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: June 12, 2015

/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: June 12, 2015

/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 April 30, 2015 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)

June 12, 2015

/s/ Karl J. Schmidt

Karl J. Schmidt

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

June 12, 2015

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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Treasury stock / share repurchase program (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	1 Months Ended			3 Months Ended
	Apr. 30, 2015	Mar. 31, 2015	Feb. 28, 2015	Apr. 30, 2015
Class of Stock [Line Items]
Investment Repurchase Agreement, Date of Agreement				Feb. 05, 2015
Stock Repurchase Program Expiration Date				Dec. 31, 2015
Treasury Stock, Shares	0	17	28	0
Treasury Stock Acquired, Average Cost Per Share	$ 0.00	$ 6.27	$ 6.64
Treasury Stock Acquired, Repurchase Authorization	$ 2,000			$ 2,000

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Investment in joint venture (Details) (USD $)	3 Months Ended
	Apr. 30, 2015	Apr. 30, 2014	Jan. 31, 2015
Schedule of Equity Method Investments [Line Items]
date of investment in joint venture	Oct. 18, 2009
initial investment in joint venture	$ 5,900,000
Payments to acquire interest in joint venture	2,000,000
Ownership percentage of joint venture	49.00%
Payments for advance to affiliate	3,900,000
Income (loss) from joint venture	165,000	(8,000)
Equity Method Investment, Summarized Financial Information, Current Assets	9,588,000		13,820,000
Equity Method Investment, Summarized Financial Information, Noncurrent Assets	12,217,000		14,023,000
Equity Method Investment, Summarized Financial Information, Current Liabilities	2,529,000		4,499,000
Equity Method Investment, Summarized Financial Information, Noncurrent Liabilities	6,825,000		9,013,000
Equity Method Investment Summarized Financial Information, Equity	12,451,000		14,331,000
Equity Method Investment, Summarized Financial Information, Revenue	6,267,000	8,937,000
Equity Method Investment, Summarized Financial Information, Gross Profit	1,167,000	725,000
Equity Method Investment, Summarized Financial Information, Income from continuing operations	685,000	213,000
Equity Method Investment, Summarized Financial Information, Net income (loss)	$ 337,000	$ (16,000)

XML

Investment in joint venture (Tables)

3 Months Ended

Apr. 30, 2015

Schedule of Equity Method Investments [Line Items]

Equity Method Investments [Table Text Block]

	Three Months Ended April 30,
	2015		2014
Share of income (loss) from joint venture		$165		($8	)

The following information summarizes the joint venture financial data as of April 30, 2015 and January 31, 2015, respectively:

	April 30, 2015	January 31, 2015
Current assets	$9,588	$13,820
Noncurrent assets	12,217	14,023
Current liabilities	2,529	4,499
Noncurrent liabilities	6,825	9,013
Equity	12,451	14,331

	Three Months Ended April 30,
	2015		2014
Revenue		$6,267		$8,937
Gross profit	1,167		725
Income from continuing operations	685		213
Net income (loss)	337		(16		)

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Debt (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Apr. 30, 2015
Debt [Line Items]
Debt	$ 29.4
Debt, net change	(0.2)
UNITED STATES
Debt [Line Items]
Maturity date	Sep. 24, 2019
Line of Credit Facility, Maximum Borrowing Capacity	25
Line of Credit Facility, Covenant Terms	require attainment of specific levels of profitability and cash flows
Line of Credit Facility, Covenant Compliance	not in compliance with the specific level of Borrowing Base availability for the period ended March 31, 2015. While not a covenant violation, the financial institution has the right in the Credit Agreement to have all domestic receipts deposited in a bank account from which all funds may only be used to serve the revolving line of credit under the Credit Agreement.
Line of Credit Facility, Collateral change	second amendment increases the borrowing base by adding the cash surrender value of assigned life insurance policies multiplied by ninety percent
Line of Credit Facility, Interest Rate Description	(a) a margin in effect plus a base rate, if below certain availability limits; or (b) a margin in effect plus the Eurodollar rate for the corresponding interest period.
Revolving line, amount outstanding	12.0
Prime interest rate	3.25%
Eurodollar interest rate	1.71%
Revolving line, remaining borrowing capacity	6.5
Letters of Credit Outstanding, Amount	0.1
Foreign Line of Credit [Member]
Debt [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	36
Line of Credit Facility, Covenant Terms	Some credit arrangement covenants requires a minimum tangible net worth to be maintained
Line of Credit Facility, Covenant Compliance	in compliance with the covenants under the credit arrangements.
Line of Credit Facility, Interest Rate Description	interest rates were 4.0% per annum below National Bank of Fujairah Base Rate, minimum 3.5% per annum, and Emirates Inter Bank Offered Rate (EIBOR) plus 3.5% per annum. At April 30, 2015, the Company's interest rates range from 3.5% to 6.0%
Revolving line, amount outstanding	1.5
Revolving line, remaining borrowing capacity	25.6
Letters of Credit Outstanding, Amount	$ 9.5

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Stock-based compensation (Details) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Apr. 30, 2015	Jan. 31, 2015
Option activity [Line Items]
Unrecognized compensation expense	$ 700,000
Unrecognized compensation expense recognized period	2 years 1 month 2 days
Restricted Stock [Member]
Option activity [Line Items]
Unrecognized compensation expense	400,000
Unrecognized compensation expense recognized period	1 year 6 months 0 days
Stock Option [Member]
Option activity [Line Items]
Outstanding at beginning of year		764
Weighted Average Exercise Price Per Share		$ 11.45
Weighted Average Remaining Contractual Term	5 years 8 months 4 days
Options Outstanding Aggregate Intrinsic Value	4,000	0
Expired or forfeited	(15)
Expired or Forfeited Weighted Average Exercise Price Per Share	$ 12.95
Outstanding end of period	749
Outstanding Weighted Average Exercise Price Per Share	$ 11.42
Outstanding Weighted Average Remaining Contractual Term	5 years 4 months 8 days
Exercisable end of period	527
Exercisable Weighted Average Exercise Price Per Share	$ 11.98
Exercisable Weighted Average Remaining Contractual Term	4 years 3 months 6 days
Exercisable Aggregate Intrinsic Value	2,000
unvested option [Member]
Option activity [Line Items]
Outstanding at beginning of year	222	232
Weighted Average Exercise Price Per Share	$ 10.10	$ 10.11
Options Outstanding Aggregate Intrinsic Value	$ 2,000	$ 0
Vested	(3)
Expired or forfeited	(7)
Expired or Forfeited Weighted Average Exercise Price Per Share	$ 10.24

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Business segment reporting

3 Months Ended

Apr. 30, 2015

Segment reporting [Line Items]

Segment Reporting Disclosure [Text Block]

Business segment reporting. The Company has two reportable segments: Piping Systems, which engineers, designs, manufactures and sells specialty piping, leak detection and location systems, and Filtration Products, which manufactures custom-designed industrial filtration products to remove particulates from air and other gas streams.

For the three months ended April 30, 2015, no customer accounted for 10% of the Company's consolidated net sales. For the three months ended April 30, 2014, one customer in Piping Systems accounted for 21% of the Company's consolidated net sales.

At April 30, 2015, one customer in Piping Systems accounted for 28% of accounts receivable. At January 31, 2015, one customer in Piping Systems accounted for 31% of accounts receivable.

	Three Months Ended April 30,
	2015			2014
Net sales
Piping Systems		$20,277			$42,354
Filtration Products	17,397			17,170
Total		$37,674			$59,524
Gross profit
Piping Systems		$2,355			$13,458
Filtration Products	1,686			2,531
Total		$4,041			$15,989
(Loss) income from operations
Piping Systems		($1,426	)		$8,017
Filtration Products	(1,230		)	(544		)
Corporate	(2,144		)	(1,764		)
Total		($4,800	)		$5,709

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Fair value of financial instruments (Details) (USD $)	3 Months Ended
	Apr. 30, 2015 Rate
Notional value Denmark swap	$ 1,300,000
Interest rate swap, maturity date	Dec. 31, 2021
swap fixed interest rate	2.47%
Fair Value, Inputs, Level 2 [Member]
Swap mark to market other long-term liability	$ 97,000

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Interest expense, net (Tables)

3 Months Ended

Apr. 30, 2015

Interest expense, net [Abstract]

Interest income and interest expense [Table Text Block]

	Three Months Ended April 30,
	2015			2014
Interest expense		$268			$352
Interest income	(274		)	(115		)
Interest expense, net		($6	)		$237

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Earnings per share (Tables)

3 Months Ended

Apr. 30, 2015

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 April 30,
	2015	2014
Basic weighted average common shares outstanding	7,252	7,177
Dilutive effect of equity compensation plans	—	138
Weighted average common shares outstanding assuming full dilution	7,252	7,315
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	643	160
Stock options with an exercise price below the average market price	106	547

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Business segment reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Apr. 30, 2015 Segments	Apr. 30, 2014	Jan. 31, 2015
Segment reporting
Number of reportable segments	2
Net sales	$ 37,674	$ 59,524
Gross profit	4,041	15,989
(Loss) income from operations	(4,800)	5,709
Piping Systems [Member]
Segment reporting
Segment Reporting Information, Description of Products and Services	Piping Systems, which engineers, designs, manufactures and sells specialty piping, leak detection and location systems
Net sales	20,277	42,354
Gross profit	2,355	13,458
(Loss) income from operations	(1,426)	8,017
Filtration Products [Member]
Segment reporting
Segment Reporting Information, Description of Products and Services	Filtration Products, which manufactures custom-designed industrial filtration products to remove particulates from air and other gas streams
Net sales	17,397	17,170
Gross profit	1,686	2,531
(Loss) income from operations	(1,230)	(544)
Corporate Segment [Member]
Segment reporting
(Loss) income from operations	$ (2,144)	$ (1,764)
Credit Concentration Risk [Member]
Segment reporting
Concentration Risk, Percentage	28.00%		31.00%
Sales Revenue, Net [Member]
Segment reporting
Concentration Risk, Percentage		21.00%

XML

Income taxes Income taxes (Details) (USD $)	3 Months Ended
	Apr. 30, 2015 Rate	Apr. 30, 2014 Rate
Income tax [Abstract]
effective income tax rate from continuing operations	(0.60%)	23.20%
Unrecognized tax benefits	$ 100,000
Unrecognized tax benefits that would impact effective tax rate	100,000
Unrecognized tax benefits, income tax penalties and interest expense	2,000
Unrecognized tax benefits, income tax penalties and interest accrued	$ 40,000
Open tax year beginning	2012
Open tax years up to the amount of research tax credit generated	January 31, 2002 through January 31, 2012
Operating loss carryforwards, expiration dates beginning	Jan. 31, 2030

XML

Basis of presentation

3 Months Ended

Apr. 30, 2015

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, 2015 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 2015 and 2014 are for the three months ended April 30,2015 and 2014, respectively.

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Other intangible assets with definite lives (Details) (USD $)	3 Months Ended
	Apr. 30, 2015	Apr. 30, 2014	Jan. 31, 2015
Other intangible assets with definite lives [Abstract]
Finite-Lived Intangible Assets, Amortization Method	Patents are capitalized and amortized on a straight-line basis over a period not to exceed the legal lives of the patents.
Finite Lived Intangible Assets, Intent or Ability to Renew or Extend Arrangement	The Company expenses costs incurred to renew or extend the term of intangible assets
Gross patents	$ 2,690,000		$ 2,680,000
Accumulated amortization	2,290,000		2,280,000
Amortization expense, next twelve months	39,400
Amortization expense, year two	49,000
Amortization expense, year three	46,000
Amortization expense, year four	37,000
Amortization expense, year five	34,000
Amortization expense, thereafter	191,715
Patent amortization expense	$ 13,000	$ 13,000

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Earnings per share (Details) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 30, 2015	Apr. 30, 2014
Earnings per share [Line Items]
Basic weighted average common shares outstanding	7,252	7,177
Dilutive effect of equity incentive plans	0	138
Weighted average common shares outstanding assuming full dilution	7,252	7,315
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	643	160
Stock options with an exercise price below the average market price	106	547

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Apr. 30, 2015	Apr. 30, 2014
Net sales	$ 37,674	$ 59,524
Cost of sales	33,633	43,535
Gross profit	4,041	15,989
Operating expenses
General and administrative expenses	6,140	7,417
Selling expenses	2,701	2,863
Total operating expenses	8,841	10,280
(Loss) income from operations	(4,800)	5,709
Income (loss) from joint venture	165	(8)
Interest (income) expense, net	(6)	237
(Loss) income from continuing operations before income taxes	(4,629)	5,464
Income tax expense	26	1,266
(Loss) income from continuing operations	(4,655)	4,198
Loss from discontinued operations, net of tax	0	(371)
Net (loss) income	$ (4,655)	$ 3,827
Weighted average common shares outstanding
Basic	7,252	7,177
Diluted	7,252	7,315
(Loss) earnings per share from continuing operations
Basic	$ (0.64)	$ 0.58
Diluted	$ (0.64)	$ 0.57
Loss per share from discontinued operations
Basic and diluted	$ 0.00	$ (0.05)
(Loss) earnings per share
Basic	$ (0.64)	$ 0.53
Diluted	$ (0.64)	$ 0.52

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	12 Months Ended
	Apr. 30, 2015	Jan. 31, 2015	Jan. 31, 2014
Stockholders' equity	$ 69,064	$ 73,523	$ 76,636
Net (loss) income	(4,655)	(256)
Stock options exercised		330
Repurchase of common stock	(290)
Stock-based compensation expense	137	124
Deferred shares converted to common stock		58
Interest rate swap	6	(51)
Pension liability adjustment		(1,611)
Foreign currency translation adjustments	380	(1,629)
Tax benefit on above items	(37)	(76)
Common Stock [Member]
Stockholders' equity	73	73	72
Stock options exercised
Shares, Outstanding	7,246,010	7,290,576	7,168,537
Shares issued	(44,566)	122,039
Additional Paid-in Capital [Member]
Stockholders' equity	52,792	52,655	52,144
Stock options exercised		330
Stock-based compensation expense	137	124
Deferred shares converted to common stock		57
Treasury Stock [Member]
Stockholders' equity	(290)
Repurchase of common stock	(290)
Retained Earnings [Member]
Stockholders' equity	20,671	25,324	25,580
Net (loss) income	(4,655)	(256)
Foreign currency translation adjustments	2	2
Accumulated Other Comprehensive Income (Loss) [Member]
Stockholders' equity	(4,182)	(4,529)	(1,160)
Interest rate swap	6	(51)
Pension liability adjustment		(1,611)
Foreign currency translation adjustments	378	(1,631)
Tax benefit on above items	$ (37)	$ (76)

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Stock-based compensation Stock-based compensation expense (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 30, 2015	Apr. 30, 2014
Stock-based compensation expense [Abstract]
Stock-based compensation expense (benefit)	$ 59	$ (381)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted Stock or Unit Expense (benefit)	$ 89	$ (69)

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Reclassifications (Notes)

3 Months Ended

Apr. 30, 2015

Reclassifications [Abstract]

Reclassifications [Text Block]

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

XML

Stock-based compensation Fair value assumptions (Details)	3 Months Ended
	Apr. 30, 2015	Apr. 30, 2014
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	40.88%	42.12%
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]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	59.39%	60.26%
Risk free interest rate	1.77%	2.19%
Dividend yield	0.00%	0.00%
Expected life	5 years 1 month 12 days	5 years 8 months 12 days

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Other intangible assets with definite lives (Tables)

3 Months Ended

Apr. 30, 2015

Other intangible assets with definite lives [Abstract]

Patent amortization expense [Table Text Block]

	Three Months Ended April 30,
	2015		2014
Patent amortization expense		$13		$13

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 30, 2015	Apr. 30, 2014
Operating activities
Net (loss) income	$ (4,655)	$ 3,827
Adjustments to reconcile net (loss) income to net cash flows used in operating activities
Depreciation and amortization	1,423	1,433
Loss (gain) on disposal of discontinued operations	0	12
Deferred tax expense	1	612
Stock-based compensation expense (benefit)	137	(352)
(Income) loss from joint venture	(165)	8
Cash surrender value on life insurance policies	(66)	(58)
Loss on disposal of fixed assets	0	4
Provision on uncollectible accounts	115	(64)
Changes in operating assets and liabilities
Accounts receivable	3,500	(1,726)
Inventories	(34)	(1,027)
Costs and estimated earnings in excess of billings on uncompleted contracts	(1,681)	(2,313)
Accounts payable	3,081	1,439
Accrued compensation and payroll taxes	5,782	(4,598)
Customers' deposits	(1,280)	1,283
Income taxes receivable and payable	(699)	947
Prepaid expenses and other current assets	268	(1,023)
Other assets and liabilities	(6,569)	280
Net cash used in operating activities	(842)	(1,316)
Investing activities
Capital expenditures	(2,034)	(776)
Proceeds from sales of property and equipment	0	3
Payment on loan from joint venture	331	0
Net cash used in investing activities	(1,703)	(773)
Financing activities
Proceeds from revolving lines	22,394	20,359
Proceeds from debt	597	48
Proceeds sourced from cash surrender value on life insurance policies	1,916	0
Payments of debt on revolving lines of credit	(22,482)	(18,733)
Payments of other debt	(539)	(766)
Increase (decrease) in drafts payable	933	435
Payments on capitalized lease obligations	(170)	(145)
Repurchase of common stock	(290)	0
Stock options exercised and restricted shares issued	0	161
Net cash provided by financing activities	2,359	1,359
Effect of exchange rate changes on cash and cash equivalents	396	173
Net increase (decrease) in cash and cash equivalents	210	(557)
Cash and cash equivalents - beginning of period	10,508	13,395
Cash and cash equivalents - end of period	10,718	12,838
Supplemental cash flow information
Interest paid	272	369
Income taxes paid	715	7
Fixed assets acquired under capital lease	732	0
Funds held in escrow related to the sale of Thermal Care, Inc. assets	$ 0	$ 1,125

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 30, 2015	Apr. 30, 2014
Net (loss) income	$ (4,655)	$ 3,827
Other comprehensive (loss) income
Foreign currency translation adjustments, net of tax	342	70
Interest rate swap, net of tax	5	(10)
Other comprehensive income	347	60
Comprehensive (loss) income	$ (4,308)	$ 3,887

XML

Earnings per share

3 Months Ended

Apr. 30, 2015

Earnings Per Share [Abstract]

Earnings per share [Text Block]

Earnings per share.

	Three Months Ended April 30,
	2015	2014
Basic weighted average common shares outstanding	7,252	7,177
Dilutive effect of equity compensation plans	—	138
Weighted average common shares outstanding assuming full dilution	7,252	7,315
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	643	160
Stock options with an exercise price below the average market price	106	547

XML

Entity information Document (USD $)	3 Months Ended
	Apr. 30, 2015	Jun. 05, 2015	Jul. 31, 2014
Document Information
Entity Registrant Name	MFRI INC.
Trading Symbol	MFRI
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	Apr. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		7,246,010
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 69,518,913

XML

Interest expense, net

3 Months Ended

Apr. 30, 2015

Interest expense, net [Abstract]

Interest Income and Interest Expense Disclosure [Text Block]

Interest expense, net.

	Three Months Ended April 30,
	2015			2014
Interest expense		$268			$352
Interest income	(274		)	(115		)
Interest expense, net		($6	)		$237

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)	Apr. 30, 2015	Jan. 31, 2015
Current assets
Cash and cash equivalents	$ 10,718,000	$ 10,508,000
Restricted cash	423,000	428,000
Trade accounts receivable, less allowance for doubtful accounts of $225 at April 30, 2015 and $110 at January 31, 2015	38,190,000	41,847,000
Inventories, net	29,765,000	29,770,000
Prepaid expenses and other current assets	3,854,000	4,349,000
Costs and estimated earnings in excess of billings on uncompleted contracts	2,442,000	700,000
Total current assets	85,392,000	87,602,000
Property, plant and equipment, net of accumulated depreciation	42,131,000	41,486,000
Other assets
Note receivable from joint venture	3,814,000	3,931,000
Investment in joint venture	8,680,000	8,514,000
Cash surrender value on life insurance policies	1,406,000	3,256,000
Other assets	3,175,000	3,215,000
Assets held for sale long-term	503,000	534,000
Total other assets	17,578,000	19,450,000
Total assets	145,101,000	148,538,000
Current liabilities
Trade accounts payable	15,072,000	11,072,000
Accrued compensation and payroll taxes	11,933,000	5,551,000
Commissions and management incentives payable	5,131,000	5,734,000
Revolving line domestic	11,954,000	11,353,000
Current maturities of long-term debt	5,035,000	5,679,000
Customers' deposits	6,064,000	7,341,000
Billings in excess of costs and estimated earnings on uncompleted contracts	742,000	681,000
Other accrued liabilities	2,270,000	2,486,000
Deferred tax liabilities - current	166,000	165,000
Income taxes payable	977,000	1,688,000
Total current liabilities	59,344,000	51,750,000
Long-term liabilities
Long-term debt, less current maturities	12,424,000	12,603,000
Deferred compensation liabilities	198,000	6,560,000
Deferred tax liabilities - long-term	294,000	309,000
Other long-term liabilities	3,777,000	3,793,000
Total long-term liabilities	16,693,000	23,265,000
Stockholders' equity
Common stock, $.01 par value, authorized 50,000 shares; 7,246 issued and outstanding at April 30, 2015 and 7,291 issued and outstanding at January 31, 2015	73,000	73,000
Additional paid-in capital	52,792,000	52,655,000
Treasury Stock 45 shares at April 30, 2015 and none at January 31,2015	(290,000)	0
Retained earnings	20,671,000	25,324,000
Accumulated other comprehensive loss	(4,182,000)	(4,529,000)
Total stockholders' equity	69,064,000	73,523,000
Total liabilities and stockholders' equity	$ 145,101,000	$ 148,538,000

XML

Other intangible assets with definite lives (Notes)

3 Months Ended

Apr. 30, 2015

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. 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 $2.69 million and $2.68 million as of April 30, 2015 and January 31, 2015, respectively. Accumulated amortization was approximately $2.29 million and $2.28 million as of April 30, 2015 and January 31, 2015, respectively. Future amortizations over the next five years ending January 31 will be $39,400 in 2016, $49,000 in 2017, $46,000 in 2018, $37,000 in 2019, $34,000 in 2020, and $191,715 thereafter. Patents are included in other assets in the balance sheet.

	Three Months Ended April 30,
	2015		2014
Patent amortization expense		$13		$13

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Impairment of long lived assets (Notes)

3 Months Ended

Apr. 30, 2015

Property, Plant and Equipment [Line Items]

Impairment of long-lived assets

Impairment of long-lived assets. The Company evaluates long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.

The Company has an idle facility in Cicero, Illinois is presented as held for sale as of April 30, 2015. In 2014, management performed the required impairment analysis on the idle facility to determine if its carrying value was recoverable. Management determined that the carrying value of the idle facility was fully recoverable.

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Business segment (Tables)

3 Months Ended

Apr. 30, 2015

Business segment reporting [Abstract]

Business segment reporting [Table Text Block]

	Three Months Ended April 30,
	2015			2014
Net sales
Piping Systems		$20,277			$42,354
Filtration Products	17,397			17,170
Total		$37,674			$59,524
Gross profit
Piping Systems		$2,355			$13,458
Filtration Products	1,686			2,531
Total		$4,041			$15,989
(Loss) income from operations
Piping Systems		($1,426	)		$8,017
Filtration Products	(1,230		)	(544		)
Corporate	(2,144		)	(1,764		)
Total		($4,800	)		$5,709

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Debt

3 Months Ended

Apr. 30, 2015

Debt [Abstract]

Debt Disclosure [Text Block]

Debt. Debt totaled $29.4 million at April 30, 2015, a net decrease of $0.2 million since January 31, 2015.

Revolving lines domestic. On September 24, 2014, the Company entered into a Credit and Security Agreement with a financial institution ("Credit Agreement"). Under the terms of the Credit Agreement, which matures on September 24, 2019, the Company can borrow up to $25 million, subject to borrowing base availability from secured domestic assets and other requirements, under a revolving line of credit. The Loan Agreement covenants restrict debt, liens, and investments, and require attainment of specific levels of profitability and cash flows. At April 30, 2015, the Company was not in compliance with the specific level of Borrowing Base availability for the period ended March 31, 2015. While not a covenant violation, the financial institution has the right in the Credit Agreement to have all domestic receipts deposited in a bank account from which all funds may only be used to serve the revolving line of credit under the Credit Agreement. The domestic revolving line balance as of January 31, 2015 has been classified as a current liability in the accompanying financial statements.

On April 30, 2015, the Company completed the second amendment to the Credit Agreement. The second amendment increases the borrowing base by adding the cash surrender value of assigned life insurance policies multiplied by ninety percent.

Interest rates vary based on the average availability in the preceding fiscal quarter and are: (a) a margin in effect plus a base rate, if below certain availability limits; or (b) a margin in effect plus the Eurodollar rate for the corresponding interest period. As of April 30, 2015, the Company had borrowed $12.0 million at 3.25% and 1.71% and had $6.5 million available to it under the revolving line of credit. In addition, $0.1 million of availability was used under the Credit Agreement primarily to support letters of credit to guarantee amounts committed for inventory purchases. Cash required for operations is provided by draw downs on the line of credit.

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 lines are secured by certain equipment, certain assets, such as accounts receivable and inventory, and a guarantee by the Company. Some credit arrangement covenants requires a minimum tangible net worth to be maintained. At April 30, 2015, the Company was in compliance with the covenants under the credit arrangements. At April 30, 2015, interest rates were 4.0% per annum below National Bank of Fujairah Base Rate, minimum 3.5% per annum, and Emirates Inter Bank Offered Rate (EIBOR) plus 3.5% per annum. At April 30, 2015, the Company's interest rates range from 3.5% to 6.0%. At April 30, 2015, the Company could have borrowed $36.3 million under these credit arrangements. In addition, $9.5 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases. At April 30, 2015, borrowings under these credit arrangements totaled $1.5 million; an additional $25.6 million remained unused.

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Stock-based compensation

3 Months Ended

Apr. 30, 2015

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 April 30,
	2015		2014
Stock-based compensation expense (benefit)		$59		($381	)
Restricted stock based compensation expense (benefit)		$89		($69	)

Stock-based compensation for 2014 was a benefit year-to-date due to cancellations. Most of these cancellations related to former employees from the discontinued operations.

Stock Options

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

	Three Months Ended April 30,
Fair value assumptions	2015	2014
Risk free interest rate	.74% - 1.77%	.74% - 2.19%
Expected volatility	40.88% - 59.39%	42.12% - 60.26%
Expected life	4.9 - 5.1 years	4.9 - 5.7 years
Dividend yield	none	none

Option activity	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 31, 2015	764			$11.45	5.7		$—
Expired or forfeited	(15	)	12.95
Outstanding end of period	749		11.42		5.4	4
Exercisable end of period	527			$11.98	4.3		$2

Unvested option activity	Options		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at January 31, 2015	232			$10.11		$—
Vested	(3	)
Expired or forfeited	(7	)	10.24
Outstanding end of period	222			$10.10		$2

As of April 30, 2015, there was $0.7 million of total unrecognized compensation expense related to unvested stock options. The expense is expected to be recognized over a period of 2.1 years.

Restricted stock

The following table summarizes restricted stock activity for the year:

Restricted stock activity	Restricted Shares	Weighted Average Grant Price Per Share		Aggregate Intrinsic Value
Outstanding at January 31, 2015	33		$11.53		$186
Granted	—
Issued	—
Outstanding end of period	33		$11.53		$198

As of April 30, 2015, there was $0.4 million of unrecognized compensation expense related to unvested restricted stock granted under the plans. The cost is expected to be recognized over the weighted-average period of 1.5 years.

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Investment in joint venture (Notes)

3 Months Ended

Apr. 30, 2015

Schedule of Equity Method Investments [Line Items]

Equity Method Investments and Joint Ventures Disclosure [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 operates in Camrose, Alberta, Canada, which provides the Company the opportunity to participate in the growing oil sands market.

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.

	Three Months Ended April 30,
	2015		2014
Share of income (loss) from joint venture		$165		($8	)

The following information summarizes the joint venture financial data as of April 30, 2015 and January 31, 2015, respectively:

	April 30, 2015	January 31, 2015
Current assets	$9,588	$13,820
Noncurrent assets	12,217	14,023
Current liabilities	2,529	4,499
Noncurrent liabilities	6,825	9,013
Equity	12,451	14,331

	Three Months Ended April 30,
	2015		2014
Revenue		$6,267		$8,937
Gross profit	1,167		725
Income from continuing operations	685		213
Net income (loss)	337		(16		)

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Cash surrender value on life insurance policies (Notes)

3 Months Ended

Apr. 30, 2015

Cash surrender value on life insurance policies [Abstract]

Cash surrender value on life insurance policies [Text Block]

Cash surrender value on life insurance policies. The Company has life insurance policies on members of management and other key employees to indemnify itself against the loss of talent, expertise, and knowledge. These life insurance contracts may be used to fund the Company's obligation under a deferred compensation agreement plan.

On April 1, 2015, the Company obtained a loan in the amount of $1.9 million, sourced from the cash surrender value of certain life insurance policies. This loan was repaid in May 2015. The net cash surrender value of these policies was $1.4 million at April 30, 2015 and was included in long-term assets on the balance sheet.

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Treasury stock / share repurchase program (Notes)

3 Months Ended

Apr. 30, 2015

Treasury stock / share repurchase program [Abstract]

Treasury Stock / share repurchase

Treasury stock / share repurchase program. On February 5, 2015, the Company's Board of Directors approved a share repurchase program, which authorizes the Company to use up to $2 million for the purchase of its outstanding shares of common stock. Share repurchases may be executed through open market or privately negotiated transactions on or prior to December 31, 2015.

The following table sets forth information with respect to repurchases by the Company of its shares of common stock during the first quarter of 2015:

Period	Total number of shares purchased	Average price paid per share
February	28	$6.64
March	17	6.27
April	—	—

For additional information, see "Part II, Item 2".

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Cash surrender value on life insurance policies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 30, 2015	Apr. 30, 2014	Jan. 31, 2015
Cash surrender value on life insurance policies [Abstract]
Proceeds sourced from cash surrender value on life insurance policies	$ 1,916	$ 0
Cash surrender value on life insurance policies	$ 1,406		$ 3,256

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Recent accounting pronouncements

3 Months Ended

Apr. 30, 2015

Recent accounting pronouncements [Abstract]

Recent accounting pronouncements [Text Block]

Recent accounting pronouncements. In August 2014, the Financial Accounting Standards Board, ("FASB"), issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 is not expected to have an impact on the Company’s consolidated financial statements.

In May 2014, the FASB, issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. This new standard provides for a single comprehensive model and supersedes most current revenue recognition guidance, including industry specific guidance, and provides for enhanced disclosure requirements. The objective of the new guidance is to improve the consistency, comparability and usefulness to users of financial statements. On April 1, 2015, FASB decided to defer the effective date of the new revenue standard by one year. As a result, public entities would apply the new revenue standard for fiscal years, and interim periods within those years, beginning after December 15, 2017. ASU 2014-09 provides for two implementation methods (1) full retrospective application to each prior period or (2) modified retrospective application with the cumulative effect as of the date of adoption. Early application is not permitted. The Company is evaluating the financial statement impacts of the guidance in this ASU and determining which transition method will be utilized.

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Stock-based compensation Stock Compensation (Tables)

3 Months Ended

Apr. 30, 2015

Stock-based compensation [Abstract]

Stock-based compensation expense [Table Text Block]

	Three Months Ended April 30,
	2015		2014
Stock-based compensation expense (benefit)		$59		($381	)
Restricted stock based compensation expense (benefit)		$89		($69	)

Fair value assumptions [Table Text Block]

	Three Months Ended April 30,
Fair value assumptions	2015	2014
Risk free interest rate	.74% - 1.77%	.74% - 2.19%
Expected volatility	40.88% - 59.39%	42.12% - 60.26%
Expected life	4.9 - 5.1 years	4.9 - 5.7 years
Dividend yield	none	none

Option activity [Table Text Block]

Option activity	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 31, 2015	764			$11.45	5.7		$—
Expired or forfeited	(15	)	12.95
Outstanding end of period	749		11.42		5.4	4
Exercisable end of period	527			$11.98	4.3		$2

Unvested option activity [Table Text Block]

Unvested option activity	Options		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at January 31, 2015	232			$10.11		$—
Vested	(3	)
Expired or forfeited	(7	)	10.24
Outstanding end of period	222			$10.10		$2

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

Restricted stock activity	Restricted Shares	Weighted Average Grant Price Per Share		Aggregate Intrinsic Value
Outstanding at January 31, 2015	33		$11.53		$186
Granted	—
Issued	—
Outstanding end of period	33		$11.53		$198

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Interest expense, net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 30, 2015	Apr. 30, 2014
Interest expense, net [Abstract]
Interest expense	$ 268	$ 352
Interest income	(274)	(115)
Interest (income) expense, net	$ (6)	$ 237

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Balance Sheet parenthetical (Parentheticals) (USD $) In Thousands, except Per Share data, unless otherwise specified	Apr. 30, 2015	Jan. 31, 2015
Allowance for doubtful accounts receivable	$ 225	$ 110
Common stock, par value per share	$ 0.01	$ 0.01
Common stock, shares authorized	50,000	50,000
Common stock, shares issued	7,246	7,291
Common stock, shares outstanding	7,246	7,291
Treasury Stock, Number of Shares Held	45	0

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Income taxes

3 Months Ended

Apr. 30, 2015

Income taxes [Abstract]

Income taxes [Text Block]

Income taxes.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. 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 a negative 0.6% and a positive 23.2% for the three months ended April 30,2015 and 2014, respectively. The change in the ETR for the two periods relates to the mix of income earned in zero rate jurisdictions.

The amount of unrecognized tax benefits, including interest and penalties, at April 30, 2015, recorded in other long-term liabilities was $0.1 million of which $0.1 million would impact the Company’s effective tax rate if recognized.  The Company includes accrued interest and penalties related to uncertain tax positions in income tax expense, with $2 thousand included in expense for the current quarter.  The amount of accrued interest and penalties at April 30, 2015, associated with unrecognized tax benefits was $40 thousand.

As of April 30, 2015, open tax years in federal and some state jurisdictions date back to 2012. In addition, federal and state tax years January 31, 2002 through January 31, 2012 are subject to adjustment on audit, up to the amount of research tax credits generated in those years. The Company has net operating loss carryforwards expiring in various years beginning January 31, 2030. Additionally, the Company files income tax returns in Denmark, India and Saudi Arabia. As of April 30, 2015, open tax years in foreign jurisdictions vary from three to seven years from the date of filing the income tax returns.

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

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Treasury stock / share repurchase program (Tables)

3 Months Ended

Apr. 30, 2015

Equity, Class of Treasury Stock [Line Items]

Treasury Stock / share repurchase

Treasury stock / share repurchase program. On February 5, 2015, the Company's Board of Directors approved a share repurchase program, which authorizes the Company to use up to $2 million for the purchase of its outstanding shares of common stock. Share repurchases may be executed through open market or privately negotiated transactions on or prior to December 31, 2015.

The following table sets forth information with respect to repurchases by the Company of its shares of common stock during the first quarter of 2015:

Period	Total number of shares purchased	Average price paid per share
February	28	$6.64
March	17	6.27
April	—	—

For additional information, see "Part II, Item 2".

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Stock-based compensation Restricted stock (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Apr. 30, 2015	Jan. 31, 2015
Disclosure of compensation, restricted shares [Abstract]
Outstanding	33	33
weighted average, outstanding	$ 11.53	$ 11.53
Aggregate Intrinsic Value, Outstanding	$ 198	$ 186
Granted	0
Weighted Average Grant Date Fair Value
Issued	0

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Fair value of financial instruments

3 Months Ended

Apr. 30, 2015

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

Fair Value Disclosures [Text Block]

Fair value of financial instruments. At April 30, 2015, 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 Company entered into an interest swap agreement in 2012 to reduce its exposure to market risks from changing interest rates and exchange 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 swap agreement is a fair value hedge. The derivative mark to market was $0.1 million at both April 30, 2015 and January 31, 2015. This was included in other long-term liabilities on the consolidated balance sheets.