10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended October 31, 2019.

Commission File No. 0-18370

Perma-Pipe International Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	36-3922969
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6410 W. Howard Street, Niles, Illinois	60714
(Address of principal executive offices)	(Zip Code)

(847) 966-1000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	PPIH	The NASDAQ Stock Market LLC

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

Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

On December 5, 2019, there were 8,041,806 shares of the registrant's common stock outstanding.

Perma-Pipe International Holdings, Inc.

FORM 10-Q

For the fiscal quarter ended October 31, 2019

TABLE OF CONTENTS

Item		Page
Part I	Financial Information
1.	Financial Statements
	Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended October 31, 2019 and 2018	2
	Consolidated Statements of Comprehensive Income/(Loss) (Unaudited) for the Three and Nine Months Ended October 31, 2019 and 2018	3
	Consolidated Balance Sheets as of October 31, 2019 (Unaudited) and January 31, 2019	4
	Consolidated Statements of Stockholders' Equity as of October 31, 2019 (Unaudited) and January 31, 2019	5
	Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended October 31, 2019 and 2018	6
	Notes to Consolidated Financial Statements (Unaudited)	7
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
4.	Controls and Procedures	24
Part II	Other Information
6.	Exhibits	25
Signatures		26

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share data)

	Three Months Ended October 31,						Nine Months Ended October 31,
	2019			2018			2019		2018
Net sales	$	34,457		$	32,806		$	95,400	$	94,020
Cost of sales		26,814			25,923			73,382		77,019
Gross profit		7,643			6,883			22,018		17,001
Operating expenses
General and administrative expenses		4,541			4,247			13,556		12,153
Selling expenses		1,354			1,554			4,030		4,017
Total operating expenses		5,895			5,801			17,586		16,170
Income from operations		1,748			1,082			4,432		831
Interest expense, net		194			280			612		830
Income from operations before income taxes		1,554			802			3,820		1
Income tax expense		1,699			934			1,747		1,525
Net (loss)/income	$	(145	)	$	(132	)	$	2,073	$	(1,524	)
Weighted average common shares outstanding
Basic		8,037			7,877			7,970		7,806
Diluted		8,037			7,877			8,047		7,806
(Loss)/income per share
Basic		(0.02	)		(0.02	)		0.26		(0.20	)
Diluted		(0.02	)		(0.02	)		0.26		(0.20	)

See accompanying notes to consolidated financial statements.

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

2

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (Unaudited)

(In thousands)

	Three Months Ended October 31,						Nine Months Ended October 31,
	2019			2018			2019		2018
Net (loss)/income	$	(145	)	$	(132	)	$	2,073	$	(1,524	)
Other comprehensive income/(loss)
Foreign currency translation adjustments, net of tax		12			(551	)		53		(1,538	)
Other comprehensive income/(loss)		12			(551	)		53		(1,538	)
Comprehensive (loss)/income	$	(133	)	$	(683	)	$	2,126	$	(3,062	)

See accompanying notes to consolidated financial statements.

3

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except per share data)

	October 31, 2019			January 31, 2019
ASSETS
Current assets
Cash and cash equivalents	$	12,221		$	10,156
Restricted cash		1,138			2,581
Trade accounts receivable, less allowance for doubtful accounts of $355 at October 31, 2019 and $536 at January 31, 2019		28,235			32,508
Inventories, net		16,270			12,289
Prepaid expenses and other current assets		3,620			3,773
Contract assets		4,363			1,653
Total current assets		65,847			62,960
Property, plant and equipment, net of accumulated depreciation		29,357			30,398
Other assets
Operating lease right-of-use asset		11,717			-
Deferred tax assets - long-term		747			458
Goodwill		2,264			2,269
Other assets		7,518			6,120
Total other assets		22,246			8,847
Total assets	$	117,450		$	102,205
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable	$	12,735		$	12,006
Accrued compensation and payroll taxes		1,675			1,544
Commissions and management incentives payable		1,600			1,866
Revolving line North America		7,758			8,890
Current maturities of long-term debt		1,644			640
Customers' deposits		3,005			3,708
Outside commissions payable		2,185			1,743
Contract liability		1,351			1,569
Operating lease liability short-term		1,130			-
Other accrued liabilities		3,234			3,856
Income taxes payable		1,352			1,266
Total current liabilities		37,669			37,088
Long-term liabilities
Long-term debt, less current maturities		6,931			6,751
Deferred compensation liabilities		3,731			3,883
Deferred tax liabilities long-term		1,434			1,435
Operating lease liability long-term		10,617			-
Other long-term liabilities		1,620			688
Total long-term liabilities		24,333			12,757
Stockholders' equity
Common stock, $.01 par value, authorized 50,000 shares; 8,042 issued and outstanding at October 31, 2019 and 7,854 issued and outstanding at January 31, 2019		80			79
Additional paid-in capital		59,754			58,793
Accumulated deficit		(1,559	)		(3,632	)
Accumulated other comprehensive loss		(2,827	)		(2,880	)
Total stockholders' equity		55,448			52,360
Total liabilities and stockholders' equity	$	117,450		$	102,205

See accompanying notes to consolidated financial statements.

4

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands, except share data)

	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
Total stockholders' equity at January 31, 2019	$	79	$	58,793	$	(3,632	)	$	(2,880	)	$	52,360
Net loss						(1,502	)					(1,502	)
Common stock issued under stock plans, net of shares used for tax withholding				79								79
Stock-based compensation expense				154								154
Foreign currency translation adjustment									(317	)		(317	)
Total stockholders' equity at April 30, 2019	$	79	$	59,026	$	(5,134	)	$	(3,197	)	$	50,774
Net income						3,720						3,720
Common stock issued under stock plans, net of shares used for tax withholding		1		43								44
Stock-based compensation expense				406								406
Foreign currency translation adjustment									358			358
Total stockholders' equity at July 31, 2019	$	80	$	59,475	$	(1,414	)	$	(2,839	)	$	55,302
Net loss						(145	)					(145	)
Common stock issued under stock plans, net of shares used for tax withholding				53								53
Stock-based compensation expense				226								226
Foreign currency translation adjustment									12			12
Total stockholders' equity at October 31, 2019	$	80	$	59,754	$	(1,559	)	$	(2,827	)	$	55,448

Shares	2019		2018
Balances at beginning of year		7,854,322		7,716,542
Shares issued		187,359		137,780
Balances at period end		8,041,681		7,854,322

See accompanying notes to consolidated financial statements.

5

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)	Nine Months Ended October 31,
	2019			2018
Operating activities
Net income/(loss)	$	2,073		$	(1,524	)
Adjustments to reconcile net income/(loss) to net cash flows provided by/(used) in operating activities
Depreciation and amortization		3,349			3,482
Deferred tax (income)/expense		(288	)		346
Equity-based compensation expense		786			999
Loss on disposal of fixed assets		154			46
Provision on uncollectible accounts		49			14
Changes in operating assets and liabilities
Accounts receivable		2,960			(165	)
Inventories		(3,980	)		2,269
Contract assets and contract liabilities		(2,929	)		(1,221	)
Accounts payable		525			(5,460	)
Accrued compensation and payroll taxes		(199	)		1,468
Customers' deposits		(704	)		(1,194	)
Income taxes receivable and payable		80			54
Prepaid expenses and other current assets		1,523			(801	)
Other assets and liabilities		(601	)		1,061
Net cash provided by/(used in) operating activities		2,798			(626	)
Investing activities
Capital expenditures		(1,423	)		(885	)
Net cash used in investing activities		(1,423	)		(885	)
Financing activities
Proceeds from revolving lines		61,281			42,201
Payments of debt on revolving lines of credit		(61,613	)		(35,152	)
Debt issuance costs		-			(930	)
Payments of other debt		(276	)		(266	)
Decrease in drafts payable		(162	)		(20	)
Payments on finance lease obligations		(185	)		(205	)
Stock options exercised and restricted shares retired for tax		176			249
Net cash provided by/(used in) financing activities		(779	)		5,877
Effect of exchange rate changes on cash, cash equivalents and restricted cash		26			(569	)
Net increase in cash, cash equivalents and restricted cash		622			3,797
Cash, cash equivalents and restricted cash - beginning of period		12,737			8,321
Cash, cash equivalents and restricted cash - end of period	$	13,359		$	12,118
Supplemental cash flow information
Interest paid	$	609		$	917
Income taxes paid		1,961			1,118
Fixed assets acquired under capital leases - non-cash		848			-

See accompanying notes to consolidated financial statements.

6

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

October 31, 2019

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

Note 1 - Basis of presentation

The interim consolidated financial statements of Perma-Pipe International Holdings, Inc., and subsidiaries (collectively, "PPIH", "Company", or "Registrant") are unaudited, but include all adjustments that 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, 2019 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 2019 and 2018 are for the three and nine months ended October 31, 2019 and 2018, and for the fiscal years ended January 31, 2020 and 2019, respectively.

Note 2 - Business segment reporting

The Company is engaged in the manufacture and sale of products in one segment: Piping Systems. The Company engineers, designs, manufactures and sells specialty piping systems, and leak detection systems. Specialty piping systems include: (i) insulated and jacketed district heating and cooling piping systems for efficient energy distribution from central energy plants to multiple locations, (ii) primary and secondary containment piping systems for transporting chemicals, hazardous fluids and petroleum products, and (iii) the coating and/or insulation of oil and gas gathering and transmission pipelines. The Company's leak detection systems are sold with its piping systems or on a stand-alone basis, to monitor areas where fluid intrusion may contaminate the environment, endanger personal safety, cause a fire hazard, impair essential services or damage equipment or property.

Note 3 - Accounts receivable

The majority of the Company's accounts receivable are due from geographically dispersed contractors and manufacturing companies. Credit is extended based on an evaluation of a customer's financial condition, including the availability of credit insurance. In the U.S., collateral is not generally required. In the United Arab Emirates and Saudi Arabia, letters of credit are usually obtained for significant orders. Accounts receivable are due within various time periods specified in the terms applicable to the specific customer and are stated at amounts due from customers net of an allowance for claims and doubtful accounts. The allowance for doubtful accounts is based on specifically identified amounts in customers' accounts, where future collectability is deemed uncertain. Management may exercise its judgment in adjusting the provision as a consequence of known items, such as current economic factors and credit trends. Past due trade accounts receivable balances are written off when the Company's collection efforts have been unsuccessful in collecting the amount due and the amount is deemed uncollectible. The write-off is recorded against the allowance for doubtful accounts. 

One of the Company’s accounts receivable in the total amount of $4.7 million as of January 31, 2019 has been outstanding for several years. Included in this balance is a retention receivable amount of $3.7 million, of which, due to the long-term nature of the receivable, $3.5 million was included in the balance of other long-term assets as of October 31, 2019 and January 31, 2019.The Company completed all of its deliverables in 2015 under the related contract, and has been engaged in ongoing active efforts to collect this outstanding amount. During the first nine months of fiscal 2019 the Company received $0.5 million, thus reducing this balance to $4.2 million as of October 31, 2019. As a result, the Company did not reserve any allowance against this receivable as of October 31, 2019. The Company continues to engage with the customer to ensure full payment of open balances, and during fiscal 2019 has received an updated acknowledgment of the outstanding balances and assurances of payment from the customer. However, if the Company’s efforts to collect on this account are not successful, the Company may recognize an allowance for all, or substantially all, of any such then uncollected amounts. 

For the three months ended October 31, 2019, one individual customer accounted for 16% of the Company’s consolidated net sales, and during the same period in 2018, no individual customer accounted for more than 10% of the Company's consolidated net sales. For the nine months ended October 31, 2019, one customer accounted for 11% of the Company’s consolidated net sales, and during the same period in 2018, no individual customer accounted for more than 10% of the Company's consolidated net sales.

At October 31, 2019 and January 31, 2019, three customers collectively accounted for 29.8% and 39.4% of the Company's accounts receivable, respectively. 

7

Note 4 - Revenue recognition 

Revenue from contracts with customers:

The Company defines a contract as an agreement that has approval and commitment from both parties, defined rights and identifiable payment terms, which ensures the contract has commercial substance and that collectability is reasonably assured.

The Company’s standard revenue transactions are classified into two main categories:

1) Systems - which include all bundled products in which the Company designs, engineers, and manufactures pre-insulated specialty piping systems, insulates subsea flowline pipe, subsea oil production equipment, and land-lines. Additionally, this systems classification also includes coating applied to pipes and structures. 

2) Products - which include cables, leak detection products, heat trace products sold under the PermAlert brand name, material/goods not bundled with piping or flowline systems, and field services not bundled into a project contract.

In accordance with ASC 606-10-25-27 through 29, the Company recognizes specialty piping and coating systems revenue over time as the manufacturing process progresses because one of the following conditions exist:

1) the customer owns the material that is being insulated or coated, so the customer controls the asset and thus the work-in-process; or

2) the customer controls the work-in-process due to the custom nature of the pre-insulated, fabricated system being manufactured as evidenced by the Company’s right to payment for work performed to date plus seller’s profit margin for products that have no alternative use for the Company.

 Products revenue is recognized when goods are shipped or services are performed (ASC 606-10-25-30).

A breakdown of the Company's revenues by revenue class for the three and nine months ended October 31, 2019 and 2018 are as follows:

	Three Months Ended October 31,										Nine Months Ended October 31,
	2019					2018					2019					2018
	Sales		% to Total			Sales		% to Total			Sales		% to Total			Sales		% to Total
Products	$	2,448		7	%	$	4,439		14	%	$	13,205		14	%	$	9,447		10	%
Specialty Piping Systems and Coating
Revenue recognized under input method		14,363		42	%		11,869		36	%		38,601		40	%		32,778		35	%
Revenue recognized under output method		17,646		51	%		16,498		50	%		43,594		46	%		51,795		55	%
Total	$	34,457		100	%	$	32,806		100	%	$	95,400		100	%	$	94,020		100	%

8

The input method, as noted in ASC 606-10-55-20, is used by the U.S. operating entities to measure revenue by the costs incurred to date relative to the estimated costs to satisfy the contract using the percentage-of-completion method. Generally, these contracts are considered a single performance obligation satisfied over time and due to the custom nature of the goods and services, the percentage-of-completion method is the most faithful depiction of the Company’s performance as it measures the value of the goods and services transferred to the customer. Costs include all material, labor and direct costs incurred to satisfy the performance obligations of the contract. Revenue recognition begins when projects costs are incurred. 

The output method, as noted in ASC 606-10-55-17, is used by all other operating entities to measure revenue by the direct measurement of the outputs produced relative to the remaining goods promised under the contract. Due to the types of end customers, generally these contracts require formal inspection protocols or specific export documentation for units produced, or produced and shipped, therefore, the output method is the most faithful depiction of the Company’s performance. Depending on the conditions of the contract, revenue may be recognized based on units produced, inspected and held by the Company prior to shipment or on units produced, inspected and shipped. 

Some of the Company’s operating entities invoice and collect milestones or other contractual obligations prior to the transfer of goods and services, but do not recognize revenue until the performance obligations are satisfied under the methods discussed above. 

Contract modifications that occur prior to the start of the manufacturing process will supersede the original contract and revenue is recognized using the modified contract value. Contract modifications that occur during the manufacturing process (changes in scope of work, job performance, material costs, and/or final contract settlements) are recognized in the period in which the revisions are known. Provisions for losses on uncompleted contracts are made in contract liabilities account in the period such losses are identified.

Contract assets and liabilities:

Contract assets represent revenue recognized in excess of amounts billed (unbilled receivables) for contract work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Contract liabilities represent billings in excess of costs (unearned revenue) for contract work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Both customer billings and the satisfaction (or partial satisfaction) of the performance obligation(s) occur throughout the manufacturing process and impacts the period end balances in these accounts.

The Company anticipates that substantially all costs incurred for uncompleted contracts as of October 31, 2019 will be billed and collected within one year.

The following tables set forth the changes in the Company's contract assets and liabilities for the periods indicated. The Company expects to recognize the remaining balances as of October 31, 2019 within one year.

	Contract Assets
Balance January 31, 2019	$	1,653
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,038	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		1,368
Closing Balance at April 30, 2019	$	1,983
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,509	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		3,000
Closing Balance at July 31, 2019	$	3,474
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,799	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		2,688
Closing Balance at October 31, 2019	$	4,363

	Contract Liabilities
Balance January 31, 2019	$	1,569
Revenue recognized during the period for uncompleted contracts from the prior period		(444	)
New contracts entered into that are uncompleted at the end of the current period		721
Closing Balance at April 30, 2019	$	1,846
Revenue recognized during the period for uncompleted contracts from the prior period		(1,250	)
New contracts entered into that are uncompleted at the end of the current period		545
Closing Balance at July 31, 2019	$	1,141
Revenue recognized during the period for uncompleted contracts from the prior period		(774	)
New contracts entered into that are uncompleted at the end of the current period		984
Closing Balance at October 31, 2019	$	1,351

Practical expedients:

Costs to obtain a contract are not considered project costs as they are not usually incremental, nor does job duration span more than one year. The Company applies practical expedient for these types of costs and as such are expensed in the period incurred.

As the Company's contracts are less than one year, the Company has applied the practical expedient regarding disclosure of the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period.

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Note 5 - 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 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. 

The Company's effective tax rate ("ETR") from operations for the third quarter and year-to-date in fiscal 2019 was 109.3% and 45.7% compared to 116.3% and 122,166.4% during the respective prior year periods. The change in the ETR from the prior year quarter to the current year quarter is largely due to changes in the mix of income and loss in various jurisdictions. Additionally, the Company was near break-even in the prior year which resulted in a large impact on the overall rate. In the prior year the Company was accruing taxes in jurisdictions where it was generating income, while applying a valuation allowance in the U.S., which attributed to the unusually large ETR for that quarter.

The amount of unrecognized tax benefits, including interest and penalties at October 31, 2019, recorded in other long-term liabilities was $0.1 million, all of which would impact the Company’s ETR if recognized. 

The U.S. Tax Cuts and Jobs Act ("Tax Act") was enacted on December 22, 2017 and introduced significant changes to U.S. income tax law. The Tax Act reduced the U.S. statutory tax rate from 35% to 21%, effective January 1, 2018 and created new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax ("GILTI") and the base erosion anti-abuse tax, respectively. The Company currently projects a GILTI inclusion for fiscal 2019, but there is no impact on tax expense due to its offset by loss carryovers with a full valuation allowance applied against it. 

Note 6 - Impairment of long-lived assets

The Company's assessment of long-lived assets, and other identifiable intangibles is based upon factors that market participants would use in accordance with the accounting guidance for the fair value measurement of assets. The Company will continue testing for potential impairment at least annually or as otherwise required by applicable accounting standards. There was no impairment of long-lived assets for the three and nine months ended October 31, 2019 and 2018.

Goodwill. The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. All identifiable goodwill as of October 31, 2019 and January 31, 2019 was attributable to the purchase of Perma-Pipe Canada, Ltd., which occurred in 2016.

	January 31, 2019		Foreign exchange change effect			October 31, 2019
Goodwill	$	2,269	$	(5	)	$	2,264

The Company performs an impairment assessment of goodwill annually as of January 31, or more frequently if triggering events occur, based on the estimated fair value of the related reporting unit or intangible asset. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. There was no impairment of goodwill for the three and nine months ended October 31, 2019 and 2018.

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Note 7 - Stock-based compensation 

The Company’s 2017 Omnibus Stock Incentive Plan dated June 13, 2017, as amended, which the Company's stockholders approved in June 2017 ("2017 Plan"), is the only incentive stock plan under which new equity incentive awards may be granted.

The Company has prior incentive plans under which previously granted awards remain outstanding, but under which no new awards may be granted. At October 31, 2019 the Company had reserved a total of 694,989 shares for grants and issuances under these incentive stock plans, which includes a reserve for issuances pursuant to unvested or unexercised prior awards, and shares for new grants or issuances pursuant to the 2017 Plan.

While the 2017 Plan provides for the grant of deferred shares, non-qualified stock options, incentive stock options, restricted shares, restricted stock units, and performance-based restricted stock units intended to qualify under section 422 of the Internal Revenue Code, to date the Company has issued only restricted shares and restricted stock units under the 2017 Plan and currently intends to continue this practice. The 2017 Plan authorizes awards to officers, employees, consultants and independent directors.

The Company has stock-based compensation awards that can be granted to eligible employees, officers or independent directors. The following is the stock-based compensation expense:

	Three Months Ended October 31,				Nine Months Ended October 31,
	2019		2018		2019		2018
Stock-based compensation expense	$	2	$	5	$	10	$	28
Restricted stock-based compensation expense		224		283		776		971
Total stock-based compensation expense	$	226	$	288	$	786	$	999

Stock Options

The Company did not grant any stock options during the three or nine months ended October 31, 2019. The following tables summarizes the Company's stock option activity:

Option activity	No. of Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding (unvested) at January 31, 2019		218		$	8.60		3.8	$	257
Exercised		(47	)		6.87				100
Expired or forfeited		(26	)		7.07
Outstanding at October 31, 2019		145			9.03		3.4		167
Exercisable at October 31, 2019		143		$	9.07		3.3	$	163

The Company received approximately $0.3 million during the nine months ended October 31, 2019 for stock options exercised. 

Unvested option activity	No. of Shares Underlying Options			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding (unvested) at January 31, 2019		11		$	7.00	$	19
Vested		(7	)
Expired or forfeited		(2	)		7.07
Outstanding at October 31, 2019		2		$	7.33	$	5

11

As of October 31, 2019, there was less than $0.1 million of total unrecognized compensation expense related to unvested stock options. The expense is expected to be recognized over a weighted average period of 0.6 years.

Restricted stock

The following table summarizes the Company's restricted stock activity for the first nine months of fiscal 2019:

Restricted stock activity	Restricted Shares			Weighted Average Grant Price Per Share		Aggregate Intrinsic Value
Outstanding (unvested) at January 31, 2019		283		$	8.74	$	2,476
Granted		152			9.09
Vested and issued		(52	)		8.86
Forfeited or retired for taxes		(24	)		8.68
Outstanding (unvested) at October 31, 2019		359		$	8.98	$	3,229

As of October 31, 2019, there was $1.7 million of unrecognized compensation expense related to unvested restricted stock granted under the plans. That cost is expected to be recognized over a weighted average period of 2.3 years.

Note 8 - Earnings per share

	Three Months Ended October 31,				Nine Months Ended October 31,
	2019		2018		2019		2018
Basic weighted average common shares outstanding		8,037		7,877		7,970		7,806
Dilutive effect of equity compensation plans		—		—		77		—
Weighted average common shares outstanding assuming full dilution		8,037		7,877		8,047		7,806
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		68		176		68		176
Stock options with an exercise price below the average market price		77		91		77		91

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Note 9 - Debt

Debt totaled $16.3 million at October 31, 2019 and January 31, 2019, respectively.

Revolving lines North America. On September 20, 2018, the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the Company, the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”), providing for a three-year $18 million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”). The Senior Credit Facility replaced the Company’s then existing $15 million Credit and Security Agreement, dated September 24, 2014, among various subsidiaries of the Company and Bank of Montreal, as successor by assignment to BMO Harris Bank N.A., as amended (the “Prior Credit Agreement”).

The Company initially used borrowings under the Senior Credit Facility to pay off outstanding amounts under the Prior Credit Agreement (which totaled approximately USD $3,773,823 plus CAD 4,794,528) and a cash collateralized letter of credit (USD $154,500). The Company has used proceeds from the Senior Credit Facility for on-going working capital needs, and expects to continue using this facility to fund future capital expenditures, working capital needs and other corporate purposes. Borrowings under the Senior Credit Facility bear interest at a rate equal to an alternate base rate or London Interbank Offered Rate ("LIBOR"), plus, in each case, an applicable margin.  The applicable margin is based on average quarterly undrawn availability with respect to the Senior Credit Facility.  Interest on alternate base rate borrowings are generally payable monthly in arrears and interest on LIBOR borrowings are generally payable in arrears on the last day of each interest period.  Additionally, the Company is required to pay a 0.375% per annum facility fee on the unused portion of the Senior Credit Facility.  The facility fee is payable quarterly in arrears.

Subject to certain exceptions, borrowings under the Senior Credit Facility are secured by substantially all of the assets of the Company and certain of the assets of its North American subsidiaries. The North American Loan Parties’ obligations under the Senior Credit Facility are guaranteed by Perma-Pipe Canada, Inc. The Senior Credit Facility will mature on September 20, 2021. Subject to certain qualifications and exceptions, the Senior Credit Facility contains covenants that, among other things, restrict the North American Loan Parties’ ability to create liens, merge or consolidate, consummate acquisitions, make investments, dispose of assets, incur debt, and pay dividends and other distributions. In addition, the North American Loan Parties cannot allow capital expenditures to exceed $3.0 million annually (plus a limited carryover of unused amounts).

The Senior Credit Facility also contains financial covenants requiring (i) the North America Loan Parties to achieve a ratio of their EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility (excluding from the calculation items related to the financial performance of the Company’s foreign subsidiaries not party to the Credit Agreement) to be not less than 1.10 to 1.00 for the nine-month period ending April 30, 2019 and for the quarter ending July 31, 2019 and each quarter end thereafter on a trailing four-quarter basis; and (ii) the Company and its subsidiaries (including the Company’s foreign subsidiaries not party to the Credit Agreement) to achieve a ratio of their EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility of not less than 1.10 to 1.00 for each quarter end on a trailing four-quarter basis. The Company was in compliance with these requirements as of October 31, 2019. 

The Senior Credit Facility contains customary events of default. If an event of default occurs and is continuing, then PNC may terminate all commitments to extend further credit and declare all amounts outstanding under the Senior Credit Facility due and payable immediately. In addition, if any of the North American Loan Parties or certain of their subsidiaries become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Senior Credit Facility will automatically become immediately due and payable. Borrowings under the Senior Credit Facility will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate while a bankruptcy event of default exists or, upon the lenders’ request, during the continuance of any other event of default.

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As of October 31, 2019, the Company had borrowed an aggregate of $7.8 million at a rate of 7.75%, 5.80%, and 5.94% resulting in a weighted average rate of 6.01% and had $4.9 million available under the Senior Credit Facility. 

Revolving lines foreign. The Company also has credit arrangements used by its 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 require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends. On October 31, 2019 the Company was in compliance with the covenants under the credit arrangements. On October 31, 2019, interest rates were based on the Emirates Inter Bank Offered Rate (EIBOR) plus 3.5% per annum, with a minimum interest rate of 4.5% per annum. On October 31, 2019, the Company's interest rates ranged from 5.4% to 5.9%, with a weighted average rate of 5.74%, and the Company could borrow $9.0 million under these credit arrangements. On October 31, 2019, $5.2 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. On October 31, 2019, the Company had borrowed $0.9 million, and had an additional $2.9 million of borrowing remaining available. The foreign revolving lines balances as of October 31, 2019 and January 31, 2019, were included as current maturities of long-term debt in the Company's consolidated balance sheets. 

Mortgages. On July 28, 2016, the Company borrowed CAD 8.0 million (approximately USD $6.1 million at the prevailing exchange rate on the transaction date) from a bank in Canada under a mortgage note secured by the Company's manufacturing facility located in Alberta, Canada that matures on December 23, 2042. The interest rate is variable, currently at 6.05%, with monthly payments of CAD 37 thousand (approximately USD $28 thousand) for interest; and monthly payments of CAD 27 thousand (approximately USD $20 thousand) for principal. Principal payments began January 2018.

On June 19, 2012, the Company borrowed $1.8 million under a mortgage note secured by its manufacturing facility in Lebanon, Tennessee. The proceeds were used for payment of amounts borrowed. The loan bears interest at 4.5% with monthly payments of $13 thousand for both principal and interest and matures July 1, 2027. On June 19, 2022, and on the same day of each year thereafter, the interest rate shall adjust to the prime rate, provided that the applicable interest rate shall not adjust more than 2.0% per annum and shall be subject to a ceiling of 18.0% and a floor of 4.5%.

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Note 10 - Leases

Effective February 1, 2019, the Company accounts for its leases under ASC 842, Leases.  Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities short-term, and operating lease liabilities long-term in the Company's consolidated balance sheets. Finance leases are included in property, plant and equipment, current maturities of long-term debt, and long-term debt less current maturities in the Company's consolidated balance sheets. 

ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.  Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term.  For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense over the lease term.  For finance leases, interest on the lease liability and the amortization of the ROU asset results in front-loaded expense over the lease term.  Variable lease expenses are recorded when incurred. ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.

As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment.

In calculating the ROU asset and lease liability, the Company elects to combine lease and non-lease components.  The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term. 

The Company continues to account for leases in the prior period financial statements under ASC Topic 840.

Finance Leases. In 2017, the Company obtained three finance leases for CAD 1.1 million (approximately USD $0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases range from 4.0% to 7.8% per annum with monthly principal and interest payments of less than $0.1 million. These leases mature between April 2021 to September 2022.

In 2019, the Company obtained two finance leases for CAD 1.1 million (approximately USD $0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases were 8.0% per annum with monthly principal and interest payments of less than $0.1 million. These leases mature in August 2023. 

In August 2016, the Company obtained a finance lease for 0.6 million Indian Rupees (approximately USD $8 thousand at the prevailing exchange rate on the transaction date) to finance vehicle equipment. The interest rate for this finance lease was 15.6% per annum with monthly principal and interest payments of less than USD $1 thousand. This lease expired in July 2019. 

The Company has several significant operating lease agreements, with lease terms of one to 14 years, which consist of real estate, vehicles and office equipment leases. These leases do not require any contingent rental payments, impose any financial restrictions or contain any residual value guarantees.  Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and ROU assets as the Company is not reasonably certain to exercise the options.  Variable expenses generally represent the Company’s share of the landlord’s operating expenses.  The Company does not have any arrangements where it acts as a lessor, other than one sub-lease arrangement. 

At October 31, 2019, the Company had operating lease liabilities of $11.7 million and operating ROU assets of $11.7 million, which are reflected in the consolidated balance sheet. At October 31, 2019, the Company also had finance lease liabilities of $1.2 million included in current maturities of long-term debt and long-term debt less current maturities, and finance ROU assets of $1.2 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheet.

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Supplemental balance sheet information related to leases is as follows: 

Operating and Finance leases:	October 31, 2019
Finance leases assets:
Property and Equipment - gross	$	1,704
Accumulated depreciation and amortization		(502	)
Property and Equipment - net	$	1,202
Finance lease liabilities:
Finance lease liability short-term	$	411
Finance lease liability long-term		788
Total finance lease liabilities	$	1,199
Operating lease assets:
Operating lease ROU assets	$	11,717
Operating lease liabilities:
Operating lease liability short-term	$	1,130
Operating lease liability long-term		10,617
Total operating lease liabilities	$	11,747

Total lease costs consist of the following: 

Lease costs	Consolidated Statements of Operations Classification	Three Months Ended October 31, 2019			Nine Months Ended October 31, 2019
Finance Lease Costs
Amortization of ROU assets	Cost of sales	$	53		$	155
Interest on lease liabilities	Interest expense		18			36
Operating lease costs	Cost of sales, SG&A expenses		579			1,716
Short-term lease costs (1)	Cost of sales, SG&A expenses		140			401
Sub-lease income	SG&A expenses		(20	)		(61	)
Total Lease costs		$	770		$	2,247

(1) Includes variable lease costs, which are immaterial

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Supplemental cash flow information related to leases is as follows:

	Nine Months Ended October 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases	$	185
Operating cash flows from finance leases		36
Operating cash flows from operating leases		1,732

	Three Months Ended October 31, 2019
ROU Assets obtained in exchange for new lease obligations:
Finance leases liabilities	$	850
Operating leases liabilities		584

Weighted-average lease terms and discount rates are as follows: 

	October 31, 2019
Weighted-average remaining lease terms (in years):
Finance leases		3.2
Operating leases		9.0
Weighted-average discount rates:
Finance leases		7.7	%
Operating leases		8.3	%

Maturities of lease liabilities as of October 31, 2019, are as follows:

Year:	Operating Leases			Finance Leases
For the three months ended January 31, 2020	$	569		$	122
For the year ended January 31, 2021		2,313			488
For the year ended January 31, 2022		2,213			332
For the year ended January 31, 2023		2,146			270
For the year ended January 31, 2024		1,967			145
For the year ended January 31, 2025		1,252			-
Thereafter		6,656			-
Total lease payments		17,116			1,357
Less: amount representing interest		(5,369	)		(158	)
Total lease liabilities at October 31, 2019	$	11,747		$	1,199

Rent expense on operating leases, which is recorded on straight-line basis, was $0.7 million for the three months ended October 31, 2019 and 2018, and $2.0 million for the nine months ended October 31, 2019 and 2018, respectively. 

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Note 11 - Restricted cash

Restricted cash held by foreign subsidiaries was $1.1 million for both October 31, 2019 and January 31, 2019 and is related to fixed deposits that also serve as security deposits and guarantees. 

	Nine Months Ended October 31,
	2019		2018
Cash and cash equivalents	$	12,221	$	9,582
Restricted cash		1,138		2,536
Cash, cash equivalents and restricted cash shown in the statement of cash flows	$	13,359	$	12,118

Note 12 - Fair value

The carrying values of cash and cash equivalents, accounts receivable and accounts payable are reasonable estimates of their fair value due to their short-term nature. The carrying amount of the Company's short-term debt, revolving line of credit and long-term debt approximate fair value because the majority of the amounts outstanding accrue interest at variable market rates.

Note 13 - Recent accounting pronouncements

In February 2016, the FASB issued Accounting Standard Update ("ASU") 2016-02, Leases (Topic 842). This ASU requires entities to recognize assets and liabilities for most leases on their balance sheets. It also requires additional qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted.  The adoption of this ASU using the alternative transition approach resulted in the recognition of operating lease ROU assets, net of deferred rent of $10.7 million and lease liability for operating leases of $11.0 million as of February 1, 2019. The Company accounts for existing finance lease assets and liabilities in the same way under the new standard.  Adoption of this ASU did not have an effect on retained earnings. The Company availed itself of the practical expedients provided under this ASU and its subsequent amendments regarding identification of leases, lease classification, indirect costs and the combination of lease and non-lease components. The Company continues to account for leases in the prior period financials statements under ASC Topic 840.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. A recently adopted amendment has delayed the effective date until fiscal years beginning after December 15, 2022. The Company is currently evaluating this standard and the impact to the financial statements of the Company. 

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits entities to reclassify the disproportionate income tax effects of the Tax Act on items within accumulated other comprehensive income/(loss) to reinvested earnings. These disproportionate income tax effect items are referred to as "stranded tax effects." The amendments in this update only relate to the reclassification of the income tax effects of the Tax Reform Act. Other accounting guidance that requires the effect of changes in tax laws or rates to be included in net income from continuing operations is not affected by this update. The Company adopted ASU 2018-02 effective February 1, 2019 and has elected to not reclassify any amounts to retained earnings. Under the Company's existing policy, any existing stranded tax effects will be eliminated when the underlying circumstances upon which it was premised cease to exist.   

The Company evaluated other recent accounting pronouncements and does not expect them to have a material impact on its consolidated financial statements or related disclosures.

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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. 

This MD&A should be read in conjunction with the Company’s consolidated financial statements, including the notes thereto, contained elsewhere in this report. Percentages set forth below in the MD&A have been rounded to the nearest percentage point, and may not exactly correspond to the comparative data presented.

RESULTS OF OPERATIONS

The Company is engaged in the manufacture and sale of products in one reportable segment. Since the Company focuses on large discrete projects, operating results could be significantly impacted in the future as a result of large variations in the level of project activity in reporting periods.

($ in thousands)	Three Months Ended October 31,																Nine Months Ended October 31,
	2019					2018					Change favorable/(unfavorable)						2019					2018					Change favorable/(unfavorable)
	Amount		Percent of Net Sales			Amount		Percent of Net Sales			Amount			Percent			Amount		Percent of Net Sales			Amount		Percent of Net Sales			Amount			Percent
Net sales	$	34,457				$	32,806				$	1,651			5	%	$	95,400				$	94,020				$	1,380			1	%
Gross profit		7,643		22	%		6,883		21	%		760			11	%		22,018		23	%		17,001		18	%		5,017			30	%
General and administrative expenses		4,541		13	%		4,247		13	%		(294	)		(7	)%		13,556		14	%		12,153		13	%		(1,403	)		(12	)%
Selling expense		1,354		4	%		1,554		5	%		200			13	%		4,030		4	%		4,017		4	%		(13	)		(0	)%
Interest expense, net		194					280					86			31	%		612					830					218			26	%
Income/(loss) from operations before income taxes		1,554					802					752						3,820					1					3,819

Three months ended October 31, 2019 ("current quarter") vs. Three months ended October 31, 2018 ("prior year quarter")

Net sales:

Net sales increased $1.7 million to $34.5 million in the current quarter, from $32.8 million in the prior year quarter. Higher revenues resulted from the Middle East region partially offset by lower revenue in North America, primarily driven by a temporary weakness in our Canadian operations. 

Cost of sales and gross profit:

Gross profit increased to $7.6 million, or 22% of net sales, in the current quarter from $6.9 million, or 21% of net sales, in the prior year quarter. This 11% increase in gross profit was driven by improved pricing, product mix and cost reduction initiatives. The cost reduction initiatives include sourcing raw material at favorable prices and focusing efforts on quality improvements. 

General and administrative expenses:

General and administrative expenses increased to $4.5 million in the current quarter, compared to $4.2 million in the prior year quarter. This increase of $0.3 million was primarily due to costs related to realignment of head office functions. 

Selling expenses:

Selling expenses reduced to $1.4 million in the current quarter, compared to $1.6 million in the prior year quarter. This decrease was due to a new sales compensation program.

Interest expense:

Net interest expense decreased to $0.2 million in the current quarter from $0.3 million in the prior year quarter due to lower borrowings. 

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Income from operations before income taxes:

Income from operations before income taxes increased by $0.8 million to $1.6 million in the current quarter from $0.8 million in the prior year quarter.This increase was due to increased revenue and improved margins.  

Nine months ended October 31, 2019 ("year-to-date") vs. Nine months ended October 31, 2018 ("prior year year-to-date")

Net sales:

Net sales increased $1.4 million to $95.4 million in the current year-to-date, from $94.0 million in the prior year year-to-date. The overall revenue increase resulted from higher revenues in the Middle East region and the Company's leak detection systems, partially offset by lower revenues of the Company's traditional coating revenues in North America, primarily driven by a temporary weakness in our Canadian operations.      

Cost of sales and gross profit:

Gross profit increased to $22.0 million, or 23% of net sales, in the current year-to-date from $17.0 million, or 18% of net sales, in the prior year year-to-date. This 30% increase in gross profit was driven by improved pricing, product mix and cost reduction initiatives. The cost reduction initiatives include sourcing raw material at favorable prices and focusing efforts on quality improvements. 

General and administrative expenses:

General and administrative expenses increased to $13.6 million in the current year-to-date, compared to $12.2 million in the prior year year-to-date. This was due to increased compensation expenses and loss on disposal of an asset, partially offset by collection of a previously reserved bad debt.

Selling expenses:

Selling expenses remained relatively flat at $4.0 million in the current year-to-date, compared to $4.0 million in the prior year year-to-date.

Interest expense:

Net interest expense decreased to $0.6 million in the current year-to-date from $0.8 million in the prior year year-to-date due to lower borrowings. 

Income/(loss) from operations before income taxes:

Income from operations before income taxes increased $3.8 million in the current year-to-date from less than $0.1 million in the prior year year-to-date. This increase was due to increased revenue and improved margins.

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Income taxes: 

The Company's effective tax rate ("ETR") from operations for the third quarter and year-to-date 2019 was 109.3% and 45.7% compared to 116.3% and 122,166.4% during the respective prior year periods in 2018. The change in the ETR from the prior year quarter to the current year quarter was largely due to changes in the mix of income and loss in various jurisdictions. Additionally, the Company was near break-even in the prior year which resulted in a large impact on the overall rate. In the prior year, the Company was accruing taxes in jurisdictions where they were generating income, while applying a valuation allowance in the U.S., which attributed to the unusually large ETR for that quarter. For additional information, see "Notes to Consolidated Financial Statements, Note 5 Income taxes".

Other 

In February 2017, the Company made a bid to provide insulation of pipes to the East Africa Crude Oil Pipeline ("EACOP") project. The EACOP project is a 1,450 Km (900 mile) long heavy crude oil pipeline from the Lake Albert Basin in Uganda to the Tanga port in Tanzania being developed by Total E&P, a French oil company, China National Offshore Oil Corporation and Tullow Oil, a London-based oil company (collectively, the "EACOP Project Entities"). 

On September 3, 2019, the Company received notice that the EACOP project had been suspended.  According to news reports, the EACOP Project Entities have not reached an ownership agreement as tax negotiations have stalled.  As a consequence, the EACOP project has been suspended while the project’s partners and the Ugandan government continue to pursue a potential agreement.

Liquidity and capital resources

Cash and cash equivalents as of October 31, 2019 were $12.2 million compared to $10.2 million on January 31, 2019. On October 31, 2019, $0.4 million was held in the U.S., and $11.8 million was held at the Company's foreign subsidiaries. From time to time, the Company repatriates cash held at certain of its foreign subsidiaries as needed to help fund the Company's working capital needs. The Company's working capital was $28.2 million on October 31, 2019 compared to $25.9 million on January 31, 2019, due to cash flows from operations.

Cash provided by operating activities year-to-date was $2.8 million, and cash used in operating activities for the prior year year-to-date was $0.6 million. This improvement was primarily due to the Company being in a net income position year-to-date compared to a loss position during the prior year year-to-date. Net cash used in investing activities year-to-date and prior year year-to-date was $1.4 million and $0.9 million, respectively. This was due to an increase in investments in fixed assets needed for the operation of the business.

Net cash used in financing activities year-to-date was $0.8 million, and cash provided by financing activities for the prior year year-to-date was $5.9 million. The primary reason for this change is that during the prior year year-to-date our borrowings exceeded our repayments under our revolving credit facility by approximately $7.0 million, whereas year-to-date, repayments exceeded borrowings by approximately $0.3 million. Debt totaled $16.3 million on October 31, 2019  and January 31, 2019, respectively. For additional information, see "Notes to Consolidated Financial Statements, Note 9 Debt".

21

On September 20, 2018, the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the Company, the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”), providing for a three-year $18 million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”). 

The Company has used proceeds from the Senior Credit Facility to pay outstanding amounts under a prior credit facility, a cash collateralized letter of credit, and for on-going working capital needs, and expects to continue using this facility to fund future capital expenditures, working capital needs and other corporate purposes. Borrowings under the Senior Credit Facility bear interest at a rate equal to an alternate base rate or London Interbank Offered Rate ("LIBOR"), plus, in each case, an applicable margin.  The applicable margin is based on average quarterly undrawn availability with respect to the Senior Credit Facility.  Interest on alternate base rate borrowings are generally payable monthly in arrears and interest on LIBOR borrowings are generally payable in arrears on the last day of each interest period.  Additionally, the Company is required to pay a 0.375% per annum facility fee on the unused portion of the Senior Credit Facility.  The facility fee is payable quarterly in arrears.

Subject to certain exceptions, borrowings under the Senior Credit Facility are secured by substantially all of the assets of the Company and certain of assets of its North American subsidiaries. The North American Loan Parties’ obligations under the Senior Credit Facility are guaranteed by Perma-Pipe Canada, Inc. The Senior Credit Facility will mature on September 20, 2021. Subject to certain qualifications and exceptions, the Senior Credit Facility contains covenants that, among other things, restrict the North American Loan Parties’ ability to create liens, merge or consolidate, consummate acquisitions, make investments, dispose of assets, incur debt, and pay dividends and other distributions. In addition, the North American Loan Parties cannot allow capital expenditures to exceed $3.0 million annually (plus a limited carryover of unused amounts).

The Senior Credit Facility also contains financial covenants requiring (i) the North America Loan Parties to achieve a ratio of their EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility (excluding from the calculation items related to the financial performance of the Company’s foreign subsidiaries not party to the Credit Agreement) to be not less than 1.10 to 1.00 for the nine-month period ending April 30, 2019 and for the quarter ending July 31, 2019 and each quarter end thereafter on a trailing four-quarter basis; and (ii) the Company and its subsidiaries (including the Company’s foreign subsidiaries not party to the Credit Agreement) to achieve a ratio of their EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility of not less than 1.10 to 1.00 for each quarter end on a trailing four-quarter basis. The Company was in compliance with these requirements as of October 31, 2019.

22

The Senior Credit Facility contains customary events of default. If an event of default occurs and is continuing, then PNC may terminate all commitments to extend further credit and declare all amounts outstanding under the Senior Credit Facility due and payable immediately. In addition, if any of the North American Loan Parties or certain of their subsidiaries become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Senior Credit Facility will automatically become immediately due and payable. Borrowings under the Senior Credit Facility will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate while a bankruptcy event of default exists or, upon the lenders’ request, during the continuance of any other event of default.

As of October 31, 2019, the Company had borrowed an aggregate of $7.8 million at a rate of 7.75%, 5.80%, and 5.94% resulting in a weighted average rate of 6.01%. The Company had $4.9 million available under the Senior Credit Facility. 

Revolving lines foreign. The Company also has credit arrangements used by its 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 require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends. On October 31, 2019, the Company was in compliance with all of its covenants. On October 31, 2019, interest rates were based on the Emirates Inter Bank Offered Rate (EIBOR) plus 3.5% per annum, with a minimum interest rate of 4.5% per annum. On October 31, 2019, the Company's interest rates ranged from 5.4% to 5.9%, with a weighted average rate of 5.74%, and the Company could borrow $9.0 million under these credit arrangements. On October 31, 2019, $5.2 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. On October 31, 2019, the Company had borrowed $0.9 million, and had an additional $2.9 million available. The foreign revolving lines balances as of October 31, 2019 and January 31, 2019, were included as current maturities of long-term debt in the Company's consolidated balance sheets. 

Mortgages. On July 28, 2016, the Company borrowed CAD 8.0 million (approximately USD $6.1 million at the prevailing exchange rate on the transaction date) from a bank in Canada under a mortgage note secured by the manufacturing facility located in Alberta, Canada that matures on December 23, 2042. The interest rate is variable, currently at 6.05%, with monthly payments of CAD 37 thousand (approximately USD $28 thousand) for interest; and monthly payments of CAD 27 thousand (approximately USD $20 thousand) for principal. Principal payments began January 2018.

On June 19, 2012, the Company borrowed $1.8 million under a mortgage note secured by its manufacturing facility in Lebanon, Tennessee. The proceeds were used for payment of amounts borrowed. The loan bears interest at 4.5% with monthly payments of $13 thousand for both principal and interest and matures July 1, 2027. On June 19, 2022, and on the same day of each year thereafter, the interest rate shall adjust to the prime rate, provided that the applicable interest rate shall not adjust more than 2.0% per annum and shall be subject to a ceiling of 18.0% and a floor of 4.5%.

Finance Leases. In 2017, the Company obtained three finance leases for CAD 1.1 million (approximately USD $0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases were from 4.0% to 7.8% per annum with monthly principal and interest payments of less than $0.1 million. These leases mature from April 30, 2021 to September 29, 2022.

In 2019, the Company obtained two finance leases for CAD 1.1 million (approximately USD $0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases were 8.0% per annum with monthly principal and interest payments of less than $0.1 million. These leases mature in August 2023. 

Accounts receivable: 

In 2013, the Company started a project in the Middle East as a sub-contractor, with billings in the aggregate amount of approximately $41.9 million. The Company completed all of its deliverables in 2015, and has since then collected approximately $37.7 million as of October 31, 2019, with a remaining balance due in the amount of $4.2 million. Included in this balance is an amount of $3.7 million, which pertains to retention clauses within the agreements of the Company's customer (contractor), and which become payable by the customer when this project is fully tested and commissioned. In the absence of a firm date for the final commissioning of the project, and due to the long-term nature of this receivable, $3.5 million of this retention amount was reclassified to a long-term receivable account.

The Company has been engaged in ongoing active efforts to collect the outstanding amount, and collected $0.5 million during the nine months ended October 31, 2019. During fiscal 2019, the Company has received an updated acknowledgment of the outstanding balances and assurances of payment from the customer. As a result, the Company did not reserve any allowance against this amount as of October 31, 2019. However, if the Company’s efforts to collect on this account are not successful, the Company may recognize an allowance for all, or substantially all, of any such then uncollected amounts.

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, 2019 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 the 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.

23

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of October 31, 2019. Based upon the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  The Company's management, including its Chief Executive Officer and Chief Financial Officer, have further concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

Changes in Internal Controls

There were no changes in our internal control over financial reporting during our most recent quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

24

PART II OTHER INFORMATION

Item 6. Exhibits

31.1	Rule 13a - 14(a)/15d - 14(a) Certifications (1) Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Rule 13a - 14(a)/15d - 14(a) Certifications (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

25

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.

		Perma-Pipe International Holdings, Inc.
Date:	December 10, 2019	/s/ David J. Mansfield
		David J. Mansfield
		President and Chief Executive Officer
		(Principal Executive Officer)
Date:	December 10, 2019	/s/ D. Bryan Norwood
		D. Bryan Norwood
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

26

EX-31.1

Exhibit 31.1

I, David J. Mansfield, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Perma-Pipe International Holdings, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with the respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 10, 2019

/s/ David J. Mansfield

David J. Mansfield

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

I, D. Bryan Norwood, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Perma-Pipe International Holdings, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with the respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 10, 2019

/s/ D. Bryan Norwood

D. Bryan Norwood 

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 Perma-Pipe International Holdings, Inc.. (the “Registrant’), certify that, to the best of their knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended October 31, 2019 of the Registrant, (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ David J. Mansfield

David J. Mansfield

President and Chief Executive Officer

(Principal Executive Officer)

/s/ D. Bryan Norwood

D. Bryan Norwood

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

December 10, 2019

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

XML

Note 11 - Restricted Cash

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Cash and Cash Equivalents Disclosure [Text Block]

Note

11

 - Restricted cash

Restricted cash held by foreign subsidiaries was

$1.1

 million for both 

October 31, 2019

and

January 31, 2019

 and is related to fixed deposits that also serve as security deposits and guarantees. 

	Nine Months Ended October 31,
	2019		2018
Cash and cash equivalents	$	12,221	$	9,582
Restricted cash		1,138		2,536
Cash, cash equivalents and restricted cash shown in the statement of cash flows	$	13,359	$	12,118

XML

Note 7 - Stock-based Compensation

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note

7

- Stock-based compensation 

The Company’s

2017

Omnibus Stock Incentive Plan dated

June 13, 2017,

as amended, which the Company's stockholders approved in

June 2017 (

"2017

Plan"), is the only incentive stock plan under which new equity incentive awards

may

be granted.

The Company has prior incentive plans under which previously granted awards remain outstanding, but under which

no

new awards

may

be granted. At

October 31, 2019

the Company had reserved a total of

694,989

shares for grants and issuances under these incentive stock plans, which includes a reserve for issuances pursuant to unvested or unexercised prior awards, and shares for new grants or issuances pursuant to the

2017

Plan.

While the

2017

Plan provides for the grant of deferred shares, non-qualified stock options, incentive stock options, restricted shares, restricted stock units, and performance-based restricted stock units intended to qualify under section

422

of the Internal Revenue Code, to date the Company has issued only restricted shares and restricted stock units under the

2017

Plan and currently intends to continue this practice. The

2017

Plan authorizes awards to officers, employees, consultants and independent directors.

The Company has stock-based compensation awards that can be granted to eligible employees, officers or independent directors. The following is the stock-based compensation expense:

	Three Months Ended October 31,				Nine Months Ended October 31,
	2019		2018		2019		2018
Stock-based compensation expense	$	2	$	5	$	10	$	28
Restricted stock-based compensation expense		224		283		776		971
Total stock-based compensation expense	$	226	$	288	$	786	$	999

Stock Options

The Company did

not

grant any stock options during the

three

or 

nine

months ended

October 31, 2019

. The following tables summarizes the Company's stock option activity:

Option activity	No. of Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding (unvested) at January 31, 2019		218		$	8.60		3.8	$	257
Exercised		(47	)		6.87				100
Expired or forfeited		(26	)		7.07
Outstanding at October 31, 2019		145			9.03		3.4		167
Exercisable at October 31, 2019		143		$	9.07		3.3	$	163

The Company received approximately

$0.3

 million during the 

nine

months ended

October 31, 2019

 for stock options exercised. 

Unvested option activity	No. of Shares Underlying Options			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding (unvested) at January 31, 2019		11		$	7.00	$	19
Vested		(7	)
Expired or forfeited		(2	)		7.07
Outstanding at October 31, 2019		2		$	7.33	$	5

As of

October 31, 2019

, there was less than $

0.1

million of total unrecognized compensation expense related to unvested stock options. The expense is expected to be recognized over a weighted average period of 

0.6

years.

Restricted stock

The following table summarizes the Company's restricted stock activity for the

first

nine

months of fiscal

2019:

Restricted stock activity	Restricted Shares			Weighted Average Grant Price Per Share		Aggregate Intrinsic Value
Outstanding (unvested) at January 31, 2019		283		$	8.74	$	2,476
Granted		152			9.09
Vested and issued		(52	)		8.86
Forfeited or retired for taxes		(24	)		8.68
Outstanding (unvested) at October 31, 2019		359		$	8.98	$	3,229

A

s of

October 31, 2019

, there was

$1.7

million of unrecognized compensation expense related to unvested restricted stock granted under the plans. That cost is expected to be recognized over a weighted average period of

2.3

 years.

XML

Note 3 - Accounts Receivable

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note

3

- Accounts receivable

The majority of the Company's accounts receivable are due from geographically dispersed contractors and manufacturing companies. Credit is extended based on an evaluation of a customer's financial condition, including the availability of credit insurance. In the U.S., collateral is

not

generally required. In the United Arab Emirates and Saudi Arabia, letters of credit are usually obtained for significant orders. Accounts receivable are due within various time periods specified in the terms applicable to the specific customer and are stated at amounts due from customers net of an allowance for claims and doubtful accounts. The allowance for doubtful accounts is based on specifically identified amounts in customers' accounts, where future collectability is deemed uncertain. Management

may

exercise its judgment in adjusting the provision as a consequence of known items, such as current economic factors and credit trends. Past due trade accounts receivable balances are written off when the Company's collection efforts have been unsuccessful in collecting the amount due and the amount is deemed uncollectible. The write-off is recorded against the allowance for doubtful accounts. 

One of the Company’s accounts receivable in the total amount of $

4.7

million

as of

January 31, 2019

has been outstanding for several years. Included in this balance is a retention receivable amount of $

3.7

million, of which, due to the long-term nature of the receivable, $

3.5

 million was included in the balance of other long-term assets

as of

October 31, 2019

and

January 31, 2019

.The Company completed all of its deliverables in

2015

under the related contract, and has been engaged in ongoing active efforts to collect this outstanding amount. During the

first

nine

 months of fiscal

2019

the Company received $

0.5

 million, thus reducing this balance to $

4.2

 million

as of

October 31, 2019

. As a result, the Company did

not

reserve any allowance against this receivable

as of

October 31, 2019

. The Company continues to engage with the customer to ensure full payment of open balances, and during fiscal

2019

 has received an updated acknowledgment of the outstanding balances and assurances of payment from the customer. However, if the Company’s efforts to collect on this account are

not

successful, the Company

may

recognize an allowance for all, or substantially all, of any such then uncollected amounts. 

For the

three

months ended 

October 31, 2019

 

one

individual customer accounted for 

16%

of the Company’s consolidated net sales, and during the same period in

2018,

 

no

individual customer accounted for more than

10%

of the Company's consolidated net sales. For the

nine

months ended 

October 31, 2019

one

 customer accounted for

11%

 of the Company’s consolidated net sales, and during the same period in

2018,

 

no

individual customer accounted for more than

10%

of the Company's consolidated net sales

At 

October 31, 2019

and

January 31, 2019

, 

three

customers collectively accounted for

29.8%

 and 

39.4%

of the Company's accounts receivable, respectively. 

XML

Note 6 - Impairment of Long-lived Assets (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Oct. 31, 2019	Oct. 31, 2018
Impairment of Long-Lived Assets Held-for-use	$ 0	$ 0	$ 0	$ 0
Goodwill, Impairment Loss	$ 0	$ 0	$ 0	$ 0

XML

Note 7 - Stock-based Compensation - Stock Option Activity (Details) - Share-based Payment Arrangement, Option [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended	12 Months Ended
	Oct. 31, 2019	Jan. 31, 2019
Outstanding at beginning of period (in shares)	218
Outstanding at beginning of period, weighted average exercise price (in dollars per share)	$ 8.60
Outstanding weighted average remaining contractual term (Year)	3 years 146 days	3 years 292 days
Outstanding at beginning of period, aggregate intrinsic value	$ 257
Exercised (in shares)	(47)
Exercised, weighted average exercise price (in dollars per share)	$ 6.87
Exercised, aggregate intrinsic value	$ 100
Expired or forfeited (in shares)	(26)
Expired or forfeited, weighted average exercise price (in dollars per share)	$ 7.07
Outstanding at end of period (in shares)	145	218
Outstanding at end of period, weighted average exercise price (in dollars per share)	$ 9.03	$ 8.60
Outstanding at end of period, aggregate intrinsic value	$ 167	$ 257
Exercisable at end of period (in shares)	143
Exercisable at end of period, weighted average exercise price (in dollars per share)	$ 9.07
Exercisable at end of period, weighted average remaining contractual term (Year)	3 years 109 days
Exercisable at end of period, aggregate intrinsic value	$ 163

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) shares in Thousands, $ in Thousands	Oct. 31, 2019	Jan. 31, 2019
Allowance for doubtful accounts receivable	$ 355	$ 536
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	50,000	50,000
Common stock, issued (in shares)	8,042	7,854
Common stock, outstanding (in shares)	8,042	7,854

XML

Document And Entity Information - shares	9 Months Ended
	Oct. 31, 2019	Dec. 05, 2019
Document Information [Line Items]
Entity Registrant Name	Perma-Pipe International Holdings, Inc.
Entity Central Index Key	0000914122
Trading Symbol	ppih
Current Fiscal Year End Date	--01-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		8,041,806
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Oct. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false
Title of 12(b) Security	Common Stock

XML

Note 2 - Business Segment Reporting

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

2

- Business segment reporting

The Company is engaged in the manufacture and sale of products in

one

segment: Piping Systems. The Company engineers, designs, manufactures and sells specialty piping systems, and leak detection systems. Specialty piping systems include: (i) insulated and jacketed district heating and cooling piping systems for efficient energy distribution from central energy plants to multiple locations, (ii) primary and secondary containment piping systems for transporting chemicals, hazardous fluids and petroleum products, and (iii) the coating and/or insulation of oil and gas gathering and transmission pipelines. The Company's leak detection systems are sold with its piping systems or on a stand-alone basis, to monitor areas where fluid intrusion

may

contaminate the environment, endanger personal safety, cause a fire hazard, impair essential services or damage equipment or property.

XML

Note 10 - Leases - Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands	Oct. 31, 2019	Jan. 31, 2019
Property and Equipment - net	$ 29,357	$ 30,398
Finance lease liability short-term	411
Finance lease liability long-term	788
Total finance lease liabilities	1,199
Operating lease right-of-use asset	11,717
Operating lease liability short-term	1,130
Operating lease liability long-term	10,617
Total operating lease liabilities	11,747
Finance Leases Assets [Member]
Property and Equipment - gross	1,704
Accumulated depreciation and amortization	(502)
Property and Equipment - net	$ 1,202

XML

Note 10 - Leases - Maturities of Lease Liabilities (Details) $ in Thousands	Oct. 31, 2019 USD ($)
For the three months ended January 31, 2020, operating leases	$ 569
For the three months ended January 31, 2020, finance leases	122
For the year ended January 31, 2021, operating leases	2,313
For the year ended January 31, 2021, finance leases	488
For the year ended January 31, 2022, operating leases	2,213
For the year ended January 31, 2022, finance leases	332
For the year ended January 31, 2023, operating leases	2,146
For the year ended January 31, 2023, finance leases	270
For the year ended January 31, 2024, operating leases	1,967
For the year ended January 31, 2024, finance leases	145
For the year ended January 31, 2025, operating leases	1,252
For the year ended January 31, 2025, finance leases
Thereafter, operating leases	6,656
Thereafter, finance leases
Total lease payments, operating leases	17,116
Total lease payments, finance leases	1,357
Less: amount representing interest, operating leases	(5,369)
Less: amount representing interest, finance leases	(158)
Total lease liabilities, operating leases	11,747
Total lease liabilities, finance leases	$ 1,199

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Note 11 - Restricted Cash (Tables)

9 Months Ended

Oct. 31, 2019

Notes Tables

Restrictions on Cash and Cash Equivalents [Table Text Block]

	Nine Months Ended October 31,
	2019		2018
Cash and cash equivalents	$	12,221	$	9,582
Restricted cash		1,138		2,536
Cash, cash equivalents and restricted cash shown in the statement of cash flows	$	13,359	$	12,118

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Note 6 - Impairment of Long-lived Assets (Tables)

9 Months Ended

Oct. 31, 2019

Notes Tables

Schedule of Goodwill [Table Text Block]

	January 31, 2019		Foreign exchange change effect			October 31, 2019
Goodwill	$	2,269	$	(5	)	$	2,264

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Note 10 - Leases (Details Textual) $ in Thousands, ₨ in Millions, $ in Millions		3 Months Ended		9 Months Ended		12 Months Ended
	Aug. 05, 2016 USD ($)	Oct. 31, 2019 USD ($)	Oct. 31, 2018 USD ($)	Oct. 31, 2019 USD ($)	Oct. 31, 2018 USD ($)	Jan. 31, 2017 USD ($)	Oct. 31, 2019 CAD ($)	Jan. 31, 2019 USD ($)	Jan. 31, 2017 CAD ($)	Aug. 05, 2016 INR (₨)
Finance Lease, Right-of-Use Asset		$ 1,200		$ 1,200
Operating Lease, Liability, Total		11,747		11,747
Operating Lease, Right-of-Use Asset		11,717		11,717
Finance Lease, Liability, Total		1,199		1,199
Operating Lease, Expense		$ 700	$ 700	$ 2,000	$ 2,000
Minimum [Member]
Lessee, Operating Lease, Term of Contract		1 year		1 year			1 year
Maximum [Member]
Lessee, Operating Lease, Term of Contract		14 years		14 years			14 years
Finance Vehicle Equipment, One [Member]
Finance Lease, Right-of-Use Asset		$ 800		$ 800		$ 800	$ 1.1		$ 1.1
Interest Rate for Finance Lease				8.00%
Finance Lease, Principal Payments and Interest Payment on Liability				$ 100
Finance Vehicle Equipment, One [Member] | Minimum [Member]
Interest Rate for Finance Lease						4.00%
Finance Vehicle Equipment, One [Member] | Maximum [Member]
Interest Rate for Finance Lease						7.80%
Finance Lease, Principal Payments and Interest Payment on Liability						$ 100
Finance Vehicle Equipment, Two [Member]
Finance Lease, Right-of-Use Asset	$ 8									₨ 0.6
Interest Rate for Finance Lease	15.60%
Finance Vehicle Equipment, Two [Member] | Maximum [Member]
Finance Lease, Principal Payments and Interest Payment on Liability	$ 1

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Note 10 - Leases - Weighted-average Lease Terms and Discount Rates (Details)	Oct. 31, 2019
Finance leases (Year)	3 years 73 days
Operating leases (Year)	9 years
Finance leases	7.70%
Operating leases	8.30%

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Note 2 - Business Segment Reporting (Details Textual)	9 Months Ended
	Oct. 31, 2019
Number of Reportable Segments	1

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Note 7 - Stock-based Compensation (Tables)

9 Months Ended

Oct. 31, 2019

Notes Tables

Share-based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block]

	Three Months Ended October 31,				Nine Months Ended October 31,
	2019		2018		2019		2018
Stock-based compensation expense	$	2	$	5	$	10	$	28
Restricted stock-based compensation expense		224		283		776		971
Total stock-based compensation expense	$	226	$	288	$	786	$	999

Share-based Payment Arrangement, Option, Activity [Table Text Block]

Option activity	No. of Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding (unvested) at January 31, 2019		218		$	8.60		3.8	$	257
Exercised		(47	)		6.87				100
Expired or forfeited		(26	)		7.07
Outstanding at October 31, 2019		145			9.03		3.4		167
Exercisable at October 31, 2019		143		$	9.07		3.3	$	163

Schedule of Nonvested Share Activity [Table Text Block]

Unvested option activity	No. of Shares Underlying Options			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding (unvested) at January 31, 2019		11		$	7.00	$	19
Vested		(7	)
Expired or forfeited		(2	)		7.07
Outstanding at October 31, 2019		2		$	7.33	$	5

Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]

Restricted stock activity	Restricted Shares			Weighted Average Grant Price Per Share		Aggregate Intrinsic Value
Outstanding (unvested) at January 31, 2019		283		$	8.74	$	2,476
Granted		152			9.09
Vested and issued		(52	)		8.86
Forfeited or retired for taxes		(24	)		8.68
Outstanding (unvested) at October 31, 2019		359		$	8.98	$	3,229

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Note 8 - Earnings Per Share

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

8

- Earnings per share

	Three Months Ended October 31,				Nine Months Ended October 31,
	2019		2018		2019		2018
Basic weighted average common shares outstanding		8,037		7,877		7,970		7,806
Dilutive effect of equity compensation plans		—		—		77		—
Weighted average common shares outstanding assuming full dilution		8,037		7,877		8,047		7,806
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		68		176		68		176
Stock options with an exercise price below the average market price		77		91		77		91

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Note 4 - Revenue Recognition

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

Note

4

- Revenue recognition 

Revenue from contracts with customers:

The Company defines a contract as an agreement that has approval and commitment from both parties, defined rights and identifiable payment terms, which ensures the contract has commercial substance and that collectability is reasonably assured.

The Company’s standard revenue transactions are classified into

two

main categories:

1 ) Systems - which include all bundled products in which the Company designs, engineers, and manufactures pre-insulated specialty piping systems, insulates subsea flowline pipe, subsea oil production equipment, and land-lines. Additionally, this systems classification also includes coating applied to pipes and structures. 

2 ) Products - which include cables, leak detection products, heat trace products sold under the PermAlert brand name, material/goods not bundled with piping or flowline systems, and field services not bundled into a project contract.

In accordance with ASC

606

-

10

-

25

-

27

through

29,

the Company recognizes specialty piping and coating systems revenue over time as the manufacturing process progresses because

one

of the following conditions exist:

1 ) the customer owns the material that is being insulated or coated, so the customer controls the asset and thus the work-in-process; or

2 ) the customer controls the work-in-process due to the custom nature of the pre-insulated, fabricated system being manufactured as evidenced by the Company’s right to payment for work performed to date plus seller’s profit margin for products that have no alternative use for the Company.

 Products revenue is recognized when goods are shipped or services are performed (ASC

606

-

10

-

25

-

30

).

A breakdown of the Company's revenues by revenue class for the

three

and

nine

months ended

October 31, 2019

and

2018

are as follows:

	Three Months Ended October 31,										Nine Months Ended October 31,
	2019					2018					2019					2018
	Sales		% to Total			Sales		% to Total			Sales		% to Total			Sales		% to Total
Products	$	2,448		7	%	$	4,439		14	%	$	13,205		14	%	$	9,447		10	%
Specialty Piping Systems and Coating
Revenue recognized under input method		14,363		42	%		11,869		36	%		38,601		40	%		32,778		35	%
Revenue recognized under output method		17,646		51	%		16,498		50	%		43,594		46	%		51,795		55	%
Total	$	34,457		100	%	$	32,806		100	%	$	95,400		100	%	$	94,020		100	%

The input method, as noted in ASC

606

-

10

-

55

-

20,

is used by the U.S. operating entities to measure revenue by the costs incurred to date relative to the estimated costs to satisfy the contract using the percentage-of-completion method. Generally, these contracts are considered a single performance obligation satisfied over time and due to the custom nature of the goods and services, the percentage-of-completion method is the most faithful depiction of the Company’s performance as it measures the value of the goods and services transferred to the customer. Costs include all material, labor and direct costs incurred to satisfy the performance obligations of the contract. Revenue recognition begins when projects costs are incurred. 

The output method, as noted in ASC

606

-

10

-

55

-

17,

is used by all other operating entities to measure revenue by the direct measurement of the outputs produced relative to the remaining goods promised under the contract. Due to the types of end customers, generally these contracts require formal inspection protocols or specific export documentation for units produced, or produced and shipped, therefore, the output method is the most faithful depiction of the Company’s performance. Depending on the conditions of the contract, revenue

may

be recognized based on units produced, inspected and held by the Company prior to shipment or on units produced, inspected and shipped. 

Some of the Company’s operating entities invoice and collect milestones or other contractual obligations prior to the transfer of goods and services, but do 

not

recognize revenue until the performance obligations are satisfied under the methods discussed above. 

Contract modifications that occur prior to the start of the manufacturing process will supersede the original contract and revenue is recognized using the modified contract value. Contract modifications that occur during the manufacturing process (changes in scope of work, job performance, material costs, and/or final contract settlements) are recognized in the period in which the revisions are known. Provisions for losses on uncompleted contracts are made in contract liabilities account in the period such losses are identified.

Contract assets and liabilities:

Contract assets represent revenue recognized in excess of amounts billed (unbilled receivables) for contract work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Contract liabilities represent billings in excess of costs (unearned revenue) for contract work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Both customer billings and the satisfaction (or partial satisfaction) of the performance obligation(s) occur throughout the manufacturing process and impacts the period end balances in these accounts.

The Company anticipates that substantially all costs incurred for uncompleted contracts

as of

October 31, 2019

will be billed and collected within

one

year.

The following tables set forth the changes in the Company's contract assets and liabilities for the periods indicated. The Company expects to recognize the remaining balances

as of

October 31, 2019

within

one

year.

	Contract Assets
Balance January 31, 2019	$	1,653
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,038	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		1,368
Closing Balance at April 30, 2019	$	1,983
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,509	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		3,000
Closing Balance at July 31, 2019	$	3,474
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,799	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		2,688
Closing Balance at October 31, 2019	$	4,363

	Contract Liabilities
Balance January 31, 2019	$	1,569
Revenue recognized during the period for uncompleted contracts from the prior period		(444	)
New contracts entered into that are uncompleted at the end of the current period		721
Closing Balance at April 30, 2019	$	1,846
Revenue recognized during the period for uncompleted contracts from the prior period		(1,250	)
New contracts entered into that are uncompleted at the end of the current period		545
Closing Balance at July 31, 2019	$	1,141
Revenue recognized during the period for uncompleted contracts from the prior period		(774	)
New contracts entered into that are uncompleted at the end of the current period		984
Closing Balance at October 31, 2019	$	1,351

Practical expedients:

Costs to obtain a contract are

not

considered project costs as they are

not

usually incremental, nor does job duration span more than

one

year. The Company applies practical expedient for these types of costs and as such are expensed in the period incurred.

As the Company's contracts are less than

one

year, the Company has applied the practical expedient regarding disclosure of the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period.

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Note 12 - Fair Value

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

12

 - Fair value

The carrying values of cash and cash equivalents, accounts receivable and accounts payable are reasonable estimates of their fair value due to their short-term nature. The carrying amount of the Company's short-term debt, revolving line of credit and long-term debt approximate fair value because the majority of the amounts outstanding accrue interest at variable market rates.

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Note 5 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Oct. 31, 2019	Oct. 31, 2018	Jan. 31, 2020
Effective Income Tax Rate Reconciliation, Percent, Total	109.30%	116.30%	45.70%	122166.40%
Unrecognized Tax Benefits, Ending Balance	$ 100		$ 100
Forecast [Member]
Global Intangible Low-taxed Income (GILTI)					$ 0

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Note 7 - Stock-based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Oct. 31, 2019	Oct. 31, 2018
Stock-based compensation expense	$ 226	$ 288	$ 786	$ 999
Share-based Payment Arrangement, Option [Member]
Stock-based compensation expense	2	5	10	28
Restricted Stock [Member]
Stock-based compensation expense	$ 224	$ 283	$ 776	$ 971

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Note 1 - Basis of Presentation

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note

1

- Basis of presentation

The interim consolidated financial statements of Perma-Pipe International Holdings, Inc., and subsidiaries (collectively, "PPIH", "Company", or "Registrant") are unaudited, but include all adjustments that 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, 2019

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

2019

and

2018

are for the 

three

and

nine

months ended

October 31, 2019

and

2018

, and for the fiscal years ended

January 31, 2020

and

2019,

respectively.

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Oct. 31, 2019	Jan. 31, 2019
Current assets
Cash and cash equivalents	$ 12,221	$ 10,156
Restricted cash	1,138	2,581
Trade accounts receivable, less allowance for doubtful accounts of $355 at October 31, 2019 and $536 at January 31, 2019	28,235	32,508
Inventories, net	16,270	12,289
Prepaid expenses and other current assets	3,620	3,773
Contract assets	4,363	1,653
Total current assets	65,847	62,960
Property, plant and equipment, net of accumulated depreciation	29,357	30,398
Other assets
Operating lease right-of-use asset	11,717
Deferred tax assets - long-term	747	458
Goodwill	2,264	2,269
Other assets	7,518	6,120
Total other assets	22,246	8,847
Total assets	117,450	102,205
Current liabilities
Trade accounts payable	12,735	12,006
Accrued compensation and payroll taxes	1,675	1,544
Commissions and management incentives payable	1,600	1,866
Revolving line North America	7,758	8,890
Current maturities of long-term debt	1,644	640
Customers' deposits	3,005	3,708
Outside commissions payable	2,185	1,743
Contract liability	1,351	1,569
Operating lease liability short-term	1,130
Other accrued liabilities	3,234	3,856
Income taxes payable	1,352	1,266
Total current liabilities	37,669	37,088
Long-term liabilities
Long-term debt, less current maturities	6,931	6,751
Deferred compensation liabilities	3,731	3,883
Deferred tax liabilities long-term	1,434	1,435
Operating lease liability long-term	10,617
Other long-term liabilities	1,620	688
Total long-term liabilities	24,333	12,757
Stockholders' equity
Common stock, $.01 par value, authorized 50,000 shares; 8,042 issued and outstanding at October 31, 2019 and 7,854 issued and outstanding at January 31, 2019	80	79
Additional paid-in capital	59,754	58,793
Accumulated deficit	(1,559)	(3,632)
Accumulated other comprehensive loss	(2,827)	(2,880)
Total stockholders' equity	55,448	52,360
Total liabilities and stockholders' equity	$ 117,450	$ 102,205

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Note 8 - Earnings Per Share - Summary of Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Oct. 31, 2019	Oct. 31, 2018
Basic weighted average common shares outstanding (in shares)	8,037	7,877	7,970	7,806
Dilutive effect of equity compensation plans (in shares)			77
Weighted average common shares outstanding assuming full dilution (in shares)	8,037	7,877	8,047	7,806
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 (in shares)	68	176	68	176
Stock options with an exercise price below the average market price (in shares)	77	91	77	91

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Note 10 - Leases - Lease Costs (Details) - USD ($) $ in Thousands		3 Months Ended	9 Months Ended
		Oct. 31, 2019	Oct. 31, 2019
Amortization of ROU assets		$ 53	$ 155
Interest on lease liabilities		18	36
Operating lease costs		579	1,716
Short-term lease costs (1)	[1]	140	401
Sub-lease income		(20)	(61)
Total Lease costs		$ 770	$ 2,247

[1] Includes variable lease costs, which are immaterial

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Note 11 - Restricted Cash (Details Textual) - USD ($) $ in Thousands	Oct. 31, 2019	Jan. 31, 2019	Oct. 31, 2018
Restricted Cash, Current	$ 1,138	$ 2,581	$ 2,536
Non-US [Member]
Restricted Cash, Current	$ 1,100	$ 1,100

XML

Note 4 - Revenue Recognition (Details Textual)	9 Months Ended
	Oct. 31, 2019
Costs Incurred for Uncompleted Contracts, Anticipated Collection Period	1 year

XML

Note 10 - Leases (Tables)

9 Months Ended

Oct. 31, 2019

Notes Tables

Supplemental Balance Sheet Information Related to Leases [Table Text Block]

Operating and Finance leases:	October 31, 2019
Finance leases assets:
Property and Equipment - gross	$	1,704
Accumulated depreciation and amortization		(502	)
Property and Equipment - net	$	1,202
Finance lease liabilities:
Finance lease liability short-term	$	411
Finance lease liability long-term		788
Total finance lease liabilities	$	1,199
Operating lease assets:
Operating lease ROU assets	$	11,717
Operating lease liabilities:
Operating lease liability short-term	$	1,130
Operating lease liability long-term		10,617
Total operating lease liabilities	$	11,747

Lease, Cost [Table Text Block]

Lease costs	Consolidated Statements of Operations Classification	Three Months Ended October 31, 2019			Nine Months Ended October 31, 2019
Finance Lease Costs
Amortization of ROU assets	Cost of sales	$	53		$	155
Interest on lease liabilities	Interest expense		18			36
Operating lease costs	Cost of sales, SG&A expenses		579			1,716
Short-term lease costs (1)	Cost of sales, SG&A expenses		140			401
Sub-lease income	SG&A expenses		(20	)		(61	)
Total Lease costs		$	770		$	2,247

Supplemental Cash Flow Information Related Leases [Table Text Block]

	Nine Months Ended October 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases	$	185
Operating cash flows from finance leases		36
Operating cash flows from operating leases		1,732

	Three Months Ended October 31, 2019
ROU Assets obtained in exchange for new lease obligations:
Finance leases liabilities	$	850
Operating leases liabilities		584

Weighted-average Lease Terms and Discount Rates [Table Text Block]

	October 31, 2019
Weighted-average remaining lease terms (in years):
Finance leases		3.2
Operating leases		9.0
Weighted-average discount rates:
Finance leases		7.7	%
Operating leases		8.3	%

Finance and Operating Lease, Liability, Maturity [Table Text Block]

Year:	Operating Leases			Finance Leases
For the three months ended January 31, 2020	$	569		$	122
For the year ended January 31, 2021		2,313			488
For the year ended January 31, 2022		2,213			332
For the year ended January 31, 2023		2,146			270
For the year ended January 31, 2024		1,967			145
For the year ended January 31, 2025		1,252			-
Thereafter		6,656			-
Total lease payments		17,116			1,357
Less: amount representing interest		(5,369	)		(158	)
Total lease liabilities at October 31, 2019	$	11,747		$	1,199

XML

Note 4 - Revenue Recognition (Tables)

9 Months Ended

Oct. 31, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended October 31,										Nine Months Ended October 31,
	2019					2018					2019					2018
	Sales		% to Total			Sales		% to Total			Sales		% to Total			Sales		% to Total
Products	$	2,448		7	%	$	4,439		14	%	$	13,205		14	%	$	9,447		10	%
Specialty Piping Systems and Coating
Revenue recognized under input method		14,363		42	%		11,869		36	%		38,601		40	%		32,778		35	%
Revenue recognized under output method		17,646		51	%		16,498		50	%		43,594		46	%		51,795		55	%
Total	$	34,457		100	%	$	32,806		100	%	$	95,400		100	%	$	94,020		100	%

Contract with Customer, Asset and Liability [Table Text Block]

	Contract Assets
Balance January 31, 2019	$	1,653
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,038	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		1,368
Closing Balance at April 30, 2019	$	1,983
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,509	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		3,000
Closing Balance at July 31, 2019	$	3,474
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,799	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		2,688
Closing Balance at October 31, 2019	$	4,363

	Contract Liabilities
Balance January 31, 2019	$	1,569
Revenue recognized during the period for uncompleted contracts from the prior period		(444	)
New contracts entered into that are uncompleted at the end of the current period		721
Closing Balance at April 30, 2019	$	1,846
Revenue recognized during the period for uncompleted contracts from the prior period		(1,250	)
New contracts entered into that are uncompleted at the end of the current period		545
Closing Balance at July 31, 2019	$	1,141
Revenue recognized during the period for uncompleted contracts from the prior period		(774	)
New contracts entered into that are uncompleted at the end of the current period		984
Closing Balance at October 31, 2019	$	1,351

XML

Note 4 - Revenue Recognition - Revenues by Revenue Class (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Oct. 31, 2019	Oct. 31, 2018
Sales by product	$ 34,457	$ 32,806	$ 95,400	$ 94,020
Sales by product	100.00%	100.00%	100.00%	100.00%
Product [Member] | Transferred at Point in Time [Member]
Sales by product	$ 2,448	$ 4,439	$ 13,205	$ 9,447
Sales by product	7.00%	14.00%	14.00%	10.00%
Specialty Piping Systems And Coating [Member] | Transferred at Point in Time Using Input Method [Member]
Sales by product	$ 14,363	$ 11,869	$ 38,601	$ 32,778
Sales by product	42.00%	36.00%	40.00%	35.00%
Specialty Piping Systems And Coating [Member] | Transferred at Point in Time Using Output Method [Member]
Sales by product	$ 17,646	$ 16,498	$ 43,594	$ 51,795
Sales by product	51.00%	50.00%	46.00%	55.00%

XML

Note 6 - Impairment of Long-lived Assets - Goodwill (Details) $ in Thousands	9 Months Ended
	Oct. 31, 2019 USD ($)
Goodwill	$ 2,269
Goodwill, foreign exchange change effect	(5)
Goodwill	$ 2,264

XML

Note 7 - Stock-based Compensation - Unvested Option Activity (Details) - Unvested Option [Member] $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Oct. 31, 2019 USD ($) $ / shares shares
Outstanding at beginning of period (in shares)	11
Outstanding at beginning of period, weighted average exercise price (in dollars per share) | $ / shares	$ 7
Outstanding at beginning of period, aggregate intrinsic value | $	$ 19
Vested, number (in shares)	(7)
Expired or forfeited (in shares)	(2)
Expired or forfeited, weighted average exercise price (in dollars per share) | $ / shares	$ 7.07
Outstanding at end of period (in shares)	2
Outstanding at end of period, weighted average exercise price (in dollars per share) | $ / shares	$ 7.33
Outstanding at end of period, aggregate intrinsic value | $	$ 5

XML

Note 10 - Leases

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

Note

10

- Leases

Effective

February 1, 2019,

the Company accounts for its leases under ASC

842,

Leases

.  Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities short-term, and operating lease liabilities long-term in the Company's consolidated balance sheets. Finance leases are included in property, plant and equipment, current maturities of long-term debt, and long-term debt less current maturities in the Company's consolidated balance sheets. 

ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.  Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term.  For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense over the lease term.  For finance leases, interest on the lease liability and the amortization of the ROU asset results in front-loaded expense over the lease term.  Variable lease expenses are recorded when incurred. ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.

As most of the Company's leases do

not

provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment.

In calculating the ROU asset and lease liability, the Company elects to combine lease and non-lease components.  The Company excludes short-term leases having initial terms of

12

months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term. 

The Company continues to account for leases in the prior period financial statements under ASC Topic

840.

Finance Leases.

In

2017,

the Company obtained

three

finance leases for CAD

1.1

million (approximately USD

$0.8

million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases range from

4.0%

to

7.8%

per annum with monthly principal and interest payments of less than

$0.1

million. These leases mature between

April 

2021

to

September 

2022.

In

2019,

 the Company obtained

two

finance leases for CAD

1.1

million (approximately USD

$0.8

million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases were

8.0%

per annum with monthly principal and interest payments of less than

$0.1

million. These leases mature in

August 2023. 

In

August 

2016,

the Company obtained a finance lease for

0.6

million Indian Rupees (approximately USD

$8

 thousand at the prevailing exchange rate on the transaction date) to finance vehicle equipment. The interest rate for this finance lease was

15.6%

per annum with monthly principal and interest payments of less than USD

$1

 thousand. This lease expired in

July 

2019.

 

The Company has several significant operating lease agreements, with lease terms of

one

to

14

years, which consist of real estate, vehicles and office equipment leases. These leases do

not

require any contingent rental payments, impose any financial restrictions or contain any residual value guarantees.  Certain of the Company’s leases include renewal options and escalation clauses; renewal options have

not

been included in the calculation of the lease liabilities and ROU assets as the Company is

not

reasonably certain to exercise the options.  Variable expenses generally represent the Company’s share of the landlord’s operating expenses.  The Company does

not

have any arrangements where it acts as a lessor, other than

one

sub-lease arrangement. 

At

October 31, 2019

, the Company had operating lease liabilities of

$11.7

 million 

a

nd operating ROU assets o

f

$11.7

 million, wh

ich are reflected in the consolidated balance sheet. At

October 31, 2019

, the Company also had finance lease liabilities of $

1.2

million included in current maturities of long-term debt and long-term debt less current maturities, and finance ROU assets of $

1.2

millio

n 

which were included in

property plant and equipment, net of accumulated depreciation 

in the consolidated balance sheet.

Supplemental balance sheet information related to leases is as follows: 

Operating and Finance leases:	October 31, 2019
Finance leases assets:
Property and Equipment - gross	$	1,704
Accumulated depreciation and amortization		(502	)
Property and Equipment - net	$	1,202
Finance lease liabilities:
Finance lease liability short-term	$	411
Finance lease liability long-term		788
Total finance lease liabilities	$	1,199
Operating lease assets:
Operating lease ROU assets	$	11,717
Operating lease liabilities:
Operating lease liability short-term	$	1,130
Operating lease liability long-term		10,617
Total operating lease liabilities	$	11,747

Total lease costs consist of the following: 

Lease costs	Consolidated Statements of Operations Classification	Three Months Ended October 31, 2019			Nine Months Ended October 31, 2019
Finance Lease Costs
Amortization of ROU assets	Cost of sales	$	53		$	155
Interest on lease liabilities	Interest expense		18			36
Operating lease costs	Cost of sales, SG&A expenses		579			1,716
Short-term lease costs (1)	Cost of sales, SG&A expenses		140			401
Sub-lease income	SG&A expenses		(20	)		(61	)
Total Lease costs		$	770		$	2,247

(

1

) Includes variable lease costs, which are immaterial

Supplemental cash flow information related to leases is as follows:

	Nine Months Ended October 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases	$	185
Operating cash flows from finance leases		36
Operating cash flows from operating leases		1,732

	Three Months Ended October 31, 2019
ROU Assets obtained in exchange for new lease obligations:
Finance leases liabilities	$	850
Operating leases liabilities		584

Weighted-average lease terms and discount rates are as follows: 

	October 31, 2019
Weighted-average remaining lease terms (in years):
Finance leases		3.2
Operating leases		9.0
Weighted-average discount rates:
Finance leases		7.7	%
Operating leases		8.3	%

Maturities of lease liabilities 

as of

October 31, 2019

, are as follows:

Year:	Operating Leases			Finance Leases
For the three months ended January 31, 2020	$	569		$	122
For the year ended January 31, 2021		2,313			488
For the year ended January 31, 2022		2,213			332
For the year ended January 31, 2023		2,146			270
For the year ended January 31, 2024		1,967			145
For the year ended January 31, 2025		1,252			-
Thereafter		6,656			-
Total lease payments		17,116			1,357
Less: amount representing interest		(5,369	)		(158	)
Total lease liabilities at October 31, 2019	$	11,747		$	1,199

Rent expense on operating leases, which is recorded on straight-line basis, was

$0.7

million for the

three

months ended 

October 31, 2019

 and

2018,

and

$2.0

 million for the

nine

 months ended 

October 31, 2019

and

2018,

respectively. 

XML

Note 6 - Impairment of Long-lived Assets

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Asset Impairment Charges [Text Block]

Note

6

- Impairment of long-lived assets

The Company's assessment of long-lived assets, and other identifiable intangibles is based upon factors that market participants would use in accordance with the accounting guidance for the fair value measurement of assets. The Company will continue testing for potential impairment at least annually or as otherwise required by applicable accounting standards. There was

no

impairment of long-lived assets for the

three

and

nine

months ended

October 31, 2019

and

2018

.

Goodwill.

The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. All identifiable goodwill 

as of

October 31, 2019

and

January 31, 2019

was attributable to the purchase of Perma-Pipe Canada, Ltd., which occurred in

2016.

	January 31, 2019		Foreign exchange change effect			October 31, 2019
Goodwill	$	2,269	$	(5	)	$	2,264

The Company performs an impairment assessment of goodwill annually 

as of

January 31,

or more frequently if triggering events occur, based on the estimated fair value of the related reporting unit or intangible asset. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. There was

no

impairment of goodwill for the 

three

and

nine

months ended

October 31, 2019

and

2018

.

XML

Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Net income (loss)					$ (1,524)
Foreign currency translation adjustment					(1,538)
Balances at beginning of year (in shares) at Jan. 31, 2018	7,716,542
Shares issued (in shares)	137,780
Balances at period end (in shares) at Oct. 31, 2018	7,854,322
Total stockholders' equity at Jan. 31, 2019	$ 79	$ 58,793	$ (3,632)	$ (2,880)	52,360
Net income (loss)			(1,502)		(1,502)
Common stock issued under stock plans, net of shares used for tax withholding		79			79
Stock-based compensation expense		154			154
Foreign currency translation adjustment				(317)	(317)
Total stockholders' equity at Apr. 30, 2019	$ 79	59,026	(5,134)	(3,197)	50,774
Balances at beginning of year (in shares) at Jan. 31, 2019	7,854,322
Total stockholders' equity at Jan. 31, 2019	$ 79	58,793	(3,632)	(2,880)	52,360
Net income (loss)					2,073
Foreign currency translation adjustment					53
Total stockholders' equity at Oct. 31, 2019	$ 80	59,754	(1,559)	(2,827)	55,448
Balances at beginning of year (in shares) at Jan. 31, 2019	7,854,322
Shares issued (in shares)	187,359
Balances at period end (in shares) at Oct. 31, 2019	8,041,681
Total stockholders' equity at Apr. 30, 2019	$ 79	59,026	(5,134)	(3,197)	50,774
Net income (loss)			3,720		3,720
Common stock issued under stock plans, net of shares used for tax withholding	1	43			44
Stock-based compensation expense		406			406
Foreign currency translation adjustment				358	358
Total stockholders' equity at Jul. 31, 2019	80	59,475	(1,414)	(2,839)	55,302
Net income (loss)			(145)		(145)
Common stock issued under stock plans, net of shares used for tax withholding		53			53
Stock-based compensation expense		226			226
Foreign currency translation adjustment				12	12
Total stockholders' equity at Oct. 31, 2019	$ 80	$ 59,754	$ (1,559)	$ (2,827)	$ 55,448
Balances at period end (in shares) at Oct. 31, 2019	8,041,681

XML

Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Oct. 31, 2019	Oct. 31, 2018
Net sales	$ 34,457	$ 32,806	$ 95,400	$ 94,020
Cost of sales	26,814	25,923	73,382	77,019
Gross profit	7,643	6,883	22,018	17,001
Operating expenses
General and administrative expenses	4,541	4,247	13,556	12,153
Selling expenses	1,354	1,554	4,030	4,017
Total operating expenses	5,895	5,801	17,586	16,170
Income from operations	1,748	1,082	4,432	831
Interest expense, net	194	280	612	830
Income from operations before income taxes	1,554	802	3,820	1
Income tax expense	1,699	934	1,747	1,525
Net (loss)/income	$ (145)	$ (132)	$ 2,073	$ (1,524)
Weighted average common shares outstanding
Basic (in shares)	8,037	7,877	7,970	7,806
Diluted (in shares)	8,037	7,877	8,047	7,806
(Loss)/income per share
Basic (in dollars per share)	$ (0.02)	$ (0.02)	$ 0.26	$ (0.20)
Diluted (in dollars per share)	$ (0.02)	$ (0.02)	$ 0.26	$ (0.20)

XML

Note 7 - Stock-based Compensation - Restricted Stock Activity (Details) - Restricted Stock [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Oct. 31, 2019	Jan. 31, 2019
Outstanding (unvested) at beginning of period (in shares)	283
Outstanding (unvested) at beginning of period, weighted average grant price per share (in dollars per share)	$ 8.98	$ 8.74
Outstanding (unvested) at beginning of period, aggregate intrinsic value	$ 3,229	$ 2,476
Granted (in shares)	152
Granted, weighted average grant price per share (in dollars per share)	$ 9.09
Vested and issued (in shares)	(52)
Vested and issued, weighted average grant price per share (in dollars per share)	$ 8.86
Forfeited or retired for taxes (in shares)	(24)
Forfeited or retired for taxes, weighted average grant price per share (in dollars per share)	$ 8.68
Outstanding (unvested) at endof period (in shares)	359

XML

Note 4 - Revenue Recognition - Contract With Customer, Asset and Liability (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2019	Jul. 31, 2019	Apr. 30, 2019
Balance, assets	$ 3,474	$ 1,983	$ 1,653
Costs and gross profit recognized during the period for uncompleted contracts from the prior period	(1,799)	(1,509)	(1,038)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period	2,688	3,000	1,368
Balance, assets	4,363	3,474	1,983
Balance, liabilities	1,141	1,846	1,569
Revenue recognized during the period for uncompleted contracts from the prior period	(774)	(1,250)	(444)
New contracts entered into that are uncompleted at the end of the current period	984	545	721
Balance, liabilities	$ 1,351	$ 1,141	$ 1,846

XML

Note 7 - Stock-based Compensation (Details Textual) $ in Millions	3 Months Ended	9 Months Ended
	Oct. 31, 2019 USD ($) shares	Oct. 31, 2019 USD ($) shares
Common Stock, Capital Shares Reserved for Future Issuance | shares	694,989	694,989
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures, Total | shares	0	0
Proceeds from Stock Options Exercised		$ 0.3
Share-based Payment Arrangement, Option [Member]
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	$ 0.1	$ 0.1
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition		219 days
Restricted Stock [Member]
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	$ 1.7	$ 1.7
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition		2 years 109 days

XML

Note 9 - Debt

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

9

- Debt

Debt totaled $

16.3

million at

October 31, 2019

 and 

January 31, 2019

, respectively.

Revolving lines North America

. 

On

September 20, 2018,

the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the Company, the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”), providing for a

three

-year

$18

million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”). The Senior Credit Facility replaced the Company’s then existing

$15

million Credit and Security Agreement, dated

September 24, 2014,

among various subsidiaries of the Company and Bank of Montreal, as successor by assignment to BMO Harris Bank N.A., as amended (the “Prior Credit Agreement”).

The Company initially used borrowings under the Senior Credit Facility to pay off outstanding amounts under the Prior Credit Agreement (which totaled approximately USD

$3,773,823

plus CAD

4,794,528

) and a cash collateralized letter of credit (USD

$154,500

). The Company has used proceeds from the Senior Credit Facility for on-going working capital needs, and expects to continue using this facility to fund future capital expenditures, working capital needs and other corporate purposes. Borrowings under the Senior Credit Facility bear interest at a rate equal to an alternate base rate or London Interbank Offered Rate ("LIBOR"), plus, in each case, an applicable margin.  The applicable margin is based on average quarterly undrawn availability with respect to the Senior Credit Facility.  Interest on alternate base rate borrowings are generally payable monthly in arrears and interest on LIBOR borrowings are generally payable in arrears on the last day of each interest period.  Additionally, the Company is required to pay a

0.375%

per annum facility fee on the unused portion of the Senior Credit Facility.  The facility fee is payable quarterly in arrears.

Subject to certain exceptions, borrowings under the Senior Credit Facility are secured by substantially all of the assets of the Company and certain of the assets of its North American subsidiaries. The North American Loan Parties’ obligations under the Senior Credit Facility are guaranteed by Perma-Pipe Canada, Inc. The Senior Credit Facility will mature on

September 20, 2021.

Subject to certain qualifications and exceptions, the Senior Credit Facility contains covenants that, among other things, restrict the North American Loan Parties’ ability to create liens, merge or consolidate, consummate acquisitions, make investments, dispose of assets, incur debt, and pay dividends and other distributions. In addition, the North American Loan Parties cannot allow capital expenditures to exceed 

$3.0

million annually (plus a limited carryover of unused amounts).

The Senior Credit Facility also contains financial covenants requiring (i) the North America Loan Parties to achieve a ratio of their EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility (excluding from the calculation items related to the financial performance of the Company’s foreign subsidiaries

not

party to the Credit Agreement) to be

not

less than

1.10

to

1.00

for the

nine

-month period ending

April 30, 2019

and for the quarter ending

July 31, 2019

and each quarter end thereafter on a trailing

four

-quarter basis; and (ii) the Company and its subsidiaries (including the Company’s foreign subsidiaries

not

party to the Credit Agreement) to achieve a ratio of their EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility of

not

less than

1.10

to

1.00

for each quarter end on a trailing

four

-quarter basis. The Company was in compliance with these requirements 

as of

October 31, 2019

. 

The Senior Credit Facility contains customary events of default. If an event of default occurs and is continuing, then PNC

may

terminate all commitments to extend further credit and declare all amounts outstanding under the Senior Credit Facility due and payable immediately. In addition, if any of the North American Loan Parties or certain of their subsidiaries become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Senior Credit Facility will automatically become immediately due and payable. Borrowings under the Senior Credit Facility will bear interest at a rate of

2.00%

per annum in excess of the otherwise applicable rate while a bankruptcy event of default exists or, upon the lenders’ request, during the continuance of any other event of default.

As of

October 31, 2019

, the Company had borrowed an aggregate of

$7.8

 million at a rate of

7.75%,

5.80%,

and

5.94%

resulting in a weighted average rate of

6.01%

and had

$4.9

 million available under the Senior Credit Facility. 

Revolving lines foreign

.

The Company also has credit arrangements used by its 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 require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividend

s. On

October 31, 2019

the Company was in compliance with the covenants under the credit arrangements. On

October 31, 2019

, interest rates were based on the Emirates Inter Bank Offered Rate (EIBOR) plus

3.5%

per annum, with a minimum interest rate of

4.5%

per annum. On

October 31, 2019

, the Company's interest rates ranged from

5.4%

to

5.9%,

with a weighted average rate of

5.74%,

an

d the Company could borrow

$9.0

 million

under these credit arrangements. On

October 31, 2019

, 

$5.2

 mi

llion of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. On

October 31, 2019

, the Company had borrowed

$0.9

 milli

on, and had an addition

al

$2.9

 mill

ion of borrowing remaining available. The foreign revolving lines balances

as of

October 31, 2019

and 

January 31, 2019

, were included as current maturities of long-term debt in the Company's consolidated balance sheets. 

Mortgages.

On

July 

28,

2016,

the Company borrowed CAD

8.0

million (approximately USD

$6.1

million at the prevailing exchange rate on the transaction date) from a bank in Canada under a mortgage note secured by the Company's manufacturing facility located in Alberta, Canada that matures on

December 

23,

2042.

The interest rate is variable, currently a

t 

6.05%,

with mon

thly payments of CAD

37

 thousand (approximately USD

$28

thousand) for interest; and monthly payments of CAD

27

thousand (approximately USD

$20

thousand) for principal. Principal payments began

January 2018.

On

June 

19,

2012,

the Company borrowed

$1.8

million under a mortgage note secured by its manufacturing facility in Lebanon, Tennessee. The proceeds were used for payment of amounts borrowed. The loan bears interest at

4.5%

with monthly payments of

$13

thousand for both principal and interest and matures

July 

1,

2027.

On

June 

19,

2022,

and on the same day of each year thereafter, the interest rate shall adjust to the prime rate, provided that the applicable interest rate shall

not

adjust more than

2.0%

per annum and shall be subject to a ceiling of

18.0%

and a floor of

4.5%.

XML

Note 5 - Income Taxes

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

5

- 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 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. 

The Company's effective tax rate ("ETR") from operations for the

third

quarter and year-to-date in fiscal

2019

was

109.3%

and

45.7%

compared to

116.3%

and

122,166.4%

during the respective prior year periods. The change in the ETR from the prior year quarter to the current year quarter is largely due to changes in the mix of income and loss in various jurisdictions. Additionally, the Company was near break-even in the prior year which resulted in a large impact on the overall rate. In the prior year the Company was accruing taxes in jurisdictions where it was generating income, while applying a valuation allowance in the U.S., which attributed to the unusually large ETR for that quarter.

The amount of unrecognized tax benefits, including interest and penalties at

October 31, 2019,

recorded in other long-term liabilities was

$0.1

 million, all of which would impact the Company’s ETR if recognized. 

The U.S. Tax Cuts and Jobs Act ("Tax Act") was enacted on

December 22, 2017

and introduced significant changes to U.S. income tax law. The Tax Act reduced the U.S. statutory tax rate from

35%

to

21%,

effective

January 1, 2018

and created new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax ("GILTI") and the base erosion anti-abuse tax, respectively. The Company currently projects a GILTI inclusion for fiscal

2019,

but there is

no

impact on tax expense due to its offset by loss carryovers with a full valuation allowance applied against it. 

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Oct. 31, 2019	Oct. 31, 2018
Operating activities
Net income/(loss)	$ 2,073	$ (1,524)
Adjustments to reconcile net income/(loss) to net cash flows provided by/(used) in operating activities
Depreciation and amortization	3,349	3,482
Deferred tax (income)/expense	(288)	346
Equity-based compensation expense	786	999
Loss on disposal of fixed assets	154	46
Provision on uncollectible accounts	49	14
Changes in operating assets and liabilities
Accounts receivable	2,960	(165)
Inventories	(3,980)	2,269
Contract assets and contract liabilities	(2,929)	(1,221)
Accounts payable	525	(5,460)
Accrued compensation and payroll taxes	(199)	1,468
Customers' deposits	(704)	(1,194)
Income taxes receivable and payable	80	54
Prepaid expenses and other current assets	1,523	(801)
Other assets and liabilities	(601)	1,061
Net cash provided by/(used in) operating activities	2,798	(626)
Investing activities
Capital expenditures	(1,423)	(885)
Net cash used in investing activities	(1,423)	(885)
Financing activities
Proceeds from revolving lines	61,281	42,201
Payments of debt on revolving lines of credit	(61,613)	(35,152)
Debt issuance costs		(930)
Payments of other debt	(276)	(266)
Decrease in drafts payable	(162)	(20)
Payments on finance lease obligations	(185)	(205)
Stock options exercised and restricted shares retired for tax	176	249
Net cash provided by/(used in) financing activities	(779)	5,877
Effect of exchange rate changes on cash, cash equivalents and restricted cash	26	(569)
Net increase in cash, cash equivalents and restricted cash	622	3,797
Cash, cash equivalents and restricted cash - beginning of period	12,737	8,321
Cash, cash equivalents and restricted cash - end of period	13,359	12,118
Supplemental cash flow information
Interest paid	609	917
Income taxes paid	1,961	1,118
Fixed assets acquired under capital leases - non-cash	$ 848

XML

Note 13 - Recent Accounting Pronouncements (Details Textual) - USD ($) $ in Thousands	Oct. 31, 2019	Feb. 01, 2019	Jan. 31, 2019
Operating Lease, Right-of-Use Asset	$ 11,717
Operating Lease, Liability, Total	$ 11,747
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset		$ 10,700
Operating Lease, Liability, Total		$ 11,000

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Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Oct. 31, 2019	Oct. 31, 2018
Net income/(loss)	$ (145)	$ (132)	$ 2,073	$ (1,524)
Other comprehensive income/(loss)
Foreign currency translation adjustments, net of tax	12	(551)	53	(1,538)
Other comprehensive income/(loss)	12	(551)	53	(1,538)
Comprehensive (loss)/income	$ (133)	$ (683)	$ 2,126	$ (3,062)

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Note 11 - Restricted Cash - Summary of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Oct. 31, 2019	Jan. 31, 2019	Oct. 31, 2018
Cash and cash equivalents	$ 12,221	$ 10,156	$ 9,582
Restricted cash	1,138	$ 2,581	2,536
Cash, cash equivalents and restricted cash shown in the statement of cash flows	$ 13,359		$ 12,118

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Note 9 - Debt (Details Textual)					9 Months Ended		13 Months Ended
	Sep. 20, 2018 USD ($)	Jul. 28, 2016 USD ($)	Jul. 28, 2016 CAD ($)	Jun. 19, 2012 USD ($)	Oct. 31, 2019 USD ($)	Oct. 31, 2018 USD ($)	Oct. 31, 2019 USD ($)	Oct. 31, 2019 CAD ($)	Jul. 31, 2019	Apr. 30, 2019	Jan. 31, 2019 USD ($)	Sep. 19, 2018 USD ($)
Debt and Lease Obligation, Total					$ 16,300,000		$ 16,300,000				$ 16,300,000
Repayments of Lines of Credit					61,613,000	$ 35,152,000
Line of Credit, Current					7,758,000		7,758,000				$ 8,890,000
Canadian Mortgage Note [Member]
Proceeds from Issuance of Debt		$ 6,100,000	$ 8,000,000
Debt Instrument, Maturity Date		Dec. 23, 2042	Dec. 23, 2042
Debt Instrument, Interest Rate, Effective Percentage		6.05%	6.05%
Debt Instrument, Periodic Payment, Interest		$ 28,000	$ 37,000
Debt Instrument, Periodic Payment, Principal		$ 20,000	$ 27,000
Mortgage Note Secured by Tennessee Manufacturing Facility [Member]
Debt Instrument, Interest Rate, Stated Percentage				4.50%
Debt Instrument, Maturity Date				Jul. 01, 2027
Debt Instrument, Issuance Date				Jun. 19, 2012
Proceeds from Issuance of Secured Debt				$ 1,800,000
Debt Instrument, Periodic Payment, Total				$ 13,000
Debt Instrument, Adjustable Interest Rate Period, Commencement Date				Jun. 19, 2022
Debt Instrument, Interest Rate, Maximum Annual Increase				2.00%
Debt Instrument, Adjustable Interest Rate, Ceiling				18.00%
Debt Instrument, Adjustable Interest Rate, Floor				4.50%
Revolving Lines, North America [Member]
Debt Instrument, Term	3 years
Line of Credit Facility, Maximum Borrowing Capacity	$ 18,000,000											$ 15,000,000
Repayments of Lines of Credit							$ 3,773,823	$ 4,794,528
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage							0.375%	0.375%
Line of Credit Facility, Capital Expenditures Restrictions					$ 3,000,000		$ 3,000,000
Line of Credit Facility, Covenant Terms, EBITDA Ratio, Term One									1.1	1.1
Line of Credit Facility, Covenant Terms, EBITDA Ratio, Term Two					1.1		1.1
Debt Instrument, Interest Rate in Excess of Stated Rate, Default	2.00%
Line of Credit Facility, Current Borrowing Capacity					$ 4,900,000		$ 4,900,000
Revolving Lines, North America [Member] | Weighted Average [Member]
Line of Credit Facility, Interest Rate at Period End					6.01%		6.01%
Revolving Lines, North America [Member] | Interest Rate 1 [Member]
Line of Credit Facility, Interest Rate at Period End					7.75%		7.75%
Revolving Lines, North America [Member] | Interest Rate 2 [Member]
Line of Credit Facility, Interest Rate at Period End					5.80%		5.80%
Revolving Lines, North America [Member] | Interest Rate 3 [Member]
Line of Credit Facility, Interest Rate at Period End					5.94%		5.94%
Letter of Credit [Member]
Repayments of Lines of Credit							$ 154,500
Foreign Revolving Lines [Member]
Line of Credit Facility, Maximum Borrowing Capacity					$ 9,000,000		9,000,000
Letters of Credit Outstanding, Amount					5,200,000		5,200,000
Proceeds from Issuance of Debt					900,000
Line of Credit Facility, Remaining Borrowing Capacity					$ 2,900,000		$ 2,900,000
Foreign Revolving Lines [Member] | EIBOR [Member]
Debt Instrument, Basis Spread on Variable Rate					3.50%
Foreign Revolving Lines [Member] | Weighted Average [Member]
Line of Credit Facility, Interest Rate at Period End					5.74%		5.74%
Foreign Revolving Lines [Member] | Minimum [Member]
Line of Credit Facility, Interest Rate at Period End					5.40%		5.40%
Debt Instrument, Interest Rate, Stated Percentage					4.50%		4.50%
Foreign Revolving Lines [Member] | Maximum [Member]
Line of Credit Facility, Interest Rate at Period End					5.90%		5.90%

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Note 10 - Leases - Supplemental Cash Flow Information Related to Leases (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Oct. 31, 2019	Oct. 31, 2019	Oct. 31, 2018
Payments on finance lease obligations		$ (185)	$ (205)
Operating cash flows from finance leases		36
Operating cash flows from operating leases		$ 1,732
Finance leases liabilities	$ 850
Operating leases liabilities	$ 584

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Note 8 - Earnings Per Share (Tables)

9 Months Ended

Oct. 31, 2019

Notes Tables

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

	Three Months Ended October 31,				Nine Months Ended October 31,
	2019		2018		2019		2018
Basic weighted average common shares outstanding		8,037		7,877		7,970		7,806
Dilutive effect of equity compensation plans		—		—		77		—
Weighted average common shares outstanding assuming full dilution		8,037		7,877		8,047		7,806
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		68		176		68		176
Stock options with an exercise price below the average market price		77		91		77		91

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Note 13 - Recent Accounting Pronouncements

9 Months Ended

Oct. 31, 2019

Notes to Financial Statements

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

Note

13

 - Recent accounting pronouncements

In

February 2016,

the FASB issued Accounting Standard Update ("ASU")

2016

-

02,

 

Leases

 (Topic

842

). This ASU requires entities to recognize assets and liabilities for most leases on their balance sheets. It also requires additional qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. ASU

No.

2016

-

02

is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018,

with early adoption permitted.  The adoption of this ASU using the alternative transition approach resulted in the recognition of operating lease ROU assets, net of deferred rent of

$10.7

million and lease liability for operating leases of

$11.0

million as of 

February 1, 2019.

The Company accounts for existing finance lease assets and liabilities in the same way under the new standard.  Adoption of this ASU did

not

have an effect on retained earnings. The Company availed itself of the practical expedients provided under this ASU and its subsequent amendments regarding identification of leases, lease classification, indirect costs and the combination of lease and non-lease components. The Company continues to account for leases in the prior period financials statements under ASC Topic

840.

In

June 2016,

the FASB issued ASU

No.

2016

-

13,

Financial Instruments-Credit Losses

(Topic

326

): Measurement of Credit Losses on Financial Instruments. The new guidance affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets

not

excluded from the scope that have the contractual right to receive cash. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2019,

with early adoption permitted. A recently adopted amendment has delayed the effective date until fiscal years beginning after

December 15, 2022. 

The Company is currently evaluating this standard and the impact to the financial statements of the Company. 

In

February 2018,

the FASB issued ASU

2018

-

02,

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

, which permits entities to reclassify the disproportionate income tax effects of the Tax Act on items within accumulated other comprehensive income/(loss) to reinvested earnings. These disproportionate income tax effect items are referred to as "stranded tax effects." The amendments in this update only relate to the reclassification of the income tax effects of the Tax Reform Act. Other accounting guidance that requires the effect of changes in tax laws or rates to be included in net income from continuing operations is

not

affected by this update. The Company adopted ASU

2018

-

02

effective

February 1, 2019

and has elected to

not

reclassify any amounts to retained earnings. Under the Company's existing policy, any existing stranded tax effects will be eliminated when the underlying circumstances upon which it was premised cease to exist.   

The Company evaluated other recent accounting pronouncements and does

not

expect them to have a material impact on its consolidated financial statements or related disclosures.

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Note 3 - Accounts Receivable (Details Textual) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Oct. 31, 2019 USD ($)	Oct. 31, 2018	Oct. 31, 2019 USD ($)	Oct. 31, 2018	Jan. 31, 2019 USD ($)
Accounts Receivable, Outstanding for Several Years	$ 4,200		$ 4,200		$ 4,700
Contract Receivable Retainage, Total	3,700		3,700		$ 3,700
Proceeds from Collection of Accounts Receivable Outstanding for Several Years			500
Allowance for Doubtful Accounts Receivable Outstanding for Several Years	$ 0		$ 0
Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Number of Major Customers	1	0	1	0
Concentration Risk, Percentage	16.00%		11.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member]
Number of Major Customers			3		3
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Three Customers [Member]
Concentration Risk, Percentage			29.80%		39.40%
Other Noncurrent Assets [Member]
Contract Receivable Retainage, Total	$ 3,500		$ 3,500		$ 3,500