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What changed in Perma-Pipe International Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Perma-Pipe International Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+185 added−228 removedSource: 10-K (2023-04-27) vs 10-K (2022-04-19)

Top changes in Perma-Pipe International Holdings, Inc.'s 2023 10-K

185 paragraphs added · 228 removed · 141 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

21 edited+1 added−10 removed19 unchanged
Biggest changeDewbre was formerly Senior Vice President, Middle East & North Africa for the Company since December 2017. He was responsible for facilities in Fujairah, U.A.E., Dammam, Saudi Arabia, Gujarat, India, and Beni Suef, Egypt, which was established in 2019 under Mr. Dewbre’s leadership of the division. Before joining the Company, Mr.
Biggest changeHe is a Fellow member of the Association of Chartered Certified Accountants . Grant Dewbre: Appointed Chief Operating Officer in July 2021. Mr. Dewbre was formerly Senior Vice President, Middle East & North Africa for the Company since December 2017. He was responsible for facilities in Fujairah, United Arab Emirates ("U.A.E."), Dammam, Saudi Arabia, Gujarat, India, and Beni Suef, Egypt.
The Company maintains a website, www.permapipe.com , where these reports and related materials are available free of charge as soon as reasonably practicable after the Company electronically files or furnishes such material with or to the SEC.
The Company maintains a website, www.permapipe.com , where these reports and related materials are available free of charge as soon as reasonably practicable after the Company electronically files with, or furnishes such material to, the SEC.
The Company's fiscal year ends on January 31. Years, results and balances described as 2022, 2021 and 2020 are for the fiscal years ended January 31, 2023, 2022 and 2021, respectively. Products and services. The Company engineers, designs, manufactures and sells specialty piping systems and leak detection systems.
The Company's fiscal year ends on January 31. Years, results and balances described as 2023 , 2022 and 2021 are for the fiscal year ending January 31, 2024 and the fiscal years ended January 31, 2023 and 2022 , respectively. PRODUCTS AND SERVICES The Company engineers, designs, manufactures and sells specialty piping systems and leak detection systems.
To mitigate these impacts, the Company has implemented several strategies, including purchasing from alternative suppliers and planning for material purchases farther in advance to ensure the Company has materials when needed. The Company has also updated its pricing to customers to offset the impacts of the raw material price increases.
To mitigate these impacts, the Company has implemented several strategies, including purchasing from alternative suppliers and planning for material purchases further in advance to ensure the Company has materials when needed. The Company also adjusts its pricing to customers to offset the impacts of the raw material price increases.
For the years ended January 31, 2022 and 2021, respectively, no one customer accounted for greater than 10% of the Company's consolidated net sales. As of January 31, 2022 and 2021, one customer accounted for 11.9% and no one customer accounted for greater than 10% of accounts receivable, respectively. Backlog.
For the years ended January 31, 2023 and 2022 , no one customer accounted for greater than 10% of the Company's consolidated net sales. As of January 31, 2023 , no one customer accounted for greater than 10% of accounts receivable. As of January 31, 2022 , one customer accounted for 11.9% of accounts receivable. Backlog.
The information on the Company's website is not part of this Annual Report on Form 10-K and is not incorporated into this or any other filings by the Company with the SEC.
The information on the Company's website is not part of this Annual Report on Form 10-K and is not incorporated into this or any other filings by the Company with the SEC. 4 Table of Contents
Due to the current inflationary environment, raw material supply shortages and transportation delays, the Company routinely experiences significant delays and increased prices for raw materials used in our production processes.
Due to the current inflationary environment, raw material supply shortages and transportation delays, the Company routinely experiences delays and increased prices for raw materials used in the Company's production processes.
Perma-Pipe Middle East FZC Niles, IL Fujairah, United Arab Emirates New Iberia, LA Perma-Pipe Saudi Arabia, LLC Lebanon, TN Dammam, Kingdom of Saudi Arabia Perma-Pipe Canada, Ltd. Perma-Pipe India Pvt. Ltd Camrose, Alberta, Canada Gandhidham, India Perma-Pipe Egypt for Metal Fabrication and Insulation Industries (Perma-Pipe Egypt) S.A.E. Beni Suef, Egypt Customers and sales channels.
Perma-Pipe Middle East LLC Niles, IL Abu Dhabi, United Arab Emirates New Iberia, LA Perma-Pipe Middle East FZC Lebanon, TN Fujairah, United Arab Emirates Perma-Pipe Canada, Ltd. Perma-Pipe Saudi Arabia, LLC Camrose, Alberta, Canada Dammam, Kingdom of Saudi Arabia Perma-Pipe Egypt for Metal Fabrication and Insulation Industries (Perma-Pipe Egypt) S.A.E. Perma-Pipe India Pvt.
The Company's customer base is industrially and geographically diverse. In the United States, the Company employs inside and outside sales managers who use and assist a network of independent manufacturers' representatives, none of whom sell products that are competitive with the Company's piping systems.
Ltd Beni Suef, Egypt Gandhidham, India Customers and sales channels. The Company's customer base is industrially and geographically diverse. In the United States, the Company employs inside and outside sales managers who use and assist a network of independent manufacturers' representatives, none of whom sell products that are competitive with the Company's piping systems.
Employees As of January 31, 2022, the Company had approximately 184 full-time employees working in the United States, of which approximately 64 were under two collective bargaining agreements, one expiring on April 30, 2023, and the other expiring on March 31, 2025. There were approximately 424 full-time employees working at the Company's international locations.
EMPLOYEES As of January 31, 2023 , the Company had approximately 194 full-time employees working in the United States, of which approximately 77 were under two collective bargaining agreements expiring on April 30, 2023 and March 31, 2025 . As of January 31, 2023 , there were approximately 473 full-time employees working at the Company's international locations.
The sensor cables used in the Company's leak detection and location systems are manufactured to the Company's specifications by companies regularly engaged in manufacturing such cables. The Company assembles the monitoring component of its leak detection and location systems from components purchased from many sources. The Company's global supply chains have been negatively affected by the COVID-19 pandemic.
The sensor cables used in the Company's leak detection and location systems are manufactured to the Company's specifications by companies regularly engaged in manufacturing such cables. The Company assembles the monitoring component of its leak detection and location systems from components purchased from many sources.
The Company considers its relationship with its employees to be good. 3 Table of Contents Available Information The Company files with and furnishes to the Securities and Exchange Commission ("SEC") reports, including annual meeting materials, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as amendments thereto.
AVAILABLE INFORMATION The Company files with, and furnishes to, the Securities and Exchange Commission ("SEC") reports, including annual meeting materials, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as amendments thereto.
Norwood held several senior leadership positions, including CFO of Smith Equipment Rental and Services, LLC, a regional oilfield service provider, Vice President and Treasurer of Key Energy Services, Inc., an oilfield multi-service provider, and Corporate Controller and Vice President Finance-Americas with Bredero Shaw, a global pipe coating provider.
Norwood held several senior leadership positions, including CFO of Smith Equipment Rental and Services, LLC, a regional oilfield service provider, Vice President and Treasurer of Key Energy Services, Inc., an oilfield multi-service provider, and Corporate Controller and Vice President Finance-Americas with Bredero Shaw, the world's largest provider of protective coatings for the oil and gas pipeline industry.
Mansfield served in numerous roles including Vice President Controller, and Commercial General Manager, Europe, Africa & FSU, and played a key role in strategy development and merger and acquisition activities as the company grew from annual revenues of $100 million to over $900 million. Grant Dewbre: Appointed Chief Operating Officer in July 2021. Mr.
Mansfield served in numerous roles including Vice President Controller, and Commercial General Manager, Europe, Africa & the former Soviet Union region, and played a key role in strategy development and merger and acquisition activities as the company grew from annual revenues of $100 million to over $900 million .
Environmental impacts. The Company provides insulated pipe for district energy systems. A district energy system is a highly efficient way to provide heating or cooling to nearby buildings. A central plant produces steam or chilled water, hot and/or chilled water that flows through insulated pipes to nearby buildings.
A district energy system is a highly efficient way to provide heating or cooling to buildings. A central plant produces steam or chilled water that flows through insulated pipes to buildings.
Dewbre served as Managing Director for Seaway Heavy Lifting in Houston, Texas, a Dutch offshore construction company, which was part of the Subsea 7 group from July 2015 to November 2017. In addition, he was Senior Vice President for Ceona Offshore, a startup offshore construction specialist company based in London, the United Kingdom from December 2013 to June 2015.
Before joining the Company, Mr. Dewbre served as Managing Director for Seaway Heavy Lifting in Houston, Texas, a Dutch offshore construction company, which was part of the Subsea 7 group from July 2015 to November 2017.
Bryan Norwood Vice President and Chief Financial Officer; Age 66 2018 Wayne Bosch Vice President, Chief Human Resources Officer; Age 65 2013 David J. Mansfield: President, Chief Executive Officer ("CEO") and member of the Board of Directors since November 2016. From 2015 to 2016, Mr.
Mansfield Director, President and Chief Executive Officer; Age 63 2016 Grant Dewbre Chief Operating Officer; Age 54 2021 D. Bryan Norwood Vice President and Chief Financial Officer; Age 67 2018 David J. Mansfield: President, Chief Executive Officer ("CEO") and member of the Board of Directors since November 2016. From 2015 to 2016, Mr.
The Company believes that quality, service, engineering design capabilities and support, a comprehensive product line, timely execution, plant location and price are key competitive factors in the industry. The Company also believes it has a more comprehensive product line than any competitor. Research and Development.
These impacts are expected to continue throughout 2023 , and the resulting future disruptions to the Company’s operations are uncertain. Competition. The piping systems market is highly competitive. The Company believes that quality, service, engineering design capabilities and support, a comprehensive product line, timely execution, plant location and price are key competitive factors in the industry.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth information regarding the executive officers of the Company as of April 14, 2022: Executive officer of the Name Offices and Positions; Age Company since David J. Mansfield Director, President and Chief Executive Officer; Age 61 2016 Grant Dewbre Chief Operating Officer; Age 53 2021 D.
The Company considers its relationship with its employees to be good. 3 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth information regarding the executive officers of the Company as of April 27, 2023 : Executive officer of the Name Offices and Positions; Age Company since David J.
The Company maintains a standalone research and development function and primarily focuses on activities and development to meet product specifications mandated by its customers and the industry. Government regulation.
The Company also believes it has a more comprehensive product line than any competitor. Research and Development. The Company's research and development efforts primarily focus on activities and development to meet product specifications mandated by its customers and the industry. Environmental impacts. The Company provides insulated pipe for district energy systems.
The Company’s backlog on January 31, 2022 was $39.3 million compared to $52.6 million on January 31, 2021, most of which is expected to be completed within 2022. This decrease was primarily the result of the Company's completion of a significant number of projects during 2021 that were delayed because of the COVID-19 pandemic and related disruptions.
The Company’s backlog on January 31, 2023 was $ 38.5 million compared to $ 39.3 million on January 31, 2022 , most of which is expected to be completed within the year ending January 31, 2024 . The Company's backlog has remained consistent year-over-year as completed projects have been replaced with new awards during the year.
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While these impacts are expected to continue into 2022, the resulting future disruptions to the Company’s operations are uncertain. Competition. The piping systems market is highly competitive. The Company believes its principal competition consists of over 20 major competitors and more small competitors.
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In addition, he was Senior Vice President for Ceona Offshore, a startup offshore construction specialist company based in London, United Kingdom from December 2013 to June 2015.
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The demand for the Company's leak detection and location systems and secondary containment piping systems, which is a small percentage of the Company's total annual piping sales, is driven in the U.S. by federal and state environmental regulation with respect to hazardous waste. The U.S.
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Federal Resource Conservation and Recovery Act requires, in some cases, that the storage, handling and transportation of fluids through underground pipelines feature secondary containment and leak detection. The U.S. National Emission Standard for hydrocarbon airborne particulates requires reduction of airborne volatile organic compounds and fugitive emissions.
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Under this regulation, many major refineries are required to recover fugitive vapors and dispose of the recovered material in a process sewer system, which then becomes a hazardous secondary waste system that must be contained.
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Although there can be no assurances as to the ultimate effects of these governmental regulations, the Company believes such regulations generally increase the demand for its piping systems products.
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In the United States and Canada, federal government regulations require that all buried oil and gas pipelines that cross state or provincial boundaries or the United States-Canada border, have an anti-corrosion coating system applied. The Company believes that this regulation has a positive effect on demand for its products due to the Company's unique expertise with respect to anti-corrosion coating.
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Wayne Bosch: Appointed Vice President and Chief Human Resources Officer in December 2013. From 2010 to 2012, Mr. Bosch was Vice President of Human Resources at Pactiv, a $4.0 billion global manufacturer and distributor of food packaging products.
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Prior to Pactiv, he led the human resource activities at the North American segment of Barilla America, a $6.3 billion global pasta, sauces and bakery manufacturer and was the Chief Human Resources Officer for water filtration leader Culligan International Company. Mr.
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Bosch's background spans the entire spectrum of human resources competencies, including mergers, acquisitions and business integration, in start-up, turnaround and high-growth businesses. The scope of his experience also includes communications, legal, ethics and compliance, health safety environment, risk management, payroll, facilities and general administrative services. On January 3, 2022, Mr.
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Bosch provided notice to the Company of his intent to retire as the Company's Vice President and Chief Human Resources Officer effective July 3, 2022. 4 Table of Contents

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

51 edited+13 added−42 removed19 unchanged
Biggest changeThe Company may be unable to purchase raw materials at favorable prices, or maintain beneficial relationships with its suppliers, which could result in a shortage of supply, or increased pricing . To the extent the Company relies upon a single source for key components of several of its products, the Company believes there are alternate sources available for such components.
Biggest changeAny material decline in oil or gas prices could have a material adverse effect on the demand for the Company's products, its operations and financial condition. The Company may be unable to purchase raw materials at favorable prices, or maintain beneficial relationships with its suppliers, which could result in a shortage of supply, or increased pricing .
While the Company believes that it will be able to renew its Middle East credit arrangements and will have continued access to individual project financing, there is no assurance that such arrangements will be renewed or made available in similar amounts or on similar terms and conditions as the current arrangements, or that such individual project financing will be available for projects that the Company is interested in pursuing.
While the Company believes that it will be able to renew its Middle East credit arrangements and will have continued access to individual project financing, there is no assurance that such arrangements will be renewed or made available in similar amounts or on similar terms and conditions as the current arrangements, or that such individual project financing will be available for projects that the Company is interested in pursuing in the future.
These factors include, but are not limited to, changes in a country's or region's economic or political conditions, trade regulations affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights in some countries, changes in the regulatory or legal environment, restrictions on currency exchange activities, burdensome taxes and tariffs and other trade barriers.
These factors include, but are not limited to, changes in a country's or region's economic or political conditions, trade regulations affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights, changes in the regulatory or legal environment, restrictions on currency exchange activities, burdensome taxes and tariffs and other trade barriers.
To mitigate these impacts, the Company has implemented several strategies, including purchasing from alternative suppliers and planning for material purchases farther in advance to ensure the Company has materials when needed. The Company has also updated its pricing to customers to offset the impacts of the raw material price increases.
To mitigate these impacts, the Company has implemented several strategies, including purchasing from alternative suppliers and planning for material purchases farther in advance to ensure the Company has materials when needed. The Company also adjusts its pricing to customers to offset the impacts of the raw material price increases.
As a result, if the Company earns net taxable income, the Company’s ability to use its pre-change NOLs to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to the Company.
As a result, if the Company earns net taxable income, the Company’s ability to use its pre-change NOLs to offset U.S. federal taxable income may be subject to limitations, which could potentially result in a future tax liability of the Company.
Since the Company's revenues are based on discrete projects, the Company's operating results in any reporting period generally are negatively impacted as a result of large variations in the level of overall market demand or delays in the timing of project execution phases.
Since the Company's revenues are based on discrete projects, the Company's operating results in any reporting period generally are negatively impacted as a result of large declines in the level of overall market demand or delays in the timing of project execution phases.
We cannot predict the impact, if any, changes in foreign policies adopted by the current U.S. administration will have on our business. International risks and uncertainties, including changing social and economic conditions as well as terrorism, political hostilities and war, could lead to reduced international sales and reduced profitability associated with such sales.
We cannot predict the impact of changes in foreign policies adopted by the current U.S. administration will have on our business. International risks and uncertainties, including changing social and economic conditions as well as terrorism, political hostilities and war, could lead to reduced international sales and reduced profitability associated with such sales.
In the future, the Company may seek to grow its business by investing in new or existing facilities, making acquisitions, entering partnerships and joint ventures, or constructing new facilities, which could entail a number of additional risks, including: • strain on working capital; • diversion of management's attention away from other activities, which could impair the operation of existing businesses; • failure to successfully integrate the acquired businesses or facilities into existing operations; • inability to maintain key pre-acquisition business relationships; • loss of key personnel of the acquired business or facility; • exposure to unanticipated liabilities; and • failure to realize efficiencies, synergies and cost savings.
In the future, the Company may seek to grow its business by investing in new or existing facilities, making acquisitions, entering partnerships and joint ventures, or constructing new facilities, which could introduce additional risks, including: • strain on working capital; • diversion of management's attention away from other activities, which could impair the operation of existing businesses; • failure to successfully integrate an acquired business or facility into existing operations; • inability to maintain key pre-acquisition business relationships; • loss of key personnel of an acquired business or facility; • exposure to unanticipated liabilities; and • failure to realize efficiencies, synergies and cost savings.
In addition, if the Company is unable to acquire timely steel supplies, it may need to decline bid and order opportunities, which could also have an adverse effect on the Company's business, results of operations, financial position and cash flows.
In addition, if the Company is unable to acquire timely raw material supplies, it may need to decline bid and order opportunities, which could also have an adverse effect on the Company's business, results of operations, financial position and cash flows.
The Company cannot predict the nature, scope, or effect of future regulatory requirements to which its operations might be subject or the manner in which existing laws might be administered or interpreted. General Risks The Company may be unable to retain its senior management and key personnel.
The Company cannot predict the nature, scope, or effect of future regulatory requirements to which its operations might be subject or the manner in which existing laws might be administered or interpreted. 8 Table of Contents General Risks The Company may be unable to retain its senior management and key personnel.
While the Company currently has product liability insurance, the Company cannot be certain that its product liability insurance coverage will be adequate for liabilities that may be incurred in the future or that such coverage will continue to be available to the Company on commercially reasonable terms.
While the Company currently has product liability insurance that it believes to be sufficient, the Company cannot be certain that its product liability insurance coverage will be adequate for liabilities that may be incurred in the future or that such coverage will continue to be available to the Company on commercially reasonable terms.
The Company's results of operations could be adversely affected by changes in trade, monetary and fiscal policies, laws and regulations, other activities of U.S. and non-U.S. governments, agencies and similar organizations, and other factors.
The Company's results of operations could be adversely affected by changes in trade, monetary and fiscal policies, laws and regulations, other activities of governments, agencies and similar organizations, and other factors.
Tax interpretations, regulations, and legislation in the various jurisdictions in which the Company operates are subject to measurement uncertainty and the interpretations can impact net income, income tax expense or recovery, and deferred income tax assets or liabilities.
Tax interpretations, regulations, and legislation in the various jurisdictions in which the Company operates are subject to measurement uncertainty and the interpretations can impact net income, income tax expense or benefit, and income tax assets or liabilities.
In addition, these risks can include extraordinarily delayed collections of accounts receivable. Because the Company conducts a significant portion of its business activities in the Middle East, the political and economic events of the countries that comprise the GCC can have a material effect on the Company’s business, results of operations, financial condition, and cash flows.
In addition, these risks can include extraordinarily delayed collections of accounts receivable. Because the Company conducts a significant portion of its business activities in the Gulf Cooperation Council ("GCC"), the political and economic events of the countries that comprise the GCC can have a material effect on the Company’s business, results of operations, financial condition, and cash flows.
In periods of declining demand, the Company's fixed cost structure may limit its ability to cut costs, which may be a competitive disadvantage compared to companies with more flexible cost structures, or may result in reduced operating margins, operating losses and negative cash flows.
In periods of declining demand, the Company's fixed cost structure may limit its ability to cut costs, which may be a competitive disadvantage compared to companies with more flexible cost structures, or may result in reduced operating margins, operating losses and negative cash flows. The Company may be subject to claims for damages for defective products.
The Company has approximately $4.2 million becoming due in 2022 under its various foreign revolving lines of credit. The Company’s credit arrangements used by its Middle Eastern subsidiaries are renewed on an annual basis. In addition to these credit arrangements, the Company also obtains project financing in the Middle East on a project-by-project basis.
The Company has approximately $ 4.0 million becoming due in the year ending January 31, 2024 under its various foreign revolving lines of credit. The Company’s credit arrangements used by its Middle Eastern subsidiaries are renewed on an annual basis. In addition to these credit arrangements, the Company also obtains financing in the Middle East on a project-by-project basis.
Any cancellation or delay in orders may result in revenues that are lower than expected. 8 Table of Contents The Company's results of operations could be adversely affected by changes in international regulations and other activities of U.S. and non-U.S. governmental agencies related to the Company’s international operations . International sales represent a significant portion of the Company's total sales.
Any reduction or cancellation of orders may result in revenues that are lower than expected. The Company's results of operations could be adversely affected by changes in international regulations and other activities of governmental agencies related to the Company’s operations . International sales represent a significant portion of the Company's total sales.
Further, the Company has been engaged by the customer to perform additional work in 2022 under customary trade credit terms that supports the continued cooperation between the Company and the customer. As a result, the Company did not reserve any allowance against this amount as of January 31, 2022.
Further, the Company has been engaged by the customer to perform additional work in the year ending January 31, 2024 under customary trade credit terms that supports the continued cooperation between the Company and the customer. As a result, the Company did not reserve any allowance against this outstanding receivable as of January 31, 2023 .
The Company employs a number of measures to prevent, detect and mitigate these threats, which include password encryption, frequent password change events, firewall detection systems, anti-virus software in-place and frequent backups; however, there is no guarantee such efforts will be successful in preventing a cyber-attack.
The Company employs a number of measures to prevent, detect and mitigate these threats, which include data and email encryption, strong password management policy, firewall systems, anti-virus software, and frequent backups. However, there is no guarantee such efforts will be successful in preventing a cyber-attack.
A successful attack could disrupt and otherwise adversely affect the Company's reputation and results of operations, including through lawsuits by third parties. The Audit Committee of the Board of Directors is responsible for overseeing the Company's cybersecurity policies and programs. 9 Table of Contents
A successful attack could adversely affect the Company's reputation and results of operations, including through lawsuits by third parties. The Audit Committee of the Board of Directors is responsible for overseeing the adequacy and effectiveness of the Company's cybersecurity policies and programs.
Decreases in government spending on projects using the Company’s products, and challenges to the Company’s non-government customers’ liquidity and availability of capital funds, may adversely impact demand for the Company’s products.
Decreases in government spending on projects using the Company’s products, and challenges to the Company’s non-government customers’ liquidity and availability of capital funds, may adversely impact demand for the Company’s products. Decreases in government spending on projects using the Company's products can have a negative impact on the Company's sales volumes.
The Company ’ s ability to use its net operating loss carryforwards and certain other tax attributes may be limited. The Company’s net operating loss (“NOL”) carryforwards in the U.S. could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under U.S. tax law.
The Company’s net operating loss (“NOL”) carryforwards in the U.S. could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under U.S. tax law.
This COVID-19 pandemic has impacted, and may continue to impact, the Company's office locations and manufacturing facilities, as well as those of its customers and third-party vendors, including through the effects of facility closures, reductions in operating hours and other social distancing efforts.
Pandemics and other public health crises may impact the Company's office locations and manufacturing facilities, as well as those of its customers and third-party vendors, including through the effects of facility closures, reductions in operating hours and other social distancing efforts.
As a result of these and other factors, including general economic risks, the Company may not be able to realize the expected benefits from future acquisitions, new facility developments, partnerships, joint ventures or other investments. The Company's information technology systems may be negatively affected by cybersecurity threats.
As a result of these and other factors, including general economic risks, the Company may not be able to realize the expected benefits from future acquisitions, new facility developments, partnerships, joint ventures or other investments. The Company and its operations may be negatively impacted by pandemics and other public health crises.
If there were an event of default under the Company's current revolving credit facilities, the lenders could cause all amounts outstanding with respect to that debt to be due and payable immediately.
There is a risk that the Company may not be able to remain in compliance with its credit agreement covenants. If there were an event of default under the Company's current revolving credit facilities, the lenders could cause all amounts outstanding with respect to that debt to be due and payable immediately.
The Company attempts to negotiate progress-billing milestones on large contracts to help manage its working capital and cash flows, and to reduce the credit risk associated with these large contracts.
The Company attempts to negotiate progress-billing milestones on large contracts to help manage its working capital and cash flows, and to reduce the credit risk associated with these large contracts. Consequently, changes in accepted billing terms of contracts could impact the Company's requirements for working capital and cash flows.
The effect of revisions to revenue and total estimated cost is recorded when the amounts are known or can be reasonably estimated. These revisions can occur at any time and could be material. On a historical basis, management believes that reasonably reliable estimates of the progress towards completion on long-term contracts have been made.
Revisions can occur at any time and could be material. On a historical basis, management believes that reasonably reliable estimates of the progress towards completion on long-term contracts have been made.
The Company extended credit to a customer for a project in the Middle East in 2013 and, if the Company is unable to collect this account receivable, its future profitability could be adversely impacted. 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 extended credit to a customer for a project in the Middle East in 2013 and, if the Company is unable to collect this account receivable, its future profitability could be adversely impacted.
Uncertainty about economic market conditions poses risks that the Company's customers may postpone spending for capital improvement and maintenance projects in response to tighter credit markets or negative financial news, which could have a material adverse effect on the demand for the Company's products.
Uncertainty about economic market conditions poses risks that the Company's customers may postpone spending for capital improvement and maintenance projects in response to tighter credit markets or negative financial news, which could have a material adverse effect on the demand for the Company's products. 5 Table of Contents Financial Risks The Company may be unable to maintain compliance with existing debt covenants, repay its debt or renew its expiring international credit facilities.
Generating net income and positive cash flows in the future will depend on the Company's ability to successfully complete and execute its strategic plan. The Company’s inability to successfully maintain profitability and positive cash flows may result in it experiencing a serious liquidity deficiency resulting in material adverse consequences that could threaten its viability.
The Company’s inability to successfully achieve profitability and positive cash flows may result in it experiencing a serious liquidity deficiency resulting in material adverse consequences that could threaten its viability.
Although the Company believes its assumptions, judgements and estimates are reasonable, changes in tax laws or the Company's interpretation of tax laws and the resolution of any tax audits could significantly impact the amounts provided for income taxes in the Company's consolidated financial statements.
Although the Company believes its assumptions, judgements and estimates are reasonable, changes in tax laws or the Company's interpretation of tax laws and the resolution of any tax audits could significantly impact the amounts provided for income taxes in the Company's consolidated financial statements. 6 Table of Contents The Company ’ s ability to use its net operating loss carryforwards and certain other tax attributes may be limited.
However, if the Company’s efforts to collect on this account are not successful in 2022, then the Company may be required to recognize an allowance for all, or substantially all, of any such then uncollected amounts in the future.
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. The Company may be impacted by interpretations and changes in tax regulations and legislation which could adversely affect the Company's results of operations.
The Company may receive defective materials from its vendors that are incorporated into the Company's products during the manufacturing process. The cost to repair, remake or replace defective products could be greater than the amount that can be recovered from the vendor.
The Company may receive defective materials from its vendors that are incorporated into the Company's products during the manufacturing process. While the Company mitigates this risk through contract terms, traceability and specifications, and has recourse to recover from vendors the costs to repair, remake or replace defective products, such costs could be greater than the amount that can be recovered.
The Company has approximately $1.8 million becoming due in 2022 under its project financing agreements.
The Company has approximately $ 1.7 million becoming due in the year ending January 31, 2024 under its project financing agreements.
As of January 31, 2022, the Company had $40.1 million of gross federal NOLs and $2.7 million of state NOLs available to offset the Company’s future taxable income, if any. Of the gross federal NOL amount, $33.8 million will begin to expire between tax years 2030 and 2037 and the remainder has an indefinite carryforward.
As of January 31, 2023 , the Company had $ 34.3 million of gross federal NOLs and $ 45.5 million of gross state NOLs available to offset the Company’s future taxable income. Of the gross federal NOL amount, $ 26.9 million will begin to expire between tax years 2033 and 2038 and the remainder has an indefinite carryforward.
The Company's sales to foreign customers increased to 66.2% in 2021 from 49.8% in 2020. The Company's anticipated growth and profitability may require increasing foreign sales volume and may necessitate further international expansion.
The Company's sales to foreign customers were 63.8% and 66.2% in the years ended January 31, 2023 and 2022 , respectively. The Company's anticipated growth and profitability may require increasing foreign sales volume and may necessitate further international expansion.
The Company's global supply chains have been negatively affected by the COVID-19 pandemic. Due to the current inflationary environment, raw material supply shortages and transportation delays, the Company routinely experiences significant delays and increased prices for raw materials used in our production processes.
Due to the current inflationary environment, raw material supply shortages and transportation delays, the Company could experience delays and has incurred increased prices for raw materials used in our production processes.
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that the Company would prevent or detect a misstatement of its financial statements or fraud. 7 Table of Contents Business Condition Risks Delays in the timing of order receipt, execution, delivery and acceptance for the Company’s products generally negatively impact the Company’s operating results.
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that the Company would prevent or detect a misstatement of its financial statements or fraud.
In addition, any refinancing, replacement or additional financing the Company may obtain could contain similar or more restrictive covenants than those currently applicable to the Company.
In addition, any refinancing, replacement or additional financing the Company may obtain could contain similar or more restrictive covenants than those currently applicable to the Company. The Company’s ability to comply with any covenants may be adversely affected by general economic conditions, political decisions, industry conditions and other events beyond management’s control.
The state NOLs expire at various dates from 2022 to 2032. The Company may experience ownership changes in the future as a result of subsequent shifts in its stock ownership.
The state NOLs expire at various dates from 2023 to 2032 . In addition, the Company's ability to use its NOLs may be limited in the event of future changes in its stock ownership.
Any increase in steel prices that is not offset by an increase in the Company's prices that is accepted by customers could have an adverse effect on the Company's business, results of operations, financial position and cash flows.
The Company regularly updates its quoting system for the movements in raw material prices and seeks to recover price differentials through increases in the selling price of the Company's products; however, the Company may not always be successful, and any increase in raw material prices that is not offset by an increase in the Company's prices that is accepted by customers could have an adverse effect on the Company's business, results of operations, financial position and cash flows.
The Company’s results of operations, financial condition, liquidity and cash flow in 2020 were materially adversely affected by the COVID-19 pandemic and may in the future be materially adversely affected if the COVID-19 pandemic again worsens, although the extent of any such impacts remains unclear at this time.
The Company’s results of operations, financial condition, liquidity and cash flow may in the future be materially adversely affected by pandemics and other public health crises, although the extent of any such impacts cannot be predicted. The Company's information technology systems may be negatively affected by cybersecurity threats.
The Company cannot be certain it will not experience material product liability losses in the future or that it will not incur significant costs to defend such claims.
The Company warrants its products to be free of certain defects. The Company has, from time to time, had claims alleging defects in its products. The Company may experience material product liability claims in the future and it could incur significant costs to defend such claims.
The steel industry is highly cyclical in nature, and at times, pricing can be highly volatile due to a number of factors beyond the Company's control, including general economic conditions, import duties, other trade restrictions and currency exchange rates. This volatility may negatively impact market conditions thus reducing project activity and the Company's results of operations.
The steel industry in particular is highly cyclical in nature, and at times, pricing can be highly volatile due to a number of factors beyond the Company's control. The Company utilizes escalation clauses and bid expiration dates to mitigate the impact of this volatility on its earnings.
Certain domestic divisions have contracts that recognize revenues using periodic recognition of income. For these contracts, the Company uses the over time accounting method. This methodology allows revenue and profits to be recognized proportionally over the life of a contract by comparing the amount of the cost incurred to date against the total amount of cost expected to be incurred.
This methodology allows revenue and profits to be recognized proportionally over the life of a contract by comparing the amount of the cost incurred to date against the total amount of cost expected to be incurred. The effect of revisions to revenue and total estimated cost is recorded when amounts are known or can be reasonably estimated.
The Company experienced net losses for its three fiscal years prior to 2019, as well as in 2020. While the Company was profitable and had positive cash flow in 2021, there is no guarantee that the Company will be able to sustain its 2021 levels of profitability or positive cash flows in the future.
The Company may be unable to achieve sustained levels of profitability or positive cash flows in the future. There is no guarantee that the Company will be able to achieve profitability or positive cash flows in the future.
In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. The Company may be required to reverse previously recorded revenue and profits as a result of inaccurate estimates made in connection with the Company’s over time revenue recognition.
The Company may be required to reverse previously recorded revenue and profits as a result of inaccurate estimates made in connection with the Company’s "over time" revenue recognition. Certain of the Company's contracts recognize revenues using periodic recognition of income. For these contracts, the Company uses the "over time" accounting method.
During 2021, the Company received approximately $0.1 million from the customer. In August 2021, the Company has also received an updated acknowledgment of the outstanding balances and assurances of payment from the customer.
The Company continues to engage with the customer to ensure full payment of open balances, and during April 2022 received an updated acknowledgment of the outstanding balances and assurances of payment from the customer. During 2022, the Company received a partial payment to settle $ 0.9 million of the customer's outstanding balance.
If the United States or other countries impose additional tariffs, that could have a further adverse impact on our business.
This volatility may negatively impact market conditions thus reducing project activity and the Company's results of operations. If the United States or other countries in which the Company operates impose tariffs on imports of raw materials, including steel, used in the Company's operations, that could have a further adverse impact on our business.
These risk factors should be considered together with information included elsewhere in this Annual Report on Form 10-K. Market Condition Risks The Company’s business has been and may continue to be negatively impacted by the ongoing COVID-19 pandemic. The COVID-19 pandemic has severely restricted the level of economic activity around the world.
These risk factors should be considered together with information included elsewhere in this Annual Report on Form 10-K. Market Condition Risks The Company's operations and earnings may be significantly affected by changes in oil and gas prices . Oil and gas prices depend on local, regional, and global events or conditions that affect supply and demand.
Due to the international scope of the Company’s operations, it is subject to a complex system of commercial and trade regulations around the world. Recent years have seen an increase in the development and enforcement of laws regarding trade compliance anti-corruption, such as the U.S.
Due to the international scope of the Company’s operations, it is subject to a complex system of commercial and trade regulations around the world. The Company’s foreign subsidiaries are governed by laws, rules and business practices that differ from those of the United States.
Removed
In response to this COVID-19 pandemic, the governments of many countries, states, cities and other geographic regions, as well as customers and suppliers, have taken preventative or protective actions, such as imposing restrictions on travel and business operations, shutdowns, lockdowns, mask mandates and other measures. Temporary closures of businesses have been ordered and numerous other businesses have temporarily closed voluntarily.
Added
There can be no assurance regarding the availability of supply for key components of the Company's products. The lack of supply of these components could result in an adverse effect on the financial condition of the Company.
Removed
These actions may continue to expand in scope, type and impact depending on the ongoing severity of the pandemic. These measures, while intended to protect human life, have had and are expected to continue to have significant adverse impacts on domestic and foreign economies.
Added
The Company is unable to predict the duration of the current inflationary environment, raw material supply shortages and transportation delays, and the resulting future disruptions to the Company’s operations are uncertain.
Removed
Currently, the effectiveness of economic stabilization efforts being taken by federal and state government authorities to mitigate the effects of these actions and the spread of COVID-19 is uncertain.
Added
One of the Company’s accounts receivable in the total amount of $ 2.7 million and $ 3.6 million as of January 31, 2023 and 2022 , respectively, has been outstanding for several years. As of January 31, 2023 , the entire balance represents a retention receivable that is payable upon the commissioning of the system.
Removed
In addition, the Company has modified its business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences), and the Company may take further actions as may be required by government authorities or that the Company determines are in the best interests of its employees, customers, partners and suppliers.
Added
Due to the long-term nature of the receivable, $ 2.5 million and $ 2.0 million were included in other long-term assets as of January 31, 2023 and 2022 , respectively.
Removed
In some cases, customer mitigation efforts have prevented the Company from accessing the facilities of its customers to deliver products and provide services. In addition, some of the Company’s customers have chosen to delay and some of the Company's customers may choose to abandon projects for which the Company provides products and/or services as a result of such actions.
Added
The Company completed all of its deliverables in 2015 under the related contract, but the system has not yet been commissioned by the customer as additional activities must be completed prior to the overall system completion and commissioning. Nevertheless, the Company has been engaged in ongoing active efforts to collect this outstanding amount.
Removed
Further, the Company may experience disruptions or delays in its supply chain as a result of such actions.
Added
In addition, at the state level, there may be periods in the future during which the use of NOLs is suspended or otherwise limited, which could result in a state tax liability which would otherwise not arise.
Removed
While a substantial portion of the Company’s businesses have been classified as an essential business in jurisdictions in which facility closures have been mandated, the Company can provide no assurance that this will not change in the future or that the Company’s businesses will be classified as essential in each of the jurisdictions in which they operate.
Added
As of January 31, 2023, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was not effective due to an identified material weakness. The material weakness was regarding the design and operating effectiveness of controls related to the existence of inventory during the fiscal year ended January 31, 2023.
Removed
Crude oil and natural gas prices are volatile, and any substantial and extended increases or decreases in oil and natural gas prices will likely have a material effect on demand and pricing in the Company's business.
Added
Specifically, the Company failed to appropriately perform cycle count procedures at one of the Company's operating facilities, resulting in a significant adjustment during the full physical inventory count at period end. Further, management review of the process and resulting adjustments on a periodic basis failed to identify the issue.
Removed
Generally, when the prices for crude oil and natural gas are higher, demand for certain of the Company’s products increases and the Company is able to negotiate higher prices.
Added
The material weakness did not result in any material misstatements to the Company’s consolidated financial statements.
Removed
On the other hand, when the prices of crude oil and natural gas are lower, demand for certain of the Company’s products decreases and the Company is forced to compete with lower prices and other concessions.
Added
A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Removed
Volatility in these commodity prices can also result in circumstances where demand for certain of the Company’s products is suddenly high, but the Company is unable to negotiate higher prices, thereby adversely impacting the Company’s margins and capacity to accept new projects at higher margins.
Added
If the current material weakness is not remediated, or if additional material weaknesses or significant deficiencies in the Company’s internal control over financial reporting are discovered or occur in the future, the Company’s consolidated financial statements may contain material misstatements and the Company could be required to restate its financial results.
Removed
Among the factors that can or could cause these price fluctuations are: • the level of consumer demand; • global supplies of crude oil and natural gas; • global drilling activity; • the actions of other crude oil exporting nations and the Organization of Petroleum Exporting Countries; • government sanctions and boycotts of crude oil, natural gas and other energy products produced by certain countries, such as the current sanctions and boycotts of oil and natural gas provided by Russia as a result of the war in Ukraine; • worldwide economic and political conditions, including political instability or armed conflict in oil and gas producing regions, such as the current war in Ukraine; and • the price and availability of, and demand for, competing energy sources, including alternative energy sources.
Added
The failure to maintain an effective system of internal control over financial reporting could limit the Company’s ability to report its financial results accurately and in a timely manner or to detect and prevent fraud and could also cause a loss of investor confidence and decline in the market price of the Company’s common stock.
Removed
Oil prices may continue to be volatile as a result of the disruption of global markets from the war in Ukraine and resulting boycotts of Russian oil and gas by several countries, as well as the ongoing COVID-19 pandemic.
Added
See further discussion of the material weakness, including the Company's planned remediation procedures, in Item 9A., Controls and Procedures. 7 Table of Contents Business Condition Risks Delays in the timing of order receipt, execution, delivery and acceptance for the Company’s products generally negatively impact the Company’s operating results.
Removed
West Texas Intermediate crude oil prices have increased from approximately $60 per barrel in March 2021 to approximately $75 per barrel in December 2021 and further increasing to approximately $100 per barrel in March 2022.
Removed
While the Company can give no assurance that this increase in prices will result in increased sales and earnings, continued higher prices historically lead to higher capital spending by energy companies.
Removed
Any U.S. federal government or other restrictions on oil and gas production, transportation or use, could have an impact on the Company's business; however, most of the Company's sales attributable to oil and gas markets are outside of the United States.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES Location Leased or Owned Illinois Leased building and office space Louisiana Owned building and leased land Tennessee Leased building and office space Texas Leased office space Canada Owned building with office space on owned land, leased land and leased office space India Leased building, office space and land Kingdom of Saudi Arabia Owned building and office space on leased land United Arab Emirates Leased office space and building on leased land Egypt Leased building and office space For further information, see Note 6 - Lease information, in the Notes to Consolidated Financial Statements.
Biggest changePROPERTIES Location Leased and/or Owned Illinois Leased building and office space Louisiana Owned building and leased land Tennessee Leased building and office space Texas Leased office space Canada Owned building with office space on owned land; leased land and leased office space India Leased building, office space and land Kingdom of Saudi Arabia Owned building and office space on leased land United Arab Emirates Leased office space and building on leased land; owned building with office space on leased land Egypt Leased building and office space For further information, see Note 6 - Leases, in the Notes to Consolidated Financial Statements.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table sets forth information with respect to repurchases by the Company of its shares of common stock during 2021 under its stock repurchase program: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs October 1, 2021 - October 31, 2021 58,528 $ 8.45 58,528 $ 2,505,216 November 1, 2021 - November 30, 2021 21,350 8.55 21,350 2,322,674 December 1, 2021 - December 31, 2021 56,447 7.99 56,447 1,871,840 January 1, 2022 - January 31, 2022 97,956 8.81 97,956 1,008,444 Total 234,281 234,281 11 Table of Contents
Biggest changeThe following table sets forth information with respect to repurchases by the Company of its shares of common stock during 2021 and 2022 (In thousands, except per share data) : Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs October 1, 2021 - October 31, 2021 59 $ 8.45 59 $ 2,505 November 1, 2021 - November 30, 2021 21 8.55 21 2,323 December 1, 2021 - December 31, 2021 56 7.99 56 1,872 January 1, 2022 - January 31, 2022 98 8.81 98 1,008 July 1, 2022 - July 31, 2022 5 8.85 5 964 December 1, 2022 - December 31, 2022 3 8.61 3 939 Total 242 242 10 Table of Contents
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company's common stock is traded on the Nasdaq Global Market under the symbol "PPIH". As of April 14, 2022, there were approximately 60 stockholders of record and other additional stockholders for whom securities firms or banks acted as nominees.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company's common stock is traded on the Nasdaq Global Market under the symbol "PPIH". As of April 25, 2023 , there were approximately 58 stockholders of record and other additional stockholders for whom securities firms or banks acted as nominees.
Stock repurchases are permitted to be executed through open market or privately negotiated transactions over the course of 12 months, depending upon current market conditions and other factors. As of January 31, 2022, the Company had repurchased its stock with a total value of $2.0 million, leaving $1.0 million remaining authorized for potential repurchase under the program.
Stock repurchases were permitted to be executed through open market or privately negotiated transactions, depending upon current market conditions and other factors. In total, the Company used $2.0 million of the $3.0 million authorized to repurchase its outstanding shares of common stock under the program.
Issuer Purchases of Equity Securities On October 4, 2021, the Company's Board of Directors approved a stock repurchase program, which authorizes the Company to purchase up to $3.0 million of its outstanding shares of common stock.
Share repurchases may be executed through open market or in privately negotiated transactions over the course of the 12 months following the Board of Directors authorization. The repurchase program approved on October 4, 2021 authorized the Company to use up to $3.0 million for the purchase of its outstanding shares of common stock.
Added
Issuer Purchases of Equity Securities On December 7, 2022 the Board of Directors authorized the use of $1.0 million remaining under the share repurchase program previously approved on October 4, 2021 that expired on October 3, 2022.
Added
On July 26, 2022, the Company retired 239,168 shares of treasury stock previously repurchased under the stock repurchase program.
Added
The retirement was recorded as a reduction to common stock based on the par value of the shares, and the excess over par value was recorded as a decrease to retained earnings in accordance with Accounting Standards Codification ("ASC") 505-30, Equity - Treasury Stock .

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

64 edited+27 added−35 removed18 unchanged
Biggest changeRisk Factors for additional information. 12 Table of Contents Results of Operations Consolidated Results of Operations: Change favorable ($ in thousands) 2021 2020 (Unfavorable) Amount Percent of Net Sales Amount Percent of Net Sales Amount Net sales $ 138,552 $ 84,694 $ 53,858 Gross profit 32,530 23.5 % 11,179 13.2 % 21,351 General and administrative expenses 19,893 14.4 % 17,222 20.3 % (2,671 ) Selling expense 4,526 3.3 % 5,334 6.3 % 808 Interest expense, net 828 381 (447 ) Other income, net 1,044 3,983 (2,939 ) Income/(loss) from operations before income taxes 8,327 (7,775 ) 16,102 Income tax expense/(benefit) 2,265 (133 ) (2,398 ) Net income/(loss) 6,062 (7,642 ) 13,704 2021 Compared to 2020 Net sales: Net sales were $138.6 million in 2021, an increase of $53.9 million, or 63.6%, from $84.7 million in 2020.
Biggest changeRisk Factors for additional information. 11 Table of Contents Results of Operations Consolidated Results of Operations: ($ in thousands) Year Ended January 31, 2023 2022 Change favorable/(unfavorable) Amount Percent of Net Sales Amount Percent of Net Sales Amount Net sales $ 142,569 $ 138,552 $ 4,017 Gross profit 38,301 27 % 32,530 23 % 5,771 General and administrative expenses 21,994 15 % 19,893 14 % (2,101 ) Selling expense 5,163 4 % 4,526 3 % (637 ) Interest expense, net 2,119 828 (1,291 ) Other income 533 1,044 (511 ) Income before income taxes 9,558 8,327 1,231 Income tax expense 3,613 2,265 (1,348 ) Net income 5,945 6,062 (117 ) Year ended January 31, 2023 Compared to year ended January 31, 2022 Net sales Net sales were $ 142.6 million and $ 138.6 million in the years ended January 31, 2023 and 2022 , respectively.
On September 17, 2021, the North American Loan Parties executed an extension of the Credit Agreement with PNC, providing for a new five-year $18.0 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the “Renewed Senior Credit Facility”). The Company's obligations under the Renewed Senior Credit Facility are currently guaranteed by Perma-Pipe Canada, Inc.
On September 17, 2021, the North American Loan Parties executed an extension of the Credit Agreement with PNC, providing for a new five-year $18 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the “Renewed Senior Credit Facility”). The Company's obligations under the Renewed Senior Credit Facility are currently guaranteed by Perma-Pipe Canada, Inc.
This credit arrangement is in the form of project financing at rates competitive in Egypt. The line was secured by certain assets (such as accounts receivable) of the Company's Egyptian subsidiary. Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricted the Company's Egyptian subsidiary's ability to undertake any additional debt.
This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by certain assets (such as accounts receivable) of the Company's Egyptian subsidiary. Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricted the Company's Egyptian subsidiary's ability to undertake any additional debt.
In order to cure any future breach of the FCCR covenant by the North American Loan Parties, the Company may repatriate cash from any of its foreign subsidiaries that are otherwise not a party to the Renewed Senior Credit Facility in an amount which, when added to the amount of the Company’s Consolidated EBITDA, would result in pro forma compliance with the covenant.
In order to cure any future breach of the FCF covenant by the North American Loan Parties, the Company may repatriate cash from any of its foreign subsidiaries that are otherwise not a party to the Renewed Senior Credit Facility in an amount which, when added to the amount of the Company’s Consolidated EBITDA, would result in pro forma compliance with the FCF covenant.
The Company was in compliance with these covenants as of January 31, 2022. The Renewed Senior Credit Facility contains customary events of default. If an event of default occurs and is continuing, then PNC may terminate all commitments to extend further credit and declare all amounts outstanding under the Renewed Senior Credit Facility due and payable immediately.
The Company was in compliance with these covenants as of January 31, 2023 . The Renewed Senior Credit Facility contains customary events of default. If an event of default occurs and is continuing, then PNC may terminate all commitments to extend further credit and declare all amounts outstanding under the Renewed Senior Credit Facility due and payable immediately.
Interest on alternate base rate borrowings are based on the alternate base rate as defined in the Renewed Senior Credit Facility plus an applicable margin ranging from 1.00% to 1.50%, based on the FCCR in the most recently reported period.
Interest on alternate base rate borrowings is the alternate base rate (as defined in the Renewed Senior Credit Facility) plus an applicable margin ranging from 1.00% to 1.50%, based on the FCCR in the most recently reported period.
Years, results and balances described as 2021 and 2020 are for the fiscal years ended January 31, 2022 and 2021, respectively. The Company is engaged in the manufacture and sale of products in one reportable segment: Piping Systems.
Years, results and balances described as 2022 and 2021 are for the fiscal years ended January 31, 2023 and 2022 , respectively. The Company is engaged in the manufacture and sale of products in one reportable segment: Piping Systems.
Interest on LIBOR or LIBOR successor rate borrowings will be the LIBOR rate as defined in the Renewed Senior Credit Facility plus an applicable margin ranging from 2.00% to 2.50%, based on the FCCR in the most recently reported period. Additionally, the Borrowers pay a 0.25% per annum facility fee on the unused portion of the Renewed Senior Credit Facility.
Interest on LIBOR or LIBOR successor rate borrowings is the LIBOR rate (as defined in the Renewed Senior Credit Facility) plus an applicable margin ranging from 2.00% to 2.50%, based on the FCCR in the most recently reported period. Additionally, the Borrowers pay a 0.25% per annum facility fee on the unused portion of the Renewed Senior Credit Facility.
Borrowings under the Renewed Senior Credit Facility bears interest at a rate equal to an alternate base rate, the London Inter-Bank Offered Rate (“LIBOR”) or a LIBOR successor rate index, plus, in each case, an applicable margin. The applicable margin is based on a fixed charge coverage ratio ("FCCR") range.
Borrowings under the Renewed Senior Credit Facility bear interest at a rate equal to an alternate base rate, London Inter-Bank Offered Rate ("LIBOR") or a LIBOR successor rate index, plus, in each case, an applicable margin. The applicable margin is based on a fixed charge coverage ratio ("FCCR") range.
The Company utilized an incremental borrowing rate of 8.0% to determine the finance obligation to record for the amounts received and will continue to depreciate the assets.
The Company utilized an incremental borrowing rate of 8.00% to determine the finance obligation to record for the amounts received and will continue to depreciate the assets.
This credit arrangement is in the form of project financing at rates competitive in the U.A.E. The line is secured by the contract for a project being financed by the Company's U.A.E. subsidiary. The facility has an interest rate of approximately 4.5% and is expected to expire in June 2023 in connection with the completion of the project.
This credit arrangement is in the form of project financing at rates competitive in the U.A.E. The line is secured by the contract for a project being financed by the Company's U.A.E. subsidiary. The facility has an interest rate of approximately 8.38% and is expected to expire in June 2023 in connection with the completion of the project.
The foreign revolving lines balances as of January 31, 2022 and 2021 were included as current maturities of long-term debt in the Company's consolidated balance sheets. Finance obligation - buildings and land. On April 14, 2021, the Company entered into a purchase and sale agreement (the "Purchase and Sale Agreement").
The foreign revolving lines balances as of January 31, 2023 and 2022 , were included as current maturities of long-term debt in the Company's consolidated balance sheets. 16 Table of Contents Finance obligation - buildings and land. On April 14, 2021, the Company entered into a purchase and sale agreement (the "Purchase and Sale Agreement").
The Renewed Senior Credit Facility also contains financial covenants requiring the North American Loan Parties to achieve a ratio of its EBITDA to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Renewed Senior Credit Facility to be not less than 1.10 to 1.00 if for any five consecutive days the undrawn availability is less than $3.0 million or any day in which the undrawn availability is less than $2.0 million.
The Renewed Senior Credit Facility also contains a free cash flow financial covenant (the "FCF covenant") requiring the North American Loan Parties to achieve a ratio of its EBITDA to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Renewed Senior Credit Facility to be not less than 1.10 to 1.00 for any five consecutive days in which the undrawn availability is less than $3.0 million or any day in which the undrawn availability is less than $2.0 million.
Subject to certain exceptions, borrowings under the Renewed Senior Credit Facility are secured by substantially all of the North American Loan Parties’ assets. The Renewed Senior Credit Facility will mature on September 20, 2026.
Subject to certain exceptions, borrowings under the Renewed Senior Credit Facility are secured by substantially all of the North American Loan Parties’ assets. The Renewed Senior Credit Facility matures on September 20, 2026.
There was no restricted cash held in the United States on January 31, 2022 or January 31, 2021. Restricted cash held by foreign subsidiaries was $1.6 million and $1.2 million as of January 31, 2022 and 2021, respectively. Restricted cash held by foreign subsidiaries related to fixed deposits that also serve as security deposits and guarantees.
There was no restricted cash held in the United States on January 31, 2023 or January 31, 2022 . Restricted cash held by foreign subsidiaries was $ 1.0 million and $ 1.6 million as of January 31, 2023 and 2022 , respectively. Restricted cash held by foreign subsidiaries related to fixed deposits that also serve as security deposits and guarantees.
The current portion of the finance obligation of $0.1 million is recognized in current maturities of long-term debt and the long-term portion of $9.3 million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of January 31, 2022.
The current portion of the finance obligation of $ 0.1 million is recognized in current maturities of long-term debt and the long-term portion of $ 9.2 million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of January 31, 2023 .
On January 31, 2022, interest rates were based on the Emirates Inter Bank Offered Rate plus 3.0% to 3.5% per annum for the U.A.E. credit arrangements, two of which have a minimum interest rate of 4.5% per annum, and based on the stated interest rate in the agreement for the Egypt credit arrangement.
On January 31, 2023 , interest rates were based on the Emirates Inter Bank Offered Rate plus 3.00% to 3.50% per annum for the U.A.E. credit arrangements, two of which have a minimum interest rate of 4.50% per annum, based on the stated interest rate in the agreement for the Egypt credit arrangement, and based on the Saudi Inter Bank Offered Rate plus 3.5% for the Saudi Arabia credit arrangement.
As of January 31, 2022, $1.2 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of January 31, 2022, the Company had borrowed $6.0 million, and had an additional $6.1 million of borrowing remaining available under the foreign revolving credit arrangements.
As of January 31, 2023 , $ 5.6 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of January 31, 2023 , the Company had borrowed $ 5.7 million and had an additional $ 10.2 million of borrowing remaining available under the foreign revolving credit arrangements.
Concurrent with the sale of the Property, the Company entered into a fifteen-year lease agreement (the “Lease Agreement”), whereby the Company will lease back the Property at an annual rental rate of approximately $0.8 million, subject to annual rent increases of 2.0%.
Concurrent with the sale of the Property, the Company entered into a 15-year lease agreement (the “Lease Agreement”), whereby the Company is leasing back the Property at an annual rental rate of approximately $0.8 million, subject to annual rent increases of 2.00%.
To mitigate these impacts, the Company has implemented several strategies, including purchasing from alternative suppliers and planning for material purchases farther in advance to ensure the Company has materials when needed. The Company has also updated its pricing to customers to offset the impacts of the raw material price increases.
To mitigate these impacts, the Company has implemented several strategies, including purchasing from alternative suppliers and planning for material purchases further in advance to ensure the Company has materials when needed. The Company also adjusts its pricing to customers to offset the impacts of the raw material price increases. See Item 1A.
(6) Refer to Note 7 - Income taxes, in the Notes to Consolidated Financial Statements for a description of the uncertain tax position obligations. 15 Table of Contents Financing Revolving line - North America .
(6) Refer to Note 7 - Income taxes, in the Notes to Consolidated Financial Statements for a description of the uncertain tax position obligations. Financing Revolving lines - North America .
As of January 31, 2022, the calculated ratio was substantially greater than 1.10 to 1.00.
As of January 31, 2023 , the calculated ratio was greater than 1.10 to 1.00.
Further, the Company has been engaged by the customer to perform additional work in 2022 under customary trade credit terms that supports the continued cooperation between the Company and the customer. As a result, the Company did not reserve any allowance against this amount as of January 31, 2022.
Further, the Company has been engaged by the customer to perform additional work in 2023 under customary trade terms that supports the continued cooperation between the Company and the customer. As a result, the Company did not reserve any allowance against the remaining outstanding balances as of January 31, 2023 .
Liquidity and capital resources Cash and cash equivalents as of January 31, 2022 and 2021 were $8.2 million and $7.2 million, respectively. On January 31, 2022, less than $0.1 million was held in the United States and $8.2 million was held by the Company's foreign subsidiaries.
Liquidity and capital resources Cash and cash equivalents as of January 31, 2023 were $ 5.8 million compared to $ 8.2 million on January 31, 2022 . On January 31, 2023 $ 0.1 million was held in the United States, and $ 5.7 million was held by the Company's foreign subsidiaries.
Based on the amount of such debt on January 31, 2022, and the weighted average interest rate of 4.25% on that debt, such interest was being incurred at an annual rate of less than $0.1 million. (2) Scheduled maturities, excluding interest. (3) Scheduled maturities of foreign revolver line, excluding interest.
Based on the amount of such debt on January 31, 2023 , and the weighted average interest rate of 8.50% on that debt, such interest was being incurred at an annual rate of approximately $ 0.4 million. (2) Scheduled maturities, excluding interest. (3) Scheduled maturities of foreign revolver line, excluding interest.
The Company used a portion of the proceeds to repay its borrowings under the Senior Credit Facility. The Company expects to use its liquidity for strategic investments and general corporate needs.
The Company used the remaining proceeds to repay its borrowings under the Senior Credit Facility, for strategic investments, and for general corporate needs.
The Company believes it will have the ability to satisfy all working capital needs and any planned capital expenditures for the twelve months following the issuance of these financial statements, based on its existing cash on hand, positive cash flows from operations and available credit facilities.
For additional information, see Note 5 - Debt, in the Notes to Consolidated Financial Statements. 13 Table of Contents The Company believes it will have the ability to satisfy all working capital needs and any planned capital expenditures for the twelve months following the issuance of the Consolidated Financial Statements, based on its existing cash on hand, cash flows from operations and available credit facilities.
The Company further enhanced its liquidity position on September 17, 2021 when the North American Loan Parties executed an extension of the Credit Agreement with PNC, providing for a new five-year $18.0 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the “Renewed Senior Credit Facility”).
Liquidity Position The Company further enhanced its liquidity position on September 17, 2021 when it executed an extension of a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association ("PNC"), as administrative agent and lender, providing for a new five-year $18 million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Renewed Senior Credit Facility”).
Based on these base rates, as of January 31, 2022, the Company's interest rates ranged from 3.77% to 8.0%, with a weighted average rate of 7.31%, and the Company had facility limits totaling $16.4 million under these credit arrangements.
Based on these base rates, as of January 31, 2023 , the Company's interest rates ranged from 8.00% to 18.25% , with a weighted average rate of 10.72% , and the Company had facility limits totaling $ 21.5 million under these credit arrangements.
Due to the current inflationary environment, raw material supply shortages and transportation delays, the Company routinely experiences significant delays and increased prices for raw materials used in our production processes.
Supply Chain Constraints and Inflationary Impacts Due to the current inflationary environment, raw material supply shortages and transportation delays, the Company could experience delays and has incurred increased prices for raw materials used in the Company's production processes.
The Company has a revolving line for 8.0 million U.A.E. Dirhams (approximately $2.2 million at January 31, 2022) from a bank in the U.A.E. The facility has an interest rate of approximately 3.77% and was originally set to expire in November 2020, however, the expiration was extended due to the COVID-19 pandemic.
The Company has a revolving line for 8.0 million U.A.E. Dirhams (approximately $ 2.2 million at January 31, 2023 ) from a bank in the U.A.E. The facility has an interest rate of approximately 8.38% . The facility was renewed in July 2022 and is now set to expire in July 2025.
In accordance with ASC Topic 842, "Leases", this transaction was recorded as a failed sale and leaseback as the present value of lease payments exceeded substantially all of the fair value of the underlying asset.
Under the Lease Agreement, the Company has four consecutive options to extend the term of the lease by five years for each such option. In accordance with ASC 842, Leases , this transaction was recorded as a failed sale and leaseback as the present value of lease payments exceeded substantially all of the fair value of the underlying asset.
The Company recognizes a tax position in its consolidated financial statements only after determining that the relevant tax authority would more likely than not sustain the position following an audit.
The Company has not recognized any tax benefits on losses in the United States due to a full valuation allowance applied against its deferred tax assets. The Company recognizes a tax position in its consolidated financial statements only after determining that the relevant tax authority would more likely than not sustain the position following an audit.
The facility has an interest rate of approximately 8.0% and is set to expire in August 2022. In December 2021, the Company entered into a credit arrangement for project financing with a bank in Egypt for 28.2 million Egyptian Pounds (approximately $1.8 million at January 31, 2022).
In December 2021, the Company entered into a credit arrangement for project financing with a bank in Egypt for 28.2 million Egyptian Pounds. As this project has progressed and the Company has made collections, the facility has decreased to a current amount of 11.2 million Egyptian Pounds (approximately $ 0.4 million at January 31, 2023 ).
The increase of $0.3 million was primarily due to increased capital investment in the Middle East and Canada during the period. Net cash provided by financing activities was $6.2 million in 2021 compared to net cash used in financing activities of $4.1 million in 2020.
Net cash used in investing activities in the years ended January 31, 2023 and 2022 was $ 6.4 million and $ 2.3 million, respectively. The increase of $ 4.1 million was primarily due to investment in the Middle East and Canada during the period.
This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by the contract for a project being financed by the Company's Egyptian subsidiary. The facility has an interest rate of approximately 8.0% and is expected to expire in June 2022 in connection with the completion of the project.
This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by the contract for a project being financed by the Company's Egyptian subsidiary.
The facility has an interest rate of approximately 4.5% and is set to expire in January 2023. The Company has a third credit arrangement for project financing with a bank in the U.A.E. for 3.0 million U.A.E. Dirhams (approximately $0.8 million at January 31, 2022).
The Company has a credit agreement for project financing with a bank in the U.A.E. for 2.0 million U.A.E. Dirhams (approximately $ 0.5 million at January 31, 2023 ). This credit arrangement is in the form of project financing at rates competitive in the U.A.E.
This block on the Company's availability under its Renewed Senior Credit Facility was removed completely based on its financial performance as of and for the year ended January 31, 2022. Revolving lines - foreign . The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E. and Egypt as discussed further below.
As of January 31, 2022 , the Company had borrowed an aggregate of $ 0.6 million and had $ 8.5 million available under the Renewed Senior Credit Facility. Revolving lines - foreign . The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E., Egypt, and Saudi Arabia as discussed further below.
Stock repurchases are permitted to be executed through open market or privately negotiated transactions over the course of 12 months, depending upon current market conditions and other factors. As of January 31, 2022, the Company had repurchased its stock with a total value of $2.0 million, leaving $1.0 million remaining authorized for potential repurchase under the program.
Stock repurchases were permitted to be executed through open market or privately negotiated transactions, depending upon current market conditions and other factors. In total, the Company used $2.0 million of the $3.0 million authorized to repurchase its outstanding shares of common stock under the program.
This decrease of $2.8 million was due primarily to increases in accounts receivable and inventory, partially offset by increases in net income and increases in accounts payable and accrued compensation and payroll taxes in the current period compared to the prior year period. Net cash used in investing activities during 2021 and 2020 was $2.3 million and $2.0 million, respectively.
This decrease of $ 1.4 million was due primarily to increases in accounts receivable and prepaid expenses and other current assets, partially offset by increases in accounts payable and accrued compensation and payroll taxes in the current year compared to the prior year.
Included in this balance is an amount of $3.4 million, which pertains to retention clauses within the agreements of the Company's customer, and which become payable by the customer when this project is fully tested and commissioned.
Nevertheless, the Company has settled approximately $ 39.1 million as of January 31, 2023 , with a remaining balance due in the amount of $ 2.7 million, all of which pertains to retention clauses within the agreements with the Company's customer, and which become payable by the customer when this project is fully tested and commissioned.
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.
The line is secured by certain assets (such as accounts receivable) of the Company's Saudi Arabian subsidiary. The facility has an interest rate of approximately 9.15% and is set to expire in April 2023. These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates.
Claims for additional compensation due to the Company are recognized in contract revenues when realization is probable, the amount can be reliably estimated and the amount is not subject to reversal. Income taxes. Deferred income taxes have been provided for temporary differences arising from differences in the basis of assets and liabilities for tax and financial reporting purposes.
Claims for additional compensation due to the Company are recognized in contract revenues when realization is probable, the amount can be reliably estimated and the amount is not subject to reversal. See Note 4 - Revenue recognition, in the Notes to Consolidated Financial Statements, for more detail. Income taxes.
As of January 31, 2022, the Company had borrowed an aggregate of $0.6 million at a rate of 4.25% and had $8.5 million available under the Renewed Senior Credit Facility, before application of a $2.5 million availability block that can be reduced by the Company's financial performance.
As of January 31, 2023 , the Company had borrowed an aggregate of $ 4.4 million at a rate of 8.50% and had $ 9.9 million available under the Renewed Senior Credit Facility.
The change in the ETR from the prior year to the current year is largely due to changes in the mix of income and loss in various jurisdictions and the absence of recognizing tax benefits on losses in the United States due to a full valuation allowance applied against its deferred tax assets.
The change in the ETR was primarily due to additional United States tax expense due to the inclusion of income from foreign jurisdictions with low effective tax rates, inability to recognize tax benefits on losses in the United States due to a full valuation allowance and changes in the mix of income and loss in the various tax jurisdictions.
For further information, see Note 7 - Income taxes, in the Notes to Consolidated Financial Statements. 14 Table of Contents Net income/(loss): The resulting net income of $6.1 million in 2021 was a $13.7 million increase from the net loss of ($7.6) million in 2020.
For further information, see Note 7 - Income taxes, in the Notes to Consolidated Financial Statements. Net income Net income was $ 5.9 million and $ 6.1 million in the years ended January 31, 2023 and 2022 , respectively. The increase in net income was a result of the changes discussed above.
Critical accounting estimates and policies The Company's significant accounting policies are discussed in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
The retirement was recorded as a reduction to common stock based on the par value of the shares, and the excess over par value was recorded as a decrease to retained earnings in accordance with ASC 505-30, Equity - Treasury Stock . 17 Table of Contents Critical accounting estimates and policies The Company's significant accounting policies are discussed in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
If actual amounts ultimately differ from previous estimates, the revisions are included in the Company's results of operations for the period in which the actual amounts become known. Revenue recognition. In accordance with Accounting Standards Update No. 2014-19, “Revenue from Contracts with Customers” (“ASC 606”), the Company recognizes revenue when a customer obtains control of promised goods or services.
If actual amounts ultimately differ from previous estimates, the revisions are included in the Company's results of operations for the period in which the actual amounts become known. Revenue recognition.
Deferred income taxes on temporary differences have been recorded at the current tax rate. The Company assesses its deferred tax assets for realizability at each reporting period. The Company has not recognized any tax benefits on losses in the United States due to a full valuation allowance applied against its deferred tax assets.
Deferred income taxes have been provided for temporary differences arising from differences in the basis of assets and liabilities for tax and financial reporting purposes. Deferred income taxes on temporary differences have been recorded at the current tax rate. The Company assesses its deferred tax assets for realizability at each reporting period.
Pursuant to the terms of the Purchase and Sale Agreement, the Company sold its land and buildings in Lebanon, Tennessee (the "Property") for a purchase price of $10.4 million. The transaction generated net cash proceeds of $9.1 million, following the release of the escrowed amount in June 2021 discussed below.
Pursuant to the terms of the Purchase and Sale Agreement, the Company sold the Property for $10.4 million. The transaction generated net cash proceeds of $9.1 million. Concurrently with the sale of the Property, the Company paid off the approximately $0.9 million remaining on the mortgage note on the Property to its lender.
In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt by the respective subsidiary. 16 Table of Contents In June 2021, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 100.0 million Egyptian Pounds (approximately $6.2 million at January 31, 2022).
In August 2022, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 100.0 million Egyptian Pounds (approximately $ 3.3 million at January 31, 2023 ). This credit arrangement is in the form of project financing at rates competitive in Egypt.
Stock repurchase plan On October 4, 2021, the Company's Board of Directors approved a stock repurchase program, which authorizes the Company to purchase up to $3.0 million of its outstanding shares of common stock.
Share repurchases may be executed through open market or in privately negotiated transactions over the course of the 12 months following the Board of Directors authorization. The repurchase program approved on October 4, 2021 authorized the Company to use up to $3.0 million for the purchase of its outstanding shares of common stock.
The Borrowers are using borrowings under the Renewed Senior Credit Facility (i) to fund capital expenditures; (ii) to fund ongoing working capital needs; and (iii) for other corporate purposes, including potentially additional stock repurchases under the Company's $3.0 million stock repurchase program.
Each of the North American Loan Parties other than Perma-Pipe Canada, Inc. is a borrower under the Renewed Senior Credit Facility (collectively, the “Borrowers”). 14 Table of Contents The Borrowers have used and will continue to use borrowings under the Renewed Senior Credit Facility (i) to fund future capital expenditures; (ii) to fund ongoing working capital needs; and (iii) for other corporate purposes, including potentially additional stock repurchases.
Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt.
The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt.
The proceeds from CEWS and CERS are recognized in other income, net in the consolidated statements of operations. 17 Table of Contents 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.
Grants to the Company ended in the second quarter of 2021 and no additional grants have been received since then. The proceeds from these grants were recognized in other (expense)/income in the consolidated statement of operations. Accounts receivable In 2015, the Company completed a project in the Middle East with billings in the aggregate amount of approximately $41.9 million.
In the absence of a firm date for the final commissioning of the project, and due to the long-term nature of this receivable, $2.0 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.
Of this retention amount, $ 2.5 million is classified in a long-term receivable account. The Company has been engaged in ongoing active efforts to collect the outstanding amount. The Company continues to engage with the customer to ensure full payment of open balances, and during June 2022 received a partial payment to settle $0.9 million of the customer's outstanding balances.
The following table summarizes the Company's estimated contractual obligations on January 31, 2022 ($ in thousands) Year Ending January 31, Contractual obligations Total 2023 2024 2025 2026 2027 Thereafter Revolving line - North America (1) $ 634 $ 634 $ - $ - $ - $ - $ - Mortgages (2) 5,257 251 251 251 251 251 4,002 Revolving lines - foreign (3) 6,049 6,049 - - - - - Long-term finance obligation (4) 14,301 837 854 871 889 906 9,944 Term loan - foreign 26 6 13 7 - - - Subtotal 26,267 7,777 1,118 1,129 1,140 1,157 13,946 Finance lease obligations 529 357 172 - - - - Operating lease obligations (5) 21,208 2,367 2,335 1,525 1,326 1,333 12,322 Uncertain tax position obligations (6) 652 - - - - - 652 Total $ 48,656 $ 10,501 $ 3,625 $ 2,654 $ 2,466 $ 2,490 $ 26,920 (1) Interest obligations exclude floating rate interest on debt payable under the North American revolving line of credit.
The following table summarizes the Company's estimated contractual obligations on January 31, 2023 (In thousands) Year Ending January 31, Contractual obligations Total 2024 2025 2026 2027 2028 Thereafter Revolving line - North America (1) $ 4,387 $ 4,387 $ - $ - $ - $ - $ - Mortgage note (2) 4,772 251 251 251 251 251 3,517 Revolving lines - foreign (3) 5,714 5,714 - - - - - Long-term finance obligation (4) 9,327 112 137 168 201 - 8,709 Term loan - foreign 5 5 - - - - - Subtotal 24,205 10,469 388 419 452 251 12,226 Finance lease obligations 145 145 - - - - - Operating lease obligations (5) 10,995 1,533 650 443 442 404 7,523 Uncertain tax position obligations (6) 901 - - - - - 901 Total $ 36,246 $ 12,147 $ 1,038 $ 862 $ 894 $ 655 $ 20,650 (1) Interest obligations exclude floating rate interest on debt payable under the North American revolving line of credit.
The Company has submitted final documentation to complete the renewal process and is awaiting official notification from the bank of the renewal completion. This process is expected to be completed in May 2022. The Company has a second revolving line for 19.5 million U.A.E. Dirhams (approximately $5.3 million at January 31, 2022) from a bank in the U.A.E.
The Company has a revolving line for 17.5 million U.A.E. Dirhams (approximately $ 4.8 million at January 31, 2023 ) from a bank in the U.A.E. The facility has an interest rate of approximately 8.38% and expired in January 2023, however the Company is in the process of renewing it.
See Note 4 - Revenue recognition, in the Notes to Consolidated Financial Statements, for more detail. Over time revenue recognition. Certain domestic divisions have contracts that recognize revenues using periodic recognition of income. For these contracts, the Company uses the over time accounting method.
In accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers , the Company recognizes revenue for certain contracts when a customer obtains control of promised goods or services. Other contracts recognize revenues using periodic recognition of income. For these contracts, the Company uses the "over time" accounting method.
Additionally, during the current period, the Company had approximately $0.5 million less net repayments under its revolving credit facility, as compared to $3.2 million in the prior year period. Further, the Company's debt totaled $21.9 million and $13.2 million as of January 31, 2022 and 2021, respectively.
The Company's working capital was $ 41.9 million on January 31, 2023 compared to $ 40.0 million on January 31, 2022 . As o f January 31, 2023 , the Company had $ 9.9 million of borrowing capacity under the Renewed Senior Credit Facility in North America and $ 10.2 million of borrowing capacity under its foreign revolving credit agreements.
The main source of cash from financing activities during 2021 was net proceeds of $8.6 million as a result of the sale and leaseback of the Company's land and buildings in Lebanon, Tennessee during 2021.
Additionally, during the year ended January 31, 2022 , the Company received net proceeds of $ 9.5 million as a result of the sale and leaseback of its land and buildings in Lebanon, Tennessee (the "Property"), partially offset by payment of $4.8 million to settle the mortgage debt.
The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term. Prior additional liquidity from the PPP On May 1, 2020, the Company entered into a loan agreement under the SBA's PPP and received proceeds of approximately $3.2 million.
The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term. Liquidity from Canadian government grants The Company's subsidiary, Perma-Pipe Canada, Ltd., received relief in the form of grants from the Canadian government of approximately $0.7 million during the year ended January 31, 2022.
The Company’s credit arrangements used by its Middle Eastern subsidiaries are subject to renewal on an annual basis. The Company was in compliance with the covenants under the credit arrangements in the U.A.E. as of January 31, 2022.
The Company was in compliance with the covenants under the credit arrangements in the U.A.E., Egypt and Saudi Arabia as of January 31, 2023 , with the exception of those arrangements that have expired and have not yet been renewed.
In addition, the Company's U.A.E. business benefitted from the introduction of a new product line in late 2020. Income taxes: The Company's worldwide effective tax rates ("ETR") were 27.2% and 1.7% in 2021 and 2020, respectively.
Grants to the Company under these programs ended in the second quarter of 2021 . Income taxes The Company's worldwide effective tax rates ("ETR") were 37.8% and 27.2% in the years ended January 31, 2023 and 2022 , respectively.
Removed
COVID-19 and the Oil and Gas Market The Company’s results of operations, financial condition, liquidity and cash flow in 2021 were materially adversely affected by the COVID-19 pandemic and the then depressed market prices for oil and gas.
Added
Ukraine War The war in Ukraine and resulting Russian oil and gas boycotts have added to the surge in oil prices which has impacted some of the Company's material and freight costs. However, the Company has not experienced any direct impact from the disruption in this region.
Removed
During 2021, the Company experienced improved results as the adverse impact of the COVID-19 pandemic diminished and delayed projects were turned to production. Increases in oil prices also helped to improve the Company's results in Canada and in the Middle East. See Item 1A. Risk Factors for additional information.
Added
The Company does not source materials from this region, nor does it serve this market in any material nature.
Removed
Liquidity Position As discussed further below, on April 14, 2021, the Company entered into a purchase and sale agreement to sell its land and buildings in Lebanon, Tennessee (the "Property"), and subsequently enter into a fifteen-year lease agreement to lease back the Property.
Added
Oil and Gas Market Increases in oil prices helped to improve demand for the Company's products in the oil and gas markets during the year ended January 31, 2023 as compared to the year ended January 31, 2022 ,the Company's activity level in Canada has increased significantly due to the rise in energy prices. See Item 1A.
Removed
The transaction generated net cash proceeds of $9.1 million, following the release of the escrowed amount of $0.4 million in June 2021. The transaction provided significant liquidity for the Company, which used a portion of the proceeds to repay its borrowings under the Senior Credit Facility. The Company expects to use its liquidity for strategic investments and general corporate needs.
Added
As of January 31, 2023 , the Company had borrowed an aggregate of $ 4.4 million and had $ 9.9 million available under the Renewed Senior Credit Facility. See further discussion of the Company's liquidity position as of January 31, 2023 in "Liquidity and capital resources" below.
Removed
The Company will lease back the Property at an annual rental rate of approximately $0.8 million, subject to annual rent increases of 2.0%.
Added
Additionally, as of January 31, 2023 , the Company had borrowed $ 5.7 million and had an additional $ 10.2 million of borrowing remaining available under its foreign revolving credit arrangements.
Removed
See further discussion below and in Note 5 - Debt, in the Notes to Consolidated Financial Statements. Supply Chain Constraints The Company's global supply chains have been negatively affected by the COVID-19 pandemic.
Added
The increase of $ 4.0 million was primarily a result of higher sales volumes in North America and Saudi Arabia. Gross profit Gross profit was $ 38.3 million, or 27% of net sales and $ 32.5 million, or 23% of net sales, in the years ended January 31, 2023 and 2022 , respectively.
Removed
While these impacts are expected to continue into 2022, the resulting future disruptions to the Company’s operations are uncertain. See Item 1A.
Added
The increase of $ 5.8 million was driven by higher sales volumes and improved gross margins as a result of the mix of projects globally. General and administrative expense General and administrative expenses were $ 22.0 million and $ 19.9 million in the years ended January 31, 2023 and 2022 , respectively.
Removed
The increase was a result of increased sales volumes in both North America and the Middle East, North Africa and India ("MENA") due largely to recovery from the effects of the COVID-19 pandemic.
Added
The increase of $ 2.1 million was primarily related to higher compensation costs. Selling expenses Selling expenses were $ 5.2 million and $ 4.5 million in the years ended January 31, 2023 and 2022 , respectively.

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