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YoY shift: Lean -
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.28pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.34pp
Lean -
Net-tone change vs last year's 10-K.
MD&A
-0.23pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adverse+2
adversely+2
instability+2
disruptions+1
limitations+1
Positive rising
No words rose this year.
Risk Factors (Item 1A)
3,635 words
ITEM 1A. RISK FACTORS
The Company's business, financial condition, results of operations and cash flows are subject to various risks, including, but not limited to, those set forth below, which could cause actual results to vary materially from recent results or from anticipated future results. These risk factors should be considered together with information included elsewhere in this Annual Report on Form 10-K.
Market Condition Risks
The Company's operations and earnings may be significantly affected by changes in oil and gas prices . Oil and gas prices depend on local, regional, and global events or conditions that affect supply and demand. Any material decline in oil or gas prices could have a material adverse effect on the demand for the Company's products, its operations and financial condition.
The Company may be unable to purchase raw materials at favorable prices, or maintain beneficial relationships with its suppliers, which could result in a shortage of supply, or increased pricing . There can be no assurance regarding the availability of supply for key components of the Company's products. The lack of supply of these components could result in an adverse effect on the financial condition of the Company. The steel industry in particular is highly cyclical in nature, and at times, pricing can be highly volatile due to a number of factors beyond the Company's control. The Company utilizes escalation clauses and bid expiration dates to mitigate the impact of this volatility on its earnings. This volatility may negatively impact market conditions thus reducing project activity and the Company's results of operations. If the United States or other countries in which the Company operates impose tariffs on imports of raw materials, including steel, used in the Company's operations, this could have an impact on the Company's business.
The Company regularly updates its quoting system for the movements in raw material prices and seeks to recover price differentials through increases in the selling price of the Company's products; however, the Company may not always be successful, and any increase in raw material prices that is not offset by an increase in the Company's prices that is accepted by customers could have an adverse effect on the Company's business, results of operations, financial position and cash flows. In addition, if the Company is unable to acquire timely raw material supplies, it may need to declineopportunities, which could also have an adverse effect on the Company's business, results of operations, financial position and cash flows.
Due to volatile economic conditions, supply chain disruptions, tariff uncertainties, and transportation delays, the Company has experienced, and may in the future experience, delays and increased prices for raw materials used in its production processes. To mitigate these impacts, the Company has implemented several strategies, including purchasing larger volumes from existing suppliers to reduce near- and medium-term supply risk, actively seeking alternative suppliers, and planning material purchases further in advance to ensure availability when needed. The Company also adjusts its pricing to customers to offset the impacts of the raw material price increases. The Company is unable to predict the duration of the current inflationary environment, raw material supply shortages and transportation delays, and the resulting future disruptions to the Company’s operations are uncertain.
Decreases in government spending on projects using the Company’s products, and challenges to the Company’s customers’ liquidity and availability of capital funds, may adversely impact demand for the Company’s products. Decreases in government spending on projects using the Company's products can have a negative impact on the Company's sales volumes. Uncertainty about economic market conditions poses risks that the Company's customers may postpone spending for capital improvement and maintenance projects in response to tighter credit markets or negative financial news, which could have a material adverse effect on the demand for the Company's products.
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Financial Risks
The Company may be unable to maintain compliance with existing debt covenants, repay its debt or renew its expiring international credit facilities. There is a risk that the Company may not be able to remain in compliance with covenants in connection with its credit agreements. If there were an event of default under the Company's current credit facilities, the lenders could cause all amounts outstanding with respect to that debt to be due and payable immediately. The Company cannot assure that its cash flow will be sufficient to fully repay amounts due under any of the financing arrangements, if accelerated upon an event of default, or, that the Company would be able to repay, refinance or restructure the payments under any such arrangements. Complying with the covenants under the Company's domestic and/or foreign credit facilities may limit management's discretion by restricting options such as:
incurring additional debt;
entering into transactions with affiliates;
making investments or other restricted payments;
paying dividends, capital returns, intercompany obligations and other forms of repatriation; and
creating liens.
The Company has approximately $5.5 million of borrowings under foreign revolving lines of credit that are scheduled to mature in the year ending January 31, 2027. Credit arrangements used by the Company’s Middle Eastern subsidiaries are typically renewed on an annual basis. In addition, the Company has obtained project-specific financing in the Middle East, with $ 0.2 million of borrowings under such arrangements becoming due in the year ending January 31, 2027. While the Company expects to renew its Middle Eastern credit arrangements and maintain access to project financing, there can be no assurance that such arrangements will be renewed on similar terms or amounts, or that project-specific financing will be available for future projects. For additional information regarding the Company’s foreign debt, refer to Note 5 – Debt
Any replacement credit arrangements outside of the United States may further limit the Company’s ability to repatriate funds from abroad. Repatriation of funds from certain countries may become limited based upon regulatory restrictions or unfeasible economically because of the taxation of funds when moved to another subsidiary or to the parent company. In addition, any refinancing, replacement or additional financing the Company may obtain could contain similar or more restrictive covenants than those currently applicable to the Company. The Company’s ability to comply with any covenants may be adversely affected by general economic conditions, political decisions, industry conditions and other events beyond management’s control.
The Company may be unable to maintain sustained levels of profitability or positive cash flows in the future. There is no guarantee that the Company will be able to maintain profitability or positive cash flows in the future. The Company’s inability to successfully maintain profitability and positive cash flows may result in it experiencing a serious liquidity deficiency resulting in material adverse consequences that could threaten its viability.
The Company extended credit to a customer for a project in the Middle East in 2013 and, if the Company is unable to collect this outstanding balance, its future profitability could be adversely impacted. One of the Company’s accounts receivable, totaling $1.2 million and $1.8 million as of January 31, 2026 and 2025, respectively, has been outstanding for several years. As of January 31, 2026, the entire balance represents a retention asset payable upon the commissioning of the system. Due to the long-term nature of the receivable, $1.2 million was included in other long-term assets as of both January 31, 2026 and 2025. The Company completed all deliverables under the related contract in 2015; however, the system has not yet been commissioned by the customer, as additional activities must be completed prior to overall system completion and commissioning. The Company continues to actively engage in collection efforts to ensure full payment of the outstanding balance. At various times throughout 2024 and 2025, the Company received partial payments of $0.4 million and $0.6 million, respectively. Additionally, the Company has been engaged by the customer to perform additional work in 2026 under customary trade credit terms, supporting the continued cooperation between the Company and the customer. As a result, the Company did not record an allowance for this receivable as of January 31, 2026. However, if collection efforts are unsuccessful, the Company may recognize an allowance for all, or substantially all, of the amount.
The Company may be impacted by interpretations and changes in tax regulations and legislation which could adversely affect the Company's results of operations. Tax interpretations, regulations, and legislation in the various jurisdictions in which the Company operates are subject to measurement uncertainty and the interpretations can impact net income, income tax expense or benefit, and income tax assets or liabilities. Tax rules and regulations, including those relating to foreign jurisdictions, are subject to interpretation and require judgment by the Company that may be challenged by the applicable taxation authorities upon audit. Although the Company believes its assumptions, judgements and estimates are reasonable, changes in tax laws or the Company's interpretation of tax laws and the resolution of any tax audits could significantly impact the amounts provided for income taxes in the Company's consolidated financial statements.
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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. As of January 31, 2026, the Company had $16.6 million of gross federal NOLs and $22.2 million of gross state NOLs available to offset the Company’s future taxable income. Of the gross federal NOL amount, $9.3 million will begin to expire between tax years 2036 and 2037 and the remainder has an indefinite carryforward. State NOLs expire at various dates from 2026 to 2045. In addition, the Company’s ability to use its NOLs may be limited in the event of future changes in its stock ownership. As a result, if the Company earns net taxable income, the Company’s ability to use its pre-change NOLs to offset U.S. federal taxable income may be subject to limitations, which could potentially result in a future tax liability of the Company. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could result in a state tax liability which would otherwise not arise.
The Company’s inability to establish and maintain effective internal control over financial reporting could harm its business and financial results. The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting. However, there are material weaknesses in internal controls such that our internal control over financial reporting has been determined not to be effective. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that the Company would prevent or detect a misstatement of its financial statements or fraud. If we are not able to remediate the material weaknesses and maintain internal control over financial reporting, our business and financial results could be .
The Company may experience changes in estimates which could result in a reduction or elimination of previously recorded revenues and profit in connection with "over time" revenue recognition. Certain of the Company's contracts recognize revenues using periodic recognition of income. For these contracts, the Company uses the "over time" accounting method. This methodology allows revenue and profits to be recognized proportionally over the life of a contract by comparing the amount of the cost incurred to date against the total amount of cost expected to be incurred. The effect of revisions to revenue and total estimated cost is recorded when amounts are known or can be reasonably estimated. Revisions can occur at any time and could be material. On a historical basis, management believes that reasonably reliable estimates of the progress towards completion on long-term contracts have been made. However, given the uncertainties associated with these types of contracts, it is possible for actual cost to vary from estimates previously made, which may result in reductions or reversals of previously recorded revenue and profits.
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Business Condition Risks
Delays in the timing of order receipt, execution, delivery and acceptance of the Company’s products generally negatively impact the Company’s operating results. The Company's operating results in any reporting period could be negatively impacted as a result of delays in the timing of project execution.
The Company may not be able to successfully negotiate progress-billing arrangements on its large-scale contracts, which could adversely impact the Company’s working capital needs, cash flows and credit risk. The Company sells systems and products under contracts that allow the Company to either bill upon the completion of certain agreed milestones, or upon actual shipment of the system or product. The Company attempts to negotiate progress-billing milestones on large contracts to help manage its working capital and cash flows, and to reduce the credit risk associated with these large contracts. Consequently, changes in accepted billing terms of contracts could impact the Company's requirements for working capital and cash flows.
Aggressive pricing by existing competitors and the entrance of new competitors in the markets in which the Company operates could drive down the Company's profits and reduce the Company's revenue. The Company's business is highly competitive. Some of the Company's competitors are large organizations with access to considerable financial resources. Additionally, many of the Company's products are also subject to competition from alternative technologies and alternative products. In periods of declining demand, the Company's fixed cost structure may limit its ability to cut costs, which may be a competitive disadvantage compared to companies with more flexible cost structures, or may result in reduced operating margins, operating losses and negative cash flows.
The Company may be subject to claims for damages from defective products. The Company warrants its products to be free of certain defects. The Company has, from time to time, had claimsallegingdefects in its products. The Company may experience material product liability claims in the future and it could incur significant costs to defend such claims. While the Company currently has product liability insurance that it believes to be sufficient, the Company cannot be certain that its product liability insurance coverage will be adequate for liabilities that may be incurred in the future or that such coverage will continue to be available to the Company on commercially reasonable terms. Any claim relating to defective products that result in liabilities exceeding the Company's insurance coverage could have a material adverse effect on the Company's business, results of operations, financial position and cash flows.
The Company may not be able to recover costs and damages from vendors that supply defective materials . The Company may receive defective materials from its vendors that are incorporated into the Company's products during the manufacturing process. While the Company mitigates this risk through contract terms, traceability and specifications, and has recourse to recover from vendors the costs to repair, remake or replace defective products, such costs could be greater than the amount that can be recovered. Such excess costs could have an adverse effect on the Company's business, results of operations, financial position and cash flows.
Product and service orders included in the Company’s backlog may be reduced or cancelled. The Company defines backlog as the revenue value resulting from confirmed customer purchase orders that have not yet been recognized as revenue. Orders may be canceled or modified at any time. In the event of a cancellation, the customer is normally responsible for all finished goods produced or shipped, all direct and indirect costs incurred and also for a reasonable allowance for anticipated profits. No assurance can be given that these amounts will be recovered after cancellation. Any reduction or cancellation of orders may result in revenues that are lower than expected.
The Company's results of operations could be adversely affected by changes in international regulations and other activities of government agencies related to the Company’ s operations . International sales represent a significant portion of the Company's total sales. The Company's sales to foreign customers were 71.7% and 66.9% in the years ended January 31, 2026 and 2025 , respectively. The Company's anticipated growth and profitability may require increasing foreign sales volume and may necessitate further international expansion. The Company's results of operations could be adversely affected by changes in trade, monetary and fiscal policies, laws and regulations, other activities of governments, agencies and similar organizations, and other factors. These factors include, but are not limited to, changes in a country's or region's economic or political conditions, trade regulations affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights, changes in the regulatory or legal environment, restrictions on currency exchange activities, burdensome taxes and tariffs and other trade barriers. We cannot predict the impact of changes in foreign policies adopted by the current U.S. administration will have on our business. International risks and uncertainties, including changing social and economic conditions as well as terrorism, political hostilities and war, could lead to reduced international sales and reduced associated with such sales. In addition, these risks can include in collection of accounts receivable. Because the Company conducts a significant portion of its business activities in the Gulf Cooperation Council ("GCC"), the political and economic events of the countries that comprise the GCC can have a material effect on the Company’s business, results of operations, financial condition, and cash flows.
Due to the international scope of the Company’s operations, it is subject to a complex system of commercial and trade regulations around the world. The Company’s foreign subsidiaries are governed by laws, rules and business practices that differ from those of the United States. If the activities of these entities do not comply with U.S. laws or business practices or the Company’s Code of Business Conduct, then violations of these laws or practices may result in severecriminal or civil sanctions, which could disrupt the Company’s business, and result in an adverse effect on the Company’s reputation, business and results of operations or financial condition. The Company cannot predict the nature, scope, or effect of future regulatory requirements to which its operations might be subject or the manner in which existing laws might be administered or interpreted.
Geopolitical Risks, Including Tensions Involving Iran, May Adversely Affect Our Business . Our operations in certain international markets expose us to geopolitical risks, including regional conflicts, political instability, and evolving government policies. Recent tensions involving Iran have increased uncertainty in parts of the regions in which we operate. Escalation of such tensions could disrupt our operations, delay project execution, restrict access to key markets, or adversely affect the security of our personnel and assets.
In addition, geopolitical developments may lead to broader economic or regulatory consequences, including sanctions, trade restrictions, or limitations on the movement of goods, services, and capital. While we have not experienced material adverse impacts to date, further escalation or prolongedinstability could have a material adverse effect on our business, financial condition, and results of operations.
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General Risks
The Company may be unable to retain its senior management and key personnel. The Company's ability to meet its strategic and financial goals will depend to a significant extent on the continued contributions of its senior management and key personnel, or the successful transition of responsibilities of departing senior management and key personnel. Future success will also depend in large part on the Company's ability to identify, attract, motivate, effectively utilize and retain highly qualified managerial, sales, marketing and technical personnel. The loss of senior management or other key personnel or the inability to identify, attract and retain qualified personnel in the future could make it more difficult to manage the Company's business and could adversely affect operations and financial results.
The Company may not be able to achieve the expected benefits from its growth initiatives. The Company's cyclical or general expansion may result in unanticipatedadverse consequences, including significant strain on management, operations and financial systems, as well as on the Company's ability to attract and retain competent employees. In the future, the Company may seek to grow its business by investing in new or existing facilities, making acquisitions, entering partnerships and joint ventures, or constructing new facilities, which could introduce additional risks, including:
strain on working capital;
diversion of management's attention away from other activities, which could impair the operation of existing businesses;
failure to successfully integrate an acquired business or facility into existing operations;
inability to maintain key pre-acquisition business relationships;
loss of key personnel of an acquired business or facility;
exposure to unanticipated liabilities; and
failure to realize efficiencies, synergies and cost savings.
As a result of these and other factors, including general economic risks, the Company may not be able to realize the expected benefits from future acquisitions, new facility developments, partnerships, joint ventures or other investments.
The Company's information technology systems may be negatively affected by cybersecurity threats. The Company faces risks relating to cybersecurity attacks that could cause the loss of confidential information and other business disruptions. The Company relies extensively on computer systems to process transactions and manage its business, and its business is at risk from and may be impacted by cybersecurity attacks. The Company employs a number of measures to prevent, detect and mitigate these threats, which include data and email encryption, strong password management policy, firewall systems, anti-virus software, and frequent backups. However, there is no guarantee such efforts will be successful in preventing a cyber-attack. A successful attack could adversely affect the Company's reputation and results of operations, including through lawsuits by third parties.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
weaknesses+5
disruptions+2
limitations+2
bridge+2
concern+2
Positive rising
effective+1
strengthened+1
strength+1
progress+1
success+1
MD&A (Item 7)
6,270 words
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), which can be identified by the use of forward-looking terminology such as "may," "will," "expect," "continue," "remains," "intend," "aim," "should," "prospects," "could," "future," "potential," "believes," "plans," "likely," and "probable," or the negative thereof or other variations thereon or comparable terminology, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act and are subject to the safe harbors created thereby. These statements should be considered as subject to the many risks and uncertainties that exist in the Company's operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected as a result of many factors, including, but not limited to, those under the headings Cautionary Statements Regarding Forward Looking Information and Item 1A. Risk Factors.
Risk Mitigation and Management
The Company is subject to a variety of risks that could materially affect its business, financial condition, results of operations, and cash flows. To address these risks, the Company has implemented several mitigating strategies across financial, operational, and strategic areas. The Company actively implements strategies to mitigate the risks described in Item 1A of this Annual Report.
The Company monitors and actively manages its debt obligations to ensure continued access to financing. For fiscal 2027, approximately $5.5 million under foreign revolving lines of credit and $0.2 million under project-specific financing are scheduled to mature. The Company expects to renew its Middle Eastern credit arrangements and maintain access to project financing; however, there can be no assurance that such arrangements will be renewed on comparable terms or amounts. The Company also regularly monitors compliance with covenants under existing credit agreements to mitigate potential restrictions on dividends, intercompany obligations, additional debt, or liens.
Accounts Receivable and Credit Risk
The Company actively monitors the creditworthiness of its customers and manages concentrated receivables. Payments for large projects are typically secured through irrevocable letters of credit from banks. For example, as of January 31, 2026, one customer represented approximately 23% of accounts receivable. Partial payments received throughout 2024–2026 have significantly reduced the outstanding balance in accordance with contract terms. The Company engages in ongoing collection efforts and has structured credit terms to support continued cooperation with customers.
Internal Controls over Financial Reporting
The Company has strengthened its internal control environment to address previously identified material weaknesses. As of January 31, 2025, four material weaknesses were reported. Following implementation of efforts to remediate these material weaknesses, three material weaknesses remain, which are scheduled for testing in 2026. Management remains committed to fully remediating these weaknesses to maintain effective internal controls and ensure the reliability of financial reporting.
Supply Chain and Raw Material Risk
To mitigate risks associated with volatile raw material prices, supply chain disruptions, tariffs, and transportation delays, the Company has adopted a multi-pronged approach. This includes purchasing larger volumes from existing suppliers, securing alternative suppliers, planning material purchases further in advance, and adjusting customer pricing to offset cost increases. These measures are designed to maintain material availability and minimize disruptions to production schedules.
Backlog, Customer Diversification, and Contract Risk
The Company closely monitors its backlog, customer concentration, and contract terms. Its backlog as of January 31, 2026, was $121.6 million, primarily expected to be completed within the following fiscal year. Customer concentration is mitigated through secured payment methods and ongoing monitoring of financial strength. Contracts are structured to include progress-billing arrangements and provisions for recoverable costs in the event of cancellations, helping to protect cash flow and working capital.
Tax and Regulatory Risk
The Company regularly monitors tax regulations, legislation, and interpretations in jurisdictions where it operates. Management applies judgment in evaluating uncertain tax positions and plans for potential limitations on net operating loss carryforwards, mitigating the risk of unexpected future tax liabilities.
Human Capital and Operational Continuity
The Company invests in attracting, developing, and retaining skilled personnel, recognizing that its human capital is essential to operational success. Ongoing training, succession planning, and engagement initiatives are in place to ensure continuity of operations and strong performance across all regions.
Through these measures, the Company seeks to mitigate risks and sustain financial performance, operational stability, and long-term growth, despite external and internal challenges.
The analysis presented below and discussed in more detail throughout this MD&A was organized to provide instructive information for better understanding the Company's results of operations, financial condition and cash flows. However, this MD&A should be read in conjunction with the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K, including the notes thereto and the risk factors contained herein. The Company's fiscal year ends on January 31. Years, results and balances described as 2025 and 2024 are for the fiscal years ended January 31, 2026 and 2025, respectively.
The Company is engaged in the manufacture and sale of products in one reportable segment: Piping Systems. Since the Company's revenues are significantly dependent upon discrete projects, the Company's operating results in any reporting period could be negatively impacted as a result of variations in the level of the Company's discrete project orders or delays in the timing of the specific project phases.
The tabular information presented throughout this MD&A is in thousands, except per share data, or unless otherwise specified.
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Results of Operations
Consolidated Results of Operations
Year Ended January 31,
Change favorable (unfavorable)
Amount
Percent of Net Sales
Amount
Percent of Net Sales
Amount
Net sales
Gross profit
General and administrative expenses
Selling expense
Interest expense, net
Other (expense) income, net
Income before income tax
Income tax expense
Net income
Less: Net income attributable to non-controlling interest
Net income attributable to common stock
Year ended January 31, 2026 Compared to year ended January 31, 2025
Net sales
Net sales were $210.9 million and $158.4 million in the years ended January 31, 2026 and 2025, respectively. The increase of $ 52.5 million was primarily the result of higher sales volumes in the Middle East, Canada, and the United States.
Gross profit
Gross profit was $69.5 million, or 33% of net sales and $53.2 million, or 34% of net sales, in the years ended January 31, 2026 and 2025, respectively. The increase of $ 16.3 million was driven by higher sales volumes and consistent gross margins globally.
General and administrative expenses
General and administrative expenses were $35.3 million and $28.0 million in the years ended January 31, 2026 and 2025, respectively. The increase of $ 7.3 million was primarily related to higher compensation costs and professional fees, including approximately $1.0 million relating to Sarbanes-Oxley 404 compliance in connection with our transition from a non-accelerated filer to an accelerated filer. This also includes a one-time compensation charge of approximately $2.0 million related to the departure of the previous CEO.
Selling expenses
Selling expenses were $ 4.7 million and $ 4.9 million in the years ended January 31, 2026 and 2025 , respectively. The decrease of $ 0.2 million was primarily driven by lower payroll expenses during the year.
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Interest expense, net
Interest expense was $1.8 million and $1.9 million in the years ended January 31, 2026 and 2025, respectively. The decrease of $ 0.1 million was the result of an overall reduction in interest rates during the current year
Income taxes
The Company's worldwide effective tax rates ("ETR") were 24.9% and 29.1% in the years ended January 31, 2026 and 2025, respectively. The change in the ETR was largely due to changes in the mix of income and loss in various tax jurisdictions and the domestic Global Intangible Low-Taxed Income ("GILTI") inclusion. For further information, see Note 7 - Income taxes , in the Notes to Consolidated Financial Statements.
Net income attributable to common stock
Net income attributable to common stock was $17.0 million and $9.0 million in the years ended January 31, 2026 and 2025, respectively. The increase in net income was a result of the changes discussed above, less amounts attributable to non-controlling interest.
Liquidity and capital resources
Cash and cash equivalents were $18.7 million and $15.7 million as of January 31, 2026 and January 31, 2025, respectively. On January 31, 2026, approximately $0.2 million was held in the United States, and $18.5 million was held by the Company's foreign subsidiaries. The Company's working capital was $66.9 million on January 31, 2026 compare d to $ 54.7 million on January 31, 2025 . As of January 31, 2026 , the Company had $ 2.7 million of borrowing capacity under the Renewed Senior Credit Facility (as defined below) in North America and $ 29.9 million of borrowing capacity under its foreign credit agreements. The Company had $ 10.7 million borrowed under the Renewed Senior Credit Facility and $ 8.4 million borrowed under its foreign credit agreements at January 31, 2026 .
Net cash provided by operating activities in the years ended January 31, 2026 and 2025 was $ 9.2 million and $ 13.9 million, respectively. The decrease of $ 4.7 million was primarily driven by an increase in accounts receivable, partially offset by an increase in net income and customer deposits compared to the prior year.
Net cash used in investing activities in the years ended January 31, 2026 and 2025 was $ 10.4 million and $ 2.8 million, respectively. The increase of $ 7.6 million was primarily driven by higher capital expenditures during the period, related to the Middle East.
Net cash provided by financing activities was $ 6.6 million for the year ended January 31, 2026 , compared to net cash used in financing activities of $0.9 million for the year ended January 31, 2025 . The $7.5 million increase in cash provided was primarily driven by increased net borrowings under the Company’s revolving lines of credit.
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Subsequent to January 31, 2026, the Company entered into a credit agreement with JPMorgan Chase Bank, N.A., which provides for a revolving credit facility with total commitments of $18.0 million. The facility effectively refinanced and replaced the Company’s existing credit facility with PNC Bank, National Association and to support the Company’s ongoing working capital and general corporate needs.
The credit facility is intended to serve as a temporary bridge financing arrangement. The Company expects to enter into a new global credit facility with a syndicate of lenders, with JPMorgan expected to act as administrative agent and lead arranger. Upon execution of the global credit facility, the Company expects that any outstanding borrowings under this credit agreement will be repaid or refinanced and the credit agreement will be terminated; however, there can be no assurance as to the timing or terms of such transaction.
The Company believes it will have the ability to satisfy all working capital needs and any planned capital expenditures for the twelve months following the issuance of the Consolidated Financial Statements, based on its existing cash on hand, cash flows from operations, and available credit facilities.
There was no restricted cash held in the United States on January 31, 2026 or January 31, 2025. Restricted cash held by foreign subsidiaries was $3.6 million and $1.4 million as of January 31, 2026 and 2025, respectively. Restricted cash held by foreign subsidiaries related to fixed deposits that also serve as security deposits and guarantees.
The following table summarizes the Company's estimated contractual obligations on January 31, 2026 :
Year Ending January 31,
Contractual obligations
Total
Thereafter
Revolving line - North America (1)
Mortgage note (2)
Revolving lines - foreign (3)
Long-term finance obligation (4)
Subtotal
Finance lease obligations
Operating lease obligations (5)
Uncertain tax position obligations (6)
Loan payable to GIG (7)
Total
Interest obligations exclude floating rate interest on debt payable under the North American revolving line of credit. Based on the amount of such debt on January 31, 2026 , and the weighted average interest rate of 7.8% on that debt, such interest was being incurred at an annual rate of approximately $ 0.8 million.
Scheduled maturities, excluding interest.
Scheduled maturities of foreign credit facilities, excluding interest.
This schedule represents the cash payments to be made under the lease agreement for the land and buildings sold by the Company in Lebanon, Tennessee and leased back from the purchaser in April 2021. These amounts differ from the liabilities presented as debt in the Consolidated Balance Sheets as the debt amount represents future payments discounted to the present date. Refer to Note 5 - Debt, in the Notes to the Consolidated Financial Statements for further discussion of the transaction.
Minimum contractual amounts, assuming no changes in variable expenses.
Refer to Note 7 - Income taxes, in the Notes to Consolidated Financial Statements for a description of the uncertain tax position obligations.
Refer to Note 11 - Non-controlling interest, in the Notes to Consolidated Financial Statements for further discussion regarding the loan payable to Gulf Insulation Group ("GIG").
Financing
Revolving lines - North America . On September 20, 2018, the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the Company, the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association ("PNC"), as administrative agent and lender, providing for a three-year, $18 million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”).
On September 17, 2021, the North American Loan Parties executed an extension of the Credit Agreement with PNC, providing for a new five-year, $18 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the “Renewed Senior Credit Facility”). The Company's obligations under the Renewed Senior Credit Facility are currently guaranteed by Perma-Pipe Canada, Inc. Each of the North American Loan Parties other than Perma-Pipe Canada, Inc. is a borrower under the Renewed Senior Credit Facility (collectively, the “Borrowers”). The Renewed Senior Credit Facility matures on September 20, 2026.
The Borrowers have used and will continue to use borrowings under the Renewed Senior Credit Facility (i) to fund future capital expenditures; (ii) to fund ongoing working capital needs; and (iii) for other corporate purposes, including potentially additional stock repurchases. Borrowings under the Renewed Senior Credit Facility bear interest at a rate equal to an alternate base rate, SOFR rate index, plus, in each case, an applicable margin. The applicable margin is based on a fixed charge coverage ratio ("FCCR") range. Interest on alternate base rate borrowings is the alternate base rate (as defined in the Renewed Senior Credit Facility) plus an applicable margin ranging from 1.00% to 1.50%, based on the FCCR in the most recently reported period. Interest on SOFR rate borrowings is the SOFR rate (as defined in the Renewed Senior Credit Facility) plus an applicable margin ranging from 2.00% to 2.50%, based on the FCCR in the most recently reported period, as well as an additional SOFR adjustment ranging from 0.10% to 0.25%, based on the term of the interest period. Additionally, the Borrowers pay a 0.25% per annum facility fee on the unused portion of the Renewed Senior Credit Facility.
Subject to certain exceptions, borrowings under the Renewed Senior Credit Facility are secured by substantially all of the North American Loan Parties’ assets. Subject to certain qualifications and exceptions, the Renewed Senior Credit Facility contains covenants that, among other things, restrict the North American Loan Parties’ ability to create liens, merge or consolidate, consummate acquisitions, make investments, dispose of assets, incur debt, and pay dividends and other distributions. In addition, the North American Loan Parties may not make capital expenditures in excess of $5.0 million annually, plus a limited carryover of unused amounts. Further, the North American Loan Parties may not make repurchases of the Company's common stock in excess of $3.0 million.
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The Renewed Senior Credit Facility also contains financial covenants requiring the North American Loan Parties to achieve a ratio of its EBITDA (as defined in the Renewed Senior Credit Facility) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Renewed Senior Credit Facility to be not less than 1.10 to 1.00 for any five consecutive days in which the undrawn availability is less than $3.0 million or any day in which the undrawn availability is less than $2.0 m illion. As of January 31, 2026 , the calculated ratio was greater than 1.10 to 1.00. In order to cure any future breach of these covenants by the North American Loan Parties, the Company may repatriate cash from any of its foreign subsidiaries that are otherwise not a party to the Renewed Senior Credit Facility in an amount which, when added to the amount of the Company’s Consolidated EBITDA, would result in compliance on a pro forma basis. The Company was in compliance with respect to these covenants as of and for the year ended January 31, 2026 .
The Renewed Senior Credit Facility contains customary events of default. If an event of default occurs and is continuing, then PNC may terminate all commitments to extend further credit and declare all amounts outstanding under the Renewed Senior Credit Facility due and payable immediately. In addition, if any of the North American Loan Parties or certain of their subsidiaries become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Renewed Senior Credit Facility will automatically become immediately due and payable. Loans outstanding under the Renewed Senior Credit Facility will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate (i) while a bankruptcy event of default exists or (ii) upon the lender's request, during the continuance of any other event of default.
As of January 31, 2026 , the Company had borrowed an aggregate of $ 10.7 million at a rate of 7.8% and had $ 2.7 million available under the Renewed Senior Credit Facility. A s of January 31, 2025, the Company had borrowed an aggregate of $ 6.8 million at a rate of 9.0% and had $ 3.7 million available under the Renewed Senior Credit Facility.
Subsequent Event — Credit Agreement. Subsequent to January 31, 2026, the Company entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., which effectively replaced the Company’s existing credit facility with PNC Bank, National Association. The Credit Agreement provides for a revolving credit commitment of up to $18.0 million, subject to customary borrowing base limitations, and matures in October 2027. Borrowings bear interest at variable rates based on SOFR or an alternate base rate, plus an applicable margin.
The Credit Agreement is intended to serve as a temporary bridge financing arrangement. The Company expects to enter into a new global credit facility with a syndicate of lenders in the coming months; however, there can be no assurance as to the timing or terms of such a transaction. Upon execution of the global credit facility, any outstanding borrowings under the Credit Agreement are expected to be transitioned into the new facility. As the Credit Agreement was executed after the balance sheet date, no amounts were outstanding under this facility as of January 31, 2026.
Credit facilities - foreign . The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E., Egypt, and Saudi Arabia as further described below:
United Arab Emirates
The Company’s credit facilities in the United Arab Emirates (“U.A.E.”) consist of the following:
Active Facilities (U.A.E.)
The Company maintains a credit facility with a financial institution in the U.A.E. totaling 65.2 million U.A.E. Dirhams (“AED”) (approximately $17.8 million at January 31, 2026). Borrowings under the facility bear interest at the Emirates Inter Bank Offered Rate (“EIBOR”) plus 3.5% per annum, subject to minimum interest rates ranging from 4.5% to 8.0% per annum, depending on the type of financing utilized. The facility is stratified by instrument type and expires at various dates through October 2026. As of January 31, 2026, the Company was in compliance with all covenants under this facility. As of January 31, 2026, the Company had outstanding borrowings of 9.4 million AED (approximately $2.6 million), which are included in “Short-term borrowings and current maturities of long-term debt” on the Consolidated Balance Sheets. Additionally, as of January 31, 2026, the Company had issued guarantees totaling 30.9 million AED (approximately $8.4 million). After accounting for outstanding borrowings and issued guarantees, the Company had unused availability of approximately $6.8 million under the credit facility as of January 31, 2026.
The Company maintains a letter of credit facility with a financial institution in the U.A.E. totaling 100.0 million AED (approximately $27.2 million at January 31, 2026) and expiring in July 2026. The facility is non-interest bearing; however, the Company incurs a commission ranging from 0.8% to 1.0% per annum on the face value of issued instruments and is required to maintain cash collateral (margins) ranging from 10% to 15% depending on the type of instrument utilized. As of January 31, 2026, the Company had outstanding guarantees under this facility of 40.5 million AED (approximately $11.0 million). The remaining available balance under the facility was 59.5 million AED (approximately $16.2 million) as of January 31, 2026.
Expired Facilities (U.A.E.)
As of January 31, 2025, the Company maintained a credit facility with a financial institution in the U.A.E. totaling 65.2 million AED (approximately $17.7 million). This facility, which expired in August 2025, bore interest at a rate of approximately 7.9% as of January 31, 2025. Outstanding borrowings under this facility were $0.1 million at January 31, 2025, and were included in “Short-term borrowings and current maturities of long-term debt” on the Consolidated Balance Sheets. As of January 31, 2025, the Company had unused availability of approximately $9.0 million, which was net of issued guarantees and letters of credit.
As of January 31, 2025, the Company maintained a revolving credit facility with a financial institution in the U.A.E. totaling 8.0 million AED (approximately $2.2 million). This facility, which expired in July 2025, bore interest at a rate of approximately 7.9% as of January 31, 2025. Outstanding borrowings under this facility were $0.4 million at January 31, 2025, and were included in “Short-term borrowings and current maturities of long-term debt” on the Consolidated Balance Sheets. As of January 31, 2025, the Company had unused availability of approximately $1.6 million, which was net of issued guarantees and letters of credit.
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Egypt
In June 2021, the Company's Egyptian subsidiary entered into a credit facility with a financial institution in Egypt, which has been subsequently amended. The facility provides project-based financing and expires in December 2026. The facility has a maximum borrowing capacity of 120.0 million Egyptian Pounds ("EGP") (approximately $2.6 million) and 100.0 million EGP (approximately $2.0 million) as of January 31, 2026 and 2025, respectively. The line is secured by certain assets of the subsidiary, including accounts receivable, and contains various covenants, including a maximum leverage ratio and restrictions on incurring additional indebtedness. As of January 31, 2026, the Company was in compliance with all covenants under this facility.
As of January 31, 2026, borrowings under the Company’s credit facility in Egypt bore interest at rates ranging from 15.0% to 20.8%. The 15.0% rate relates to specific government-sponsored initiatives, while the 20.8% rate applies to our general facility limits. The Company had $0.2 million outstanding under this arrangement as of January 31, 2026, and an insignificant amount outstanding as of January 31, 2025. Both amounts are included in "Short-term borrowings and current maturities of long-term debt" on the Consolidated Balance Sheets. As of January 31, 2026 and 2025, the Company had unused availability of approximately $2.4 million and $2.0 million, respectively.
Saudi Arabia
In March 2022, the Company’s Saudi Arabian subsidiary entered into a credit arrangement with a financial institution in Saudi Arabia for a revolving line totaling 37.0 million Saudi Riyals (“SAR”) (approximately $9.9 million at January 31, 2026). The credit arrangement provides project-based financing at interest rates competitive in Saudi Arabia, is secured by certain assets of the subsidiary including accounts receivable, and expires on April 27, 2026. As of January 31, 2026, the facility bore interest at a rate of approximately 8.5%. As of January 31, 2026, the Company was in compliance with all covenants under this arrangement. The Company had outstanding borrowings of $2.9 million and $1.5 million as of January 31, 2026 and 2025, respectively, which are included in “Short-term borrowings and current maturities of long-term debt” on the Consolidated Balance Sheets. Unused availability under this arrangement was $5.3 million and $3.0 million as of January 31, 2026 and 2025, respectively, which are net of both outstanding borrowings and issued letters of guarantee.
Foreign credit facilities - overall
These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates. The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt. The Company guarantees only a portion of the subsidiaries' debt, including foreign debt. As of January 31, 2026 and January 31, 2025, the amount of foreign subsidiary debt guaranteed by the Company was approximately $8.4 million and $4.8 million, respectively.
The Company was in compliance with respect to the covenants under the credit arrangements in the U.A.E., Egypt, and Saudi Arabia as of January 31, 2026. Certain of these arrangements are subject to periodic renewal; while such renewals are being processed, the Company remains in regular communication with the lenders, and the arrangements have historically continued without interruption or penalty. On January 31, 2026, interest rates were based on (i) the EIBOR plus 3.5% per annum for the U.A.E. credit arrangements, which have minimum interest rates ranging from 4.5% to 8.0% per annum; (ii) interest rates ranging from 15.0% to 20.8% for the Egypt credit arrangements; and (iii) an interest rate of 8.5% for the Saudi Arabia credit arrangement. Based on these base rates, as of January 31, 2026, the Company's interest rates ranged from 7.1% to 20.8%, with a weighted average rate of 8.1%, and the Company had facility limits totaling $57.5 million under these credit arrangements. As of January 31, 2026, $21.1 million of the facility limits were utilized to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of January 31, 2026, the Company had borrowed $5.7 million and had an additional $29.9 million of borrowing availability remaining under the foreign revolving credit arrangements. The foreign revolving lines balances were included as a component of "Short-term borrowings and current maturities of long-term debt" on the Consolidated Balance Sheets as of January 31, 2026 and January 31, 2025.
Finance obligation - buildings and land. On April 14, 2021, the Company entered into a purchase and sale agreement (the "Purchase and Sale Agreement") to sell its land and building in Lebanon, Tennessee (the "Property"). Pursuant to the terms of the Purchase and Sale Agreement, the Company sold the Property for $10.4 million. The transaction generated net cash proceeds of $9.1 million. Concurrently with the sale of the Property, the Company paid off the approximately $0.9 million remaining on the mortgage note on the Property to its lender. The Company used the remaining proceeds to repay its borrowings under the Senior Credit Facility, for strategic investments, and for general corporate needs. Concurrent with the sale of the Property, the Company entered into a fifteen-year lease agreement (the “Lease Agreement”), whereby the Company is leasing back the Property at an annual rental rate of approximately $0.8 million, subject to annual rent increases of 2.0%. Under the Lease Agreement, the Company has four consecutive options to extend the term of the lease by five years for each such option. As of January 31, 2026 and 2025, the Company had a net book value relating to this asset of $1.7 million and $1.8 million, respectively.
In accordance with ASC 842, Leases , this transaction was recorded as a failed sale and leaseback as the present value of lease payments exceeded substantially all of the fair value of the underlying asset. The Company utilized an incremental borrowing rate of 8.0% to determine the finance obligation to record for the amounts received and will continue to depreciate the assets. The current portion of the finance obligation of $0.3 million is recognized in "Short-term borrowings and current maturities of long-term debt" and the long-term portion of $8.5 million is recognized in "Long-term finance obligation" on the Consolidated Balance Sheets as of January 31, 2026. The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.
Mortgage Note. On July 28, 2016, the Company entered into a mortgage agreement secured by the Company's manufacturing facility located in Alberta, Canada that matures on December 23, 2042. As of January 31, 2026, the remaining balance on the mortgage in Canada is approximately 5.4 million Canadian Dollars ("CAD") (approximately $4.0 million at January 31, 2026). The interest rate is variable, and was 6.3% at January 31, 2026. The principal balance is included as a component of "Short-term borrowings and current maturities of long-term debt" and "Long-term debt, less current maturities" on the Consolidated Balance Sheets and is presented net of issuance costs of $0.1 million as of January 31, 2026 and January 31, 2025.
Loan Payable to GIG. In June 2023, in connection with the formation of a joint venture with Gulf Insulation Group (“GIG”), the Company assumed a promissory note with an aggregate principal amount of approximately $2.8 million, which originally carried a maturity date of April 9, 2026. Subsequent to the fiscal year ended January 31, 2026, the Company and GIG entered into discussions to formally extend the maturity of the note. While a specific revised maturity date has not yet been finalized, both parties expect the joint venture to continue for the foreseeable future and the joint venture has continued to operate without any restrictions or disruption. Because the Company does not currently have a contractual, unconditional right to defer settlement for at least twelve months following the balance sheet date, the obligation is classified as a current liability within “Short-term borrowings and current maturities of long-term debt” at January 31, 2026, compared to its classification within “Long-term debt, less current maturities” at January 31, 2025. The Company is currently evaluating a formal amendment to the note agreement and will reclassify the debt to long-term in future periods should a formal extension beyond one year be executed.
We assess going concern uncertainty on a quarterly basis to determine if we have sufficient cash and cash equivalents on hand, working capital and access to capital through financing agreements to operate for a period of at least a year from the date of our consolidated financial statements are issued (the lookforward period). Our ability to continue as a going concern is dependent on many factors, including, among other things, our ability to comply with the covenants in our debt agreements, our ability to cure any defaults that may occur under our debt agreements, or forbearances with respect to any such defaults, and our ability to pay, retire, amend, replace or refinance our indebtedness as principal payments come due. We can offer no assurances that we will be able to successfully obtain financing.
A summary of our liquidity and relevant cash flows is presented above. We believe that our unrestricted cash, cash flows from operating activities and availability and commitments under existing financing agreements are sufficient to meet future business requirements for the look-forward period.
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Accounts receivable
In 2015, the Company completed a project in the Middle East with billings in the aggregate amount of approximately $41.9 million. The system has not yet been commissioned by the customer. Nevertheless, the Company has settled approximately $ 40.7 million as of January 31, 2026 , with a remaining balance due in the amount of $ 1.2 million, all of which pertains to retention clauses within the agreements with the Company's customer, and which become payable by the customer when this project is fully tested and commissioned. Of this retention amount, $ 1.2 million is classified in a long-term asset account.
The Company continues to actively engage in ongoing collection efforts with the customer to ensure full payment of open balances, and at various times throughout 2025 and 2024, the Company received a partial payment to settle $ 0.6 million and $0.4 million of the customer's outstanding balances, respectively. Additionally, the Company has been engaged by the customer to perform additional work in 2026 under customary trade terms that support the continued cooperation between the Company and the customer. As a result, the Company did not reserve any allowance against the remaining outstanding balances as of January 31, 2026 . However, if the Company’s efforts to collect on this account are not successful, the Company may recognize an allowance for all, or substantially all, of any such then uncollected amounts.
Stock repurchase plan
On August 29, 2024, the Company retired all remaining treasury stock previously acquired under the stock repurchase program. The retirement was recorded as a reduction to common stock based on the par value of the shares, and the excess over par value was recorded as a decrease in retained earnings in accordance with ASC 505-30, Equity - Treasury Stock .
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Critical accounting estimates and policies
The Company's significant accounting policies are discussed in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. The application of certain of these policies requires significant judgments or a historical based estimation process that can affect the results of operations and financial position of the Company, as well as the related footnote disclosures. The Company bases its estimates on historical experience and other assumptions that it believes are reasonable. If actual amounts ultimately differ from previous estimates, the revisions are included in the Company's results of operations for the period in which the actual amounts become known.
Revenue recognition. In accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers , the Company recognizes revenue over time for certain contracts when a customer obtains control of promised goods or services. Other contracts recognize revenues using periodic recognition of income. Under the input accounting method, income is recognized in each reporting period based on the status of the uncompleted contracts and the current estimates of costs to complete. The amount of revenue recognized is determined by the relationship of costs incurred to the total estimated costs of the contract. Provisions are made for estimated losses on uncompleted contracts in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income. Such revisions are recognized in the period in which they are determined. Claims for additional compensation due to the Company are recognized in contract revenues when realization is probable, the amount can be reliably estimated, and the amount is not subject to reversal. See Note 4 - Revenue recognition, in the Notes to Consolidated Financial Statements, for further information relating to the revenue recognition accounting methods.
Income taxes. Deferred income taxes have been provided for temporary differences arising from differences in the basis of assets and liabilities for tax and financial reporting purposes. Deferred income taxes on temporary differences have been recorded at the current tax rate. The Company assesses its deferred tax assets for realizability at each reporting period. The Company maintains a partial valuation allowance in the United States against certain deferred tax assets.
The Company recognizes a tax position in its consolidated financial statements only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. For further information, see Note 7 - Income taxes, in the Notes to Consolidated Financial Statements.
New accounting pronouncements. See "Accounting Pronouncements Recently Adopted" in Note 2 - Significant accounting policies, in the Notes to Consolidated Financial Statements.
