SEC Comment Letter for Perma-Pipe International Holdings, Inc. (PPIH) (CIK 0000914122) (PPIH) — Dec 23, 2008
Perma-Pipe International Holdings, Inc. (PPIH) (CIK 0000914122)
Date: Dec. 23, 2008 · CIK: 0000914122 · Accession: 0000000000-08-063278
AI Filing Summary & Sentiment
Reasoning
Letter
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-7010 DIVISION OF CORPORATION FINANCE December 23, 2008 Mr. Michael D. Bennett Vice President, Secretary and Treasurer, MFRI, Inc. 7720 N. Leigh Ave Niles, IL 60714 Re: MFRI, Inc. Form 10-K for the year ended January 31, 2008 Definitive Proxy Statement on Schedule 14A, filed May 29, 2008 Form 10-Q for the quart er ended October 31, 2008 File No. 1-32530
Dear Mr. Bennett: We have reviewed your filing and have th e following comments. Where indicated, we think you should revise your document in response to these comments. If you disagree, we will consider your explanation as to why our commen t is inapplicable or a revision is unnecessary. Please be as detailed as necessa ry in your explanation. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. After reviewing this information, we may or may not raise additional comments.
Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requir ements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or on any other aspe ct of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Form 10-K for the year ended January 31, 2008
Item 1. Business, page 1 Piping Systems Business, page 3
Patents, Trademarks, and Approvals, page 3
1. We note that you own several patents covering th e features of your piping and electronic detection systems. In future filings, pleas e disclose the duration and effect of your patents or explain supplementally why you believe this information is immaterial to your piping systems business. See Item 101(c)(1)(iv) of Regulation S-K.
Mr. Michael D. Bennett MFRI, Inc. December 23, 2008 Page 2 Raw Materials and Manufacturing, page 4
2. We note from the first paragraph in this sec tion that you currently have adequate supplies or available sources for raw materials but th at “there are risks and uncertainties with respect to the supply of certain raw materi als,” which could impact your ability to obtained those needed materials. In futu re filings, please expa nd your raw materials discussion to identify the risks and uncertainti es that pose an issue for you and identify those materials that are likely to be affected.
Item 13. Certain Relationships and Related Transactions…, page 29
3. You incorporate the information required by Item 13 of Form 10-K by reference to your proxy statement for the 2008 annual stockholders meeting. However, there is no discussion of related party transactions in your proxy statement. In future filings, please include the discussion required by Item 404 of Regulation S-K. In this regard, we note from the third paragraph on page 24 that you we re engaged in at le ast one related party transaction with “two princi pal stockholders, who are also members of management, for approximately $4,438,000.” Please also file as ex hibits the agreements related to these transactions as required by Item 601(b)(10)(ii)(A) of Regulation S-K.
Item 15. Exhibits and Financia l Statement Schedules, page 29
General
4. In future filings, please file as a material contract the employment agreement you have with Mr. Elgendy. See Item 601(b) (10)(iii)(A) of Regulation S-K.
Notes to the Consolidated Financial Statements Note 9 – Employee Retirement Plans, page 47
Pension Plan, page 47
5. We note at January 31, 2008 that approximately 99% of your pension plan assets were held in mutual funds. In future filings please expand your discussion to include the impact market conditions have had on plan assumptions and the net periodic benefit cost, as well as the expected impact on future operatio ns from a decrease in plan assets, change in expected return and amor tization of actuarial loss. Please also address potential funding requirements relative to your accumulate d benefit obligation and the implications to current and future liquidity resulting from potential incremental cash payments required to maintain funding requirements.
Mr. Michael D. Bennett MFRI, Inc. December 23, 2008 Page 3
Note 10 – Business Segment and Geographic Information, page 49 Geographical Information, page 51
6. In future filings please disclose net sales attributable to individual countries within Europe and Asia, if material. We note your increasing foreign activ ity and believe this disclosure refinement will assist your invest ors. See paragraph 38 a. of SFAS 131 for guidance.
Exhibits 31.1 and 31.2
7. We note that your certifications omit the intr oductory language in paragraph 4 referring to internal control over financial reporting as required by Item 601(b)(31) of Regulation S-K. In this regard, please amend your latest Form 10-K and your Forms 10-Q for the quarters ended April 30, July 31, and Oct ober 31, 2008 to include the aforementioned language in your certifications. Each of your amendments may consist of a cover page, explanatory note, signature pa ge and paragraphs 1, 2, 4, a nd 5 of the certifications.
8. We note that paragraph 4(d) of your certifi cations omits the phrase “(the registrant's fourth fiscal quarter in the case of an annual report).” In future filings, including in the amendments requested above, please insert this omitted phrase as required by Item 601(b)(31) of Regulation S-K.
Definitive Proxy Statement on Schedule 14A
Compensation Discussion and Analysis, page 9 Incentive Compensation, page 10
9. In future filings, please disclose the percentage s of (i) consolidated income before income taxes and before corporate profit-based incentive compensation a nd (ii) business unit income from operations before allocated cor porate expenses that you must meet in order for executives to earn a bonus and disclose what the actual amounts were for the prior year.
Mr. Michael D. Bennett MFRI, Inc. December 23, 2008 Page 4 Executive Compensation, page 12 Compensation Plans for NEOs…, page 13
10. With respect to your discussion of Mr. El gendy’s employment arrangement on page 14, you state that his incentive compensation is ca lculated as a defined percentage of the “Perma-Pipe Incentive Earnings.” In future filings, please define this term, provide any further disclosure necessary for an investor to understand how Mr. Elgendy’s incentive compensation is determined, and quantify the most recent amount.
Form 10-Q for the period ended October 31, 2008
Liquidity and Capital Resources, page 13
11. We note your non-compliance with the earni ngs covenant at Ja nuary 31, 2008 and your reference to the subsequent waiver and amen dment of that covenants. Please disclose here or elsewhere in your f iling the specific terms of any ma terial debt covenants in your debt agreements. For any material debt covena nts, please disclose the required ratios as well as the actual ratios as of each reporti ng date. This will allow readers to understand how much cushion there is between the requi red ratios and the actual ratios. Please show the specific computations used to arrive at the actual ratio s with corresponding reconciliations to US GAAP amounts, if necessa ry. See Sections I.D and IV.C of the SEC Interpretive Release No. 33-8350 and Question 10 of our FAQ Regarding the Use of Non-GAAP Financial Measur es dated June 13, 2003.
Critical Accounting Estimates and Policies Goodwill and Other Intangibles Assets with Indefinite Lives, page 14
12. It appears that your cu rrent market capitaliza tion is significantly below the book value of your equity. Please advise us whether you have performed a recent impairment test. If not, please explain how you anal yzed the difference to conclude that an impairment test is not necessary. Please expl ain any qualitative and quantit ative factors you considered (e.g. reconciliation). If you have performed a recent impairment test, please provide us with a summary of your results in Step 1 and Step 2, if applicable. We may have further comment.
As appropriate, please amend your filing a nd respond to these comments within 10 business days or tell us when you will provide us with a response. Please provide us with a supplemental response letter that keys your re sponses to our comments and provides any requested supplemental information. Detailed letter s greatly facilitate our review. Please file your supplemental response on EDGAR as a corres pondence file. Please understand that we may have additional comments after reviewing your responses to our comments.
Mr. Michael D. Bennett MFRI, Inc. December 23, 2008 Page 5
We urge all persons who are responsible for th e accuracy and adequacy of the disclosure in the filing to be certain that the filing incl udes all information require d under the Securities and Exchange Act of 1934 and that they have provi ded all information investors require for an informed investment decision. Since the compa ny and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the acc uracy and adequacy of the disclosures they have made. In connection with responding to our comment s, please provide, in writing, a statement from the company acknowledging that: • the company is responsible for the adequacy an d accuracy of the disclosure in their filings; • staff comments or changes to disclosure in re sponse to staff comments do not foreclose the Commission from taking any action w ith respect to the filing; and • the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the sta ff of the Division of Corporati on Finance in our review of your filing or in response to our comments on your filing. If you have any questions regarding these comments, please direct them to Mindy Hooker, Staff Accountant, at (202) 551-3732, Hagen Ganem, Attorney, at (202) 551-3330, Jennifer Hardy, Legal Branch Chief, at (202) 551-3767 or to the unde rsigned at (202) 551-3768.
Sincerely, John Cash Branch Chief
Show Raw Text
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE
December 23, 2008
Mr. Michael D. Bennett Vice President, Secretary and Treasurer, MFRI, Inc. 7720 N. Leigh Ave Niles, IL 60714
Re: MFRI, Inc.
Form 10-K for the year ended January 31, 2008 Definitive Proxy Statement on Schedule 14A, filed May 29, 2008
Form 10-Q for the quart er ended October 31, 2008
File No. 1-32530
Dear Mr. Bennett:
We have reviewed your filing and have th e following comments. Where indicated, we
think you should revise your document in response to these comments. If you disagree, we will
consider your explanation as to why our commen t is inapplicable or a revision is unnecessary.
Please be as detailed as necessa ry in your explanation. In some of our comments, we may ask
you to provide us with information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requir ements and to enhance the overall disclosure in
your filing. We look forward to working with you in these respects. We welcome any questions
you may have about our comments or on any other aspe ct of our review. Feel free to call us at
the telephone numbers listed at the end of this letter.
Form 10-K for the year ended January 31, 2008
Item 1. Business, page 1
Piping Systems Business, page 3
Patents, Trademarks, and Approvals, page 3
1. We note that you own several patents covering th e features of your piping and electronic
detection systems. In future filings, pleas e disclose the duration and effect of your
patents or explain supplementally why you believe this information is immaterial to your
piping systems business. See Item 101(c)(1)(iv) of Regulation S-K.
Mr. Michael D. Bennett
MFRI, Inc.
December 23, 2008 Page 2
Raw Materials and Manufacturing, page 4
2. We note from the first paragraph in this sec tion that you currently have adequate supplies
or available sources for raw materials but th at “there are risks and uncertainties with
respect to the supply of certain raw materi als,” which could impact your ability to
obtained those needed materials. In futu re filings, please expa nd your raw materials
discussion to identify the risks and uncertainti es that pose an issue for you and identify
those materials that are likely to be affected.
Item 13. Certain Relationships and Related Transactions…, page 29
3. You incorporate the information required by Item 13 of Form 10-K by reference to your
proxy statement for the 2008 annual stockholders meeting. However, there is no discussion of related party transactions in your proxy statement. In future filings, please
include the discussion required by Item 404 of Regulation S-K. In this regard, we note
from the third paragraph on page 24 that you we re engaged in at le ast one related party
transaction with “two princi pal stockholders, who are also members of management, for
approximately $4,438,000.” Please also file as ex hibits the agreements related to these
transactions as required by Item 601(b)(10)(ii)(A) of Regulation S-K.
Item 15. Exhibits and Financia l Statement Schedules, page 29
General
4. In future filings, please file as a material contract the employment agreement you have
with Mr. Elgendy. See Item 601(b) (10)(iii)(A) of Regulation S-K.
Notes to the Consolidated Financial Statements
Note 9 – Employee Retirement Plans, page 47
Pension Plan, page 47
5. We note at January 31, 2008 that approximately 99% of your pension plan assets were
held in mutual funds. In future filings please expand your discussion to include the
impact market conditions have had on plan assumptions and the net periodic benefit cost,
as well as the expected impact on future operatio ns from a decrease in plan assets, change
in expected return and amor tization of actuarial loss. Please also address potential
funding requirements relative to your accumulate d benefit obligation and the implications
to current and future liquidity resulting from potential incremental cash payments
required to maintain funding requirements.
Mr. Michael D. Bennett
MFRI, Inc.
December 23, 2008 Page 3
Note 10 – Business Segment and Geographic Information, page 49
Geographical Information, page 51
6. In future filings please disclose net sales attributable to individual countries within
Europe and Asia, if material. We note your increasing foreign activ ity and believe this
disclosure refinement will assist your invest ors. See paragraph 38 a. of SFAS 131 for
guidance.
Exhibits 31.1 and 31.2
7. We note that your certifications omit the intr oductory language in paragraph 4 referring
to internal control over financial reporting as required by Item 601(b)(31) of Regulation
S-K. In this regard, please amend your latest Form 10-K and your Forms 10-Q for the
quarters ended April 30, July 31, and Oct ober 31, 2008 to include the aforementioned
language in your certifications. Each of your amendments may consist of a cover page,
explanatory note, signature pa ge and paragraphs 1, 2, 4, a nd 5 of the certifications.
8. We note that paragraph 4(d) of your certifi cations omits the phrase “(the registrant's
fourth fiscal quarter in the case of an annual report).” In future filings, including in the
amendments requested above, please insert this omitted phrase as required by Item 601(b)(31) of Regulation S-K.
Definitive Proxy Statement on Schedule 14A
Compensation Discussion and Analysis, page 9
Incentive Compensation, page 10
9. In future filings, please disclose the percentage s of (i) consolidated income before income
taxes and before corporate profit-based incentive compensation a nd (ii) business unit
income from operations before allocated cor porate expenses that you must meet in order
for executives to earn a bonus and disclose what the actual amounts were for the prior
year.
Mr. Michael D. Bennett
MFRI, Inc.
December 23, 2008 Page 4
Executive Compensation, page 12
Compensation Plans for NEOs…, page 13
10. With respect to your discussion of Mr. El gendy’s employment arrangement on page 14,
you state that his incentive compensation is ca lculated as a defined percentage of the
“Perma-Pipe Incentive Earnings.” In future filings, please define this term, provide any further disclosure necessary for an investor to understand how Mr. Elgendy’s incentive
compensation is determined, and quantify the most recent amount.
Form 10-Q for the period ended October 31, 2008
Liquidity and Capital Resources, page 13
11. We note your non-compliance with the earni ngs covenant at Ja nuary 31, 2008 and your
reference to the subsequent waiver and amen dment of that covenants. Please disclose
here or elsewhere in your f iling the specific terms of any ma terial debt covenants in your
debt agreements. For any material debt covena nts, please disclose the required ratios as
well as the actual ratios as of each reporti ng date. This will allow readers to understand
how much cushion there is between the requi red ratios and the actual ratios. Please show
the specific computations used to arrive at the actual ratio s with corresponding
reconciliations to US GAAP amounts, if necessa ry. See Sections I.D and IV.C of the SEC
Interpretive Release No. 33-8350 and Question 10 of our FAQ Regarding the Use of
Non-GAAP Financial Measur es dated June 13, 2003.
Critical Accounting Estimates and Policies
Goodwill and Other Intangibles Assets with Indefinite Lives, page 14
12. It appears that your cu rrent market capitaliza tion is significantly below the book value of
your equity. Please advise us whether you have performed a recent impairment test. If
not, please explain how you anal yzed the difference to conclude that an impairment test
is not necessary. Please expl ain any qualitative and quantit ative factors you considered
(e.g. reconciliation). If you have performed a recent impairment test, please provide us
with a summary of your results in Step 1 and Step 2, if applicable. We may have further
comment.
As appropriate, please amend your filing a nd respond to these comments within 10
business days or tell us when you will provide us with a response. Please provide us with a
supplemental response letter that keys your re sponses to our comments and provides any
requested supplemental information. Detailed letter s greatly facilitate our review. Please file
your supplemental response on EDGAR as a corres pondence file. Please understand that we
may have additional comments after reviewing your responses to our comments.
Mr. Michael D. Bennett
MFRI, Inc.
December 23, 2008 Page 5
We urge all persons who are responsible for th e accuracy and adequacy of the disclosure
in the filing to be certain that the filing incl udes all information require d under the Securities and
Exchange Act of 1934 and that they have provi ded all information investors require for an
informed investment decision. Since the compa ny and its management are in possession of all
facts relating to a company’s disclosure, they are responsible for the acc uracy and adequacy of
the disclosures they have made.
In connection with responding to our comment s, please provide, in writing, a statement
from the company acknowledging that:
• the company is responsible for the adequacy an d accuracy of the disclosure in their filings;
• staff comments or changes to disclosure in re sponse to staff comments do not foreclose the
Commission from taking any action w ith respect to the filing; and
• the company may not assert staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the sta ff of the Division of Corporati on Finance in our review of your
filing or in response to our comments on your filing.
If you have any questions regarding these comments, please direct them to Mindy
Hooker, Staff Accountant, at (202) 551-3732, Hagen Ganem, Attorney, at (202) 551-3330,
Jennifer Hardy, Legal Branch Chief, at (202) 551-3767 or to the unde rsigned at (202) 551-3768.
Sincerely, John Cash Branch Chief