RUDNICK & WOLFE
203 North LaSalle Street
Suite 1800
Chicago, IL 60601
May 2, 1997
(312) 368-2109
VIA EDGAR
Securities and Exchange Commission
450 5th Street, N. W.
Washington, D. C. 20549
Re: MFRI, INC.
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1996
FILE NO. 0-18370
REGISTRATION STATEMENT ON FORM S-3
FILE NO. 333-21951
Ladies and Gentlemen:
Attached, for filing, is a conformed copy of Amendment No. 1 to
Registration Statement No. 333-21951 on Form S-3, including exhibits
thereto, with respect to shares of common stock, par value $. 01 per share,
of MFRI, Inc. (the "Company"), that were issued in connection with the
merger of Midwesco, Inc. ("Midwesco") with and into the Company.
The changes in Amendment No. 1 include: (i) changes made in response to
the staff's letter of comment dated March 20, 1997 (as discussed below);
and (ii) minor editorial efforts and corrections.
The responses herein are numbered consecutively to correspond to the
comments in the staff's letter.
THE COMPANY, PAGE 3
1. The Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1997 ("1997 Form 10-K Report"), which is incorporated by
reference into the Registration Statement, includes a discussion of the
business of Thermal Care.
SELLING STOCKHOLDERS, PAGE 5
2. The Registration Statement has been revised as requested.
3. The Registration Statement has been revised as requested.
PLAN OF DISTRIBUTION, PAGE 7
4. The Registration Statement has not been revised, in accordance with
telephone conversations between the undersigned and Mr. Mark Webb of the
staff.
INFORMATION INCORPORATED BY REFERENCE, PAGE 7
5. The Registration Statement has been amended as requested.
6. As discussed by the undersigned and Mr. Webb, the Registration Statement
incorporates the Company's Current Report on Form 8-K dated December 30,
1996, as required by Item 12 of Form S-3. However, no information
incorporated therein has been incorporated by reference into the
Registration Statement.
EXPERTS
7. The Registration Statement has been revised to reflect the filing of the
1997 Form 10-K Report. See the responses to questions 10 and 11 below.
INFORMATION INCORPORATED BY REFERENCE
8. The Registration Statement has been revised as requested.
GENERAL
9. A consent for the use of the audit report contained in the 1997
Form 10-K Report has been included in the Registration Statement.
10. The Registration Statement has been amended to incorporate by reference
the financial statements of the Company as of and for the year ended
January 31, 1997 included in the 1997 Form 10-K Report.
11. The financial statements of the Company included in the 1997 Form 10-K
Report include updated pro forma financial information with respect to the
Company's December 30, 1996 acquisition of Midwesco. Midwesco merged with
and into the Company and through such merger, Midwesco's accounts are
included in the consolidated financial statements of the Company since the
date of acquisition in accordance with APB No. 16. Management of the
Company does not believe that the separate historic interim or prior year
financial statements of Midwesco, after the consummation of the transaction
and the merger of Midwesco into the Company, would be meaningful to the
readers of its financial statements at this time.
12. Midwesco Management believes that, as a privately held entity, the
"segmentation" provisions of APB 30 do not apply to Midwesco. The spin off
of certain operations of Midwesco was contingent upon approval of the
acquisition of Midwesco by the stockholders of the Company; thus, no
"measurement date" under paragraph 14 of APB 30 had been reached.
Management does not believe that restatement of Midwesco's historic interim
or prior year financial statements, after the consummation of the
transaction and the merger of Midwesco into the Company, would be
meaningful to the readers of its financial statements at this time.
13. Because the fiscal 1994 consolidated statement of operations is not
included in the 1997 Form 10-K Report, management does not believe it is
meaningful at this point to amend the disclosure in the earlier year's
Form 10-K. Management believes that the comparisons made in the referenced
Form 10-K/A1 are meaningful given their pro forma nature.
14. The following reconciles the changes in the balance sheet accumulated
depreciation and amortization to the cash flow provision for depreciation
and amortization, for the year ended January 31, 1996 in $000's:
PATENTS AND PROPERTY, PLANT OTHER TOGETHER
GOODWILL AND EQUIPMENT ASSETS
Accum. Deprec/amort $158 $3,138 $-- $3,296
beginning
Provision 289 983 63 1,335
Disposals (369) (369)
Accum. Deprec/amort
- - ending $447 $3,752 $63 $4,199
15. and 16. In the Company's financial statements for the fiscal year ended
January 31, 1997, the first paragraph of Note 1 - Basis of Presentation,
has been modified to make it clear that the Company became successor to
Midwesco Filter Resources, Inc. through merger. The previous registrant
was Midwesco Filter Resources, Inc. which is now a wholly-owned subsidiary
of MFRI, Inc. ; the Company had no operations prior to its merger with
Midwesco Filter Resources, Inc.
17. The Company adopted SFAS 121 in the fiscal year ended January 31, 1997.
Note 2 - Significant Accounting Polices, to the Company's fiscal 1997
consolidated financial statements includes the disclosures required by this
Statement, including a reference that since the adoption, no impairment
losses have been recognized.
18. The debt referred to was repaid during the fiscal 1997. The language
in Note 7 - Debt, did not make it clear that the waiver the Company
received extended for more than one year.
19. The caption in Note 9 - Income Taxes has been revised to read "Accrued
Commissions" not "Unearned Commissions." Management does not believe that
this drafting change is material.
20. Note 12 (Note 3 in the Company's fiscal 1997 financial statements)
- Related Party Transactions, has been reworded.
21. Amendment No. 1 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1996 (the "1996 Form 10-K Report") was filed
in order to correct the following:
1. In the Consolidated Statements of Cash Flows "Prepaid expenses and other
assets" for the year ended January 31, 1996 was changed from (1,285,000) to
(1,151,000), with resulting totals changing accordingly.
2. In Notes to Consolidated Financial Statements Note 13, "Cash paid for
interest" for the year ended January 31, 1996 was changed from 1,009,000 to
928,000.
3. In Notes to Consolidated Financial Statements Note 13, the Ricwil
acquisition disclosures for the year ended January 31, 1995 were modified.
Amendment No. 2 to the 1996 Form 10-K Report changes the third sentence
under the caption "Liquidity and Capital Resources" of the Management's
Discussion and Analysis of Financial Condition and Results of Operations
section of the 1996 Form 10-K Report as follows:
"This line of credit is unsecured, has a term of three years and provides
for interest at the higher of the federal funds rate, in effect from time
to time, plus 50 basis points and the bank's prime rate in effect from time
to time."
22. and 23. The Company does not propose to amend its Form 8-K/A dated
December 30, 1996. The Company believes that its amendment of the
Registration Statement to incorporate by reference the Company's fiscal
1997 consolidated financial statements is sufficient to comply with
Rule 3-01 and Rule 3-02 for Regulation S-X. See the responses to
questions 10 and 11 above.
24. For the periods presented there were no contract claims for either the
Company or Midwesco for which "realization [was] probable and the amount
[was] reasonably estimable" (the Midwesco recognition policy) but for which
"claims [were not yet] settled" (the MFRI recognition policy). Therefore,
there was no difference in revenues measured in accordance with the two
policies. Note that in the 1997 Form 10-K Report, the Company has reworded
the description of its revenue recognition policy to more clearly describe
its revenue recognition practices.
25. The Company is not awaiting additional information for any FAS 38
contingencies. Accordingly, the purchase price allocation is not
considered to be preliminary.
26. The fair value of the MFRI common stock used to determine the purchase
price has been changed to include a reasonable period before and after the
Thermal Care Merger was announced.
27. Revenues, costs and expenses presented as those of Midwesco Businesses
spun-off directly attributable to the transaction represent the revenue,
costs and expenses of those businesses which the Company has no intention
of pursuing, and which New Midwesco (as defined in the Company's Proxy
Statement relating to the Special Meeting of Stockholders held on
December 16, 1996) intended to continue (and has in fact continued
uninterrupted since the time of the transaction). Those revenues, costs
and expenses (including corporate general and administrative expenses) are
factually supportable in that they have not been allocated but rather have
been derived from the ledgers and related accounting records of Midwesco,
in which its businesses have been separately accounted for. As a result
of, and as a part of the transaction as planned at the time the
Registration Statement was filed, Midwesco employees and resources adequate
to support the general and administrative needs of Midwesco Businesses
spun-off have been spun off to New Midwesco with those businesses.
28. The reconciliation requested is as follows, for the year ended
January 31, 1996, in $000's:
Income for operations: Heat transfer equipment, $2,231
page F-19 Note 10
Corporate administrative expenses to support this (759)
business and being spun off with it
Charge for unabsorbed costs of the leased building, to (154)
be shared on an actual cost basis as provided by the
Management Services Agreement
Acquired Midwesco income from operations, page 48 $1,318
29. The Simtech subsidiary has operated at a loss and the minority
stockholder has no obligation to fund such losses.
30. Midwesco's ownership percentage in MPJV (which ownership was spun off
to New Midwesco in the transaction) was 55%. This special partnership
completed in 1989 the construction project which was the sole purpose for
its formation. Due to the dormant nature of this venture and its relative
size, management of Midwesco elected not to fully consolidate its accounts.
31. The management of Midwesco and of MPJV's new owner, New Midwesco,
believe recognition of contract revenue relating to claims is supported by
SOP 81-1, as follows:
a. The basis for the claims is a contractual performance guarantee for
turbine performance, which was not met.
b. The circumstances causing the additional costs were unforeseen at the
contract date and the result of the turbine supplier's performance, not of
MPJV's performance.
c. Costs associated with the claim have been identified and measured and
are reasonable in view of the work performed.
d. The evidence supporting the claim is objective and verifiable. It
consists of contractually guaranteed turbine performance to be measured by
a contractually specified engineering formula, compared with the results of
actual performance measured in accordance with that formula supervised,
evaluated and attested to by competent third parties, including expert
third parties who have testified during pretrial preparation and
depositions. An offer to settle for an amount approximately the amount
recognized on Midwesco's statements was once received from the turbine
supplier but was rejected as inadequate.
32. Midwesco had deferred a portion (38%) of the gain on the sale of
Perma-Pipe to the Company in order to match revenues with expenses in its
consolidated financial statements. Immediately after selling Perma-Pipe to
the Company, Midwesco owned approximately 38% of the stock of the Company.
Therefore, Midwesco's gain resulted from a transaction with a 38%-owned
affiliate and, subsequent to the sale of Perma-Pipe to the Company,
Midwesco's financial statements included its 38% share of the earnings of
the Company, which the Company's earnings were net of amortizing goodwill
generated by the purchase of Perma-Pipe from Midwesco. By deferring 38% of
the gain and amortizing it into income over the same period over which the
Company was amortizing the Perma-Pipe goodwill, Midwesco matched the timing
of its gain with the corresponding goodwill amortization expense of its
38%-owned affiliate in its financial statements. At the time of the
acquisition of Midwesco by the Company, the 38% ownership was eliminated.
* * * * *
A manually signed and currently dated accountant's consent has been filed
as Exhibit 23. 1 to the Registration Statement.
Attached hereto, in accordance with Rule 461, is a letter from the Company
to the Commission relating to acceleration of the effective date of the
Registration Statement. We expect that the Company will submit an oral
request for acceleration asking that the Registration Statement be ordered
effective during mid-May. Accordingly, we would appreciate any further
comments of the staff as soon as practicable.
Please call the undersigned or Hal M. Brown (312/368-4012) of this law firm
if there are any comments or questions concerning the enclosed Amendment
No. 1.
Very truly yours,
RUDNICK & WOLFE
/s/ Dorian R. Williams
Dorian R. Williams
DRW/ph
Enclosures
cc:Steven C. Duvall
James Rosenberg
Kevin Trolaro
Mark S. Webb
David Unger
Michael D. Bennett
Hal M. Brown
MFRI, INC.
7720 Lehigh Avenue
Niles, IL 60714
May 2, 1997
Securities and Exchange Commission
450 5th Street, N. W.
Washington, D. C. 20549
Re: MFRI, INC. (THE "COMPANY")
REGISTRATION STATEMENT ON FORM S-3 (REGISTRATION STATEMENT NO. 333-21951)
Ladies and Gentlemen:
Please be advised that the Company, at the appropriate time, intends to
make an oral request that appropriate action be taken by the Commission
under Section 8(a) of the Securities Act of 1933, as amended (the "Act"),
to order the above-captioned registration statement on Form S-3 (relating
to 2,124,298 shares of common stock) effective. The Company is aware of
its obligations under the Act.
Very truly yours,
/s/ Michael D. Bennett
Michael D. Bennett
Vice President
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2, 1997.
REGISTRATION NO. 333-21951
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MFRI, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3922969
(State or other (IRS Employer
jurisdiction Identification No.)
of incorporation or
organization)
7720 LEHIGH AVENUE
NILES, ILLINOIS 60714
(847) 966-1000
(Address, including ZIP code, and telephone number,
including area code, of registrant's principal executive offices)
DAVID UNGER
CHAIRMAN OF THE BOARD OF DIRECTORS
MFRI, INC.
7720 LEHIGH AVENUE
NILES, ILLINOIS 60714
(847) 966-1000
(Name, address, including ZIP Code, and
telephone number, including area code, of agent for service)
COPIES TO:
HAL M. BROWN, ESQ.
DORIAN R. WILLIAMS, ESQ.
RUDNICK & WOLFE
203 NORTH LASALLE STREET, SUITE 1800
CHICAGO, ILLINOIS 60601
(312) 368-4000
(312) 236-7516(TELECOPIER)
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 2, 1997
PROSPECTUS
2,124,298 Shares
MFRI, INC.
COMMON STOCK
This Prospectus relates to 2,124,298 outstanding shares ("Shares") of
common stock, par value $.01 per share (the "Common Stock"), of MFRI, Inc., a
Delaware corporation (the "Company"), which may hereaf
sold from time to time for the account of persons named under the caption
"Selling Stockholders."
The Shares were issued in the merger (the "Merger") of Midwesco, Inc., an
Illinois corporation, with and into the Company, which occurred on
December 30, 1996 (the "Merger Closing Date").
The Shares may hereafter be offered or sold from time to time for the
account of persons named under the caption "Selling Stockholders" on the
Nasdaq National Market, or otherwise, at prices and on terms then
obtainable, in broker's transactions, special offerings, exchange
distributions, negotiated transactions, block transactions, or otherwise.
See "Selling Stockholders" and "Plan of Distribution." The Company will
not realize any proceeds from any sale of the Shares.
SEE "RISK FACTORS" ON PAGE 2 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
The Common Stock is traded on the Nasdaq National Market under the symbol
MFRI. On May ____, 1997, the last reported sale price of the Common Stock
on the Nasdaq National Market was $__________.
______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION PASSED OR ANY STATE SECURITIES COMMISSION UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
______________
MAY , 1997
NO DEALER, BROKER OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED ON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SECURITIES TO WHICH
IT RELATES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION OF AN OFFER. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
THIS PROSPECTUS, INCLUDING DOCUMENTS INCORPORATED BY REFERENCE, CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. FORWARD-LOOKING
STATEMENTS ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES, MANY OF WHICH
CANNOT BE PREDICTED WITH ACCURACY AND SOME OF WHICH MIGHT NOT EVEN BE
ANTICIPATED. FUTURE EVENTS AND ACTUAL RESULTS, FINANCIAL AND OTHERWISE,
MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" HEREIN AND IN
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION" INCORPORATED BY REFERENCE IN THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 1997, WHICH IS
INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
TABLE OF CONTENTS
PAGE
Available Information 2
Risk Factors 2
The Company 3
Selling Stockholders 5
Use of Proceeds 7
Plan of Distribution 7
Legal Matters 8
Experts 8
Information Incorporated By Reference 8
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files periodic reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N. W., Washington, D. C. 20549, and should also be
available for inspection and copying at the regional offices of the
Commission located at 75 Park Place, 14th Floor, New York, New York 10007
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material can also be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N. W., Washington, D. C. 20549 at
prescribed rates. The Commission maintains a Web site that contains
reports, proxy and information statements, and other information about the
Company. The address of the Web site maintained by the Commission is
"http://www. sec. gov".
This Prospectus constitutes a part of a registration statement on Form S-3
(herein, together with all amendments and exhibits, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), filed by the Company. This Prospectus does not contain all of the
information set forth in the Registration Statement. For further
information, reference is hereby made to the Registration Statement,
including the financial schedules and exhibits filed or incorporated by
reference as a part thereof, which may be -examined at the Public Reference
Room of the Commission in Washington, D. C., without charge, or copies of
which may be obtained from the Commission upon payment of the prescribed
fees. Statements contained herein concerning the provisions of documents
filed herewith as exhibits are necessarily summaries of such documents, and
each such statement is qualified in its entirety by reference to the copy
of the applicable document filed with the Commission.
RISK FACTORS
COMPETITION; BUSINESS. The businesses in which the Company is engaged are
highly competitive. In addition, new installations of baghouses are
subject to competition from alternative technologies and the sale of
specialty piping systems and electronic leak detection and location systems
are subject to competition from alternative products. The business of
Thermal Care is dependent on the plastics industry. Any adverse trends in
the plastics industry may have a material adverse effect on the business of
Thermal Care. Thermal Care relies upon a single source for key components
of several of its products. Although the Company believes that there are
alternate sources available for such components, there can be no assurance
that the interruption of supplies of such components would not have an
adverse effect on the financial condition of the Company, and that the
Company, if required to do so, would be able to negotiate agreements with
alternative sources on acceptable terms.
GOVERNMENT REGULATION. The demand for the Company's leak detection and
location systems and secondary containment piping systems is driven
primarily by government regulation with respect to hazardous waste. Laws
such as the Federal Resource Conservation and Recovery Act ("RCRA"), and
standards such as the National Emission Standard for Hydrocarbon Airborne
Particulates ("NESHAP"), have increased the demand for the Company's leak
detection and location and secondary containment piping systems. The
Company's filtration products business to a large extent is dependent on
governmental regulation of air pollution at the federal and state levels.
The Company believes that continuing growth in the sale of filtration
products and services will be materially dependent on continuing
enforcement of environmental laws such as the Federal Clean Air Act
Amendments of 1990 ("Clean Air Act Amendments"). Although changes in such
environmental regulations could significantly alter the demand for the
Company's products and services, the Company does not believe that such a
change is likely to decrease demand in the foreseeable future.
ECONOMIC FACTORS. Although demand for many of the Company's products is
generally affected by its customers' need to comply with governmental
regulations, purchases of the Company's products at times may be delayed by
customers due to adverse economic factors.
DIVIDENDS. The Company has not paid dividends in the past and does not
anticipate paying cash dividends on its common stock in the foreseeable
future. The Company's line of credit agreement contains certain
restrictions on payment of dividends. The primary restriction limits
dividends to a cumulative amount of up to 25% of net income.
LACK OF ARM'S-LENGTH NEGOTIATIONS; CONFLICTS OF INTEREST. The agreements
between the Company and Midwesco relating to the Merger and the Perma-Pipe
Transaction were not negotiated on an arm's-length basis. However, the
Company believes the consideration, representations, warranties and
covenants in such agreements are fair to the Company even though they may
not provide the same level of protection as similar representations,
warranties and covenants contained in comparable agreements with persons
that are not affiliates of the Company. Members of the Board of Directors
affiliated with Midwesco (Messrs. Unger, Ogilvie, Elgendy, Gruenberg and
Henry and Bradley Mautner) will have a conflict of interest with respect to
their obligations as directors and officers of the Company, and enforcing
the terms of such agreements against Midwesco, if necessary.
THE COMPANY
The Company is engaged in the manufacture and sale of filter bags for use
in industrial air pollution control systems known as "baghouses", and also
engineers, designs and manufactures specialty piping systems and leak
detection and location systems, and industrial water cooling equipment.
The Company, which was incorporated in Delaware in October 1993, is the
successor corporation to Midwesco Filter Resources, Inc. ("Midwesco
Filter").
Midwesco Filter was incorporated in Delaware in October 1989 as a wholly
owned subsidiary of Midwesco. On December 13, 1989, Midwesco Filter
exchanged shares of its common stock for the net assets constituting its
Midwesco Filter Resources division ("Filter Division") of Midwesco. The
Filter Division was formed from certain assets of the Filter Media division
of the Kennecott Corporation, acquired by Midwesco in June 1982, and
certain assets of the Filter Resources Corporation, acquired by Midwesco in
December 1983.
On January 28, 1994 pursuant to a merger transaction ("Perma-Pipe
Transaction") between the Company, a subsidiary of the Company and Midwesco
Filter, the Company acquired the Perma-Pipe business ("Perma-Pipe") from
Midwesco for cash and 278,666 shares of Common Stock. Pursuant to the
Perma-Pipe Transaction, each share of common stock of Midwesco Filter was
exchanged for one share of Common Stock. Immediately prior to the
effective time of the Perma-Pipe Transaction, a public offering (the
"Offering") of shares of common stock of Midwesco Filter was consummated,
the net proceeds of which were used to repay bank debt related to
Perma-Pipe. Perma-Pipe is in the business of engineering, designing and
manufacturing specialty piping systems and leak detection and location
systems.
On September 30, 1994, the Company and an indirect wholly-owned subsidiary
of the Company, pursuant to a purchase agreement dated as of such date
("Purchase Agreement"), acquired substantially all of the assets of Ricwil
Piping Systems Limited Partnership ("Ricwil LP") for cash and 55,710 shares
of Common Stock, as adjusted in accordance with the terms of the Purchase
Agreement. Ricwil LP was a manufacturer of insulated piping systems for
district heating and cooling systems.
On December 6, 1995, Perma-Pipe acquired for cash the net assets and leak
detection business of Hagenuk GmbH.
On August 15, 1996, the Company, pursuant to an Asset Purchase Agreement
dated as of such date (the "Purchase Agreement"), acquired substantially
all of the assets of Eurotech Air Filtration, Inc., an Oregon corporation
("Eurotech"), for cash and 30,571 shares of Common Stock, subject to
possible adjustments in accordance with the terms of the Purchase
Agreement. Pursuant to the Purchase Agreement, Eurotech has the right,
subject to certain conditions, to distribute such shares to its four
shareholders.
On December 30, 1996, the Company acquired the Thermal Care Division
("Thermal Care") and certain other specified assets and liabilities of
Midwesco by the merger of Midwesco with and into MFRI (the "Merger").
Through the Merger, an aggregate of 2,124,298 shares of Common Stock were
issued to the shareholders of Midwesco and the 1,717,666 shares of Common
Stock owned by Midwesco immediately prior to the consummation of the Merger
were cancelled. Thermal Care engineers, designs and manufactures
industrial water cooling equipment.
The Company's filtration products business is carried on by Midwesco
Filter, and the piping system products business is carried on by Perma-
Pipe, Inc. Midwesco Filter and Perma-Pipe, Inc. are wholly-owned
subsidiaries of MFRI. As used herein, unless the context otherwise
requires, the term Company includes MFRI, Inc., Midwesco Filter, Thermal
Care, Perma-Pipe, Inc., and its subsidiaries, and their predecessors.
The Company's principal executive offices are located at 7720 Lehigh
Avenue, Niles, Illinois 60714 and its telephone number is (847) 966-1000.
Other information concerning the Company's management, business,
securities, and results of operations is incorporated by reference from its
reports filed with the Commission. See "Information Incorporated by
Reference."
SELLING STOCKHOLDERS
The Shares may be offered from time to time for the account of the Selling
Stockholders whose names are set forth in the table below. The table sets
forth information as of January 31, 1997 with respect to the beneficial
ownership of the Shares by the Selling Stockholders. To the knowledge of
the Company, none of the Selling Stockholders has any material relationship
with the Company except as set forth in the footnotes to the following
table and as more fully described elsewhere in this Prospectus (including
the information incorporated by reference in this Prospectus).
NO. OF SHARES NO. OF SHARES NO. OF SHARES WHICH
OWNED PRIOR TO WHICH MAY BE MAY BE OWNED AFTER
SELLING STOCKHOLDER OFFERING(1) OFFERED OFFERING(1)
Henry Mautner(2) 451,688 419,938 31,750
Debra Mautner 170,473 170,473 --
David M. Mautner(3) 171,298 170,473 825
Bradley E. Mautner(4) 172,773 170,473 2,300
David Unger(5) 535,677 489,927 45,750
Maxine S. Unger(6) 29,359 12,859 16,500
Judith Golden 141,632 141,632 --
Rebecca Fishman 148,932 141,632 7,300
Michael Unger 142,132 141,632 500
Robert F. Spreenberg(7)187,925 187,925 --
David A. Miller(8) 6,611 5,511 1,100
William F. Davis(9) 27,126 25,901 1,225
Judith & Jeff Golden 4,374 3,674 700
Don L. Gruenberg(10) 4,587 1,837 2,750
John F. Conroy(11) 2,543 918 1,625
Carlo Ferraro(12) 367 367 --
Edward A. Crylen(13) 3,062 1,837 1,225
Herbert J. Sturm(14) 9,815 3,490 6,325
Robert K. Spreenberg(15) 9,552 9,552 --
Gene K. Ogilvie(16) 43,772 11,022 32,750
Michael D. Bennett(17) 10,331 3,306 7,025
Fati Elgendy(18) 27,969 9,919 18,050
(1) Includes shares, if any, held by spouse; held as custodian; held in
joint tenancy with spouse; held by or for the benefit of the named person
or one or more members of his immediate family; with respect to which the
named person has or shares voting or investment powers; or in which the
named person otherwise has a beneficial interest. Also includes shares
issuable upon exercise of employee stock options.
(2) Henry Mautner is Director and Vice Chairman of the Board of Directors
of the Company. From 1972 to the Merger Closing Date, he served as
Chairman of Midwesco.
(3) From June 1985 to the Merger Closing Date, David M. Mautner served as
Director of Midwesco.
(4) Bradley E. Mautner is Director and Vice President of the Company. From
January 1994 to the Merger Closing Date, he served as President of
Midwesco. In addition, since February 1996, he served as the Chief
Executive Officer of Midwesco Services, Inc. ("Midwesco Services"), which,
prior to the Merger Closing Date, was a 50% owned affiliate of Midwesco.
Mr. Mautner served as President of Midwesco Services from February 1988 to
January 1996.
(5) David Unger is Director, Chairman of the Board of Directors, President
and Chief Executive Officer of the Company. From 1972 to the Merger
Closing Date, he served as Director of Midwesco, having served as President
from 1972 to January 1994 and Vice President since January 1994.
(6) From March 1993 to the Merger Closing Date, Maxine S. Unger served as
Director of Midwesco.
(7) From February 1970 to the Merger Closing Date, Robert K. Spreenberg
served as Director and Executive Vice President of Midwesco.
(8) From June 1979 to the Merger Closing Date, Mr. Miller served as Vice
President of Midwesco.
(9) From June 1979 to the Merger Closing Date, Mr. Davis served as Vice
President of Midwesco.
(10) Mr. Gruenberg is Director and Vice President of the Company. From
August 1980 to the Merger Closing Date, he served as Vice President of
Midwesco.
(11) Mr. Conroy is Comptroller and Assistant Secretary of the Company.
From January 1980 to the Merger Closing Date, he served as Controller of
Midwesco.
(12) From May 1982 to the Merger Closing Date, he served as Vice President
of Midwesco Services.
(13) From August 1982 to the Merger Closing Date, he served as Vice
President of Midwesco.
(14) Mr. Sturm is Vice President of the Company and of Midwesco Filter.
(15) Robert K. Spreenberg is an employee of the Company. From May 1979 to
the Merger Closing Date, he was employed by Midwesco.
(16) Mr. Ogilvie is Director, Vice President of the Company and President
of Midwesco Filter. From 1982 to the Merger Closing Date, he served as
Vice President of Midwesco.
(17) Mr. Bennett is Vice President, Secretary and Treasurer of the Company.
From 1989 to the Merger Closing Date, he served as Vice President,
Secretary and Treasurer of Midwesco.
(18) Mr. Elgendy is Director, Vice President of the Company and President
of Perma-Pipe, Inc.
At March 31, 1997, there were 4,965,329 shares of Common Stock outstanding.
USE OF PROCEEDS
This Prospectus relates solely to Shares being offered and sold for the
accounts of the Selling Stockholders. The Company will not realize any
proceeds from any sale of Shares by the Selling Stockholders.
PLAN OF DISTRIBUTION
The Selling Stockholders may offer and sell Shares by means of the
Prospectus from time to time in one or more transactions, directly by the
Selling Stockholders, or through agents, dealers or brokers to be
designated from time to time; such offers and sales may be effected over
any national securities exchange or automated interdealer quotation system
on which shares of the Common Stock are then listed, in negotiated
transactions or in a combination of such methods of sale; the selling price
of the Shares may be at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices;
and the Shares may also be offered in coordinated block transactions
through underwriters, dealers or agents, or otherwise who may receive
compensation in the form of underwriting or brokerage discounts,
concessions or commissions from the Selling Stockholders or the purchasers
of such Shares for whom they may act as agents. In certain states, the
Selling Stockholders may be required to offer and sell Shares only through
brokers and dealers registered in such states.
The Selling Stockholders and any brokers or dealers that act in connection
with the sale of Shares hereunder may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act and any commissions
received by them and any profit on the sale of Shares as principal may be
deemed to be underwriting discounts and commissions under the Securities
Act.
The Company will pay all of the expenses of the preparation, printing and
filing of the Registration Statement, any amendments or supplements
thereto, and prospectuses and revised prospectuses as required to cover the
transactions covered hereby, as well as the Company's fees and
disbursements of its counsel and accountants relating to the Registration
Statement, but the Company is not obligated to pay any underwriting
discounts and commissions, brokers' commissions or charges, the legal fees
and expenses of the Selling Stockholders, or transfer taxes, if any,
relating to the sale or disposition of Shares by a Selling Shareholder.
The Selling Stockholders may also resell Shares in open market transactions
pursuant to the resale provisions of Rule 144 under the Securities Act or
in transactions otherwise permitted under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Shares, including the validity
of the Shares, will be passed upon for the Company by Rudnick & Wolfe,
Chicago, Illinois.
EXPERTS
The financial statements of MFRI, Inc. and subsidiaries incorporated in
this Prospectus by reference from the Company's Annual Report on Form 10-K
for the year ended January 31, 1997 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference, and have been so incorporated in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act (SEC File No. 1-18370) are hereby incorporated
by reference into this Prospectus:
(i) the registration statement of the Company's predecessor on Form 8-A
filed on March 13, 1990 registering common stock of the Company's
predecessor under Section 12(g) of the Securities Exchange Act of 1934;
(ii) the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1997; and
(iii) the Company's Current Report on Form 8-K dated December 30, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering of shares of the Common Stock made hereby are
hereby incorporated by reference, and such documents are deemed to be a
part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not, except as so modified or superseded,
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER OF COMMON STOCK, TO WHOM A COPY OF THIS PROSPECTUS IS
DELIVERED, UPON THE ORAL OR WRITTEN REQUEST OF SUCH PERSON, A COPY OF ANY
AND ALL OF THE INFORMATION THAT HAS BEEN INCORPORATED BY REFERENCE IN THIS
PROSPECTUS (NOT INCLUDING EXHIBITS TO THE INFORMATION THAT IS INCORPORATED
BY REFERENCE UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH INFORMATION). SUCH REQUEST SHOULD BE DIRECTED TO
MICHAEL D. BENNETT, SECRETARY, MFRI, INC., 7720 LEHIGH AVENUE, NILES,
ILLINOIS 60714 (TELEPHONE (847) 966-1000).
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 16. EXHIBITS.
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement for Merger by and between Midwesco, Inc. and MFRI, Inc.
[Incorporated by reference to Appendix A to the Company's Proxy Statement
dated November 12, 1996 relating to the Company's Special Meeting of
Stockholders held on December 16, 1996 (SEC File No. 0-18370)].
2.2 Agreement and Plan of Merger by and between Midwesco, Inc. and MFRI,
Inc. [Incorporated by reference to Exhibit 2. 2 to the Company's Current
Report on Form 8-K dated December 30, 1996 (SEC File No. 0-18370)].
5 Opinion of Rudnick & Wolfe with respect to the legality of the Common
Stock being registered.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Rudnick & Wolfe (contained in Exhibit 5 hereof).
24.1 Power of Attorney of Directors and certain officers of the Company.*
24.2 Power of Attorney of certain Directors of the Company.
* Previously filed.
</R?
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this amendment
to registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Niles, State of Illinois, on
May 2, 1997.
MFRI, INC.
By: /S/ DAVID UNGER
David Unger
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed below by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
David Unger* Director and Chairman of the
Board of Directors (Principal
Executive Officer) May 2, 1997
Henry M. Mautner* Director, Vice Chairman of
the Board of Directors May 2, 1997
Gene K. Ogilvie* Director and Vice President May 2, 1997
Bradley E. Mautner* Director and Vice President May 2, 1997
Michael D. Bennett* Vice President, Secretary and
Treasurer (Principal Financial
and Accounting Officer) May 2, 1997
Fati Elgendy* Director and Vice President May 2, 1997
Don Gruenberg* Director and Vice President May 2, 1997
Arnold F. Brookstone* Director May 2, 1997
Eugene Miller* Director May 2, 1997
Stephen B. Schwartz* Director May 2, 1997
*By:/S/ DAVID UNGER Individually and as Attorney- May 2, 1997
David Unger in-fact
EXHIBIT INDEX
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement for Merger by and between Midwesco, Inc. and MFRI, Inc.
[Incorporated by reference to Appendix A to the Company's Proxy Statement
dated November 12, 1996 relating to the Company's Special Meeting of
Stockholders held on December 16, 1996 (SEC File No. 0-18370)].
2.2 Agreement and Plan of Merger by and between Midwesco, Inc. and MFRI,
Inc. [Incorporated by reference to Exhibit 2. 2 to the Company's Current
Report on Form 8-K dated December 30, 1996 (SEC file No. 0-18370)].
5 Opinion of Rudnick & Wolfe with respect to the legality of the Common
Stock being registered.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Rudnick & Wolfe (contained in Exhibit 5 hereof).
24.1 Power of Attorney of the Directors and certain officers of the
Company.*
24.2 Power of Attorney of certain Directors of the Company.
*Previously filed.
EXHIBIT 5
RUDNICK & WOLFE
203 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601-1293
May 2, 1997 (312) 368-4000
The Board of Directors
MFRI, Inc.
7720 Lehigh Avenue
Niles, IL 60714
Gentlemen:
We have examined the registration statement on Form S-3 (Registration No.
333-21951) filed with the Securities and Exchange Commission on or about
February 17, 1997, for registration under the Securities Act of 1933, as
amended, of 2,124,298 shares of common stock of MFRI, Inc., a Delaware
corporation (the "Company"), par value $. 01 per share ("Common Stock").
We have examined pertinent corporate documents and records of the Company,
including its Certificate of Incorporation and its By-Laws, and we are
familiar with the corporate proceedings had and contemplated in connection
with the issuance of such shares of Common Stock by the Company. We have
also made such other examinations as we have deemed necessary or
appropriate as a basis for the opinion hereinafter expressed.
On the basis of the foregoing, we are of the opinion that such 2,124,298
shares of Common Stock of the Company have been duly authorized, and are
legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement and to the reference to our firm in the registration
statement under the caption "Legal Matters."
Very truly yours,
RUDNICK & WOLFE
By: /S/ DORIAN R. WILLIAMS
Dorian R. Williams, a Partner
EXHIBIT 23. 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
of MFRI, Inc. on Form S-3 of our report dated April 18, 1997, appearing in
the Annual Report on Form 10-K of MFRI, Inc. for the year ended January 31,
1997 and to the reference to us under the "Experts" in the Prospectus,
which is part of this Registration Statement.
/S/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Chicago, Illinois
May 2, 1997
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a
director or officer, or both, of MFRI, Inc., a Delaware corporation (the
"Company"), does hereby constitute and appoint David Unger, Henry M.
Mautner, Bradley E. Mautner, Fati Elgendy and Michael D. Bennett with full
power of substitution and resubstitution to each of said attorneys, to
execute, file or deliver any and all instruments and to do any and all acts
and things which said attorneys and agents, or any of them, deem advisable
to enable the Company to comply with the Securities Act of 1933, as
amended, and any requirements or regulations of the Securities and Exchange
Commission in respect thereto, in connection with the registration under
said Securities Act of the sale of shares of common stock of the Company by
certain stockholders of the Company, which shares were issued by the
Company in connection with the merger of Midwesco, Inc., an Illinois
corporation, and the Company, including specifically, but without
limitation of the general authority hereby granted, the power and authority
to sign his or her name as director or officer, or both, of the Company, as
indicated below opposite his or her signature, to the registration
statements and any amendment, post-effective amendment, supplement or
papers supplemental thereto, to be filed with respect to said shares of
common stock, and each of the undersigned does hereby fully ratify and
confirm all that said attorneys and agents, or any one of them, or the
substitute of any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these presents,
this 2nd day of May, 1997.
SIGNATURE TITLE
/S/ ARNOLD F. BROOKSTONE
Arnold F. Brookstone, Director
/s/ STEPHEN B. SCHWARTZ
Stephen B. Schwartz, Director