MELVILLE, N.Y., March 25, 2021 /PRNewswire/ -- P&F
Industries, Inc. (NASDAQ: PFIN) today announced its results from
operations for the year ended December 31,
2020. The Company is reporting net revenue of $49,136,000, compared to $58,674,000, reported in 2019.
Additionally, the Company is reporting a 2020 loss before
income taxes of $6,855,000, compared
to income before income taxes of $6,708,000 in 2019. Included in the current
year's loss before income taxes was an impairment charge of
$1,612,000, while 2019's income
before income taxes included a $7,817,000 gain realized from the sale of the
Company's Jupiter, Florida
facility. After giving effect to income taxes, the Company is
reporting for 2020 a net loss of $4,954,000, compared to net income of
$4,911,000 for 2019.
Richard Horowitz, the Company's
Chairman of the Board, Chief Executive Officer and President
commented, "Our revenue and net results for 2020 were greatly
affected by several factors, the most significant of which is the
ongoing negative impact of the global COVID-19 pandemic.
Additionally, we encountered extreme weakness in the aerospace
sectors in which we do business. Specifically, during 2020 the
Boeing Company severely limited the production of its 737 MAX
aircraft. This was exacerbated by reduced production of military
and other commercial aircraft throughout the industry. These
factors caused a significant decline in our aerospace revenue.
In addition, the downturn in global oil and gas exploration
and production activity resulted in lower related revenue, compared
to 2019. With lower sales, our production was reduced, in
turn resulting in weak manufacturing absorption at our
manufacturing facilities, which severely affected our overall gross
margin. In an effort to lessen the impact of lower margins, we
reduced our selling, and general administrative expenses by nearly
$2,500,000. Finally, during 2020 we
recorded impairment charges of $1,612,000."
Mr. Horowitz continued, "On a more positive note, as
the United States is beginning to
show initial signs of recovery from the harsh effects that COVID-19
had brought upon us, we, in turn, are currently beginning to see
modest signs of improvement. During the first two months of 2021,
we have witnessed increases in overall customer order activity,
compared to levels achieved during the latter half of 2020.
Additionally, our ability this year to visit current and
prospective customers has improved compared to 2020. Specifically,
our Power Transmission Group, or PTG has witnessed an
increase in order and sales activity during the first two
months of 2021, compared to their average levels incurred in 2020.
Lastly, Boeing has restarted its manufacture of their 737 MAX
aircraft, as well as announcing increases in other aircraft
production. We believe this ramp up in their activity,
combined with increasing air travel, should generate revenue
opportunities at Jiffy and Florida Pneumatic."
Mr. Horowitz added, "We remain optimistic about sales
opportunities in Europe. However,
all were put on some form of hold during 2020, due to the global
pandemic. With several key European countries still in some form of
lockdown, combined with the sluggish rates of vaccination, we
believe it is likely these opportunities may not begin to
materialize, if at all, until the second half of 2021."
Mr. Horowitz concluded his remarks with, "We continue our
product development across the Company's businesses. In
addition, we expect to further expand our Engineered Solutions
business and PTG, through the pursuit of new applications,
customers, and markets, both in the
United States and Europe.
We remain confident that when this pandemic subsides, we will be
well positioned to take advantage of the economic recovery. We
remain focused on being a key provider and developer of power hand
tools and accessories. In addition, as the Company has previously
announced, it received a $2.9 million
Payroll Protection Program loan in April of 2020. We have submitted
our application for forgiveness of this loan and believe we have
met all criteria necessary to have most, if not all, of it
forgiven. Further, we believe we have access to ample capital under
our credit facility. We will continue to serve our customer's
needs, while also ensuring the health and safety of our employees.
Finally, I wish to thank and recognize the incredible
work our employees have done to navigate through these
unprecedented times."
The Company will be reporting the following:
TRENDS AND UNCERTAINTIES
COVID-19 PANDEMIC
On March 11, 2020, the World Health Organization designated
the recent novel coronavirus, or COVID-19, as a global
pandemic. COVID-19 was first detected in Wuhan City, Hubei
Province, China and
continued to spread, significantly impacting various markets around
the world, including the United
States. Various policies and initiatives have been
implemented to reduce the global transmission of COVID-19.
For a portion of 2020, the COVID-19 pandemic impacted our
ability to source certain of our products, particularly with
respect to factories that we utilize located in China and Italy; however, we do not believe that this is
likely to have a material negative impact on our results for the
foreseeable future.
The impact of the COVID-19 virus and the resultant global
economic down-turn has had a material impact on our results during
2020. In March 2020, nearly all of the United States, United Kingdom and much of Europe, had ordered non-essential businesses
to stop physical operations and ordered its residents to remain
home or "shelter-in-place" in order to attempt to control the
impact of this pandemic. In addition, many businesses are
restricting visits from vendors thus impeding demand. Fortunately,
we were able to continue our operations at all of our
facilities. While these controls were lifted in the United
Sates and many countries abroad, a number of major European nations
and the United Kingdom reinstated
"lock-downs" in late 2020 and early 2021. We believe that
until this pandemic subsides, where hospitalizations and deaths
have declined significantly, it is likely our results will continue
to be negatively affected.
BOEING/AEROSPACE
The Federal Aviation Administration ("FAA") and the European
Union Aviation Safety Agency ("EASA") have lifted the grounding of
the 737 MAX. However, production is still very limited due to the
inventory at Boeing and the reluctance of airlines to accept
deliveries due to weak air travel demand. This will likely continue
to have an adverse effect on our revenue. In addition, production
of military and other commercial aircraft throughout the industry
has slowed as well due to the ongoing global COVID-19 pandemic.
However, we believe when all other commercial and military
production lines throughout the United
States come back online, an increase in our revenue should
follow.
OIL AND GAS
We believe the primary factor contributing to the significant
decline occurring in early 2020 in the price of oil worldwide was
the COVID-19 pandemic. The profitability of crude oil production
generally declines as prices fall. As a result, as prices dropped
in 2020, production slowed dramatically worldwide. This
activity is most easily measured by analyzing the number of active
rotary rigs. The number of active rotary oil rigs according to
Baker Hughes, Inc. as of December 31,
2020, has declined by approximately 60% or more, from a year
ago. Additionally, while not as large a market for our
products, the natural gas rig count is down approximately 34% when
comparing the data for same two dates. Until these
counts return to pre-pandemic levels, we will continue to be
impacted negatively.
TECHNOLOGIES
We believe that over time, several newer technologies and
features will have a greater impact on the market for our
traditional pneumatic tool offerings. The impact of this evolution
has been felt initially by the advent of advanced cordless operated
hand tools in the automotive aftermarket. We continue to perform a
cost-benefit analysis of developing or incorporating more advanced
technologies in our tool platforms.
RESULTS OF OPERATIONS
2020 compared to
2019
REVENUE
The tables set forth below provide an analysis of our revenue
for the years ended December 31, 2020
and 2019.
Consolidated
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
Decrease
|
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
$
|
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
38,276,000
|
|
|
|
77.9
|
%
|
|
$
|
43,357,000
|
|
|
|
73.9
|
%
|
|
$
|
(5,081,000)
|
|
|
|
(11.7)
|
%
|
Hy-Tech
|
|
|
10,860,000
|
|
|
|
22.1
|
|
|
|
15,317,000
|
|
|
|
26.1
|
|
|
|
(4,457,000)
|
|
|
|
(29.1)
|
|
Total
|
|
$
|
49,136,000
|
|
|
|
100.0
|
%
|
|
$
|
58,674,000
|
|
|
|
100.0
|
%
|
|
$
|
(9,538,000)
|
|
|
|
(16.3)
|
%
|
Florida Pneumatic
Florida Pneumatic markets its air tool products to four primary
sectors within the pneumatic tool market; Retail, Automotive,
Aerospace, and Industrial. It also generates revenue from its
Berkley products line, as well as a line of air filters and other
OEM parts ("Other").
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
(Decrease)
increase
|
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
$
|
|
|
%
|
|
Automotive
|
|
$
|
13,270,000
|
|
|
|
34.7
|
%
|
|
$
|
14,800,000
|
|
|
|
34.1
|
%
|
|
$
|
(1,530,000)
|
|
|
|
(10.3)
|
%
|
Retail
|
|
|
12,940,000
|
|
|
|
33.8
|
|
|
|
12,467,000
|
|
|
|
28.8
|
|
|
|
473,000
|
|
|
|
3.8
|
|
Aerospace
|
|
|
8,087,000
|
|
|
|
21.1
|
|
|
|
10,513,000
|
|
|
|
24.2
|
|
|
|
(2,426,000)
|
|
|
|
(23.1)
|
|
Industrial
|
|
|
3,481,000
|
|
|
|
9.1
|
|
|
|
4,969,000
|
|
|
|
11.5
|
|
|
|
(1,488,000)
|
|
|
|
(29.9)
|
|
Other
|
|
|
498,000
|
|
|
|
1.3
|
|
|
|
608,000
|
|
|
|
1.4
|
|
|
|
(110,000)
|
|
|
|
(18.1)
|
|
Total
|
|
$
|
38,276,000
|
|
|
|
100.0
|
%
|
|
$
|
43,357,000
|
|
|
|
100.0
|
%
|
|
$
|
(5,081,000)
|
|
|
|
(11.7)
|
%
|
The Boeing Corporation is a major customer of Jiffy. The
continued grounding and minimal production of Boeing's 737 MAX and
reduced production of other Boeing aircraft was the major factor
driving the decline in Florida Pneumatic's 2020 revenue, when
compared to 2019 revenue. Additionally, we believe that the
limited air travel caused by the COVID-19 pandemic forced many of
our other aircraft customers to reduce their 2020 order
levels. Further, military aircraft production declined, we
believe due to constraints placed in manufacturing facilities
caused by the pandemic. Although the FAA has recently lifted
the "No Fly" ruling it imposed on all Boeing 737 MAX aircraft,
recently allowing it to begin flights in the United States, we believe it will take
several months for the Boeing Corporation to increase its
manufacturing of its 737 MAX aircraft to a volume that will require
our Jiffy tools. Our Industrial product line has also
encountered lower revenue this year, compared to 2019, due
primarily to the business interruptions caused by global effects of
the COVID-19 pandemic, as our ability to travel has resulted in
little to no direct interaction with current or prospective
customers. Automotive revenue also declined when comparing
full year 2020 and 2019 results.
The key drivers to this decline were weak sales at our U.K.
operations, which in turn was due we believe to limited travel
caused by the pandemic, and the loss of a major distributor in the
U.S. A portion of this decline was offset with higher gross
margin sales to other distributors. After an increase in
Retail revenue during the first quarter of 2020, the pandemic
adversely affected revenue during the second quarter of 2020, then
improved again during the last six months of 2020. The
improvement that occurred during the second half of 2020 was driven
primarily from the sale of spray guns (used to apply anti-viral and
anti-bacterial solution) and, to a lesser extent, growth in other
pneumatic tools.
Hy-Tech
Hy-Tech designs, manufactures, and sells a wide range of
industrial products under the brands ATP and ATSCO which are
categorized as ATP for reporting purposes. In addition to
Engineered Solutions, products and components manufactured for
other companies under their brands are included in the OEM category
in the table below. Power Transmission Group ("PTG") revenue is
comprised of products manufactured and sold by the gear businesses
that were acquired in October 2019, products sold through
Hy-Tech's legacy gear manufacturing division and products sold to a
certain customer whose revenue was included in OEM in 2019. NUMATX,
Thaxton and other peripheral product lines, such as general
machining, are reported as Other.
|
|
Year Ended December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
(Decrease)
increase
|
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
$
|
|
|
%
|
|
OEM
|
|
$
|
4,272,000
|
|
|
|
39.4
|
%
|
|
$
|
6,790,000
|
|
|
|
44.3
|
%
|
|
$
|
(2,518,000)
|
|
|
|
(37.1)
|
%
|
PTG
|
|
|
3,326,000
|
|
|
|
30.6
|
|
|
|
1,475,000
|
|
|
|
9.6
|
|
|
|
1,851,000
|
|
|
|
125.5
|
|
ATP
|
|
|
2,796,000
|
|
|
|
25.7
|
|
|
|
6,290,000
|
|
|
|
41.1
|
|
|
|
(3,494,000)
|
|
|
|
(55.5)
|
|
Other
|
|
|
466,000
|
|
|
|
4.3
|
|
|
|
762,000
|
|
|
|
5.0
|
|
|
|
(296,000)
|
|
|
|
(38.8)
|
|
Total
|
|
$
|
10,860,000
|
|
|
|
100.0
|
%
|
|
$
|
15,317,000
|
|
|
|
100.0
|
%
|
|
$
|
(4,457,000)
|
|
|
|
(29.1)
|
%
|
The decline in Hy-Tech's total net revenue for the fiscal year
2020, compared to 2019, was primarily due to the following key
factors: the global COVID-19 pandemic; the severe downturn of the
oil and gas market, and certain key customers that were in
inventory over-stock positions and unable or unwilling to place
orders during 2020, at similar levels to 2019. Additionally,
our OEM revenue was adversely affected by significant declines in
orders during the third quarter of 2020, compared to the same
period in 2019, from a major customer that services the aerospace
market, which as discussed elsewhere, encountered weak demand for
new aircraft. Specifically, we believe that our ATP products
offering is likely to continue to struggle due to among other
things, the ongoing sluggishness of the price of oil and natural
gas, which in turn inhibits exploration and drilling. The oil
and gas sector in the United
States has been hindered by the downward pricing pressure
caused by among other things, excess supply, and ripple effects
from the pandemic. This is evidenced by the significant decline in
drilling rigs, which is a metric that we monitor. According to
Baker Hughes Inc., the average number of rotary rigs in operation
during 2020 were 433, compared to 943 during 2019. As such, early
in 2020 we made a decision to focus a greater portion of our
product development and marketing efforts on our Engineered
Solutions and to a lesser extent PTG products offering. We believe
the development of the Engineered Solutions and PTG product
offerings should provide Hy-Tech an opportunity to generate new,
additional sources of revenue in the future. Additionally, we
believe that the inability to travel, due to restrictions put in
place as the result of the pandemic, greatly reduced direct
interaction with current and potential customers was a significant
factor in the decline in revenue in all product categories,
particularly OEM. Further, as noted above, certain OEM
customers who were active in 2019, did not place orders in
2020. Partially offsetting the above, our PTG line, driven by
the acquisition in late 2019, saw its revenue improve.
However, the transition and relocation from their former
Illinois locations to our facility
in Punxsutawney Pennsylvania and
the ongoing negative effects of the COVID-19 pandemic, resulted in
lower than projected PTG revenue and profits during 2020.
Reductions in staff, marketing and product development are the key
factors in the reduction on Hy-Tech's Other lines.
GROSS MARGIN
|
|
Year Ended
December 31,
|
|
|
Decrease
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
14,022,000
|
|
|
$
|
17,058,000
|
|
|
$
|
(3,036,000)
|
|
|
|
(17.8)
|
%
|
As percent of
respective revenue
|
|
|
36.6
|
%
|
|
|
39.3
|
%
|
|
|
(2.7)
|
% pts
|
|
|
|
|
Hy-Tech
|
|
$
|
171,000
|
|
|
$
|
3,900,000
|
|
|
$
|
(3,729,000)
|
|
|
|
(95.6)
|
%
|
As percent of
respective revenue
|
|
|
1.6
|
%
|
|
|
25.5
|
%
|
|
|
(23.9)
|
% pts
|
|
|
|
|
Total
Tools
|
|
$
|
14,193,000
|
|
|
$
|
20,958,000
|
|
|
$
|
(6,765,000)
|
|
|
|
(32.3)
|
%
|
As percent of
respective revenue
|
|
|
28.9
|
%
|
|
|
35.7
|
%
|
|
|
(6.8)
|
% pts
|
|
|
|
|
A significant factor causing the 2.7 percentage point decline in
Florida Pneumatic's gross margin is the under absorption of
manufacturing overhead at Jiffy, due to lower Aerospace revenue,
which as discussed earlier was due to travel and visitation
restrictions caused by the COVID-19 pandemic and the halt in
production of Boeing's 737 MAX aircraft and other commercial and
military sales. Additionally, its gross margin declined due to
product/customer mix. Specifically, there was a nearly 30 percent
decline in Industrial and Automotive revenue sectors when comparing
2020 to 2019, both of which have higher gross margin than other
product lines, compounded with an increase in Retail revenue, which
tends to generate lower gross margin.
The decline in Hy-Tech's gross margin was the result of several
factors. We believe this significant decline was directly corelated
to the global pandemic and economic down turn. With major travel
constraints imposed due to the COVID-19 global pandemic, Hy-Tech's
revenue was greatly impacted, which lead to Hy-Tech encountering a
reduction in machine hours, which resulted in significant under
absorption of their manufacturing overhead. Specifically,
when comparing full year 2020 to 2019, total machine hours declined
approximately 35%. Hy-Tech's total gross margin was also
negatively impacted by the general mix of products sold during the
year. During the second quarter of 2020, Hy-Tech recorded an
unfavorable physical inventory adjustment. Additionally, it
incurred an increase in charges relating to obsolete, slow moving
inventory, ("OSMI") which also negatively impacted Hy-Tech's
overall gross margin. Further, primarily occurring during the first
half of 2020, Hy-Tech's total gross margin was impacted by lower
than expected gross margin on the sale of PTG products, due
primarily to start-up issues in the new facility during this
period. Lastly, Hy-Tech incurred increased duty charges on certain
imported parts and increased costs incurred from outside vendors
due to smaller batch sizes for certain manufacturing processes.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A")
include salaries and related costs, commissions, travel,
administrative facilities, communications costs and promotional
expenses for our direct sales and marketing staff, administrative
and executive salaries, and related benefits, legal, accounting,
and other professional fees as well as general corporate overhead
and certain engineering expenses.
Our SG&A during 2020 declined to $19,367,000, from $21,869,000 in 2019. A significant component of
the net decrease of approximately $2.5
million was a reduction of $1,434,000 in compensation expenses, which is
comprised of base salaries and wages, accrued performance-based
bonus incentives and associated payroll taxes and employee
benefits. The elimination of 2020 corporate bonuses, and to a much
lesser extent, staff reductions and significant reductions of
subsidiary bonuses also contributed to the reduction in our 2020
SG&A. Additionally, our variable expenses, which consist
of operating costs such as travel and entertainment, commission,
warranty, advertising, and freight out, decreased $956,000, primarily due to travel and business
constraints caused by the COVID-19 pandemic. Additionally, non-cash
impairment charges that were reported in 2019 did not reoccur in
2020, thus resulting in a $221,00
expense reduction. Depreciation and general corporate
expenses declined $128,000 and
$81,000, respectively. The decrease
in depreciation was due primarily to the sale in 2019 of the
Jupiter, Florida facility.
Partially offsetting the above decreases was an increase of
$237,000 in professional fees and
consulting costs. The relocation of the gear businesses during the
first and second quarters of 2020 and temporary staffing were the
primary factors. Lastly, our rent expense increased $55,000, as Florida Pneumatic now rents a portion
of the facility it sold.
GOODWILL AND INTANGIBLE ASSETS IMPAIRMENT
During the second quarter of 2020, we recorded goodwill and
intangible asset impairment charges totaling
$1,612,000, with $284,000 related to goodwill and $1,328,000 related to customer relationships,
patents, and trade name.
OTHER INCOME
In connection with the Gears Acquisition, there was the
possibility that we could pay additional consideration ("contingent
consideration") to the sellers if certain inventory components were
sold during the two-year period commencing on the date of
acquisition. At the time of the acquisition we believed,
based on a range of possible outcomes, that it was more likely than
not, that items within this inventory group would be sold, and
accordingly included in the purchase price a contingent
consideration obligation of $64,000. In January
2021, we and the sellers agreed to settle this obligation
for $12,000. As such, we
reduced the contingent consideration payable by $52,000 and recorded a like amount as Other
Income.
During 2020 we received grants totaling $53,000 at our United
Kingdom operation from Her Majesty's Government, which is
not required to be repaid.
INTEREST EXPENSE – NET
|
|
Year Ended
December 31,
|
|
|
(Decrease)
Increase
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Interest expense
attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
106,000
|
|
|
$
|
167,000
|
|
|
$
|
(61,000)
|
|
|
|
(36.6)
|
%
|
PPP loan
|
|
|
18,000
|
|
|
|
---
|
|
|
|
18,000
|
|
|
|
NA
|
|
Term loans
|
|
|
---
|
|
|
|
9,000
|
|
|
|
(9,000)
|
|
|
|
(100.0)
|
|
Amortization expense
of debt issue costs
|
|
|
16,000
|
|
|
|
22,000
|
|
|
|
(6,000)
|
|
|
|
(27.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
140,000
|
|
|
$
|
198,000
|
|
|
$
|
(58,000)
|
|
|
|
(29.3)
|
%
|
The reduction in short-term borrowings interest expense was due
primarily to lower average borrowings in 2020, compared to the
average borrowing levels in the prior year. The reduction in
short-term borrowings were driven by reduced inventory and accounts
receivable levels. As we have not received forgiveness
from the Small Business Administration relating to our PPP loan we
accrued $18,000. The Term loan
interest in 2019 related to a loan that was fully paid during 2019.
Lastly, we and our bank amended the Credit Agreement in
February 2019. The debt issue costs
associated with such amendment, are significantly lower than the
costs associated with the expiring Credit Agreement. As such,
the amortization of debt issue costs during 2020 declined compared
to the prior year.
INCOME TAX EXPENSE
The 2020 provision for income taxes was a benefit of
$1,901,000 compared to a tax expense
of $1,797,000 in
2019. Significant factors impacting 2020's
net effective tax benefit rate of 27.7% were the enactment of the
Coronavirus Aid, Relief, and Economic Security Act, non-deductible
permanent differences, state and local taxes. The net effective tax
rate for 2019 was 26.8%.
LIQUIDITY AND CAPITAL RESOURCES
We monitor such metrics as days' sales outstanding, inventory
requirements, accounts payable and capital expenditures to project
liquidity needs, as well as evaluate return on assets. Our primary
sources of funds are operating cash flows and our Revolver Loan
("Revolver") with our bank.
We gauge our liquidity and financial stability by various
measurements, some of which are shown in the following table:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Working
capital
|
|
$
|
21,258,000
|
|
|
$
|
22,115,000
|
|
Current
ratio
|
|
|
3.57 to 1
|
|
|
|
2.92 to 1
|
|
Shareholders'
equity
|
|
$
|
41,538,000
|
|
|
$
|
46,506,000
|
|
Credit facility
We have a credit facility with Capital One bank, N.A., which
provides the ability to borrow funds under a $16,000,000 revolver line ("Revolver"), subject
to certain borrowing base criteria. Additionally, there is a
$2,000,000 line for capital
expenditures ("Capex Loan"), with $1,600,000 available for future borrowings.
Revolver and Capex Loan borrowings are secured by our accounts
receivable, inventory, equipment, and real property, among other
things. The Credit facility expires on February 8, 2024. This
credit facility is discussed further in our previously filed
Quarterly Reports on Form 10-Q.
The average balance of short-term borrowings during the years
ended December 31, 2020 and 2019 were
$4,042,000 and $4,253,000, respectively.
We believe that should a need arise whereby the current credit
facility is insufficient; we can obtain additional funds based on
the value of our real property.
Payroll Protection Program Loan ("PPP")
On April 20, 2020, we received a
$2.9 million PPP loan, as provided
pursuant to the CARES Act. This loan was obtained from BNB Bank is
unsecured and is guaranteed by the SBA.
Cash Flows
At December 31, 2020, cash
provided by operating activities for the year was $3,047,000, compared to cash used in operating
activities for the year ended December 31,
2019 of $2,514,000. At
December 31, 2020, our cash balance
was $904,000, compared to
$380,000 at December 31, 2019. Cash at our UAT subsidiary at
December 31, 2020 and 2019 was
$335,000 and $85,000, respectively. We operate under the terms
and conditions of the Credit Agreement. As a result, all domestic
cash receipts are remitted to Capital One lockboxes.
Our total debt to total book capitalization (total debt divided
by total debt plus equity) at December 31,
2020 was 9.4%, compared to 10.8% at December 31, 2019.
We believe as a result of operations and working capital needs
due to anticipated growth, we will likely be required to increase
our borrowings from our Revolver during 2021.
Capital spending during the year ended December 31, 2020 was $1,104,000, compared to $1,524,000 in 2019. Capital expenditures
currently planned for 2021 are approximately $1,100,000, which we expect will be financed
through the Credit Facility. The major portion of these planned
capital expenditures will be for new metal cutting equipment,
tooling and information technology hardware and software.
On February 11, 2020, our Board of Directors, in accordance
with its dividend policy, declared a quarterly cash dividend of
$0.05 per common share, which was
paid on February 28, 2020, to shareholders of record at the
close of business on February 24, 2020. The total amount of
this dividend payment was approximately $157,000. Additionally, our Board of
Directors did not issue any further dividends in 2020. As relates
to declarations and payments of dividends in the future, the Board
of Directors will continue to monitor several factors, which
includes such things as our overall financial condition, results of
operations, capital requirements and other factors our board may
deem relevant.
At December 31, 2020, we had
$8,530,000 of open purchase order
commitments, compared to $4,871,000
at December 31, 2019.
Customer concentration
At December 31, 2020, The Home
Depot ("THD") accounted for 26.3% of our consolidated revenue,
compared to 20.7% of 2019's revenue. Further, accounts receivable
at December 31, 2020 and 2019 from
THD were 38.0% and 27.2%, respectively. There was no other customer
that accounted for more than 10% of revenue or accounts receivable
in 2020 or 2019.
IMPACT OF INFLATION
We believe that the effects of changing prices and inflation on
our consolidated financial position and our results of operations
have been minimal.
OTHER INFORMATION
P&F Industries Inc. has scheduled a conference call for
March 25, 2021 , at 11:00 A.M., Eastern Time, to discuss its fiscal
year of 2020's results and financial condition. Investors and
other interested parties who wish to listen to or participate can
call 1-866-337-5532. It is suggested you call at least 10 minutes
prior to the call commencement. For those who cannot listen
to the live broadcast, a replay of the call will also be available
on the Company's website beginning on or about March 26, 2021.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the
"Reform Act") provides a safe harbor for forward-looking statements
made by or on behalf of P&F Industries, Inc. and
subsidiaries ("P&F", or the "Company"). P&F and its
representatives may, from time to time, make written or verbal
forward-looking statements, including statements contained in the
Company's filings with the Securities and Exchange Commission and
in its reports to shareholders. Generally, the inclusion of the
words "believe," "expect," "intend," "estimate," "anticipate,"
"will," "may," "would," "could," "should" and their opposites and
similar expressions identify statements that constitute
"forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and that are intended to come
within the safe harbor protection provided by those sections. Any
forward-looking statements contained herein, including those
related to the Company's future performance, are based upon the
Company's historical performance and on current plans, estimates
and expectations. All forward-looking statements involve risks and
uncertainties. These risks and uncertainties could cause the
Company's actual results for all or part the 2021 fiscal year and
beyond to differ materially from those expressed in any
forward-looking statement made by or on behalf of the Company for a
number of reasons including, but not limited to:
- Risks related to the global outbreak of COVID-19 and other
public health crises;
- Exposure to fluctuations in energy prices;
- Debt and debt service requirements;
- Borrowing and compliance with covenants under our credit
facility;
- Disruption in the global capital and credit markets;
- The strength of the retail economy in the United States and abroad;
- Risks associated with sourcing from overseas;
- Importation delays;
- Risks associated with Brexit;
- Customer concentration;
- Adverse changes in currency exchange rates;
- Impairment of long-lived assets and goodwill;
- Unforeseen inventory adjustments or changes in purchasing
patterns;
- Market acceptance of products;
- Competition;
- Price reductions;
- Interest rates;
- Litigation and insurance;
- Retention of key personnel;
- Acquisition of businesses;
- Regulatory environment;
- The threat of terrorism and related political instability and
economic uncertainty, and
- Information technology system failures and attacks,
and those other risks and uncertainties described in the
Company's most recent Annual Report on Form 10-K, its
Quarterly Reports on Form 10-Q, and its other reports and
statements filed by the Company with the Securities and Exchange
Commission. Forward-looking statements speak only as of the date on
which they are made. The Company undertakes no obligation to update
publicly or revise any forward-looking statement, whether as a
result of new information, future developments or otherwise. The
Company cautions you against relying on any of these
forward-looking statements.
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
(In Thousands
$)
|
December 31,
2020
|
December 31,
2019
|
|
|
(Unaudited)
|
(Audited)
|
|
Assets
|
|
|
|
Cash
|
|
$
|
904
|
|
|
$
|
380
|
|
Accounts receivable -
net
|
|
|
7,468
|
|
|
|
9,313
|
|
Inventories
|
|
|
18,362
|
|
|
|
22,882
|
|
Prepaid expenses and
other current assets
|
|
|
2,806
|
|
|
|
1,497
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
29,540
|
|
|
|
34,072
|
|
|
|
|
|
|
|
|
|
|
Net property and
equipment
|
|
|
9,395
|
|
|
|
10,109
|
|
Goodwill
|
|
|
4,449
|
|
|
|
4,726
|
|
Other intangible
assets - net
|
|
|
6,226
|
|
|
|
8,259
|
|
Deferred income taxes
- net
|
|
|
226
|
|
|
|
216
|
|
Right-of-use assets –
operating leases
|
|
|
3,281
|
|
|
|
3,859
|
|
Other assets –
net
|
|
|
250
|
|
|
|
502
|
|
Total
assets
|
|
$
|
53,367
|
|
|
$
|
61,743
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
1,374
|
|
|
$
|
5,648
|
|
Accounts
payable
|
|
|
2,199
|
|
|
|
1,843
|
|
Accrued compensation
and benefits
|
|
|
525
|
|
|
|
2,019
|
|
Accrued other
liabilities
|
|
|
1,354
|
|
|
|
1,568
|
|
Current maturities of
long-term debt (PPP loan)
|
|
|
1,983
|
|
|
|
-
|
|
Current leased
liabilities – operating leases
|
|
|
847
|
|
|
|
879
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
8,282
|
|
|
|
11,957
|
|
|
|
|
|
|
|
|
|
|
Non-current leased
liabilities – operating leases
|
|
|
2,474
|
|
|
|
3,070
|
|
Long-term debt, less
current maturities (PPP loan)
|
|
|
946
|
|
|
|
-
|
|
Other
liabilities
|
|
|
127
|
|
|
|
210
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
11,829
|
|
|
|
15,237
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
41,538
|
|
|
|
46,506
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
|
$
|
53,367
|
|
|
$
|
61,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
|
|
|
|
|
Years ended
December 31,
|
|
(In Thousand
$)
|
2020
|
2019
|
|
|
|
|
|
Net
revenue
|
$
|
49,136
|
$
|
58,674
|
|
Cost of
sales
|
34,943
|
37,716
|
|
Gross
profit
|
14,193
|
20,958
|
|
Selling, general and
administrative expenses
|
19,367
|
21,869
|
|
Impairment of
goodwill and other intangible assets
|
1,612
|
-
|
|
Operating
loss
|
(6,786)
|
(911)
|
|
(Loss) gain on sale
of property and equipment
|
(35)
|
7,817
|
|
Other
income
|
106
|
-
|
|
Interest
expense
|
(140)
|
(198)
|
|
(Loss) income before
income taxes
|
(6,855)
|
6,708
|
|
Income tax benefit
(expense)
|
1,901
|
(1,797)
|
|
Net (loss)
income
|
$
|
(4,954)
|
$
|
4,911
|
|
|
|
|
|
|
|
P&F INDUSTRIES
INC. AND SUBSIDIARIES
|
|
(LOSS) EARNINGS PER
SHARE (UNAUDITED)
|
|
|
Years ended
December 31,
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings
per share
|
|
$
|
(1.57)
|
|
|
$
|
1.53
|
|
Diluted (loss)
earnings per share
|
|
$
|
(1.57)
|
|
|
$
|
1.51
|
|
|
|
|
|
|
|
|
|
|
P&F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
Years
ended
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
|
|
December
31,
|
|
(In Thousands
$)
|
|
2020
|
|
|
2019
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
Net (loss) income
from operations
|
|
$
|
(4,954)
|
|
|
$
|
4,911
|
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net (loss) income from operations to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash and other
charges:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,787
|
|
|
|
1,566
|
|
Amortization of other intangible assets
|
|
|
702
|
|
|
|
703
|
|
Amortization of operating lease assets
|
|
|
899
|
|
|
|
582
|
|
Amortization of debt issue costs
|
|
|
16
|
|
|
|
23
|
|
Amortization of consideration payable to a customer
|
|
|
270
|
|
|
|
270
|
|
Provision for (recovery) of losses on accounts
receivable
|
|
|
24
|
|
|
|
(38)
|
|
Stock-based compensation
|
|
|
41
|
|
|
|
106
|
|
Restricted stock-based compensation
|
|
|
41
|
|
|
|
52
|
|
Loss (gain) on sale of fixed assets
|
|
|
35
|
|
|
|
(7,817)
|
|
Deferred income taxes
|
|
|
(11)
|
|
|
|
409
|
|
Gain on contingent consideration settlement
|
|
|
(52)
|
|
|
|
-
|
|
Gain on lease
obligation settlement
|
|
|
(31)
|
|
|
|
-
|
|
Gain on forgiveness of
grant obligation
|
|
|
(53)
|
|
|
|
-
|
|
Impairment of
assets
|
|
|
1,612
|
|
|
|
194
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,835
|
|
|
|
529
|
|
Inventories
|
|
|
4,538
|
|
|
|
(1,714)
|
|
Prepaid expenses and other current assets
|
|
|
(1,341)
|
|
|
|
(339)
|
|
Other assets
|
|
|
-
|
|
|
|
(1)
|
|
Accounts payable
|
|
|
352
|
|
|
|
(1,025)
|
|
Accrued compensation and benefits
|
|
|
(1,498)
|
|
|
|
(318)
|
|
Accrued other liabilities
|
|
|
(185)
|
|
|
|
255
|
|
Operating lease liabilities
|
|
|
(918)
|
|
|
|
(597)
|
|
Other
liabilities
|
|
|
(62)
|
|
|
|
(265)
|
|
Total
adjustments
|
|
|
8,001
|
|
|
|
(7,425)
|
|
Net cash provided by
(used in) operating activities
|
|
|
3,047
|
|
|
|
(2,514)
|
|
P&F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
Years
ended
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
|
|
December
31,
|
|
(In Thousands
$)
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
$
|
(1,104)
|
|
|
$
|
(1,524)
|
|
Proceeds from sale of
real property and other assets
|
|
|
1
|
|
|
|
8,766
|
|
Purchase of net
assets of gear businesses
|
|
|
—
|
|
|
|
(3,518)
|
|
Net cash (used in) provided by investing activities
|
|
|
(1,103)
|
|
|
|
3,724
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
|
|
|
|
|
Dividend
payments
|
|
|
(157)
|
|
|
|
(632)
|
|
Proceeds from
exercise of stock options
|
|
|
18
|
|
|
|
—
|
|
Purchase of
Class A common stock
|
|
|
—
|
|
|
|
(3,518)
|
|
Net (payments)
proceeds from short-term borrowings
|
|
|
(4,274)
|
|
|
|
3,552
|
|
Payment of contingent
consideration
|
|
|
—
|
|
|
|
(692)
|
|
Payments of notes
payable
|
|
|
—
|
|
|
|
(453)
|
|
Payments of debt
issue costs
|
|
|
—
|
|
|
|
(72)
|
|
Proceeds from
Grant
|
|
|
53
|
|
|
|
—
|
|
Proceeds from PPP
loan
|
|
|
2,929
|
|
|
|
—
|
|
Net cash used in financing activities
|
|
|
(1,431)
|
|
|
|
(1,815)
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
|
11
|
|
|
|
(14)
|
|
Net increase
(decrease) in cash
|
|
|
524
|
|
|
|
(619)
|
|
Cash at beginning of
period
|
|
|
380
|
|
|
|
999
|
|
Cash at end of
period
|
|
$
|
904
|
|
|
$
|
380
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid
for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
120
|
|
|
$
|
171
|
|
Income
taxes
|
|
$
|
35
|
|
|
$
|
1,809
|
|
Cash paid for amounts included in the measurement of operating
lease liabilities
|
|
$
|
5
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
Contingent
consideration on acquisition of gear businesses
|
|
$
|
—
|
|
|
$
|
64
|
|
|
|
|
|
|
|
|
|
|
Non-cash
information:
|
|
|
|
|
|
|
|
|
Right of Use ("ROU")
assets recognized for new operating lease liabilities
|
|
$
|
140
|
|
|
$
|
4,032
|
|
Operating lease
liability related to ROU assets recognized upon adoption
of
ASC 842
|
|
$
|
—
|
|
|
$
|
418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
NON-GAAP FINANCIAL
MEASURE AND RECONCILIATION
|
|
COMPUTATION OF (EBITIDA) - EARNINGS
BEFORE INTEREST, TAXES, IMPAIRMENT, DEPRECIATION, AND
AMORIZATION
|
(UNAUDITED)
|
|
|
|
(In Thousands
$)
|
|
For the years
ended December 31,
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
Net (loss)
income
|
|
$
|
(4,954)
|
|
|
$
|
4,911
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
2,489
|
|
|
|
2,269
|
|
|
Impairment
charges
|
|
|
1,612
|
|
|
|
-
|
|
|
Interest
expense
|
|
|
140
|
|
|
|
198
|
|
|
Income tax (benefit)
expense
|
|
|
(1,901)
|
|
|
|
1,797
|
|
|
|
|
|
2,340
|
|
|
|
4,264
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITIDA
(1)
|
|
$
|
(2,614)
|
|
|
$
|
9,175
|
|
|
|
|
(1)
|
The Company discloses
a tabular comparison of EBITIDA, which is a non-GAAP measure
because it is instrumental in comparing the results from period to
period. The Company's management believes that the comparison
of EBITIDA provides greater insight into the Company's results of
operations for the periods presented. EBITIDA should not be
considered in isolation or as a substitute for operating income as
reported on the face of our statement of operations.
|
View original
content:http://www.prnewswire.com/news-releases/pf-industries-inc-reports-results-for-the-year-ended-december-31-2020-301255598.html
SOURCE P&F Industries, Inc.