MELVILLE, N.Y., March 29, 2022 /PRNewswire/ -- P&F
Industries, Inc. (NASDAQ: PFIN) today announced its results from
operations for the fiscal year ended December 31, 2021. The Company is reporting net
revenue of $53,554,000 for the fiscal
year ended December 31, 2021,
compared to $49,136,000 for fiscal
year ended December 31, 2020.
For fiscal 2021, the Company is reporting net income before
income taxes of $2,288,000, compared
to a net loss before income taxes of $6,855,000, for fiscal 2020. Further, for
fiscal 2021, the Company is reporting net income after-taxes of
$2,290,000, compared, to a net loss
after-taxes of $4,954,000 for fiscal
2020. The income before income taxes for fiscal 2021, includes the
recognition of the forgiveness of a $2,929,200 Paycheck Protection Program loan, and
an Employee Retention Credit of $2,028,000. Lastly, the Company stated that its
basic and diluted income per share for fiscal 2021 was $0.72, compared to a $1.57 loss per share for fiscal 2020.
Richard Horowitz, the Company's
Chairman of the Board, Chief Executive Officer and President
commented, "Although the world remained in the throes of the
coronavirus pandemic throughout 2021, as well as inflation
reaching levels not seen in quite some time, and encountering ocean
freight costs that were, at times, more than five times the prior
year levels, we were able to increase revenue by $4.4 million, or 9.0 percent, and strengthen our
consolidated gross margin by 3.5 percentage points, with our
selling, general and administrative expenses increasing only 2.5%
over last year's levels. Specifically, Florida Pneumatic's
revenue increased 8.4% or more than $3.2
million, with Hy-Tech increasing its 2021 revenue by 11.1%
or more than $1.2 million when
compared to 2020's results. Florida Pneumatic's gross margin
improved slightly by 0.2 percentage points, while Hy-Tech's gross
margin rebounded significantly, improving 15.6 percentage points,
when compared to 2020. During 2021, we benefitted by two of
the programs offered within the CARES Act. We recorded as
other income the forgiveness of the full amount of our Paycheck
Protection Program loan of $2.9
million. Additionally, included in other income is a
$2.0 million payroll tax credit in
connection with the Employee Retention Credit program."
Mr. Horowitz went on to add, "Although unrelated to our 2021
results, I wish to highlight our recent acquisition of the Jackson
Gear Company business, which was effective January 15, 2022. We are very excited about
the opportunities this acquisition will provide us in 2022 and
beyond."
Mr. Horowitz concluded, "We are encouraged by the improved
results over the prior year and remain optimistic for the future.
Our business is on solid ground, and we believe the Jackson Gear
business acquisition will certainly add to our growth. However, we
also realize that we must be prepared to battle the oncoming
headwinds caused by, such factors as rising inflation, geopolitical
events, and the ongoing pandemic. Lastly, our goal is and
always will be to serve our customers, while improving shareholder
value."
Below is additional information provided by the Company.
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.
The COVID-19 virus and the resultant global economic down-turn
continued to have a negative impact on our 2021 results.
Additionally, we believe the supply-chain crisis as discussed
below, is related to the pandemic. In addition, the COVID-19
pandemic has caused many of our customers and potential customers
to refuse on-site visits, which is critical to generating revenue.
We believe that until the above issues subside, our business will
likely continue to be adversely affected.
BOEING/AEROSPACE
The Federal Aviation Administration ("FAA") and the European
Union Aviation Safety Agency ("EASA") have lifted the grounding of
the 737 MAX. China, which is
a large customer of Boeing, has not lifted the grounding on the 737
MAX aircraft. Boeing is currently holding completed 737 MAX
aircraft destined for Chinese carriers. As a result of the
aforementioned, and airline companies limiting deliveries of new
aircraft due to weak air travel demand, we believe production at
Boeing of its 737 MAX aircraft is likely to remain below the
production levels that existed prior to both the onset of the
coronavirus pandemic and the grounding of the 737 MAX aircraft.
COVID-19 and the grounding of the 737 MAX aircraft. Further,
the Federal Aviation Administration continues to impose close
monitoring and approval of Boeings 787 Dreamliner. Until
these issues are fully resolved, we will likely continue to have an
adverse effect on our revenue for the foreseeable future. In
addition, production of military and other commercial aircraft
throughout the industry has slowed as well, we believe 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.
INTERNATIONAL SUPPLY CHAIN
Beginning in early 2021, but magnified during the third and
fourth quarters, we encountered severe delays in receiving
inventory from our Asian suppliers, which led to intermittent
shortages of inventory. Further, during this same period and
continuing into 2022, ocean freight costs have greatly
increased. This trend of higher costs, delayed deliveries
have continued into 2022. The major reasons for these issues
include the following:
- Increased price of fuel
- Shortage of shipping containers
- Congestion at the ports in Asia and the United
States
- Shortage of truck drivers in the
United States.
At the present time, we believe the above-mentioned supply chain
disruptions, along with increased freight and general domestic
transportation costs will likely continue during 2022. It is
unknown at this time how much, if any of the increased costs can be
passed on to our customers.
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 analyze
the practicality of developing or incorporating more advanced
technologies in our tool platforms.
INVENTORY GROWTH
Our inventory increased to $24,021,000 at December
31, 2021, from $18,362,000 at
December 31, 2020. Such
increase, most of which took place at Florida Pneumatic, was the
result of increased purchases during the second half of the year in
order to increase safety stock levels. This was necessary in
order to protect against significant delays in the receipt of
overseas shipments beginning in mid-2021, which in turn had
resulted in "out of stock" positions on several key items. Further,
we received a relatively large order in late 2021 that is scheduled
to ship to a customer in the first half of 2022. Lastly, it should
be noted that inventory levels at December
31, 2020, were suppressed due primarily to sales and
production levels being hampered by the pandemic. As such, a
portion of this year-over-year inventory increase was designed to
raise our inventory at all locations to safer pre-pandemic levels,
in order to provide necessary inventory for growth.
OTHER MATTERS
In May 2021, Florida Pneumatic
detected a ransomware attack on its information technology systems
that caused data to be encrypted. At the present time, all critical
Florida Pneumatic information technology systems have been
remediated and are operational. We believe that our corporate
office and our other subsidiaries, all of which operate on
separate, independent networks, were not affected by this
incident.
Other than the aforementioned, or matters that may be discussed
below, there are no major trends or uncertainties that had, or we
could have reasonably expected to have a material impact on our
revenue, nor was there any unusual or infrequent event, transaction
or any significant economic change that materially affected our
results of operations.
Unless otherwise discussed elsewhere in the Management's
Discussion and Analysis, we believe that our relationships with our
key customers and suppliers remain satisfactory.
RESULTS OF OPERATIONS
2021 compared to 2020
REVENUE
The tables set forth below provide an analysis of our revenue
for the years ended December 31,
2021, and 2020.
Consolidated
|
|
Year Ended December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
Increase
|
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
$
|
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
41,488,000
|
|
|
|
77.5
|
%
|
|
$
|
38,276,000
|
|
|
|
77.9
|
%
|
|
$
|
3,212,000
|
|
|
|
8.4
|
%
|
Hy-Tech
|
|
|
12,066,000
|
|
|
|
22.5
|
|
|
|
10,860,000
|
|
|
|
22.1
|
|
|
|
1,206,000
|
|
|
|
11.1
|
|
Total
|
|
$
|
53,554,000
|
|
|
|
100.0
|
%
|
|
$
|
49,136,000
|
|
|
|
100.0
|
%
|
|
$
|
4,418,000
|
|
|
|
9.0
|
%
|
Florida Pneumatic
Florida Pneumatic markets its air tool products to four primary
sectors within the pneumatic tool market; Automotive, Retail,
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,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Increase
(decrease)
|
|
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
$
|
|
|
%
|
|
Automotive
|
|
|
$
|
14,543,000
|
|
|
|
35.1
|
%
|
|
$
|
13,270,000
|
|
|
|
34.7
|
%
|
|
$
|
1,273,000
|
|
|
|
9.6
|
%
|
Retail
|
|
|
|
13,995,000
|
|
|
|
33.7
|
|
|
|
12,940,000
|
|
|
|
33.8
|
|
|
|
1,055,000
|
|
|
|
8.2
|
|
Aerospace
|
|
|
|
7,184,000
|
|
|
|
17.3
|
|
|
|
8,087,000
|
|
|
|
21.1
|
|
|
|
(903,000)
|
|
|
|
(11.2)
|
|
Industrial
|
|
|
|
5,289,000
|
|
|
|
12.7
|
|
|
|
3,481,000
|
|
|
|
9.1
|
|
|
|
1,808,000
|
|
|
|
51.9
|
|
Other
|
|
|
|
477,000
|
|
|
|
1.2
|
|
|
|
498,000
|
|
|
|
1.3
|
|
|
|
(21,000)
|
|
|
|
(4.2)
|
|
Total
|
|
|
$
|
41,488,000
|
|
|
|
100.0
|
%
|
|
$
|
38,276,000
|
|
|
|
100.0
|
%
|
|
$
|
3,212,000
|
|
|
|
8.4
|
%
|
The increase in Florida Pneumatic's total 2021 revenue when
compared to the prior year was driven by its Automotive, Retail,
and Industrial sectors. Specifically, the 9.6% increase in
its Automotive revenue was due primarily to stronger consumer
demand for its AIRCAT brand of tools and accessories during 2021,
compared to the prior year. The most significant portion of
the growth in revenue of its Retail sector (The Home Depot), was
due to the demand for specific tools and accessories, which we
believe were used by its customers to combat the COVID-19 pandemic.
The largest year over year revenue growth occurred at its
Industrial tools' product line. This 51.9% growth was the
result of stronger demand for its products in 2021 from its
foundry, metal fabrication, manufacturing, and assembly, partially
offset by a slight decline in aerospace customers within this
sector.
Most of the Aerospace revenue is attributable to Jiffy Air Tool.
The Boeing Corporation is a major customer of Jiffy. The Boeing 737
MAX aircraft had been grounded by the FAA and the EASA in
March 2019. In 2021, both agencies
lifted the "No Fly" ruling it imposed on all Boeing 737 MAX
aircraft, allowing it to begin flights in the United States, and Europe. As a
result, order activity from Boeing during the latter portion of
2021 began to slowly improve. However, it is uncertain how
long, if ever, it will take for the Boeing Corporation to increase
its manufacturing of its 737 MAX aircraft to a volume that would be
comparable to 2019 levels. Lastly, we do note that orders
from other aerospace companies and military aircraft manufacturers
also improved slightly during the latter portion of 2021, compared
to earlier in the year, and to the same period in 2020. Further, we
believe that as both domestic and international travel increase and
Boeing and other major aircraft manufacturers begin to produce and
deliver new aircraft, we could see a continuation of the improved
order level within this Aerospace sector. However, no
assurance can be made, and it is possible that this sector will
remain depressed for the foreseeable future.
Hy-Tech
Hy-Tech designs, manufactures, and sells a wide range of
industrial products 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. PTG revenue is
comprised of products manufactured and sold by Hy-Tech's gear
business. NUMATX, Thaxton and other peripheral product lines, such
as general machining, are reported as Other.
|
|
|
Year Ended December
31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Increase
(decrease)
|
|
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
Revenue
|
|
|
Percent of
revenue
|
|
|
$
|
|
|
%
|
|
OEM
|
|
|
$
|
5,842,000
|
|
|
|
48.4
|
%
|
|
$
|
4,272,000
|
|
|
|
39.4
|
%
|
|
$
|
1,570,000
|
|
|
|
36.8
|
%
|
PTG
|
|
|
|
2,846,000
|
|
|
|
23.6
|
|
|
|
3,326,000
|
|
|
|
30.6
|
|
|
|
(480,000)
|
|
|
|
(14.4)
|
|
ATP
|
|
|
|
3,024,000
|
|
|
|
25.1
|
|
|
|
2,796,000
|
|
|
|
25.7
|
|
|
|
228,000
|
|
|
|
8.2
|
|
Other
|
|
|
|
354,000
|
|
|
|
2.9
|
|
|
|
466,000
|
|
|
|
4.3
|
|
|
|
(112,000)
|
|
|
|
(24.0)
|
|
Total
|
|
|
$
|
12,066,000
|
|
|
|
100.0
|
%
|
|
$
|
10,860,000
|
|
|
|
100.0
|
%
|
|
$
|
1,206,000
|
|
|
|
11.1
|
%
|
Although still somewhat hampered by the ill effects that the
COVID-19 pandemic has placed upon Hy-Tech's results during 2021, it
was able to increase its total revenue by 11.1%, compared to 2020.
As illustrated in the table above, the growth came from its OEM and
ATP products lines. Significant orders from certain major OEM
customers, along with its Engineered Solutions approach, which
continues to gain market momentum, provided the impetus for the
growth in OEM. Its ATP revenue improvement was due in large
part to a rebound in general economic activity. However, as stated
in previous filings, Hy-Tech decided to focus a greater portion of
its product development and marketing efforts on its Engineered
Solutions. We believe the development of the Engineered Solutions
and PTG product offerings provides Hy-Tech an opportunity to
generate new, additional sources of revenue in the future.
Additionally, in an effort to increase market penetration, Hy-Tech
has "refreshed" and/or improved several of its ATP tools, including
providing additional resources to support the marketing of its
Magnum Force line of large impact wrenches. Hy-Tech believes
that the Magnum Force line, a series of super duty
industrial impact tools, that are designed specifically for use in
demanding environments, such as refinery turnarounds, power
generation outages, structural steel erection, mining, and other
similar bolting applications, is beginning to gain acceptance. The
above increases were partially offset by a decline in its PTG and
Other revenue. Despite on-going PTG product and internal systems
improvements, this line continues to encounter delays and
disruptions in its outside third-party processors, creating delays
in its delivery time to its customers. Additionally, PTG
continues to encounter reluctance to permit face to face
visitation, which we believe is critical to completing the sale of
PTG products and services to its current, and more importantly, its
prospective customers. The decline in Hy-Tech's Other revenue
was due primarily to a large order for its Thaxton products
shipping during the third quarter in 2020, with no similar order
this year, and reduced orders for its NUMATX products in 2021,
compared to the prior year.
GROSS MARGIN
|
|
Year Ended December
31,
|
|
|
Increase
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
15,274,000
|
|
|
$
|
14,022,000
|
|
|
$
|
1,252,000
|
|
|
|
8.9
|
%
|
As percent of
respective revenue
|
|
|
36.8
|
%
|
|
|
36.6
|
%
|
|
|
0.2
|
% pts
|
|
|
|
|
Hy-Tech
|
|
$
|
2,073,000
|
|
|
$
|
171,000
|
|
|
$
|
1,902,000
|
|
|
|
1112.3
|
%
|
As percent of
respective revenue
|
|
|
17.2
|
%
|
|
|
1.6
|
%
|
|
|
15.6
|
% pts
|
|
|
|
|
Total Tools
|
|
$
|
17,347,000
|
|
|
$
|
14,193,000
|
|
|
$
|
3,154,000
|
|
|
|
22.2
|
%
|
As percent of
respective revenue
|
|
|
32.4
|
%
|
|
|
28.9
|
%
|
|
|
3.5
|
% pts
|
|
|
|
|
As discussed earlier, the increase in Florida Pneumatic's
Industrial revenue, which tends to generate stronger margins,
contributed to the higher gross margin in 2021, compared to that
generated in 2020. Additionally, improved overhead absorption
during 2021 at Jiffy contributed to Florida Pneumatic's improved
gross margin. However, increased freight costs, particularly
inbound ocean freight, and incremental costs associated with supply
chain disruptions, partially offset the improvement. Florida
Pneumatic's ocean freight costs, particularly during the second
half of 2021, have increased approximately four-fold when compared
to a year ago. We are attempting to pass through a portion of these
increases; however, we may not be able to fully neutralize the
negative effects.
Hy-Tech manufactures most of its products. Its gross margin is
significantly affected by customer/product mix. Additionally,
factors such as absorption of manufacturing overhead, raw material
pricing third-party costs, and the supply chain issues discussed
above, have affected its gross margin, all of which have been
impacted by the ongoing ill effects of the pandemic. Specifically,
Hy-Tech has encountered higher raw material, freight, and outside
third-party vendor costs, all adversely affecting its gross margin
in 2021. It should be noted that during 2020 Hy-Tech incurred
an excess charge relating to obsolete, slow-moving inventory
("OSMI"). 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 then new facility. The two
previous factors relating to fiscal 2020 were the causes for the
weak gross margin.
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 expenses during 2021 were $19,856,000, compared to $19,367,000, or an increase of 2.5% in 2020.
There were significant factors which contributed to the net change.
First, driven by an increase of more than $4,400,000 in revenue, our variable expenses
increased $333,000. Variable expenses
include among other items, commissions, freight out, travel,
advertising, shipping supplies and warranty costs. Additionally, we
incurred approximately $376,000 in
additional information systems costs during 2021, compared to the
prior year, most of which related to the May
2021 ransomware attack at our Florida Pneumatic subsidiary.
Further, compensation expense increased $430,000. Compensation expense is comprised of
base salaries and wages, accrued performance-based bonus incentives
and associated payroll taxes and employee benefits. This increase
is due in part to an increase in Company-wide bonuses being issued
in 2021 over 2020. Partially offsetting the above increases was a
decline in professional fees of $565,000, most of which relates to expenses in
2020 incurred as the result of the relocation and set up of the two
gear businesses that were acquired in late 2019, none of the
relocation expenses repeated in 2021. Lastly, depreciation and
amortization expenses declined $77,000, and corporate expenses and stock-based
compensation declined $29,000 and
$34,000, respectively.
IMPAIRMENT OF ASSETS
During 2021, we reduced by $88,000, the carrying value of certain not-in-use
fixed assets to their fair market value.
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
The Employee Retention Credit ("ERC") was established by the
Coronavirus Aid, Relief, and Economic Security Act ("CARES, or
"CARES Act"), in March 2020. Its
intention was to help businesses retain employees and avoid layoffs
during the coronavirus pandemic. The ERC provides a per employee
credit to eligible businesses based on a percentage of qualified
wages and certain benefits paid to, or on behalf of employees.
There are two tests to determine if a company is eligible: a) if a
business encountered a partial or total government ordered
shutdown, or b) a business recorded a decline in gross receipts.
(measuring quarterly gross receipts each quarter to same quarter in
2019). For 2020, the decline in gross receipts had to be greater
than 50%, and for 2021 the decline in gross receipts had to greater
than 20%. In December 2021 we began
and completed the process of determining and verifying our
eligibility and amount of credit. This resulted in filing amended
payroll tax forms for credits totaling $2,028,000 The ERC is subject to federal and
local income tax.
Additionally, pursuant to the CARES Act, on April 20, 2020, we received a Paycheck Protection
Program ("PPP") loan, in the amount of $2,929,000. Under the terms of the CARES Act, as
amended, we were eligible to apply for forgiveness for all or a
portion of the PPP loan. In February
2021, we filed an application for forgiveness with the
lender, who approved this submission and submitted the application
for forgiveness to the SBA. On June 9,
2021, we were advised that the SBA had approved our PPP loan
forgiveness application. Accordingly, the lender applied the
funds it received from the SBA and paid off PPP loan principal and
interest in full. In accordance with accounting guidance this
forgiveness of debt and related accrued interest is to be accounted
for as Other Income and is not considered as taxable income.
In connection with the acquisition completed in late 2019, we
and the seller agreed to settle a contingent liability originally
recorded as $64,000 for $12,000. As such, in 2020, we reduced the
contingent consideration payable by $52,000 and recorded a like amount as Other
Income. Additionally, during 2020, we received Coronavirus related
grants totaling $53,000 at our
United Kingdom operation from Her
Majesty's Government, which were recorded as Other Income. The
grant funds were not required to be repaid.
INTEREST EXPENSE – NET
|
|
Year Ended December
31,
|
|
|
(Decrease)
Increase
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Interest expense
attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
47,000
|
|
|
$
|
106,000
|
|
|
$
|
(59,000)
|
|
|
|
(55.7)
|
%
|
PPP loan
|
|
|
(18,000)
|
|
|
|
18,000
|
|
|
|
36,000
|
|
|
|
200.0
|
|
Amortization expense of
debt issue costs
|
|
|
16,000
|
|
|
|
16,000
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
45,000
|
|
|
$
|
140,000
|
|
|
$
|
(95,000)
|
|
|
|
(67.9)
|
%
|
The Applicable Margin, as defined in our Credit Agreement was
the same during the fiscal years ended December 31, 2021, and 2020. The average
balance of short-term borrowings during the fiscal years ended
December 31. 2021, and 2020, were
$2,686,000 and $4,042,000, respectively. The reduction in
short-term borrowings interest expense was due primarily to lower
average borrowings in 2021, 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.
In late April 2020, we borrowed
approximately $2.9 million as part of
the Paycheck Protection Program ("PPP") from BNB Bank as provided
under the CARES Act. The PPP Loan, accrued interest at a rate of
1.0% per annum. Pursuant to the Flexibility Act, interest on any
unforgiven amount is deferred until the forgiveness determination
is made by the Small Business Administration ("SBA"). On
June 9, 2021, we received notice that
the SBA had forgiven our obligation to repay the PPP loan and
related accrued interest. As such, we recorded a reversal of
the accrued interest related to the PPP loan.
Lastly, we and our bank amended the Credit Agreement in
February 2019. The amortization
expense is related to the debt issue costs associated with
amendments to our banking facility.
INCOME TAX EXPENSE
The benefit from income taxes was $2,000 in 2021 and $1,901,000 in 2020. Significant factors impacting
2021's net effective tax benefit rate of 0.1% were the enactment of
the Coronavirus Aid, Relief, and Economic Security Act,
non-deductible permanent differences and state and local taxes. The
net effective tax benefit for 2020 was 27.7%.
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
source of funds is 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,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Working
capital
|
|
$
|
24,598,000
|
|
|
$
|
21,258,000
|
|
Current
ratio
|
|
|
3.04 to 1
|
|
|
|
3.57 to 1
|
|
Shareholders'
equity
|
|
$
|
43,840,000
|
|
|
$
|
41,538,000
|
|
Credit facility
The average balance of short-term borrowings during the years
ended December 31, 2021, and 2020
were $2,686,000 and $4,042,000, respectively.
Should the need arise whereby the current credit facility is
insufficient; we believe that the current facility could be
expanded, and/or we could obtain additional funds based on the
value of our real property.
Cash Flows
For the year ended December 31,
2021, cash used by operating activities for the year was
$4,149,000, compared to cash provided
by operating activities for the year ended December 31, 2020, of $3,047,000. At December
31, 2021, our consolidated cash balance was $539,000, compared to $904,000 at December 31,
2020. Cash at our UAT subsidiary on December 31, 2021, and 2020 was $190,000 and $335,000, 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) on December 31,
2021, was 11.6%, compared to 9.4% on December 31, 2020.
As a result of the acquisition of the Jackson Gear business in
January 2022, additional working
capital needs due to anticipated growth, and a roll-out of a tools
program to our retail customer, our Revolver borrowings will
increase significantly in the first half of 2022 and should then
decline as we approach the end of 2022.
Capital spending during the year ended December 31, 2021, was $642,000, compared to $1,104,000 in 2020. Capital expenditures
currently planned for 2022 are approximately $1,400,000, 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, and the
expansion of our Punxsutawney, PA
facility as a result of the acquisition of Jackson Gear.
Our liquidity and capital is primarily sourced from our credit
facility, and cash from operations, when generated. At
December 31, 2021, we had
$9,578,000 available to us from the
revolver portion of the credit facility.
For the year ended December 31,
2021, we had $16,331,000 of
open purchase order commitments, compared to $8,530,000 at December 31,
2020.
Customer concentration
At December 31, 2021, we had one
customer that accounted for 26.1% of our consolidated revenue,
compared to 26.3% of 2020's revenue. Further, accounts receivable
on December 31, 2021, and 2020 due
from this customer were 35.9% and 38.0%, respectively, of total
accounts receivable.
IMPACT OF INFLATION
Increasing prices, most notably in freight/transportation and,
to a lesser extent, the cost of raw materials had a material effect
on our results of operations in 2021. We believe that recent
significant increases of inflation, the on-going volatility of
freight/transportation costs, and recent geopolitical unrest will
have an impact on our results of operations during 2022.
ABOUT P&F INDUSTRIES, INC.
P&F Industries, Inc., through its wholly owned subsidiaries,
is a leading manufacturer and importer of air-powered tools and
accessories sold principally to the aerospace, industrial,
automotive, and retail markets. P&F's products are sold
under its own trademarks, as well as under the private labels of
major manufacturers and retailers.
OTHER INFORMATION
P&F Industries Inc. has scheduled a conference call later
today at 11:00 A.M. Eastern Time, to
discuss its fiscal 2021 results and financial condition.
Investors and other interested parties who wish to listen to or
participate can dial 1-888-394-8218. 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 30, 2022.
Forward Looking Statement
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 of the 2022 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;
|
|
·
|
Risks associated with
sourcing from overseas;
|
|
·
|
Disruption in the
global capital and credit markets;
|
|
·
|
Importation
delays;
|
|
·
|
Customer
concentration;
|
|
·
|
Unforeseen inventory
adjustments or changes in purchasing patterns;
|
|
·
|
Market acceptance of
products;
|
|
·
|
Competition;
|
|
·
|
Price
reductions;
|
|
·
|
Exposure to
fluctuations in energy prices;
|
|
·
|
The strength of the
retail economy in the United States and abroad;
|
|
·
|
Risks associated with
Brexit;
|
|
·
|
Adverse changes in
currency exchange rates;
|
|
·
|
Interest
rates;
|
|
·
|
Debt and debt service
requirements;
|
|
·
|
Borrowing and
compliance with covenants under our credit facility;
|
|
·
|
Impairment of
long-lived assets and goodwill;
|
|
·
|
Retention of key
personnel;
|
|
·
|
Acquisition of
businesses;
|
|
·
|
Regulatory
environment;
|
|
·
|
Litigation and
insurance;
|
|
·
|
The threat of terrorism
and related political instability and economic uncertainty;
and
|
|
·
|
Business disruptions or
other costs associated with information technology, cyber-attacks,
system implementations, data privacy or catastrophic
losses,
|
and those other risks and uncertainties described in its most
recent Annual Report filed 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,
2021
|
December 31,
2020
|
|
(Unaudited)
|
(Audited)
|
Assets
|
|
|
Cash
|
|
$
|
539
|
|
|
$
|
904
|
|
Accounts receivable -
net
|
|
|
7,550
|
|
|
|
7,468
|
|
Inventories
|
|
|
24,021
|
|
|
|
18,362
|
|
Prepaid expenses and
other current assets
|
|
|
4,566
|
|
|
|
2,806
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
36,676
|
|
|
|
29,540
|
|
|
|
|
|
|
|
|
|
|
Net property and
equipment
|
|
|
8,080
|
|
|
|
9,395
|
|
Goodwill
|
|
|
4,447
|
|
|
|
4,449
|
|
Other intangible assets
- net
|
|
|
5,592
|
|
|
|
6,226
|
|
Deferred income taxes -
net
|
|
|
349
|
|
|
|
226
|
|
Right-of-use assets –
operating leases
|
|
|
2,969
|
|
|
|
3,281
|
|
Other assets –
net
|
|
|
77
|
|
|
|
250
|
|
Total
assets
|
|
$
|
58,190
|
|
|
$
|
53,367
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
5,765
|
|
|
$
|
1,374
|
|
Accounts
payable
|
|
|
2,920
|
|
|
|
2,199
|
|
Accrued compensation
and benefits
|
|
|
1,475
|
|
|
|
525
|
|
Accrued other
liabilities
|
|
|
1,078
|
|
|
|
1,354
|
|
Current leased
liabilities – operating leases
|
|
|
840
|
|
|
|
847
|
|
Current maturities of
long-term debt (PPP loan)
|
|
|
---
|
|
|
|
1,983
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
12,078
|
|
|
|
8,282
|
|
|
|
|
|
|
|
|
|
|
Noncurrent leased
liabilities – operating leases
|
|
|
2,176
|
|
|
|
2,474
|
|
Long-term debt, less
current maturities (PPP loan)
|
|
|
---
|
|
|
|
946
|
|
Other
liabilities
|
|
|
96
|
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
14,350
|
|
|
|
11,829
|
|
|
|
|
|
|
|
|
|
|
Total shareholders'
equity
|
|
|
43,840
|
|
|
|
41,538
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
|
$
|
58,190
|
|
|
$
|
53,367
|
|
|
|
|
|
|
|
|
|
|
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
|
|
|
|
|
Year Ended December
31,
|
|
(In Thousands
$)
|
2021
|
2020
|
|
|
|
|
|
|
|
|
|
Net revenue
|
$
|
53,554
|
$
|
49,136
|
|
|
|
|
|
Cost of
sales
|
36,207
|
34,943
|
|
|
|
Gross profit
|
17,347
|
14,193
|
|
|
|
Selling, general and
administrative expenses
|
19,856
|
19,367
|
|
|
|
Impairment of assets
held for sale
|
88
|
---
|
|
|
|
Impairment of goodwill
and other intangible assets
|
---
|
1,612
|
|
|
|
Operating
loss
|
(2,597)
|
(6,786)
|
|
|
|
Loss on sale of
property and equipment
|
(27)
|
(35)
|
|
|
|
Other income
|
4,957
|
106
|
|
|
|
Interest
expense
|
(45)
|
(140)
|
|
|
|
Income (loss) before
income taxes
|
2,288
|
(6,855)
|
|
|
|
Income tax
benefit
|
2
|
1,901
|
|
|
|
Net income
(loss)
|
$
|
2,290
|
$
|
(4,954)
|
|
|
|
|
|
P&F INDUSTRIES
INC. AND SUBSIDIARIES
|
|
EARNINGS (LOSS) PER
SHARE (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
Year Ended December
31,
|
|
|
|
|
|
2021
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings(loss)
per share
|
|
$
|
0.72
|
|
|
$
|
(1.57)
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss)
per share
|
|
$
|
0.72
|
|
|
$
|
(1.57)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P&F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
Year
Ended
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
|
|
December
31,
|
|
(In Thousands
$)
|
|
2021
|
|
|
2020
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
2,290
|
|
|
$
|
(4,954)
|
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net income (loss) to net cash (used in) provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash and other
charges:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,788
|
|
|
|
1,787
|
|
Amortization of other intangible assets
|
|
|
631
|
|
|
|
702
|
|
Operating lease expense
|
|
|
895
|
|
|
|
899
|
|
Amortization of debt issue costs
|
|
|
16
|
|
|
|
16
|
|
Amortization of consideration payable to a
customer
|
|
|
270
|
|
|
|
270
|
|
Provision for losses on accounts receivable
|
|
|
10
|
|
|
|
24
|
|
Stock-based compensation
|
|
|
5
|
|
|
|
41
|
|
Restricted stock-based compensation
|
|
|
43
|
|
|
|
41
|
|
(Loss) gain on sale of fixed assets
|
|
|
(27)
|
|
|
|
35
|
|
Deferred income taxes
|
|
|
(120)
|
|
|
|
(11)
|
|
Fair value adjustment of assets held for sale
|
|
|
88
|
|
|
|
---
|
|
Gain on
contingent consideration settlement
|
|
|
---
|
|
|
|
(52)
|
|
Gain on
lease obligation settlement
|
|
|
---
|
|
|
|
(31)
|
|
Forgiveness of government grant obligations
|
|
|
(2,929)
|
|
|
|
(53)
|
|
Impairment of goodwill and other intangible assets
|
|
|
---
|
|
|
|
1,612
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(96)
|
|
|
|
1,835
|
|
Inventories
|
|
|
(5,671)
|
|
|
|
4,538
|
|
Prepaid expenses and other current assets
|
|
|
(1,825)
|
|
|
|
(1,341)
|
|
Accounts payable
|
|
|
726
|
|
|
|
352
|
|
Accrued compensation and benefits
|
|
|
954
|
|
|
|
(1,498)
|
|
Accrued other liabilities and other current
liabilities
|
|
|
(264)
|
|
|
|
(185)
|
|
Operating lease liabilities
|
|
|
(888)
|
|
|
|
(918)
|
|
Other liabilities
|
|
|
(45)
|
|
|
|
(62)
|
|
Total
adjustments
|
|
|
(6,439)
|
|
|
|
8,001
|
|
Net cash (used in)
provided by operating activities
|
|
|
(4,149)
|
|
|
|
3,047
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
$
|
(642)
|
|
|
$
|
(1,104)
|
|
Proceeds from disposal
of property and equipment
|
|
|
58
|
|
|
|
1
|
|
Net cash used in
investing activities
|
|
|
(584)
|
|
|
|
(1,103)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
Dividend
payments
|
|
|
—
|
|
|
|
(157)
|
|
Proceeds from exercise
of stock options
|
|
|
—
|
|
|
|
18
|
|
Net proceeds
(repayments) relating to short-term borrowings
|
|
|
4,391
|
|
|
|
(4,274)
|
|
Proceeds from
Grant
|
|
|
—
|
|
|
|
53
|
|
Proceeds from PPP
loan
|
|
|
—
|
|
|
|
2,929
|
|
Net cash provided by
(used in) financing activities
|
|
|
4,391
|
|
|
|
(1,431)
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
|
(23)
|
|
|
|
11
|
|
Net (decrease)
increase in cash
|
|
|
(365)
|
|
|
|
524
|
|
Cash at beginning of
period
|
|
|
904
|
|
|
|
380
|
|
Cash at end of
period
|
|
$
|
539
|
|
|
$
|
904
|
|
|
|
|
|
|
|
|
|
|
|
P&F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)(continued)
|
|
|
|
|
|
|
|
|
(In Thousands
$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid
for:
|
|
|
|
|
|
|
Interest
|
|
$
|
39
|
|
|
$
|
120
|
|
Taxes
|
|
$
|
22
|
|
|
|
35
|
|
Cash paid for amounts included in the measurement of
operating lease liabilities
|
|
$
|
10
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
Noncash
information:
|
|
|
|
|
|
|
|
|
Right of Use ("ROU")
assets recognized for new operating lease liabilities
|
|
$
|
427
|
|
|
$
|
140
|
|
|
|
|
|
|
|
|
|
|
|
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
NON-GAAP FINANCIAL
MEASURE AND RECONCILIATION
|
|
COMPUTATION OF (EBITDIA) - EARNINGS
BEFORE INTEREST, TAXES,
DEPRECIATION, IMPAIRMENT, AND AMORIZATION
|
(UNAUDITED)
|
|
|
|
(In Thousands
$)
|
|
For the Year Ended
December 31,
|
|
|
|
|
2021
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
Net income (loss)
(2)
|
|
$
|
2,290
|
|
|
$
|
(4,954)
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
2,419
|
|
|
|
2,489
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
45
|
|
|
|
140
|
|
|
|
|
|
|
|
|
Impairment,
etc.
|
|
|
88
|
|
|
|
1,612
|
|
|
|
|
|
|
|
|
Income tax
benefit
|
|
|
(2)
|
|
|
|
(1,901)
|
|
|
|
|
|
|
|
|
|
|
|
2,550
|
|
|
|
2,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1)
|
|
$
|
4,840
|
|
|
$
|
(2,614)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company discloses a
tabular comparison of EBITDIA, 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 EBITDIA provides greater insight into the Company's results of
operations for the periods presented. EBITDIA should not be
considered in isolation or as a substitute for operating income as
reported on the face of our statement of operations.
|
(2)
|
Included in Net
income for 2021 is the forgiveness of the $2,929,200 Paycheck
Protection Program loan and $2,028,000 related to the Employee
Retention Credit.
|
View original
content:https://www.prnewswire.com/news-releases/pf-industries-inc-reports-results-for-the-fiscal-year-ended-december-31-2021-301512463.html
SOURCE P&F Industries, Inc.