MELVILLE, N.Y., Aug. 11,
2022 /PRNewswire/ -- P&F Industries, Inc.
(NASDAQ: PFIN) today announced its results from operations for the
three and six-month periods ended June 30,
2022. The Company is reporting net revenue of $17,810,000, and $31,831,000, for the three and six-month periods
ended June 30, 2022, compared to
$13,589,000, and $27,535,000, for the same periods in 2021.
For the three-month period ended June 30,
2022, the Company is reporting net income before income
taxes of $55,000, compared to
$2,334,000 for the three-month period
ended June 30, 2021. For the
six-month period ended June 30, 2022,
the Company is reporting a loss before income taxes of $659,000, compared to income before taxes of
$1,957,000 for the six-month period
ended June 30, 2021. The
Company noted that during the second quarter of 2021 it recorded a
gain from the forgiveness of its Paycheck Protection Program loan
of $2,929,000 by the Small Business
Administration in accordance with the Coronavirus Aid, Relief, and
Economic Security Act, known as the CARES Act. For the
three-and six-month periods ended June 30,
2022, the Company is reporting net losses after-taxes of
$21,000 and $639,000, respectively, compared to net income
after-taxes of $2,423,000 and
$2,116,000, respectively, for the
three and six-month periods ended June
30, 2021. Again, the Company noted that the income
after income taxes for the three and six-months ended June 30, 2021, included the recognition of the
forgiveness of a $2,929,200 Payroll
Protection Program loan. The Company's basic and diluted loss
per share for the three-month period ended June 30, 2022, was $(0.01), compared to basic and diluted earnings
per share of $0.76 for the same
three-month period in 2021. For the six-month period ended
June 30, 2022, the Company's basic
and diluted loss per share were $(0.20), compared to basic earnings per share of
$0.67, and diluted earnings per share
of $0.66, respectively, which was
driven by the loan forgiveness of $2,929,200, during the second quarter of
2021.
The Company further announced today that its Board of Directors
declared a special cash dividend of $0.05 per share payable on August 29, 2022, to stockholders of record at the
close of business on August 22, 2022.
The total amount of this special dividend payment will be
approximately $160,000 based on the
current number of shares outstanding. Declarations of dividends and
the establishment of record and payment dates in the future are
subject to the Board of Directors' determination that such actions
would be in the best interests of the Company's stockholders and in
compliance with applicable law.
Richard Horowitz, the Company's
Chairman of the Board, Chief Executive Officer and President
commented, "I am pleased to report that our revenue this quarter is
more than $4.2 million greater than
the same period a year ago. Key factors contributing to this
growth were a rollout of a refreshed line of tools to The Home
Depot, and strong increases in our Aerospace and Industrial
sectors. Further, primarily the result of the Jackson Gear business
acquisition completed earlier this year, our PTG product line
revenue increased more than 160% over their second quarter 2021
revenue. Lastly, our second quarter 2022 OEM revenue improved more
than $1.1 million, compared to the
same period in 2021. However, our consolidated gross margin did
decline 4.1 percentage points, driven primarily by customer and
product mix, rising material costs, ongoing ocean freight costs
that continue to run three to four times the costs that were in
effect prior to the Covid-19 pandemic, and under absorption of
other manufacturing overhead costs. Our SG&A was relatively the
same this quarter compared to the prior year. Our interest expense
increased, due primarily to higher interest rates this quarter, as
well as increased borrowings for the inventory build in connection
with a rollout of new products to The Home Depot, and to improve
our safety stock positions, and the Jackson Gear acquisition. As a
result, our income before taxes this quarter was $55,000, compared to $2,334,000 during the same period in the prior
year. During the second quarter of 2021, we recorded a gain of more
than $2.9 million as the result of
the forgiveness of the Payroll Protection Program loan thus greatly
impacting the comparison between the periods."
Mr. Horowitz added, "We are happy with the improvement in our
operating income, and we are cautiously optimistic as we look to
the future as we have a number of major initiatives in place that
we believe will help improve margins and further absorb factory
overhead during the second half of 2022 and beyond. However, it is
difficult to foresee what the impact will be on our businesses from
rising inflation, and a potential global recession. Further,
COVID-19 remains an issue, as cases have once again risen in many
parts of the country and abroad. We intend to do our utmost to
continue to serve our customers, while ensuring the health and
safety of our employees."
Mr. Horowitz concluded his remarks, "Furthermore, I am pleased
to report that our Board of Directors has declared a $0.05 special cash dividend. This special
dividend will be paid to the shareholders of record as of the close
of business on August 22, 2022. The
Board continues to be very grateful for the support it has received
from its investors and believes that this dividend declaration was
appropriate based on the Company's current financial condition,
results of operations, capital requirements and other factors."
The Company will be reporting the following:
TRENDS AND UNCERTAINTIES
COVID-19 PANDEMIC
The COVID-19 virus and the resultant global economic down-turn
had a negative impact on our fiscal 2021 results and continues to
negatively impact certain sectors of the Company during 2022.
Additionally, we believe that, while easing slightly, the on-going
supply-chain crisis is related in large part to the pandemic.
Further, we believe the COVID-19 global pandemic has been and
continues to be the primary factor in the significant increases in
the cost of international ocean freight and related matters. We
believe that until the above issues improve, our business will
likely continue to be adversely affected by the COVID-19 global
pandemic.
BOEING/AEROSPACE
The Federal Aviation Administration ("FAA") and the European
Union Aviation Safety Agency ("EASA") have lifted the grounding of
the 737 MAX, however, China, which
is a large market for 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, we believe production at Boeing of its 737 MAX
aircraft is likely to remain below the production levels that
existed prior to the grounding of certain Boeing aircraft and the
COVID-19 pandemic.
Although the 787 Dreamliner is still in production, albeit at a
reduced rate, we believe that Boeing has not been able to deliver a
new aircraft to a customer for over one1 year. But a firm timeline
for customer deliveries of new aircraft has not been announced.
INTERNATIONAL SUPPLY CHAIN
During the third and fourth quarters of 2021, and early 2022, we
encountered severe delays in receiving inventory from our Asian
suppliers, which led to intermittent shortages of inventory. It
should be noted however that the international supply chain crisis
has, as of late, begun to ease somewhat. Lastly, our ocean freight
costs, which increased in some cases five-fold during the latter
half of 2021 and for much of 2022, have begun to decline, but still
well in excess of pre pandemic levels. This trend of higher
costs and delayed deliveries has continued for most of 2022.
We believe the major factors driving the above include:
- Increased price of fuel;
- Shortage of shipping containers;
- Congestion at the ports in Asia and the United
States; and
- Shortage of truck drivers in the
United States.
At the present time, we believe the above-mentioned supply chain
disruptions will likely continue during the remainder of 2022.
While we believe that most of these related costs associated with
the items above have been, or will be, passed on to our customers
throughout 2022, there is no assurance that any additional cost
increases can be passed on in the future.
DOMESTIC TRANSPORTATION COSTS
Due to the shortage of truckers in the US, there has been both
difficulty in moving goods from the ports to our facilities as well
as arranging for pickups to deliver to our customers. In addition,
we have seen an increase in the costs for these transportation
services. It is unclear when or if this situation will abate. As
such, these issues will affect the Company for the foreseeable
future impacting our overall margins and possibly depressing
sales.
IMPACT OF INFLATION / GEOPOLITCAL ISSUES
Increasing prices, most notably in freight/transportation, the
cost of raw materials and labor had a material effect on our
results of operations during the three and six-month periods ended
June 30, 2022. We believe that the
current and projected significant levels of inflation will continue
to adversely impact our operating costs. As such, at the present
time, we are unable to reasonably estimate the impact these issues
will have on our results of operations for the remainder of 2022
and beyond.
During the six-month period ended June
30, 2022, we do not believe we were directly materially
impacted by current geopolitical global events.
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.
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.
We believe that our relationships with our key customers and
suppliers remain satisfactory.
REVENUE
The tables below provide an analysis of our net revenue for the
three and six-month periods ended June 30,
2022 and 2021:
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June
30,
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
12,666,000
|
|
$
|
10,712,000
|
|
$
|
1,954,000
|
|
18.2
|
%
|
Hy-Tech
|
|
|
5,144,000
|
|
|
2,877,000
|
|
|
2,267,000
|
|
78.8
|
|
Consolidated
|
|
$
|
17,810,000
|
|
$
|
13,589,000
|
|
$
|
4,221,000
|
|
31.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
22,947,000
|
|
$
|
21,614,000
|
|
$
|
1,333,000
|
|
6.2
|
%
|
Hy-Tech
|
|
|
8,884,000
|
|
|
5,921,000
|
|
|
2,963,000
|
|
50.0
|
|
Consolidated
|
|
$
|
31,831,000
|
|
$
|
27,535,000
|
|
$
|
4,296,000
|
|
15.6
|
%
|
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").
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
|
|
2022
|
|
2021
|
|
Increase
(decrease)
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
Automotive
|
|
$
|
3,853,000
|
|
30.4
|
%
|
$
|
3,782,000
|
|
35.3
|
%
|
$
|
71,000
|
|
1.9
|
%
|
Retail
|
|
|
4,826,000
|
|
38.1
|
|
|
3,763,000
|
|
35.1
|
|
|
1,063,000
|
|
28.2
|
|
Industrial
|
|
|
1,705,000
|
|
13.5
|
|
|
1,303,000
|
|
12.3
|
|
|
402,000
|
|
30.9
|
|
Aerospace
|
|
|
2,179,000
|
|
17.2
|
|
|
1,734,000
|
|
16.2
|
|
|
445,000
|
|
25.7
|
|
Other
|
|
|
103,000
|
|
0.8
|
|
|
130,000
|
|
1.1
|
|
|
(27,000)
|
|
(20.8)
|
|
Total
|
|
$
|
12,666,000
|
|
100.0
|
%
|
$
|
10,712,000
|
|
100.0
|
%
|
$
|
1,954,000
|
|
18.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
|
|
2022
|
|
2021
|
|
Increase
(decrease)
|
|
|
|
|
|
|
Percent
of
|
|
|
|
|
Percent
of
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
Automotive
|
|
$
|
7,734,000
|
|
33.7
|
%
|
$
|
7,884,000
|
|
36.5
|
%
|
$
|
(150,000)
|
|
(1.9)
|
%
|
Retail
|
|
|
7,845,000
|
|
34.2
|
|
|
7,553,000
|
|
34.9
|
|
|
292,000
|
|
3.9
|
|
Industrial
|
|
|
3,111,000
|
|
13.6
|
|
|
2,662,000
|
|
12.3
|
|
|
449,000
|
|
16.9
|
|
Aerospace
|
|
|
3,994,000
|
|
17.4
|
|
|
3,262,000
|
|
15.1
|
|
|
732,000
|
|
22.4
|
|
Other
|
|
|
263,000
|
|
1.1
|
|
|
253,000
|
|
1.2
|
|
|
10,000
|
|
4.0
|
|
Total
|
|
$
|
22,947,000
|
|
100.0
|
%
|
$
|
21,614,000
|
|
100.0
|
%
|
$
|
1,333,000
|
|
6.2
|
%
|
When comparing the three-month periods ended June 30, 2022 and 2021, the most significant
change in Florida Pneumatic's revenue occurred within its Retail
sector. The 28.2% increase was driven primarily by a stocking
rollout to The Home Depot ("THD") during the second quarter of
2022. These items effectively replaced certain tools that were
discontinued. The increase in Industrial revenue was driven by
among other things, slightly improved supply chain conditions,
which in turn increased our in-stock inventory, allowing an
increase in shipments, price increases that went into effect during
the quarter, and better economic conditions this quarter, compared
to the second quarter of 2021. Aerospace continued to show
year-over-year improvement with revenue increasing 25.7% this
quarter, compared to the second quarter of 2021, due primarily to
an increase in orders from both our commercial aircraft and
defense-related customers. Our Automotive revenue improved a
modest 1.9% this quarter, compared to the same period a year
ago. However, due to a previously disclosed change in
distribution channel strategy, as well as changes in both economic
and competitive factors, we believe that Automotive revenue could
lessen in the future periods.
The 22.4%, or $732,000 increase in
Florida Pneumatic's Aerospace revenue during the six-month period
ended June 30, 2022, compared to the
same period in the prior year, is the most significant factor in
analyzing the overall improvement in Florida Pneumatic's
year-to-date revenue. This improvement is being driven by increased
orders from both the commercial and military markets. Its
Industrial revenue for the six-month period ended June 30, 2022, grew 16.9% over the same period in
2021, due primarily to slightly improved supply chain conditions
and price increases, both occurring during the second quarter of
this year, and better economic conditions during most of the
six-month period ended June 30, 2022,
compared to the same period in 2021. Revenue for the Retail sector
during the first six months of 2022 is 3.9% higher than the same
period in 2021. This year-to-date improvement was driven by a
stocking rollout, which occurred during the second quarter of 2022,
partially offset by a decline in the spray gun category.
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
|
|
2022
|
|
2021
|
|
Increase
(decrease)
|
|
|
|
|
|
Percent of
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
OEM
|
|
$
|
2,542,000
|
|
49.4
|
%
|
$
|
1,408,000
|
|
48.9
|
%
|
$
|
1,134,000
|
|
80.5
|
%
|
ATP
|
|
|
945,000
|
|
18.4
|
|
|
779,000
|
|
27.1
|
|
|
166,000
|
|
21.3
|
|
PTG
|
|
|
1,583,000
|
|
30.8
|
|
|
604,000
|
|
21.0
|
|
|
979,000
|
|
162.1
|
|
Other
|
|
|
74,000
|
|
1.4
|
|
|
86,000
|
|
3.0
|
|
|
(12,000)
|
|
(14.0)
|
|
Total
|
|
$
|
5,144,000
|
|
100.0
|
%
|
$
|
2,877,000
|
|
100.0
|
%
|
$
|
2,267,000
|
|
78.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
|
|
2022
|
|
2021
|
|
Increase
|
|
|
|
|
|
|
Percent
of
|
|
|
|
|
Percent
of
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
OEM
|
|
$
|
4,507,000
|
|
50.7
|
%
|
$
|
3,019,000
|
|
51.0
|
%
|
$
|
1,488,000
|
|
49.3
|
%
|
ATP
|
|
|
1,687,000
|
|
19.0
|
|
|
1,492,000
|
|
25.2
|
|
|
195,000
|
|
13.1
|
|
PTG
|
|
|
2,522,000
|
|
28.4
|
|
|
1,250,000
|
|
21.1
|
|
|
1,272,000
|
|
101.8
|
|
Other
|
|
|
168,000
|
|
1.9
|
|
|
160,000
|
|
2.7
|
|
|
8,000
|
|
5.0
|
|
Total
|
|
$
|
8,884,000
|
|
100.0
|
%
|
$
|
5,921,000
|
|
100.0
|
%
|
$
|
2,963,000
|
|
50.0
|
%
|
Key factors driving the 80.5% growth in Hy-tech's OEM product
line revenue this quarter, compared to the same three-month period
in 2021, were a significant increase in orders from a major
customer, the easing of COVID-19 travel and visitation
restrictions, and overall improvement in economic conditions this
quarter compared to the same period a year ago. Revenue
generated from the JGC, which was acquired in early 2022, was the
major component of the $979,000
increase in our PTG product line revenue. Our ATP revenue
increased 21.3% this quarter over the same period in the prior year
due primarily to improved economic conditions.
Hy-Tech's six-month, year-over-year growth was mostly
accomplished during the three-month period ended June 30, 2022. As such, factors contributing to
this growth include increased orders from a major OEM customer, the
JGC business acquisition, the easing of COVID-19 restrictions, and
slight improvement in the general economic conditions.
GROSS MARGIN/PROFIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Increase
(decrease)
|
|
|
|
2022
|
|
2021
|
|
Amount
|
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
4,771,000
|
|
$
|
4,165,000
|
|
$
|
606,000
|
|
|
14.6
|
%
|
As percent of
respective revenue
|
|
|
37.7
|
%
|
|
38.9
|
%
|
|
(1.2)
|
%
|
pts
|
|
|
Hy-Tech
|
|
$
|
865,000
|
|
$
|
683,000
|
|
$
|
182,000
|
|
|
26.6
|
|
As percent of
respective revenue
|
|
|
16.8
|
%
|
|
23.7
|
%
|
|
(6.9)
|
%
|
pts
|
|
|
Total
|
|
$
|
5,636,000
|
|
$
|
4,848,000
|
|
$
|
788,000
|
|
|
16.3
|
%
|
As percent of
respective revenue
|
|
|
31.6
|
%
|
|
35.7
|
%
|
|
(4.1)
|
%
|
pts
|
|
|
Although Florida Pneumatic's gross profit increased 14.6%, its
consolidated gross margin declined 1.2 percentage points. This net
decline was driven primarily due to a higher mix of lower gross
margin Retail revenue. Related thereto, Florida Pneumatic continued
to encounter higher ocean freight and product costs during the
three-month period ended June 30,
2022, compared to the same three-month period in 2021.
Partially offsetting the above were better than prior year gross
margins in its Industrial, Automotive and Aerospace product
lines. Hy-Tech's gross profit declined 6.9 percentage
points this quarter, compared to the same three-month period in
2021, due primarily to increased revenue attributable to low margin
customers during the second quarter of 2022. Additionally,
Hy-Tech's PTG product line under absorbed its manufacturing
overhead costs during the second quarter of 2022, as it is going
through the process of integrating the JGC
acquisition.
|
|
Six months ended June 30,
|
|
Increase
(decrease)
|
|
|
|
2022
|
|
2021
|
|
Amount
|
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
8,721,000
|
|
$
|
8,365,000
|
|
$
|
356,000
|
|
|
4.3
|
%
|
As percent of
respective revenue
|
|
|
38.0
|
%
|
|
38.7
|
%
|
|
(0.7)
|
%
|
pts
|
|
|
Hy-Tech
|
|
$
|
1,426,000
|
|
$
|
1,119,000
|
|
$
|
307,000
|
|
|
27.4
|
|
As percent of
respective revenue
|
|
|
16.1
|
%
|
|
18.9
|
%
|
|
(2.8)
|
%
|
pts
|
|
|
Total
|
|
$
|
10,147,000
|
|
$
|
9,484,000
|
|
$
|
663,000
|
|
|
7.0
|
%
|
As percent of
respective revenue
|
|
|
31.9
|
%
|
|
34.4
|
%
|
|
(2.5)
|
%
|
pts
|
|
|
Florida Pneumatic's gross profit improved by 4.3%, when
comparing the six-month periods ended June
30, 2022 and 2021. Its gross margin however, declined by 0.7
percentage point. Primary factors affecting these results were
primarily mix, with greater low margin Retail revenue, being
partially offset by stronger gross margin for all other product
lines. As discussed above, under absorption of PTG
manufacturing overhead and product mix are the primary factors
causing the 2.8 percentage points decline in Hy-Tech's six-month
gross margin, when compared to the same period a year ago. We
are in the process of integrating the JGC business acquisition that
occurred during the first quarter of this year. We expect to
make significant progress on integration during the second half of
2022 and thus improve gross margin as well.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A")
include salaries and related costs, commissions, travel,
administrative facilities costs, 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.
During the second quarter of 2022, our SG&A was $5,479,000, compared to $5,458,000 incurred during the same three-month
period in 2021. Key components to the net change are:
- During the second quarter of 2021, we incurred approximately
$288,000 in costs related to the
May 2021 ransomware attack at our
Florida Pneumatic subsidiary, where no such costs were incurred
during the second quarter of 2022.
- Our compensation expense increased $151,000. Compensation expense is comprised of
base salaries and wages, accrued performance-based bonus incentives
and associated payroll taxes and employee benefits. Several
factors contributed to this increase, among them the staffing added
in connection with the JGC acquisition, increased wages primarily
related to retention incentives and annual wage adjustments and a
net increase in companywide bonus/incentive/performance
accruals.
- We incurred increases this quarter, compared to the same
quarter in 2021 in professional fees, stock-based compensation, and
amortization of $47,000, $37,000, and $23,000, respectively.
Our six-month 2022 total SG&A was $10,652,000, compared to $10,449,000 incurred during the same period in
the prior year. Key components to the net change are:
- Compensation expenses increased $316,000. Compensation expense is comprised of
base salaries and wages, accrued performance-based bonus incentives
and associated payroll taxes and employee benefits. Several
factors contributed to this increase, among them the staffing added
in connection with the JGC acquisition, increased wages primarily
related to retention incentives and annual wage adjustments and
increases in companywide bonus/incentive/performance accruals.
- Professional fees and expenses increased $280,000, due primary to legal, accounting, and
other fees incurred in connection with the JGC acquisition. Other
expenses that contributed to the increase in professional fees were
cyber security related costs and recruitment fees.
- Our variable expenses decreased $253,000. Driving this decline were significantly
lower advertising at Florida Pneumatic, caused by a change in a
distribution channel strategy.
- Our computer-related expenses declined $248,000, when comparing the six-month periods
ended June 30, 2022 and 2021. During
the second quarter of 2021 we incurred approximately $288,000 in costs related to the May 2021 ransomware attack at our Florida
Pneumatic subsidiary, where no such costs were incurred during the
second quarter of 2022.
- Lastly, our general corporate expenses declined $61,000 this quarter, compared to the same period
in 2021.
OTHER EXPENSE (INCOME)
Other expense in 2022 consists primarily of adjustments to the
fair value of certain assets.
On April 20, 2020, we received a
Paycheck Protection Program ("PPP") loan, in the amount of
$2,929,000. Under the terms of the
Coronavirus Aid, Relief, and Economic Security Act, ("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 and as such, the PPP loan and interest were
forgiven in its entirety. Accordingly, the lender applied the
funds and paid off PPP loan principal in its entirety and interest
in full. In accordance with current accounting guidance this
forgiveness of debt and related accrued interest was accounted for
as Other Income in 2022.
INTEREST EXPENSE (INCOME)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June
31,
|
|
Increase
(decrease)
|
|
|
|
2022
|
|
2021
|
|
Amount
|
|
%
|
|
Interest expense
attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
89,000
|
|
$
|
8,000
|
|
$
|
81,000
|
|
1012.5
|
%
|
PPP loan
|
|
|
—
|
|
|
(27,000)
|
|
|
27,000
|
|
100.0
|
|
Amortization expense of
debt issue costs
|
|
|
4,000
|
|
|
4,000
|
|
|
—
|
|
NA
|
|
Other
|
|
|
(7,000)
|
|
|
—
|
|
|
(7,000)
|
|
NA
|
|
Total
|
|
$
|
86,000
|
|
$
|
(15,000)
|
|
$
|
101,000
|
|
673.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June
30,
|
|
Increase (decrease)
|
|
|
|
2022
|
|
2021
|
|
Amount
|
|
%
|
|
Interest expense
attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
137,000
|
|
$
|
18,000
|
|
$
|
119,000
|
|
661.1
|
%
|
PPP loan
|
|
|
—
|
|
|
(19,000)
|
|
|
19,000
|
|
100.0
|
|
Amortization expense of
debt issue costs
|
|
|
8,000
|
|
|
8,000
|
|
|
—
|
|
NA
|
|
Other
|
|
|
(7,000)
|
|
|
—
|
|
|
(7,000)
|
|
NA
|
|
Total
|
|
$
|
138,000
|
|
$
|
7,000
|
|
$
|
131,000
|
|
1,871.4
|
%
|
Our average short-term borrowings during the three and six-month
periods ended June 30, 2022,
increased significantly, when compared to the same periods in 2021.
This increase was due primarily to our decision to increase safety
stock levels of inventory, due primarily to delays and other supply
chain issues, increased inventory related to the shipment of the
stocking rollout that occurred during the second quarter of 2022,
and the purchase and related costs associated with the acquisition
in the first quarter of 2022 of the JGC business. Additionally, the
Applicable Margins, as defined in the Credit Agreement with Capital
One bank, NA, also increased.
As discussed earlier, during the second quarter of 2021, we
applied for and received forgiveness of the PPP loan. Accordingly,
we recorded the reversal of associated interest expense.
Debt issue costs are associated with an amendment to the Credit
Agreement. There were no amortizable debt issue costs
incurred with Amendment No. 9, or Amendment No. 10 to the Credit
Agreement.
Other interest relates to interest received in connection with
federal income tax refunds received.
INCOME TAXES
At the end of each interim reporting period, we compute an
effective tax rate based upon our estimated full year results. This
estimate is used to determine the income tax provision or benefit
on a year-to-date basis and may change in subsequent interim
periods. Accordingly, the effective tax rate for the three and
six-month periods ended June 30,
2022, were a tax expense of 138.2%, and a tax benefit of
3.0%, compared to a tax benefit of 3.8% and 8.1% for the same three
and six-month periods in 2021. The effective tax rates for all
periods presented were impacted primarily by state taxes, and
non-deductible expenses. Impacting 2021's effective tax benefit was
the enactment of the CARES Act. Under the terms of the CARES
Act, we applied for and were approved to treat the gain on the
forgiveness of the PPP loan as non-taxable income. Accordingly, the
gain resulting from the forgiveness of the PPP loan was not
included in the computation of the 2021 effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
We monitor such metrics as days' sales outstanding, inventory
requirements, inventory turns, estimated future purchasing
requirements and capital expenditures to project liquidity needs,
as well as evaluate return on assets. Our primary sources of funds
are operating cash flows, existing working capital 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:
|
|
|
|
|
|
|
|
|
June 30,
2022
|
|
December 31, 2021
|
Working
capital
|
|
$
|
22,407,000
|
|
$
|
24,598,000
|
Current
ratio
|
|
|
2.40 to 1
|
|
|
3.04 to 1
|
Shareholders'
equity
|
|
$
|
43,066,000
|
|
$
|
43,840,000
|
Credit facility
We and the Bank entered into an amendment that, among other
things, increased the Revolver borrowing commitment by $2,000,000 to $18,000,000 through June
30, 2022. We believe the return to the $16,000,000 maximum Revolver borrowing amount
will not impact future operations.
At June 30, 2022, there was
$7,000,000 available to us under our
Revolver arrangement.
Should the need arise whereby the current Credit Agreement is
insufficient; we believe that the current Agreement could be
expanded, and/or we could obtain additional funds based on the
value of our real property.
Cash flows
For the six-month period ended June 30,
2022, cash used by operating activities was $1,154,000, compared to cash provided by
operating activities during the six-month period ended June 30, 2021, of $1,368,000. At June
30, 2022, our consolidated cash balance was $431,000, compared to $539,000 at December 31,
2021. We operate under the terms and conditions of the
Credit Agreement. As a result, all domestic cash receipts are
remitted to Capital One lockboxes and therefore does not represent
cash on hand.
Our total debt to total book capitalization (total debt divided
by total debt plus equity) on June 30,
2022, was 18.9%, compared to 11.6% on December 31, 2021.
During the six-month period ended June
30, 2022, we completed the JGC acquisition, with a purchase
price of $2,300,000, plus acquisition
expenses that included among other things, legal, accounting, and
relocation expenses.
During the six-month period ended June
30, 2022, we used $923,000 for
capital expenditures, compared to $247,000 during the same period in the prior
year. Capital expenditures currently planned for the
remainder of 2022 are approximately $700,000, 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 JGC business.
Our liquidity and capital is primarily sourced from our credit
facility.
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 second quarter 2022 results and financial
condition. Investors and other interested parties who wish to
listen to or participate can dial 1-888-221-3881. 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 August 12, 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 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;
- 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 Annual Report on Form 10-K for the year ended
December 31, 2021, 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
$)
|
June 30,
2022
|
December 31,
2021
|
|
(Unaudited)
|
(Audited)
|
Assets
|
|
|
Cash
|
|
$
|
431
|
|
|
$
|
539
|
|
Accounts receivable -
net
|
|
|
10,418
|
|
|
|
7,550
|
|
Inventories
|
|
|
24,610
|
|
|
|
24,021
|
|
Prepaid expenses and
other current assets
|
|
|
2,946
|
|
|
|
4,566
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
38,405
|
|
|
|
36,676
|
|
|
|
|
|
|
|
|
|
|
Net property and
equipment
|
|
|
8,941
|
|
|
|
8,080
|
|
Goodwill
|
|
|
4,822
|
|
|
|
4,447
|
|
Other intangible assets
- net
|
|
|
5,673
|
|
|
|
5,592
|
|
Deferred income taxes -
net
|
|
|
374
|
|
|
|
349
|
|
Right-of-use assets –
operating leases
|
|
|
3,718
|
|
|
|
2,969
|
|
Other assets –
net
|
|
|
69
|
|
|
|
77
|
|
Total
assets
|
|
$
|
62,002
|
|
|
$
|
58,190
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
10,069
|
|
|
$
|
5,765
|
|
Accounts
payable
|
|
|
2,337
|
|
|
|
2,920
|
|
Accrued compensation
and benefits
|
|
|
1,187
|
|
|
|
1,475
|
|
Accrued other
liabilities
|
|
|
1,484
|
|
|
|
1,078
|
|
|
|
|
|
|
|
|
|
|
Current leased
liabilities – operating leases
|
|
|
921
|
|
|
|
840
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
15,998
|
|
|
|
12,078
|
|
|
|
|
|
|
|
|
|
|
Noncurrent leased
liabilities – operating leases
|
|
|
2,855
|
|
|
|
2,176
|
|
Other
liabilities
|
|
|
83
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
18,936
|
|
|
|
14,350
|
|
|
|
|
|
|
|
|
|
|
Total shareholders'
equity
|
|
|
43,066
|
|
|
|
43,840
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
|
$
|
62,002
|
|
|
$
|
58,190
|
|
|
|
|
|
|
|
|
|
|
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
|
|
|
|
|
Three months ended
June 30,
|
Six months ended
June 30,
|
(In Thousand
$)
|
2022
|
2021
|
2022
|
2021
|
|
|
|
|
|
Net revenue
|
$
|
17,810
|
$
|
13,589
|
$
|
31,831
|
$
|
27,535
|
Cost of
sales
|
12,174
|
8,741
|
21,684
|
18,051
|
Gross profit
|
5,636
|
4,848
|
10,147
|
9,484
|
Selling
|
5,479
|
5,458
|
10,652
|
10,449
|
Operating
loss
|
157
|
(610)
|
(505)
|
(965)
|
Other (expense)
income
|
(16)
|
2,929
|
(16)
|
2,929
|
Interest (expense)
income
|
(86)
|
15
|
(138)
|
(7)
|
Income (loss) before
income taxes
|
55
|
2,334
|
(659)
|
1,957
|
Income tax (expense)
benefit
|
(76)
|
89
|
20
|
159
|
Net income
(loss)
|
$
|
(21)
|
$
|
2,423
|
$
|
(639)
|
$
|
2,116
|
P&F INDUSTRIES, INC. AND
SUBSIDIARIES
|
Six months
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
ended June 30,
|
|
|
(In Thousands $)
|
2022
|
|
|
2021
|
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
$
|
(639)
|
|
|
$
|
2,116
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash and other
charges:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
881
|
|
|
|
902
|
|
|
Amortization of other
intangible assets
|
|
341
|
|
|
|
316
|
|
|
Rent expense from
leased obligations
|
|
471
|
|
|
|
449
|
|
|
Amortization of debt
issue costs
|
|
8
|
|
|
|
8
|
|
|
Amortization of
consideration payable to a customer
|
|
135
|
|
|
|
135
|
|
|
Provision for losses on
(recovery of) accounts receivable
|
|
42
|
|
|
|
59
|
|
|
Stock-based
compensation
|
|
1
|
|
|
|
3
|
|
|
Stock-based
compensation – exercise of options
|
|
38
|
|
|
|
—
|
|
|
Restricted stock-based
compensation
|
|
19
|
|
|
|
27
|
|
|
Forgiveness of PPP
loan
|
|
—
|
|
|
|
(2,929)
|
|
|
Deferred income
taxes
|
|
(20)
|
|
|
|
(159)
|
|
|
(Loss) gain on sale of
fixed assets
|
|
(5)
|
|
|
|
7
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
(2,276)
|
|
|
|
(750)
|
|
|
Inventories
|
|
(353)
|
|
|
|
(895)
|
|
|
Prepaid expenses and
other current assets
|
|
1,302
|
|
|
|
414
|
|
|
Accounts
payable
|
|
(778)
|
|
|
|
1,482
|
|
|
Accrued compensation
and benefits
|
|
681
|
|
|
|
718
|
|
|
Accrued other
liabilities and other current liabilities
|
|
(524)
|
|
|
|
(64)
|
|
|
Payments on lease
liabilities
|
|
(461)
|
|
|
|
(443)
|
|
|
Other
liabilities
|
|
(17)
|
|
|
|
(28)
|
|
|
Total
adjustments
|
|
(515)
|
|
|
|
(748)
|
|
|
Net cash (used in)
provided by operating activities
|
|
(1,154)
|
|
|
|
1,368
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
$
|
(923)
|
|
|
$
|
(247)
|
|
|
Purchase of net assets
of Jackson Gear Company business
|
|
(2,300)
|
|
|
|
—
|
|
|
Net cash used in
investing activities
|
|
(3,223)
|
|
|
|
(247)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from exercise
of stock options
|
|
2
|
|
|
|
|
|
|
Net payments relating
to short-term borrowings
|
|
4,304
|
|
|
|
(1,004)
|
|
|
Net cash (provided by)
used in financing activities
|
|
4,306
|
|
|
|
(1,004)
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash
|
|
(37)
|
|
|
|
(4)
|
|
|
Net increase (decrease)
in cash
|
|
(108)
|
|
|
|
113
|
|
|
Cash at beginning of
period
|
|
539
|
|
|
|
904
|
|
|
Cash at end of
period
|
$
|
431
|
|
|
$
|
1,017
|
|
|
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
|
|
$
|
114
|
|
|
$
|
19
|
|
Taxes
|
|
$
|
124
|
|
|
|
12
|
|
Cash paid for amounts
included in the measurement of operating lease
liabilities
|
|
$
|
--
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
Noncash
information:
|
|
|
|
|
|
|
|
|
Right of Use ("ROU")
assets recognized for new operating lease liabilities
|
|
$
|
987
|
|
|
$
|
53
|
|
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
NON-GAAP FINANCIAL
MEASURE AND RECONCILIATION
|
|
|
|
COMPUTATION OF (EBITDA) - EARNINGS
BEFORE INTEREST, TAXES, DEPRECIATION,
AND AMORIZATION
|
|
(UNAUDITED)
|
|
|
|
|
|
(In Thousands
$)
|
|
For the three-month
periods ended
June 30,
|
For the six-month
periods ended
June
30,
|
|
|
|
|
2022
|
|
|
|
2021
|
|
|
|
2022
|
|
|
2021
|
|
Net income (loss)
(2)
|
|
$
|
(21)
|
|
|
$
|
2,423
|
|
|
$
|
(639)
|
|
$
|
2,116
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
622
|
|
|
|
608
|
|
|
|
1,222
|
|
|
1,218
|
|
Interest expense
(income)
|
|
|
86
|
|
|
|
(15)
|
|
|
|
138
|
|
|
7
|
|
Income tax expense
(benefit)
|
|
|
76
|
|
|
|
(89)
|
|
|
|
(20)
|
|
|
(159)
|
|
|
|
|
784
|
|
|
|
504
|
|
|
|
1,340
|
|
|
1,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1)
|
|
$
|
763
|
|
|
$
|
2,927
|
|
|
$
|
701
|
|
$
|
3,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company discloses a
tabular comparison of EBITDA, 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 EBITDA provides greater insight into the Company's results of
operations for the periods presented. EBITDA 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 the three-
and six-month Net income for 2021 is the forgiveness of the
$2,929,200 PPP loan.
|
View original
content:https://www.prnewswire.com/news-releases/pf-industries-inc-reports-results-for-the-three-and-six-month-periods-ended-june-30-2022-and-announces-special-dividend-301604037.html
SOURCE P&F Industries, Inc.