MELVILLE, N.Y., Nov. 9, 2022
/PRNewswire/ -- P&F Industries, Inc. (NASDAQ: PFIN) today
announced its results from operations for the three and nine-month
periods ended September 30, 2022. The
Company is reporting net revenue of $14,516,000, and $46,347,000, for the three and nine-month periods
ended September 30, 2022, compared to
$12,985,000, and $40,520,000, for the same periods in 2021.
For the three-month period ended September
30, 2022, the Company is reporting a net loss before income
taxes of $346,000, compared to a net
loss before income taxes of $841,000
for the three-month period ended September
30, 2021. For the nine-month period ended September 30, 2022, the Company is reporting a
loss before income taxes of $1,005,000, compared to income before taxes of
$1,116,000 for the same nine-month
period in 2021. For the three-and nine-month periods ended
September 30, 2022, the Company is
reporting net losses after-taxes of $237,000 and $876,000, respectively, compared to net loss
after-taxes of $733,000 and net
income after tax of $1,383,000,
respectively, for the three and nine-month periods ended
September 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. The Company's
basic and diluted loss per share for the three-month period ended
September 30, 2022, was $0.08, compared to basic and diluted loss per
share of $0.23 for the same
three-month period in 2021. For the nine-month period ended
September 30, 2022, the Company's
basic and diluted loss per share were $0.28, compared to basic earnings per share of
$0.44, and diluted earnings per share
of $0.43, respectively, 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 November 30, 2022, to stockholders of record at
the close of business on November 18,
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, "Although certainly not the quarterly results we strived
for, we have been able to improve our after-tax results by almost
$500,000 compared to a year ago.
Additionally, I am pleased to report that our consolidated
revenue this quarter reflects an improvement of 11.8% over the same
period a year ago, with 80% of this growth occurring at
Hy-Tech. Specifically, driven by the Jackson Gear business
acquisition completed earlier this year, our PTG third quarter 2022
revenue was $811,000, or 92.0%
greater than the same period a year ago. Additionally,
Hy-Tech continued to grow its OEM business recording a $519,000, or 31.1%, revenue improvement when
comparing the third quarter of 2022 to the same period in the prior
year. Further, Hy-Tech recorded increases in sales of its
Thaxton and Numatx products. However, Hy-Tech encountered a
decline in its ATP revenue this quarter, compared to third quarter
of 2021. We believe this was due to a general weakness in
certain industrial markets/customers serviced by Hy-Tech.
Florida Pneumatic's third quarter 2022 revenue improved 3.1%,
compared to the same period in 2021. This net improvement was
driven primarily by stronger aerospace revenue, partially offset by
a decline in retail revenue.
Our consolidated third quarter 2022 gross margin improved 2.8
percentage points, when compared to the same period in the prior
year, driven primarily by customer and product mix, as well as
increases in selling prices. Further, with increased revenue
this quarter, our gross profit improved $873,000 or 22% over the same three-month period
in 2021.
SG&A, driven primarily by higher revenue and additional
costs associated with the Jackson acquisition, increased 7.4% this
quarter, compared to third quarter 2021. Our interest expense
increased, due primarily to higher interest rates this quarter, as
well as increased borrowings.
We are cautiously optimistic as we look to the future.
However, it is difficult to foresee what the impact will be
on our businesses from the on-going supply chain difficulties and
associated delays, rising inflation, and a possible global
recession. Further, COVID-19 does remain an issue, particularly
with respect to our Asian suppliers. 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 November 18, 2022. The
Board continues to be 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:
REVENUE
The tables below provide an analysis of our net revenue for the
three and nine-month periods ended September
30, 2022 and 2021:
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September
30,
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
9,906,000
|
|
$
|
9,607,000
|
|
$
|
299,000
|
|
3.1
|
%
|
Hy-Tech
|
|
|
4,610,000
|
|
|
3,378,000
|
|
|
1,232,000
|
|
36.5
|
|
Consolidated
|
|
$
|
14,516,000
|
|
$
|
12,985,000
|
|
$
|
1,531,000
|
|
11.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September
30,
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
32,853,000
|
|
$
|
31,221,000
|
|
$
|
1,632,000
|
|
5.2
|
%
|
Hy-Tech
|
|
|
13,494,000
|
|
|
9,299,000
|
|
|
4,195,000
|
|
45.1
|
|
Consolidated
|
|
$
|
46,347,000
|
|
$
|
40,520,000
|
|
$
|
5,827,000
|
|
14.4
|
%
|
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 September
30,
|
|
|
|
2022
|
|
2021
|
|
Increase (decrease)
|
|
|
|
|
|
|
Percent of
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
Automotive
|
|
$
|
3,110,000
|
|
31.4
|
%
|
$
|
3,168,000
|
|
33.0
|
%
|
$
|
(58,000)
|
|
(1.8)
|
%
|
Retail
|
|
|
2,779,000
|
|
28.0
|
|
|
3,222,000
|
|
33.5
|
|
|
(443,000)
|
|
(13.7)
|
|
Industrial
|
|
|
1,305,000
|
|
13.2
|
|
|
1,257,000
|
|
13.1
|
|
|
48,000
|
|
3.8
|
|
Aerospace
|
|
|
2,538,000
|
|
25.6
|
|
|
1,832,000
|
|
19.1
|
|
|
706,000
|
|
38.5
|
|
Other
|
|
|
174,000
|
|
1.8
|
|
|
128,000
|
|
1.3
|
|
|
46,000
|
|
35.9
|
|
Total
|
|
$
|
9,906,000
|
|
100.0
|
%
|
$
|
9,607,000
|
|
100.0
|
%
|
$
|
299,000
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September
30,
|
|
|
|
2022
|
|
2021
|
|
Increase (decrease)
|
|
|
|
|
|
|
Percent of
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
Automotive
|
|
$
|
10,845,000
|
|
33.0
|
%
|
$
|
11,053,000
|
|
35.4
|
%
|
$
|
(208,000)
|
|
(1.9)
|
%
|
Retail
|
|
|
10,625,000
|
|
32.3
|
|
|
10,775,000
|
|
34.5
|
|
|
(150,000)
|
|
(1.4)
|
|
Industrial
|
|
|
4,416,000
|
|
13.5
|
|
|
3,919,000
|
|
12.6
|
|
|
497,000
|
|
12.7
|
|
Aerospace
|
|
|
6,531,000
|
|
19.9
|
|
|
5,094,000
|
|
16.3
|
|
|
1,437,000
|
|
28.2
|
|
Other
|
|
|
436,000
|
|
1.3
|
|
|
380,000
|
|
1.2
|
|
|
56,000
|
|
14.7
|
|
Total
|
|
$
|
32,853,000
|
|
100.0
|
%
|
$
|
31,221,000
|
|
100.0
|
%
|
$
|
1,632,000
|
|
5.2
|
%
|
Florida Pneumatic
When comparing the three-month periods ended September 30, 2022, and 2021, the most
significant change in Florida Pneumatic's revenue occurred within
its stronger gross margin Aerospace product line, which had a 38.5%
increase this quarter over the same three-month period in
2021. This improvement is in both commercial aircraft and
defense-related customers. We believe the primary cause for
the decline in Retail revenue is the result of recent economic
conditions, which has slowed end user demand at the retail level,
causing our customer to lower its purchases during the third
quarter. Our Automotive revenue declined 1.8% compared to the same
period a year ago, due to changes in both economic and competitive
factors. Lastly, we believe the automotive sector will continue to
be adversely affected by the current sluggish economic market
conditions.
The 28.2%, or $1,437,000 increase
in Florida Pneumatic's Aerospace revenue during the nine-month
period ended September 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 was being
driven by increased orders from both the commercial and military
markets. Its Industrial revenue for the nine-month period ended
September 30, 2022, grew 12.7% over
the same period in 2021, due primarily to slightly improved supply
chain conditions, price increases, and better economic/sector
conditions, which occurred during the early part of this year.
Our nine-month 2022 Automotive revenue is down slightly,
compared to the same period in 2021. As noted above we believe this
sector will continue to be adversely affected by the current
sluggish economic market conditions.
Hy-Tech
Hy-Tech designs, manufactures, and sells a wide range of
industrial products including tools, parts, accessories, and
sockets, 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 September
30,
|
|
|
|
2022
|
|
2021
|
|
Increase (decrease)
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
OEM
|
|
$
|
2,187,000
|
|
47.4
|
%
|
$
|
1,668,000
|
|
49.4
|
%
|
$
|
519,000
|
|
31.1
|
%
|
ATP
|
|
|
490,000
|
|
10.6
|
|
|
751,000
|
|
22.2
|
|
|
(261,000)
|
|
(34.8)
|
|
PTG
|
|
|
1,693,000
|
|
36.8
|
|
|
882,000
|
|
26.1
|
|
|
811,000
|
|
92.0
|
|
Other
|
|
|
240,000
|
|
5.2
|
|
|
77,000
|
|
2.3
|
|
|
163,000
|
|
211.7
|
|
Total
|
|
$
|
4,610,000
|
|
100.0
|
%
|
$
|
3,378,000
|
|
100.0
|
%
|
$
|
1,232,000
|
|
36.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September
30,
|
|
|
|
2022
|
|
2021
|
|
Increase (decrease)
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
OEM
|
|
$
|
6,693,000
|
|
47.4
|
%
|
$
|
4,688,000
|
|
50.4
|
%
|
$
|
2,005,000
|
|
42.8
|
%
|
ATP
|
|
|
2,178,000
|
|
16.1
|
|
|
2,242,000
|
|
24.1
|
|
|
(64,000)
|
|
(2.9)
|
|
PTG
|
|
|
4,216,000
|
|
31.2
|
|
|
2,132,000
|
|
22.9
|
|
|
2,084,000
|
|
97.7
|
|
Other
|
|
|
407,000
|
|
3.0
|
|
|
237,000
|
|
2.5
|
|
|
170,000
|
|
71.7
|
|
Total
|
|
$
|
13,494,000
|
|
100.0
|
%
|
$
|
9,299,000
|
|
100.0
|
%
|
$
|
4,195,000
|
|
45.1
|
%
|
A key factor driving the 36.5% increase in Hy-Tech's total
fiscal third quarter of 2022, compared to the same period in the
prior year was the acquisition of the Jackson Gear Company ("JGC")
business that occurred in early 2022, which, contributed
significantly to the PTG revenue improvement of $811,000. Additionally, Hy-Tech's OEM
revenue continued to strengthen, recording a net 31.1% increase
over the prior year. This improvement is due primarily to increased
shipments to a major OEM customer. Further, during this
quarter, other revenue increased due to a large one-time order for
its Thaxton products. Partially offsetting the above its ATP
product sales declined. As noted in prior filings, we believe
that its ATP products continue to be price-challenged by off-shore
suppliers.
Hy-Tech's nine-month, year-over-year growth essentially tracks
its third quarter results. The JGC business acquisition
resulted in PTG revenue growth. Additionally, continued revenue
growth in the OEM line was primarily the result of expanded sales
opportunities with a major customer. As noted above, the key
component to Hy-Tech's other revenue was due to a large one-time
order for its Thaxton products.
GROSS MARGIN/PROFIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September
30,
|
|
Increase
(decrease)
|
|
|
|
2022
|
|
2021
|
|
Amount
|
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
4,113,000
|
|
$
|
3,381,000
|
|
$
|
732,000
|
|
|
21.7
|
%
|
As percent of
respective revenue
|
|
|
41.5
|
%
|
|
35.2
|
%
|
|
6.3
|
%
|
pts
|
|
|
Hy-Tech
|
|
$
|
734,000
|
|
$
|
593,000
|
|
$
|
141,000
|
|
|
23.8
|
|
As percent of
respective revenue
|
|
|
15.9
|
%
|
|
17.6
|
%
|
|
(1.7)
|
%
|
pts
|
|
|
Total
|
|
$
|
4,847,000
|
|
$
|
3,974,000
|
|
$
|
873,000
|
|
|
22.0
|
%
|
As percent of
respective revenue
|
|
|
33.4
|
%
|
|
30.6
|
%
|
|
2.8
|
%
|
pts
|
|
|
The 6.3 percentage point improvement in Florida Pneumatic's
gross margin was due to price increases, which were put in place to
partially offset rising material, labor, and other costs, as well
as an increase in its higher margin Aerospace revenue.
Additionally, a decline in ocean freight costs during the third
quarter of 2022 and a stronger U.S. Dollar to the TWD contributed
to Florida Pneumatic's gross margin improvement this quarter,
compared to the same period in 2021. The stronger gross
margin drove the 21.7% increase in its quarterly gross profit.
Hy-Tech's gross profit declined 1.7 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 third quarter of 2022. Additionally, its PTG product
line under absorbed its manufacturing overhead costs during the
third quarter of 2022, as it is going through the process of
integrating the JGC acquisition and its customer base.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September
30,
|
|
Increase
(decrease)
|
|
|
|
2022
|
|
2021
|
|
Amount
|
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
12,834,000
|
|
$
|
11,746,000
|
|
$
|
1,088,000
|
|
|
9.3
|
%
|
As percent of
respective revenue
|
|
|
39.1
|
%
|
|
37.6
|
%
|
|
1.5
|
%
|
pts
|
|
|
Hy-Tech
|
|
$
|
2,160,000
|
|
$
|
1,712,000
|
|
$
|
488,000
|
|
|
26.2
|
|
As percent of
respective revenue
|
|
|
16.0
|
%
|
|
18.4
|
%
|
|
(2.4)
|
%
|
pts
|
|
|
Total
|
|
$
|
14,994,000
|
|
$
|
13,458,000
|
|
$
|
1,536,000
|
|
|
11.4
|
%
|
As percent of
respective revenue
|
|
|
32.4
|
%
|
|
33.2
|
%
|
|
(0.8)
|
%
|
pts
|
|
|
Florida Pneumatic's gross margin strengthened by 1.5 percentage
points and its gross profit increased nearly $1.1 million, when comparing the nine-month
periods ended September 30, 2022 and
2021. Factors affecting these nine-month results were
primarily customer and product mix.
Similar to the discussion above, the primary causes for the
decline in Hy-Tech's nine-month period ended September 30, 2022, as compared to the gross
margin for the same period in the prior year include
under-absorption of PTG manufacturing overhead and customer/product
mix. In an effort to improve the current year's gross margin,
we have increased selling prices, wherever possible, particularly
for products that were most significantly impacted by raw material
and freight costs that Hy-Tech was forced to absorb throughout the
year. Additionally, we are in the process of completing the
integration of the JGC business acquisition that occurred during
the first quarter of this year. The integration is taking
longer than expected and will continue well into 2023. We
believe the completion of the integration of the JGC business into
the facility in Punxsutawney, PA.
will result in improved manufacturing, productivity. Lastly,
combined with recent price increases, we believe Hy-Tech's overall
gross margin will begin to improve in 2023.
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 third quarter of 2022, our SG&A was $5,084,000, compared to $4,734,000 incurred during the same three-month
period in 2021. Key components to the net increase are:
i)
|
Our compensation
expense increased $373,000. 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.
|
ii)
|
We incurred increases
this quarter, compared to the same quarter in 2021 in professional
fees of $69,000.
|
iii)
|
Our variable expenses,
which among other things includes commissions, freight out,
advertising and travel and entertainment expenses declined
$95,000.
|
Our nine-month 2022 total SG&A was $15,736,000, compared to $15,183,000 incurred during the same period in
the prior year. Key components to the net change are:
i)
|
Compensation expenses
increased $597,000. 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.
|
ii)
|
Professional fees and
expenses increased $350,000, 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
included ongoing cyber security/prevention costs, recruitment fees
and legal fees associated with regulatory initiatives.
|
iii)
|
Our variable expenses
decreased $352,000. Driving this decline were significantly lower
advertising costs at Florida Pneumatic, caused by a change in a
distribution channel strategy.
|
iv)
|
Our computer-related
expenses declined $293,000, when comparing the nine-month periods
ended September 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.
|
v)
|
Lastly, temporary labor
and stock-based compensation expense increased $50,000 and $37,000,
respectively.
|
OTHER EXPENSE (INCOME)
Other expense (income) consists primarily of adjustments to the
fair value of certain assets, partially offset by the gain
recognized during the three-month period ended September 30, 2022, as the result of the early
termination of a real property lease.
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 2021.
INTEREST EXPENSE (INCOME)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September
31,
|
|
Increase
|
|
|
|
2022
|
|
2021
|
|
Amount
|
|
%
|
|
Interest expense
attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
102,000
|
|
$
|
10,000
|
|
$
|
92,000
|
|
920.0
|
%
|
Amortization expense of
debt issue costs
|
|
|
4,000
|
|
|
4,000
|
|
|
—
|
|
—
|
|
Total
|
|
$
|
106,000
|
|
$
|
14,000
|
|
$
|
92,000
|
|
657.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September
30,
|
|
Increase
(decrease)
|
|
|
|
2022
|
|
2021
|
|
Amount
|
|
%
|
|
Interest expense
attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
239,000
|
|
$
|
28,000
|
|
$
|
211,000
|
|
753.6
|
%
|
PPP loan
|
|
|
—
|
|
|
(19,000)
|
|
|
19,000
|
|
100.0
|
|
Amortization expense of
debt issue costs
|
|
|
12,000
|
|
|
12,000
|
|
|
—
|
|
NA
|
|
Other
|
|
|
(7,000)
|
|
|
—
|
|
|
(7,000)
|
|
NA
|
|
Total
|
|
$
|
244,000
|
|
$
|
21,000
|
|
$
|
223,000
|
|
1061.9
|
%
|
Our average short-term borrowings during the three and
nine-month periods ended September 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, and the purchase and related costs
associated with the acquisition in the first quarter of 2022 of the
JGC business. Further, our borrowings increased to support the
working capital needs as a result of significant revenue growth.
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
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 recorded in connection with
federal income tax refunds received during the second quarter of
2022.
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
nine-month periods ended September 30,
2022, were an income tax benefit of 31.5%, and 12.8%,
respectively, compared to a tax benefit of 12.8% and of 23.9% for
the same three and nine-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:
|
|
|
|
|
|
|
|
|
September 30,
2022
|
|
December 31, 2021
|
Working
capital
|
|
$
|
22,125,000
|
|
$
|
24,598,000
|
Current
ratio
|
|
|
2.47 to 1
|
|
|
3.04 to 1
|
Shareholders'
equity
|
|
$
|
42,525,000
|
|
$
|
43,840,000
|
Credit facility
We and our 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 September 30, 2022, there was
$7,200,000 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 nine-month period ended September
30, 2022, cash provided by operating activities was
$1,305,000, compared to cash used by
operating activities during the nine-month period ended
September 30, 2021, of $1,610,000. At September 30, 2022, our consolidated cash balance
was $410,000, 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 September 30,
2022, was 16%, compared to 11.6% on December 31, 2021.
During the nine-month period ended September 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 nine-month period ended September 30, 2022, we used $1,222,000 for capital expenditures, compared to
$428,000 during the same period in
the prior year. Capital expenditures currently planned for
the remainder of 2022 are approximately $1,000,000, 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.
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 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.
For information relating to the products and services we offer,
please visit our website at www.pfina.com. From there you can link
to our subsidiary websites.
OTHER INFORMATION
P&F Industries Inc. has scheduled a conference call on
November 10, 2022 at 11:00 A.M. Eastern Time, to discuss its third
quarter 2022 results and financial condition. Investors and
other interested parties who wish to listen to or participate can
dial 1-866-580-3963. 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 November 11, 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 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;
- Exposure to fluctuations within the cost of raw materials;
- The strength of the retail economy in the United States and abroad;
- 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 ("2021 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
$)
|
September 30,
2022
|
December 31,
2021
|
|
(Unaudited)
|
(Audited)
|
Assets
|
|
|
Cash
|
|
$
|
410
|
|
|
$
|
539
|
|
Accounts receivable -
net
|
|
|
9,458
|
|
|
|
7,550
|
|
Inventories
|
|
|
24,731
|
|
|
|
24,021
|
|
Prepaid expenses and
other current assets
|
|
|
2,600
|
|
|
|
4,566
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
37,199
|
|
|
|
36,676
|
|
|
|
|
|
|
|
|
|
|
Net property and
equipment
|
|
|
8,846
|
|
|
|
8,080
|
|
Goodwill
|
|
|
4,808
|
|
|
|
4,447
|
|
Other intangible assets
- net
|
|
|
5,480
|
|
|
|
5,592
|
|
Deferred income taxes -
net
|
|
|
487
|
|
|
|
349
|
|
Right-of-use assets –
operating leases
|
|
|
3,189
|
|
|
|
2,969
|
|
Other assets –
net
|
|
|
65
|
|
|
|
77
|
|
Total
assets
|
|
$
|
60,074
|
|
|
$
|
58,190
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
8,087
|
|
|
$
|
5,765
|
|
Accounts
payable
|
|
|
3,056
|
|
|
|
2,920
|
|
Accrued compensation
and benefits
|
|
|
1,475
|
|
|
|
1,475
|
|
Accrued other
liabilities
|
|
|
1,630
|
|
|
|
1,078
|
|
Current leased
liabilities – operating leases
|
|
|
826
|
|
|
|
840
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
15,074
|
|
|
|
12,078
|
|
|
|
|
|
|
|
|
|
|
Noncurrent leased
liabilities – operating leases
|
|
|
2,399
|
|
|
|
2,176
|
|
Other
liabilities
|
|
|
76
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
17,549
|
|
|
|
14,350
|
|
|
|
|
|
|
|
|
|
|
Total shareholders'
equity
|
|
|
42,525
|
|
|
|
43,840
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
|
$
|
60,074
|
|
|
$
|
58,190
|
|
|
|
|
|
|
|
|
|
|
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
|
|
|
|
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
(In Thousand
$)
|
2022
|
2021
|
2022
|
2021
|
|
|
|
|
|
Net revenue
|
$
|
14,516
|
$
|
12,985
|
$
|
46,347
|
$
|
40,520
|
|
|
9,669
|
|
9,011
|
|
31,353
|
|
27,062
|
Gross profit
|
4,847
|
3,974
|
14,994
|
13,458
|
Selling
|
5,084
|
4,734
|
15,736
|
15,183
|
Operating
loss
|
(237)
|
(760)
|
(742)
|
(1,725)
|
Other (expense)
income
|
(3)
|
---
|
(24)
|
2,929
|
(Loss) gain on sale of
property and equipment
|
---
|
(67)
|
5
|
(67)
|
Interest
expense
|
(106)
|
(14)
|
(244)
|
(21)
|
(Loss) income before
income taxes
|
(346)
|
(841)
|
(1,005)
|
1,116
|
Income tax
benefit
|
109
|
108
|
129
|
267
|
Net (loss)
income
|
$
|
(237)
|
$
|
(733)
|
$
|
(876)
|
$
|
1,383
|
P&F INDUSTRIES, INC. AND
SUBSIDIARIES
|
|
Nine months
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
ended September 30,
|
(In Thousands $)
|
|
2022
|
|
|
|
2021
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(876)
|
|
|
$
|
1,383
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash and other
charges:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,270
|
|
|
|
1,345
|
Amortization of other intangible assets
|
|
|
514
|
|
|
|
474
|
Rent expense from leased obligations
|
|
|
710
|
|
|
|
670
|
Amortization of debt issue costs
|
|
|
12
|
|
|
|
12
|
Amortization of consideration payable to a
customer
|
|
|
157
|
|
|
|
202
|
Provision for losses on (recovery of) accounts
receivable
|
|
|
(33)
|
|
|
|
19
|
Stock-based compensation
|
|
|
1
|
|
|
|
4
|
Stock-based compensation – exercise of options
|
|
|
38
|
|
|
|
---
|
Restricted stock-based compensation
|
|
|
36
|
|
|
|
35
|
Forgiveness of PPP loan
|
|
|
---
|
|
|
|
(2,929))
|
Deferred income taxes
|
|
|
(129)
|
|
|
|
(267))
|
(Gain) loss on sale of fixed assets
|
|
|
(5)
|
|
|
|
33
|
Gain on early termination of lease
|
|
|
(19)
|
|
|
|
---
|
Fair value adjustment of assets held for sale
|
|
|
---
|
|
|
|
40
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,262)
|
|
|
|
(1,007)
|
Inventories
|
|
|
(554)
|
|
|
|
(3,274)
|
Prepaid expenses and other current assets
|
|
|
1,608
|
|
|
|
248
|
Accounts payable
|
|
|
(45)
|
|
|
|
1,406
|
Accrued compensation and benefits
|
|
|
28
|
|
|
|
711
|
Accrued other liabilities and other current
liabilities
|
|
|
582
|
|
|
|
(14)
|
Operating lease liabilities
|
|
|
(7032)
|
|
|
|
(665)
|
Other liabilities
|
|
|
(25)
|
|
|
|
(36)
|
Total
adjustments
|
|
|
2,181
|
|
|
|
(2,993)
|
Net cash provided by
(used in) operating activities
|
|
|
1,305
|
|
|
|
(1,610)
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
$
|
(1,222)
|
|
|
$
|
(428)
|
Proceed from sale of
fixed assets
|
|
|
---
|
|
|
|
28
|
Purchase of net assets
of Jackson Gear Company business
|
|
|
(2,300
|
|
|
|
—
|
Net cash used in
investing activities
|
|
|
(3,522)
|
|
|
|
(400)
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
Proceeds from exercise
of stock options
|
|
|
2
|
|
|
|
—
|
Dividend
Payment
|
|
|
(160)
|
|
|
|
—
|
Net payments relating
to short-term borrowings
|
|
|
2,323
|
|
|
|
1,921
|
Net cash used in financing activities
|
|
|
2,165
|
|
|
|
1,921
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash
|
|
|
(77)
|
|
|
|
(26)
|
Net decrease in
cash
|
|
|
(129)
|
|
|
|
(115)
|
Cash at beginning of
period
|
|
|
539
|
|
|
|
904
|
Cash at end of
period
|
|
$
|
410
|
|
|
$
|
789
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
213
|
|
|
$
|
25
|
|
|
Taxes
|
|
$
|
126
|
|
|
|
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
|
|
|
$
|
320
|
|
|
ROU adjustment due to
early termination
|
|
$
|
359
|
|
|
$
|
—
|
|
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
NON-GAAP FINANCIAL
MEASURE AND RECONCILIATION
|
|
|
|
COMPUTATION OF (EBITDA) - EARNINGS
(LOSS) BEFORE INTEREST, TAXES, DEPRECIATION, AND
AMORIZATION
|
|
(UNAUDITED)
|
|
|
|
|
|
(In Thousands
$)
|
|
For the three-month
periods ended
September 30,
|
For the nine-month
periods ended
September
30,
|
|
|
|
|
2022
|
|
|
|
2021
|
|
|
|
2022
|
|
|
2021
|
|
Net (loss) income
(2)
|
|
$
|
(237)
|
|
|
|
(733)
|
|
|
$
|
(876)
|
|
|
1,383
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation &
amortization (3)
|
|
|
828
|
|
|
|
893
|
|
|
|
2,664
|
|
|
2,703
|
|
Interest
expense
|
|
|
106
|
|
|
|
14
|
|
|
|
244
|
|
|
21
|
|
Income tax
benefit
|
|
|
(109)
|
|
|
|
(108)
|
|
|
|
(129)
|
|
|
(267))
|
|
|
|
|
825
|
|
|
|
799
|
|
|
|
2,779
|
|
|
2,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1)
|
|
$
|
588
|
|
|
|
66
|
|
|
$
|
1,903
|
|
|
3,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
(2)
|
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.
Included in the
2021 three and nine-month net income values is the forgiveness of
the $2,929,200 PPP loan.
|
|
(3)
|
Includes depreciation,
and amortization of: (a) intangible assets; (b) operating lease
assets; (c) debt issue costs, and (d) consideration payable to a
customer.
|
View original
content:https://www.prnewswire.com/news-releases/pf-industries-inc-reports-results-for-the-three-and-nine-month-periods-ended-september-30-2022-and-announces-special-dividend-301673863.html
SOURCE P&F Industries, Inc.