MELVILLE, N.Y., Aug. 10,
2023 /PRNewswire/ -- P&F Industries, Inc.
(NASDAQ: PFIN) today announced its results from operations for the
three and six-month periods ended June 30,
2023. The Company is reporting net revenue of $16,163,000 and $31,906,000, respectively, for the three and
six-month periods ended June 30,
2023, compared to $17,810,000
and $31,831,000, respectively, for
same periods in 2022. For the three-month period ended
June 30, 2023, the Company is
reporting net income before income taxes of $356,000, compared to net income before income
taxes of $55,000, for the three-month
period ended June 30, 2022. For
the six-month period ended June 30,
2023, the Company is reporting net income before income
taxes of $850,000, compared to a net
loss of $659,000 for the six-month
period ended June 30, 2022. For
the three and six-month periods ended June
30, 2023, the Company is reporting net income after taxes of
$237,000 and $574,000, respectively, compared to net losses
after taxes of $21,000 and
$639,000, respectively, for the same
period in 2022. The Company's basic and diluted earnings per
share for the three and six-month periods ended June 30, 2023, were $0.07 and $0.18,
respectively, compared to basic and diluted loss per share of
$0.01 and $0.20 for the same three and six-month periods in
2022.
Richard Horowitz, the Company's
Chairman of the Board, Chief Executive Officer and President
commented, "I am pleased to report that our net income continues to
show improvement over the prior year. Despite a decline in
revenue, stronger gross margin and lower operating expenses enabled
us to generate greater net income, compared to a net loss in the
second quarter of 2022. Hy-Tech and Florida Pneumatic strengthened
their respective gross margins by 8.1 and 3.9 percentage points
this quarter, compared to the same period one year ago. These
improvements were driven by, among other things, pricing, and
improved manufacturing efficiencies."
Mr. Horowitz continued, "Our second quarter consolidated revenue
declined 9.2%. The primary factor causing this decline was Florida
Pneumatic's retail customer's decision to reduce the number of
stock-keeping units and associated floor space.
However, as a result, we reduced our net inventory by $2,558,000 from March 31,
2023, and by $3,395,000 from
December's level. Partially offsetting Florida Pneumatic's
revenue decline, Hy-Tech's revenue this quarter increased
$174,000 over the same period in
2022. 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 such likely head winds caused by
rising inflation, a possible global recession, and other
geo-political events. We intend to do our utmost to continue
to serve our customers and improve shareholder value."
The Company will be reporting the following:
TRENDS AND UNCERTAINTIES
INTERNATIONAL SUPPLY CHAIN
Although much less than during the three and six-month periods
ended June 30, 2022, we continue to
encounter delays in receiving inventory from our Asian suppliers,
which leads to intermittent shortages of inventory. Our ocean
and domestic freight costs, which had increased significantly
during the COVID-19 pandemic, are slowly approaching pre-pandemic
levels.
DOMESTIC TRANSPORTATION COSTS
Although domestic transportation costs and associated issues
discussed in prior filings have improved, compared to the prior
year, they remain above pre-pandemic levels. The availability
of port to warehouse transportation services has also improved
compared to 2022.
At the present time, we believe that some or all of the
above-mentioned uncertainties may continue for some time. While we
believe that most of the related costs associated with the issues
discussed above have been factored into our selling price, there is
no assurance that we will be able to pass through any future
additional direct costs or costs incurred related to our
international supply chain issues in the future.
IMPACT OF INFLATION/GEOPOLITICAL ISSUES
We believe that the current and projected levels of inflation,
as well as a possible economic recession will likely continue to
have an effect on our manufacturing and operating costs. At the
present time, we are unable to reasonably estimate the impact
inflation and geo-political issues will have on our results of
operations for the foreseeable future.
We believe that our results of operations and financial
condition during the three and six-month periods ended June 30, 2023 have not been impacted by the
Russia-Ukraine conflict; however, we cannot predict
what impact this conflict may have on our results in the
future.
BOEING
Sales of aircraft by Boeing, a Jiffy customer, have been
depressed since the two 737 MAX crashes in 2018 and 2019.
Further, the Federal Aviation Administration grounded all 737 MAX
aircraft for several quarters. These events, coupled with the
COVID-19 pandemic, reduced Boeing's aircraft production levels to
well below those prior to the pandemic and the grounding. In 2019,
Boeing produced 52 737 MAX aircraft per month. It is
currently still producing below that level. Per Boeing, it plans to return to those levels
in 2025 and expects to add a fourth 737 MAX production line in
2024. We believe that these stated plans along with the return of
the Boeing 787 aircraft shipments, which has also had production
delays to full production, will be beneficial to P&F's
aerospace sales in the next several years.
TECHNOLOGIES
We believe that over time, several newer technologies and
features will have a greater effect on the market for our
traditional pneumatic tool offerings. So far, the greatest impact
has been on the automotive aftermarket with the advent of advanced
cordless operated tools. Currently, we do not offer a cordless tool
to the automotive aftermarket. However, with respect to the
industrial market, we have developed for one of our largest OEM
customers a tool mechanism that is incorporated into a major line
of their cordless power tools. These tools have been in full
production with our supplied system for several years and our sales
of these products have continued to grow over that time. We
continue to analyze the practicality of developing or incorporating
newer technologies in our tool platforms for other markets as well.
This includes adding our internally developed mechanisms to
existing cordless power sources as well as producing complete
cordless tool systems. In addition, we have recently developed a
cordless installation tool for the aerospace market. We have begun
taking orders for this product and we expect to introduce an
additional version later in 2023.
OTHER MATTERS
Other than the trends and uncertainties mentioned above, or
matters that may be discussed below, there are no major trends or
uncertainties that had, or we could reasonably expect to have a
material impact on our revenue and operations, 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.
REVENUE
The tables below provide an analysis of our net revenue for the
three-month periods ended June 30,
2023, and 2022:
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June
30,
|
|
|
|
|
|
|
|
Increase
(Decrease)
|
|
|
|
2023
|
|
2022
|
|
$
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
10,845,000
|
|
$
|
12,666,000
|
|
$
|
(1,821,000)
|
|
(14.4)
|
%
|
Hy-Tech
|
|
|
5,318,000
|
|
|
5,144,000
|
|
|
174,000
|
|
3.4
|
|
Consolidated
|
|
$
|
16,163,000
|
|
$
|
17,810,000
|
|
$
|
(1,647,000)
|
|
(9.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June
30,
|
|
|
|
|
|
|
|
Increase
(Decrease)
|
|
|
|
2023
|
|
2022
|
|
$
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
20,769,000
|
|
$
|
22,947,000
|
|
$
|
(2,178,000)
|
|
(9.5)
|
%
|
Hy-Tech
|
|
|
11,137,000
|
|
|
8,884,000
|
|
|
2,253,000
|
|
25.4
|
|
Consolidated
|
|
$
|
31,906,000
|
|
$
|
31,831,000
|
|
$
|
75,000
|
|
0.2
|
%
|
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,
|
|
|
|
2023
|
|
2022
|
|
Increase (decrease)
|
|
|
|
|
|
|
Percent of
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
Automotive
|
|
$
|
3,503,000
|
|
32.3
|
%
|
$
|
3,853,000
|
|
30.4
|
%
|
$
|
(350,000)
|
|
(9.1)
|
%
|
Retail
|
|
|
2,920,000
|
|
26.9
|
|
|
4,826,000
|
|
38.1
|
|
|
(1,906,000)
|
|
(39.5)
|
|
Industrial
|
|
|
1,337,000
|
|
12.3
|
|
|
1,705,000
|
|
13.5
|
|
|
(368,000)
|
|
(21.6)
|
|
Aerospace
|
|
|
2,963,000
|
|
27.3
|
|
|
2,179,000
|
|
17.2
|
|
|
784,000
|
|
36.0
|
|
Other
|
|
|
122,000
|
|
1.2
|
|
|
103,000
|
|
0.8
|
|
|
19,000
|
|
18.4
|
|
Total
|
|
$
|
10,845,000
|
|
100.0
|
%
|
$
|
12,666,000
|
|
100.0
|
%
|
$
|
(1,821,000)
|
|
(14.4)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
2023
|
|
2022
|
|
Increase (decrease)
|
|
|
|
|
|
|
Percent of
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
Automotive
|
|
$
|
6,762,000
|
|
32.6
|
%
|
$
|
7,734,000
|
|
33.7
|
%
|
$
|
(972,000)
|
|
(12.6)
|
%
|
Retail
|
|
|
5,470,000
|
|
26.3
|
|
|
7,845,000
|
|
34.2
|
|
|
(2,375,000)
|
|
(30.3)
|
|
Industrial
|
|
|
2,914,000
|
|
14.0
|
|
|
3,111,000
|
|
13.6
|
|
|
(197,000)
|
|
(6.3)
|
|
Aerospace
|
|
|
5,374,000
|
|
25.9
|
|
|
3,994,000
|
|
17.4
|
|
|
1,380,000
|
|
34.6
|
|
Other
|
|
|
249,000
|
|
1.2
|
|
|
263,000
|
|
1.1
|
|
|
(14,000)
|
|
(5.3)
|
|
Total
|
|
$
|
20,769,000
|
|
100.0
|
%
|
$
|
22,947,000
|
|
100.0
|
%
|
$
|
(2,178,000)
|
|
(9.5)
|
%
|
Automotive revenue declined this quarter, compared to the same
period in 2022, due primarily to an across-the-board price increase
in all distribution channels in order to address rising input
costs. This change in pricing strategy led to a decline in the
number of unit sales and thus overall revenue in this category.
However, Automotive gross margin improved as a result of this
change. With respect to our Retail revenue, during the second
quarter of 2022 we shipped a stocking rollout, with no such new
product rollout occurring during 2023. Additionally, The Home Depot
("THD") continued its efforts that began earlier this year of: a)
reducing the number of individual stock keeping units offered, as
well as the quantity of each; b) reducing the display area of their
pneumatic tools, and c) increased pressure from on-line
distributors, as well as and other "brick and mortar" retailers
expanding their presence in this product line. Partially offsetting
the above-mentioned declines our Aerospace revenue improved 36.0%
when comparing the second quarter of 2023 to the same period in
2022. This improvement was driven by, among other factors,
increased demand for new consumable parts, that Jiffy has begun to
market, and improved market conditions in both the commercial and
military aviation. Lastly, we believe the fall-off in
Industrial revenue was driven by economic uncertainty and concerns
of rising inflation and concerns of a possible recession.
Florida Pneumatic's six-month revenue analysis is quite similar
to that of its second quarter 2023. When compared to the
six-month period ended June 30, 2022,
Automotive revenue declined 12.6%, due primarily to our revised
pricing and marketing changes put into effect mid-2022. As will be
discussed later in this discussion and analysis, this change
contributed to an overall improvement in Florida Pneumatic's gross
margin. The significant factors causing the decline in our
Retail revenue for the six-month periods ended June 30, 2023, compared to the same period in
2022 was the product rollout that occurred in the second quarter of
2022 with no such event occurring during 2023. This
year-over-year decline was also driven by THD's decisions to lower
its inventory of floor display space this year. During the
six-month period ended June 30, 2023,
Aerospace revenue increased 34.6%, when compared to the same period
in the prior year. The improvement was driven by resurgence
in both the commercial and military components of the Aerospace
sector, and increased demand for the new, consumable parts that
Jiffy has begun to market.
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,
|
|
|
|
2023
|
|
2022
|
|
Increase (decrease)
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
OEM
|
|
$
|
2,676,000
|
|
50.3
|
%
|
$
|
2,542,000
|
|
49.4
|
%
|
$
|
134,000
|
|
5.3
|
%
|
ATP
|
|
|
808,000
|
|
15.2
|
|
|
945,000
|
|
18.4
|
|
|
(137,000)
|
|
(14.5)
|
|
PTG
|
|
|
1,742,000
|
|
32.8
|
|
|
1,583,000
|
|
30.8
|
|
|
159,000
|
|
10.0
|
|
Other
|
|
|
92,000
|
|
1.7
|
|
|
74,000
|
|
1.4
|
|
|
18,000
|
|
24.3
|
|
Total
|
|
$
|
5,318,000
|
|
100.0
|
%
|
$
|
5,144,000
|
|
100.0
|
%
|
$
|
174,000
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June
30,
|
|
|
|
2023
|
|
2022
|
|
Increase
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
|
Revenue
|
|
revenue
|
|
Revenue
|
|
revenue
|
|
$
|
|
%
|
|
OEM
|
|
$
|
5,749,000
|
|
51.6
|
%
|
$
|
4,507,000
|
|
50.7
|
%
|
$
|
1,242,000
|
|
27.6
|
%
|
ATP
|
|
|
1,505,000
|
|
13.5
|
|
|
1,687,000
|
|
19.0
|
|
|
(182,000)
|
|
(10.8)
|
|
PTG
|
|
|
3,674,000
|
|
33.0
|
|
|
2,522,000
|
|
28.4
|
|
|
1,152,000
|
|
45.7
|
|
Other
|
|
|
209,000
|
|
1.9
|
|
|
168,000
|
|
1.9
|
|
|
41,000
|
|
24.4
|
|
Total
|
|
$
|
11,137,000
|
|
100.0
|
%
|
$
|
8,884,000
|
|
100.0
|
%
|
$
|
2,253,000
|
|
25.4
|
%
|
The net improvement in Hy-Tech's revenue this quarter, compared
to the same three-month period in 2022, was driven by the 10%
growth of PTG's revenue. This improvement is due to improved
manufacturing efficiency and an increase in new business.
Additionally, its OEM revenue improved 5.3%, due primarily to
improving market conditions. The above improvements were partially
offset by a decline in its ATP revenue. This decline in ATP revenue
is attributable to our decision to focus our marketing efforts on
OEM and PTG product offerings. The increase in Hy-Tech's Other
revenue was due to stronger NUMATX and general machining revenue
growth this quarter, compared to the same three-month period in
2022.
The 25.4% year-to-date increase in Hy-Tech's total revenue was
primarily driven by its first quarter results. The approximate
$1.2 million increase in OEM revenue
was driven by growth in certain markets that are served by a number
of Hy-Tech's OEM customers. The markets served by our customers
include multiple industrial applications, as well as the tool
rental market. PTG revenue for the six-month period ended
June 30, 2023, increased 45.7% when
compared to the same period in the prior year. This
improvement was driven by the acquisition of the Jackson Gear
Company business acquired in January
2022. The increase in Hy-Tech's Other revenue was due
to stronger NUMATX and general machining revenue growth this
quarter, compared to the same three-month period in 2022. The
modest decline in ATP revenue is attributable to our decision to
focus our marketing efforts on OEM and PTG product offerings.
GROSS MARGIN/PROFIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June
30,
|
|
Increase
(decrease)
|
|
|
|
2023
|
|
2022
|
|
Amount
|
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
4,511,000
|
|
$
|
4,771,000
|
|
$
|
(260,000)
|
|
|
(5.4)
|
%
|
As percent of
respective revenue
|
|
|
41.6
|
%
|
|
37.7
|
%
|
|
3.9
|
%
|
pts
|
|
|
Hy-Tech
|
|
$
|
1,325,000
|
|
$
|
865,000
|
|
$
|
460,000
|
|
|
53.2
|
|
As percent of
respective revenue
|
|
|
24.9
|
%
|
|
16.8
|
%
|
|
8.1
|
%
|
pts
|
|
|
Total
|
|
$
|
5,836,000
|
|
$
|
5,636,000
|
|
$
|
200,000
|
|
|
3.5
|
%
|
As percent of
respective revenue
|
|
|
36.1
|
%
|
|
31.6
|
%
|
|
4.5
|
%
|
pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June
30,
|
|
Increase
(decrease)
|
|
|
|
2023
|
|
2022
|
|
Amount
|
|
|
%
|
|
Florida
Pneumatic
|
|
$
|
8,787,000
|
|
$
|
8,721,000
|
|
$
|
66,000
|
|
|
0.8
|
%
|
As percent of
respective revenue
|
|
|
42.3
|
%
|
|
38.0
|
%
|
|
4.3
|
%
|
pts
|
|
|
Hy-Tech
|
|
$
|
2,791,000
|
|
$
|
1,426,000
|
|
$
|
1,365,000
|
|
|
95.7
|
|
As percent of
respective revenue
|
|
|
25.1
|
%
|
|
16.1
|
%
|
|
9.0
|
%
|
pts
|
|
|
Total
|
|
$
|
11,578,000
|
|
$
|
10,147,000
|
|
$
|
1,431,000
|
|
|
14.1
|
%
|
As percent of
respective revenue
|
|
|
36.3
|
%
|
|
31.9
|
%
|
|
4.4
|
%
|
pts
|
|
|
Florida Pneumatic's gross margin for the three-month period
ended June 30, 2023, improved
compared to the same period in the prior year principally due to a
shift away from their lower margin Retail and Automotive product
lines to the higher margin, Industrial and Aerospace categories.
Further, during the latter half of 2022, we raised prices in all
product categories, which contributed to the improved gross
margin.
During the second fiscal quarter of 2023 Hy-Tech's gross margin
increased 8.1 percentage points, when compared to the same period
in 2022. This improvement was due primarily to
product/customer mix. Additionally, as was the case for our first
quarter 2023 results, Hy-Tech continued to pursue cost and expense
reductions, and coupled with revisions in pricing structure,
enabled Hy-Tech to improve its blended gross margin, thus
contributing to the overall gross margin improvement.
As with its results for the quarter, Florida Pneumatic's gross
margin for the six-month period ended June
30, 2023, improved compared to the same period in the prior
year principally due to a shift away from their lower margin
product lines to the higher margin, categories. Further, during the
latter half of 2022, we raised prices in all product categories,
which contributed to the improved gross margin. This change in
marketing strategy and pricing adjustments led to a 4.3 percentage
point year-to-date improvement over the same period in the prior
year.
The improvement in Hy-Tech's six-month gross margin is due
primarily to product/customer mix. Further, during this period,
Hy-Tech was able to reduce manufacturing costs and expenses. Also
as noted above, beginning in 2022, Hy-Tech modified its pricing
structure, which enabled Hy-Tech to improve its gross margin.
Additionally, Hy-Tech will continue to focus on improving
manufacturing overhead absorption, particularly at its PTG
facility.
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 2023, our SG&A was $5,368,000 compared to $5,479,000, incurred during the same three-month
period in 2022. Significant components to the net change include a)
compensation expenses increased $6,000; b) stock-based compensation decreased
$38,000; c) professional fees and
other expenses (i.e. accounting, legal, consulting, etc.) had net
increase of $186,000; and d) variable
expenses declined $281,000. Variable
expenses include among other items, commissions, freight out,
travel, advertising, shipping supplies and warranty costs. Driving
this decline was lower advertising and shipping costs at Florida
Pneumatic, caused primarily by lower Retail revenue this quarter
and a reduction in discretionary Automotive advertising expenses,
compared to the same period a year ago.
Our SG&A for the six-month period ended June 30, 2023, was $10,543,000, compared to $10,652,000 for the same six-month period a year
ago. Key components of this net decline include among other
things a reduction in variable expenses of $315,000, due primarily to lower Retail sales,
and lower stock-based compensation of $39,000. The above-mentioned reductions
were partially offset by increases in compensation expenses of
$112,000, depreciation and
amortization expense of $70,000, and
$100,000 of professional fees and
other expenses.
OTHER EXPENSE (INCOME) – net
During the three-month period ended June
30, 2023, we recognized a net expense of $4,000, which was primarily due to a loss on the
disposal of equipment. During the three-month period ended
March 31, 2023, we recognized a gain
of $21,000 from the sale of fully
depreciated equipment. Additionally, as a result of final
resolution of our Employee Retention Tax Credit ("ERTC") filing, we
recorded an additional $15,000 as
Other Income. The ERTC income is subject to federal and local
tax.
Other expense recorded during the three and six-month periods
ended June 30, 2022, consisted
primarily of adjustments to the fair value of certain assets during
the second quarter of 2022.
INTEREST – NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June
30,
|
|
(Increase) decrease
|
|
|
|
2023
|
|
2022
|
|
Amount
|
|
%
|
Interest expense
attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
112,000
|
|
$
|
89,000
|
|
$
|
(23,000)
|
|
(25.8)
|
%
|
Amortization expense of
debt issue costs
|
|
|
3,000
|
|
|
4,000
|
|
|
1,000
|
|
25.0
|
|
ERTC
interest
|
|
|
(8,000)
|
|
|
(7,000)
|
|
|
1,000
|
|
14.43
|
|
Total
|
|
$
|
107,000
|
|
$
|
86,000
|
|
$
|
(21,000)
|
|
(24.4)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June
30,
|
|
(Increase)
decrease
|
|
|
|
2023
|
|
2022
|
|
Amount
|
|
%
|
|
Interest expense
attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
236,000
|
|
$
|
137,000
|
|
$
|
(99,000)
|
|
(72.3)
|
%
|
Amortization expense of
debt issue costs
|
|
|
22,000
|
|
|
8,000
|
|
|
(14,000)
|
|
(175.0)
|
|
ERTC
interest
|
|
|
(42,000)
|
|
|
(7,000)
|
|
|
35,000
|
|
500.0
|
|
Total
|
|
$
|
216,000
|
|
$
|
138,000
|
|
$
|
(78,000)
|
|
(56.5)
|
%
|
The most significant factor causing the increase in our
short-term borrowings interest expense this quarter, compared to
the same three-month period in 2022, was the increase SOFR and
prime rates. Most of our borrowings are SOFR plus Applicable
Margin. The Applicable Margin, as defined in our Credit
Agreement, during the three-month period ended June 30, 2023, was 2.10% applied to all SOFR
borrowings and 1.10% applied to Base Rate borrowings. The
Applicable Margins that were added to LIBOR and Base Rate
borrowings during the three-month period ended June 30, 2022, were 1.50% and 0.50%,
respectively. Driven by the general increase in the cost of
short-term borrowing rates, during the three-month period ended
June 30, 2023, the SOFR ranged from
4.76% to 5.15%, compared to LIBOR, which we were using during the
second quarter of 2022 that ranged from 0.43% to 1.51%. The
Prime Rate during the three-month period ended June 30, 2023, ranged from 8.00% to 8.25%,
compared to a range of 3.5% to 4.00%, during the same period a year
ago.
The average balance of short-term borrowings during the
three-month periods ended June 30,
2023, and 2022, were $7,060,000, and $11,544,000, respectively.
We and our bank amended the Credit Agreement, and as a result,
we wrote off the balance of the unamortized debt issue cost as of
the date of Amendment No.11 during the first quarter of 2023.
The Debt issue costs incurred in connection with the
above-referenced Amendment No. 11, are being amortized through the
expiration date of credit Agreement, which is February
2027.
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,
2023, were approximately 33.4% and 32.5%, respectively, and
for the same periods in 2022, the effective tax rates were a tax
expense of 138.2% and a tax benefit of 3.0%, respectively. The
effective tax rates for all periods presented were impacted
primarily by state taxes and non-deductible expenses.
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 source of funds
is our Revolver loan with our bank.
We gauge our liquidity and financial stability by various
measurements, some of which are shown in the following table:
|
|
|
|
|
|
|
|
|
June 30,
2023
|
|
December 31, 2022
|
Working
capital
|
|
$
|
21,245,000
|
|
$
|
20,838,000
|
Current
ratio
|
|
|
2.86 to 1
|
|
|
2.44 to 1
|
Shareholders'
equity
|
|
$
|
42,309,000
|
|
$
|
41,956,000
|
Credit Agreement
We and our bank entered into an amendment to the Credit Facility
that, among other things, extended the expiration date to
February 8, 2027.
At June 30, 2023, there was
approximately $9,324,000 available to
us under the Revolver arrangement.
Cash Flows
For the six-month period ended June 30,
2023, cash provided by operating activities was $4,234,000, compared to cash used in operating
activities for the six-month period ended June 30, 2022, of $1,154,000. At June 30,
2023, and December 31,2022,
our consolidated cash balance was $657,000, and $667,000, 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.
Thus, nearly all cash on hand represents funds to cover checks
issued but not yet presented for payment.
Our total debt to total book capitalization (total debt divided
by total debt plus equity) at June 30,
2023, was 11.2%, compared to 15.3% at December 31, 2022.
During the six-month period ended June
30, 2023, we used $1,682,000
for capital expenditures, compared to $923,000 during the same period in the prior
year. Capital expenditures currently planned for the
remainder of 2023 are approximately $1,300,000, 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 are primarily sourced from the Credit
Agreement and cash from operations.
Should the need arise whereby the current Credit Agreement is
insufficient, we believe we could obtain additional funds based on
the value of our real property and believe the borrowing under the
current Agreement could be increased.
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 2023 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 August 11, 2023.
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 2023 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 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;
- Risks related to the global outbreak of COVID-19 and other
public health crises;
- The threat of terrorism and related political instability and
economic uncertainty;
- 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 the 2022
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.
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.
Joseph A. Molino, Jr.
Chief Financial Officer
631-694-9800
www.pfina.com
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
|
|
|
|
CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
(In Thousands
$)
|
June 30,
2023
|
December 31,
2022
|
|
(Unaudited)
|
(Audited)
|
Assets
|
|
|
Cash
|
|
$
|
657
|
|
|
$
|
667
|
|
Accounts receivable -
net
|
|
|
9,885
|
|
|
|
7,370
|
|
Inventories
|
|
|
21,096
|
|
|
|
24,491
|
|
Prepaid expenses and
other current assets
|
|
|
1,018
|
|
|
|
2,753
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
32,656
|
|
|
|
35,281
|
|
|
|
|
|
|
|
|
|
|
Net property and
equipment
|
|
|
10,008
|
|
|
|
9,363
|
|
Goodwill
|
|
|
4,829
|
|
|
|
4,822
|
|
Other intangible assets
- net
|
|
|
4,991
|
|
|
|
5,326
|
|
Deferred income taxes -
net
|
|
|
431
|
|
|
|
629
|
|
Right-of-use assets –
operating leases
|
|
|
5,103
|
|
|
|
5,521
|
|
Other assets –
net
|
|
|
75
|
|
|
|
62
|
|
Total
assets
|
|
$
|
58,093
|
|
|
$
|
61,004
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
5,340
|
|
|
$
|
7,570
|
|
Accounts
payable
|
|
|
1,958
|
|
|
|
3,094
|
|
Accrued compensation
and benefits
|
|
|
1,500
|
|
|
|
1,757
|
|
Accrued other
liabilities
|
|
|
1,796
|
|
|
|
1,002
|
|
Current leased
liabilities – operating leases
|
|
|
817
|
|
|
|
1,020
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
11,411
|
|
|
|
14,443
|
|
|
|
|
|
|
|
|
|
|
Noncurrent leased
liabilities – operating leases
|
|
|
4,317
|
|
|
|
4,535
|
|
Other
liabilities
|
|
|
56
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
15,784
|
|
|
|
19,048
|
|
|
|
|
|
|
|
|
|
|
Total shareholders'
equity
|
|
|
42,309
|
|
|
|
41,956
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
|
$
|
58,093
|
|
|
$
|
61,004
|
|
|
|
|
|
|
|
|
|
|
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
|
|
|
|
|
|
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|
(In Thousands
$)
|
2023
|
2022
|
2023
|
2022
|
|
|
|
|
|
Net revenue
|
$
|
16,163
|
$
|
17,810
|
$
|
31,906
|
$
|
31,831
|
Cost of
sales
|
10,328
|
12,174
|
20,328
|
21,684
|
Gross profit
|
5,835
|
5,636
|
11,578
|
10,147
|
Selling, general &
administrative exp
|
5,368
|
5,479
|
10,543
|
10,652
|
Operating income
(loss)
|
467
|
157
|
1,035
|
(505)
|
Other (expense)
income
|
(4)
|
(16)
|
31
|
(16)
|
Interest
expense
|
(107)
|
(86)
|
(216)
|
(138)
|
Income (loss) before
income tax
|
356
|
55
|
850
|
(659)
|
Income tax (expense)
benefit
|
(119)
|
(76)
|
(276)
|
20
|
Net income
(loss)
|
$
|
237
|
$
|
(21)
|
$
|
574
|
$
|
(639)
|
|
|
|
|
|
|
|
|
|
|
P&F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
Six
months
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
|
|
ended June
30,
|
|
(In Thousands
$)
|
|
2023
|
|
|
2022
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
574
|
|
|
$
|
(639)
|
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash and other
charges:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,020
|
|
|
|
881
|
|
Amortization of other
intangible assets
|
|
|
346
|
|
|
|
341
|
|
Amortization of
operating lease assets
|
|
|
474
|
|
|
|
471
|
|
Amortization of debt
issue costs
|
|
|
21
|
|
|
|
8
|
|
Amortization of
consideration payable to a customer
|
|
|
—
|
|
|
|
135
|
|
Provision for losses on
accounts receivable
|
|
|
47
|
|
|
|
42
|
|
Stock-based
compensation
|
|
|
16
|
|
|
|
1
|
|
Stock-based
compensation – exercise of options
|
|
|
—
|
|
|
|
38
|
|
Restricted stock-based
compensation
|
|
|
14
|
|
|
|
19
|
|
Deferred income
taxes
|
|
|
287
|
|
|
|
(20)
|
|
Gain on sale of fixed
assets
|
|
|
(16)
|
|
|
|
(5)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(2,547)
|
|
|
|
(2,276)
|
|
Inventories
|
|
|
3,445
|
|
|
|
(353)
|
|
Prepaid expenses and
other current assets
|
|
|
1,735
|
|
|
|
1,302
|
|
Accounts
payable
|
|
|
(1,138)
|
|
|
|
(778)
|
|
Accrued compensation
and benefits
|
|
|
(261)
|
|
|
|
681
|
|
Accrued other
liabilities and other current liabilities
|
|
|
708
|
|
|
|
(524)
|
|
Payments on lease
liabilities
|
|
|
(477)
|
|
|
|
(461)
|
|
Other
liabilities
|
|
|
(14)
|
|
|
|
(17)
|
|
Total
adjustments
|
|
|
3,660
|
|
|
|
(515)
|
|
Net cash provided by
(used in) operating activities
|
|
|
4,234
|
|
|
|
(1,154)
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(1,682)
|
|
|
|
(923)
|
|
Proceeds from the sale
of fixed assets
|
|
|
34
|
|
|
|
—
|
|
Purchase of net assets
of Jackson Gear Company business
|
|
|
—
|
|
|
|
(2,300)
|
|
Net cash used in
investing activities
|
|
|
(1,648)
|
|
|
|
(3,223)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(320)
|
|
|
|
—
|
|
Proceeds from exercise
of stock options
|
|
|
—
|
|
|
|
2
|
|
Bank Financing
costs
|
|
|
(35)
|
|
|
|
—
|
|
Net payments relating
to short-term borrowings
|
|
|
(2,230)
|
|
|
|
4,304
|
|
Net cash (used in)
provided by financing activities
|
|
|
(2,585)
|
|
|
|
4,306
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash
|
|
|
(11)
|
|
|
|
(37)
|
|
Net decrease in
cash
|
|
|
(10)
|
|
|
|
(108)
|
|
Cash at beginning of
period
|
|
|
667
|
|
|
|
539
|
|
Cash at end of
period
|
|
$
|
657
|
|
|
$
|
431
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid
for:
|
|
|
|
|
|
|
Interest
|
|
$
|
255
|
|
|
$
|
114
|
|
Taxes
|
|
$
|
10
|
|
|
$
|
124
|
|
|
|
|
|
|
|
|
|
|
Noncash
information:
|
|
|
|
|
|
|
|
|
Right of Use ("ROU")
assets recognized for new operating lease liabilities
|
|
$
|
—
|
|
|
$
|
987
|
|
|
|
|
|
|
|
|
|
|
P & F
INDUSTRIES, INC. AND SUBSIDIARIES
|
|
NON-GAAP FINANCIAL
MEASURE AND RECONCILIATION
|
|
|
|
COMPUTATION OF (EBITDA) - EARNINGS
BEFORE INTEREST, TAXES, DEPRECIATION, AND
AMORTIZATION
|
|
|
|
(UNAUDITED)
|
|
|
|
|
|
(In Thousands
$)
|
|
For the three-month
periods ended
June 30,
|
For the six-month
periods ended
June
30,
|
|
|
|
|
2023
|
|
|
|
2022
|
|
|
|
2023
|
|
|
2022
|
|
Net income
(loss)
|
|
$
|
237
|
|
|
$
|
(21)
|
|
|
$
|
574
|
|
$
|
(639)
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
682
|
|
|
|
622
|
|
|
|
1,366
|
|
|
1,222
|
|
Interest expense
(income)
|
|
|
107
|
|
|
|
86
|
|
|
|
216
|
|
|
138
|
|
Income tax expense
(benefit)
|
|
|
119
|
|
|
|
76
|
|
|
|
276
|
|
|
(20)
|
|
|
|
|
908
|
|
|
|
784
|
|
|
|
1,858
|
|
|
1,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1)
|
|
$
|
1,145
|
|
|
$
|
763
|
|
|
$
|
2,432
|
|
$
|
701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
View original
content:https://www.prnewswire.com/news-releases/pf-industries-inc-reports-improved-results-for-the-three-and-six-month-periods-ended-june-30-2023-301897574.html
SOURCE P&F Industries, Inc.