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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:
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 | 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. |
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SOURCE P&F Industries, Inc.