-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BUtlsuFaZ+ZBAXA/+nAN9TzmnpMJwem7+oJjo+dCciTBNgkG/TbqY8VDV6ET5Sew 1aP6aa4ttIM6ihIn3NdPgQ== 0000912057-00-022170.txt : 20000509 0000912057-00-022170.hdr.sgml : 20000509 ACCESSION NUMBER: 0000912057-00-022170 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: P&F INDUSTRIES INC CENTRAL INDEX KEY: 0000075340 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 221657413 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05332 FILM NUMBER: 621415 BUSINESS ADDRESS: STREET 1: 300 SMITH ST CITY: FARMINGDALE STATE: NY ZIP: 11735 BUSINESS PHONE: 5166941800 FORMER COMPANY: FORMER CONFORMED NAME: PLASTICS & FIBERS INC DATE OF NAME CHANGE: 19671225 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------- FORM 10-Q --------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1 - 5332 P & F INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) DELAWARE 22-1657413 (State of incorporation) (I.R.S. Employer Identification Number) 300 SMITH STREET, FARMINGDALE, NEW YORK 11735 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (516) 694-1800 --------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES ( X ) NO ( ) As of May 5, 2000, there were outstanding 3,574,733 shares of the Registrant's Class A Common Stock, par value $1.00 per share. P & F INDUSTRIES, INC. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000 TABLE OF CONTENTS
PAGE ---- PART I Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 1 - 2 Consolidated Statements of Income for the three months ended March 31, 2000 and 1999 3 Consolidated Statement of Shareholders' Equity for the three months ended March 31, 2000 4 Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999 5 - 6 Notes to Consolidated Financial Statements 7 - 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 - 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 PART II Item 1. Legal Proceedings 16 Item 2. Changes in Securities and Use of proceeds 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17 EXHIBIT INDEX 18 - 19
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS P & F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) =======================================
MARCH 31, DECEMBER 31, 2000 1999 ------------ ------------ ASSETS ------ CURRENT: Cash $ 251,728 $ 1,305,351 Accounts receivable, less allowance for possible losses of $782,582 in 2000 and $767,456 in 1999 12,183,970 12,086,000 Inventories 23,895,374 20,614,501 Deferred income taxes 532,000 532,000 Prepaid expenses and other 527,794 570,914 ------------ ------------ TOTAL CURRENT ASSETS 37,390,866 35,108,766 ------------ ------------ PROPERTY AND EQUIPMENT: Land 1,182,938 1,182,939 Buildings and improvements 5,942,838 5,942,838 Machinery and equipment 11,293,944 11,078,539 ------------ ------------ 18,419,720 18,204,316 Less accumulated depreciation and amortization 7,555,409 7,200,142 ------------ ------------ NET PROPERTY AND EQUIPMENT 10,864,311 11,004,174 ------------ ------------ GOODWILL, net of accumulated amortization of $1,595,585 in 2000 and $1,514,476 in 1999 7,869,373 7,950,482 OTHER ASSETS 173,487 176,937 ------------ ------------ TOTAL ASSETS $ 56,298,037 $ 54,240,359 ============ ============
1 P & F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED) =======================================
MARCH 31, DECEMBER 31, 2000 1999 ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Short-term borrowings $ 8,000,000 $ 6,000,000 Accounts payable 5,934,339 5,592,249 Accruals: Compensation 975,416 2,474,519 Other 2,401,991 2,173,516 Current maturities of long-term debt 953,591 947,884 ------------ ------------ TOTAL CURRENT LIABILITIES 18,265,337 17,188,168 LONG-TERM DEBT, less current maturities 7,120,976 7,325,661 DEFERRED INCOME TAXES 702,000 702,000 ------------ ------------ 26,088,313 25,215,829 ------------ ------------ SHAREHOLDERS' EQUITY: Preferred stock - $10 par; authorized - 2,000,000 shares; no shares outstanding -- -- Common stock: Class A - $1 par; authorized - 7,000,000 shares; issued - 3,643,893 shares and 3,504,893 shares 3,643,893 3,504,893 Class B - $1 par; authorized - 2,000,000 shares; no shares issued or outstanding -- -- Additional paid-in capital 8,444,289 8,282,602 Retained earnings 18,812,542 17,735,535 Treasury stock, at cost (69,160 shares) (691,000) (498,500) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 30,209,724 29,024,530 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 56,298,037 $ 54,240,359 ============ ============
2 P & F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) =======================================
THREE MONTHS ENDED MARCH 31, ------------------ 2000 1999 ------------ ------------ REVENUES: Net sales $ 20,685,575 $ 17,876,353 Other 111,381 231,915 ------------ ------------ 20,796,956 18,108,268 ------------ ------------ COSTS AND EXPENSES: Cost of sales 14,402,372 12,546,061 Selling, administrative and general 4,325,835 3,721,495 Interest - net 334,742 288,305 ------------ ------------ 19,062,949 16,555,861 ------------ ------------ INCOME BEFORE TAXES ON INCOME 1,734,007 1,552,407 TAXES ON INCOME 657,000 591,000 ------------ ------------ NET INCOME $ 1,077,007 $ 961,407 ============ ============ Weighted average common shares outstanding: Basic 3,476,865 3,248,247 Diluted 3,669,512 3,729,720 Earnings per share of common stock: Basic $ .31 $ .30 Diluted $ .29 $ .26
3 P & F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) ==============================================
ADDITIONAL COMMON PAID-IN RETAINED TREASURY STOCK CAPITAL EARNINGS STOCK ----------- ----------- ------------ --------- Balance, January 1, 2000 $ 3,504,893 $ 8,282,602 $ 17,735,535 ($ 498,500) Net income for the three months ended March 31, 2000 -- -- 1,077,007 -- Exercise of stock options, 139,000 shares 139,000 161,687 -- -- Common stock received on exercise of stock options, 19,925 shares -- -- -- (192,500) ----------- ----------- ------------ --------- Balance, March 31, 2000 $ 3,643,893 $ 8,444,289 $ 18,812,542 ($ 691,000) =========== =========== ============ =========
4 P & F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) =======================================
THREE MONTHS ENDED MARCH 31, ------------------ 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,077,007 $ 961,407 ------------ ------------ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 355,267 334,136 Amortization 85,403 60,445 (Gain) on disposal of fixed assets (41,193) -- Provision for losses on accounts receivable - net 15,126 1,500 Decrease (increase): Accounts receivable (113,096) (2,915,253) Inventories (3,280,873) (2,214,764) Prepaid expenses and other 43,120 (206,555) Other assets (844) -- Increase (decrease): Accounts payable 342,090 493,309 Accruals and other (1,270,628) (503,770) ------------ ------------ Total adjustments (3,865,628) (4,950,952) ------------ ------------ Net cash used in operating activities (2,788,621) (3,989,545) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (215,405) (701,109) Proceeds from sale of fixed assets 41,194 -- ------------ ------------ Net cash used in investing activities (174,211) (701,109) ------------ ------------
5 P & F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED) =======================================
THREE MONTHS ENDED MARCH 31, ------------------ 2000 1999 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term borrowings 2,500,000 4,000,000 Repayments of short-term borrowings (500,000) -- Principal payments on long-term debt (198,978) (37,847) Proceeds from exercise of stock options 108,187 18,750 ------------ ------------ Net cash used in financing activities 1,909,209 3,980,903 ------------ ------------ NET (DECREASE) INCREASE IN CASH (1,053,623) (709,751) CASH AT BEGINNING OF PERIOD 1,305,351 2,280,788 ------------ ------------ CASH AT END OF PERIOD $ 251,728 $ 1,571,037 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Income taxes $ 121,654 $ 53,300 ============ ============ Interest $ 324,823 $ 346,420 ============ ============
During the quarter ended March 31, 2000, the Company received 19,925 shares of common stock in connection with the exercise of stock options. The value of these shares was recorded at $192,500. 6 P & F INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 1 - SUMMARY OF ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements contained herein include the accounts of P & F Industries, Inc. and its subsidiaries (the "Company"). All significant intercompany balances and transactions have been eliminated. The Company conducts its business operations through three wholly-owned subsidiaries. Embassy Industries, Inc. ("Embassy") is engaged in the manufacture and sale of baseboard heating products and the importation and sale of radiant heating systems. Embassy also imports a line of door and window hardware items through its Franklin division. Florida Pneumatic Manufacturing Corporation ("Florida Pneumatic") is engaged in the importation, manufacture and sale of pneumatic hand tools, primarily for the industrial and retail markets, and the importation and sale of compressor air filters. Florida Pneumatic also markets, through its Berkley Tool division, a line of pipe cutting and threading tools, wrenches and replacement electrical components for a widely used brand of pipe cutting and threading machines. Green Manufacturing, Inc. ("Green") is engaged primarily in the manufacture, development and sale of heavy-duty welded custom designed hydraulic cylinders. Green also manufactures a line of access equipment for the petro-chemical industry and a line of post hole digging equipment for the agricultural industry. BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, these interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company, the unaudited consolidated financial statements include all adjustments necessary to a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. Results for interim periods are not necessarily indicative of results to be expected for a full year, since the operations of some of the Company's subsidiaries are seasonal in nature. The consolidated balance sheet information for December 31, 1999 was derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. These interim financial statements should be read in conjunction with that Report. 7 P & F INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED) BASIS OF FINANCIAL STATEMENT PRESENTATION (CONTINUED) In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 - INVENTORIES Major classes of inventory were as follows:
MARCH 31, DECEMBER 31, 2000 1999 ------------ ------------ Finished goods $ 19,476,590 $ 15,673,198 Work in process 1,030,154 812,929 Raw materials and supplies 3,388,630 4,128,374 ------------ ------------ $ 23,895,374 $ 20,614,501 ============ ============
NOTE 3 - CAPITAL STOCK TRANSACTIONS During the quarter ended March 31, 2000, a director of the Company surrendered 13,144 shares of Class A Common Stock, with a fair value of $130,625, in connection with the exercise of options to purchase 50,000 shares of Class A Common Stock. Also during the quarter ended March 31, 2000, an employee of the Company surrendered 6,781 shares of Class A Common Stock, with a fair value of $61,875, in connection with the exercise of options to purchase 35,000 shares of Class A Common Stock. 8 P & F INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 4 - SEGMENTS OF BUSINESS The following tables present financial information by segment for the periods ended March 31, 2000 and 1999. Segment profit excludes general corporate expenses, interest expense and income taxes. During these periods, there were no intersegment revenues.
PNEUMATIC TOOLS AND THREE MONTHS ENDED CON- RELATED HYDRAULIC HEATING MARCH 31, 2000 SOLIDATED EQUIPMENT CYLINDERS EQUIPMENT HARDWARE - ------------------- --------- --------- --------- --------- -------- (In thousands) Revenues from external customers $ 20,797 $ 11,070 $ 5,836 $ 2,291 $ 1,600 ========= ========= ========= ========= ======== Segment profit $ 2,855 $ 2,198 $ 386 $ 115 $ 156 ========= ========= ========= ========= ========
PNEUMATIC TOOLS AND THREE MONTHS ENDED CON- RELATED HYDRAULIC HEATING MARCH 31, 1999 SOLIDATED EQUIPMENT CYLINDERS EQUIPMENT HARDWARE - ------------------- --------- --------- --------- --------- -------- (In thousands) Revenues from external customers $ 18,108 $ 9,767 $ 5,051 $ 1,900 $ 1,390 ========= ========= ========= ========= ======== Segment profit $ 2,568 $ 2,031 $ 340 $ 21 $ 176 ========= ========= ========= ========= ========
9 P & F INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 4 - SEGMENTS OF BUSINESS (CONTINUED) The reconciliation of combined operating profits for reportable segments to consolidated income before income taxes is as follows:
THREE MONTHS ENDED MARCH 31, ----------------------- 2000 1999 ---------- ---------- Total profit for reportable segments $2,854,748 $2,567,985 General corporate expenses (785,999) (727,273) Interest expense (334,742) (288,305) ---------- ---------- Income before income taxes $1,734,007 $1,552,407 ========== ==========
10 P & F INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ========================================== NOTE 5 - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per common share:
THREE MONTHS ENDED MARCH 31, ----------------------- 2000 1999 ---------- ---------- Numerator: Numerator for basic and diluted earnings per common share - income available to common shareholders $1,077,007 $ 961,407 ========== ========== Denominator: Denominator for basic earnings per common share - weighted average common shares outstanding 3,476,865 3,248,247 Effect of dilutive securities: Common stock options 192,647 481,473 --------- --------- Denominator for diluted earnings per common share - adjusted weighted average common shares and assumed conversions 3,669,512 3,729,720 ========= ========= Earnings per common share: Basic $ .31 $ .30 ===== ===== Diluted $ .29 $ .26 ===== =====
11 P & F INDUSTRIES, INC. AND SUBSIDIARIES ======================================= ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST QUARTER ENDED MARCH 31, 2000 COMPARED WITH FIRST QUARTER ENDED MARCH 31, 1999 Consolidated revenues increased 14.8%, from $18,108,268 to $20,796,956. Revenues from pneumatic tools and related equipment increased 13.3%, from $9,767,148 to $11,069,618, due to the addition of a large new customer obtained in the fourth quarter of 1999. The increase in revenues would have been greater by $1,685,000 had it not been for a special promotion that occurred in the first quarter of 1999. Selling prices of pneumatic tools and related equipment were virtually unchanged from the first quarter of 1999. Revenues from hydraulic cylinders and other equipment increased 15.5%, from $5,050,745 to $5,835,674, due primarily to an increase in sales to the wrecker and refuse markets. Selling prices of hydraulic cylinders were virtually unchanged from the first quarter of 1999. Revenues from heating equipment increased 20.6%, from $1,899,890 to $2,291,404, due primarily to an increase in radiant and commercial product sales. Revenues from hardware increased 15.1%, from $1,390,485 to $1,600,260, primarily as the result of a significant increase in sales to a large customer. Selling prices of all heating and hardware products were virtually unchanged from the first quarter of 1999. Consolidated gross profit, as a percentage of revenues, was unchanged at 30.7%. Gross profit from pneumatic tools and related equipment increased from 38.5% to 38.9%, due primarily to a more profitable product mix. Gross profit from hydraulic cylinders and other equipment decreased from 15.1% to 14.8%, due primarily to higher overhead costs resulting from a large increase in state mandated workers compensation rates. Without these increased costs, gross profit from hydraulic cylinders and other equipment would have improved to 15.4% as the result of improvements in factory efficiency. Gross profit from heating equipment decreased from 34.3% to 34.0%, due primarily to higher material costs for baseboard product, and gross profit from hardware was virtually unchanged, going from 28.0% to 27.9%. Consolidated selling, general and administrative expenses increased 16.2%, from $3,721,495 to $4,325,835, due primarily to the increase in revenues. As a percentage of revenues, however, these expenses increased only slightly, from 20.6% to 20.8%. Interest expense increased 16.1%, from $288,305 to $334,742, as a result of higher interest rates and a slight increase in short-term borrowings. The effective tax rates for the quarters ended March 31, 2000 and 1999 were 37.9% and 38.1%, respectively. 12 LIQUIDITY AND CAPITAL RESOURCES The Company gauges its liquidity and financial stability by the measurements shown in the following table (dollar amounts in thousands):
MARCH 31, DECEMBER 31, MARCH 31, 2000 1999 1999 --------- ------------ --------- Working Capital $ 19,126 $ 17,921 $ 16,401 Current Ratio 2.05 to 1 2.04 to 1 1.95 to 1 Shareholders' Equity $ 30,210 $ 29,025 $ 25,430
During the quarter ended March 31, 2000, gross accounts receivable increased by approximately $113,000, due primarily to increases in accounts receivable at Embassy and Green as the result of very strong sales during March 2000. The increases at Embassy and Green were partially offset by a decrease in accounts receivable at Florida Pneumatic due to weaker first quarter 2000 sales compared to the fourth quarter of 1999. Inventories increased by approximately $3,281,000, due primarily to restocking required after extremely strong fourth quarter sales at Florida Pneumatic. Accounts payable increased approximately $342,000, due primarily to the timing of inventory receipts. On July 26, 1999, the Company renewed its credit agreement, as amended, with European American Bank. This agreement provides the Company with various credit facilities, including revolving credit loans, term loans for acquisitions and a foreign exchange line. The revolving credit loan facility provides a total of $12,000,000, with various sublimits, for direct borrowings, letters of credit, bankers' acceptances and equipment loans. The amended credit agreement also includes a step-up period, from the date of renewal through January 31, 2000, during which the total availability under the revolving credit loan facility was increased to $17,000,000 to support the buildup of inventory related to a significant new customer. At March 31, 2000, there was $8,000,000 outstanding against the revolving credit loan facility. There was also a commitment of approximately $405,000 at March 31, 2000 for open letters of credit. The term loan facility provides a commitment of $15,000,000 to finance acquisitions subject to the lending banks approval. In September 1998, $10,000,000 of the term loan facility was used to help finance the acquisition of Green and there was $3,666,667 still outstanding against this facility at March 31, 2000. This 7-year term loan bears interest at LIBOR (London Interbank Offered Rates) plus 1.75%. The Company made payments of interest only through October 1999, at which time payments of both principal and interest became due. The amended credit agreement also includes a step-up period, from the date of renewal through January 31, 2000, during which the total availability under the term loan facility was increased to $18,000,000 to support potential acquisitions. There was also a standby letter of credit totalling approximately $821,000 outstanding against this facility at March 31, 2000. This standby letter of credit was used to secure the Economic Development Revenue Bond assumed as part of the acquisition of Green. 13 LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) The foreign exchange line provides for the availability of up to $10,000,000 in foreign currency forward contracts. These contracts fix the exchange rate on future purchases of Japanese yen needed for payments to foreign suppliers. The total amount of foreign currency forward contracts outstanding at March 31, 2000 was approximately $2,750,000. The Company's credit agreement is subject to annual review by the lending bank. Under this agreement, the Company is required to adhere to certain financial covenants. At March 31, 2000, and for the three months then ended, the Company satisfied all of these covenants. Capital spending for the quarter ended March 31, 2000 was approximately $215,000. The total amount was provided from working capital. Capital expenditures for the rest of 2000 are expected to total approximately $1,500,000, some of which may be financed through the Company's credit facilities. Included in the expected total for the rest of 2000 are capital expenditures relating to new products, expansion of existing product lines and replacement of old equipment. The Company, through Florida Pneumatic, imports a significant amount of its purchases from Japan, with payment due in Japanese yen. As a result, the Company is subject to the effects of foreign currency exchange fluctuations. The Company uses a variety of techniques to protect itself from any adverse effects from these fluctuations, including increasing its selling prices, obtaining price reductions from its overseas suppliers, using alternative supplier sources and entering into foreign currency forward contracts. Nevertheless, the weakening of the U.S. dollar versus the Japanese yen over the last 12 months has had a negative effect on the Company's results of operations and its financial position. The Company believes that cash on hand, cash derived from operations and cash available through borrowings under its credit facilities will be sufficient to allow the Company to support its capital expenditure program and to meet its foreseeable working capital needs. 14 NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 is effective for the Company beginning January 1, 2001 and requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of the hedge transaction and the type of hedge transaction. The ineffective portion of all hedges will be recognized in earnings. The Company is in the process of reviewing SFAS 133 to determine what impact, if any, the adoption of SFAS 133 will have on its results of operations and its financial position. Based on current market conditions, the Company does not believe that the impact will be material. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risks, which include changes in U.S. and international exchange rates, the prices of certain commodities and currency rates as measured against the U.S. dollar and each other. The Company attempts to reduce the risks related to foreign currency fluctuation by utilizing financial instruments, pursuant to Company policy. The value of the U.S. dollar affects the Company's financial results. Changes in exchange rates may positively or negatively affect the Company's gross margins and operating expenses. The Company engages in hedging programs aimed at mitigating the impact of currency fluctuations. Using primarily forward exchange contracts, the Company hedges some of those transactions that, when remeasured according to generally accepted accounting principles, impact the income statement. Factors that could impact the effectiveness of the Company's programs include volatility of the currency markets and availability of hedging instruments. All currency contracts that are entered into by the Company are components of hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure, not for speculation. The Company does not buy or sell financial instruments for trading purposes. Although the Company maintains these programs to reduce the impact of changes in currency exchange rates, when the U.S. dollar sustains a weakening exchange rate against currencies in which the Company incurs costs, the Company's costs are adversely affected. At March 31, 2000, the Company held open hedge forward contracts to deliver approximately $2,750,000 of Japanese yen. The potential loss in value of the Company's net investment in foreign currency forward contracts resulting from a hypothetical 10 percent adverse change in foreign currency exchange rates at March 31, 2000 is approximately $305,000. 15 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Registrant is not a party to any litigation that is expected to have a material adverse effect on its business. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits See "Exhibit Index" immediately following the signature page. (b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter ended March 31, 2000. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. P & F INDUSTRIES, INC. (Registrant) By /s/ Joseph A. Molino, Jr. ------------------------------- Joseph A. Molino, Jr. Vice President Dated: May 8, 2000 (Principal Financial Officer) 17 EXHIBIT INDEX
EXHIBIT NO. - ------- 2.1 Asset Purchase Agreement, dated as of September 16, 1998, by and between Green Manufacturing, Inc., an Ohio corporation, and the Registrant (Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K dated September 16, 1998). Pursuant to Item 601(b)(2) of Regulation S-K, the Registrant agrees to furnish supplementally a copy of any exhibit or schedule omitted from the Asset Purchase Agreement to the Commission upon request. 3.1 Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999). 3.2 Amended By-laws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999). 4.1 Rights Agreement, dated as of August 23, 1994, between the Registrant and American Stock Transfer & Trust Company, as Rights Agent (Incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A dated August 24, 1994). 4.2 Amendment to Rights Agreement, dated as of April 11, 1997, between the Registrant and American Stock Transfer & Trust Company, as Rights Agent (Incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated April 11, 1997). 4.3 Credit Agreement, dated as of July 23, 1998, by and among the Registrant, Florida Pneumatic Manufacturing Corporation, a Florida corporation, Embassy Industries, Inc., a New York corporation, and European American Bank, a New York banking corporation (Incorporated by reference to Exhibit 4.3 to the Registrant's Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998). 4.4 Amendment No. 1 to Credit Agreement, dated as of September 16, 1998, by and among the Registrant, Florida Pneumatic Manufacturing Corporation, a Florida corporation, Embassy Industries, Inc., a New York corporation, Green Manufacturing, Inc., a Delaware corporation, and European American Bank, a New York banking corporation (Incorporated by reference to Exhibit 4.4 to the Registrant's Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998). 18 EXHIBIT INDEX (CONTINUED) EXHIBIT NO. - ------- 4.5 Amendment No. 2 to Credit Agreement, dated as of July 28, 1999, by and among the Registrant, Florida Pneumatic Manufacturing Corporation, a Florida corporation, Embassy Industries, Inc., a New York corporation, Green Manufacturing, Inc., a Delaware corporation, and European American Bank, a New York banking corporation (Incorporated by reference to Exhibit 4.5 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999). 4.6 Certain instruments defining the rights of holders of the long-term debt securities of the Registrant are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Registrant agrees to furnish supplementally copies of these instruments to the Commission upon request. 10.1 Amended and Restated Employment Agreement, dated as of May 28, 1997, between the Registrant and Richard A. Horowitz (Incorporated by reference to Exhibit 10.1 to the Registrant's Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998). 10.2 Consulting Agreement, effective as of November 1, 1998, between the Registrant and Sidney Horowitz (Incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998). 10.3 1992 Incentive Stock Option Plan of the Registrant, as amended and restated as of March 13, 1997 (Incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998). 27 Financial Data Schedules (submitted to the Securities and Exchange Commission in electronic format).
19 EX-27 2 EXHIBIT 27
5 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN P & F INDUSTRIES, INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 251,728 0 12,183,970 0 23,895,374 37,390,866 18,419,720 7,555,409 56,208,037 18,265,337 7,120,976 0 0 3,643,893 26,565,831 56,298,037 20,685,575 20,796,956 14,402,372 14,402,372 0 0 334,742 1,734,007 657,000 1,077,007 0 0 0 1,077,007 .31 .29 ACCOUNTS RECEIVABLE ARE NET OF ALLOWANCE
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