-----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, TgjCwmSEcX26qTTTwhulktjpBNOeP+ozmZJDwQqESQjEqV+BK5XwDt+Y+HKVDhEW B0dEey5RxRf8ZzNw1QetSQ== 0001005477-96-000370.txt : 19961101 0001005477-96-000370.hdr.sgml : 19961101 ACCESSION NUMBER: 0001005477-96-000370 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961031 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 001-05332 FILM NUMBER: 96651032 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 SEPTEMBER 30, 1996 [_] 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 October 28, 1996, there were outstanding 2,928,867 shares of the Registrant's Class A Common Stock, par value $1.00 per share. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS P & F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) ======================================= SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------ ------------ ASSETS CURRENT: Cash $ 1,110,691 $ 1,224,603 Accounts receivable, less allowance for possible losses of $409,410 in 1996 and $350,684 in 1995 8,117,591 9,163,246 Inventories 13,081,695 14,903,561 Note receivable from officer 40,000 65,000 Deferred income taxes 423,000 423,000 Prepaid expenses and other assets 264,680 367,988 ------------ ------------ TOTAL CURRENT ASSETS 23,037,657 26,147,398 ------------ ------------ PROPERTY AND EQUIPMENT: Land 993,020 993,020 Buildings and improvements 4,509,960 4,505,889 Machinery and equipment 5,585,059 5,394,134 ------------ ------------ 11,088,039 10,893,043 Less accumulated depreciation and amortization 5,248,014 4,760,074 ------------ ------------ NET PROPERTY AND EQUIPMENT 5,840,025 6,132,969 ------------ ------------ GOODWILL, net of accumulated amortization of $902,737 in 1996 and $828,946 in 1995 2,911,030 2,984,821 OTHER ASSETS, net of accumulated amortization of $30,659 in 1996 and $18,663 in 1995 125,388 150,484 ------------ ------------ TOTAL ASSETS $ 31,914,100 $ 35,415,672 ============ ============ 1 P & F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED) ======================================= SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings $ 805,233 $ 4,233,753 Accounts payable 2,539,281 3,499,174 Accruals and other liabilities 2,229,213 2,222,870 Current maturities of long-term debt 261,470 353,874 ------------ ------------ TOTAL CURRENT LIABILITIES 5,835,197 10,309,671 LONG-TERM DEBT, less current maturities 5,797,401 6,044,981 SUBORDINATED DEBENTURES 1,369,200 1,369,200 ------------ ------------ 13,001,798 17,723,852 ------------ ------------ SHAREHOLDERS' EQUITY: Preferred stock, $10 par, cumulative; shares authorized 2,000,000; outstanding 263,345 2,633,450 2,633,450 Common stock: Class A - $1 par; shares authorized 7,000,000; outstanding 2,928,867; reserved for options 1,632,200 shares; reserved for warrants 70,000 shares 2,928,867 2,928,867 Class B - $1 par; shares authorized 2,000,000 -- -- Additional paid-in capital 7,607,614 7,607,614 Retained earnings 5,742,371 4,521,889 ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 18,912,302 17,691,820 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 31,914,100 $ 35,415,672 ============ ============ 2 P & F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) =======================================
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------ 1996 1995 1996 1995 ------------ ------------ ------------ ------------ REVENUES: Net sales $ 12,857,555 $ 9,854,150 $ 31,785,290 $ 30,155,420 Other 97,851 82,233 237,751 208,760 ------------ ------------ ------------ ------------ 12,955,406 9,936,383 32,023,041 30,364,180 ------------ ------------ ------------ ------------ COSTS AND EXPENSES: Cost of sales 8,787,068 6,634,725 21,259,432 20,449,078 Selling, administrative and general 2,681,189 2,528,065 7,397,940 7,391,959 Interest - net 194,053 288,324 626,938 806,948 Depreciation 156,194 157,075 459,740 467,968 ------------ ------------ ------------ ------------ 11,818,504 9,608,189 29,744,050 29,115,953 ------------ ------------ ------------ ------------ INCOME BEFORE TAXES ON INCOME 1,136,902 328,194 2,278,991 1,248,227 TAXES ON INCOME 425,000 130,000 861,000 479,000 ------------ ------------ ------------ ------------ NET INCOME $ 711,902 $ 198,194 $ 1,417,991 $ 769,227 ============ ============ ============ ============ Preferred dividends $ 65,836 $ 65,836 $ 197,509 $ 197,509 ============ ============ ============ ============ Net income attributable to common stock $ 646,066 $ 132,358 $ 1,220,482 $ 571,718 ============ ============ ============ ============ Average number of common shares and common share equivalents - primary 3,237,809 3,354,918 3,204,686 3,355,585 ========= ========= ========= ========= - fully diluted 3,317,177 3,354,918 3,317,916 3,355,585 ========= ========= ========= ========= Earnings per share of common stock - primary $ .20 $ .04 $ .38 $ .18 ====== ====== ====== ====== - fully diluted $ .19 $ .04 $ .37 $ .18 ====== ====== ====== ======
3 P & F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ======================================= NINE MONTHS ENDED SEPTEMBER 30, ------------------ 1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,417,991 $ 769,227 ------------ ------------ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 595,660 678,895 Deferred income taxes -- 439,000 Provision for losses on accounts receivable 76,067 57,687 Decrease (increase): Accounts receivable 969,588 1,957,191 Inventories 1,821,866 (1,773,676) Note receivable from officer 25,000 20,000 Prepaid expenses and other assets 91,275 204,322 Other assets 3,200 400 Increase (decrease): Accounts payable (959,893) 1,248,040 Accruals and other 6,343 (647,913) ------------ ------------ Total adjustments 2,629,106 2,183,946 ------------ ------------ Net cash provided by operating activities 4,047,097 2,953,173 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (194,996) (216,654) Payment for acquisition of assets of Tradesman Tool Co. and Intech Industries, Inc. -- (752,959) ------------ ------------ Net cash used in investing activities (194,996) (969,613) ------------ ------------ 4 P & F INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED) ======================================= NINE MONTHS ENDED SEPTEMBER 30, ------------------ 1996 1995 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term borrowings 10,525,943 11,115,646 Repayments of short-term borrowings (13,954,463) (12,713,023) Proceeds from mortgage refinancing 2,062,500 -- Principal payments on long-term debt (2,402,484) (257,259) Dividends paid on preferred stock (197,509) (197,509) ------------ ------------ Net cash used in financing activities (3,966,013) (2,052,145) ------------ ------------ NET INCREASE (DECREASE) IN CASH (113,912) (68,585) CASH AT BEGINNING OF PERIOD 1,224,603 1,071,903 ------------ ------------ CASH AT END OF PERIOD $ 1,110,691 $ 1,003,318 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Income taxes $ 817,199 $ 314,025 ============ ============ Interest $ 847,231 $ 888,221 ============ ============ 5 P & F INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO 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 consolidated financial statements for the nine months ended September 30, 1996 and 1995 are presented as unaudited but, in the opinion of the Company, they include all adjustments necessary for a fair statement of the results of operations for those periods. All such adjustments are of a normal recurring nature. The consolidated balance sheet information for December 31, 1995 was derived from audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. These interim financial statements should be read in conjunction with that report. Results for interim periods are not necessarily indicative of results to be expected for a full year, since some segments of the Company's operations have sales patterns that are seasonal or irregular. The Company conducts its business operations through two wholly-owned subsidiaries. Florida Pneumatic Manufacturing Corporation ("Florida Pneumatic") is engaged in the importation, manufacture and sale of pneumatic hand tools for the industrial, retail and automotive markets and air filters. Florida Pneumatic also markets, through its Berkley Tool Division ("Berkley"), a line of pipe cutting and threading tools, wrenches and replacement electrical components for a widely used brand of pipe cutting and threading machines. Embassy Industries, Inc. ("Embassy") is engaged in the manufacture and sale of baseboard and radiant hot-water heating products. Embassy also imports, assembles and packages a line of home hardware items through its Franklin Hardware division ("Franklin"). BASIS OF FINANCIAL STATEMENT PRESENTATION 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. 6 P & F INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) ======================================= NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED) EARNINGS PER SHARE Primary and fully diluted earnings per share are computed using the treasury stock method, modified for stock options and warrants outstanding in excess of 20% of the total outstanding shares of common stock. Under this method, the aggregate number of shares outstanding reflects the assumed use of proceeds from the hypothetical exercise of the outstanding options and warrants, unless the effect on earnings per share is antidilutive. The assumed proceeds are used to repurchase shares of common stock, to a maximum of 20% of the shares outstanding. The balance of the proceeds, if any, are used to reduce outstanding debt. Fully diluted earnings per share also reflects the assumed use of proceeds from the hypothetical exercise of contingent issuances if such contingent issuances have a reasonable possibility of occurring. In calculating the purchase price of common stock, the average market value for the period is used for primary earnings per share and the greater of the average or ending market value for the period is used for fully diluted earnings per share. Net income or loss is adjusted for preferred dividends in computing the net income or loss attributable to the common stock. NOTE 2 - INVENTORIES Major classes of inventory were as follows: SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------ ------------ Finished goods $ 9,363,601 $ 11,004,092 Work in process 945,133 423,114 Raw materials and supplies 2,772,961 3,476,355 ------------ ------------ $ 13,081,695 $ 14,903,561 ============ ============ 7 P & F INDUSTRIES, INC. AND SUBSIDIARIES ======================================= ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIRD QUARTER ENDED SEPTEMBER 30, 1996 COMPARED WITH THIRD QUARTER ENDED SEPTEMBER 30, 1995 Consolidated revenues increased 30.4%, from $9,936,383 to $12,955,406. Revenues from pneumatic tools and related equipment increased 39.9%, from $6,688,236 to $9,354,712, reflecting increased sales to existing customers. The pattern of sales is sometimes irregular and it is not expected that this increased level of revenues will be sustained in the fourth quarter. Selling prices of pneumatic tools and related equipment were virtually unchanged. Revenues from heating equipment increased 2.1%, from $2,271,102 to $2,319,108. Revenues from hardware increased 31.3%, from $975,549 to $1,281,132. Selling prices of both heating equipment and hardware were virtually unchanged. Consolidated gross profit, as a percentage of revenues, decreased from 33.2% to 32.2%. Gross profit from pneumatic tools and related equipment decreased from 34.7% to 33.1%, due to a less favorable product mix. This was partially offset by a more favorable exchange rate of the dollar compared to the Japanese yen, which reduced the cost of imported product. Gross profit from heating equipment increased from 30.9% to 32.3%, due to a more favorable product mix. Gross profit from hardware decreased from 25.0% to 22.5%, due to a less favorable product mix. Consolidated selling, administrative and general expenses increased 6.1%, from $2,528,065 to $2,681,189, but decreased as a percentage of revenues, from 25.4% to 20.7%, due to the increased revenues. 8 P & F INDUSTRIES, INC. AND SUBSIDIARIES ======================================= NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1995 Consolidated revenues increased 5.5%, from $30,364,180 to $32,023,041. Revenues from pneumatic tools and related equipment increased 4.2%, from $22,351,066 to $23,280,056, reflecting increased sales to existing customers. Partially offsetting these increased sales was the loss of a large customer in late 1995, which resulted in a decrease in revenues of $1,656,979 in 1996. Selling prices of pneumatic tools and related equipment increased approximately 1.7%. Revenues from heating equipment increased 5.2%, from $5,229,854 to $5,502,364. Selling prices of heating equipment increased approximately 2.5%. These higher selling prices and the increased sales of radiant heating products accounted for the increase in revenues from heating equipment. Revenues from hardware increased 16.2%, from $2,788,377 to $3,239,220, due to increased sales to existing customers. Selling prices of hardware were unchanged. Consolidated gross profit, as a percentage of revenues, increased from 32.7% to 33.6%. Gross profit from pneumatic tools and related equipment increased from 32.8% to 34.6%, due to the increased selling prices and a more favorable exchange rate of the dollar compared to the Japanese yen, which reduced the cost of imported product. These improvements in gross profit were partially offset by a less favorable product mix. Gross profit from heating equipment decreased from 33.0% to 32.8%. Higher material costs offset the approximately 2.5% increase in selling prices. Gross profit from hardware decreased from 27.1% to 24.6%, due to a less favorable product mix. Consolidated selling, general and administrative expenses were virtually unchanged, but decreased as a percentage of revenues, from 24.3% to 23.1%, due to the increased revenues. 9 P & F INDUSTRIES, INC. AND SUBSIDIARIES ======================================= LIQUIDITY AND CAPITAL RESOURCES The Company gauges its liquidity and financial stability by the measurements shown in the following table (dollar amounts in thousands): SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, 1996 1995 1995 ------------- ------------ ------------- Working Capital $ 17,202 $ 15,838 $ 15,254 Current Ratio 3.95 to 1 2.54 to 1 2.96 to 1 Shareholders' Equity $ 18,912 $ 17,692 $ 17,035 During the nine months ended September 30, 1996, gross accounts receivable decreased by approximately $990,000. A decrease in gross accounts receivable of approximately $2,490,000, resulting from the collection of the unusually high level of accounts receivable at December 31, 1995, including approximately $2,337,000 in one-time sales to a customer in December 1995, was partially offset by an increase of approximately $1,500,000 resulting from increased sales in the third quarter of 1996. Also during the nine months ended September 30, 1996, inventories decreased by approximately $1,825,000. The funds provided by these decreases in gross accounts receivable and inventories were used in the reduction of short-term borrowings, which decreased by approximately $3,429,000. This decrease in short-term borrowings contributed to the increase in the Company's current ratio. The Company's credit facilities provide a line of credit totalling $18,000,000. Of this amount, $14,000,000 is available for direct loans, letters of credit and bankers' acceptances. At September 30, 1996, there were loans totalling approximately $805,000 outstanding against this line of credit. Also at September 30, 1996, there were commitments for letters of credit totalling approximately $1,926,000. The total line of credit also includes $4,000,000 earmarked for acquisitions subject to the lending bank's approval. The Company's credit facilities also provide 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 September 30, 1996 was approximately $1,245,000. The Company's credit facilities agreement is subject to annual review by the lending bank. Under this agreement, the Company is required to adhere to certain financial covenants. At September 30, 1996, and for the nine months then ended, the Company satisfied all of these covenants. 10 P & F INDUSTRIES, INC. AND SUBSIDIARIES ======================================= LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) In April 1996, the mortgage on the Company's Farmingdale, New York facility was refinanced. The original principal balance on the new mortgage was $2,062,500. Payments of principal and interest are due monthly through May 2006, at which time the entire remaining unpaid principal balance will be due. The interest rate on the new mortgage is variable, as was the interest rate on the previous mortgage. At September 30, 1996, the interest rate on the new mortgage was approximately 7.9%, which was lower than the interest rate on the previous mortgage. The Company is currently conducting an extensive acquisition search. The funds for an acquisition will be provided by the Company's credit facilities described above. The total funds available, including cash derived from operations, will be approximately $9,000,000. Capital spending for the nine months ended September 30, 1996 was approximately $195,000. The total amount was provided from working capital. Capital expenditures for the rest of 1996 are expected to total approximately $114,000, some of which may be financed. Included in the expected total for 1996 are capital expenditures relating to new products, expansion of existing product lines and replacement of old equipment. On February 15, 1995, Florida Pneumatic purchased the assets and business of Tradesman Tool Co., Inc. ("Tradesman"), a domestic manufacturer of heavy-duty pipe wrenches. On March 31, 1995, Florida Pneumatic purchased the assets and business of Intech Industries, Inc. ("Intech"), a domestic manufacturer of air filters used in compressors. Cash totalling approximately $753,000 was paid for these purchases. The operations of both Tradesman and Intech were merged into the operations of Florida Pneumatic. 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. Because of these steps taken by the Company, foreign currency exchange rate fluctuations have not had a significant negative effect on the Company's results of operations or its financial position. Any future weakness of the dollar would again, however, present a problem and there can be no certainty that the Company will continue to be successful in its efforts to counter this problem. 11 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. 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 None. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1996. 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/ Leon D. Feldman ------------------------------- Leon D. Feldman Executive Vice President Dated: October 28, 1996 (Principal Financial Officer) 12 EX-27 2 EXHIBIT 27 FOR 09-30-96 10-Q
5 1 9-MOS DEC-31-1996 SEP-30-1996 1,110,691 0 8,117,591 0 13,081,695 23,037,657 11,088,039 5,248,014 31,914,100 5,835,197 7,166,601 0 2,633,450 2,928,867 13,349,985 31,914,100 31,785,290 32,023,041 21,259,432 21,259,432 0 0 626,938 2,278,991 861,000 1,417,991 0 0 0 1,417,991 .38 .37 ACCOUNTS RECEIVABLE ARE NET OF ALLOWANCE
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