P&F Industries, Inc.
Joseph A. Molino, Jr.
Chief Operating Officer
P&F INDUSTRIES, INC. REPORTS IMPROVED RESULTS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2023
MELVILLE, N.Y., May 11, 2023 -
P&F Industries, Inc. (NASDAQ: PFIN) today
announced its results from operations for the three-month period ended March 31, 2023. The
Company is reporting net revenue for the three-month period ended March 31, 2023, of $15,742,000,
compared to $14,021,000 for the same three-month period in 2022. Additionally, the Company is
reporting a net income before income taxes of $494,000 for the three-month period ended March 31,
2023, compared to a net loss before income taxes of $714,000, for the three-month period ended March
31, 2022. The Company is reporting a net income after-taxes of $337,000 for the three-month period
ended March 31, 2023, compared to a net loss after-taxes of $618,000 for the same three-month period a year ago.
Lastly, the Company stated that its basic and diluted income per share for the three-month period ended March 31,
2023, was $0.11, compared to a basic and diluted loss per share of $0.19 for the same three-month period a year ago.
Richard Horowitz, the Company’s Chairman of the Board, Chief Executive Officer and President
commented, “I am very pleased to report that, when comparing the three-month periods ended March
31, 2023, and 2022, our revenue increased $1,721,000 and our income before taxes improved by $1,208,000.
Revenue at Hy-Tech increased 55.6% or almost $2.1 million. Our PTG product line had the most significant
improvement, percentage-wise, with revenue increasing 105.6% this quarter, compared to the same three-month
period in 2022. Our OEM product line had the largest dollar revenue growth with sales up by more than $1.1 million
compared to the same three-month period in 2022. Although Florida Pneumatic’s revenue this quarter declined 3.5% from
the same period last year, due to weakness in its Automotive and Retail product lines, its higher
margin Aerospace revenue improved 35.7%, which led to its increased gross margin and gross profit.”
Mr. Horowitz continued, “Our first quarter 2023 consolidated gross margin was 36.5%, compared
to 32.2% for the same period a year ago. This improvement was driven primarily by price
increases that began in mid to late 2022, lower ocean freight costs, improved absorption
of manufacturing overhead and product mix. Additionally, the early-stage start-up issues
related to the integration of the Jackson Gear acquisition have significantly decreased.
Despite the 12.3% increase in net revenue, we were able to control our total operating expenses,
which increased only $2,000. It should be noted that during the first quarter of 2022 we incurred
approximately $150,000 of acquisition-related expenses pertaining to the Jackson Gear Company business
acquisition, which was included in our selling, general and administrative expenses.”
Mr. Horowitz concluded “We are doing our best to navigate through these challenging times
caused by rising inflation, an unsettled U.S. economy, and ongoing global supply chain issues.
We believe that P&F should continue to see improved results, as customer orders are strong,
costs and expenses are less volatile than in the recent past, and manufacturing overhead absorption
continues to improve. In addition, there are multiple growth opportunities provided by both the Jackson
Gear business acquisition and our other product lines.”
The Company will be reporting the following.
TRENDS AND UNCERTAINTIES
INTERNATIONAL SUPPLY CHAIN
Although much less than during the first quarter of 2022, we continue to encounter delays in
receiving inventory from our Asian suppliers, which leads to intermittent shortages of inventory.
Our ocean freight costs, which had increased significantly during the COVID-19 pandemic, have
recently returned to pre-pandemic levels. The above factors continued in the first quarter of 2023
to impact our results. Lastly, we believe the following international supply chain issues have also
negatively impacted our 2023 results:
- Increased price of fuel;
- Shortage of shipping containers;
- Congestion at the ports in Asia and the United States.
At the present time, we believe that some or all of the above-mentioned supply chain
disruptions will likely continue for some time in fiscal 2023. While we believe that most of
the related costs associated with the issues discussed above have been factored into our selling
price, there is no assurance that we will be able to pass through any future additional direct
costs or costs incurred related to our international supply chain issues in the future.
DOMESTIC TRANSPORTATION COSTS
During the first quarter of 2023 supply chain conditions continued to improve yielding
lower domestic transportation costs. The availability of port to warehouse transportation
services has improved significantly compared to 2022 and associated domestic freight rates have
continued to moderate although rising fuel costs (diesel) have tempered rate reductions.
IMPACT OF INFLATION/GEOPOLITICAL ISSUES
We believe that the current and projected levels of inflation, as well as a possible economic
recession will likely continue to have an effect on our manufacturing and operating costs.
At the present time, we are unable to reasonably estimate the impact inflation and geo-political
issues will have on our results of operations for the foreseeable future.
We believe that our results of operations and financial condition during 2023, were not
materially impacted by the Russia-Ukraine conflict, however we cannot predict what impact
this conflict may have on our results in the future.
Sales of aircraft by Boeing have been depressed since the two 737 MAX crashes in 2018 and 2019.
Further, the Federal Aviation Administration grounded all 737 MAX aircraft for several quarters.
These events, coupled with the COVID-19 pandemic reduced Boeing’s aircraft production levels to
well below those prior to the pandemic and the grounding. In 2019, Boeing produced 52 737 MAX
aircraft per month. It is currently still producing significantly below that level. Per Boeing,
it plans to return to those levels in 2025 and expects to add a fourth 737 MAX production line in
2024. We believe that these stated plans along with the return of the Boeing 787 aircraft, which
has also had production delays to full production, will be beneficial to P&F’s aerospace sales in
the next several years.
We believe that over time, several newer technologies and features will have a greater effect
on the market for our traditional pneumatic tool offerings. So far, the greatest impact has
been on the automotive aftermarket with the advent of advanced cordless operated tools.
Currently, we do not offer a cordless tool to the automotive aftermarket. However, with respect
to the industrial market, we have developed for one of our largest OEM customers a tool mechanism
that is incorporated into a major line of their cordless power tools. These tools have been in full
production with our supplied system for several years and our sales of these products have continued
to grow over that time. We continue to analyze the practicality of developing or incorporating newer
technologies in our tool platforms for other markets as well. This includes adding our internally developed
mechanisms to existing cordless power sources as well as producing complete cordless tool systems.
In addition, we have recently developed a cordless installation tool for the aerospace market.
We have begun taking orders for this product and we expect to introduce other versions later in 2023.
Other than the trends and uncertainties mentioned above, or matters that may be discussed below,
there are no major trends or uncertainties that had, or we could reasonably expect to have a
material impact on our revenue and operations, nor was there any unusual or infrequent event,
transaction or any significant economic change that materially affected our results of operations.
RESULTS OF OPERATIONS
The tables below provide an analysis of our net revenue for the three-month periods ended March 31, 2023, and 2022:
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”).
Automotive revenue declined this quarter, compared to the same period in 2022, due primarily to
an across-the-board price increase in all distribution channels in order to address rising input
costs. This change in pricing strategy led to a decline in number of unit sales and thus overall
revenue in this category. However, Automotive gross margin improved as a result of this change.
The primary factors contributing to the 15.6% decline in our Retail revenue were: a) a decision
by The Home Depot (“THD”) to reduce in-store inventory levels; b) a reduction in display area at
THD stores; c) a net reduction in the number of items being offered by THD this quarter, compared
to the same three-month period in 2022, and d) increased pressure from on-line distributors, as
well as and other “brick and mortar” retailers expanding their presence in this product line.
Partially offsetting the above-mentioned declines our Aerospace revenue improved 35.7% when
comparing the first quarter of 2023 and 2022. This improvement was driven by, among other factors,
increased demand for new, limited life parts that JIFFY has begun to market, and an overall
increase in demand throughout the sector for standard drilling, installation and torque control
tools. Lastly, our Industrial revenue increased primarily due to improved general market conditions.
Hy-Tech designs, manufactures, and sells a wide range of industrial products which are
categorized as ATP for reporting purposes. In addition to Engineered Solutions, products
and components manufactured for other companies under their brands are included in the OEM
category in the table below. PTG revenue is comprised of products manufactured and sold by
Hy-Tech’s gear business. NUMATX, Thaxton and other peripheral product lines, such as general
machining, are reported as Other.
The $1.1 million increase in OEM revenue this quarter, compared to the first quarter of 2022,
was driven by growth in certain markets that are served by a number of Hy-Tech’s OEM customers.
The markets served by our customers include multiple industrial applications, as well as the tool
rental market. PTG revenue for the first three months of 2023 more than doubled its revenue
reported for the same period a year ago. This improvement was driven by the acquisition of the
Jackson Gear Company business that we acquired in January 2022. The increase in Hy-Tech’s Other
revenue was due to stronger NUMATX and general machining revenue growth this quarter, compared to
the same three-month period in 2022. The modest decline in ATP revenue is attributable to our
decision to focus our marketing efforts on OEM and PTG product offerings.
During the first quarter of 2023, Florida Pneumatic’s gross margin improved compared to the
same period in the prior year principally due to a shift away from the lower margin product
lines, Retail and Automotive, to the higher margin, industrial and aerospace categories.
Additionally, during 2022, we raised prices in all product categories.
The improvement in Hy-Tech’s gross margin is due primarily to its overall product/customer mix.
Additionally, cost and expense reductions, coupled with revisions in pricing structure, enabled
Hy-Tech to improve its blended gross margin, thus contributing to the overall gross margin improvement.
We continue to focus on improving manufacturing overhead absorption, particularly at our PTG facility.
While always ongoing, we expect the process of integrating the Jackson Gear Company acquisition
to be effectively complete by approximately mid-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 first quarter of 2023, our SG&A was $5,175,000, compared to $5,173,000, incurred
during the same three-month period in 2022. Significant components to the net change include:
a) compensation expenses increased $223,000, due to several factors, among them the additional
staffing added throughout the Company, increased wages primarily related to retention incentives
and annual wage adjustments and increases in company-wide bonus/incentive/performance accruals;
b) increased depreciation and amortization of $51,000; c) professional fees and expenses decreased
$140,000, due primary to legal, accounting and other fees incurred in connection with the JGC
acquisition during the first quarter of 2023 not recurring in the first quarter of 2023; and d)
variable expenses declined $131,000. Variable expenses include among other items, commissions,
freight out, travel, advertising, shipping supplies and warranty costs. Driving this decline was
lower advertising and shipping costs at Florida Pneumatic, caused primarily by lower Retail revenue
this quarter and a reduction in discretionary Automotive advertising expenses, compared to the same
period a year ago.
During the three-month period ended March 31, 2023, we recognized a gain of $21,000 from the
sale of fully depreciated equipment. Additionally, as a result of final resolution of our
Employee Retention Tax Credit (“ERTC”) filing, we recorded an additional $15,000 as Other Income.
This income is subject to federal and local tax.
INTEREST – NET
The most significant factor causing the increase in our short-term borrowings interest expense
was the growth in the SOFR and prime rates. Most of our borrowings are SOFR plus Applicable Margin.
The Applicable Margin, as defined in our Credit Agreement, during the three-month period ended
March 31, 2023, was 2.10% applied to all SOFR borrowings and 1.60% applied to Base Rate borrowings.
The Applicable Margin that was added to LIBOR and Base Rate borrowings during the three-month period
ended March 31, 2022, were 1.50% and 0.50%, respectively. During the three-month period ended
March 31, 2023, the SOFR rates ranged from 4.43% to 4.86%, compared to LIBOR rates, which we were
using during the first quarter of 2022, that ranged from 0.10% to 0.47%. Further, the prime rate,
which is the interest rate used for Base Rate borrowings before the Applicable Margin, during the
first three months of 2023 ranged from 7.5% to 8.0%, compared to prime rates ranging from 3.25% to 3.50%
during the same three-month period in 2022.
The amortization expense incurred during the three-month period ended March 31, 2023, is
related to the debt issue costs associated with Amendment 11 to our banking facility
The average balance of short-term borrowings during the three-month periods ended March 31,
2023, and 2022, were $7,287,000, and $10,157,000, respectively.
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-month periods ended March 31, 2023, and 2022, were approximately
a tax provision rate of 31.8% and tax benefit rate 13.4%, respectively. The effective tax rates
for all periods presented were impacted primarily by state taxes, and non-deductible expenses.
LIQUIDITY AND CAPITAL RESOURCES
We monitor such metrics as days’ sales outstanding, inventory requirements, inventory turns,
estimated future purchasing requirements and capital expenditures to project liquidity needs,
as well as evaluate return on assets. Our primary 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:
We and Capital One Bank, NA entered into an amendment to the Credit Facility that, among other
things, extended the expiration date to February 8, 2027.
At March 31, 2023, there was approximately $7,800,000 available to us under the Revolver arrangement.
For the three-month period ended March 31, 2023, cash provided by operating activities
was $790,000, compared to cash used by operating activities for the three-month period ended
March 31, 2022, of $3,972,000. At March 31, 2023, and 2022, our consolidated cash balance was
$561,000, and $642,000, respectively. We operate under the terms and conditions of the Credit Agreement.
As a result, all domestic cash receipts are remitted to Capital One lockboxes. Thus, nearly all
cash on hand represents funds to cover checks issued but not yet presented for payment.
Our total debt to total book capitalization (total debt divided by total debt plus equity) at
both March 31, 2023, and December 31, 2022, was 15.3%.
During the three-month period ended March 31, 2023, we used $905,000 for capital expenditures,
compared to $380,000 during the same period in the prior year. Capital expenditures currently
planned for the remainder of 2023 are approximately $2,400,000, 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.
The major portion of these planned capital expenditures will be for new metal cutting equipment,
tooling and information technology hardware and software.
Our liquidity and capital are primarily sourced from our Credit Facility.
Should the need arise whereby the current Credit Agreement is insufficient, we could obtain
additional funds based on the value of our real property, and we believe the borrowing under
the current Agreement could be increased.
IMPACT OF INFLATION
During the three-month period ended March 31, 2023, with respect to our cost of inventory,
we encountered price increases in raw materials, imported parts and tools, ocean freight and labor.
Additionally, our operating costs continue to encounter cost/price increases.
It is difficult to accurately determine what portion of the above referenced increases are
attributable to inflation. We have been able to pass through most of the above-mentioned price
increases, however we cannot predict our ability to continue this practice, nor to what degree.
We intend to continue to actively manage the impact of inflation on our results of operations,
however, we cannot reasonably estimate possible future impacts at this time.
ABOUT P&F INDUSTRIES, INC.
P&F Industries, Inc., through its wholly owned subsidiaries, is a leading manufacturer and
importer of air-powered tools and accessories sold principally to the aerospace, industrial,
automotive, and retail markets. P&F’s products are sold under its own trademarks, as well
as under the private labels of major manufacturers and retailers.
For information relating to the products and services we offer, please visit our website at
From there you can link to our subsidiary websites.
P&F Industries Inc. has scheduled a conference call on May 11, 2023, at 11:00 A.M.
Eastern Time, to discuss its first quarter 2023 results and financial condition.
Investors and other interested parties who wish to listen to or participate can dial 1-866-580-3963.
It is suggested you call at least 10 minutes prior to the call commencement.
For those who cannot listen to the live broadcast, a replay of the call will also be
available on the Company’s website beginning on or about May 12, 2023.
Forward Looking Statement
The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a safe harbor
for forward-looking statements made by or on behalf of P&F Industries, Inc., and subsidiaries
(“P&F”, or the “Company”). P&F and its representatives may, from time-to-time, make written or
verbal forward-looking statements, including statements contained in the Company’s filings with
the Securities and Exchange Commission and in its reports to shareholders. Generally, the
inclusion of the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,”
“would,” “could,” “should,” and their opposites and similar expressions identify statements that
constitute “forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are intended to
come within the safe harbor protection provided by those sections. Any forward-looking statements
contained herein, including those related to the Company’s future performance, are based upon the
Company’s historical performance and on current plans, estimates and expectations. All forward-looking
statements involve risks and uncertainties. These risks and uncertainties could cause the Company’s
actual results for all or part the 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:
CONSOLIDATED BALANCE SHEET
- Risks related to the global outbreak of COVID-19 and other public health crises;
- Risks associated with sourcing from overseas;
- Disruption in the global capital and credit markets;
- Importation delays;
- Customer concentration;
- Unforeseen inventory adjustments or changes in purchasing patterns;
- Market acceptance of products;
- Price reductions;
- Exposure to fluctuations in energy prices;
- Exposure to fluctuations within the cost of raw materials;
- The strength of the retail economy in the United States and abroad;
- Adverse changes in currency exchange rates;
- Interest rates;
- Debt and debt service requirements;
- Borrowing and compliance with covenants under our credit facility;
- Impairment of long-lived assets and goodwill;
- Retention of key personnel;
- Acquisition of businesses;
- Regulatory environment;
- Litigation and insurance;
- The threat of terrorism and related political instability and economic uncertainty; and
- Business disruptions or other costs associated with information technology, cyber-attacks, system implementations, data privacy or catastrophic losses,
and those other risks and uncertainties described in its Annual Report on Form 10-K for the
year ended December 31, 2022 (“2022 Form 10-K”), its Quarterly Reports on Form 10-Q, and
its other reports and statements filed by the Company with the Securities and Exchange Commission.
Forward-looking statements speak only as of the date on which they are made. The Company undertakes
no obligation to update publicly or revise any forward-looking statement, whether as a result of new information,
future developments or otherwise. The Company cautions you against relying on any of these
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