2014

P&F Industries Reports Results For The Three-Month Period Ended March 31, 2013

MELVILLE, N.Y., May 9, 2013 /PRNewswire/ -- P&F Industries, Inc. (NASDAQ: PFIN) today announced its results of operations for the three-month period ended March 31, 2013.

P&F Industries, Inc. is reporting revenue of $20,709,000 for the three-month period ended March 31, 2013, compared to $14,317,000 for the same period in 2012.  Additionally, the Company is reporting income before income taxes of $993,000 compared to $729,000 for the three-month periods ended March 31, 2013 and 2012, respectively.  Lastly, the Company is reporting income after taxes of $621,000 compared to $706,000 for the three-month periods ended March 31, 2013 and 2012, respectively.

Richard Horowitz, the Company's Chairman of the Board, Chief Executive Officer and President commented, "I am pleased to report that, driven primarily by Florida Pneumatic's continued roll-out of its pneumatic tools to The Home Depot, P&F's first quarter of 2013 consolidated revenue increased nearly $6.4 million, or 44.6%, compared to the same period in the prior year.  We did, however, absorb one-time expenses of $700,000 in connection with this roll-out, which negatively impacted our first quarter results. Our tax expense for the first quarter of 2013 was $372,000, compared to only $23,000 in the first quarter in 2012.  It should be noted that during the third quarter of 2012 we eliminated the valuation allowance on our federal deferred tax assets, which resulted in an effective tax rate of 37.5% in the first quarter 2013 compared to 3.1% in the first quarter of 2012. Prior to this elimination, in lieu of recording a tax expense, we adjusted the then in place valuation allowance, thus creating minimal effective tax rates that would have been applied to our pretax income. With the valuation allowance removed, current and future tax provisions will more significantly impact our after-tax earnings, as well as our earnings per share."



For the three month period ended March 31,





2013



2012










Basic earnings per common share


$

0.17


$

0.20












Diluted earnings per common share


$

0.16


$

0.19














 

A summary of P&F's results of operations for the three month periods ended March 31, 2013 and 2012 follows.

REVENUE


Three months ended March 31,











Increase (decrease)





2013



2012



$



%



Tools















Florida Pneumatic


$

11,462,000



$

5,417,000



$

6,045,000




111.6


%

Hy-Tech



4,167,000




4,255,000




(88,000)




(2.1)



Tools Total



15,629,000




9,672,000




5,957,000




61.6





















Hardware


















Hardware Total



5,080,000




4,645,000




435,000




9.4





















Consolidated


$

20,709,000



$

14,317,000



$

6,392,000




44.6


%




















Tools

Florida Pneumatic markets its air tool products to two primary sectors within the pneumatic tool industry; retail and industrial/catalog. Additionally, Florida Pneumatic also markets, to a much lesser degree, air tools to the automotive market. It also generates revenue from its Berkley pipe cutting product line, as well as from a line of air filters and other OEM parts ("Other").

 



Three months ended March 31,




2013



2012



Increase (decrease)




Revenue



Percent of

revenue



Revenue



Percent of

revenue



$



%



Retail customers


$

8,878,000



77.5

%


$

2,460,000



45.4

%


$

6,418,000



260.9


%

Industrial/catalog



1,919,000



16.7




2,009,000



37.1




(90,000)



(4.5)



Automotive



267,000



2.3




305,000



5.6




(38,000)



(12.5)



Other



398,000



3.5




643,000



11.9




(245,000)



(38.1)



Total


$

11,462,000



100.0

%


$

5,417,000



100.0

%


$

6,045,000)



111.6


%

 

During the first quarter of 2013, Florida Pneumatic continued to ship the initial product delivery, or roll-out, to The Home Depot locations. Revenue from Sears Holdings Corporation declined slightly, when compared to the same three month period in 2012. The Industrial/catalog sector, which had reported quarter over quarter improvement throughout 2012, had a slight decline in revenue due primarily to a softening within this sector, which we believe is likely to continue.  First quarter of 2013 Automotive product revenue and Other revenue declined, when compared to the same period in 2012, primarily due to Florida Pneumatic's decision to place greater emphasis on expanding its Retail and Industrial/catalog lines, as well as the loss of a large air filter customer.

Hy-Tech focuses primarily on the industrial sector of the pneumatic tools market.  Hy-Tech manufactures and markets its own value-added line of air tools and parts, as well as distributes a complementary line of sockets ("ATP"). 

 



Three months ended March 31,




2013



2012



Increase (decrease)




Revenue



Percent of

revenue



Revenue



Percent of

revenue



$


%



ATP


$

2,860,000



68.6

%


$

2,624,000



61.7

%


$

236,000



9.0


%

Hy-Tech Machine



417,000



10.0




403,000



9.5




14,000



3.5



Major customer



820,000



19.7




1,095,000



25.7




(275,000)



(25.1)



Other



70,000



1.7




133,000



3.1




(63,000)



(47.4)



Total


$

4,167,000



100.0

%


$

4,255,000



100.0

%


$

(88,000)



(2.1)


%

 

When comparing the first quarter of 2013 to the same period in the prior year, ATP product revenue improved, due primarily to special orders shipped in the first quarter of 2013. Additionally, Hy-Tech Machine products, which primarily focus on the mining, construction and industrial manufacturing markets ("Hy-Tech Machine"), saw its first quarter of 2013 revenue increase slightly, when compared to the same period in 2012.  Finally revenue from its Major customer declined, as we believe this customer has been reducing its world-wide inventory levels during the first quarter of 2013.  

Hardware

Our Hardware segment, which currently consists of only Nationwide, generates revenue from the sale of fencing and gate hardware, kitchen and bath accessories, OEM products and patio hardware.

 



Three months ended March 31,




2013



2012



Increase (decrease)




Revenue



Percent of

revenue



Revenue



Percent of

revenue



$



%



Fence and gate hardware


$

3,651,000



71.9

%


$

3,078,000



66.3

%


$

573,000



18.6


%

Kitchen and Bath



703,000



13.8




846,000



18.2




(143,000)



(16.9)



OEM



364,000



7.2




433,000



9.3




(69,000)



(15.9)



Patio



362,000



7.1




288,000



6.2




74,000



25.7



Total


$

5,080,000



100.0

%


$

4,645,000



100.0

%


$

435,000



9.4


%

 

The increase in Fence and gate hardware revenue is due primarily to an expanding customer base, as well as from new product releases. The increase in patio revenue is due primarily to increased activity in the sale of foreclosed home units occurring primarily in Florida.  When comparing the first quarter of 2013 to the same period in 2012, OEM product line revenue declined, primarily due to certain orders being delayed by its customers from the fourth quarter 2011, to the first quarter of 2012. The continued softening of the Kitchen and Bath market, in addition to Nationwide's largest Kitchen and Bath customers filing for bankruptcy protection in late 2012, are the key factors for the decline in the Kitchen and Bath product line revenue.

 

GROSS MARGINS / PROFITS


Three months ended

March 31,



Increase (decrease)



2013



2012



Amount


%



Tools

$

5,819,000



$

3,832,000



$

1,987,000


51.9

%

As percent of respective revenue


37.2

%



39.6

%


(2.4) pts.




 

Hardware

$

1,915,000



$

1,779,000



$

136,000


7.6

%

As percent of respective revenue


37.7

%



38.3

%


(0.6) pts.




 

Consolidated

$

7,734,000



$

5,611,000



$

2,123,000


37.8

%

As percent of respective revenue


37.3

%



39.2

%


(1.9) pts.




 

 

Tools


Three months ended 

March 31,



Increase (decrease)




2013



2012



Amount




%



Florida Pneumatic

$

4,046,000



$

2,011,000



$

2,035,000




101.2

%


As percentage of respective revenue


35.3

%



37.1

%



(1.8)


 % pts.






















Hy-Tech

$

1,773,000



$

1,821,000



$

(48,000)




(2.6)



As percentage of respective revenue


42.5

%



42.8

%



(0.3)


 % pts.






















Total Tools

$

5,819,000



$

3,832,000



$

1,987,000




51.9



As percentage of respective revenue


37.2

%



39.6

%



(2.4)


 % pts. 





The primary factor contributing to the 1.8 percentage point decline in Florida Pneumatic's gross margin is the additional $6.4 million in Retail revenue, which tends to generate lower gross margins compared to its other product lines.   However, with this increase in its Retail revenue, its gross profit improved $2,035,000, or 101.2%, when comparing the first quarter of 2013 to the same period in 2012.   The change in Hy-Tech's gross margin and gross profit was due largely to product / customer mix, partially offset by improved cost of manufacturing.  

Hardware

Gross margin at our Hardware segment during the first quarter of 2013 declined 0.6 percentage point, when compared to the same period in 2012.  This decline is primarily due to: (i) product / customer mix, and (ii) certain product cost increases for which Nationwide is unable to pass through to its customers.   However, as the result of increased revenue, gross profit increased $136,000 during the first quarter of 2013, compared to the same period in 2012.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses, ("SG&A") include salaries and related costs, commissions, travel, administrative facilities, 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 2013, our SG&A was $6,632,000, or 32.0% as a percentage of revenue, compared to $4,740,000, or 33.1% of revenue during the same three-month period in 2012.  The most significant items contributing to the increase are the incremental variable costs associated with the additional Retail revenue generated at Florida Pneumatic, which includes, among other things, commissions, warranty costs, freight out and advertising/promotional fees, aggregating $1,229,000.  Additionally, included in our first quarter of 2013 SG&A, is a one-time only marketing fee of $700,000 incurred by Florida Pneumatic in connection with the initial roll-out to The Home Depot.  Further, our first quarter of 2013 SG&A compensation, which is comprised of base salaries and wages, accrued performance-based bonus incentives, associated payroll taxes and employee benefits, increased $176,000, when compared to the same period in the prior year.  The aforementioned increases were partially offset by, among other things, reductions in professional fees and depreciation and amortization expenses, which, in the aggregate were $257,000

INTEREST

Our net interest expense during the first quarter of 2013 was $109,000, compared to $142,000 for the same period in the prior year.  The most significant factor affecting interest expense was a reduction in the applicable loan margins that are added to both our LIBOR (London InterBank Offered Rate) or Base Rate, as defined in the Credit Agreement borrowings.  The reduction in the interest rate is the result of the amendment to our credit facility entered into in December 2012.  The average balance of short-term borrowings during the first quarter of 2013 was $7,244,000 compared to $6,120,000 during the same three-month period in 2012.  

OTHER INFORMATION

P&F Industries has scheduled a conference call for today, May 9, 2013, at 11:00 A.M., Eastern Time to discuss its first quarter of 2013 results. Investors and other interested parties can listen to the call by dialing 866-796-3865, or via a live web cast accessible at www.pfina.com. To listen to the web cast, please register and download audio software at the site at least 15 minutes prior to the call.  For those who cannot listen to the live broadcast, a replay of the call will also be available on the Company's web-site beginning on or about May 11, 2013.

P&F Industries, Inc., through its two wholly owned operating subsidiaries, Continental Tool Group, Inc. and Countrywide Hardware, Inc., manufactures and/or imports air-powered tools sold principally to the industrial, retail and automotive markets, and various residential hardware such as kitchen and bath hardware, fencing hardware and door and window hardware primarily to the housing industry.  P&F's products are sold under their own trademarks, as well as under the private labels of major manufacturers and retailers.

Safe Harbor Statement. This is a Safe-Harbor Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including those related to the Company's future performance, and those contained in the comments of management, are based upon the Company's historical performance and on current plans, estimates and expectations, which are subject to various risks and uncertainties, including, but not limited to, the strength of the retail, industrial, housing and other markets in which the Company operates, the impact of competition, product demand, supply chain pricing, the Company's debt and debt service requirements and those other risks and uncertainties described in the Company's most recent Annual Report on Form 10-K, and its other reports and statements filed by the Company with the Securities and Exchange Commission. These risks could cause the Company's actual results for the 2013 fiscal year and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. Forward-looking statements speak only as of the date on which they are made, and 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.                                                                             



P & F INDUSTRIES, INC. AND SUBSIDIARIES


CONSOLIDATED CONDENSED BALANCE SHEETS




(In thousands $)

March 31, 2013

December 31, 2012


(Unaudited)

(NOTE 1)

Assets



Cash

$     582

$         695

Accounts receivable - net

13,350

6,675

Inventories - net

23,473

24,073

Deferred income taxes - net

1,139

1,139

Prepaid expenses and other current assets

846

547

Total current assets

39,390

33,129




Net property and equipment

10,851

11,102

Goodwill

5,150

5,150

Other intangible assets - net

1,676

1,752

Deferred Income taxes – net

2,913

3,211

Other assets – net

797

813

Total assets

$       60,777

$     55,157




Liabilities and Shareholders' Equity



Short-term borrowings

$       10,683

$     2,793

Accounts payable

3,235

4,843

Other accrued liabilities

3,121

4,332

Current maturities of long-term debt

460

460

Total current liabilities

17,499

12,428




Long-term debt, less current maturities

7,248

7,363

Other liabilities

274

278




Total liabilities

25,021

20,069




Total shareholders' equity

35,756

35,088




Total liabilities and shareholders' equity

$       60,777

$       55,157











NOTE-1
The unaudited consolidated condensed balance sheet information as of December 31, 2012 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

 

P & F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED

STATEMENTS OF EARNINGS


Three months ended March 31,

 

(In thousands, except per share data)

2013

2012


(Unaudited)

(Unaudited)

Net revenue

$     20,709

$       14,317

Cost of sales

12,975

8,706

Gross profit

7,734

5,611

Selling, general and administrative expenses

6,632

4,740

Operating income

1,102

871

Interest expense – net

109

142

Income  before income taxes

993

729

Income tax expense

372

23

Net income

$         621

$           706




Basic earnings per share

$ 0.17

$         0 .20



Diluted earnings per share

$ 0.16

$         0.19





SOURCE P&F Industries, Inc.



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