10-Q 1 tmb-20220930x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                 

Commission File Number 1-5332

P&F INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

22-1657413

(State or other jurisdiction of

 

(I.R.S. Employer Identification Number)

incorporation or organization)

 

 

 

 

 

445 Broadhollow Road, Suite 100, Melville, New York

 

11747

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (631) 694-9800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Class A common stock, $1.00 par value

 

PFIN

 

NASDAQ

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company 

 

 

 

 

 

 

 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for the complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

As of November 7, 2022, there were 3,194,699 shares of the registrant’s Class A common stock outstanding.

P&F INDUSTRIES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

PAGE

PART I — FINANCIAL INFORMATION

3

Item 1.

Financial Statements

3

Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021

3

Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine–month periods ended September 30, 2022 and  2021 (unaudited)

5

Consolidated Statements of Shareholders’ Equity for the three and nine–month periods ended September 30, 2022 and  2021 (unaudited)

6

Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)

8

Notes to Consolidated Financial Statements (unaudited)

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

34

PART II — OTHER INFORMATION

34

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3.

Defaults Upon Senior Securities

34

Item 4.

Mine Safety Disclosures

34

Item 5.

Other Information

34

Item 6.

Exhibits

34

Signature

35

Exhibit Index

36

2

PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2022

December 31, 2021

    

(unaudited)

    

(See Note 1)

ASSETS

CURRENT ASSETS

Cash

$

410,000

$

539,000

Accounts receivable — net

 

9,458,000

 

7,550,000

Inventories

 

24,731,000

 

24,021,000

Prepaid expenses and other current assets

 

2,600,000

 

4,566,000

TOTAL CURRENT ASSETS

 

37,199,000

 

36,676,000

PROPERTY AND EQUIPMENT

Land

 

507,000

 

507,000

Buildings and improvements

 

4,087,000

 

3,605,000

Machinery and equipment

 

27,224,000

 

25,675,000

 

31,818,000

 

29,787,000

Less accumulated depreciation and amortization

 

22,972,000

 

21,707,000

NET PROPERTY AND EQUIPMENT

 

8,846,000

 

8,080,000

GOODWILL

 

4,808,000

 

4,447,000

OTHER INTANGIBLE ASSETS — net

 

5,480,000

 

5,592,000

DEFERRED INCOME TAXES — net

 

487,000

 

349,000

RIGHT-OF-USE ASSETS – OPERATING LEASES

3,189,000

2,969,000

OTHER ASSETS — net

 

65,000

 

77,000

TOTAL ASSETS

$

60,074,000

$

58,190,000

See accompanying notes to consolidated financial statements (unaudited).

3

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2022

December 31, 2021

    

(unaudited)

    

(See Note 1)

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Short-term borrowings

$

8,087,000

$

5,765,000

Accounts payable

 

3,056,000

 

2,920,000

Accrued compensation and benefits

 

1,475,000

 

1,475,000

Accrued other liabilities

 

1,630,000

 

1,078,000

Current lease liabilities – operating leases

826,000

840,000

TOTAL CURRENT LIABILITIES

 

15,074,000

 

12,078,000

Noncurrent lease liabilities – operating leases

2,399,000

2,176,000

Other liabilities

 

76,000

 

96,000

TOTAL LIABILITIES

 

17,549,000

 

14,350,000

SHAREHOLDERS’ EQUITY

 

 

  

Preferred stock - $10 par; authorized - 2,000,000 shares; no shares issued

 

 

Common stock

 

 

  

Class A - $1 par; authorized - 7,000,000 shares; issued – 4,467,000 at September 30, 2022, and 4,453,000 at December 31, 2021

 

4,467,000

 

4,453,000

Class B - $1 par; authorized - 2,000,000 shares; no shares issued

 

 

Additional paid-in capital

 

14,230,000

 

14,167,000

Retained earnings

 

35,010,000

 

36,046,000

Treasury stock, at cost – 1,273,000 shares at September 30, 2022 and December 31, 2021

 

(10,213,000)

 

(10,213,000)

Accumulated other comprehensive loss

 

(969,000)

 

(613,000)

TOTAL SHAREHOLDERS’ EQUITY

 

42,525,000

 

43,840,000

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

60,074,000

$

58,190,000

See accompanying notes to consolidated financial statements (unaudited).

4

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(unaudited)

Three months

Nine months

ended September 30,

ended September 30, 

    

2022

    

2021

    

2022

    

2021

Net revenue

$

14,516,000

$

12,985,000

$

46,347,000

$

40,520,000

Cost of sales

 

9,669,000

9,011,000

31,353,000

27,062,000

Gross profit

 

4,847,000

3,974,000

14,994,000

13,458,000

Selling, general and administrative expenses

 

5,084,000

4,734,000

15,736,000

15,183,000

Operating loss

 

(237,000)

(760,000)

(742,000)

(1,725,000)

Other (expense) income

 

(3,000)

(24,000)

2,929,000

(Loss) gain on sale of property and equipment

(67,000)

5,000

(67,000)

Interest expense

(106,000)

(14,000)

(244,000)

(21,000)

(Loss) income before income taxes

(346,000)

(841,000)

(1,005,000)

1,116,000

Income tax benefit

 

109,000

108,000

129,000

267,000

Net (loss) income

$

(237,000)

$

(733,000)

$

(876,000)

$

1,383,000

Basic (loss) earnings per share

$

(0.08)

$

(0.23)

$

(0.28)

$

0.44

Diluted (loss) earnings per share

$

(0.08)

$

(0.23)

$

(0.28)

$

0.43

Weighted average common shares outstanding:

 

Basic

 

3,195,000

3,181,000

3,183,000

3,177,000

Diluted

 

3,195,000

3,181,000

3,183,000

3,191,000

Net (loss) income

$

(237,000)

$

(733,000)

$

(876,000)

$

1,383,000

Other comprehensive loss - foreign currency translation adjustment

 

(160,000)

(61,000)

(356,000)

(42,000)

Total comprehensive (loss) income

$

(397,000)

$

(794,000)

$

(1,232,000)

$

1,341,000

See accompanying notes to consolidated financial statements (unaudited).

5

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

Three months ended September 30, 2022

Accumulated

Class A common

Additional

other

stock, $1 par

paid-in

Retained

Treasury stock

comprehensive

    

Total

    

Shares

    

Amount

    

capital

    

earnings

    

Shares

    

Amount

    

loss

Balance, July 1, 2022

$

43,066,000

 

4,467,000

$

4,467,000

$

14,214,000

$

35,407,000

 

(1,273,000)

$

(10,213,000)

$

(809,000)

 

Net loss

 

(237,000)

 

 

 

 

(237,000)

 

 

 

Restricted common stock compensation

 

16,000

 

 

 

16,000

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

Dividends

 

(160,000)

 

 

 

 

(160,000)

 

 

 

 

Foreign currency translation adjustment

 

(160,000)

 

 

 

 

 

 

 

(160,000)

 

Balance, September 30, 2022

$

42,525,000

 

4,467,000

$

4,467,000

$

14,230,000

$

35,010,000

 

(1,273,000)

$

(10,213,000)

$

(969,000)

Three months ended September 30, 2021

 

Accumulated

 

Class A common

 

Additional

 

other

 

stock, $1 par

 

paid-in

 

Retained

 

Treasury stock

 

comprehensive

    

Total

    

Shares

    

Amount

    

capital

    

earnings

    

Shares

    

Amount

    

loss

Balance, July 1, 2021

$

43,703,000

 

4,453,000

$

4,453,000

$

14,149,000

$

35,872,000

 

(1,273,000)

$

(10,213,000)

$

(558,000)

Net loss

 

(733,000)

 

 

 

 

(733,000)

 

 

 

Restricted common stock compensation

 

8,000

 

 

 

8,000

 

 

 

 

Stock-based compensation

 

1,000

 

 

 

1,000

 

 

 

 

Foreign currency translation adjustment

 

(61,000)

 

 

 

 

 

 

 

(61,000)

Balance, September 30, 2021

$

42,918,000

 

4,453,000

$

4,453,000

$

14,158,000

$

35,139,000

 

(1,273,000)

$

(10,213,000)

$

(619,000)

See accompanying notes to consolidated financial statements (unaudited).

6

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

Nine months ended September 30, 2022

Accumulated

Class A common

Additional

other

stock, $1 par

paid-in

Retained

Treasury stock

comprehensive

    

Total

    

Shares

    

Amount

    

capital

    

earnings

    

Shares

    

Amount

    

loss

Balance, January 1, 2022

$

43,840,000

 

4,453,000

$

4,453,000

$

14,167,000

$

36,046,000

 

(1,273,000)

$

(10,213,000)

$

(613,000)

Net loss

 

(876,000)

 

 

 

 

(876,000)

 

 

 

Exercise of Stock Options

40,000

7,000

7,000

33,000

Restricted common stock compensation

 

36,000

 

7,000

 

7,000

 

29,000

 

 

 

 

Stock-based compensation

 

1,000

 

 

 

1,000

 

 

 

 

Dividends

 

(160,000)

 

 

 

 

(160,000)

 

 

 

Foreign currency translation adjustment

 

(356,000)

 

 

 

 

 

 

 

(356,000)

Balance, September 30, 2022

$

42,525,000

 

4,467,000

$

4,467,000

$

14,230,000

$

35,010,000

 

(1,273,000)

$

(10,213,000)

$

(969,000)

Nine months ended September 30, 2021

Accumulated

Class A common

Additional

other

stock, $1 par

paid-in

Retained

Treasury stock

comprehensive

    

Total

    

Shares

    

Amount

    

capital

    

earnings

    

Shares

    

Amount

    

loss

Balance, January 1, 2021

$

41,538,000

 

4,428,000

$

4,428,000

$

14,144,000

$

33,756,000

 

(1,273,000)

$

(10,213,000)

$

(577,000)

Net income

 

1,383,000

 

 

 

 

1,383,000

 

 

 

Restricted common stock compensation

 

35,000

 

25,000

 

25,000

 

10,000

 

 

 

 

Stock-based compensation

 

4,000

 

 

 

4,000

 

 

 

 

Foreign currency translation adjustment

 

(42,000)

 

 

 

 

 

 

 

(42,000)

Balance, September 30, 2021

$

42,918,000

 

4,453,000

$

4,453,000

$

14,158,000

$

35,139,000

 

(1,273,000)

$

(10,213,000)

$

(619,000)

See accompanying notes to consolidated financial statements (unaudited).

7

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine months

ended September 30,

    

2022

    

2021

Cash Flows from Operating Activities:

Net (loss) income

$

(876,000)

$

1,383,000

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Non-cash and other charges:

Depreciation

 

1,271,000

1,345,000

Amortization of other intangible assets

 

514,000

474,000

Amortization of operating lease assets

710,000

670,000

Amortization of debt issue costs

 

12,000

12,000

Amortization of consideration payable to a customer

 

157,000

202,000

Recovery of provision for losses on accounts receivable

 

(33,000)

19,000

Stock-based compensation

 

1,000

4,000

Stock-based compensation-options exercise

38,000

Restricted stock-based compensation

 

35,000

35,000

Deferred income taxes

 

(129,000)

(267,000)

(Gain) loss on disposal of fixed assets

(5,000)

33,000

Gain on early termination of lease

(19,000)

Forgiveness of Paycheck Protection Program loan

(2,929,000)

Fair value adjustment of assets held for sale

40,000

Changes in operating assets and liabilities, net of effects of acquisition

 

Accounts receivable

 

(1,262,000)

(1,007,000)

Inventories

 

(554,000)

(3,274,000)

Prepaid expenses and other current assets

 

1,608,000

248,000

Accounts payable

 

(45,000)

1,406,000

Accrued compensation and benefits

 

28,000

711,000

Accrued other liabilities and other current liabilities

582,000

(14,000)

Operating lease liabilities

 

(703,000)

(665,000)

Other liabilities

 

(25,000)

(36,000)

Total adjustments

 

2,181,000

(2,993,000)

Net cash provided by (used in) operating activities

1,305,000

(1,610,000)

See accompanying notes to consolidated financial statements (unaudited).

8

P&F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine months

ended September 30,

    

2022

    

2021

Cash Flows from Investing Activities:

 

  

 

  

Capital expenditures

$

(1,222,000)

$

(428,000)

Proceeds from sale of fixed asset

28,000

Purchase of net assets of the Jackson Gear Company business

 

(2,300,000)

Net cash used in investing activities

 

(3,522,000)

(400,000)

Cash Flows from Financing Activities:

 

Dividend payments

 

(160,000)

Net proceeds from short-term borrowings

 

2,323,000

1,921,000

Proceeds from exercise of stock options

2,000

Net cash provided by financing activities

 

2,165,000

1,921,000

Effect of exchange rate changes on cash

 

(77,000)

(26,000)

Net decrease in cash

 

(129,000)

(115,000)

Cash at beginning of period

 

539,000

904,000

Cash at end of period

$

410,000

$

789,000

Supplemental disclosures of cash flow information:

 

Cash paid for:

 

Interest

$

213,000

$

25,000

Taxes

$

126,000

$

12,000

Cash paid for amounts included in the measurement of operating lease liabilities

$

$

6,000

Non-cash information:

 

Right of Use (“ROU”) assets recognized for new operating lease liabilities

$

987,000

$

320,000

ROU adjustment due to early termination

$

359,000

$

See accompanying notes to consolidated financial statements (unaudited).

9