<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE COMMISSION ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
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 ( )
Number of shares of Class A common stock
outstanding as of October 27, 1995.........2,928,867
<PAGE>
PART I. FINANCIAL INFORMATION
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
------------------------------------------------
------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
ASSETS
-------
<S> <C> <C>
CURRENT:
Cash and cash equivalents $ 1,003,318 $ 1,071,903
Accounts receivable, less allowance
for possible losses of $417,470
in 1995 and $354,252 in 1994 6,383,812 8,315,300
Inventories 14,849,899 12,867,604
Note receivable from officer 65,000 85,000
Deferred income taxes 325,000 764,000
Prepaid expenses and other assets 415,532 618,686
------------- ---------------
TOTAL CURRENT ASSETS 23,042,561 23,722,493
------------- ---------------
PROPERTY AND EQUIPMENT:
Land 993,020 993,020
Buildings and improvements 4,512,050 4,490,216
Machinery and equipment 5,243,556 4,596,342
------------- ---------------
10,748,626 10,079,578
Less accumulated depreciation
and amortization 4,652,302 4,164,690
------------- ---------------
NET PROPERTY AND EQUIPMENT 6,096,324 5,914,888
------------- ---------------
GOODWILL, net of accumulated
amortization of $804,349 in
1995 and $730,558 in 1994 3,009,418 3,083,209
OTHER ASSETS, net of accumulated
amortization of $489,666 in 1995
and $402,663 in 1994 182,207 292,710
------------- --------------
TOTAL ASSETS $ 32,330,510 $ 33,013,300
------------- --------------
------------- --------------
</TABLE>
1
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(CONTINUED)
----------------------------------------------------
----------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings $ 1,916,913 $ 3,514,290
Accounts payable 4,200,523 2,952,483
Accruals and other liabilities 1,323,285 1,971,198
Current maturities of long-term debt 348,003 344,514
------------ -------------
TOTAL CURRENT LIABILITIES 7,788,724 8,782,485
LONG-TERM DEBT, less current maturities 6,137,677 6,398,425
SUBORDINATED DEBENTURES 1,369,200 1,369,200
------------- ------------
15,295,601 16,550,110
------------- ------------
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 1,683,200
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 3,864,978 3,293,259
------------- -----------
TOTAL SHAREHOLDERS' EQUITY 17,034,909 16,463,190
------------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 32,330,510 $ 33,013,300
------------ ------------
------------ ------------
</TABLE>
2
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
------------------------------------------
------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1995 1994 1995 1994
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 9,854,150 $ 10,993,240 $ 30,155,420 $ 30,525,653
Other 82,233 50,523 208,760 51,016
------------ ------------ ------------ -------------
9,936,383 11,043,763 30,364,180 30,576,669
------------ ------------ ------------ -------------
COSTS AND EXPENSES:
Cost of sales 6,634,725 7,801,703 20,449,078 21,053,615
Selling, administrative and general 2,528,065 2,484,416 7,391,959 7,250,494
Interest - net 288,324 263,409 806,948 790,901
Depreciation 157,075 142,888 467,968 428,664
------------ ------------ ------------ -------------
9,608,189 10,692,416 29,115,953 29,523,674
------------ ------------ ------------ -------------
INCOME BEFORE TAXES ON INCOME 328,194 351,347 1,248,227 1,052,995
TAXES ON INCOME 130,000 157,000 479,000 421,000
------------ ------------ ------------ -------------
NET INCOME $ 198,194 $ 194,347 $ 769,227 $ 631,995
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Preferred dividends $ 65,836 $ 65,836 $ 197,509 $ 197,509
--------- --------- --------- ----------
--------- --------- --------- ----------
Net income attributable
to common stock $ 132,358 $ 128,511 $ 571,718 $ 434,486
--------- --------- --------- ----------
--------- --------- --------- ----------
Average number of common shares
and common share equivalents
- primary 3,354,918 3,377,418 3,355,585 3,237,308
--------- --------- --------- ----------
--------- --------- --------- ----------
- fully diluted 3,354,918 3,377,418 3,355,585 3,238,224
--------- --------- --------- ----------
--------- --------- --------- ----------
Earnings per share of common
stock - primary and fully diluted $ .04 $ .04 $ .18 $ .14
------ ------ ------ -------
------ ------ ------ -------
</TABLE>
3
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-----------------------------------------
-----------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1995 1994
----------- -----------
<S>
CASH FLOWS FROM OPERATING ACTIVITIES: <C> <C>
Net income $ 769,227 $ 631,995
----------- -----------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 678,895 604,658
Deferred income taxes 439,000 95,000
Provision for losses on
accounts receivable 57,687 74,997
Decrease (increase):
Accounts receivable 1,957,191 1,116,780
Inventories (1,773,676) (3,001,556)
Note receivable from officer 20,000 15,000
Prepaid expenses and other assets 204,322 (442,875)
Net assets of discontinued
operation - net of cash -- 3,221,254
Other assets 400 (44,632)
Increase (decrease):
Accounts payable 1,248,040 (2,950,136)
Accruals and other (647,913) 101,839
----------- -----------
Total adjustments 2,183,946 (1,209,671)
----------- ----------
Net cash provided by
operating activities 2,953,173 (577,676)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (216,654) (98,113)
Payment for acquisition of assets
of Tradesman Tool Co. and Intech
Industries, Inc. (752,959) --
----------- ----------
Net cash used in
investing activities (969,613) (98,113)
----------- ----------
</TABLE>
4
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(UNAUDITED)
---------------------------------------------
---------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1995 1994
<S> ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES: <C> <C>
Proceeds from short-term borrowings 11,115,646 14,131,742
Repayments of short-term borrowings (12,713,023) (11,474,842)
Proceeds from mortgage refinancing -- 2,343,400
Principal payments on long-term debt (257,259) (2,859,526)
Dividends paid (197,509) (226,797)
------------ ------------
Net cash provided by (used in)
financing activities (2,052,145) 1,913,977
------------ ------------
NET INCREASE (DECREASE) IN CASH (68,585) 1,238,188
CASH AT BEGINNING OF PERIOD - including
cash of discontinued operation of
$881,537 in 1994 1,071,903 1,969,071
------------ ------------
CASH AT END OF PERIOD $ 1,003,318 $ 3,207,259
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes $ 314,025 $ 258,729
------------ ------------
------------ ------------
Interest $ 888,221 $ 899,101
------------ ------------
------------ ------------
</TABLE>
5
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------
-------------------------------------------
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements for the nine months ended September
30, 1995 and 1994 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, 1994 was
derived from audited financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994. 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 the operations of some of the Company's
subsidiaries are seasonal in nature.
2. INVENTORIES
Major classes of inventory were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Finished goods $ 11,791,282 $ 10,142,039
Work in process 94,311 26,163
Raw materials and supplies 2,964,306 2,699,402
------------ ------------
$ 14,849,899 $ 12,867,604
------------ ------------
------------ ------------
</TABLE>
3. 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 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 is adjusted for preferred dividends in computing the net income
attributable to the common stock.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
P & F INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
----------------------------------------
THIRD QUARTER ENDED SEPTEMBER 30, 1995 COMPARED WITH THIRD QUARTER ENDED
SEPTEMBER 30, 1994
Revenues declined 10% to $9,936,383 from $11,043,763. This decline in
revenues is attributable to a decline of $1,386,057 in revenues from hydraulic
equipment, the result of a change in accounting for these revenues. In 1994,
revenues from hydraulic equipment were primarily accounted for as sales, with
corresponding cost of sales, while in 1995 these net revenues were accounted for
as commission income. Excluding the change in revenues from hydraulic equipment,
total revenues increased 2.9%. Revenues from pneumatic tools and related
equipment and baseboard and radiant heating products increased 1.7% and 10.1%,
respectively, while revenues from hardware declined 3.3%.
Cost of sales declined 3.9 percentage points as a percentage of revenues.
Excluding the effect of the change in accounting for hydraulic equipment sales
described above, cost of sales as a percentage of revenues was virtually
unchanged. Higher selling prices offset cost increases.
Average selling prices of pneumatic tools and heating equipment were
approximately 4.6% and 7.8% higher, respectively, than the prior year. Hardware
average selling prices were unchanged.
Selling, administrative and general expenses were virtually unchanged as a
percentage of revenues, as adjusted for the change in revenues from hydraulic
equipment. Interest expense rose $24,915 due to higher interest rates.
7
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
----------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1994
Revenues were essentially unchanged from the prior year, despite a decline
of $2,018,335 in revenues from hydraulic equipment, resulting from the change in
accounting for these revenues described above. Excluding the change in revenues
from hydraulic equipment, total revenues increased 6.4%. Revenues from pneumatic
tools and related equipment, baseboard and radiant heating equipment and
hardware increased 5.5%, 10.7% and 6.5%, respectively.
Average selling prices of pneumatic tools and heating equipment were
approximately 3.9% and 5.5% higher, respectively, than the prior year. Hardware
average selling prices were unchanged.
Cost of sales declined 1.5 percentage points as a percentage of revenues.
Excluding the effect of the change in accounting for hydraulic equipment sales
described above, cost of sales as a percentage of revenues was virtually
unchanged, with higher selling prices offsetting higher material costs.
Selling, administrative and general expenses rose 2%, but declined 1.1
percentage points as a percentage of revenues, as adjusted for the change in
revenues from hydraulic equipment, due to the 6.4% increase in these adjusted
revenues.
8
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
---------------------------------------
---------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The Company gauges its liquidity and financial stability by the
measurements as shown in the following table (dollar amounts in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1995 1994 1994
------------- ------------ -------------
<S> <C> <C> <C>
Working Capital $ 15,254 $ 14,940 $ 14,441
Current Ratio 2.96 to 1 2.70 to 1 2.22 to 1
Shareholders' Equity $ 17,035 $ 16,463 $ 15,928
</TABLE>
During the nine months ended September 30, 1995, accounts receivable
declined approximately $1,950,000. The monies received from the collection of
accounts receivable were used to reduce short-term borrowings, which declined by
approximately $1,600,000.
In December 1994, the Company's credit facilities were consolidated to
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. The
total amount of these instruments outstanding as of September 30, 1995 was
approximately $5,090,000, including approximately $1,920,000 for direct loans.
The total line of credit also includes $4,000,000 earmarked for acquisitions
subject to the lending bank's approval. The Company also has a $10,000,000 line
for foreign exchange transactions.
In June 1994, substantially all of the net assets of Triangle Sheet Metal
Works, Inc. ("Triangle") were sold for $3,500,000 in cash to an investment group
which included Triangle's senior management. The proceeds from the sale of
Triangle were used to reduce short-term borrowings. The Company is currently
leasing its facilities in New Hyde Park, New York to the new entity. The
divestiture of Triangle was in line with the Company's previously stated goal of
disengaging itself from the volatility of the construction industry.
The Company is currently conducting an extensive acquisition search. The
funds for an acquisition will be provided by reborrowing the $3,500,000 received
from the sale of the assets of Triangle, referred to above, which was
temporarily used to reduce short-term debt, and from the new $4,000,000 credit
facility earmarked for acquisitions referred to above. The total of funds
available, including cash derived from operations, is approximately $9,000,000.
9
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
---------------------------------------
---------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Capital spending for the nine months ended September 30, 1995 totalled
$216,654. Capital expenditures for the rest of 1995 are expected to total
approximately $335,000. The funds for all capital expenditures for 1995 have
been and will be provided from working capital. Included in the expected total
for 1995 are capital expenditures relating to new products, expansion of
existing product lines and replacement of old equipment.
During 1994, the mortgage on the Company's Jupiter, Florida facility, in
the amount of $2,343,400, was refinanced, through February 1999. The interest
rate, 1/2% over prime per annum, remained the same.
On August 23, 1994, the Board of Directors of the Company authorized the
redemption, effective September 6, 1994, of all outstanding rights issued under
a shareholder rights plan established in 1989 and also declared a dividend
distribution of new rights under a new shareholder rights plan. The redemption
price of $.01 per right resulted in an aggregate payment of $29,289, which was
treated as a dividend for tax purposes.
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 $752,959 was paid for these
purchases. The operations of Tradesman and Intech have been merged with the
operations of Florida Pneumatic.
The Company, through Florida Pneumatic, imports a significant amount of its
purchases of tools 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 against adverse
effects of these fluctuations, including product pricing adjustments,
alternative supplier sources and the use of forward currency contracts to hedge
currency positions. 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 further
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.
10
<PAGE>
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, 1995.
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 LEON D. FELDMAN
--------------------------------
Leon D. Feldman
Executive Vice President
Dated: October 27, 1995 (Principal Financial Officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,003,318
<SECURITIES> 0
<RECEIVABLES> 6,383,812
<ALLOWANCES> 0<F1>
<INVENTORY> 14,849,899
<CURRENT-ASSETS> 23,042,561
<PP&E> 10,748,626
<DEPRECIATION> 4,652,302
<TOTAL-ASSETS> 32,330,510
<CURRENT-LIABILITIES> 7,788,724
<BONDS> 7,506,877
<COMMON> 2,928,867
0
2,633,450
<OTHER-SE> 11,472,592
<TOTAL-LIABILITY-AND-EQUITY> 17,034,909
<SALES> 30,155,420
<TOTAL-REVENUES> 30,364,180
<CGS> 20,449,078
<TOTAL-COSTS> 20,449,078
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 806,948
<INCOME-PRETAX> 1,248,227
<INCOME-TAX> 479,000
<INCOME-CONTINUING> 769,227
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 769,227
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
<FN>
<F1>ACCOUNTS RECEIVABLE ARE NET OF ALLOWANCE
</FN>
</TABLE>
