<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 MARCH 31, 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 May 5, 1995..........2,928,867
<PAGE>
PART I. FINANCIAL INFORMATION
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
=======================================
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
------
CURRENT:
Cash $ 618,124 $ 1,071,903
Accounts receivable, less allowance
for possible losses of $374,544
in 1995 and $354,252 in 1994 6,075,859 8,315,300
Inventories 13,416,797 12,867,604
Note receivable from officer 65,000 85,000
Deferred income taxes 611,000 764,000
Prepaid expenses and other assets 544,961 618,686
------------ ------------
TOTAL CURRENT ASSETS 21,331,741 23,722,493
------------ ------------
PROPERTY AND EQUIPMENT:
Land 993,020 993,020
Buildings and improvements 4,501,286 4,490,216
Machinery and equipment 5,112,681 4,596,342
------------ ------------
10,606,987 10,079,578
Less accumulated depreciation
and amortization 4,321,812 4,164,690
------------ ------------
NET PROPERTY AND EQUIPMENT 6,285,175 5,914,888
------------ ------------
GOODWILL, net of accumulated
amortization of $755,155 in
1995 and $730,558 in 1994 3,058,612 3,083,209
OTHER ASSETS, net of accumulated
amortization of $431,664 in 1995
and $402,663 in 1994 260,409 292,710
------------ ------------
TOTAL ASSETS $ 30,935,937 $ 33,013,300
============ ============
</TABLE>
1
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(CONTINUED)
=======================================
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 1,674,242 $ 3,514,290
Accounts payable 3,571,009 2,952,483
Accruals and other liabilities 994,019 1,971,198
Current maturities of long-term debt 345,183 344,514
------------ ------------
TOTAL CURRENT LIABILITIES 6,584,453 8,782,485
LONG-TERM DEBT, less current maturities 6,312,443 6,398,425
SUBORDINATED DEBENTURES 1,369,200 1,369,200
------------ ------------
14,266,096 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 1,163,200
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 3,499,910 3,293,259
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 16,669,841 16,463,190
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 30,935,937 $ 33,013,300
============ ============
</TABLE>
2
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
=======================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
------------ ------------
<S> <C> <C>
REVENUES:
Net sales $ 9,604,535 $ 9,627,903
Other 24,654 303
------------ ------------
9,629,189 9,628,206
------------ ------------
COSTS AND EXPENSES:
Cost of sales 6,386,422 6,670,353
Selling, administrative and general 2,426,946 2,293,494
Interest - net 233,612 237,598
Depreciation 147,722 142,888
------------ ------------
9,194,702 9,344,333
------------ ------------
INCOME BEFORE TAXES ON INCOME 434,487 283,873
TAXES ON INCOME 162,000 104,000
------------ ------------
NET INCOME $ 272,487 $ 179,873
============ ============
Preferred dividends $ 65,836 $ 65,836
========= =========
Net income attributable
to common stock $ 206,651 $ 114,037
========= =========
Average number of common shares
and common share equivalents
- primary and fully diluted 3,355,918 3,127,418
========= =========
Earnings per share of common
stock - primary and fully diluted $ .06 $ .04
====== ======
</TABLE>
3
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
=======================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 272,487 $ 179,873
------------ ------------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 210,720 236,857
Deferred income taxes 153,000 105,000
Provision for losses on
accounts receivable 24,999 24,999
Decrease (increase):
Accounts receivable 2,297,832 652,665
Inventories (340,574) 378,213
Note receivable from officer 20,000 15,000
Prepaid expenses and other assets 73,725 (165,131)
Net assets of discontinued
operation - net of cash -- 1,221,745
Other assets 3,300 10,801
Increase (decrease):
Accounts payable 618,526 (4,251,460)
Accruals and other (977,179) (515,558)
------------ ------------
Total adjustments 2,084,349 (2,286,869)
------------ ------------
Net cash provided by (used in)
operating activities 2,356,836 (2,106,996)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (66,459) (52,662)
Payment for acquisition of assets
of Tradesman Tool Co. and Intech
Industries, Inc. (752,959) --
------------ ------------
Net cash used in
investing activities (819,418) (52,662)
------------ ------------
</TABLE>
4
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(UNAUDITED)
=======================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 2,442,007 4,372,987
Repayments of short-term borrowings (4,282,055) (1,562,947)
Proceeds from mortgage refinancing -- 2,343,400
Principal payments on long-term debt (85,313) (2,493,265)
Dividends paid on preferred stock (65,836) (65,836)
Financing activities of
discontinued operation -- (33,641)
------------ ------------
Net cash provided by (used in)
financing activities (1,991,197) 2,560,698
------------ ------------
NET INCREASE (DECREASE) IN CASH (453,779) 401,040
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 - including
cash of discontinued operation of
$1,723,459 in 1994 $ 618,124 $ 2,370,111
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes $ 94,355 $ 219,636
============ ============
Interest $ 216,694 $ 294,027
============ ============
</TABLE>
5
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
=======================================
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements for the three months ended March 31,
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>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Finished goods $ 10,513,260 $ 10,142,039
Work in process 248,226 26,163
Raw materials and supplies 2,655,311 2,699,402
------------ ------------
$ 13,416,797 $ 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
=======================================
FIRST QUARTER ENDED MARCH 31, 1995 COMPARED WITH FIRST QUARTER ENDED
MARCH 31, 1994
Revenues were virtually unchanged, totalling $9,628,206 in 1995 and
$9,626,189 in 1994. Pneumatic tool revenues were flat. Heating equipment and
hardware revenues rose 16.2% and 15.6%, respectively, aided by an improving
economy and an increased customer base. Revenues from sales of hydraulic
equipment, which are shipped by the overseas suppliers direct to the customer,
are now accounted for as commission income. This change resulted in a $381,827
reduction in reported revenues in the first quarter of 1995, thereby offsetting
the increases in heating equipment and hardware revenues. Excluding this amount,
revenues increased by 4.2%.
Average selling prices of pneumatic tools increased approximately 4.4%,
necessitated by the continuing weakness of the U.S. dollar as compared to the
Japanese yen, which caused the prices of the Company's imported tools to rise
once again. Heating equipment selling prices were 3.8% higher than in the first
quarter of 1994. Hardware prices were unchanged.
Cost of sales declined 4.3 percentage points, as a percentage of revenues.
This was caused by the selling price increases referred to above, which became
effective in the third and fourth quarters of 1994, and the elimination from
revenues of hydraulic equipment sales, with their attendant lower gross profit
margins. The increasing costs of imported product caused by the fall in value of
the U.S. dollar compared to the Japanese yen will be felt more strongly in the
second quarter of 1995 and thereafter.
Selling, administrative and general expenses increased $133,452 to
$2,426,946, from $2,293,494 in the prior year. The overhead increase
attributable to the Company's new radiant heat product line was $37,215.
Excluding this amount, the increase amounted to 4.2%. The largest dollar amount
increases were in salaries, freight, insurance and professional fee expenses.
Interest expense was virtually unchanged. Higher interest rates offset
lower borrowings.
7
<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>
MARCH 31, DECEMBER 31, MARCH 31,
1995 1994 1994
--------- ------------ ---------
<S> <C> <C> <C>
Working Capital $ 14,747 $ 14,940 $ 14,018
Current Ratio 3.24 to 1 2.70 to 1 2.37 to 1
Shareholders' Equity $ 16,670 $ 16,463 $ 15,637
</TABLE>
During the quarter ended March 31, 1995, accounts receivable declined
approximately $2,240,000. Part of the monies received from the collection of
accounts receivable was used to reduce short-term borrowings, which declined by
approximately $1,840,000.
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 March 31, 1995 was
approximately $4,400,000, including approximately $1,674,000 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 funds
available, including cash derived from operations, will be approximately
$9,000,000.
8
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
=======================================
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Capital spending for the quarter ended March 31, 1995 was $66,459. The
total amount was provided from working capital. Capital expenditures for the
rest of 1995 are expected to total approximately $735,000, some of which may be
financed. 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 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. The continued weakness of the dollar,
however, presents an ongoing problem and there can be no certainty that the
Company will continue to be successful in its efforts to counter this problem.
9
<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 March 31, 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: May 5, 1995 (Principal Financial Officer)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 618,124
<SECURITIES> 0
<RECEIVABLES> 6,075,859
<ALLOWANCES> 0<F1>
<INVENTORY> 13,416,797
<CURRENT-ASSETS> 21,331,741
<PP&E> 10,606,987
<DEPRECIATION> 4,321,812
<TOTAL-ASSETS> 30,935,937
<CURRENT-LIABILITIES> 6,584,453
<BONDS> 7,781,643
<COMMON> 2,928,867
0
2,633,450
<OTHER-SE> 11,107,524
<TOTAL-LIABILITY-AND-EQUITY> 30,935,937
<SALES> 9,604,535
<TOTAL-REVENUES> 9,629,189
<CGS> 6,386,422
<TOTAL-COSTS> 6,386,422
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 233,612
<INCOME-PRETAX> 434,487
<INCOME-TAX> 162,000
<INCOME-CONTINUING> 272,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 272,487
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
<FN>
<F1>13) ACCOUNTS RECEIVABLE ARE NET OF ALLOWANCE
</FN>
</TABLE>
