<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-Q
------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 ( )
As of July 31, 1997, there were outstanding 2,978,867 shares of the
Registrant's Class A Common Stock, par value $1.00 per share.
<PAGE>
P & F INDUSTRIES, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
TABLE OF CONTENTS
PAGE
PART I ----
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996 1 - 2
Consolidated Statements of Income for the
six months ended June 30, 1997 and 1996 3
Consolidated Statements of Cash Flows for
the six months ended June 30, 1997 and 1996 4 - 5
Notes to Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 10
PART II
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
=======================================
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
ASSETS
------------
CURRENT:
Cash $ 834,115 $ 4,558,135
Accounts receivable, less allowance
for possible losses of $389,786
in 1997 and $370,410 in 1996 6,162,219 6,113,259
Inventories 14,262,995 11,119,850
Note receivable from officer -- 40,000
Deferred income taxes 211,000 211,000
Prepaid expenses and other assets 156,468 300,850
------------ ------------
TOTAL CURRENT ASSETS 21,626,797 22,343,094
------------ ------------
PROPERTY AND EQUIPMENT:
Land 993,020 993,020
Buildings and improvements 4,505,889 4,505,889
Machinery and equipment 5,441,423 5,246,699
------------ ------------
10,940,332 10,745,608
Less accumulated depreciation
and amortization 5,316,691 4,965,956
------------ ------------
NET PROPERTY AND EQUIPMENT 5,623,641 5,779,652
------------ ------------
DEFERRED INCOME TAXES 175,000 175,000
GOODWILL, net of accumulated
amortization of $976,528 in
1997 and $927,334 in 1996 2,837,239 2,886,433
OTHER ASSETS, net of accumulated
amortization of $42,663 in 1997
and $34,659 in 1996 139,460 147,464
------------ ------------
TOTAL ASSETS $ 30,402,137 $ 31,331,643
------------ ------------
------------ ------------
1
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(CONTINUED)
==========================================
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term borrowings $ -- $ --
Accounts payable 3,887,809 2,661,589
Accruals and other liabilities 1,750,015 2,082,031
Current maturities of long-term debt 1,903,902 1,917,691
------------ ------------
TOTAL CURRENT LIABILITIES 7,541,726 6,661,311
LONG-TERM DEBT, less current maturities 3,841,244 3,919,370
SUBORDINATED DEBENTURES 1,369,200 1,369,200
------------ ------------
12,752,170 11,949,881
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock, $10 par, cumulative;
shares authorized 2,000,000; -- 2,633,450
Common stock:
Class A - $1 par; shares authorized
7,000,000; outstanding 2,978,867
and 2,928,867; reserved for
options - 727,000 shares; reserved
for warrants - 70,000 shares 2,978,867 2,928,867
Class B - $1 par; shares authorized
2,000,000 -- --
Additional paid-in capital 7,632,614 7,607,614
Retained earnings 7,038,486 6,211,831
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 17,649,967 19,381,762
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 30,402,137 $ 31,331,643
------------ ------------
------------ ------------
2
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
======================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
REVENUES:
<S> <C> <C> <C> <C>
Net sales $ 10,533,536 $ 9,593,600 $ 19,722,224 $ 18,927,735
Other 109,787 97,610 138,907 139,900
------------ ------------ ------------ ------------
10,643,323 9,691,210 19,861,131 19,067,635
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales 6,768,469 6,329,359 12,602,683 12,472,364
Selling, administrative and general 2,759,245 2,443,414 5,238,760 4,716,751
Interest - net 152,803 201,369 293,641 432,885
Depreciation 169,768 135,272 339,535 303,546
------------ ------------ ------------ ------------
9,850,285 9,109,414 18,474,619 17,925,546
------------ ------------ ------------ ------------
INCOME BEFORE TAXES ON INCOME 793,038 581,796 1,386,512 1,142,089
TAXES ON INCOME 306,000 226,000 538,000 436,000
------------ ------------ ------------ ------------
NET INCOME $ 487,038 $ 355,796 $ 848,512 $ 706,089
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Preferred dividends $ -- $ 65,837 $ 21,857 $ 131,673
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income attributable
to common stock $ 487,038 $ 289,959 $ 826,655 $ 574,416
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Average number of common shares
and common share equivalents
- primary 3,472,197 3,215,884 3,473,183 3,188,124
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
- fully diluted 3,472,197 3,268,415 3,473,183 3,269,371
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per share of common
stock - primary and fully diluted $ .14 $ .09 $ .24 $ .18
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
3
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
=======================================
SIX MONTHS ENDED
JUNE 30,
---------------------
1997 1996
---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 848,512 $ 706,089
------------ ------------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 414,533 394,160
Deferred income taxes -- --
Provision for losses on
accounts receivable 41,391 54,486
Decrease (increase):
Accounts receivable (90,351) 2,750,026
Inventories (3,143,145) (41,293)
Note receivable from officer 40,000 25,000
Prepaid expenses and other assets 137,782 108,740
Other assets -- 3,200
Increase (decrease):
Accounts payable 1,226,220 (1,191,769)
Accruals and other (332,016) (1,017,247)
------------ ------------
Total adjustments (1,705,586) 1,085,303
------------ ------------
Net cash (used in) provided by
operating activities (857,074) 1,791,392
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (194,724) (122,851)
------------ ------------
Net cash used in
investing activities (194,724) (122,851)
------------ ------------
4
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(UNAUDITED)
========================================
SIX MONTHS ENDED
JUNE 30,
---------------------
1997 1996
---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 6,609,726 7,635,754
Repayments of short-term borrowings (6,609,726) (9,341,961)
Principal payments on long-term debt (91,915) (2,338,097)
Proceeds from exercise of stock options 75,000 --
Dividends paid on preferred stock (21,857) (131,673)
Redemption of preferred stock (2,633,450) --
Proceeds from mortgage refinancing -- 2,062,500
------------ ------------
Net cash used in
financing activities (2,672,222) (2,113,477)
------------ ------------
NET (DECREASE) INCREASE IN CASH (3,724,020) (444,936)
CASH AT BEGINNING OF PERIOD 4,558,135 1,224,603
------------ ------------
CASH AT END OF PERIOD $ 834,115 $ 779,667
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes $ 594,908 $ 600,449
------------ ------------
------------ ------------
Interest $ 384,902 $ 575,683
------------ ------------
------------ ------------
5
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
=======================================
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements contained herein include the accounts
of P & F Industries, Inc. and its subsidiaries (the "Company"). All significant
intercompany balances and transactions have been eliminated.
The consolidated financial statements for the periods ended June 30, 1997
and 1996 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, 1996 was
derived from audited financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. 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.
The Company conducts its business operations through two wholly-owned
subsidiaries. Florida Pneumatic Manufacturing Corporation ("Florida Pneumatic")
is engaged in the importation, manufacture and sale of pneumatic hand tools for
the industrial, retail and automotive markets and air filters. Florida Pneumatic
also markets, through its Berkley Tool Division ("Berkley"), a line of pipe
cutting and threading tools, wrenches and replacement electrical components for
a widely used brand of pipe cutting and threading machines. Embassy Industries,
Inc. ("Embassy") is engaged in the manufacture and sale of baseboard and radiant
hot-water heating products. Embassy also imports, assembles and packages a line
of small hardware items through its Franklin Hardware division ("Franklin").
BASIS OF FINANCIAL STATEMENT PRESENTATION
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
6
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
=======================================
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
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 aggregate 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 or loss is adjusted for preferred dividends in computing the net
income or loss attributable to the common stock.
NOTE 2 - INVENTORIES
Major classes of inventory were as follows:
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
Finished goods $ 10,344,264 $ 7,661,749
Work in process 1,159,852 735,792
Raw materials and supplies 2,758,879 2,722,309
------------ ------------
$ 14,262,995 $ 11,119,850
------------ ------------
------------ ------------
7
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
=======================================
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SECOND QUARTER ENDED JUNE 30, 1997 COMPARED WITH FIRST QUARTER ENDED
JUNE 30, 1996
Consolidated revenues increased 9.8%, from $9,691,210 to $10,643,323.
Revenues from pneumatic tools and related equipment increased 10.6%, from
$7,140,977 to $7,894,762. Selling prices of pneumatic tools and related
equipment were virtually unchanged from the prior year.
Revenues from heating equipment increased 10.4%, from $1,546,595 to
$1,707,685. Revenues from hardware increased 3.7%, from $1,003,051 to
$1,040,454. Selling prices of both heating equipment and hardware were unchanged
from the prior year.
Consolidated gross profit, as a percentage of revenues, rose from 34.7% to
36.4%. Gross profit from pneumatic tools and related equipment rose from 35.5%
to 37.5%, due to a more profitable product mix and an increase in the value of
the U.S. dollar as compared to the Japanese yen, which lowered the cost of
imported product. Gross profit from heating equipment rose from 33.2% to 33.7%
and gross profit from hardware rose from 27.8% to 28.9%, both due to a more
profitable product mix.
Consolidated selling, general and administrative expenses increased 12.9%,
from $2,443,414 to $2,759,245, primarily due to increases in advertising,
commissions and salaries. Interest expense fell sharply, from $201,369 to
$152,803, as a result of lower average short-term borrowings in 1997.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED
JUNE 30, 1996
Consolidated revenues increased 4.2%, from $19,067,635 to $19,861,131.
Revenues from pneumatic tools and related equipment increased 4.1%, from
$13,925,344 to $14,489,677. Selling prices of pneumatic tools and related
equipment were virtually unchanged from the prior year.
Revenues from heating equipment increased 5.8%, from $3,183,256 to
$3,368,627. Revenues from hardware increased 2.2%, from $1,958,088 to
$2,001,653. Selling prices of both heating equipment and hardware were unchanged
from the prior year.
8
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
=======================================
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED
JUNE 30, 1996 (CONTINUED)
Consolidated gross profit, as a percentage of revenues, rose from 34.6% to
36.6%. Gross profit from pneumatic tools and related equipment rose from 35.6%
to 37.9%, due to a more profitable product mix and an increase in the value of
the U.S. dollar as compared to the Japanese yen, which lowered the cost of
imported product. Gross profit from heating equipment rose from 33.2% to 34.0%
and gross profit from hardware rose from 25.9% to 26.9%, both due to a more
profitable product mix.
Consolidated selling, general and administrative expenses increased 11.1%,
from $4,716,751 to $5,238,760, primarily due to increases in advertising,
commissions and salaries. Interest expense fell sharply, from $432,885 to
$293,641, as a result of lower average short-term borrowings in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company gauges its liquidity and financial stability by the
measurements shown in the following table (dollar amounts in thousands):
JUNE 30, DECEMBER 31, JUNE 30,
1997 1996 1996
--------- ------------ --------
Working Capital $ 14,085 $ 15,682 $ 16,491
Current Ratio 2.87 to 1 3.35 to 1 3.62 to 1
Shareholders' Equity $ 17,650 $ 19,382 $ 18,266
During the six months ended June 30, 1997, accounts receivable decreased by
approximately $90,000. Inventories increased approximately $3,143,000, to a
level more suitable to the needs of the customers in the current mix of sales.
Accounts payable increased approximately $1,226,000 as a result of the increase
in inventories.
On January 30, 1997, the Company redeemed all of its outstanding preferred
stock, at the par value of $10 per share, for a total of $2,633,450. This
redemption was funded by working capital and resulted in the decreases in the
Company's working capital, current ratio and shareholders' equity shown above.
Capital spending for the six months ended June 30, 1997 was approximately
$195,000. The total amount was provided from working capital. Capital
expenditures for the rest of 1997 are expected to total approximately $640,000,
some of which may be financed. Included in the expected total for 1997 are
capital expenditures relating to new products, expansion of existing product
lines and replacement of old equipment.
9
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
=======================================
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company's credit facility provides 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. At June 30, 1997, there were no loans
outstanding against this line of credit. There was a commitment at June 30, 1997
of approximately $3,900,000 for open letters of credit. In addition, at June 30,
1997, approximately $1,570,000 of the Company's credit facility was used to
secure accounts payable. The total line of credit also includes $4,000,000
earmarked for acquisitions subject to the lending bank's approval. The Company's
credit facility also provides the availability of up to $10,000,000 in foreign
currency forward contracts. These contracts fix the exchange rate on future
purchases of Japanese yen needed for payments to foreign suppliers. The total
amount of foreign currency forward contracts outstanding at June 30, 1997 was
approximately $1,685,000.
The Company's credit facility agreement is subject to annual review by the
lending bank. Under this agreement, the Company is required to adhere to certain
financial covenants. At June 30, 1997, and for the six months then ended, the
Company satisfied all of these covenants.
The Company continues to conduct an extensive acquisition search. The funds
for an acquisition will be provided by working capital and existing credit
facilities, including the $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.
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 from any adverse effects from
these fluctuations, including increasing its selling prices, obtaining price
reductions from its overseas suppliers, using alternative supplier sources and
entering into foreign currency forward contracts. 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 future 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
The following exhibits have been filed as part of this report:
Exhibit 4 - Amendment to Rights Agreement, dated April 11, 1997,
between the Registrant and American Stock Transfer & Trust
Company.
Exhibit 11 - Schedule of Computation of Earnings Per Common
Share.
Exhibit 27 - Financial Data Schedules (submitted to the
Securities and Exchange Commission in electronic format).
(b) Reports on Form 8-K
A report on Form 8-K was filed by the Registrant regarding an
amendment to the Rights Agreement between the Registrant and
American Stock Transfer & Trust Company. The date of the report
was April 11, 1997.
11
<PAGE>
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 /s/ Leon D. Feldman
------------------------------
Leon D. Feldman
Executive Vice President
Dated: July 31, 1997 (Principal Financial Officer)
12
<PAGE>
Exhibit 4
P & F INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 4
AMENDMENT TO RIGHTS AGREEMENT WITH
AMERICAN STOCK TRANSFER & TRUST COMPANY
=======================================
AMENDMENT, dated as of April 11, 1997, by and between P&F Industries, Inc.,
a Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company, a New York corporation (the "Rights Agent").
W I T N E S S E T H
WHEREAS, the Company and the Rights Agent are parties to a Rights Agreement
dated as of August 23, 1994 (the "Rights Agreement");
WHEREAS, pursuant to Section 26 of the Rights Agreement, the Board of
Directors of the Company has determined that an amendment to the Rights
Agreement as set forth herein is necessary and desirable and the Company and the
Rights Agent desire to evidence such amendment in writing.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
1. Amendment of Section l(a). Section l(a) of the Rights Agreement is
amended and restated to read as follows:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding, but shall not
include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee
benefit plan of the Company or of any Subsidiary of the Company, (iv) any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan, (v) Sidney Horowitz and his Associates and
Affiliates and (vi) Richard A. Horowitz and his Associates and Affiliates (each
of (i) through (vi), an "Exempted Person"); provided, however, that (i) if
Sidney Horowitz or his Associates (other than Richard A. Horowitz) or Affiliates
shall become the Beneficial Owner of 10% or more of the shares of Common Stock
then outstanding, each of them shall be then deemed to be an "Acquiring Person"
and (ii) if Richard A. Horowitz or his Associates (including Sidney Horowitz) or
Affiliates shall become the Beneficial Owner of 46% or more of the shares of
Common Stock then outstanding (the "RAH Trigger Amount"), then each of them
shall be deemed to be an "Acquiring Person", except that Richard A. Horowitz and
his Associates (other than Sidney Horowitz) and Affiliates shall not be deemed
to be an "Acquiring Person" as a result of being the Beneficial Owner of shares
of Common Stock in excess of the RAH Trigger Amount solely because Sidney
Horowitz or his Associates (other than Richard A. Horowitz) or Affiliates are
deemed to be an Acquiring Person. Notwithstanding the foregoing, (i) no Person
shall become an "Acquiring Person" as a result of an acquisition of Common Stock
by the Company which, by reducing the number of such shares then outstanding,
increases
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 4
(CONTINUED)
AMENDMENT TO RIGHTS AGREEMENT WITH
AMERICAN STOCK TRANSFER & TRUST COMPANY
=======================================
the proportionate number of shares beneficially owned by such Person to 15% (or
in the case of Sidney Horowitz 10%, or in the case of Richard A. Horowitz the
RAH Trigger Amount) or more of the outstanding Common Stock, except that if such
Person, after such share purchases by the Company, becomes the Beneficial Owner
of any additional shares of Common Stock, such Person shall be deemed to be an
"Acquiring Person;" and (ii) if the Board of Directors of the Company determines
in good faith that a Person who would otherwise be an "Acquiring Person" has
become such inadvertently, and such Person divests as promptly as practicable a
sufficient number of Common Stock so that such Person would no longer be an
Acquiring Person then such Person shall not be deemed to be an "Acquiring
Person." The term "outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then issued and outstanding which such Person would be deemed to
beneficially own hereunder.
2. Effectiveness. This Amendment shall be deemed effective as of
April 11, 1997 as if executed on such date. Except as amended hereby, the Rights
Agreement shall remain in full force and effect in accordance with its terms and
shall be otherwise unaffected hereby.
3. Miscellaneous. This Amendment shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such state applicable
to contracts to be made and performed entirely within such state. This Amendment
may be executed in any number of counterparts, each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument. If any provision, covenant
or restriction of this Amendment is held by a court of competent jurisdiction or
other authority to be invalid, illegal or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be effected, impaired or invalidated.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
P&F INDUSTRIES, INC. AMERICAN STOCK TRANSFER
& TRUST COMPANY
as Rights Agent
By: /s/ Richard Horowitz By: /s/ Herbert J. Lemmer
Name: Richard Horowitz Name: Herbert J. Lemmer
Title: President Title: Vice President
<PAGE>
Exhibit 11
P & F INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 11
SCHEDULE OF COMPUTATION OF EARNINGS PER COMMON SHARE
QUARTER ENDED JUNE 30, 1997
=====================================================
FULLY
PRIMARY DILUTED
------- -------
Net income $ 487 038 $ 487 038
Dividends on preferred stock -- --
---------- ----------
Net income for earnings per
common share $ 487 038 $ 487 038
---------- ----------
---------- ----------
Weighted average number of common
shares outstanding during the year 2 979 991 2 979 991
Common share equivalents - shares
issuable upon exercise of stock
options 492 206 492 206
---------- ----------
Weighted average number of common
shares and common share equivalents
used in calculation of earnings
per common share 3 472 197 3 472 197
---------- ----------
---------- ----------
Earnings per common share $ .14 $ .14
----- -----
----- -----
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 11
(CONTINUED)
SCHEDULE OF COMPUTATION OF EARNINGS PER COMMON SHARE
QUARTER ENDED JUNE 30, 1996
====================================================
FULLY
PRIMARY DILUTED
------- -------
Net income $ 355 796 $ 355 796
Dividends on preferred stock (65 837) (65 837)
---------- ----------
Net income for earnings per
common share $ 289 959 $ 289 959
---------- ----------
---------- ----------
Weighted average number of common
shares outstanding during the year 2 929 991 2 929 991
Common share equivalents - shares
issuable upon exercise of stock
options 285 893 338 424
---------- ----------
Weighted average number of common
shares and common share equivalents
used in calculation of earnings
per common share 3 215 884 3 268 415
---------- ----------
---------- ----------
Earnings per common share $ .09 $ .09
----- -----
----- -----
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 11
(CONTINUED)
SCHEDULE OF COMPUTATION OF EARNINGS PER COMMON SHARE
SIX MONTHS ENDED JUNE 30, 1997
====================================================
FULLY
PRIMARY DILUTED
------- -------
Net income $ 848 512 $ 848 512
Dividends on preferred stock (21 857) (21 857)
---------- ----------
Net income for earnings per
common share $ 826 655 $ 826 655
---------- ----------
---------- ----------
Weighted average number of common
shares outstanding during the year 2 968 113 2 968 113
Common share equivalents - shares
issuable upon exercise of stock
options 505 070 505 070
---------- ----------
Weighted average number of common
shares and common share equivalents
used in calculation of earnings
per common share 3 473 183 3 473 183
---------- ----------
---------- ----------
Earnings per common share $ .24 $ .24
----- -----
----- -----
<PAGE>
P & F INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 11
(CONTINUED)
SCHEDULE OF COMPUTATION OF EARNINGS PER COMMON SHARE
SIX MONTHS ENDED JUNE 30, 1996
====================================================
FULLY
PRIMARY DILUTED
------- -------
Net income $ 706 089 $ 706 089
Dividends on preferred stock (131 673) (131 673)
---------- ----------
574 416 574 416
---------- ----------
---------- ----------
Addback to net income of decrease
in interest expense resulting
from assumed use of proceeds
from exercise of options to
reduce outstanding debt 450 --
---------- ----------
Net income for earnings per
common share $ 574 866 $ 574 866
---------- ----------
---------- ----------
Weighted average number of common
shares outstanding during the year 2 929 991 2 929 991
Common share equivalents - shares
issuable upon exercise of stock
options 258 133 339 380
---------- ----------
Weighted average number of common
shares and common share equivalents
used in calculation of earnings
per common share 3 188 124 3 269 371
---------- ----------
---------- ----------
Earnings per common share $ .18 $ .18
----- -----
----- -----
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 834,115
<SECURITIES> 0
<RECEIVABLES> 6,162,219
<ALLOWANCES> 0
<INVENTORY> 14,262,995
<CURRENT-ASSETS> 21,626,797
<PP&E> 10,940,332
<DEPRECIATION> 5,316,691
<TOTAL-ASSETS> 30,402,137
<CURRENT-LIABILITIES> 7,541,726
<BONDS> 5,210,444
2,978,867
0
<COMMON> 0
<OTHER-SE> 14,671,100
<TOTAL-LIABILITY-AND-EQUITY> 30,402,137
<SALES> 19,722,224
<TOTAL-REVENUES> 19,861,131
<CGS> 12,602,683
<TOTAL-COSTS> 12,602,683
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 293,641
<INCOME-PRETAX> 1,386,512
<INCOME-TAX> 538,000
<INCOME-CONTINUING> 848,512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 848,512
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
