Investor Relations| P & F Industries Reports Fourth Quarter and Year-end 2000 Results
Harriet Fried/Klea Theoharis
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P & F Industries Reports Fourth Quarter and Year-end 2000 Results
Revenues for the fourth quarter of 2000 decreased to $19.3 million from $27.1 million for the fourth quarter of 1999. Net income for the quarter totaled $778,400, or diluted earnings per share of $0.21, compared to $1.6 million, or diluted earnings per share of $0.44, for the comparable period of 1999.
For the twelve months ended December 31, 2000, revenues decreased to $80.9 million from $82.7 million for the comparable period of 1999. Net income for the period was $3.8 million, or diluted earnings per share of $1.04, compared to $4.5 million, or diluted earnings per share of $1.23, for 1999.
The decrease in the full year results was primarily due to the general weakness in sales to all accounts at Florida Pneumatic, with the exception of one significant customer, the strengthening of the Japanese Yen in relation to the U.S. dollar for the full year, and a plant shutdown at a significant customer of Green Manufacturing, which reduced sales.
Florida Pneumatic's fourth quarter sales decreased to $11.3 million from $17.7 million due to a weakening in the retail and home center sectors, as well as to the non-recurrence of one-time sales for inventory stocking by a significant new account in the fourth quarter of 1999. Gross margins increased to 34.9% from 33.0% due to a weakening of the Japanese Yen in the fourth quarter and improvements in factory efficiencies.
Green Manufacturing's fourth quarter sales decreased to $3.9 million from $5.3 million in 1999, primarily due to a plant shutdown at Green's second largest customer, which resulted in lower than expected orders and weakness in the wrecker and refuse sectors. Given the fixed costs associated with factory overhead, gross margins decreased to 8% from 17.2%.
Embassy Industries' fourth quarter sales of heating products decreased 1.0% to $3.0 million. Gross margin from heating products increased to 41.1% from 38.8%, due to a change in the product mix and a decrease in the cost of certain raw materials. Hardware sales at Embassy's Franklin division were unchanged at $1.1 million. Gross margin from hardware sales increased to 28.3% from 26.4%, primarily due to a change in product mix.
Richard Horowitz, Chairman, President and Chief Executive officer of P&F Industries, stated, "P&F's performance for the quarter was consistent with our expectations. Results for the fourth quarter of 2000 compared unfavorably to the results for the fourth quarter of 1999, primarily due to Florida Pneumatic's unprecedented 1999 results. Weakness in the overall economy also affected various segments of our business. In the fourth quarter, we began to see the impact of the drop in housing starts on our heating business at Embassy. The profit decline at Green would have been more pronounced had we not been able to raise prices to certain low margin accounts in the hydraulic cylinders business, which increased average overall selling prices by about 5%. Despite the revenue decrease at Florida Pneumatic, in the fourth quarter we were pleased to see the start of productivity improvements that resulted from manufacturing initiatives implemented with respect to our U.S. made products."
"Further, we expect to experience a softening in demand for all our products in the first quarter of 2001," said Mr. Horowitz. "Florida Pneumatic is expected to experience a revenue decline of between 5% and 10% due to general weakness in customer demand and a difference in the timing of shipments in comparison to 2000. Sales at Green Manufacturing are expected to decrease 25%-30% due to decreased demand from the refuse market, which has been negatively affected by low recycled cardboard prices, and the wrecker and tow truck markets, and to lost sales resulting from the customer plant shutdown noted earlier. Further, in our Embassy heating segment, a continued slowdown in new housing starts and an unusually large backlog of orders entering 2000 is expected to negatively affect comparisons to the first quarter of 2000, resulting in an anticipated decrease of 15% - 20% in sales. We anticipate that hardware sales in our Franklin division will be down 25% - 30% in the first quarter of 2001 due to bankruptcy filings since the third quarter by two large accounts."
"We expect gross profits in the first quarter of 2001 to be between 30% and 32%, in line with last year. Selling, general and administrative expenses are expected to remain comparable to the first quarter of 2000, but will increase as a percentage of sales due to the anticipated decline in revenue. We expect a modest decrease in interest expense as we continue to pay down debt. As a result of the foregoing, we expect P&F's first quarter 2001 net income to decrease by 45% - 50%. We do not expect the first quarter's decrease in profits to be representative of the full year's results because some of the decrease in sales for the first quarter is due to the difference in the timing of shipments from one year to the next."
"Despite our near term challenges, there are several positive developments that I wish to highlight. First, the Japanese Yen has continued to weaken since the end of the year, which will increase gross margins at Florida Pneumatic. Second, the approximately 50% employee turnover we experienced in 2000 at Green Manufacturing has been virtually eliminated as a result of a restructured wage program, which has resulted in productivity improvements whose dollar impact is exceeding the cost of the plan. At Embassy, the initial response to our new Ambassador boiler line is exceeding our expectations and we fully expect this product to be a major contributor to sales and earnings in the near future. Finally, although Franklin lost two significant accounts, we have promising new relationships developing with several new large customers that have the potential to replace the accounts lost last year."
P&F Industries has scheduled a conference call on Thursday, March 8th at 11:00 a.m. Eastern Time to discuss its fourth quarter and year-end 2000 results. Investors and other interested parties can listen to the call by dialing 212-896-6085 or via a live Web cast accessible at www.pfina.com. To listen, please register and download audio software at the site at least 15 minutes prior to the call. The Web cast will be archived on P&F's Web site and a telephone replay of the call will be available for two days beginning at 12:00 p.m. Eastern Time, March 8, 2000, at 1-800-633-8284, reservation # 18115854.
P & F Industries, Inc., through its three wholly owned subsidiaries, Florida Pneumatic Manufacturing Corporation, Green Manufacturing, Inc. and Embassy Industries, Inc., manufactures and/or imports air-powered tools, hydraulic cylinders, baseboard and radiant heating products. The Company also imports various security hardware items and compressor air filters, markets a line of pipe-cutting and threading tools and makes heavy-duty pipe wrenches. P&F's products are sold under their own trademarks, as well as under the private labels of major manufacturers and retailers.
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 performance for the year 2001, are based upon the Company's historical performance and on current plans, estimates and expectations. They are subject to various risks and uncertainties, including, but not limited to, the impact of competition, product demand and pricing. These risks could cause the Company's actual results for the 2001 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. CONSOLIDATED BALANCE SHEETS & SUMMARY OF EARNINGS (PDF)
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