Investor Relations| P&F INDUSTRIES REPORTS RESULTS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2013
Joseph A. Molino, Jr.
Chief Operating Officer
P&F INDUSTRIES REPORTS RESULTS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2013
P&F Industries, Inc. is reporting revenue of $20,709,000 for the three-month period ended March 31, 2013, compared to $14,317,000 for the same period in 2012. Additionally, the Company is reporting income before income taxes of $993,000 compared to $729,000 for the three-month periods ended March 31, 2013 and 2012, respectively. Lastly, the Company is reporting income after taxes of $621,000 compared to $706,000 for the three-month periods ended March 31, 2013 and 2012, respectively.
Richard Horowitz, the Company's Chairman of the Board, Chief Executive Officer and President commented, "I am pleased to report that, driven primarily by Florida Pneumatic's continued roll-out of its pneumatic tools to The Home Depot, P&F's first quarter of 2013 consolidated revenue increased nearly $6.4 million, or 44.6%, compared to the same period in the prior year. We did, however, absorb one-time expenses of $700,000 in connection with this roll-out, which negatively impacted our first quarter results. Our tax expense for the first quarter of 2013 was $372,000, compared to only $23,000 in the first quarter in 2012. It should be noted that during the third quarter of 2012 we eliminated the valuation allowance on our federal deferred tax assets, which resulted in an effective tax rate of 37.5% in the first quarter 2013 compared to 3.1% in the first quarter of 2012. Prior to this elimination, in lieu of recording a tax expense, we adjusted the then in place valuation allowance, thus creating minimal effective tax rates that would have been applied to our pretax income. With the valuation allowance removed, current and future tax provisions will more significantly impact our after-tax earnings, as well as our earnings per share."
Florida Pneumatic markets its air tool products to two primary sectors within the pneumatic tool industry; retail and industrial/catalog. Additionally, Florida Pneumatic also markets, to a much lesser degree, air tools to the automotive market. It also generates revenue from its Berkley pipe cutting product line, as well as from a line of air filters and other OEM parts ("Other").
When comparing the first quarter of 2013 to the same period in the prior year, ATP product revenue improved, due primarily to special orders shipped in the first quarter of 2013. Additionally, Hy-Tech Machine products, which primarily focus on the mining, construction and industrial manufacturing markets ("Hy-Tech Machine"), saw its first quarter of 2013 revenue increase slightly, when compared to the same period in 2012. Finally revenue from its Major customer declined, as we believe this customer has been reducing its world-wide inventory levels during the first quarter of 2013.
Our Hardware segment, which currently consists of only Nationwide, generates revenue from the sale of fencing and gate hardware, kitchen and bath accessories, OEM products and patio hardware.
The increase in Fence and gate hardware revenue is due primarily to an expanding customer base, as well as from new product releases. The increase in patio revenue is due primarily to increased activity in the sale of foreclosed home units occurring primarily in Florida. When comparing the first quarter of 2013 to the same period in 2012, OEM product line revenue declined, primarily due to certain orders being delayed by its customers from the fourth quarter 2011, to the first quarter of 2012. The continued softening of the Kitchen and Bath market, in addition to Nationwide's largest Kitchen and Bath customers filing for bankruptcy protection in late 2012, are the key factors for the decline in the Kitchen and Bath product line revenue.
The primary factor contributing to the 1.8 percentage point decline in Florida Pneumatic's gross margin is the additional $6.4 million in Retail revenue, which tends to generate lower gross margins compared to its other product lines. However, with this increase in its Retail revenue, its gross profit improved $2,035,000, or 101.2%, when comparing the first quarter of 2013 to the same period in 2012. The change in Hy-Tech's gross margin and gross profit was due largely to product / customer mix, partially offset by improved cost of manufacturing.
Gross margin at our Hardware segment during the first quarter of 2013 declined 0.6 percentage point, when compared to the same period in 2012. This decline is primarily due to: (i) product / customer mix, and (ii) certain product cost increases for which Nationwide is unable to pass through to its customers. However, as the result of increased revenue, gross profit increased $136,000 during the first quarter of 2013, compared to the same period in 2012.
SELLING AND GENERAL AND ADMINISTRATTIVE ESPENSES
Selling, general and administrative expenses, ("SG&A") include salaries and related costs, commissions, travel, administrative facilities, communications costs and promotional expenses for our direct sales and marketing staff, administrative and executive salaries and related benefits, legal, accounting and other professional fees, as well as general corporate overhead and certain engineering expenses.
During the first quarter of 2013, our SG&A was $6,632,000, or 32.0% as a percentage of revenue, compared to $4,740,000, or 33.1% of revenue during the same three-month period in 2012. The most significant items contributing to the increase are the incremental variable costs associated with the additional Retail revenue generated at Florida Pneumatic, which includes, among other things, commissions, warranty costs, freight out and advertising/promotional fees, aggregating $1,229,000. Additionally, included in our first quarter of 2013 SG&A, is a one-time only marketing fee of $700,000 incurred by Florida Pneumatic in connection with the initial roll-out to The Home Depot. Further, our first quarter of 2013 SG&A compensation, which is comprised of base salaries and wages, accrued performance-based bonus incentives, associated payroll taxes and employee benefits, increased $176,000, when compared to the same period in the prior year. The aforementioned increases were partially offset by, among other things, reductions in professional fees and depreciation and amortization expenses, which, in the aggregate were $257,000.
Our net interest expense during the first quarter of 2013 was $109,000, compared to $142,000 for the same period in the prior year. The most significant factor affecting interest expense was a reduction in the applicable loan margins that are added to both our LIBOR (London InterBank Offered Rate) or Base Rate, as defined in the Credit Agreement borrowings. The reduction in the interest rate is the result of the amendment to our credit facility entered into in December 2012. The average balance of short-term borrowings during the first quarter of 2013 was $7,244,000 compared to $6,120,000 during the same three-month period in 2012.
P&F Industries has scheduled a conference call for today, May 9, 2013, at 11:00 A.M., Eastern Time to discuss its first quarter of 2013 results. Investors and other interested parties can listen to the call by dialing 866-796-3865, or via a live web cast accessible at www.pfina.com. To listen to the web cast, please register and download audio software at the site at least 15 minutes prior to the call. For those who cannot listen to the live broadcast, a replay of the call will also be available on the Company's web-site beginning on or about May 11, 2013.
P&F Industries, Inc., through its two wholly owned operating subsidiaries, Continental Tool Group, Inc. and Countrywide Hardware, Inc., manufactures and/or imports air-powered tools sold principally to the industrial, retail and automotive markets, and various residential hardware such as kitchen and bath hardware, fencing hardware and door and window hardware primarily to the housing industry. P&F's products are sold under their own trademarks, as well as under the private labels of major manufacturers and retailers.
Safe Harbor Statement. 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 future performance, and those contained in the comments of management, are based upon the Company's historical performance and on current plans, estimates and expectations, which are subject to various risks and uncertainties, including, but not limited to, the strength of the retail, industrial, housing and other markets in which the Company operates, the impact of competition, product demand, supply chain pricing, the Company's debt and debt service requirements and those other risks and uncertainties described in the Company's most recent Annual Report on Form 10-K, and its other reports and statements filed by the Company with the Securities and Exchange Commission. These risks could cause the Company's actual results for the 2013 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 CONDENSED BALANCE SHEETS (PDF)
P&F Industires, Inc. make available forms & documents which are available for download. These forms & documents are in Adobe® PDF (portable document file) format. In order to view these forms & documents, you must have Adobe® Acrobat® 7 Reader. If you don't have the reader, you can download it for free from Adobe® by clicking here or on the "Get Acrobat® Reader" icon below.