Investor Relations| P & F INDUSTRIES REPORTS FOURTH QUARTER AND YEAR-END 2001 RESULTS
Harriet Fried/Klea Theoharis
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P & F INDUSTRIES REPORTS FOURTH QUARTER AND YEAR-END 2001 RESULTS
For the year ended December 31, 2001, revenues were $67.2 million, compared to $80.9 million for 2000. Net income for the period was $1.8 million, or diluted earnings per share of $0.50, compared to $3.8 million, or diluted earnings per share of $1.04, for 2000.
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. However, I'd like to point out that initiatives we've taken during 2001 have already begun to bear fruit, and they will be even more beneficial to the company as the economy improves. Substantial productivity improvements at Green Manufacturing and Florida Pneumatic have resulted in increased margins, even in a weak sales environment. Going forward, we hope to reap the benefits of newly introduced products at Florida Pneumatic.
Florida Pneumatic's fourth quarter sales were $9.6 million, compared to $11.3 million the prior year, due primarily to a decrease in special promotions by a significant customer, as well as to the overall weakness caused by the economic slowdown. Gross margins were flat quarter-over-quarter, at 36.8%, as the weakening of the Japanese yen in the fourth quarter offset the decline in margins that generally follows such a substantial decrease in revenue.
Green's fourth quarter sales were $3.3 million, versus $3.9 million in 2000, primarily due to soft demand in its major market segments. Despite the decrease in sales, Green experienced an improvement in gross margin, from 8.0% to 10.3%. The catalysts for the margin improvement were the implementation of major cost initiatives and improved productivity. Margin improvement was realized even though significant manpower was utilized to create prototypes for pursuing new business.
"The rapid pace of prototyping activity that took place at Green in 2001 has resulted in a large backlog of potential new business," said Mr. Horowitz. Prototyping is the final step in bidding for new business, and it historically has a high correlation to eventual orders. Prototypes produced in 2001 are forecasted to generate sales of $2.9 million in 2002, with some products already shipping in the first quarter. In addition, there are currently several million dollars of potential additional sales being quoted. Embassy Industries' fourth quarter sales of heating products increased 3.7%, from $3.0 million to $3.1 million, driven by radiant heating and boilers. Gross margin from heating products decreased from 41.1% to 35.2%, due to a shift in product mix and lower production activity that resulted in lower absorption of fixed expenses. Hardware sales at Embassy's Franklin division were flat, at $1.1 million. Gross margin from hardware sales increased to 31.4% from 28.3%, resulting from a favorable change in product mix. Mr. Horowitz continued, "The success of our marketing programs at Embassy is evidenced by an increasing awareness of our radiant and boiler products in the marketplace and increased sales. We are developing a number of new and improved product offerings, that we hope to roll out later this year.
Overall results for the fourth quarter were negatively impacted by weak retail sales and capital goods expenditures, along with slow housing starts in the Northeast. Offsetting the full impact of these events was a weakening of the Japanese yen and strong productivity increases at both Florida Pneumatic and Green.
"For the first quarter of 2002, we expect results to stabilize, but still anticipate a 5%-10% decrease in overall sales," said Mr. Horowitz. "Florida Pneumatic is expected to experience a revenue decline of between 5% and 10%, primarily due to weakness in overall demand and price concessions granted to a major customer in July 2001. Sales at Green are expected to decrease 10% to 15%, due to the winding down of business with a major account and overall weakness in the capital goods market. Sales at Embassy are expected to be up 5% to 10%, due to increases in our commercial business, as well as in radiant and boiler products. We anticipate that hardware sales in our Franklin division will be up 10% to 15%, as a result of sales to two significant new customers obtained in the second half of 2001.
"We expect gross profits in the first quarter of 2002 to be between 33% and 35%, up from last year's figure of just under 30%. A major weakening of the yen is expected to be partially offset by a less favorable product mix at Embassy and Franklin. Although selling, general and administrative expenses will decrease slightly, they will not decrease as much as the anticipated decrease in sales. These expenses are forecast to be between 25.5% and 26.5% of sales. We expect a substantial decrease in interest expense due to decreases in both the amount of debt outstanding and the average borrowing rates. As a result of the foregoing, we expect P&F's first quarter 2002 net income to increase 50% to 75%."
Mr. Horowitz concluded, "Positive developments for the near term include continued weakness of the Japanese yen, which will lower the cost of imported product for Florida Pneumatic. In addition, we have gotten off to a strong start with our new customers at Franklin, and plan to pursue opportunities at other significant accounts. Any improvement in the economic environment will serve to bolster P&F's progress toward resuming historical profitability and growth rates."
P&F Industries has scheduled a conference call on Thursday, March 21st at 11:00 a.m. Eastern Time to discuss its fourth quarter and year-end 2001 results. Investors and other interested parties can listen to the call by dialing 212-896-6069 or via a live webcast 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 24 hours beginning at 1:00 p.m. Eastern Time, March 21, 2001, at 1-800-633-8284, reservation # 20365582.
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 and 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 future performance, 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 2002 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 & STATEMENTS OF INCOME (PDF)
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