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Edited Transcript of PFIN earnings conference call or presentation 8-Aug-19 3:00pm GMT

Q2 2019 P&F Industries Inc Earnings Call

Melville Oct 17, 2019 (Thomson StreetEvents) -- Edited Transcript of P&F Industries Inc earnings conference call or presentation Thursday, August 8, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Joseph A. Molino

P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer

* Richard A. Horowitz

P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer

* Richard B. Goodman

P&F Industries, Inc. - General Counsel

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Conference Call Participants

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* Andrew Evan Shapiro

Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member

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Presentation

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Operator [1]

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Good day and welcome to the P&F Industries, Inc. Q2 2019 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Richard Goodman, P&F's General Counsel. Please go ahead, sir.

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Richard B. Goodman, P&F Industries, Inc. - General Counsel [2]

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Thank you, operator. Good morning and welcome to P&F Industries Second Quarter 2019 Conference Call. With us today from management are Richard Horowitz, Chairman, President, and Chief Executive Officer; and Joseph Molino, Chief Operating Officer and Chief Financial Officer.

Before we get started, I'd like to remind you that any forward-looking statements discussed on today's call by our management, including those related to the company's future performance and outlook, are based upon the company's historical performance and current plans, estimates and expectations, which are subject to various risks and uncertainties, including, but not limited to, exposure to fluctuations in energy prices, debt and debt service requirements, borrowing and compliance with covenants under our credit facility, disruptions in the global capital market and credit markets, the strength of the retail economy in the United States and abroad, risk associated with sourcing from overseas, customer concentration, adverse changes in currency, exchange rates, impairment of long-lived assets and goodwill, unforeseen inventory adjustments or changes in purchasing patterns, market acceptance of products, competition, price reductions, interest rates, litigation and insurance, retention of key personnel, acquisitions of businesses, regulatory environment, threat of terrorism, and related political instability, and economic uncertainty, and information technology system failures and attacks, and those other risks and uncertainties described in the reports and statements filed by the company with the SEC, including, among others, as described in our most recent annual report on Form 10-K and, our quarterly reports on 10-Q, and our other filings.

These risks could cause the company's actual results for future periods to differ materially from those expressed in any forward-looking statements 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 statements, whether as a result of new information, future developments or otherwise.

And with that, I would now like to turn the call over to Richard Horowitz. Good morning, Richard.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [3]

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Good morning, Rich. Thank you so much and good morning, everybody. Thank you all for joining us this morning on our call. I will begin today's call with a brief summary of our second quarter 2019 results and how this data compares to the same period last year.

However, I direct you to our press release earlier today for more complete information. This morning's release presented P&F's balance sheet, statement of income, per-share data along with most of management's discussion and analysis. I wish to reemphasize that the purpose of today's call is intended to solely to discuss and review the company's results for the 3-month period ended June 30, 2019. As such, I must insist that you please confine your questions to that topic at hand.

After my report, I will then ask Joe Molino to briefly review key cash flow information and provide an update on any key events affecting the company, after which we will move to a Q&A session.

By far, the most significant event occurring during the second quarter of 2019 was the sale in Jupiter -- of the Jupiter, Florida property, the home of Florida Pneumatic, for $9.2 million. The building was listed on our balance sheet for $932,000. As a result of this transaction, the company recognized a pretax gain of approximately $7.8 million. Further, after-tax fees and expenses, we received approximately $8.7 million, from which we paid all bank debt, which, at that time, was $7.8 million in total. Simultaneous with the sale, Florida Pneumatic entered into a 5-year lease with the buyer for approximately 58% of the space of the building.

With respect to operations during the quarter, the company's second quarter 2019 consolidated revenue was $14,798,000 compared to $16,188,000 in the second period of 2018. As discussed in the company's press release published earlier today, a significant portion of decline was a reduction in retail revenue, which was due to the Home Depot being in an overstock position in Florida Pneumatic tools. Additionally, we counted a significant decline in our aerospace revenue. These declines were partially offset by an increase in revenue in Hy-Tech specifically in our OEM sales.

The company's second quarter 2019 gross margin was 37.2% compared to 36.3% for the same period the prior year. On a year-over-year basis, Florida Pneumatic's gross margin increased 2.4 percentage points. This net increase was due primarily to a change in marketing strategy for our AIRCAT brand partially offset by lower gross margin on sales to the Home Depot, which was due primarily to the previously agreed-upon 2% price reduction after our line review in late 2018 and, to a lesser degree, product mix. Gross margin in Hy-Tech were negatively affected this quarter by a slight uptick in its computation of obsolete and slow-moving inventory as well as product mix.

Our selling, general and administrative expenses for the 3-month period ended June 30, 2019 and 2018 were $5,453,000 and $5,355,000 respectively.

Lastly, the company's interest expense during the second quarter of 2019 was $68,000 compared to $55,000 incurred during the same period a year ago. This increase was primarily due to increased revolver borrowings. Taking all the above into consideration, for the 3-month period ended June 30, 2019, we are reporting a pretax income of $7,804,000 compared to $433,000 for the same period in 2019.

On an after-tax basis, we are reporting net income of $5,688,000 compared to $305,000 in the second quarter of last year. For the 3-month period ended June 30, 2019 and 2018, we are reporting basic earnings per share of $1.74 and $0.08 respectively. Diluted earnings per share for the same periods are $1.71 and $0.08 respectively. Common shares outstanding as of August 5 were 3,143,810 shares. Again, as a reminder, I refer you to this morning's press release for additional information.

At this time, Joe Molino will discuss our cash flows. Joe?

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [4]

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Thank you, Richard. Capital expenditures during the 6-month period ended June 30, 2019, were $920,000 compared to $1,224,000 during the second quarter of 2018. Significant noncash items affecting the 6-month period ended June 30 cash flows were depreciation and amortization of $774,000, amortization of other intangible assets of $344,000, amortization of consideration payable to a customer of $135,000, stock-based compensation of $62,000 and deferred income taxes of $364,000.

Additionally, significant components that impacted cash used in operating activities during the 6-month period ended June 30, 2019, were increase in inventories of $1,255,000, an increase of $214,000 in prepaid and other current assets, a decrease of $1,040,000 in accrued compensation and benefits. Accounts payable accrued and other liabilities in aggregate increased $1,824,000.

With that, I'd like to turn the call back over to Richard. Richard?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [5]

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Thank you, Joe. In closing, I would like to acknowledge all of our employees and dedicated management for their continued outstanding efforts in this increasingly challenging environment. That's the end of our report today, and now we'd be happy to answer any questions anybody might have. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we have our first question from Andrew Shapiro with Lawndale Capital Management.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [2]

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I have several questions. I'll ask a few and then get back in the queue. To start off with, as you mentioned, the biggest news was the sale of Jupiter for the huge gain in almost $9 million in proceeds and debt paydown, and it resulted in a commensurate jump in your net book value to $15 a share and net tangible book value to almost $11.25 a share.

Where does the Board and management lean to now with respect to future capital allocation? Is the view to focus more towards making new acquisitions to permanently lower and keep the company's average debt levels down from where they've been, which wasn't too high in the first place, or to continue returning or even more aggressively returning capital to shareholders with the bump in dividend rate and/or pricing of stock buybacks?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [3]

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We have a Board meeting next month, Andrew, and -- but I would say that our attitude has been and continues to be to grow the business. And so we are actively pursuing that as a first line of defense. If at some point we find that we're not successful with doing that, then we may consider other avenues, perhaps a dividend increase or whatever. But as of now, that's not the purview. I think the purview is and the Board sentiment is to continue to try to grow the business.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [4]

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And the company announced in the press release that you did buy back shares here in the month of July starting the third quarter. But that purchase into the middle of July finished out the current authorized buyback. I guess why not have created or addressed the reauthorization of that in advance of the completion of the program rather than it sounds like -- I don't know if you really have to wait until you have an in-person Board meeting. When would be the timing for which you guys would -- the Board would meet and reauthorize and start a new -- a fresh buyback program?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [5]

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We discussed it at our prior Board meeting after the annual meeting, recognizing that we were going to be finishing the 100,000 shares prior to our next Board meeting. And the collective wisdom was to wait until our next meeting.

But just as a frame of reference so you understand, and I'm sure you do, we have in the last 2 years purchased over almost 700,000 shares of stock, [20%]...

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [6]

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I know. It's phenomenal and it's been very accretive to all of us. And frankly, as long as the stock is this cheap, especially after the sale of this facility taking -- cleaning up the balance sheet so completely and putting the book value per share of this company at $15 a share and net tangible book value at $11.25, I mean right now, the stock is below net-net working capital. There really aren't many, if any, investments out there for the company to make that would be cheaper than our own stock, which is why it's surprising that the collective wisdom would be to allow a period of time to go by because you can't buy that many shares on a daily basis as it is, to allow any period of time to go by without picking off 300, 400 shares a day as you've been doing.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [7]

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Right. Well, as I said, we spent quite a bit of time talking about it at our last Board meeting, and there are other factors that go into all of our thinking. And the Board has been considering and will consider to repurchase additional sales at our next meeting.

But there are many factors that go into this decision, including alternate uses for the cash and the restrictions and other terms of our loan facility, just to mention a few things like that. And we would like -- obviously, we would like to buy stock, but in a vacuum, we would say, of course, yes. But we need to delicately balance all those things and see where we come out, including our bank.

So after our next Board meeting, if there's something to announce, we will announce it. And I understand exactly what you're saying, and I don't say we disagree but recognizing that there are other factors.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [8]

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Sure. I would assume the bank would be fairly malleable since you basically paid them off, but I know you do have a working capital line and revolver that you tend to need to use.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [9]

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But I would...

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [10]

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So I guess the sooner you reestablish it, I think the better, even if it was a telephonic, just because I feel that your buyback activities, again, albeit it's only 400 shares to 1,000 shares a day unless there's some big blocks like Fidelity, and Mr. [Stavos] in the past, et cetera, when there's a block exemption, I do think that even though small amounts of shares, just the company being there and in the market adds to the company's liquidity far more than any concerns about acquiring and retiring shares, reducing liquidity. I think anyone who wants to buy shares in the company when the stock is -- when our valuation is so cheap looks to how the company chooses to allocate capital. And it gives a buyer a new investor comfort to know that the company is buying shares of the stock when cheap regardless. So just -- and I know that some are listening on the call, and I appreciate the opportunity. Okay.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [11]

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We don't disagree, and we'll just -- we'll keep you advised -- you and everybody else advised.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [12]

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Continuing on the capital allocation, a question or two I have and I'll back out. On previous calls, you said you were still very actively looking at tool businesses, aerospace, automotive, industrial. Can you update us on the status and the focus of your acquisition process, if there's any particular subsectors that you are seeing or if there's some valuation opportunities or valuation excesses that could give us a little bit of insight as to where your focus is on that acquisition path?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [13]

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Yes. Well, I can tell you that everything that you just cited are the areas that we look into, but we also look into areas that -- or products that go into our tools that perhaps that may be part of it as well. So there are a host of areas, and we've spent an enormous amount of time looking at companies and going down the road with companies, et cetera, et cetera. And when the time comes, if there's something to talk about, obviously, we'll talk about it, and we'll announce it. But I know you know, like I know, that we can't say anything -- if there was anything to report, we couldn't say anything if there was until there was a formal agreement and a formal announcement.

So -- but that's the scale of what we're looking at, tools and ancillary products that go around the tools or into the tools. That's our -- we've broadened it in that regard.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [14]

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Okay. I have other questions. I'll back out and into the queue, but please come back to me.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [15]

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No need to because there's nobody else in the queue.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [16]

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All right. So then let's go to the second elephant in the room, which is getting a handle on the aerospace and then maybe some Home Depot questions here. But on the aerospace side, we saw -- the company saw some weakness in aerospace in Q1 last quarter from what you referred to was a commercial program customer. Which today's press release inferred that that commercial program customer was not Boeing and that it was somewhere else.

Has that program or toolset order level, the one that caused headwinds in Q1, has that program or toolset level returned this quarter or it's still absent?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [17]

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I'm not sure what we said that gave you or other readers that impression but that certainly was not what we're trying to do. The greatest part of the issue is Boeing.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [18]

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It was last quarter as well? Sorry, Richard. I didn't mean to interrupt but last quarter was Boeing as well?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [19]

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Yes, it was.

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [20]

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Let me retrace the steps. There's a major program that began in the first quarter of 2018, spilled over into the second quarter of 2018, a major jet program that was put in place. They ordered a ton of tools to kick it off. They told us that was going to repeat, maybe not exactly at the same level, but that was what we were told.

The continuation -- they're still building those jets but they did not reorder all those tools they told us they were going to reorder. So on a comparative basis that affected Q1, and to a lesser extent, Q2. And on top of that, as you know in all the press, Q2 began all the craziness with the 737max. That double whammy so to speak. So hopefully that clears it up.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [21]

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It does because I think we had asked about and we got the impression from Q&A last quarter. And even go back to look at your words here, it just gave the impression that last quarter wasn't related to Boeing and that this quarter was. But now, we understand it's certainly -- there's a double whammy with Boeing this quarter.

So now, when we talk about the current quarter and aerospace weakness is due to the curtailed Boeing production, obviously the 737max program, the backlog building up. You refer to an expectation of this weak purchasing by them to continue through the third quarter. And just trying to clarify, to understand how these tools are acquired, inventoried so to speak by the customer. They use them and some break, some get lost, whatever, and then there's replacement going on.

Can you clarify if these tools are -- you're referring to tools that are specific to the 737max program or just Boeing's utilization of tools in general that in their own working capital conservation approaches they're reducing their need for new and replacement tools to bring their inventory levels down as a cash or working capital management activity.

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [22]

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The tools themselves are not unique to Boeing. They're general installation tools and tools that -- drills and such. So they're used for constructing the fuselage and the final assembly on the jets. We don't exactly know how they go about -- what algorithm they use for buying tools.

We do know that when they start up a line, or they change the number of -- the speed at which they send jets off the line, we usually get a surge. And then the opposite happens if they go from 52 planes a month to 42 planes a month. Then they stop ordering tools for some period of time and there's a little bit a hole in the order rate. So I don't know if that answers your question or not.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [23]

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Yes, it does. It's the idea that the tools are general utilization and so once they bring their tools level down in their working capital, if you want to call it that, or PP&E, once they bring that level down to a particular level that matches whatever their adjusted production rate is, then presumably replacement tool purchasing would renew again with you.

And of course, if and when the production line started to hum and go from 42 to 56, et cetera, then you'd have a surge. And so there would be, presumably, if the backlog doesn't go away, they're going to eventually -- you're going to eventually make the sales that you would've made.

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [24]

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Yes. I'll add one other layer of complexity. Different parts of the jet are made in different places and then ultimately assembled in Washington State. So there are other decisions made in other parts of the country separate and apart from decisions made up in Renton where final assembly is. And there's significant other parts of the jet that are built elsewhere and those decisions on orders are separate. So you could be up orders in one place, down orders in another, or they could all go in the same direction at the same time. So it's a fairly complex thing to predict.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [25]

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It does have a domino effect, Andrew, because it's not just Boeing but it's, as Joe mentioned, other companies that we sell that sell to Boeing for certain parts of their production.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [26]

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Sure. It's just like an auto parts. I mean there's only so many airframe manufacturers here in the United States. It's a whole industry.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [27]

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In our estimate about the third quarter, we don't have a crystal ball and nobody else does either. We're just giving you what our best guess is. But it could be short. It could be long. It could be before that.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [28]

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But I was trying to clarify and you did clarify it. What I was trying to clarify if your best guess was focused on the 737max, which I feel is more of a shot in the dark for you guys because that's really highly dependent on the FAA. Or if it is your guess at, again, their broader inventory or tools inventory management for all of the different airframes that go off of their line.

So there's other need for your tools. That's what I wanted to get at and that your tools were general in use rather than specific to the 737max. Because god forbid -- well, I don't want to say god forbid but if it's not a safe plan, it's not a safe plan. But if that program were canceled and you had tools specific to the program that would be obviously much more debilitating than just Boeing being back on their heels for x amount of period of time and then your tools start selling again. So that's what I wanted to get at. So thank you.

Lastly on this particular issue, then I'll back out, is that you've discussed a couple of large aerospace customers, not Boeing, that you were working on some of the R&D in connection with potential accounts in other countries and whether that was to utilize and get designed in tools and products from the Pneumatics product line that you acquired and have out of Pennsylvania, or alternative or additional customers for Jiffy.

The main airframe manufacturer that would benefit from 737max issues is Airbus. Have you made headway with them as well as other airframe manufacturers yet with your tools? And I do realize that this is a several quarters, maybe more than a year type of process. But we ask about it only every 3 months. And so want to get your insight.

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [29]

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We have made, since the last call, significant progress in moving some projects along with some very, very large international set manufacturers and that's all I can say. We're happy with how it's going. We're optimistic that it will result in business. But as you said, it's going to take a few more quarters and when there's something to report, we will.

But we can report progress and we feel -- I feel confident that we're eventually going to get to a point where we will have meaningful orders, but we're not there yet and we can't say much more than that.

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Operator [30]

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(Operator Instructions) And we have a follow-up from Andrew Shapiro with Lawndale Capital Management.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [31]

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Okay. On the last couple of calls you spoke of concrete initiatives beginning to marry up Florida Pneumatics, Jiffy, Hy-Tech Resources to I guess go -- I don't know if it's Florida Pneumatic anymore as Jiffy and Hy-Tech, and particularly AIRCAT, for distribution opportunities and tool sales in Europe with a new hire that's now been on the ground for a while. Are these efforts running into headwinds with the slowing European economy there? Or since this is brand-new territory for P&F and its products and brands, you have market share and growth still on the horizon even in a slowing European economy?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [32]

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Our changed initiative started the beginning of the year, so we're like 8 months into it. And I would say it's more the latter than the former. We're starting from such a low base that we're having good success so far. Not dramatic, meaningful in the overall scheme of P&F, but building blocks and we're getting some very nice orders and very good recognition. And we're turning over a lot of stones.

Joe, you want to add to that?

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [33]

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I would just add that we've had a number of issues to work through and we've never really had a major push onto the Continent. So there are some intellectual property issues we had to get into, and research, and make sure we were square on that. And like Rich just said, we're starting from nothing and it is just one person. And it's a pretty big Continent. So we're happy with progress, but if we had 5 or 10 people there, obviously, we'd be going a lot faster.

But we want to make sure there's something to this. We think there is and we're pretty happy with the penetration we've made. But again, we're dealing with large companies for the most part and very entrenched competitors as well. Having said that, we're pretty confident we're going to make some headway here, but there's not much more to report other than progress at this point.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [34]

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In what ways do you have visibility of Home Depot sell-through and stocking? We discussed this quite a bit on the last call and it seems like this quarter might've been a continuation? Or is it a different type of lack of visibility that occurred with the Home Depot and the stocking of the new products? Has visibility improved at all since last quarter's surprise Or it's still the same on that? And then I have a follow-up.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [35]

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Visibility is very, very hard for us to get. They don't really share that information with us for the most part. We do get some things from time to time. But I think that the second quarter was, Joe can confirm or deny, but I think the second quarter was an improvement over the first quarter since we kind of had a void there for weeks with no orders at the beginning of the year. So it's been a more steady pace but still not as robust as we were hoping it would be. Joe, you want to add to that?

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [36]

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The only thing I'd add is we do know that we were told that they were still cleaning out a little bit of some older inventory. I don't exactly know how much that affected the sales of the new product. But they did admit to us that there is some of the old stuff they're still moving out. And to wherever those tools are would obviously have some impact on us.

But we don't, to answer your question a little earlier about stocking levels, we don't have any idea about stocking levels. We do have some idea about what's selling at the store but we don't know how many units are at the store. We don't know how many units are at the distribution centers. So it's -- we can't gauge when they might need to order because they're low on things. We just don't when they are. They only tell us when they need product.

But we do believe we're at a fairly steady pace now on a weekly basis of what we expect from them order wise.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [37]

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Now, as of the end of March on the May call, you said that the response from Home Depot, that you had sales, I guess, figures or some visibility at the store level. And obviously, you don't know from their distribution centers and wherever. But you at least had some insight as to how the new product was selling. And you had said that the consumers seemed to accept the newly refreshed product line and that sales might've actually increased 10% or thereabouts is what you had thought. But that you'd have a better sense at the store level in the coming months.

Has the increase and the sales throughput of the new product lines at the stores continued at that pace? Has it scaled back? How has the new product line performed and do you have a feel of how it fares against other Home Depot labels that they were to offer?

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [38]

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Well, you're saying there was 10% growth. I don't remember that but we obviously can check.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [39]

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There was speculation about how sales of the new product line might have been up as much as that overall. It's just that you guys were seeing or getting very favorable reports of sell-through at the store level. But again, not allowing you the visibility on this whole stocking issue?

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [40]

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We do know they're happy with the new tools. They like them better than what they replaced. It did appear for a period that they were outselling the tools from the same period in the prior year. At this point, as I said, we kind of know what the run rate is overall. I couldn't tell you on a SKU-by-SKU basis.

But we do know that they have a, I think it's a half a dozen tools of another line in there. It's a different price point but that has had some impact on our business that didn't exist before.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [41]

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And it was expected to.

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [42]

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We know that going in that when we replaced -- we swapped out the tools that they were going to bring in a different price point for a very small suite of them. It's hard to say exactly what the impact of that is, but where we're going head-to-head with something else, a non-Husky brand, we think we're doing pretty well. But at this point, things are fairly steady and some tools are a little bit better than the prior ones. Some are about the same but they're happy with how things are going and things seem to have stabilized since the Q1 issue and the inventory management issue.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [43]

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And then on Hy-Tech, with such sizable gains in OEM engineered solutions, are there any particular areas, industries, products worthy of any callout and elaboration?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [44]

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No, not really. Not really. It's all the same stuff and -- but they're doing very, very nicely.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [45]

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And you recently announced a new line of ATP Magnum Force Industrial Air Impact Tools. Can you give a little more information on what is new about these tools and the potential markets and size for them? Or is this just it was a small industry trade promotional piece?

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [46]

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I think it was little more than that. I mean we put a lot of R&D into upgrading the tools for really the 21st century. I don't know the exact date but the tools we were selling, that tech was decades old. So in the interim, not that our competitors had gotten that far ahead of us, but we needed to create some features to replicate what was out there, things having to do with how much torque in the reverse position, how much torque in general per weight, just the ergonomics. All those things needed to be upgraded.

And based on the feedback we got during the design phase from some of our customers that we involved in the process, they think we did really well and we're very happy with the results so far. So we feel we've got a tool that looks, and feels, and performs as better if not better than anybody else's out there, whether it's IR's, or CP's.

And so it was a little more than just a marketing piece. It's a real attempt to solidify our share in the channel and remind you there that's a bit of a pull channel. People just tend to order what they need. It's a little less susceptible to slick marketing programs. Having said that, if we've got a tool that's better than other people's, we'd like to think that it will get ordered more.

So we're just getting started with that. We'll probably have more to report. But again, our engineering efforts are really focused in other areas where there's a lot of opportunity for growth. The impact line, while it's nice to improve it, and we're happy get a little bit more share, that market is saturated and long-term growth there isn't as much of an opportunity as the OEMs engineered solutions business.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [47]

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Are the margins on the new products equal or better?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [48]

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Yes.

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [49]

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Yes.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [50]

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Okay. So it helps to enhance your margins even if you were -- and are you seeing any sales increase as a result of the introduction of the new line? Or is it just maintenance of share?

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [51]

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It's way too early. I don't think they've even been on the shelf in the distribution channels for 30 days.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [52]

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Okay, we'll ask you in another 3 months then. On a previous call, we discussed how the first round of tariff motivated price increases were put in place and the next round of tariffs occurred was also absorbed within the suppliers and customers. While these price increases have been absorbed, have the products themselves experienced any slowdown in unit sales as a result of all this?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [53]

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No. Not to our knowledge.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [54]

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Do you have any increased concerns given the recent developments regarding tariffs and the latest round of tweets?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [55]

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We'd be foolish if we didn't but nothing is affecting us thus far.

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [56]

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And just to be clear, the latest tweet with the other $300 million in goods had no effect on us. Those were not our products.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [57]

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New products. It's new products. They've already hit us square in the head.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [58]

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So when they widened to the $300 million that -- those things are consumer stuff outside of your realm?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [59]

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That's correct.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [60]

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Can you update on Universal's local currency, actual performance during the quarter and the year? I don't know if the currency has had an impact in your reported numbers.

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [61]

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I mean I can't give you specific numbers but I can tell you that we've restructured the management there in the last few months and we're actually pretty happy. The results have actually improved on a local currency basis. Obviously, the pound-dollar rate is not working in our favor. But locally there, we're pretty happy with the results with respect to our expectations for the year so far.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [62]

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Your press release made no mention of any current shares outstanding number or even the one used I think the EPS calculations. So all we have is your April proxy to go off of. Can you provide us with a more current outstanding share, a fully diluted share count?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [63]

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I said it in my report, [3,145,000], I believe. Let me just double-check my thing here.

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Andrew Evan Shapiro, Lawndale Capital Management - Founder, Chairman, President, Portfolio Manager, and Managing Member [64]

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And that was as of what date?

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Joseph A. Molino, P&F Industries, Inc. - VP, COO, CFO, VP, Secretary & Treasurer [65]

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August 5.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [66]

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That was as of August 5 -- [3,145,000].

I might have dialed in -- I probably dialed in late on that. So thank you on that. I don't have any further questions. I don't know if anyone else in the queue. I hope so but if not, I'm done.

Thank you for your interest and support as always, Andrew.

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Operator [67]

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(Operator Instructions)

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President & Assistant Treasurer [68]

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Thank you, operator, and thank you everybody for your time today on the call and we look forward to speaking to you at our Q3 later in the year in November. Have a good day. Thank you everybody.

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Operator [69]

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Thank you, ladies and gentlemen. That concludes today's teleconference. You may now disconnect.