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Edited Transcript of PFIN earnings conference call or presentation 27-Mar-17 3:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 P&F Industries Inc Earnings Call

Melville Mar 27, 2017 (Thomson StreetEvents) -- Edited Transcript of P&F Industries Inc earnings conference call or presentation Monday, March 27, 2017 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. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary

* Richard A. Horowitz

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

* Richard B. Goodman

P&F Industries, Inc. - General Counsel

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Conference Call Participants

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* Adam Kathiriya

Lawndale Capital Management - Associate

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Presentation

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Operator [1]

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Good day, everyone, and welcome to the P&F Industries 2016 Earnings Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Richard Goodman, 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. Welcome to P&F Industries' 2016 Earnings 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 and fluctuations in energy prices; debt and debt service requirements; borrowings; compliance with covenants under our credit facility; disruption in the global capital and credit markets; the strength of the retail economy in the United States and abroad; supply chain disruptions; 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 business; regulatory environment; the threat of terrorism and related political instability and economic uncertainty; information technology and systems failures and attacks; and 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, our quarterly reports on Form 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 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 statements, whether as a result of new information, future developments or otherwise.

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 and Assistant Treasurer [3]

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Good morning. Thank you, Rich, and good morning, everybody. Thank you all for joining us this morning. I will begin today's call with a brief summary of the company's results from continuing operations and earnings per share for fiscal year 2016 and how we compare to fiscal 2015. As this earning call precedes the release of our annual report filed on Form 10-K, I will incorporate some key fourth quarter 2016 financial data and how it compares to the same period in 2015.

I will also discuss our 2016 results from discontinued operations and how that compared to 2015. However, I direct you to our release from earlier today for more detailed information. The release this morning presented P&F's balance sheet, statements of income and earnings per share data, along with most of our management's discussion and analysis.

Then I will ask Joe Molino to briefly review cash flow information and provide an update on key events affecting the company, after which we will move to our usual Q&A session.

And lastly, before I begin, I wish to remind all of you that the purpose of this call is to discuss and review the company's fiscal 2016 results. As such, I ask that you kindly -- that you -- I ask kindly that questions focus on our 2016 results only. Thank you for your cooperation. And also, unless otherwise noted, the financial information discussed on today's call refers to our continuing operations, which excludes Nationwide Industries. As most of you know, we sold Nationwide in February 2016 and adjusted -- and as a result, its adjusted results were included in discontinued operations in both 2016 and 2015.

The company's consolidated revenue for 2016 was $57,276,000 compared to $60,312,000 in 2015. The company's 2016 net income was $6,901,000 compared to $3,544,000 for 2015. And P&F was reporting net income from discontinuing operations of $12,584,000, of which $12,512,000 is from the gain on the sale of Nationwide Industries, compared to net income from continued -- discontinued operations, $1,688,000 from the prior year.

For the year ended December 31, 2016, the company is reporting a loss from continuing operations before taxes of $8,638,000 compared to income from continuing operations before taxes for the year ended December 31, 2015, of $2,681,000.

Significant factors contributing to the loss this year were: one, noncash impairment charges to goodwill and other intangible assets of $9,581,000; two, a downward adjustment to the carrying value of certain inventory of $1,001,000; and three, partially offsetting the above, we recorded a gain on the sale of real property that was used by Nationwide of $1,703,000. We are reporting a net loss from continuing operations for 2016 of $5,683,000 compared to net income from continuing operations last year of $1,856,000.

For the 3-month period ended December 31, 2016, our revenue was $12,507,000 compared to $13,771,000 for the same period in 2015. The company's fourth quarter 2016 net income was $61,000 compared to $401,000 in the same period a year ago. Fourth quarter loss from continuing operations before income taxes was $176,000 compared to income from continuing operations before income taxes of $407,000 in the fourth quarter of 2015. Net loss from continuing operations was $93,000 for the fourth quarter of 2016 compared to income from continuing operations of $346,000 for the same period in the prior year. Net income from discontinued operations during the fourth quarter of 2016 was $154,000 compared to $55,000 a year ago.

With respect to P&F's consolidated gross margin, it was 31.2% and 33.1%, respectively, for the 3-month period and full year ended December 31, 2016, compared to 34.3% and 35.9%, respectively, for the same periods in 2015.

Florida Pneumatic's gross margins were relatively flat when comparing the fourth quarter of 2016 to the same period last year, while its full year 2016 gross margin improved over 2015 by 120 basis points.

With respect to Hy-Tech's gross margin, we recorded an adjustment of $257,000 for the fair value of its inventory during the fourth quarter of 2016 and just $1 million for all of 2016. During 2015, there were no inventory fair value adjustments. Further, Hy-Tech's 2016 gross margin declined compared to the same period in 2015 due to, among other things, poor overhead absorption, in turn due primarily to less production running through the facility, and our decision to comply with certain commitments to manufacture a suite of very low gross margin products for a major ATSCO customer.

Our selling and general administrative expenses for the 3-month period ended December 31, 2016 and 2015 were $5,792,000, which includes all impairment charges of $1,270,000 and $4,323,000, respectively. Our SG&A for all of 2016 was $29,191,000, which includes impairment charges of $9,581,000 compared to $19,157,000 in 2015.

Our interest expense in 2016 was $181,000 compared to $116,000. Included in the above are debt issue costs of $128,000 and $111,000, respectively, in 2016 and 2015. Our interest expense in the fourth quarter of 2016 was $17,000 compared to $30,000. Included in the above are debt issue costs of $10,000 and $28,000, respectively, in 2016 and 2015.

As previously mentioned, in November of 2016, we sold the Tampa, Florida facility, which resulted in a net gain of approximately $1.7 million.

With respect to per-share data, 2016 basic and diluted loss per share from continuing operations was $1.58 compared to basic earnings per share from continuing operations of $0.51 in 2015 and diluted earnings per share from continuing operations in 2015 of $0.49. Basic and diluted earnings per share from discontinued operations for 2016 were $3.50 compared to basic earnings per share from discontinued operations in 2015 of $0.47 and diluted earnings per share from discontinued operations in 2015 of $0.45.

Lastly, our full year earnings before interest, taxes, depreciation and payment charges and depreciation was $3,760,000 compared to the prior year's $5,589,000.

At this time, I'd ask Joe Molino to provide some insight into our cash flow. Joe?

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

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Thank you, Richard. Capital expenditures during fiscal 2016 were $1,066,000 compared to $1,261,000 in 2015. Significant noncash items affecting our cash flows during 2016 were: depreciation and amortization of $1,620,000; amortization of other intangible assets of $1,016,000; amortization of debt issue costs of $128,000; and net deferred income tax change of $3,946,000. Additionally, as Richard had mentioned, there was a gain on the sale of fixed assets of $1.7 million.

Other significant components that impacted our net cash used in operating activities of continuing operations were: a decrease in accounts receivable of $498,000; offset by increases in both inventory and prepaid expenses of $316,000 and $2,006,000, respectively.

As a final note, in the aggregate, the company paid $2,335,000 in dividends during fiscal 2016 and made the $0.05 per share -- per common share quarterly dividend payment just recently in February of 2017 of $180,000.

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 and Assistant Treasurer [5]

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Thank you, Joe. With all these numbers, there are a lot of numbers flying back and forth all over the place, and me and Joe, we understand it, we're comfortable with it, since we live it every day. But I can only imagine, with all the numbers flying back and forth, how confusing this can be to those of you on the call.

Let me just give you my 40,000-foot assessment of the company so that you can get a better sense, a better comfort level. Last year, we sold our one non-tool company division, and we sold it for a little over $22 million. And we paid very -- it was a very, very tax-efficient transaction with very little taxes played -- paid. Then we sold the building of Nationwide at over -- about $3.5 million.

With those 2 things, our debt was paid down totally to dramatically under $1 million. And at the same time, we had a onetime dividend of, I believe, $0.50 a share, and we've been continuing quarterly dividends thereafter.

The reason we sold the company, Nationwide, was because we want to refocus on tools, which is our mission now, and that's what it was. And really, when you look at our whole company, Florida Pneumatic was up very nicely for the year and Hy-Tech was down, and the reasons were cited. But -- with oil and gas, et cetera, et cetera. But I will say that Hy-Tech has shown signs of improvement this quarter, and we're very -- we're more -- much more optimistic than we had been before.

So I just would like to keep -- I just want to tell you those things so that you can keep it all in a sense of perspective, because the numbers look more daunting than the actual condition of the company is.

And in the meantime, I'd like to acknowledge, as always, all of our employees and management for doing such outstanding jobs during these difficult economic times.

And now that's the end of our report today. We'd be happy to answer any questions anybody may have. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we do have a question from Jan Svenda.

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Unidentified Analyst, [2]

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Do you hear me?

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

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Yes.

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Unidentified Analyst, [4]

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So firstly, could you please tell me what percentage would you say Sears accounted for the total revenue for this fiscal year?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [5]

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Let's see. Off the top of my head, 12%, in that range.

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Unidentified Analyst, [6]

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Okay. So that's -- so of the total revenue, yes, not only from the tools, yes?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [7]

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Well, all of Sears revenue is -- yes, that's total revenue of P&F. But keep in mind, in terms of revenue, we reported, in continuing operations, it was only tool revenue. The discontinued operation does not show up as revenue.

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Unidentified Analyst, [8]

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Yes. So sorry. I meant the Florida Pneumatic. Yes, sure. Got it. So in terms of -- because you mentioned in the press release that you are looking to non-renew the contract. So I was thinking, what would be the gross margin impact on that -- of that, of discontinuing the Sears?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [9]

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Yes, well, we don't look at the Sears business at the gross margin level since there are tremendous expenses we are required to outlay in that relationship. But just roughly speaking, if you were comparing the business after we exit the Sears relationship, it's approximately a change to the EBITDA of around $1 million or so.

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Unidentified Analyst, [10]

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Okay. Sure. So the impact would be $l million. Got it. And just on a general level, do you think that there's any opportunity to cut any overhead costs?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [11]

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Yes, there will be, and that is factored into the number I gave you. The people that handle that business do things other than just manage the Sears relationship. But that estimate I gave you would include reduction of some variable overhead.

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Unidentified Analyst, [12]

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Okay. Sure. And on -- and apart from Sears, because obviously, I mean, the business is kind of stagnating due to the macro environment. Are you comfortable with the current kind of overhead and the expenses that you guys have there? Or...

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [13]

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Yes. But having said that, once we exit that situation, we will reevaluate that. But at this point, we're comfortable.

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Unidentified Analyst, [14]

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Okay. Sure. And just lastly, should Hy-Tech revenue continue to underperform, are you thinking of writing off further inventory? Or is that something that you're happy with right now?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [15]

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Given the current level of activity, I don't have a crystal ball, but we don't anticipate any material changes to inventory value.

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Unidentified Analyst, [16]

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Okay. Sure. And also, actually, could you just give me an approximation of what percentage of inventory is tied to which subsidiary? So what percentage is Hy-Tech and what percentage is Florida?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [17]

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It's close to 50-50. I mean, I think there may be a little more inventory at Florida Pneumatic than Hy-Tech at this point. Without the Sears relationship, it probably gets closer to even. But fairly distributed. I would say, this is ballpark, 55% to 60% Florida Pneumatic, maybe 40% Hy-Tech, in that range. Certainly no more than...

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Unidentified Analyst, [18]

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Sure. Sure. Sure. And just actually, one more follow-up. In terms of the automation -- automated revenue, are you -- what sort of opportunities are you looking for? Because you mentioned some in the press release, but it was -- are you looking for some specific use case in terms of that? Or...

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [19]

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I'm not sure I'm following you. Automated revenue? Or automotive revenue?

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Unidentified Analyst, [20]

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Automotive, yes. Automotive, yes.

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [21]

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Okay. Sorry about that. So maybe you could ask the question again with respect to automotive revenue.

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Unidentified Analyst, [22]

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Yes. So in the press release, you were mentioning that you are going to focus on expanding the customer base. Do you have any specific use case in mind? Or is it just the general business that you have been (inaudible)?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [23]

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No, no. We had stated in the last call and we announced in the fall the release of a new suite of tools that are targeted to a slightly different portion of the automotive aftermarket. These would be tools used in bodywork. The suite of tools we've had up and through the fall was primarily in repair -- targeted towards car repair. We came up with a suite of tools in the fall and are beginning to promote them now that are targeted towards bodywork. So fender benders and working on the exteriors of cars.

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Operator [24]

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(Operator Instructions) We'll go next to Adam Kathiriya with Lawndale Capital.

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Adam Kathiriya, Lawndale Capital Management - Associate [25]

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Just with regards to Hy-Tech, what is the status of your development efforts to open new industry channels for Hy-Tech? And in general, what kind of acquisitions might similarly work for Hy-Tech?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [26]

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With respect to your first question, we are just starting to see orders and some serious negotiations with respect to some of these nonstandard lines of tools and expect to have more announcements about that in the next call or two. So I would say our efforts there are starting to bear some fruit and should have impact -- should beginning -- should begin to impact the top line probably beginning in earnest in Q2 in a more significant way.

With respect to acquisitions, the acquisition search we're doing is with respect to both Florida Pneumatic and Hy-Tech. There are certain (inaudible) companies and types of companies we're looking at that would be fits for both. So we're absolutely not forgetting about Hy-Tech in the acquisition search. It's not just for Florida Pneumatic bolt-ons. I don't know if that answers your questions but...

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Adam Kathiriya, Lawndale Capital Management - Associate [27]

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Yes, that was helpful. And then let's see here. Just looking at your release back in September, you guys began shipping new products that utilized the extensive air tool motor manufacturing knowledge to new OEM markets and customers, and you guys specifically noted processing, transportation and industrial maintenance. Can you update us on the progress on this front?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [28]

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Yes. We're -- the markets we're working on, without getting into a lot of detail, would be industrial maintenance, that we absolutely have made some progress there; we're making more progress in the food production market; and then lastly in the transportation market. So I'd say all 3 of those are on track. Those 3 -- those are 3 new markets to us that we'll be in full swing on probably by the middle of this year.

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Adam Kathiriya, Lawndale Capital Management - Associate [29]

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And you guys have previously stated that, should Hy-Tech's prospects deteriorate, there could be some additional impairment charges and so forth. Approximately how much goodwill and intangible asset value remains on the balance sheet that's associated with Hy-Tech?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [30]

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That's a good question. Give me 1 second and I can get you the answer. Goodwill, there's -- we don't -- I don't believe there's any goodwill left, so we'd be just looking at some intangibles. I mean, I'm going to speak off the top of my head. It's less than $1 million. Does that sound about right? Intangibles. We're going to -- we're double-checking. If you could bear with me, ask me another question, we'll get you a more specific answer.

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Adam Kathiriya, Lawndale Capital Management - Associate [31]

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Yes. That works. Let's see. With Florida Pneumatic, specifically with AIRCAT, on the last call you guys spoke of additional AIRCAT products that came online. You guys mentioned maybe it's a dozen of them or so. Can you update us on how they're performing and if you think they're doing -- I think you guys described them as sensational, as you had stated on the last call?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [32]

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I think you're referring to the suite of tools being targeted towards bodywork. Those have been just launched so I don't really have a lot of feedback on that. Probably have a lot more to say about that in the next couple calls.

To answer your -- just to answer your question, the remaining intangibles related to Hy-Tech are just under $700,000.

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Adam Kathiriya, Lawndale Capital Management - Associate [33]

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Okay. And I have a few more questions. And I know there's probably other people on the call who would like to ask questions. But you had said you had additional geography, primarily in Central Europe -- sorry, this is with regards to Florida Pneumatic -- developing for AIRCAT and other tools with regards to distribution opportunities. Can you provide an update on that?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [34]

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Not a lot of progress. We're still hopeful, but progress has been kind of slow. We really never expected that to begin in earnest until Q2. So we're still hopeful that will be the case, but there's really nothing new to report on that right now.

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Adam Kathiriya, Lawndale Capital Management - Associate [35]

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Okay. And with regards to Home Depot, what is your current experience and visibility with respect to them? And you had mentioned that you've previously had a launch with Home Depot Canada that was quite favorable, yet it is like just a fraction of the U.S. business, and if you could just touch on that as well.

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

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Well, with respect to -- I'm not sure what the first part of your question I could answer exactly. Our relationship there continues. I would say that, if you put Canada aside, the growth rate there has definitely slowed down as that has gotten to be mature and our line has gotten filled. Until we add other products, probably wouldn't expect a lot of growth there.

With respect to Canada, which, again, is probably less than 10% of the size of the U.S. market, we did launch that last year, and we expect that to grow a little bit this year. But again, I'm not sure you're going to notice that growth. Even though it's double digits in Canada, it's just not going to be that material to the consolidated...

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Adam Kathiriya, Lawndale Capital Management - Associate [37]

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Understood. Understood. And I'll step back into the queue, but we have additional questions as well.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President and Assistant Treasurer [38]

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There are nobody else in the queue so you could finish your questions.

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Adam Kathiriya, Lawndale Capital Management - Associate [39]

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Okay. Perfect.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President and Assistant Treasurer [40]

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Do you have other questions?

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Adam Kathiriya, Lawndale Capital Management - Associate [41]

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Yes, yes. Just give me a moment. Just going back to Hy-Tech, I know you guys have called -- frequently called out the price of crude oil and the resulting reduced rig count as a cause of Hy-Tech's revenue decline. With rig count up, oil trending up until very recently, have you seen any changes or fortunes turn at all over there?

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

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Yes. Through the end of the year we had seen very little. But I can report that probably in the last 45 days we're absolutely seeing some activity. We're hopeful that, that will continue and grow. So there's some reason for optimism there.

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Adam Kathiriya, Lawndale Capital Management - Associate [43]

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Okay. And then just more on a, let's see here, corporate level, with regards to potential acquisitions and acquisition process, what are you seeing as the most desirable areas from a synergy standpoint as well as from a valuation perspective?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [44]

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I think the most desirable opportunities would be ones where there'd be air tools that serve markets that are distinct from markets we've got right now, whether that would be a particular application or a particular kind of channel or maybe even a different geography than we currently serve. So they would be tools we're familiar with but we don't really have a brand or a name in that market. So that's what we're looking at. Those are the types of things that seem to make the most sense that we're actively pursuing.

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Adam Kathiriya, Lawndale Capital Management - Associate [45]

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Okay. And let's see here. P&F, just like any other company, the valuation multiple is going to be directly impacted by the costs -- the company's cost of capital and thus the value that can be added from acquisitions or other uses of company capital. We know in the past you didn't feel that investor relations efforts were worthwhile from a financial or time perspective. And just with regards to some pretty high sell-off in P&F shares, some crazy levels, have you given any thought to increasing the company's investor communications efforts?

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President and Assistant Treasurer [46]

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I have not seen any crazy levels of selling that you're referring to, frankly. But we have discussed this many times. And we just really -- at this point we don't feel that that's a story that we have much to say right now. We do it through our conference calls and it's been productive and is successful. I don't -- we have no plans at this moment to go with any small cap conferences, if that's what you're asking us.

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [47]

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At least not as presenters.

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

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Not as presenters. We certainly visit those conferences and get a sense of the market and all that, and we'll be doing -- we do attend those, and we'll continue to do that. But as a presenter, I don't think that would serve us well at this point.

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Adam Kathiriya, Lawndale Capital Management - Associate [49]

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Okay. And what would, I guess, change your minds about that? What specifically during the thought process would change your minds on that?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [50]

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I mean, I'm not sure how to answer that. I'm not sure how the market is any different than what it was when we used to do this with very little results. Maybe there's some dynamic that I'm not following. But I'm not sure that, given our situation, it makes a lot of sense unless there's something different about the market than when it was -- last time we tried this.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President and Assistant Treasurer [51]

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When we've done it before, it has not been successful at all, because people have felt that they can easily get into the stock but they couldn't as easily get out of the stock. And we discussed that -- I'd mentioned that to Andrew in the past. He doesn't like the answer, but that's what they told us, not our answer. And as Joe said, I don't see any dynamic that's changed that would make it seem like it's any better now to do it than it was before. It's a very closely held stock position between a very few people. It's the greatest preponderance of ownership. And there's not that much flowed out there. So I don't know what we'd benefit from in that regard.

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Adam Kathiriya, Lawndale Capital Management - Associate [52]

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Okay. And then can you update us on the board's process and position with regards to adopting a 10b5 plan and a buyback, potential buyback?

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

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Again, we discussed that at our recent meeting, which was a couple weeks ago. We spent considerable amount of time talking about it. And it's the collective wisdom, very unanimously, that we want to use our funds for acquisitions, which is the refocusing of our company. And that's where we want to spend our funds and our attention right now. So that's where we -- we'll continue to review it, but that's -- and of course, remember, we do a dividend. We give you a dividend. We give every stockholder a dividend quarterly and a onetime dividend that was last year, I mentioned earlier. So that's continuing that. But in terms of anything else, that's our position at this point.

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Adam Kathiriya, Lawndale Capital Management - Associate [54]

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And just a couple more questions for you guys. This is with regards to CapEx. Regarding the Hy-Tech CNC machine, that was a pretty big CapEx item last quarter. You had said it was still running well below your capacity and activity levels were nowhere close to where you'd like them to be. Have you guys increased those activity levels? And do you see more visibility as whether that expenditure is actually paying off as anticipated?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [55]

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Well, it will pay off if activity levels continue to rise. I think with respect to efficiencies, the equipment purchases have always -- have recently improved those. But really, to get the full benefit out of these machines, activity levels have to get back to more -- closer to where they were.

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Adam Kathiriya, Lawndale Capital Management - Associate [56]

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Okay. And can you just discuss some CapEx plans for 2017 and any major projects that are embarked on or expect to be embarked on?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [57]

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I think for '17, I would say it's probably going to be a little more of a modest year in terms of capital expenditures. I don't anticipate any major pieces of equipment at Hy-Tech. But as between Hy-Tech and Florida Pneumatic, certainly we would be expecting the typical tooling capital expenditures that would be -- come along with new product development. But major, large pieces of equipment, I would say probably not in '17.

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Adam Kathiriya, Lawndale Capital Management - Associate [58]

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Okay. And just the last question for you guys. And this is going back to Florida Pneumatic, specifically within the industrial. You called out aerospace as a subsegment. That was to see several new products before year-end. You said that it could be a lag -- a long lag time and there wasn't great visibility on that front. But can you update us on the progress on that?

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Joseph A. Molino, P&F Industries, Inc. - COO, CFO, Principal Accounting Officer, VP, Treasurer and Secretary [59]

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We have continued to look at that and evaluate the opportunities in the market. So for right now, we don't have anything new to announce on aerospace development. We may have more to say about that in the next quarter or 2. But as of now, there is nothing material to discuss. But that could change.

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Operator [60]

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(Operator Instructions) And gentlemen, with no further questions, I'll turn the call back to you for any additional or closing remarks.

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Richard A. Horowitz, P&F Industries, Inc. - Founder, Chairman, CEO, President and Assistant Treasurer [61]

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Okay. Well, thank you all for being on our call today. I want to take you back to my comments at the end of my presentation about the company. And we look forward to giving you a good report in the next few upcoming quarters. Have a good day, everybody.

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Operator [62]

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Thank you. And that does conclude today's conference. Thank you for your participation. You may now disconnect.