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P&F Industries Inc – ‘10-Q’ for 3/31/02

On: Tuesday, 5/14/02 · For: 3/31/02 · Accession #: 912057-2-20111 · File #: 1-05332

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/14/02  P&F Industries Inc                10-Q        3/31/02    3:136K                                   Merrill Corp/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      22     85K 
 2: EX-4.8      Instrument Defining the Rights of Security Holders    30     78K 
 3: EX-10.5     Material Contract                                     18     71K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Changes in Securities Exhibit Index Exhibits and Reports on Form 8-K Financial Statements Item 3 Management's Discussion and Analysis of Financial Condition and Results of Operations Other Information Quantitative and Qualitative Disclosures About Market Risk Submission of Matters to a Vote of Security Holders
1	1st Page - Filing Submission
2	Item 3
3	Item 1. Financial Statements
13	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
17	Item 3. Quantitative and Qualitative Disclosures About Market Risk
18	Item 2. Changes in Securities
"	Item 4. Submission of Matters to a Vote of Security Holders
"	Item 5. Other Information
"	Item 6. Exhibits and Reports on Form 8-K
20	Exhibit Index

10-Q 1st Page of 22 TOC ↑Top Previous Next ↓Bottom Just 1st
 
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 ---------
 FORM 10-Q
 ---------

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2002

 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 COMMISSION FILE NUMBER 1 - 5332

P & F INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

DELAWARE                                      22-1657413    
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)                                                

300 SMITH STREET, FARMINGDALE, NEW YORK                            11735
  (Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code: (631) 694-1800

 ---------

 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of   
1934 during the preceding 12 months, and (2) has been subject to such filing    
requirements for the past 90 days.                                              
YES (X)  NO ( )                                                                 

     As of May 13, 2002, there were 3,504,148 shares of the registrant's Class A
Common Stock outstanding.                                                       

10-Q 2nd Page of 22 TOC 1st Previous Next ↓Bottom Just 2nd
P & F INDUSTRIES, INC.

 FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2002

 TABLE OF CONTENTS

                                                                [Download Table]

                                                                            PAGE
                                                                            ----
                                                                                
PART I                                                                          
Item 1.   Financial Statements                                                  

            Consolidated Balance Sheets as of                                   
              March 31, 2002 and December 31, 2001                         1 - 2

            Consolidated Statements of Income                                   
              for the three months ended March 31, 2002                        3

            Consolidated Statement of Shareholders' Equity                      
              for the three months ended March 31, 2002                        4

            Consolidated Statements of Cash Flows for the                       
              three months ended March 31, 2002 and 2001                   5 - 6

            Notes to Consolidated Financial Statements                    7 - 10

Item 2.   Management's Discussion and Analysis of Financial                     
            Condition and Results of Operations                          11 - 14

Item 3.   Quantitative and Qualitative Disclosures About                        
            Market Risk                                                       15

PART II                                                                         
Item 1.   Legal Proceedings                                                   16

Item 2.   Changes in Securities and Use of proceeds                           16

Item 3.   Defaults Upon Senior Securities                                     16

Item 4.   Submission of Matters to a Vote of Security Holders                 16

Item 5.   Other Information                                                   16

Item 6.   Exhibits and Reports on Form 8-K                                    16

SIGNATURES                                                                    17

EXHIBIT INDEX                                                            18 - 20

 i

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PART I - FINANCIAL INFORMATION                                                  

ITEM 1.   FINANCIAL STATEMENTS                                                  

 P & F INDUSTRIES, INC. AND SUBSIDIARIES

 CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)

                                                                [Download Table]

                                                       MARCH 31,    DECEMBER 31,
                                                         2002           2001    
                                                     ------------   ------------
                                                                                
   ASSETS                                                                       
   ------                                                                       
CURRENT:                                                                        
  Cash                                               $     43,762   $    507,833
  Accounts receivable, less allowance                                           
    for possible losses of $410,808                                             
    in 2002 and $404,557 in 2001                       11,655,838      9,729,605
  Inventories                                          16,298,266     17,223,225
  Deferred income taxes                                   580,000        580,000
  Prepaid expenses and other                              761,741        723,538
                                                     ------------   ------------
      TOTAL CURRENT ASSETS                             29,339,607     28,764,201
                                                     ------------   ------------

PROPERTY AND EQUIPMENT:                                                         
  Land                                                  1,182,938      1,182,938
  Buildings and improvements                            6,301,849      6,291,225
  Machinery and equipment                              13,011,090     12,728,582
                                                     ------------   ------------
                                                       20,495,877     20,202,745
  Less accumulated depreciation                                                 
    and amortization                                   10,270,594      9,901,650
                                                     ------------   ------------
      NET PROPERTY AND EQUIPMENT                       10,225,283     10,301,095
                                                     ------------   ------------

GOODWILL, net of accumulated                                                    
  amortization of $2,163,347                            7,699,551      7,301,611

OTHER ASSETS                                               99,165        102,615
                                                     ------------   ------------
      TOTAL ASSETS                                   $ 47,363,606   $ 46,469,522
                                                     ============   ============

 1

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

 CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
 (CONTINUED)

                                                                [Download Table]

                                           MARCH 31,    DECEMBER 31, 
                                             2002           2001     
                                         ------------   ------------ 
                                                                     
   LIABILITIES AND SHAREHOLDERS' EQUITY                              
   ------------------------------------                              
CURRENT LIABILITIES:                                                 
  Short-term borrowings                  $  1,800,000   $  2,000,000 
  Accounts payable                          3,131,608      1,981,368 
  Accruals:                                                          
    Compensation                              750,684      1,512,141 
    Other                                   2,237,391      1,947,143 
  Current maturities of long-term debt        306,395        313,075 
                                         ------------   ------------ 
      TOTAL CURRENT LIABILITIES             8,226,078      7,753,727 

LONG-TERM DEBT, less current maturities     3,517,816      3,548,945 

DEFERRED INCOME TAXES                         939,000        939,000 
                                         ------------   ------------ 
                                           12,682,894     12,241,672 
                                         ------------   ------------ 

SHAREHOLDERS' EQUITY:                                                
  Preferred stock - $10 par;                                         
    authorized - 2,000,000 shares;                                   
    no shares outstanding                           -              - 
  Common stock:                                                      
    Class A - $1 par;                                                
      authorized - 7,000,000 shares;                                 
      issued - 3,677,593 shares             3,677,593      3,677,593 
    Class B - $1 par;                                                
      authorized - 2,000,000 shares;                                 
      no shares issued or outstanding               -              - 
  Additional paid-in capital                8,464,139      8,464,139 
  Retained earnings                        23,926,945     23,373,283 
  Treasury stock, at cost                                            
    (173,445 shares and 157,445 shares)    (1,387,965)    (1,287,165)
                                         ------------   ------------ 
      TOTAL SHAREHOLDERS' EQUITY           34,680,712     34,227,850 
                                         ------------   ------------ 
      TOTAL LIABILITIES AND                                          
        SHAREHOLDERS' EQUITY             $ 47,363,606   $ 46,469,522 
                                         ============   ============ 

 2

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF INCOME
 (UNAUDITED)

                                                                [Download Table]

                                                          THREE MONTHS ENDED    
                                                               MARCH 31,        
                                                     ---------------------------
                                                          2002          2001    
                                                     ------------   ------------
                                                                                
REVENUES:                                                                       
  Net sales                                            17,037,755     17,298,505
  Other                                                    58,964        145,259
                                                     ------------   ------------
                                                       17,096,719     17,443,764
                                                     ------------   ------------

COSTS AND EXPENSES:                                                             
  Cost of sales                                        12,004,222     12,254,793
  Selling, general and administrative                   4,089,063      4,214,920
  Interest - net                                          101,772        270,072
                                                     ------------   ------------
                                                       16,195,057     16,739,785
                                                     ------------   ------------

INCOME BEFORE TAXES ON INCOME                             901,662        703,979

TAXES ON INCOME                                           348,000        273,000
                                                     ------------   ------------

NET INCOME                                           $    553,662   $    430,979
                                                     ============   ============

Weighted average common shares outstanding:                                     
    Basic                                               3,510,605      3,575,599

    Diluted                                             3,587,437      3,649,245

Earnings per share of common stock:                                             
  Basic                                              $        .16   $        .12

  Diluted                                            $        .15   $        .12

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
 (UNAUDITED)

                                                                [Download Table]

                                        ADDITIONAL                            
                             COMMON       PAID-IN     RETAINED     TREASURY   
                              STOCK       CAPITAL     EARNINGS       STOCK    
                          -----------  -----------  ------------   ---------- 
                                                                              

Balance, January 1, 2002  $ 3,677,593  $ 8,464,139  $ 23,373,283  $(1,287,165)

Net income for the                                                            
  three months ended                                                          
  March 31, 2002                    -            -       553,662            - 

Purchase of Class A                                                           
  Common Stock                      -            -             -     (100,800)
                          -----------  -----------  ------------   ---------- 

Balance, March 31, 2002   $ 3,677,593  $ 8,464,139  $ 23,926,945  $(1,387,965)
                          ===========  ===========  ============   ========== 

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)

                                                                [Download Table]

                                                  THREE MONTHS ENDED     
                                                       MARCH 31,         
                                             --------------------------- 
                                                  2002          2001     
                                             ------------   ------------ 
                                                                         
CASH FLOWS FROM OPERATING ACTIVITIES:                                    
  Net income                                 $    553,662        430,979 
                                             ------------   ------------ 

  Adjustments to reconcile net income                                    
    to net cash provided by (used in)                                    
    operating activities:                                                
      Depreciation                                368,944        363,876 
      Amortization                                  4,295         85,403 
      Provision for losses on                                            
        accounts receivable - net                   6,251          2,143 
  Decrease (increase):                                                   
    Accounts receivable                        (1,932,484)        91,921 
    Inventories                                   924,959       (628,453)
    Prepaid expenses and other                    (39,048)       (33,139)
    Other assets                                        -        (16,296)
  Increase (decrease):                                                   
    Accounts payable                            1,150,240        471,393 
    Accruals and other                           (471,209)    (1,463,370)
                                             ------------   ------------ 
      Total adjustments                            11,948     (1,126,522)
                                             ------------   ------------ 
        Net cash provided by (used in)                                   
          operating activities                    565,610       (695,543)
                                             ------------   ------------ 

CASH FLOWS FROM INVESTING ACTIVITIES:                                    
  Capital expenditures                           (293,132)      (297,275)
  Payments for acquisition-related expenses      (397,940)             - 
                                             ------------   ------------ 
        Net cash used in                                                 
          investing activities                   (691,072)      (297,275)
                                             ------------   ------------ 

 5

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 (CONTINUED)

                                                                [Download Table]

                                             THREE MONTHS ENDED     
                                                  MARCH 31,         
                                        --------------------------- 
                                             2002          2001     
                                        ------------   ------------ 
                                                                    
CASH FLOWS FROM FINANCING ACTIVITIES:                               
  Proceeds from short-term borrowings        800,000      2,000,000 
  Repayments of short-term borrowings     (1,000,000)    (1,000,000)
  Principal payments on long-term debt       (37,809)       (34,806)
  Purchase of Class A Common Stock          (100,800)      (357,045)
                                        ------------   ------------ 
        Net cash provided by (used in)                              
          financing activities              (338,609)       608,149 
                                        ------------   ------------ 

NET INCREASE (DECREASE) IN CASH             (464,071)      (384,669)

CASH AT BEGINNING OF PERIOD                  507,833        388,422 
                                        ------------   ------------ 

CASH AT END OF PERIOD                   $     43,762   $      3,753 
                                        ============   ============ 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW                                
  INFORMATION:                                                      
    Cash paid during the period for:                                

      Income taxes                      $      2,500   $     23,000 
                                        ============   ============ 

      Interest                          $    107,635   $    271,873 
                                        ============   ============ 

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES                                         

PRINCIPLES OF CONSOLIDATION                                                     
  The consolidated unaudited financial statements contained herein include
the accounts of P & F Industries, Inc. and its subsidiaries. All significant    
intercompany balances and transactions have been eliminated.                    

   P & F Industries, Inc. ("P & F") conducts business operations through its
three wholly-owned subsidiaries; Florida Pneumatic Manufacturing Corporation    
("Florida Pneumatic"), Green Manufacturing, Inc. ("Green") and Embassy          
Industries, Inc. ("Embassy"). P & F and its subsidiaries are herein referred to 
collectively as the "Company".                                                  

  Florida Pneumatic is engaged in the importation, manufacture and sale of
pneumatic hand tools, primarily for the industrial and retail markets, and the  
importation and sale of compressor air filters. Florida Pneumatic also markets, 
through its Berkley Tool division ("Berkley"), a line of pipe cutting and       
threading tools, wrenches and replacement electrical components for a           
widely-used brand of pipe cutting and threading machines. Green is engaged      
primarily in the manufacture, development and sale of heavy-duty welded custom  
designed hydraulic cylinders. Green also manufactures a line of access equipment
for the petro-chemical industry and a line of post hole digging equipment for   
the agricultural industry. Embassy is engaged in the manufacture and sale of    
baseboard heating products and the importation and sale of radiant heating      
systems. Embassy also imports a line of door and window hardware items through  
its Franklin hardware division ("Franklin"). Note 4 of the Notes to Consolidated
Financial Statements presents financial information for the segments of the     
Company's business.                                                             

BASIS OF FINANCIAL STATEMENT PRESENTATION                                       

The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the     
United States of America for interim financial information, and with the rules  
and regulations of the Securities and Exchange Commission regarding interim     
financial reporting. Accordingly, these interim financial statements do not     
include all of the information and footnotes required by accounting principles  
generally accepted in the United States of America for complete financial       
statements. In the opinion of the Company, these unaudited consolidated         
financial statements include all adjustments necessary to present fairly the    
information set forth therein. All such adjustments are of a normal recurring   
nature. Results for interim periods are not necessarily indicative of results to
be expected for a full year.                                                    

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF FINANCIAL STATEMENT PRESENTATION (CONTINUED)                           

The consolidated balance sheet information for December 31, 2001 was  
derived from the audited financial statements included in the Company's Annual  
Report on Form 10-K for the year ended December 31, 2001. The interim financial 
statements contained herein should be read in conjunction with that Report.     

    In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required to   
make estimates and assumptions that affect the reported amounts of assets and   
liabilities and the disclosure of contingent assets and liabilities at the date 
of the financial statements and the reported amounts of revenues and expenses   
during the reporting period. Actual results could differ from those estimates.  

NOTE 2 - INVENTORIES                                                            

Major classes of inventory were as follows:                           

                                                                [Download Table]

                               MARCH 31,     DECEMBER 31,
                                 2002            2001    
                             ------------    ------------
                                                         
Raw materials and supplies   $  2,903,609    $  3,122,061
Work in process                   735,430         740,036
Finished goods                 12,659,227      13,361,128
                             ------------    ------------
                             $ 16,298,266    $ 17,223,225
                             ============    ============

NOTE 3 - CAPITAL STOCK TRANSACTIONS                                             

    During the three months ended March 31, 2002, the Company purchased 16,000
shares of its Class A Common Stock, at a cost of $100,800.                      

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - SEGMENTS OF BUSINESS                                                   

The following tables present financial information by segment for the 
three-month periods ended March 31, 2002 and 2001. Segment profit (loss)        
excludes general corporate expenses, interest expense and income taxes. There   
were no intersegment revenues.                                                  

                                                                [Download Table]

                                       PNEUMATIC                                
                                       TOOLS AND                                
 THREE MONTHS ENDED                     RELATED   HYDRAULIC    HEATING          
  MARCH 31, 2002        CONSOLIDATED   EQUIPMENT  CYLINDERS   PRODUCTS  HARDWARE
----------------------  ------------   ---------  ---------  ---------  --------
   (IN THOUSANDS)                                                               
                                                                                
 Revenues from                                                                  
   external customers   $     17,097   $  10,009  $   3,343  $   2,281  $  1,464
                        ============   =========  =========  =========  ========

 Segment profit (loss)  $      1,770   $   1,737  $     (94) $     102  $     25
                        ============   =========  =========  =========  ========


                                       PNEUMATIC                                
                                       TOOLS AND                                
THREE MONTHS ENDED                      RELATED   HYDRAULIC    HEATING          
 MARCH 31, 2001         CONSOLIDATED   EQUIPMENT  CYLINDERS   PRODUCTS  HARDWARE
----------------------  ------------   ---------  ---------  ---------  --------
   (IN THOUSANDS)                                                               
                                                                                
 Revenues from                                                                  
   external customers   $     17,444   $  10,171  $   4,161  $   1,971  $  1,141
                        ============   =========  =========  =========  ========

 Segment profit         $      1,696   $   1,553  $      47  $      67  $     29
                        ============   =========  =========  =========  ========

     The reconciliation of combined operating profits for reportable segments to
consolidated income before income taxes is as follows:                          

                                                                [Download Table]

                                                      THREE MONTHS ENDED      
                                                           MARCH 31,          
                                                  --------------------------- 
                                                      2002           2001     
                                                  ------------   ------------ 
                                                                              
Total profit for reportable segments              $  1,770,133   $  1,695,556 

General corporate expenses                            (766,699)      (721,505)

Interest expense                                      (101,772)      (270,072)
                                                  ------------   ------------ 
Income before income taxes                        $    901,662   $    703,979 
                                                  ============   ============ 

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - EARNINGS PER SHARE                                                     

The following table sets forth the computation of basic and diluted   
earnings per common share:                                                      

                                                                [Download Table]

                                                        THREE MONTHS ENDED    
                                                            MARCH 31,         
                                                   ---------------------------
                                                       2002           2001    
                                                   ------------   ------------
                                                                              
Numerator:                                                                    
  Numerator for basic and diluted                                             
    earnings per common share -                                               
    income available to common                                                
    shareholders                                   $    553,662   $    430,979
                                                   ============   ============

Denominator:                                                                  
  Denominator for basic earnings                                              
    per common share - weighted                                               
    average common shares outstanding                 3,510,605      3,575,599

  Effect of dilutive securities:                                              
    Common stock options                                 76,742         73,646
                                                   ------------   ------------
  Denominator for diluted earnings                                            
    per common share - adjusted                                               
    weighted average common shares                                            
    and assumed conversions                           3,587,347      3,649,245
                                                   ============   ============

Earnings per common share:                                                    
  Basic                                            $        .16   $        .12
                                                   ============   ============

  Diluted                                          $        .15   $        .12
                                                   ============   ============

NOTE 6 - SUBSEQUENT EVENT                                                       

On May 3, 2002, a newly formed wholly-owned subsidiary of the Company 
acquired the stock of Nationwide Industries, Inc. ("Nationwide") for            
$11,500,000, subject to adjustment. Nationwide is engaged in the business of    
importing and manufacturing door, window and fencing hardware. This acquisition 
was financed primarily through the term loan facility available under the       
Company's credit agreement. In connection with this acquisition, the same       
subsidiary entered into a contract to purchase, for $2,500,000, the real        
property and the improvements thereon in which Nationwide conducts its business.
As of the date of this Quarterly Report on Form 10-Q, the purchase of the real  
property and improvements thereon had not yet been consummated.                 

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION            
AND RESULTS OF OPERATIONS                                                       

QUARTER ENDED MARCH 31, 2002 COMPARED WITH QUARTER ENDED MARCH 31, 2001         

Consolidated revenues decreased 2.0%, from $17,443,764 to $17,096,719.
Revenues from pneumatic tools and related equipment decreased 1.6%, from        
$10,170,433 to $10,008,910, due primarily to the continued weakness in the      
industrial and catalog segments, which was partially offset by increased sales  
to the retail market. Selling prices of pneumatic tools and related equipment   
were unchanged from the prior year, with the exception of prices to one         
significant customer, which were reduced by an average of 16%. Revenues from    
hydraulic cylinders and other equipment decreased 19.7%, from $4,160,842 to     
$3,343,175, due primarily to the loss of a significant customer in the wrecker  
market and a decrease in orders from a customer with significant sales to the   
airline industry. Selling prices of hydraulic cylinders and other equipment were
unchanged from the prior year. Revenues from heating equipment increased 15.7%, 
from $1,971,073 to $2,280,355, due to increased sales in all of its product     
lines. Selling prices of heating equipment were unchanged from the prior year.  
Revenues from hardware increased 28.3%, from $1,141,416 to $1,464,279, due      
primarily to the addition of two significant customers in late 2001. Selling    
prices of hardware products were unchanged from the prior year.                 

Consolidated gross profit, as a percentage of revenues, increased from
29.7% to 29.8%. Gross profit from pneumatic tools and related equipment         
increased from 36.1% to 36.9%, due primarily to increases in the value of the   
U.S. dollar as compared to both the Japanese yen and the New Taiwan dollar,     
which decreased the cost of imported product, continuing productivity           
improvements and expense reductions. Gross profit from hydraulic cylinders and  
other equipment decreased from 12.7% to 9.1%, due primarily to the lower        
absorption of fixed expenses resulting from the decreased manufacturing         
activity. In addition, significant production labor resources were expended to  
produce prototypes and initial short-run orders for new customers. These new    
account activities generate little to no gross profit. Labor productivity       
increases partially offset these negatives. Gross profit from heating equipment 
decreased from 34.7% to 32.0%, due primarily to a change in product mix. Gross  
profit from hardware decreased from 26.6% to 25.2%, due primarily to a less     
favorable product mix.                                                          

   Consolidated selling, general and administrative expenses decreased 3.0%,
from $4,214,920 to $4,089,063, due primarily to an overall decrease in revenues 
for the period. Interest expense decreased 62.3%, from $270,072 to $101,772, due
primarily to decreases in both the average outstanding balance of the Company's 
borrowings and the average interest rate on these borrowings.                   

     The effective tax rates for the quarters ended March 31, 2002 and 2001 were
38.6% and 38.8%, respectively.                                                  

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

LIQUIDITY AND CAPITAL RESOURCES                                                 

The Company gauges its liquidity and financial stability by the       
measurements shown in the following table (dollar amounts in thousands):        

                                                                [Download Table]

                           MARCH 31,    DECEMBER 31,    MARCH 31, 
                             2002           2001          2001    
                          -----------   ------------   -----------
                                                                  
Working Capital           $    21,114   $     21,010   $    19,321
Current Ratio               3.57 to 1      3.71 to 1     2.18 to 1
Shareholders' Equity      $    34,681   $     34,228   $    33,066

During the quarter ended March 31, 2002, gross accounts receivable    
increased by approximately $1,932,000, with increases of approximately          
$1,668,000 at Florida Pneumatic, approximately $85,000 at Green and             
approximately $179,000 at Embassy. The increase at Florida Pneumatic was the    
result of granting longer payment terms to one significant customer and         
increased sales to another significant customer that also has extended payment  
terms. The increases at Green and Embassy were the result of increased sales.   

During the quarter ended March 31, 2002, inventories decreased by     
approximately $925,000, with decreases of approximately $685,000 at Florida     
Pneumatic, approximately $114,000 at Green and approximately $126,000 at        
Embassy. At Florida Pneumatic, inventory decreased due to the reduction in sales
and decreased purchasing activity. The decreases in inventory at Green and      
Embassy were made to improve inventory turns.                                   

During the quarter ended March 31, 2002, accounts payable increased by
approximately $1,150,000, with increases of approximately $990,000 at Florida   
Pneumatic and approximately $196,000 at Green being partially offset by a       
decrease of approximately $36,000 at Embassy. All of the changes in accounts    
payable were the result of the timing of payments. Short-term borrowings        
decreased by $200,000, as a result of the decrease in working capital           
requirements consistent with changes in accounts receivable, accounts payable   
and inventory.                                                                  

The Company has a credit agreement, as amended, with Citibank, N.A.   
(successor-in-interest to European American Bank), which expires on July 26,    
2002. This agreement provides the Company with various credit facilities,       
including revolving credit loans, term loans for acquisitions and a foreign     
exchange line. On May 3, 2002, the credit agreement was amended in connection   
with the Company's acquisition of Nationwide.                                   

  The revolving credit loan facility provides a total of $12,000,000, with
various sublimits, for direct borrowings, letters of credit, bankers'           
acceptances and equipment loans. At March 31, 2002, there was $1,800,000        
outstanding against the revolving credit loan facility. There was a commitment  
of approximately $830,000 for open letters of credit at March 31, 2002.         

12

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)                                     

The term loan facility provides a commitment of $15,000,000 to finance
acquisitions subject to the lending bank's approval. There was no loan balance  
outstanding against this facility at March 31, 2001. There was, however, a      
standby letter of credit totaling approximately $510,000 outstanding against    
this facility at March 31, 2001. This standby letter of credit was used to      
secure the Economic Development Revenue Bond assumed as part of the acquisition 
of Green.                                                                       

On May 3, 2002, the Company borrowed $11,500,000 against the term loan
facility in connection with the acquisition of Nationwide.                      

The foreign exchange line provides for the availability of up to      
$10,000,000 in foreign currency forward contracts. These contracts fix the      
exchange rate on future purchases of Japanese yen needed for payments to foreign
suppliers. The total amount of foreign currency forward contracts outstanding at
March 31, 2002 was approximately $2,530,000.                                    

   The Company's credit agreement is subject to annual review by the lending
bank. Under this agreement, the Company is required to adhere to certain        
financial covenants. At March 31, 2002, and for the three months then ended, the
Company satisfied all of these covenants.                                       

 Capital spending for the quarter ended March 31, 2002 was approximately
$295,000. The total amount was provided from working capital. Capital           
expenditures for the remainder of 2002 are expected to total approximately      
$1,000,000, some of which may be financed through the Company's credit          
facilities. Included in the expected total for the remainder of 2002 are capital
expenditures relating to new products, expansion of existing product lines and  
replacement of old equipment.                                                   

     The Company, through Florida Pneumatic, imports a significant amount of its
purchases from Japan, with payment due in Japanese yen. As a result, the Company
is subject to the effects of foreign currency exchange fluctuations. The Company
uses a variety of techniques to mitigate the effects of these fluctuations,     
including increasing its selling prices, obtaining price reductions from its    
overseas suppliers, using alternative supplier sources and entering into foreign
currency forward contracts. The strengthening of the U.S. dollar versus the     
Japanese yen over the last 12 months has had a positive effect on the Company's 
results of operations and its financial position. There can be no assurance     
however, that this situation will continue. See "Item 3 - Quantitative and      
Qualitative Disclosures About Market Risk."                                     

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

NEW ACCOUNTING PRONOUNCEMENTS                                                   

     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"),   
and No. 142, "Goodwill and Other Intangible Assets" ("SFAS" 142). SFAS 141      
requires the use of the purchase method of accounting for business combinations 
initiated after June 30, 2001. SFAS 141 also requires that the Company recognize
acquired intangible assets apart from goodwill if the acquired intangible assets
meet certain criteria. SFAS 141 applies to all business combinations initiated  
after June 30, 2001, and to all business combinations accounted for by the      
purchase method for which the date of acquisition is July 1, 2001 or later. It  
also requires, upon adoption of SFAS 142, that the Company reclassify, if       
necessary, the carrying amounts of intangible assets and goodwill, based on the 
criteria in SFAS 141.                                                           

  SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In        
addition, SFAS 142 requires that the Company identify reporting units for the   
purposes of assessing potential future impairments of goodwill, reassess the    
useful lives of other existing recognized intangible assets, and cease          
amortizing intangible assets with an indefinite useful life. An intangible asset
with an indefinite useful life should be tested for impairment in accordance    
with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal     
years beginning after December 15, 2001 to all goodwill and other intangible    
assets recognized. SFAS 142 requires the Company to complete a transitional     
goodwill impairment test six months from the date of adoption. The Company is   
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.                               

With respect to the Company's business combinations that were effected
prior to June 30, 2001 using the purchase method of accounting, the net carrying
amount of the resulting goodwill as of March 31, 2002 was $7,301,611. The       
Company is currently assessing the effect that the adoption of SFAS 141 and SFAS
142 will have on its consolidated financial statements.                         

    In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the     
Impairment or Disposal of Long-Lived Assets", which supersedes Statement of     
Financial Accounting Standards No. 121, "Accounting for the Impairment of       
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and addresses   
financial accounting and reporting for the impairment of long-lived assets to be
disposed of. SFAS 144 is required to be adopted for fiscal years beginning after
December 15, 2001. The Company is currently assessing the effect that the       
adoption of SFAS 144 will have on its consolidated financial statements.        

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 P & F INDUSTRIES, INC. AND SUBSIDIARIES

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK             

   The Company is exposed to market risks, which include changes in U.S. and
international exchange rates, the prices of certain commodities and currency    
rates as measured against the U.S. dollar and each other. The Company attempts  
to reduce the risks related to foreign currency fluctuation by utilizing        
financial instruments, pursuant to Company policy.                              

The value of the U.S. dollar affects the Company's financial results. 
Changes in exchange rates may positively or negatively affect the Company's     
gross margins and operating expenses. The Company engages in hedging programs   
aimed at limiting, in part, the impact of currency fluctuations. Using primarily
forward exchange contracts, the Company hedges some of those transactions that, 
when remeasured according to accounting principles generally accepted in the    
United States of America, impact the income statement. Factors that could impact
the effectiveness of the Company's programs include volatility of the currency  
markets and availability of hedging instruments. All currency contracts that are
entered into by the Company are components of hedging programs and are entered  
into for the sole purpose of hedging an existing or anticipated currency        
exposure and not for speculation. The Company does not buy or sell financial    
instruments for trading purposes. Although the Company maintains these programs 
to mitigate the effects of changes in currency exchange rates, when the U.S.    
dollar sustains a weakening exchange rate against currencies in which the       
Company incurs costs, the Company's costs are adversely affected.               

    The Company accounts for changes in the fair value of its foreign currency
contracts by marking them to market and recognizing any resulting gains or      
losses through its statement of income. The Company also marks its              
yen-denominated payables to market, recognizing any resulting gains or losses in
its statement of income. At March 31, 2002, the Company had foreign currency    
forward contracts, maturing in 2002, to purchase approximately $2,530,000 in    
Japanese yen at contracted forward rates. This amount was not in excess of the  
Company's yen-denominated payables.                                             

The potential loss in value of the Company's net investment in foreign
currency forward contracts resulting from a hypothetical 10 percent adverse     
change in foreign currency exchange rates at March 31, 2002 was approximately   
$280,000.                                                                       

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PART II - OTHER INFORMATION                                                     

ITEM 1.   LEGAL PROCEEDINGS                                                     
         The Company is a defendant or co-defendant in various actions brought
   about in the course of conducting its business. The Company has
     accrued approximately $400,000 for possible liability relating to
these actions.                                              

ITEM 2.   CHANGES IN SECURITIES                                                 
None.                                                       

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES                                       
None.                                                       

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                   
None.                                                       

ITEM 5.   OTHER INFORMATION                                                     
None.                                                       

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                                      
(a)  Exhibits                                               
               See "Exhibit Index" immediately following the signature page.

(b)  Reports on Form 8-K                                    
                No reports on Form 8-K were filed by the registrant during the
quarter ended March 31, 2002.                 

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SIGNATURES

  Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the        
undersigned thereunto duly authorized.                                          

                  P & F INDUSTRIES, INC.
        (Registrant)

                           By    /s/ Joseph A. Molino, Jr.
                                 -------------------------------
                               Joseph A. Molino, Jr.
                              Vice President
Dated: May 13, 2002                         (Principal Financial Officer)       

17

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 EXHIBIT INDEX

EXHIBIT                                                                         
NO.                                                                             
-------                                                                         

2.1    Asset Purchase Agreement, dated as of September 16, 1998, by and between 
Green Manufacturing, Inc., an Ohio corporation, and the Registrant
   (Incorporated by reference to Exhibit 2.1 of the Registrant's Current
      Report on Form 8-K dated September 16, 1998). Pursuant to Item 601(b)(2)
       of Regulation S-K, the Registrant agrees to furnish supplementally a copy
     of any exhibit or schedule omitted from the Asset Purchase Agreement to
the Securities and Exchange Commission upon request.              

3.1    Restated Certificate of Incorporation of the Registrant (Incorporated by 
     reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999).                     

3.2    Amended By-laws of the Registrant (Incorporated by reference to Exhibit  
   3.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999).                                            

4.1    Rights Agreement, dated as of August 23, 1994, between the Registrant and
       American Stock Transfer & Trust Company, as Rights Agent (Incorporated by
       reference to Exhibit 1 to the Registrant's Registration Statement on Form
8-A dated August 24, 1994).                                       

4.2    Amendment to Rights Agreement, dated as of April 11, 1997, between the   
     Registrant and American Stock Transfer & Trust Company, as Rights Agent
   (Incorporated by reference to Exhibit 4.1 to the Registrant's Current
Report on Form 8-K dated April 11, 1997).                         

4.3    Credit Agreement, dated as of July 23, 1998, by and among the Registrant,
 Florida Pneumatic Manufacturing Corporation, a Florida corporation,
     Embassy Industries, Inc., a New York corporation, and European American
Bank, a New York banking corporation (Incorporated by reference to
  Exhibit 4.3 to the Registrant's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1998).                             

4.4    Amendment No. 1 to Credit Agreement, dated as of September 16, 1998, by  
      and among the Registrant, Florida Pneumatic Manufacturing Corporation, a
    Florida corporation, Embassy Industries, Inc., a New York corporation,
      Green Manufacturing, Inc., a Delaware corporation, and European American
Bank, a New York banking corporation (Incorporated by reference to
  Exhibit 4.4 to the Registrant's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1998).                             

18

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 EXHIBIT INDEX
 (CONTINUED)

EXHIBIT                                                                         
NO.                                                                             
-------                                                                         

4.5    Amendment No. 2 to Credit Agreement, dated as of July 28, 1999, by and   
  among the Registrant, Florida Pneumatic Manufacturing Corporation, a
    Florida corporation, Embassy Industries, Inc., a New York corporation,
      Green Manufacturing, Inc., a Delaware corporation, and European American
Bank, a New York banking corporation (Incorporated by reference to
   Exhibit 4.5 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999).                                     

4.6    Amendment No. 3 to Credit Agreement, dated as of July 26, 2000, by and   
  among the Registrant, Florida Pneumatic Manufacturing Corporation, a
    Florida corporation, Embassy Industries, Inc., a New York corporation,
      Green Manufacturing, Inc., a Delaware corporation, and European American
Bank, a New York banking corporation (Incorporated by reference to
   Exhibit 4.5 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000).                                     

4.7    Amendment No. 4 to Credit Agreement, dated as of June 25, 2001, by and   
  among the Registrant, Florida Pneumatic Manufacturing Corporation, a
    Florida corporation, Embassy Industries, Inc., a New York corporation,
      Green Manufacturing, Inc., a Delaware corporation, and European American
Bank, a New York banking corporation (Incorporated by reference to
   Exhibit 4.7 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000).                                    

4.8    Amendment No. 5 to Credit Agreement, dated as of May 3, 2002, by and     
  among the Registrant, Florida Pneumatic Manufacturing Corporation, a
    Florida corporation, Embassy Industries, Inc., a New York corporation,
   Green Manufacturing, Inc., a Delaware corporation, and Citibank, N.A.
   (successor-in-interest to European American Bank), a New York banking
corporation.                                                      

4.9    Certain instruments defining the rights of holders of the long-term debt 
securities of the Registrant are omitted pursuant to Section      
    (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Registrant agrees to
       furnish supplementally copies of these instruments to the Commission upon
request.                                                          

10.1   Second Amended and Restated Employment Agreement, dated as of May 30,    
   2001, between the Registrant and Richard A. Horowitz (Incorporated by
    reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 2000).                       

19

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 EXHIBIT INDEX
 (CONTINUED)

EXHIBIT                                                                         
NO.                                                                             
-------                                                                         

10.2   Consulting Agreement, effective as of November 1, 2000, between the      
       Registrant and Sidney Horowitz (Incorporated by reference to Exhibit 10.3
     to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000).                                              

10.3   1992 Incentive Stock Option Plan of the Registrant, as amended and       
      restated as of March 13, 1997 (Incorporated by reference to Exhibit 10.3
  to the Registrant's Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1998).                                         

10.4   Executive Incentive Bonus Plan of the Registrant (Incorporated by        
      reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 2001).                     

10.5   2002 Stock Incentive Plan of the Registrant.                             

20

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	7/26/02	14
Filed on:	5/14/02
	5/13/02	1	19
	5/3/02	12	21	8-K
For Period End:	3/31/02	1	18
	1/1/02	6
	12/31/01	10	22	10-K405
	12/15/01	16
	7/1/01	16
	6/30/01	16		10-Q
	6/25/01	21
	5/30/01	21		DEF 14A
	3/31/01	2	15	10-Q
	11/1/00	22
	9/30/00	22		10-Q
	7/26/00	21
	6/30/00	21		10-Q
	3/31/00	21		10-Q
	12/31/99	20		10-K405
	7/28/99	21
	6/30/99	21		10-Q
	3/31/99	20		10-K, 10-Q
	12/31/98	20	22	10-K, 10-K/A
	9/16/98	20		8-K, 8-K/A
	7/23/98	20
	4/11/97	20		8-A12B/A, 8-K
	3/13/97	22		4
	8/24/94	20
	8/23/94	20
				List all Filings

3 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 3/29/23  P&F Industries Inc.               10-K       12/31/22   75:8.1M                                   Toppan Merrill/FA2
 3/30/22  P&F Industries Inc.               10-K       12/31/21   70:7.8M                                   Toppan Merrill/FA2
 3/26/21  P&F Industries Inc.               10-K       12/31/20   71:7.3M                                   Toppan Merrill/FA

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Filing Submission 0000912057-02-020111 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

P&F Industries Inc – ‘10-Q’ for 3/31/02

On: Tuesday, 5/14/02 · For: 3/31/02 · Accession #: 912057-2-20111 · File #: 1-05332

Quarterly Report — Form 10-QFiling Table of Contents

10-Q — Quarterly ReportDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

3 Subsequent Filings that Reference this Filing

Quarterly Report — Form 10-Q
Filing Table of Contents

10-Q — Quarterly Report
Document Table of Contents