P & F Industries Inc. (PFIN, Financial) filed Annual Report for the period ended 2011-12-31.
P&f Industries has a market cap of $16.1 million; its shares were traded at around $3.97 with and P/S ratio of 0.3.
During 2011 Florida Pneumatic continued to expand its presence in the higher gross margin, industrial/catalog sector. As a result, as indicated in the table above, it was able to increase revenue by 5.4 percentage points, or approximately $1,513,000, when comparing 2011 and 2010. We intend to continue to expand our marketing efforts in the industrial/catalog market. In addition, revenue from its Berkley, air filters and OEM lines, in the aggregate, increased 1.0 percentage point, or approximately $311,000. Florida Pneumatic also increased revenue at its automotive line by 1.8 percentage points, or approximately $457,000. However, revenue from its major retail customer declined 8.2 percentage points, or approximately $1,294,000, when comparing 2011 to 2010. This decline was due primarily to a reduction in 2011 of shipments of specialty and promotional items compared to the levels shipped in 2010. We were able to partially mitigate the revenue shortfall through increased sales of basic items and accessories.
SG&A for 2011 was $17,491,000 compared to $16,016,000 in 2010, an increase of $1,475,000, or 9.2%. As a percentage of revenue, SG&A increased 0.5 percentage points to 32.1% in 2011 compared to 31.6% in 2010. A significant component of the increase is compensation, which includes wages, performance-based bonus incentives, associated payroll taxes and employee benefits. Compensation increased $1,306,000 when comparing 2011 to 2010, due primarily to the reinstatement in January 2011 of wage and benefit reductions that were put in effect in April 2009, as well as performance-based bonus incentives. Primarily the result of improved revenue, our variable expenses, which includes commissions, freight out, travel and entertainment, advertising and warranty costs increased an aggregate amount of $360,000. Additionally, non-cash, stock based compensation charges were $98,000 higher in 2011 than 2010. We encountered increases in depreciation and amortization of $40,000. The above increases were partially offset by decreases in legal and other professional fees of $430,000, which were incurred in 2010, primarily in connection with resolving conflicts with our former banks, and not incurred in 2011.
P&F, along with Florida Pneumatic, Hy-Tech and Nationwide, as borrowers, entered into a Credit Agreement (“Credit Agreement”) with Capital One Leverage Finance Corporation, as agent (“COLF”). The Credit Agreement, entered into in October 2010, has a three-year term, with maximum borrowings of $22,000,000 at that time. The Credit Agreement provides for a Revolving Credit Facility (“Revolver”) with a maximum borrowing of $15,910,000. At December 31, 2011 and 2010, the balances owing on the Revolver were $5,648,000 and $9,996,000, respectively. Direct borrowings under the Revolver are secured by our accounts receivable, mortgages on our real property located in Cranberry, PA, Jupiter, FL and Tampa, FL (“Real Property”), inventory and equipment, and are cross-guaranteed by certain of our subsidiaries (the “Subsidiary Guarantors”). Revolver borrowings bear interest at LIBOR (London InterBank Offered Rate) or the Base Rate, as defined in the Credit Agreement, plus the currently applicable margin rates. Beginning April 1, 2011, the loan margins applicable to borrowings on the Revolver are determined based upon the computation of total debt divided by earnings before interest, taxes, depreciation and amortization (“EBITDA”).
We have one customer in the Tools segment that accounted for approximately 24.0% of consolidated revenue for the year ended December 31, 2011 and 44.6% of consolidated accounts receivable as of December 31, 2011. The products we sell to this customer are part of a major brand and we believe the brand has extreme value in today’s marketplace. Generally, our revenue from retail customers increases to peak levels during the holiday season shipping period, which is typically, during the fourth calendar quarter. As a result our accounts receivable balance from this customer at December 31, 2011 was near peak level. At other times during the year this customer’s accounts receivable balance generally is approximately 20% to 22% of consolidated accounts receivable. During the first two months of 2012 this customer reduced its December 31, 2011 accounts receivable balance of $2,816,000 by approximately $875,000. To date, this customer continues, with minor exceptions, to be current in its payments.
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P&f Industries has a market cap of $16.1 million; its shares were traded at around $3.97 with and P/S ratio of 0.3.
Highlight of Business Operations:
The Tools segment has one customer that accounted for approximately 24.0% and 28.4%, respectively, of consolidated net revenue for the years ended December 31, 2011 and 2010, and 44.6% and 43.1%, respectively, of consolidated accounts receivable as of December 31, 2011 and 2010. See Management’s Discussion and Analysis – Liquidity and Capital Resources for further discussion pertaining to this customer. There are no such significant customers in the Hardware segment.During 2011 Florida Pneumatic continued to expand its presence in the higher gross margin, industrial/catalog sector. As a result, as indicated in the table above, it was able to increase revenue by 5.4 percentage points, or approximately $1,513,000, when comparing 2011 and 2010. We intend to continue to expand our marketing efforts in the industrial/catalog market. In addition, revenue from its Berkley, air filters and OEM lines, in the aggregate, increased 1.0 percentage point, or approximately $311,000. Florida Pneumatic also increased revenue at its automotive line by 1.8 percentage points, or approximately $457,000. However, revenue from its major retail customer declined 8.2 percentage points, or approximately $1,294,000, when comparing 2011 to 2010. This decline was due primarily to a reduction in 2011 of shipments of specialty and promotional items compared to the levels shipped in 2010. We were able to partially mitigate the revenue shortfall through increased sales of basic items and accessories.
SG&A for 2011 was $17,491,000 compared to $16,016,000 in 2010, an increase of $1,475,000, or 9.2%. As a percentage of revenue, SG&A increased 0.5 percentage points to 32.1% in 2011 compared to 31.6% in 2010. A significant component of the increase is compensation, which includes wages, performance-based bonus incentives, associated payroll taxes and employee benefits. Compensation increased $1,306,000 when comparing 2011 to 2010, due primarily to the reinstatement in January 2011 of wage and benefit reductions that were put in effect in April 2009, as well as performance-based bonus incentives. Primarily the result of improved revenue, our variable expenses, which includes commissions, freight out, travel and entertainment, advertising and warranty costs increased an aggregate amount of $360,000. Additionally, non-cash, stock based compensation charges were $98,000 higher in 2011 than 2010. We encountered increases in depreciation and amortization of $40,000. The above increases were partially offset by decreases in legal and other professional fees of $430,000, which were incurred in 2010, primarily in connection with resolving conflicts with our former banks, and not incurred in 2011.
P&F, along with Florida Pneumatic, Hy-Tech and Nationwide, as borrowers, entered into a Credit Agreement (“Credit Agreement”) with Capital One Leverage Finance Corporation, as agent (“COLF”). The Credit Agreement, entered into in October 2010, has a three-year term, with maximum borrowings of $22,000,000 at that time. The Credit Agreement provides for a Revolving Credit Facility (“Revolver”) with a maximum borrowing of $15,910,000. At December 31, 2011 and 2010, the balances owing on the Revolver were $5,648,000 and $9,996,000, respectively. Direct borrowings under the Revolver are secured by our accounts receivable, mortgages on our real property located in Cranberry, PA, Jupiter, FL and Tampa, FL (“Real Property”), inventory and equipment, and are cross-guaranteed by certain of our subsidiaries (the “Subsidiary Guarantors”). Revolver borrowings bear interest at LIBOR (London InterBank Offered Rate) or the Base Rate, as defined in the Credit Agreement, plus the currently applicable margin rates. Beginning April 1, 2011, the loan margins applicable to borrowings on the Revolver are determined based upon the computation of total debt divided by earnings before interest, taxes, depreciation and amortization (“EBITDA”).
We have one customer in the Tools segment that accounted for approximately 24.0% of consolidated revenue for the year ended December 31, 2011 and 44.6% of consolidated accounts receivable as of December 31, 2011. The products we sell to this customer are part of a major brand and we believe the brand has extreme value in today’s marketplace. Generally, our revenue from retail customers increases to peak levels during the holiday season shipping period, which is typically, during the fourth calendar quarter. As a result our accounts receivable balance from this customer at December 31, 2011 was near peak level. At other times during the year this customer’s accounts receivable balance generally is approximately 20% to 22% of consolidated accounts receivable. During the first two months of 2012 this customer reduced its December 31, 2011 accounts receivable balance of $2,816,000 by approximately $875,000. To date, this customer continues, with minor exceptions, to be current in its payments.
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