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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 JUNE 30, 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 August 12, 2002, there were 3,516,922 shares of the registrant's
Class A Common Stock outstanding.
P & F INDUSTRIES, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2002
TABLE OF CONTENTS
PAGE
PART I ----
- ------
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 2002 and December 31, 2001 1 - 2
Consolidated Statements of Operations
for the six months ended June 30, 2002 and 2001 3 - 4
Consolidated Statement of Shareholders' Equity
for the six months ended June 30, 2002 and 2001 5
Consolidated Statements of Cash Flows for the
six months ended June 30, 2002 and 2001 6 - 7
Notes to Consolidated Financial Statements 8 - 19
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 20 - 24
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 24
PART II
- -------
Item 1. Legal Proceedings 25
Item 2. Changes in Securities and Use of proceeds 25
Item 3. Defaults Upon Senior Securities 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
SIGNATURES 27
EXHIBIT INDEX 28 - 31
i
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
=======================================
JUNE 30, DECEMBER 31,
2002 2001
------------ ------------
ASSETS
------
CURRENT:
Cash $ 496,578 $ 507,833
Accounts receivable, less allowance
for possible losses of $435,676
in 2002 and $404,557 in 2001 10,604,526 9,729,605
Inventories 20,284,060 17,223,225
Deferred income taxes 580,000 580,000
Prepaid expenses and other 921,685 723,538
------------ ------------
TOTAL CURRENT ASSETS 32,886,849 28,764,201
------------ ------------
PROPERTY AND EQUIPMENT:
Land 1,582,938 1,182,938
Buildings and improvements 8,681,341 6,291,225
Machinery and equipment 14,161,130 12,728,582
------------ ------------
24,425,409 20,202,745
Less accumulated depreciation
and amortization 10,652,181 9,901,650
------------ ------------
NET PROPERTY AND EQUIPMENT 13,773,228 10,301,095
------------ ------------
DEFERRED INCOME TAXES 1,513,000 --
GOODWILL, net of accumulated
amortization of $1,419,274 8,424,835 7,301,611
OTHER ASSETS, net of accumulated
amortization of $88,667 in 2002 2,667,049 102,615
------------ ------------
TOTAL ASSETS $ 59,264,961 $ 46,469,522
============ ============
1
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(CONTINUED)
=======================================
JUNE 30, DECEMBER 31,
2002 2001
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term borrowings $ 2,500,000 $ 2,000,000
Accounts payable 3,650,038 1,981,368
Accruals:
Compensation 1,221,950 1,512,141
Other 2,663,864 1,947,143
Deferred income taxes 256,700 --
Current maturities of long-term debt 584,173 313,075
------------ ------------
TOTAL CURRENT LIABILITIES 10,876,725 7,753,727
LONG-TERM DEBT, less current maturities 15,226,143 3,548,945
DEFERRED INCOME TAXES 761,000 939,000
------------ ------------
26,863,868 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 21,647,326 23,373,283
Treasury stock, at cost
(173,445 shares and 157,445 shares) (1,387,965) (1,287,165)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 32,401,093 34,227,850
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 59,264,961 $ 46,469,522
============ ============
2
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
=======================================
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
REVENUES:
Net sales $ 18,398,541 $ 15,952,173 $ 35,436,296 $ 33,250,678
Other 267,855 294,003 326,819 439,262
------------ ------------ ------------ ------------
18,666,396 16,246,176 35,763,115 33,689,940
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales 12,520,520 11,109,972 24,524,742 23,364,765
Selling, general and administrative 4,424,727 4,224,741 8,513,790 8,439,661
Interest - net 162,650 235,894 264,422 505,966
------------ ------------ ------------ ------------
17,107,897 15,570,607 33,302,954 32,310,392
------------ ------------ ------------ ------------
INCOME BEFORE TAXES ON INCOME AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 1,558,499 675,569 2,460,161 1,379,548
TAXES ON INCOME 599,000 259,000 947,000 532,000
------------ ------------ ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE $ 959,499 $ 416,569 $ 1,513,161 $ 847,548
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR GOODWILL,
NET OF TAXES OF $1,668,000 (3,239,118) -- (3,239,118) --
------------ ------------ ------------ ------------
NET INCOME (LOSS) ($ 2,279,619) $ 416,569 ($ 1,725,957) $ 847,548
============ ============ ============ ============
3
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
=======================================
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2002 2001 2002 2001
Weighted average common
shares outstanding:
Basic 3,505,272 3,555,572 3,507,924 3,565,530
Diluted 3,582,421 3,633,632 3,584,476 3,641,383
Earnings (loss) per share of common stock:
Basic:
Income before cumulative
effect of change in
accounting principle $ .27 $ .12 $ .43 $ .24
Cumulative effect of
change in accounting
principle, net of taxes (.92) -- (.92) --
------ ----- ------ ------
Net income (loss) ($ .65) $ .12 ($ .49) $ .24
====== ===== ====== ======
Diluted:
Income before cumulative
effect of change in
accounting principle $ .27 $ .11 $ .42 $ .23
Cumulative effect of
change in accounting
principle, net of taxes (.90) -- (.90) --
------ ----- ------ ------
Net income (loss) ($ .64) $ .11 ($ .48) $ .23
====== ===== ====== ======
4
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
==============================================
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 (loss) for
the six months ended
June 30, 2002 -- -- (1,725,957) --
Purchase of Class A
Common Stock -- -- -- (100,800)
----------- ----------- ------------ -----------
Balance,
June 30, 2002 $ 3,677,593 $ 8,464,139 $ 21,647,326 ($1,387,965)
=========== =========== ============ ===========
5
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
=======================================
SIX MONTHS ENDED
JUNE 30,
------------------
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 1,725,957) $ 847,548
------------ ------------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Cumulative effect of change in
accounting for goodwill 3,239,118 --
Depreciation 750,531 722,513
Amortization 97,256 170,807
Provision for losses on
accounts receivable - net (8,881) (7,493)
Deferred income taxes (23,000) --
Decrease (increase) - net of
acquisition of Nationwide:
Accounts receivable 266,687 1,418,573
Inventories (185,331) 1,169,788
Prepaid expenses and other (196,041) (310,608)
Other assets -- (17,141)
Increase (decrease) - net of
acquisition of Nationwide:
Accounts payable 964,488 (58,959)
Accruals and other (142,946) (982,333)
------------ ------------
Total adjustments 4,761,881 2,105,147
------------ ------------
Net cash provided by
operating activities 3,035,924 2,952,695
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,362,664) (507,467)
Payments for acquisition
of Nationwide Industries, Inc.
- net of $2,920 cash acquired (10,448,794) --
Payments for
acquisition-related expenses (1,148,217) --
------------ ------------
Net cash used in
investing activities (14,959,675) (507,467)
------------ ------------
6
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
=======================================
SIX MONTHS ENDED
JUNE 30,
------------------
2002 2001
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 1,500,000 2,500,000
Repayments of short-term borrowings (1,435,000) (4,500,000)
Proceeds from mortgage 2,024,000 --
Proceeds from term loan 11,500,000 --
Principal payments on long-term debt (1,575,704) (69,946)
Purchase of Class A Common Stock (100,800) (357,045)
------------ ------------
Net cash provided by (used in)
financing activities 11,912,496 (2,426,991)
------------ ------------
NET INCREASE (DECREASE) IN CASH (11,255) 18,237
CASH AT BEGINNING OF PERIOD 507,833 388,422
------------ ------------
CASH AT END OF PERIOD $ 496,578 $ 406,659
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes $ 480,000 $ 638,000
============ ============
Interest $ 228,461 $ 566,976
============ ============
7
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 four wholly-owned subsidiaries; Florida Pneumatic Manufacturing Corporation
("Florida Pneumatic"), Green Manufacturing, Inc. ("Green"), Embassy Industries,
Inc. ("Embassy") and Countrywide Hardware, Inc. ("Countrywide"). 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"). Countrywide, through its
subsidiary, Nationwide Industries, Inc. ("Nationwide"), imports and manufactures
door, window and fencing hardware for OEM's throughout the United States. Note 5
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.
8
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
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.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is based only on the average number of
shares of the Company's Class A Common Stock common stock outstanding for the
period. Diluted earnings (loss) per share reflects the effect of shares of
common stock issuable upon the exercise of options or warrants.
Diluted earnings (loss) per share is computed using the treasury stock
method. Under this method, the aggregate number of shares of common stock
outstanding reflects the assumed use of proceeds from the hypothetical exercise
of any outstanding options or warrants to purchase shares of the Company's Class
A Common Stock, unless the effect on earnings (loss) is antidilutive. The
average market value for the period is used as the assumed purchase price.
NOTE 2 - INVENTORIES
Major classes of inventory were as follows:
JUNE 30, DECEMBER 31,
2002 2001
------------ ------------
Raw materials and supplies $ 3,771,364 $ 3,122,061
Work in process 788,582 740,036
Finished goods 15,724,114 13,361,128
------------ ------------
$ 20,284,060 $ 17,223,225
============ ============
9
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 3 - LONG-TERM DEBT
Long-term debt consists of:
JUNE 30, DECEMBER 31,
2002 2001
------------ -----------
Term loan - payments of interest only are due monthly through May $ 10,000,000 $ --
2003. Principal amount outstanding at June 1, 2003 to be paid in
equal quarterly installments (plus interest at LIBOR plus 175
basis points) from June 2003 through March 2009
Mortgage loan - $11,244 payable monthly (plus interest at LIBOR
plus 155 basis points) through May 2009 (a) 2,024,000 --
Mortgage loan - $17,438 payable monthly (plus interest at 8.16%)
through May 2006, when a final payment of approximately $1,435,000
is due (a) 1,731,831 1,765,004
Mortgage loan - $16,370 payable monthly (plus interest at 7.09%)
through February 2014 (a) 1,549,485 1,592,016
Economic Development Revenue Bond - payable yearly in various
principal amounts (plus interest at variable rates) through
November 2004 (b) 505,000 505,000
------------ -----------
15,810,316 3,862,020
Less current maturities 584,173 313,075
------------ -----------
$ 15,226,143 $ 3,548,945
============ ===========
- -------------------------
(a) These mortgages payable are collateralized and relate to the
land and buildings of the Company's subsidiaries.
(b) This bond was assumed by the Company as part of the
acquisition of Green and is secured by a standby letter of
credit.
The term loan facility, which is part of the Company's credit agreement
with a bank, provides a commitment of $15,000,000 to finance acquisitions
subject to the lending bank's approval. As noted below, $11,500,000 of this
facility was used to finance the acquisition of Nationwide, and there was
$10,000,000 still outstanding against this facility at June 30, 2002. There was
also a standby letter of credit totaling approximately $510,000 outstanding
against this facility at June 30, 2002. This standby letter of credit is used to
secure the Economic Development Revenue Bond assumed as part of the acquisition
of Green.
10
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 4 - CAPITAL STOCK TRANSACTIONS
During the six months ended June 30, 2002, the Company purchased 16,000
shares of its Class A Common Stock, at a cost of $100,800.
On July 12, 2002, the Company issued to various employees options to
purchase an aggregate of 221,100 shares of the Company's Class A Common Stock.
On July 12, 2002, the Company issued 12,774 unrestricted shares of its
Class A Common Stock to an officer of the Company.
NOTE 5 - SEGMENTS OF BUSINESS
The following tables present financial information by segment for the
periods ended June 30, 2002 and 2001. Segment profit (loss) excludes general
corporate expenses, interest expense and income taxes. There were no
intersegment revenues.
PNEUMATIC
TOOLS AND
SIX MONTHS ENDED CON- RELATED HYDRAULIC HEATING
JUNE 30, 2002 SOLIDATED EQUIPMENT CYLINDERS PRODUCTS HARDWARE
- -------------------- --------- --------- --------- -------- --------
(In thousands)
Revenues from
external customers $ 35,763 $ 19,701 $ 6,508 $ 4,267 $ 5,287
========= ========= ========= ========= =======
Segment profit (loss) $ 4,334 $ 3,894 $ (272) $ 124 $ 588
========= ========= ========= ========= =======
Cumulative effect of
change in accounting
accounting
principle ($ 3,239) $ -- ($ 3,239) $ -- $ --
========== ========= ========== ========= =======
11
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 5 - SEGMENTS OF BUSINESS (CONTINUED)
PNEUMATIC
TOOLS AND
SIX MONTHS ENDED CON- RELATED HYDRAULIC HEATING
JUNE 30, 2001 SOLIDATED EQUIPMENT CYLINDERS PRODUCTS HARDWARE
- -------------------- --------- --------- --------- -------- --------
(In thousands)
Revenues from
external customers $ 33,690 $ 19,647 $ 7,607 $ 4,125 $ 2,311
========= ========= ========= ========= =======
Segment profit (loss) $ 3,382 $ 3,266 $ (121) $ 174 $ 63
========= ========= ========= ========= =======
Cumulative effect
of change in
accounting
principle $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= =======
PNEUMATIC
TOOLS AND
THREE MONTHS ENDED CON- RELATED HYDRAULIC HEATING
JUNE 30, 2002 SOLIDATED EQUIPMENT CYLINDERS PRODUCTS HARDWARE
- -------------------- --------- --------- --------- -------- --------
(In thousands)
Revenues from
external customers $ 18,666 $ 9,692 $ 3,165 $ 1,986 $ 3,823
========= ========= ========= ========= =======
Segment profit (loss) $ 2,563 $ 2,157 $ (178) $ 28 $ 556
========= ========= ========= ========= =======
Cumulative effect
of change in
accounting
principle ($ 3,239) $ -- ($ 3,239) $ -- $ --
========= ========= ========= ========= =======
12
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 5 - SEGMENTS OF BUSINESS (CONTINUED)
PNEUMATIC
TOOLS AND
THREE MONTHS ENDED CON- RELATED HYDRAULIC HEATING
JUNE 30, 2001 SOLIDATED EQUIPMENT CYLINDERS PRODUCTS HARDWARE
- -------------------- --------- --------- --------- -------- --------
(In thousands)
Revenues from
external customers $ 16,246 $ 9,476 $ 3,446 $ 2,154 $ 1,170
========= ========= ========= ========= =======
Segment profit (loss) $ 1,686 $ 1,713 $ (168) $ 107 $ 34
========= ========= ========= ========= =======
Cumulative effect
of change in
accounting
principle $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= =======
The reconciliation of combined operating profits for reportable
segments to consolidated income before income taxes and cumulative effect of
change in accounting principle is as follows:
SIX MONTHS ENDED
JUNE 30,
-----------------------
2002 2001
---------- ----------
Total profit for reportable segments $4,333,768 $3,381,648
General corporate expenses (1,609,185) (1,496,134)
Interest expense - net (264,422) (505,966)
---------- ----------
Income before taxes and
cumulative effect of change
in accounting principle $2,460,161 $1,379,548
========== ==========
13
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 5 - SEGMENTS OF BUSINESS (CONTINUED)
THREE MONTHS ENDED
JUNE 30,
-----------------------
2002 2001
---------- ----------
Total profit for reportable segments $2,563,635 $1,686,092
General corporate expenses (842,486) (774,629)
Interest expense - net (162,650) (235,894)
---------- ----------
Income before taxes and
cumulative effect of change
in accounting principle $1,558,499 $ 675,569
========== ==========
NOTE 6 - EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted
earnings (loss) per common share:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Numerator:
Numerator for basic and diluted
earnings (loss) per common
share - income available to
common shareholders ($2,279,619) $ 416,569 ($1,725,957) $ 847,548
=========== =========== =========== ===========
Denominator:
Denominator for basic
earnings (loss) per common
share - weighted average
common shares outstanding 3,505,272 3,555,572 3,507,924 3,565,530
Effect of dilutive securities:
Common stock options 77,149 78,060 76,552 75,853
----------- ----------- ----------- -----------
Denominator for diluted
earnings per common
share - adjusted weighted
average common shares and
assumed conversions 3,582,421 3,633,632 3,584,476 3,641,383
=========== =========== =========== ===========
14
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 6 - EARNINGS (LOSS) PER SHARE (CONTINUED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
2002 2001 2002 2001
-------- --------- -------- --------
Earnings
(loss) per common share:
Basic:
Income before cumulative
effect of change in
accounting principle $ .27 $ .12 $ .43 $ .24
Cumulative effect of change
in accounting principle (.92) -- (.92) --
----- ----- ----- -----
Net income (loss) ($.65) $ .12 ($.49) $ .24
===== ===== ===== =====
Diluted:
Income before cumulative
effect of change in
accounting principle $ .27 $ .11 $ .42 $ .23
Cumulative effect of change
in accounting principle (.90) -- (.90) --
----- ----- ----- -----
Net income (loss) ($.64) $ .11 ($.48) $ .23
===== ===== ===== =====
NOTE 7 - ACQUISITION
On May 3, 2002, Countrywide acquired all of the stock of Nationwide for
approximately $10,452,000, plus acquisition costs and working capital
adjustments of approximately $750,000. Nationwide is engaged in the business of
importing and manufacturing door, window and fencing hardware. This acquisition
was financed through the term loan facility available under the Company's credit
agreement. In addition to the cash paid at the closing, Nationwide's previous
owner is entitled to contingent payments of 30% of the excess of Nationwide's
earnings before interest and taxes over $2,500,000 in each twelve-month period
subsequent to the acquisition, for a period of five years. These contingent
payments will be treated as additions to goodwill.
15
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 7 - ACQUISITION (CONTINUED)
In connection with this acquisition, Countrywide also entered into a
contract to purchase, for $2,500,000, the real property and the improvements
thereon in which Nationwide conducts its business. This transaction was
completed on May 24, 2002.
The consolidated financial statements presented in this report include
the combined results of operations of Countrywide and Nationwide for the period
from May 4, 2002 through June 30, 2002.
The following table summarizes the unaudited estimated fair value of
the assets acquired and the liabilities assumed in connection with the
acquisition of Nationwide. The Company obtained third party valuations for the
property, plant and equipment and intangible assets (i.e., employment agreement
and customer list).
(AMOUNTS IN THOUSANDS)
Current assets $ 4,015
Property, plant and equipment 860
Employment agreement 760
Customer list 1,900
Goodwill 5,632
-----
Total assets acquired 13,167
------
Current liabilities (1,965)
-----
Total liabilities assumed (1,965)
-----
Net assets acquired $11,202
=======
The employment agreement and the customer list have each been assigned
a useful life of five years. The amortization of these intangible assets is not
deductible for tax purposes.
Amortization expense for intangible assets subject to amortization was
approximately $89,000 for the period ended June 30, 2002. Amortization expense
for each of the years in the five-year period ending December 31, 2006 is
estimated to be approximately $355,000 in 2002, $532,000 in 2003 through 2006,
and approximately $177,000 in 2007.
16
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 7 - ACQUISITION (CONTINUED)
The following table summarizes, on an unaudited pro forma basis, the
combined results of operations of the Company and Countrywide (combined with
Nationwide), as though the acquisition had been made January 1, 2001. The pro
forma amounts give effect to appropriate adjustments for depreciation of fixed
assets, amortization of intangible assets, interest expense and income taxes.
The pro forma amounts presented are not necessarily indicative of
future operating results.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net sales $19,698,000 $18,829,000 $39,277,000 $38,064,000
=========== =========== =========== ===========
Income before cumulative
effect of change in
accounting principle $ 993,000 $ 567,000 $ 1,745,000 $ 1,031,000
=========== =========== =========== ===========
Earnings per share
of common stock
Basic $.28 $.16 $.50 $.29
==== ==== ==== ====
Diluted $.28 $.16 $.49 $.28
==== ==== ==== ====
17
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS
In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS" 142), which changed the accounting for goodwill from
an amortization method to an impairment-only approach. Upon the adoption of SFAS
142 on January 1, 2002, the Company had ceased amortizing its goodwill. As
prescribed under SFAS 142, the Company had its goodwill tested for impairment
during the second fiscal quarter of 2002.
Due to extremely weak market conditions in the hydraulic cylinder
business, the Company has revised its earnings forecasts for Green. As a result,
the fair market value of Green's goodwill, as determined by an independent third
party appraiser, was lower than the carrying value as of December 31, 2001.
Accordingly, the Company has recorded an after-tax impairment charge of
approximately $3.2 million, which is reported as a cumulative effect of change
in accounting principle resulting from the adoption of SFAS 142.
The impairment tests performed require that the Company determine the
fair market value of its reporting units for comparison to the carrying value of
such net assets to assess whether an impairment exists. The methodologies used
to estimate fair market value involve the use of estimates and assumptions,
including projected revenues, earnings and cash flows.
The changes in the carrying amounts of goodwill for the six months
ended June 30, 2002 are as follows:
PNEUMATIC
TOOLS AND
CON- RELATED HYDRAULIC HEATING
(IN THOUSANDS) SOLIDATED EQUIPMENT CYLINDERS PRODUCTS HARDWARE
--------- --------- --------- -------- --------
Balance, January 1, 2002 $ 7,302 $ 2,327 $ 4,907 $ -- $ 68
Goodwill acquired during
the six months ended
June 30, 2002 6,030 -- 398 -- 5,632
Impairment losses (4,907) -- (4,907) -- --
--------- --------- --------- -------- --------
Balance, June 30, 2002 $ 8,425 $ 2,327 $ 398 $ -- $ 5,700
=== ==== ========= ========= ========= ====== ========
18
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================
NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
The amortization expense and net income (loss) (including any tax
effects) of the Company for the periods ended June 30, 2002 and June 30, 2001,
respectively, are as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
2002 2001 2002 2001
------------ ------------ ------------ -----------
Reported net income (loss) ($ 2,279,619) $ 416,569 ($ 1,725,957) $ 847,548
Goodwill amortization -- 81,109 -- 162,218
Tax effect -- (31,000) -- (62,000)
------------ ------------ ------------ -----------
Adjusted net income (loss) ($ 2,279,619) $ 466,678 ($ 1,725,957) $ 947,766
============ ============ ============ ============
Earnings per share of common stock:
BASIC:
Reported net income (loss) ($ .65) $ .12 ($ .49) $ .24
Goodwill amortization -- .02 -- .05
Tax effect -- (.01) -- (.02)
----- ----- ----- -----
Adjusted net income (loss) ($ .65) $ .13 ($ .49) $ .27
===== ===== ===== =====
DILUTED:
Reported net income (loss) ($ .64) $ .11 ($ .48) $ .23
Goodwill amortization -- .03 -- .04
Tax effect -- (.01) -- (.01)
----- ----- ----- -----
Adjusted net income (loss) ($ .64) $ .13 ($ .48) $ .26
===== ===== ===== =====
19
P & F INDUSTRIES, INC. AND SUBSIDIARIES
=======================================
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF QUARTERS ENDED JUNE 30, 2002 AND JUNE 30, 2001
Consolidated revenues increased 14.9%, from $16,246,176 to
$18,666,396. Revenues from pneumatic tools and related equipment increased
2.3%, from $9,476,009 to $9,691,652, due primarily to strong sales of a June
promotion at a major customer and the launch of two new product lines. This
was partially offset by the sale of a product line in the second quarter of
2001 that did not repeat in 2002. Selling prices of pneumatic tools and
related equipment were virtually unchanged from the second quarter of 2001
with the exception of prices to one significant customer which were reduced
by an average of 16%. Revenues from hardware increased 226.7%, from
$1,170,299 to $3,822,901, due primarily to the acquisition of Nationwide on
May 3, 2002. Revenues from hydraulic cylinders and other equipment decreased
8.1%, from $3,445,946 to $3,165,181, due primarily to the phasing out of a
major customer in the first quarter. Selling prices of hydraulic cylinders
were unchanged from the second quarter of 2001. Revenues from heating
products decreased 7.8%, from $2,153,922 to $1,986,662, due primarily to
weakness in the commercial and radiant businesses. Selling prices of heating
products were unchanged from the second quarter of 2001.
Consolidated gross profit, as a percentage of revenues, increased
from 31.6% to 32.9%. Gross profit from pneumatic tools and related equipment
increased from 40.1% to 41.5%, due primarily to the weakening of the Japanese
yen and productivity improvements that were offset somewhat by a price
reduction to a major customer in the second half of 2001. Gross profit from
hardware increased from 27.2% to 32.6%, due primarily to the addition of
Nationwide's higher margin OEM business now included in the product mix.
Gross profit from hydraulic cylinders and other equipment increased from 7.6%
to 9.0%, due primarily to a change in product mix. Gross profit from heating
products decreased from 34.9% to 29.9%, due primarily to the inability to
reduce fixed expenses in line with the volume decreases, as well as to a
change in product mix.
Consolidated selling, general and administrative expenses increased
4.7%, from $4,224,741 to $4,424,727, due primarily to the addition of these
expenses at Nationwide, partially offset by major cost cutting efforts across
all of the facilities. Interest expense decreased 31.0%, from $235,894 to
$162,650, as a result of a decrease in the Company's average interest rate on
its borrowings.
The effective tax rates for the quarters ended June 30, 2002 and 2001
were 38.4% and 38.3%, respectively.
20
P & F INDUSTRIES, INC. AND SUBSIDIARIES
=======================================
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2002 AND JUNE 30, 2001
Consolidated revenues increased 6.2%, from $33,689,940 to
$35,763,115. Revenues from pneumatic tools and related equipment increased
..3%, from $19,646,442 to $19,700,562. This marginal increase was the result
of several factors. Strong sales of a June promotion at a major customer and
the launch of two new product lines was almost entirely offset by the sale of
a product line in the second quarter of 2001 that did not repeat in 2002 and
weakness across all customers with the exception of the largest two. Selling
prices of pneumatic tools and related equipment were virtually unchanged from
the second quarter of 2001 with the exception of prices to one significant
customer, which were reduced by an average of 16%. Revenues from hardware
increased 128.7%, from $2,311,715 to $5,287,180, due primarily to the
acquisition of Nationwide. Selling prices of hardware products were unchanged
from the six months ended June 30, 2001. Revenues from hydraulic cylinders
and other equipment decreased 14.4%, from $7,606,788 to $6,508,356, due
primarily to the phasing out of a major customer in the first quarter.
Selling prices of hydraulic cylinders and other equipment were virtually
unchanged from the six months ended June 30, 2001. Revenues from heating
products increased 3.4%, from $4,124,995 to $4,267,017, as increases in sales
of residential products were partially offset by decreases in sales of
commercial and radiant products. Selling prices of heating products were
unchanged from the six months ended June 30, 2001.
Consolidated gross profit, as a percentage of revenues, increased from
30.6% to 31.4%. Gross profit from pneumatic tools and related equipment
increased from 38.1% to 39.1%, due primarily to the weakening of the Japanese
yen and productivity improvements that were partially offset by a price
reduction to a major customer in the second half of 2001. Gross profit from
hardware increased from 26.9% to 30.5%, due primarily to the addition of
Nationwide's higher margin OEM business now included in the product mix. Gross
profit from hydraulic cylinders and other equipment decreased from 10.4% to
9.1%, due primarily to the decrease in revenues, which reduced coverage of fixed
expenses. Gross profit from heating products decreased from 34.8% to 31.1%, due
primarily to a less profitable product mix and an increase in overhead expenses.
Consolidated selling, general and administrative expenses increased
..9%, from $8,439,661 to $8,513,790, due primarily to the addition of these
expenses at Nationwide, partially offset by major cost cutting efforts across
all of the facilities. Interest expense decreased 47.7%, from $505,966 to
$264,422, as a result of 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 six months ended June 30, 2002 and 2001
were 38.5% and 38.6%, respectively.
21
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):
JUNE 30, DECEMBER 31, JUNE 30,
2002 2001 2001
------------- ------------ ------------
Working Capital $ 22,010 $ 21,010 $ 19,933
Current Ratio 3.02 to 1 3.71 to 1 2.49 to 1
Shareholders' Equity $ 32,401 $ 34,228 $ 33,483
During the six months ended June 30, 2002, gross accounts receivable
decreased by approximately $267,000, with decreases of approximately $592,000,
$42,000 and $18,000 at Florida Pneumatic, Embassy and Green, respectively, being
partially offset by an increase of approximately $385,000 at Countrywide. The
decreases in accounts receivable at Florida Pneumatic and Green were due
primarily to the timing of receipts from customers. The decrease in accounts
receivable at Embassy was consistent with the decrease in revenues between the
fourth quarter of 2001 and the second quarter of 2002. The increase in accounts
receivable at Countrywide was due to increased sales volume.
During the six months ended June 30, 2002, inventories increased by
approximately $185,000, with increases of approximately $267,000, $161,000
and $102,000 at Embassy, Countrywide and Green, respectively, being partially
offset by a decrease of approximately $345,000 at Florida Pneumatic. The
increase in inventories at Embassy was the result of initial stocking of new
items at its Franklin division, as well as preparation for the busy season
for the heating business. The increase at Countrywide was primarily due to
overall growth in the business. The increase at Green was due primarily to
the receipt in June of a major shipment of materials for the agricultural
products line. The decrease in inventory at Florida Pneumatic was primarily
the result of an unexpected increase in sales of some items whose inventory
has yet to be replenished and lower purchases for domestically manufactured
products.
During the six months ended June 30, 2002, short-term borrowings
increased by $500,000, primarily to fund working capital changes and capital
expenditures. During the six months ended June 30, 2002, accounts payable
increased by approximately $964,000, with increases of approximately
$876,000, $312,000 and $49,000 at Florida Pneumatic, Green and Countrywide,
respectively, being partially offset by a decrease at Embassy of
approximately $273,000. The increase at Florida Pneumatic was due primarily
to the timing of purchases. The increase at Green was due primarily to the
buildup of agricultural product noted above and the timing of payments. The
increase at Countrywide was due primarily to the growth in business. The
decrease at Embassy was due primarily to the timing of payments.
22
P & F INDUSTRIES, INC. AND SUBSIDIARIES
=======================================
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
On August 1, 2002, the Company renewed its credit agreement, as
amended, with Citibank through July 26, 2003. This agreement provides the
Company with various credit facilities, including revolving credit loans, term
loans for acquisitions and a foreign exchange line. 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 June
30, 2002, there was $2,500,000 outstanding against the revolving credit loan
facility. There were no commitments for letters of credit at June 30, 2002.
The term loan facility provides a commitment of $15,000,000 to finance
acquisitions subject to the lending bank's approval. There was a balance
outstanding against this facility at June 30, 2002 of $10,000,000 as a result of
the acquisition of Nationwide. There was also a standby letter of credit
totalling approximately $510,000 outstanding against this facility at June 30,
2002. This standby letter of credit was used to secure the Economic Development
Revenue Bond assumed as part of the acquisition of Green.
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
June 30, 2002 was approximately $930,000.
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. As a result of both the increased borrowings resulting from
the acquisition of Nationwide and the cumulative effect of the change in
accounting principle, the Company was not in compliance with all of these
covenants at June 30, 2002 and for the six months then ended. The lending bank
has granted a waiver regarding these covenants.
Capital spending for the six months ended June 30, 2002 was
approximately $3,363,000, including $2,500,000 for the purchase of the real
property and the improvements thereon in which Nationwide conducts its business.
The total amount was provided from working capital. Capital expenditures for the
rest of 2002 are expected to total approximately $500,000, some of which may be
financed through the Company's credit facilities. Included in the expected total
for the rest of 2002 are capital expenditures relating to new products,
expansion of existing product lines and replacement of old equipment.
23
P & F INDUSTRIES, INC. AND SUBSIDIARIES
=======================================
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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 protect itself from any adverse effects
from 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."
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 mitigating 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, not for speculation. The Company does not buy or sell financial
instruments for trading purposes. Although the Company maintains these programs
to reduce the impact 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. At June 30, 2002, the
Company held open hedge forward contracts to deliver approximately $930,000 of
Japanese yen. 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 June 30, 2002 is
approximately $103,000.
24
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 $360,000 for possible liability relating to these
actions.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
At June 30, 2002 and for the period then ended, the Company was not in
compliance with all of the financial covenants contained in its credit
agreement with the lending bank. The Company has received a waiver from
the lending bank regarding these covenants.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 29, 2002, the Registrant held its Annual Meeting of
Stockholders, at which three proposals were voted upon: (i) Election of
Directors; (ii) the Approval of the 2002 Stock Incentive Plan; and
(iii) the Appointment of Auditors.
The following persons were duly elected to serve, subject to the
Company's Bylaws, as directors of the Registrant until the 2005 Annual
Meeting of Stockholders, or until election and qualification of their
successor(s):
Votes Votes Votes
in favor against abstained
--------- ------- ---------
Robert L. Dubofsky 2,898,334 404,335 0
Neil Novikoff 2,898,354 404,315 0
Marc A. Utay 2,898,354 404,315 0
The terms of office of Alan I. Goldberg, Richard A. Horowitz, Sidney
Horowitz, Arthur Hug, Jr., Dennis Kalick and Robert M. Steinberg as
directors of the Registrant continued after the Annual Meeting of
Stockholders.
The 2002 Stock Incentive Plan was approved by 1,496,953 votes in favor
and 1,267,230 votes against, with 20,463 votes abstained.
The appointment of BDO Seidman, LLP as the Company's Auditors was
ratified by 3,271,884 votes in favor and 15,502 votes against, with
15,283 votes abstained.
There were no broker non-votes pertaining to these proposals.
25
PART II - OTHER INFORMATION (CONTINUED)
- ---------------------------------------
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
A report on Form 8-K was filed by the Registrant
regarding the acquisition of the outstanding
capital stock of Nationwide Industries, Inc. The
date of the report was May 3, 2002.
26
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: August 14, 2002 (Principal Financial Officer)
27
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.
2.2 Stock Purchase Agreement, dated as of May 3, 2002, by and between Mark
C. Weldon and the Registrant (Incorporated by reference to Exhibit 2.1
of the Registrant's Current Report on Form 8-K dated May 3, 2002).
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).
28
EXHIBIT INDEX
(CONTINUED)
EXHIBIT
NO.
- ---
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).
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. (Incorporated by reference to Exhibit 4.7 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 2002).
29
EXHIBIT INDEX
(CONTINUED)
EXHIBIT
NO.
- ---
4.9 Amendment No. 6 to Credit Agreement, dated as of June 13, 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.
4.10 Amendment No. 7 to Credit Agreement, dated as of August 1, 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, Countrywide
Hardware, Inc., a Delaware corporation, and Nationwide Industries,
Inc., a Florida corporation and Citibank, N.A. (successor-in-interest
to European American Bank), a New York banking corporation.
4.11 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).
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 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).
10.4 2002 Stock Incentive Plan of the Registrant (Incorporated by reference
to Exhibit 4.7 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2002).
30
EXHIBIT INDEX
(CONTINUED)
EXHIBIT
NO.
- ---
10.5 Sale and Purchase Agreement, made as of the 1st day of May 2002,
between W. I. Commercial Properties, Inc., a Florida corporation and
Countrywide Hardware, Inc., a Delaware corporation.
99.1 Certification of Richard A. Horowitz, Chief Executive Officer of the
Registrant, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 OF the Sarbanes-Oxley Act of 2002
99.2 Certification of Joseph A. Molino, Jr., Chief Financial Officer of the
Registrant, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 OF the Sarbanes-Oxley Act of 2002
31