P&F Industries, Inc. (PFIN) on Q3 2021 Results - Earnings Call Transcript
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Operator: 00:05 Good day, and welcome to the P&F Industries, Inc. Q3 twenty twenty one Earnings Conference Call. Today's conference is being recorded. 00:14 At this time, I'd like to turn the conference over to Mr. Richard Goodman, General Counsel. Please go ahead, sir.
Richard Goodman: 00:19 Thank you, operator. Good morning, and welcome to P&F Industries third quarter twenty twenty one conference call. With us today from management are Richard Horowitz, Chairman, President and Chief Executive Officer; and Joseph Molino, Chief Operating Officer and Chief Financial Officer. 00:35 Before we get started, I'd like to remind you that any forward-looking statements discussed on today's call by our management, including those related to the company's future performance and outlook are based upon the company's historical performance and current plans, estimates and expectations, which are subject to various risks and uncertainties, including, but not limited to, risks related to the global outbreak of COVID-19 and other public health crises, exposure to fluctuations in energy prices, debt and debt service requirements, borrowing and compliance covenants under our credit facility, disruption in the global capital and credit markets, the strength of the retail economy in the United States and abroad risks associated with sourcing from overseas, importation delays, customer concentration, impairment of long-lived assets and goodwill, unforeseen inventory adjustments or changes in purchasing patterns, market acceptance of products, acquisition of businesses, regulatory and client and information technology system failures and attacks, and those other risks and uncertainties described in the reports and statements filed by the company with the Securities and Exchange Commission, including, among others, as described in our most recent annual report on Form 10-K, our quarterly reports on Form 10-Q and our other filings. 01:44 These risks could cause the company's actual results for future periods to differ materially from those expressed in any forward-looking statements made by or on behalf of the company. Forward-looking statements speak only as of the date on which they are made, and the company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. 02:06 And with that, I would now like to turn the call over to Richard Horowitz. Good morning, Richard.
Richard Horowitz: 02:11 Good morning, Rich and thank you so much and good morning, everybody. Thank you all for joining us for our third quarter twenty twenty one results. I hope you all are doing well as the country and the world are trying their very best to exit the ill effects of this COVID global pandemic. Like everybody else in most of our companies, P&F -- in P&F, we continue to battle past these harsh effects of the COVID-19 global pandemic. 02:37 The areas within our business still affected our, of course, scenarios where both current and potential customers here have yet to permit on-site meetings or presentations for the most part, there are exceptions, but for the very most part, that's where it is, in particular, it's hampering our growth at the PTG or otherwise known the gears business. 02:58 And the supply chain disruption, which we all see on the news every single day, which has caused major delays in the seat of much needed inventories, not to mention at dramatically higher prices. We all hope that this pandemic may soon be under control as our thoughts and prayers are with all those affected by COVID-19. 03:17 I would like to direct your attention today to the company's press release that was released earlier this morning, which includes the company's September thirty, twenty twenty one, balance sheet statement of operations, statements of cash flows and discussions related to the company's three and nine months fiscal twenty twenty one results of operations and how they compare to the same periods in twenty twenty. We believe this release should have answered most of your questions. 03:43 In order to make better use of everyone's time here this morning, yet be mindful of the purpose of this conference call. I would once again like to remind you all of the following procedures that have been placed for quite some time now. Firstly, we have done from several previous conference calls and has become our standard practice, we will move directly to a question-and-answer session after I have my brief speech here and not restate what is already in the morning's press release. 04:07 Secondly, please be aware, and we will only be answering questions directly related to the company's results of operations and financial condition. We must insist that you adhere to this procedure. Our management will not be entertaining any questions that go beyond the scope of this call. 04:23 And with that, we would be happy to answer any pertinent questions anybody might have. Operator, please get the questions for us. Thank you.
Operator: 04:34 Absolutely, thank you. And we'll take our first question from Andrew Shapiro with Lawndale Capital Management.
Andrew Shapiro: 05:08 Hi. Good morning. I think I'll go straight into some of the subsidiaries or the segments, if you won’t mind. Regarding aerospace, this is both Jiffy and Florida Pneumatic and also Pneumatics inside of Hy-Tech, albeit for -- it was only for a small amount this quarter in Q3. Aerospace has now improved from Q2. It continued, which was a decent sequential trend that also began in Q1. Are you seeing a ramp-up in orders that supports the sales rebound trend to continue or is there like a substantial lumpiness or a larger order that influences things?
Richard Horowitz: 06:00 Andrew, I don't want to -- I think we should be clear. We're comparing an increase this quarter to kind of dismal last year, actually.
Andrew Shapiro: 06:11 No, I'm comparing it -- Richard, you misunderstand me. When I say sequential, and it's Q3 from Q2, I'm saying, there was only a small increase from the last quarter, but it was an increase, and Q2 was an increase from Q1. That's pretty straight quarter where things are improving, and I'm trying to get a handle on it heavily troughed and are we on a, albeit slow or a ramp here on sales rebound? And are your orders that you have in hand somewhat reinforcing or reflecting that or was there some lumpiness or a larger order that's influencing things here? And the current quarter that we're in, frankly, the current quarter that we're almost done with some holidays are kicking in, is this something that we're going to have lumpiness in or do you have like orders in hand that this business -- the segment, the sector, the business has stabilized and the slow ramp-up of production, for example, from Boeing and your other aerospace customers, supports a view and belief that we've troughed and we're on a steady, albeit slow ramp. Unless there's something more exciting, that would be great to hear.
Richard Horowitz: 07:36 Right. So let me just tell you, first of all, we don't have much insight into what goes on. We talk about it, we ask them, but they don't really -- they don't want to give us that. Boeing is still nowhere to be found for the most part. We're getting orders but very, very few and for the planes is sporadic. We're getting more things from Lockheed or other customers like that. Boeing, as you know, has still the issues with the 737 with the Chinese. And I think that's what we're told in the world and all that stuff, is that if the Chinese accept the 737 MAX going forward, that would help Boeing tremendously. But for now, we're getting this little bits and pieces, which is better than it was before, but it's not really anything to get excited about. And it starts and then stops. It's like sporadic. And it's -- of course, it's a supply chain issue going forward. Joe, I don't know if you want to add any color to that comment.
Joseph Molino: 08:43 I mean, Boeing has stated publicly and Spirit, which is a big supplier, Boeing has stated publicly that the number of 737 MAX is being produced per month is certainly higher than it was. I think it was zero or four a month there throughout the pandemic, and I think earlier this year, reading the reports, we have read that something like fifteen or twenty, and I think they're now looking at Q1 of like thirty a month. So obviously, that's way better than four, but I think they were at like fifty two a month before the pandemic. And plus we also don't really even know how much inventory of our tools are sitting at Boeing. We don't really have any idea. So there could also be a delay in getting more orders until they work through what inventory they have. But having said all that, thirty planes a month is a big improvement from where we were. And hopefully, that will continue and lead to more orders eventually.
Andrew Shapiro: 09:50 Right. And their order business with you actually didn't drop off at the start of the pandemic. It actually dropped off even earlier when the 737 was grounded and they -- which was actually well before the pandemic began, and they had to scale back the production lines because their inventory of completed planes was backing up.
Richard Horowitz: 10:16 That's correct.
Andrew Shapiro: 10:19 Okay. On a previous call…
Richard Horowitz: 10:24 We stated publicly that they have a tremendous inventory of claims. I think I may not have the exact number, but it's over -- I think I believe it's over two hundred planes as they state.
Andrew Shapiro: 10:38 They have a ton of planes. They also have been shipping planes now, I think, faster than they're producing, but that inventory is still high of planes. But they're making thirty a month or they are making fifteen a month, they're arguably losing -- and using your wearing down and using your tools because your tools have a certain amount of like life standing use and they lose them. That's -- I mean, it's somewhat a replacement business, right, in terms of your products, your legacy products you provide them.
Richard Horowitz: 11:15 Right.
Andrew Shapiro: 11:16 Okay. On a previous call, you discussed you've had the full suite of all your aerospace tools, including some new ones. I don't know if it was impact wrenches or there's some specialty design tools that can serve aerospace, that you're excited about, you're ready to present to both Boeing and Airbus, once you're able to get into their facilities again. I think on the last call, you talked about you've been able to get into Boeing to meet or to pitch and talk about your existing legacy lines, but they hadn't been able to, and weren't -- no one was focusing on adapting, adopting or approving new tools, and you haven't been able to get into Airbus. What are the status of things being able to get into either the Boeing universe -- ecoverse or into the Airbus area to introduce and to pitch on these new tools.
Richard Horowitz: 12:20 Yes. Airbus is still the same situation. We had some appointments. I believe we had an appointment, but they're really not there much, and the same thing is really important. Admittedly, there are some people are Boeing now, more than there were before, but still very slow go, very, very, very slow go. Now we're hearing early January, I believe, they announced in the paper last week or the week before, that they're looking to -- thinking about them, but now the mandate with the vaccine, maybe slowing down. I don't know but we -- just in general, I would say we could pick a part of Airbus, Boeing or for that matter any other company but for the very, very most part, we are -- it's between what we get to see people and public. And we're not selling a paper clip, we're selling an engineered product, and we need to see people, they need to touch and feel. They need to be able to touch that in all aspects. So it's very, very slow go still. Gears..
Andrew Shapiro: 13:28 Yeah. And that's the PTG side, not the aerospace, so where do you see gears?
Richard Horowitz: 13:32 Yes. Both. I said both.
Andrew Shapiro: 13:36 Yes, No, I understand. And with respect to the new product development, you had said on prior calls that, that was still ongoing, right because that's all within in your area. Are you -- do you have other new products that are on the, we'll call it, front burner to introduce once these doors are open for you to get in front of them or you have enough of the new ones already designed and developed that, that's not a major area of focus for you at the company?
Richard Horowitz: 14:13 It's always a major focus, but the latter is more of a for now. What do you say, Joe, you want to...
Joseph Molino: 14:22 Yes. It's -- yes, I mean, we have tools under development continuously, but regardless of what we've got, we can't seem to get in front of the people we need to get in front of in the way we'd like. So it's all -- it almost doesn't matter how much we've gotten our development until we get more meeting set up.
Andrew Shapiro: 14:45 Right. And this isn't a market share thing, right? Like others are getting meetings. No one's getting meetings, right?
Joseph Molino: 14:51 No. I know Airbus isn't taking meetings or very infrequently, it's -- yes, it's not about us.
Andrew Shapiro: 15:05 You cut out, I'm sorry, Richard.
Richard Horowitz: 15:10 I said, if we're not getting in, nobody else will not be getting into.
Andrew Shapiro: 15:15 Okay. And you talked about in terms of vaccination requirements and everything else. I've asked on the prior quarters, you were assembling that information and also waiting for guidance. I think you're an entity that has over one hundred employees, you're providing products as a subcontractor or two subcontractors of several contracts, in particular, on the defense side. Do you have an estimate of the percentage of your workforce presently vaccinated with the first shot or fully vaccinated? And have you initiated or considered initiating financial incentives and bonuses for employees to get vaccinated or now given the government's authorization mandates?
Richard Horowitz: 16:00 Joe, go ahead.
Joseph Molino: 16:04 We are -- we don't disclose what percentage of our employees are vaccinated. We're not a government contractor, just so you know, technically, we do not -- we're not a government contractor. We sell to people who sell to the government. I will say this we have had extremely little interruption. We've had no interruption in operations and very, very little lost time from personnel due to anything related to COVID or COVID prevention or what quarantine is required, very low.
Joseph Molino: 16:48 And Andrew, a federal judge, I believe, just like in the last hour halted the Biden mandate. I saw that on the news this morning. So I don't know what that means, but it's certainly very contributing.
Andrew Shapiro: 17:02 All right. Fair enough. But you have also stated that there's problems for everyone to get into European or elsewhere and that they're going to -- they may have vaccination mandates. Are your sales and engineering force, the people who have to go out and meet with these or get meetings with these in order for us to make some additional footholds here and reinitiate growth. Is that crew all backed up?
Richard Horowitz: 17:39 We just can't discuss that, Andrew. It's the Privacy Act issue and we can't discuss what people's personal things are.
Joseph Molino: 17:47 It's not inhibiting -- our vaccination status of our employees is not inhibiting our ability to grow in service customers was the question.
Andrew Shapiro: 17:54 Okay. And are you encountering pushback or employee turnover in light of this evolution towards vaccination, non-vaccination, et cetera.
Joseph Molino: 18:11 No.
Andrew Shapiro: 18:12 No, Good. I have more questions. I'll back out into the queue, but thank you.
Richard Horowitz: 18:17 Okay.
Operator: 18:19 Thank you. Your next question from with private investor.
Unidentified Analyst: 18:28 Hello. Good morning. Hi. Can you hear me?
Richard Horowitz: 18:37 Yeah. We hear you.
Unidentified Analyst: 18:38 I'm just curious, given the very low trading volume and low market cap, have you considered delisting from the NASDAQ and switching to an OTC listing as a cost saving measure?
Richard Horowitz: 18:55 Joe, do you want to take that?
Joseph Molino: 18:58 Well, I mean, certainly, there are yes, look, we don't really have a significant comment on our listing status on NASDAQ. Now, we follow the NASDAQ rules. I don't exactly know what would go into...
Richard Horowitz: 19:23 Maybe Joe, disconnect from that. It's not to make in this call, and we can't comment on that. Sorry, any other questions?
Unidentified Analyst: 19:41 So I don't take this as -- I don't mean this to be insensitive, but is there any executive succession plan in place or is that just something that Board going to deal with as it comes up?
Richard Horowitz: 19:52 I'm sorry, you got cut off there. Could you say it again, please?
Unidentified Analyst: 19:58 Is there any plan for succession of executives in place or is that something that the Board will deal with as it comes up?
Richard Horowitz: 20:07 The Board deals with it very regularly for several years. So the answer to your question is yes.
Unidentified Analyst: 20:15 Okay. Thank you.
Operator: 20:21 Thank you. We have no additional questions in the queue at this time. I'd like to turn the conference back over to management for any additional or closing remarks.
Joseph Molino: 20:39 I would wait for a minute. I'm fairly certain that Andrew Shapiro is probably going to have some more questions.
Richard Horowitz: 20:44 Yes. He stepped out for a moment, and he said he would be coming back in. So let's give him a minute. Let's give him another minute.
Operator: 20:51 Absolutely. Andrew has requeued. Andrew your line is opened. Please go ahead.
Andrew Shapiro: 20:53 Yeah, I had actually requeued before. I don't understand what the technical issue is, but I'm here. I have several other questions if you don't mind. No, while we've discussed the potential business opportunities for P&F to pursue with Airbus and the large existing share of business you have with Boeing and its ecoverse. Do you have aerospace business already selling product into Bombardier or is that an opportunity to pursue and of course, when not requiring overseas travel, perhaps less of a hindrance to getting in there and winning new business.
Richard Horowitz: 21:32 Go ahead, Joe. I mean, we said that, okay.
Joseph Molino: 21:35 We call on essentially every aircraft manufacturer in the world that we can call on. So Bombardier is absolutely one of them. I couldn't tell you right now what we've got going on with them, if anything, but I know they're on the hit list. So we're not precluded from speaking to anybody. We talk to everybody. And if we've got a solution that works for them, we sell them tools.
Andrew Shapiro: 22:06 And then for what part of the third quarter, if any, were you able to conduct on-site visits with current or prospective customers for both -- for your PTG area? I know, I understand why it's needed, and you really never had the chance to do it because the pandemic kicked in just as you were removing the equipment into Pennsylvania. But I think on the last call, you talked about some things were starting to open. And I'm wondering, have you been able to get into still some more current or prospective customers. And having done that in those instances has that resulted in some new business.
Richard Horowitz: 22:54 We have a very long list of prospects that we've spoken to, a very long list of prospects that we've spoken to, mostly telephonically. There are and have been some examples of companies that have let us, I'm not going to say that nobody as well as in the door. There are some that have, and we've had some reasonably good success on the ones that we have. We've had a pretty good hit rate, but it's not enough to really move the needle in right now. I mean we've got -- it's a very long process. Unfortunately and as an engineered product, and it's just taking a long time. And we don't -- we keep hearing, they keep kicking it down the road. Some people were saying right at the Christmas, some people were saying at the end of the first quarter. I don't -- I think everybody is kind of like a wait and see mode but I know if that's answered your question, but we.
Andrew Shapiro: 23:48 We have this to start?
Joseph Molino: 23:50 Yes. I would just add, Andrew, to answer the last part of your question, if we can get in front of somebody. And this is assuming it's not a current customer, it's a potential new customer. And we can -- we have the means to solve their problem. I'd say we have a pretty good success rate. We just can't -- we don't have as many as those opportunities as we'd like right now.
Andrew Shapiro: 24:16 Okay. And since this was a new business segment and focus, et cetera, again, as we hit the pandemic, I don't -- I've been an investor for three decades here. I don't have the experience yet with this inside of your own, okay, you get into the new customer, you make your pitch, you have a good chance of getting the business if you have the capabilities for it. Now assuming you have the capabilities and they give you the order, how long is the time window for that order then to turn into reportable revenue stream? Is it a quarter? Is it multiple quarters? I'm not sure how -- because it's an engineered product, but what's the time window, what's the process here?
Richard Horowitz: 25:03 Yes. I mean, Joe, you can chime in also, but it varies on the product, and it varies what the need is. But I would say it's somewhere between three and six months, generally speaking. Is that correct? Joe, you would mean that?
Joseph Molino: 25:21 Yes. I think that it certainly could be as long as six months depending on the complexity. But I would say more of them are closer to three months from the time -- well, it depends on when you're keeping score. From the time -- I mean there's always a series of meetings, and this is very iterative. You go in there, you find out what their need is. Maybe you take a sample back with you. We analyze it. We come back to them. We talk a little bit more, maybe they want to make a change. So it depends on the complexity. If it's not that complex, it's probably less than three months but the more complexity there is, the longer it gets.
Andrew Shapiro: 26:08 Okay. And now you order, you get the order, and it sounds like you go back and you go to your machine shop and you're doing this stuff, to what extent is your ability to fulfill their needs dependent on your supply chains? It's more -- is this more -- like the bulk of this is all in-house and domestic and not dependent on supply chain problems that are -- you're experiencing, obviously, with your importation?
Richard Horowitz: 26:41 Well, again, it depends on the product and what it really is. If it's gears, I mean, it depends on what it is. It just depends. I don't think we can give you a blanket answer, but supply chain issues are affecting everybody everywhere, including just metal, for metal to grind into gears. It's all an issue. I'm not saying that we don't get our supplies. We do. We don't get them as a timely fashion, and we're not getting them at the prices that we've added in the past. We and anybody else. So I can't -- I don't think we can give you a straight answer on that, Andrew, because it really honestly depends on...
Andrew Shapiro: 27:21 Well, I'm not trying to get into the micro detail of any particular order. But in general, this is a -- I'm trying to understand, this is a different line of business than the manufacturing and importation of tools from Taiwan, right? I mean you're not sitting on container ships. So your basic raw materials, your basic supplies to meet the needs of your PTG customer, that's basically hard metal stock that you're cutting down in machining. Is that right?
Richard Horowitz: 27:50 Yes.
Andrew Shapiro: 27:52 Okay. And the -- okay. So in that sense, you're not as supply dependent as you are in the other portion of your automotive parts and to other tools business. Okay. Now would you say that PTG and high-tech are potentially a domestic supply chain solution to your customers versus what they otherwise might have been dependent on or looking to?
Richard Horowitz: 28:29 Joe, you can answer that, but not really. Why don't you answer it? He can explain it better.
Joseph Molino: 28:40 Let me go back to your -- finish commenting on your prior question. Yes, for the most part, it's all domestic. However, we can't do every single process within the four walls in Punxsutawney and the four walls in Cranberry. There is some grinding we can't do depending on tolerances. There's some heat treating we can't do because we don't have a heat treating facility. There's some hardening that might be required that requires some outside processing. So that's not done overseas, but it's not in our building. So to the extent those companies have issues of their own, whether it be employees or material or whatever, that could slow us down and has slowed us down on occasion. With respect -- I think, Richard is mostly right about, in general, we're not a supplier to replace imported products. But yes, I'm sure there are potential customers out there that are importing product that would like a domestic source. So depending on what it is, it's a viable option, but it's not the lion's share of the business or where we see the biggest potential. But certainly, I think it's logical that in some cases, that might.
Andrew Shapiro: 30:04 Now your Hy-Tech tooling, whether it's into oil and gas, ATP or other things. Florida Pneumatic, and a lot of that stuff's imported, Taiwan or elsewhere in Asia, okay? On the Hy-Tech side, is that mostly -- are you a onshore, again, a potential onshore solution to your customers in the Hy-Tech side in the Hy-Tech tools or you have a meaningful amount of offshore supply dependence.
Richard Horowitz: 30:36 Go ahead, Joe.
Joseph Molino: 30:37 I'm not sure. Are you saying on the Hy-Tech side, can we replace -- can we take the place of another vendor who is importing? Is that what you're saying? Is it the same question you asked?
Andrew Shapiro: 30:50 Yes. Are you -- exactly. I mean it's less engineered, but your manufacturing at Hy-Tech, where Florida Pneumatic has a decent amount of importation. I think Hy-Tech's more manufacturing than, let's say, Florida Pneumatic is. And so in that sense, if that is the case, are you more of an onshoring solution, again, where there would be from people who want to do onshoring, they might come to Hy-Tech.
Joseph Molino: 31:29 For the most part, no, because the Hy-Tech tools are very heavy duty in general. They don't import well. They're small quantities, highly engineered. It's very expensive to ship something that heavy. The quantities are small. That's -- I don't...
Andrew Shapiro: 31:52 So your competition is already onshore is what you're saying?
Joseph Molino: 31:54 I would say for the most part, but not everywhere. Certainly, we're competing against some internet -- Asian made tools. But we don't see those necessarily as our competition but because...
Andrew Shapiro: 32:15 And your supply -- in your supply chain for the Hy-Tech side, where you're doing more of the manufacturing, that's mostly, again, domestic or getting down to the basic raw metal material?
Joseph Molino: 32:26 Yes, for the most part, sure.
Andrew Shapiro: 32:30 Okay. Now do you have any opportunities to onshore more of what is going on the Florida Pneumatic and on the automotive tool side that could address or alleviate some of your supply chain difficulties or you and the rest of the industry have -- everything has to come from offshore on that one?
Richard Horowitz: 32:59 For the greatest part. Go ahead, Joe.
Joseph Molino: 33:03 Well, remember, in aerospace, it's mostly not offshore. As you know or maybe don't know, but...
Andrew Shapiro: 33:13 No, I know of the Jiffy. I'm very impressed.
Joseph Molino: 33:15 Yes. So the rest, the Florida Pneumatic, U.S. manufacturing, I just don't think we can get there. Now could we get there in some other part of North America? I don't know, maybe, but it's not really -- we can't really compete with those numbers. It's just still -- it's a great thought but for high volume, relatively low or entry level tools, it's just not possible.
Andrew Shapiro: 33:50 Okay. And unless your competitors are similarly situated, so your decline in the sales side, do you feel -- it's just is resulting in barren shelves and at the distributors and barren shelves at Home Depot or that others have been gaining some of that shelf space and share?
Joseph Molino: 34:17 Yes. I think there's enough but nobody's gained. This is my opinion. We think there's enough inventory in the channel. I don't think people who want at AIRCAT 1150 aren't getting one. There's a lot of channel inventory. So I don't think there's any bare shelves at Home Depot. To my knowledge, I haven't heard anything about that. And I don't think anybody is having a problem getting one of our AIRCAT tools if they want one.
Andrew Shapiro: 34:49 So if that's the case, then why would our sales levels be down and supply chain somewhat cited, on the sales revenue side. I know in the cost side...
Joseph Molino: 35:02 Remember, we're not selling directly to anyone, right? So there's all this channel inventory. Our customers are the channel distributors.
Andrew Shapiro: 35:13 So those channel distributors -- but those channel distributors are some in this product, right? There's either demand for it or not. And if there's supply chain issues, it's -- and that means demand is exceeding supply. So the distributors arguably have the supply. And they're selling the product. That means you're not necessarily selling it. I appreciate that but why wouldn't in the face of supply chain fear mongering or fear everywhere, why would the distributors be turning around and ordering from you to refill their inventory so that they're not caught short.
Joseph Molino: 35:55 Okay. So let's be clear. Are you talking about Home Depot? Are you talking about industry? Are you talking about AIRCAT of Jiffy? Which one?
Andrew Shapiro: 36:02 I'm referring to the instances you just cited how -- my line of questioning is regarding the idea that supply chain issues have impinged on selling units. We'll get to the cost issue in a second, okay? So where does that exist? That would not -- that doesn't seem to exist in the distribution model you're referring to, where the distributors are clearing out -- the distributors are selling into the consumer or the customer.
Joseph Molino: 36:39 I think the question is best answered in pieces. So let's look at the home depot or retail business. In the Q3 of twenty twenty, there was a huge surge at Home Depot for two reasons. One, there was all sorts of pent-up demand from Q2 when things were shut down. And second, when things got turned on, and we didn't know this, our spray guns were suddenly being used to spray disinfectant. There was a tremendous surge in orders in the third quarter at Home Depot. So that has leveled off. So at Home Depot, I think you're talking about a unique situation. So let's take that one off the table. So Jiffy, we've already talked about. So that leaves us with industrial and automotive. Industrial, I don't have in front of me, but I think industrial has had an improvement from the prior quarter.
Andrew Shapiro: 37:51 Yes, It has.
Joseph Molino: 37:55 So you're not asking about industrial. So really, you're down to asking about automotive. All right, okay. So let's talk about automotive.
Andrew Shapiro: 38:01 We understand retail because that's primarily Home Depot. Where just, by the way, Amazon, fit into all of that? Is that automotive or retail?
Joseph Molino: 38:10 Amazon is considered automotive. That's the -- I mean, and again, we're not -- we do not sell on Amazon. Our product ends up being sold on Amazon, but it gets there through distribution, various distribution. So on the automotive side for the quarter, we were down about ten percent. So multiple things going on there. Actually, I'd say, two major things going on. One, we've had these tremendous delays in importation. So even if vendors want some products, we've had trouble getting it in-house from overseas. 39:07 And second, on the automotive side, during the third quarter, we made some changes to the way we go into the distribution channel and change some things up. So there was a onetime reduction in the inventory levels into the channel. But again, that, in my opinion, has had very little impact in the amount of demand from an individual customer wanting an AIRCAT 1150 or whatever they want but the channel has been disrupted. But remember, there's a lot of inventory in the channel, and there's lots of people selling AIRCAT tools. So if I can't find it on -- through my regular distribution, I can find it on -- I might be able to find it in an internet site from a distributor. I might be able to find it on Amazon. So there are multiple places a person can get a tool. So I -- again, that inventory in the channel has absorbed our distribution problem -- excuse me, our importation problems. So I don't know if that answers your question, but that is what...
Richard Horowitz: 40:24 I've got a couple more here if you don't mind, Andrew, in all due respect, we're forty minutes into this call. And this is not a drill down into the micromanaging of our business. So I really would appreciate if you could talk about the results. The questions you're asking are certainly good questions, and we appreciate...
Andrew Shapiro: 40:45 Richard, I do not understand how these questions are not -- it's the meat of the results, especially to the extent you guys cite and you talk about supply chains, and there's an inconsistency that Joe has finally helped clarify. I mean, not just because you're impatient about it, it's not my problem.
Richard Horowitz: 41:06 I'm not impatient. Andrew, I'm not going to...
Andrew Shapiro: 41:10 If there's others who have questions.
Richard Horowitz: 41:12 We're not going to talk over each other. I'm just going to tell you that this is a conference call to talk about the quarter, and we're happy to spend as much time as you need to understand the things. We're really happy to do that but there comes a point that you're drilling down a little too far, and it's not really germane. I'm respectfully asking you to try to keep it more in a global sense. That's what I'm asking to do but I'm happy to answer it. I'm happy to answer your questions. I mean -- and honestly, we want to answer them. You're a stockholder for a long time and you're entitled to the answers and everybody else as well but please just try to be a little more global, if you can. And that's all...
Andrew Shapiro: 41:50 Well, I'm sure and I surely hope there are some members of the Board, and then maybe Joe offline can chat with you and explain exactly why and how clearly, my questioning, even the little drill down on this particular is very, very germane. But we'll move on to other questions. But if someone else would like to ask you questions, I'll be glad to get out. But it is -- I'll be glad to get out and ask and let someone else in if you have someone who wants to ask a question.
Richard Horowitz: 42:20 We have someone in the queue.
Andrew Shapiro: 42:25 Good. I have other questions. Thanks.
Operator: 42:31 Thank you. We will take our next question from another follow-up from , private investor.
Unidentified Analyst: 42:41 Hi. I'm curious, during the last call, it was briefly mentioned talk about resuming a buyback and/or a dividend. Can you give any update on that?
Richard Horowitz: 42:55 Yes. The update is that we discuss it at every board meeting as well as in between Board meetings. And when there's something to report, so we will -- you'll read about it. We'll be announcing it to the world. I can't -- there's nothing more to say right now. What I can tell you is that we discuss it. It's on the forefront of our agenda at every board meeting and in between all the audit committee meetings, et cetera, et cetera. So it's definitely something that we talk about, and when there's something to talk about in a more newsworthy fashion, we will actually be quoting that to you.
Unidentified Analyst: 43:34 Okay. So I'm not really asking for -- like for you to give up news right now. I'm just wondering what is it that goes into that consideration? Are you waiting for better cash flow, like a stronger balance sheet? What -- can you share any thought about that?
Richard Horowitz: 43:52 Yes. Well, all that -- the answer is yes on all those questions. We examined the cash flow of the business, the cash needs of the business. And that's really what we do. The declaration, when we talk about dividends, it depends on the company's financial condition, the results of the operations, all the things that can think about capital requirements and any other relevant factors that may be at that point. But as of now, we have -- as I said, we haven't declared anything yet. And we will continue to analyze these dividend questions, and we'll talk about when there's something to talk about. I promise that we will be announcing it if and when that time comes.
Unidentified Analyst: 44:40 Okay. Thank you. Can I add one more question?
Richard Horowitz: 44:45 Sure, please.
Unidentified Analyst: 44:51 And this is a high-level question. Why is it that you choose not to sell directly to consumers? I'm just curious like you don't have a very strong presence on the Home Depot site or on Amazon. And like -- it seems like something to me that company could take into its own hands to grow its revenue.
Richard Horowitz: 45:19 Joe, do you want to answer that one?
Joseph Molino: 45:21 Yes, let me address that. With respect to Home Depot, we do not dictate the Home Depot, what if any of our tools end up on the Home Depot site versus what's in the store. Home Depot is a customer. They can choose to go to market in any way they'd like. So there's nothing we can do about that. With respect to Amazon, and why we don't sell directly on Amazon, we don't necessarily want to pick favorites and that we've got multiple ways to -- for one of our customers to get to buying one of our tools. And while it's great that some of them choose to go to Amazon, many of them choose to buy through a local mobile truck but they don't choose to buy on another website, many of them choose to buy through other means. So I think if we just decided we were going to go with Amazon directly, that would be making a bet but there would be repercussions to the rest of the channel for that. And I'm not sure that's necessarily the best course of action for the most revenue. Having said that, we are in Amazon. We do advertising on Amazon. And I would disagree that we have no presence on Amazon. I think we've done a very good job with that channel and that means of selling our tools. It's by no means the only way we go to market. But I guess I would disagree that we have no presence there. In fact, I think we have one of the most highly rated tools in the category on Amazon. So hopefully that answers.
Unidentified Analyst: 47:05 I apologize. I didn't suggest that you have no presence. I was just questioning the lack of direct marketing.
Joseph Molino: 47:17 Well, some of our tools really don't lend themselves to direct marketing. The gears don't lend themselves in direct marketing, the industrial tools, to a lesser extent, don't lend themselves to direct marketing. They require more of an engineered sale, but the Depot, the tools for Home Depot and the tools for Amazon are, in my view, marketed directly, although there is a level of distribution between us and them and the customer.
Unidentified Analyst: 47:49 All right. Thank you.
Joseph Molino: 47:50 You’re welcome.
Operator: 47:55 Thank you. We hear again from Andrew Shapiro with Lawndale Capital Management.
Andrew Shapiro: 48:01 Thanks. Carrying over the supply chain issues on the cost side, if everyone is experiencing the same issues, and I believe that is the case, and you're not losing share. What is the -- can you comment and give more color on the pace of passing through price increases that inevitably would reflect the cost increases on freight, shipping, et cetera, that all of your competitors are also faced with.
Richard Horowitz: 48:37 I think, Andrew, what you're asking is, what was -- I think we related in the press release, actually, but I'll restate it, if this is what you're asking. If not, please let me know. We -- for the very, very most part, all of our customers, be it our biggest customer to our smallest customer have been given price increases over the last several months and recently has been last month, and we're looking and continuing to look because prices are still insanely inflationary, as you know. And so we're continuing -- it's a moving target. Everybody has been getting price increases at the time it was what it was. And now we're looking at it again to see if we need to do it again. I kind of think we don't. I think we're pretty covered at this point. Our margins are holding up and all that stuff, but we're looking further into that. But is that what you're asking me?
Andrew Shapiro: 49:34 Yes. And the customers have reluctantly absorbed -- they've accepted it, you're selling your units.
Richard Horowitz: 49:46 Yes. I mean -- and we have too. It's unfortunately, like the way of the world right now. Everybody -- there's nobody who lives in Morocco doesn't see and hear what's going on and not the venue. And everybody understands it and they know it. And if our President can get a control on to the ports and what the stuff is there and all the other things, I think I read this morning, that inflation is the highest in thirty years now for the last month. If -- I may be wrong but I'm pretty sure I read that this morning on Bloomberg.
Andrew Shapiro: 50:24 The one month print was the highest -- it goes back to the nineties, and it includes the energy price and other increases, but yes.
Richard Horowitz: 50:34 Right.
Andrew Shapiro: 50:39 What's the size -- you talked about this in last quarter, and you guys didn't have the information as of yet and on the return, but do you have a handle on the size and status of the tax refunds, I guess, that you expect in Q4?
Richard Horowitz: 50:52 Joe, I'm not sure if we can talk about this.
Joseph Molino: 50:57 Yes. I mean it's -- we're certainly -- we have filed our return. I'm not going to go into exactly what we're hoping to get back, but we expect to get a refund at some point. But honestly, our tax advisers are telling us that given everybody doing the same thing, it's unclear exactly when we're get a refund and what that refund will be, but it's coming. There is a refund of some sort.
Andrew Shapiro: 51:23 Is it meaningful?
Joseph Molino: 51:27 Yes. It's -- I don't remember what we said in our filings, but we certainly expect a refund.
Richard Horowitz: 51:38 Any amount is meaningful. I don't know what meaningful is to you. But it -- well, it comes to. I understand again, but you have to understand, it's not public information, and we really can't divulge that. I don't how else to say to you.
Andrew Shapiro: 52:01 First of all, here's your public call. Secondly, I was going to ask, it's already been accrued for, right? It's just going to be a matter of cash flow.
Joseph Molino: 52:08 Actually, you don't accrue for a potential receipt of a refund. We don't.
Andrew Shapiro: 52:13 Okay. It's -- when you take your -- no, but when you take your GAAP provisions, you've been taking GAAP provisions against your pretax losses, pretax into.
Joseph Molino: 52:29 Yes.
Andrew Shapiro: 52:30 Yes, okay. You have your deferred tax thing and then you get it. So what we're dealing with here is it's not going to be a GAAP reported item as much as it's going to be a cash flow item.
Joseph Molino: 52:44 Yes. I mean, Andrew, once we know what we're getting, we'll have something to say about it, but we don't really know yet.
Andrew Shapiro: 52:53 Okay. And can you provide -- you talked a bit about it last quarter. Can you provide an update and some more color on your development of cordless models and the type of automotive or nonautomotive applications for which P&F is developing cordless models of its tools in either the Hy-Tech or Florida Pneumatic side?
Joseph Molino: 53:14 Yes. I don't want to divulge too much about product development for some strategic reasons, but there are certain niches where we've got cordless tools underdeveloped to sit alongside our non-core models. But I can't -- at some point, when they're ready to go, we'll talk about them. There's still underdevelopment, and I can't even -- I'm uncomfortable saying even where we plan on selling them for strategic reasons.
Andrew Shapiro: 53:47 Okay. And is that prospective time range in which -- is there a prospective time range in which the products might be introduced?
Joseph Molino: 53:54 I would say in the first half of next year, I'm hoping that we'll introduce something.
Andrew Shapiro: 54:01 Okay. Now you had sizable gains in the OEM Engineered solutions side at Hy-Tech. Can you discuss your new products and experience so far, if there's any particular areas or industries and products worthy of a call out and elaboration?
Joseph Molino: 54:17 I mean it's really all over the place. As we've said, I don't know anyone I would call out. Some of that is just I think a rebound. Those are obviously cases where we have been able to visit. And I think for the most part, it's current customers that are rebounding a bit as opposed to new customers. So as I think, well, maybe this is sort of implied, given the fact that we're struggling to meet new customers, the best source of growth in some case is old customers who were just doing better. And I believe that's probably more of what's going on, although I think it's both.
Andrew Shapiro: 55:04 And my last question, which is still a function of you guys not issuing the 10-Q before the call, and we always have it after the fact, is what's the shares outstanding that's going to be on that cover?
Joseph Molino: 55:19 All right. I don't know the answer to that, but if you have it on the question...
Andrew Shapiro: 55:28 And perhaps can you build that into your future -- and perhaps can you build that into your future scripts?
Joseph Molino: 55:34 The number of shares outstanding, somebody just stuck in front of me...
Andrew Shapiro: 55:41 Three million one...
Joseph Molino: 55:43 Three point one hundred and eighty one dollars, I don't think it's changed much, Andrew.
Andrew Shapiro: 55:45 No, that's unchanged. That's standard, no change. Very good. Thank you.
Joseph Molino: 55:51 You’re welcome.
Richard Horowitz: 55:52 Thank you, Andrew. I’ll see you time.
Operator: 55:57 Thank you. We'll take our next question from with private investor.
Unidentified Analyst: 56:03 Yes. Hi, everybody. First, thank you. You're doing an excellent job. I have a question for the infrastructure bill. If the company cannot benefit, I think just the industrial branch because I don't see any construction tools. Do you think in the future you will go in or just going to let everything on special job with them? That’s my question?
Richard Horowitz: 56:32 I don't -- did you understand the question.
Joseph Molino: 56:33 Yes, I think I understand the question. Will we benefit from the infrastructure bill? I think the answer to that is yes. Historically, we have sold a lot of tools into bridge repair, bridge construction, road construction, wind mill maintenance and construction, railroad maintenance and construction. Those are all part of the infrastructure bill. So while I couldn't point to anything specifically. I'm pretty comfortable that we're going to share in some of those activities because they're very consistent with where we've sold tools in the past.
Unidentified Analyst: 57:17 Thank you so much. And great job you did guys. Thank you.
Joseph Molino: 57:20 Thank you.
Richard Horowitz: 57:21 Thank you.
Operator: 57:23 Thank you. And that does conclude the questions in the queue at this time. I'll turn the conference back over to management for additional or closing remarks.
Richard Horowitz: 57:32 Okay. Nothing further to say other than thank you all for taking the time today. Thank you for all your questions. Hope we gave you more insight than you had beforehand. And we look forward to speaking with you with our year-end call. I believe that's in March. So stay well, stay safe and happy holidays, everybody.
Operator: 57:54 Thank you and that does conclude today's conference. We thank you all for your participation, and you may now disconnect.
