P&F Industries Inc (PFIN) 2010 Q2 法說會逐字稿

Greetings and welcome to the P&F Industries second quarter 2010 earnings conference call. (Operator Instructions). It is now my pleasure to introduce your host, Richard Goodman, General Counsel for P&F Industries. Thank you. Mr. Goodman, you may begin.

Thank you, operator. Welcome to P&F Industries second quarter 2010 conference call. With us today from management is Richard Horowitz, Chairman, President and CEO and Joseph Molino, Chief Operating Officer and CFO.

Before we get started, I would like to remind you that any forward-looking statements contained herein, including those related to the Company's future performance and those contained in comments of management are based upon the Company's historical performance and current plans, estimates and expectations, which are subject to various risk and uncertainties, including but not limited to the strength of the retail industrial housing and other markets in which we operate, the impact of competition, product demand, supply chain pricing and our debt and debt service requirements and potential exposure of the Company in connection with the foreclosures of the assets of the Company's WM Coffman subsidiary, now known as Old Stairs Co., and those other risks and uncertainties described in the reports and statements followed filed by the Company with the Securities and Exchange Commission, including among others as described in our annual report on Form 10-K for the fiscal year ended December 31, 2009.

These risks could cause the Company's actual results for 2010 fiscal year and beyond 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.

With that I would now like to turn the call over to Richard. Good morning, Richard.

Good morning, Rich, and thank you and good morning to everybody on the call. Thank you all for joining us this morning on our second quarter 2010 conference call.

I would like to begin this conference call with a brief update on certain facts and events involving our Company which occurred during this last quarter. On June 7, PNC Bank and WM Coffman agreed to a friendly foreclosure on WM Coffman's assets. PNC bank proceeded to, among other things, sell all of WM Coffman's assets, other than the machinery and equipment located in Marion, Virginia. They arranged to auction these fixed assets and WM Coffman agreed to change its name to Old Stairs Co., LLC. We have been told verbally by PNC bank that the net proceeds from these two actions should generate cash sufficient to repay all the secured creditors. However, at the present time , Old Stairs Co. has not received a final accounting from PNC of its liquidation efforts and, therefore, cannot determine if all of the secured creditors have been paid at this time.

Also I would like to note that as discussed during our last earnings call in April, we and our banks entered into a new amendment and waiver. I would like to note that we continue to exceed the financial covenants established within the waiver, that waiver with our banks. Further, we are in discussion with potential new lenders regarding a revolving line of credit as well as a term loan secured by the Company's real estate, real property and machinery and equipment. The goal of these activities is to enhance our access to capital as well as cash flow going forward.

At this time I would briefly view our financial results for the second quarter of this year. The Company's revenue from continuing operations was $13.3 million for the three month period ended June 30, compared to revenue from continuing operations of $14.1 million for the same period in 2009. The after tax profit from continuing operations is $269,000 compared to an after tax loss of $71,000 during the second quarter of 2009.

Basic and diluted earnings per share from continuing operations this quarter was $0.07 compared to basic and diluted loss per share from continuing operations in the second quarter of 2009 of $0.02. We are also reporting basic and diluted loss per share from discontinued operations this quarter of $3.01, compared to a basic and diluted loss per share from discontinued operations of $0.14 in the same period in 2009.

Now let me talk about each of our business units. The Continental Tool group reported first quarter 2010 revenue of $8.7 million compared to $9.3 million for the same period in 2009. Specifically revenue at Florida Pneumatic for the second quarter of 2010 was $5.1 million compared to $6.1 million for the same period a year ago.

This decrease is due in part from, among other things, our decision to discontinue the marketing of the Franklin product lines effective January 1 of this year, creating a $433,000 shortfall, reduced volumes from our major retail customer basic product line of $498,000, the specialty product revenue during the three month period ended June 30, 2009, which did not occur during the three month period ended June 30, 2010, of $506,000.

Offsetting the points above were increases in revenue from our Industrial and Catalog product lines of $308,000 and our Berkley automotive product lines had a combined increase in revenue of $176,000 when comparing the periods June 30, 2010, to 2009.

Revenue at Hy-Tech, which focuses on the industrial sector of the pneumatic tool market, increased $361,000 this quarter compared to the same period in the prior year.

Hy-Tech was able to increase its volume over the prior year due to a major customer by approximately $252,000 thus accounting for much of this increase.

Revenue from our ATP product line increased nominally over the prior year. And now Nationwide of course is now the sole entity within our hardware segment. It markets fencing and gate hardware, kitchen and bath accessories OEM products and hard -- patio hardware.

Revenue for the three month period ended June 30, 2010, was $4.6 million, down slightly from the $4.7 million the same period last year.

Our fence and gate hardware sales increased $321,000 due primarily to the introduction of new products and increased customer base. While our kitchen and bath product sales declined $147,000 due primarily to ongoing declines in the recreational vehicle and modular home markets and competitive pressures. Much of the decline in OEM revenue of $391,000 was due to the loss of Coffman Stairs, LLC which prior to the WMC transaction in June of 2009 was a customer of Nationwide.

Sales by Nationwide to WM Coffman after the date of the WMC transaction were eliminated on consolidation. Gross margins in the tool segments for the three month period ended June 30, 2010, increased 6.8 percentage points to 33.8% from 27.0% for the three month period ended June 30, 2009.

Gross profit, therefore, increased $413,000. Specifically when comparing the three month periods ended June 30, 201, and 2009, Florida Pneumatic's gross margin increased 9 percentage points. This increase in gross margin is due primarily to, among other things, improved product mix sold, improved pricing from our overseas suppliers, lower indirect labor and improved utilization of our fixed overhead.

Although revenue decreased as a result of the improved gross margin, Florida Pneumatic improved its gross profit by $278,000. Gross margin increased at Hy-Tech to 35.5% from 35.3% when comparing the three month period this year to last year. This improvement is due in part to improved costs of manufacturing.

During the second quarter of 2009, Hy-Tech reduced its costs of manufacturing in an effort to offset the impact of less volume through the facility which lowers overhead absorption. This improvement in gross margin, combined with the slight increase in revenue, resulted in Hy-Tech's gross profit increasing $135,000 when comparing the three month periods June 30, 2010, and 2009. As for the gross margin at our hardware segment, Nationwide's gross margin increased to 37.9% from 30.5% and its gross profit increased to $1.75 million from $1.44 million both increases due primarily to product mix, reduction in the cost of products being released from inventory and lastly greater absorption of warehouse overhead.

I would like to take a moment to discuss our Selling and G&A as well as our interest expense now. For the three month period ended June 30, 2010, our Selling and G&A expenses were $4,084,000 compared to $3,823,000 for the three month period in 2009. Significant items affecting this change were an increase of $118,000 in legal consulting and accounting fees incurred during this quarter compared to the first quarter of 2009, primarily attributable to our efforts to resolve various matters with our banks.

Freight out, bank fees and our depreciation also increased when comparing the three month periods this year to last year by $42,000, $34,000 and $31,000 respectively. Partially offsetting the above was, as a result of the continued Company-wide pay rate reduction, a decrease in our compensation payroll taxes and benefits aggregating $38,000.

And, finally, interest expense of $337,000 for the three month period ended June 30, 2010, reflects an increase from $322,000 in the same period last year. Chief factors contributing to our interest expense are, interest increased on the revolver due to default rates applied through April 23 of this year, interest accrued on the contingent consideration note payable to the Hy-Tech sellers of $35,000 this quarter, compared to none in the second quarter of last year. The factors above were partially offset by lower interest on the term loan as balance continues to decrease. At this time I've asked Joe to review the year-to-date results. Joe?

Thank you, Richard.

The Company's revenue from continuing operations was $24.5 million for the six month period ended June 30, 2010, compared to revenue from continuing operations of $26.3 million for the same period in 2009.

For the first six months of 2010 we had an after tax loss from continuing operations of $438,000 compared to an after tax loss from continuing operations of $410,000 during the second quarter of 2009.

The basic and diluted loss per share from continuing operations for the six month period ended June 30, 2010, was $0.12 compared to basic and diluted loss per share from continuing operations of $0.11 for the same period in 2009.

Basic and diluted loss per share from discontinued operations for the six month period ended June 30, 2010, was $3.49 compared to $0.21 during the same period a year ago.

Revenue at our Tools group was $16.5 million, down from $18.5 million for the six month period. Specifically, revenue at Florida Pneumatic was $9.7 million compared to $10.8 million in the prior year. The decrease is primarily the result of the decision to no longer market the Franklin product line this year, plus the reduction in base volume from our major retail customer. These reductions were partially offset by increases in revenue from our Industrial and Catalog accounts as well as new products and promotional sales to our major retail customer.

Year-to-date revenue at Hy-Tech declined to $6.8 million from $7.6 million, primarily due to an exceptional first quarter of 2009, which included unusually large orders from one customers that have not repeated thus far in 2010.

Revenue for the six month period ended June 30, 2010, at Nationwide reflects growth in our fencing, gate hardware and patio product lines of $688,000. However, this growth was partially offset by declines in kitchen, bath and OEM product lines, aggregating $549,000. As Richard noted earlier, a major portion of the OEM decline was due to WM Coffman no longer being an arm's length customer.

Year-to-date consolidated gross margin was 35.5% compared to 30.7% in the same period a year ago. Consolidated gross profit was $8.7 million compared to $8.1 million in the prior year.

Gross margin for the Tool segment for the six month period ended June 30, 2010, increased to 34.2% from 31% in the same period a year ago. While gross profit decreased slightly to $5.6 million for the six months ended June 30, 2010, compared to $5.7 million in the same period in 2009.

Florida Pneumatic, during the six month period ended June 30, 2010, was able to improve its six month gross margin by 7.5 percentage points, primarily due to improved mix of products sold, lower pricing from its overseas suppliers, lower indirect labor and improved utilization of fixed overhead. Despite revenue decreasing during the six month period ended June, compared to the same time a year ago, Florida Pneumatic was able to increase its gross profit by $420,000.

Hy-Tech's gross margin for the six month period ended June 30, 2010, decreased to 35.3% from 38.2% for the same period in 2009, due in part to less product being manufactured, thereby adversely affecting absorption of fixed overhead, thus increasing costs. The lower gross margin in 2010 applied to decrease year-to-date revenue, caused Hy-Tech's gross profit to decline $500,000 when comparing the six month periods ended June 30, 2010 to 2009.

Our gross margin at our Hardware segment for the six month period ended June 30, 2010, increased to 38.3% from 30.4% during the same period in the prior year. Also, when comparing the six month periods ended June 30, 2010, and 2009, gross profit increased $3 million from $2.3 million in the same period in 2009.

Gross margins and gross profits increased for all product lines except for patio which decreased slightly. This improvement is primarily a result of product mix, reduction in the cost of products being released from inventory, and greater absorption of warehouse overhead. Our SG&A for the six month period ended June 30, 2010, of $8,401,000 reflects an increase of $375,000 or 4.7% from the $8,026,000 reported during the same period in the prior year.

The most significant component of the increase is noted above, our legal, consulting and accounting costs of approximately $555,000 incurred in connection with our efforts to resolve matters with our banks, including a new waiver and amendment entered into during the second quarter of 2010, and costs incurred as a result of PNC's actions pertaining to their foreclosure on WM Coffman.

Additional areas which encountered increases were depreciation and amortization of $76,000 which is due primarily to our software application implementation and freight out which increased $59,000. These increases were partially offset by among other things, our continuing compensation and benefit reduction plan and reduced staff which resulted in a savings of $315,000 and a reduction of $69,000 in the required expensing of prior period noncash stock-based compensation charges.

Our net interest for the six month period ended June 30, 2010, was $726,000 compared to $627,000 during the same period in 2009, an increase of $99,000 or 15.8%.

Interest expense incurred in connection with our term loan decreased principally as the result of lower average borrowings during the period due to repayments.

Interest expense on borrowings under our revolving credit loan facility for the six month period ended June 30, 2010, increased. Factors contributing to this increase include higher interest rates, which included the addition of the default rate adjustment applied to our borrowings through April 23. The increase was partially offset by lower average loan balances.

Other material items include interest expense of $60,000 applicable to the Hy-Tech seller's note and $11,000 of accrued interest on the loan from our CEO and an unrelated third party, made as a condition to the waiver and amendment to our credit facility dated April 23, 2010.

Capital expenditures for the six month period ended June 30, 2010, were approximately $99,000 compared to $1,066,000 for the same period a year ago. Significant noncash items affecting our cash flows of continuing operations for the six month period ended June 30, were depreciation of $826,000 and amortization of $175,000.

On a previous call we were asked for a breakdown of the Company's fixed assets. They are as follows. Land, $1,550,000, buildings at a cost of $7,480,000 with accumulated depreciation of $3,041,000, giving us a net book value on buildings of $4,439,000. Our machinery and equipment cost is $16,199,000 with accumulated depreciation of $9,751,000 giving us a net book value of $6,448,000.

With that I would like to turn the call back over to Richard. Richard.

Thank you, Joe, and that's the end of our report for the second quarter of 2010 and now of course we would be happy to answer any questions anybody may have. Operator?

Thank you. (Operator Instructions). One moment please while I poll for questions. Our first question is from Timothy Stabosz with -- he is a private investor. Please proceed with your question.

Good morning, gentlemen.

Morning.

Good morning, Tim.

Morning. A few questions here. What -- I did get dropped off my cell phone and I'm on a landline now so I hope I'm not asking anything that was answered, but is P&F liable for any amount over and above the secured proceeds? If they do not cover -- I'm sorry -- if the proceeds do not cover the secured amounts for Coffman?

No. We don't believe we're liable for anything -- any of those debts at WM Coffman.

Okay. So what is it the significance to P&F of those monies coming up short if they do?

Well, it's just we would like to have everybody paid. That's all. It's no more than that. Tim, WMC is a limited liability corporation and we believe that the subs and P&F are not a party to any of the obligations.

Okay.

From the bank, or from WMC at anyplace else.

Okay. Joe, if I may go to you, please, I presume this is yours to answer what were the elements of the write-off for discontinued operations? Could you summarize what was -- and I guess let me clarify why I'm asking this question. I seem to recall from the last conference call that we may have been in a position where we were writing off amounts beyond what was on our books for and then we get that back. Or am I misremembering that?

Yes, I'm not sure that that's exactly right. Well, let me answer your first question. For the quarter, the components of the adjustment would be the results of the operations, of course, for the period through June the sixth or seventh, and then the biggest piece of the additional change would be the result of the transaction itself where our assets were liquidated for less than we had them on the books for, and then lastly we also had to accrue or set up a liability for essentially the discounted present value of the future lease payments under the Marion lease as a result of that lease being terminated per the agreement, or the lease agreement, all of those rents become current at a discounted value with some other minor additional adjustments accrued. So does that answer your question?

I think so. It kind of leads into my next question, which is trying to understand the carrying on our balance sheet of the liability, of significant liability of discontinued operations, on the balance sheet, right? We're carrying that? That's for the lease?

Yes. We have -- as far as GAAP rules are concerned we really have no choice. Those expenses or that liability sits at the subsidiary and while there's no intention that it ever get paid, there's no legal requirement that it ever get paid by the parent, since it is a consolidating subsidiary, GAAP requires that as part of the consolidation its there. There really isn't much we can do about that.

What's the offsetting asset? Is there an offsetting asset then?

There's no offsetting setting asset. All the assets at WM Coffman, and our investment in WM Coffman was written off.

So we're carrying -- I'm still confused. So we're carrying a liabilities on our books for how much again is it? I don't have it right in front of me.

I think it's about $11 million or $12 million.

And at what point in time does that come off?

We don't believe that it -- at this point it doesn't look like it ever comes off. There's only a couple of ways per GAAP that a liability goes away. It gets paid. That's the obvious one. It gets forgiven, or it gets adjudicated in some sort of governmental transaction like a bankruptcy filing and we did not file bankruptcy.

If I figure out the Company's book value per share, the book value equity, total dollars in equity value, do I add back $11 million to $12 million or what?

That's a very interesting question. Frankly, it's not -- there is a very solid business person's argument that that liability is really zero, but unfortunately, GAAP rules require at this point that it stays there as a liability. I will point out that we are researching it further as it is a very unusual circumstance --

Yes.

We may have effort other update on that in the future. The update would simply be that it could possibly be reduced or go away, but, again, it is never going to be paid.

Is that the lion's share of the writeoff then that we took in the current quarter or was that from a previous quarter?

Well, no. That's the lion's share, the lion's share was in this quarter.

Was all of that $11 million to $12 million in the current quarter? (Overlapping speakers.)

Yes. Almost all of it. Now let's just be clear there was --the balance sheet had contained previously about $5 million related to the note payable to Visador. That had been on the balance sheet, but it was not in discontinued operations until January 1.

Do you fully understand -- I just want to make sure management fully understands and appreciates very much that in terms of the street, to the readers of street following or anyone trying to understand the Company it's going to hurt the way the Company's valued if that liability is carried on the books into perpetuity or for lengthy periods of time. I take it we fully appreciate that?

We do and we certainly have attempted, looked at every angle we can to this point to try to remove it. As we've said it doesn't really have any street value, that liability, but again, our current reading of the regs and the rules say that it's got to be there but we're going to continue to take a look at that and try to maybe come up with some other ideas.

Okay.

But we understand.

Okay. I will ask one more and then I will get back in queue. Do you have anyone waiting, by the way?

Yes, we do.

Okay. What is your rough estimate, Joe and/or Richard, of the size of our Company now on an ongoing revenues basis now that the Stair division is gone, I believe is the right term? What are we -- from a revenue perspective, normalized or whatever, are we 60% of the Company we were basically?

(Overlapping speakers.) Go ahead.

Well --

I don't know how to answer that exactly. I mean the second quarter is certainly representative of the three businesses that we have. The business is a little bit cyclical and while we don't give projections, I think you could probably draw some conclusions about a full year number. I mean I don't know how to calculate the percentage of what it was, but looking at the math, it's a revenue business in the $45 million to $50 million range. That's our Company now.

Right. Right, and I guess, we were, although that was stronger economic times, we were what, over $100 million, I believe, right?

Just about $100 million.

Yes.

Yes, I'm not sure what year you're referring to, but certainly at one point we were at $100 million.

Let me try one more if I can, since I know the next questioner is probably going to ask a lot of questions. Do you believe the business -- Richard, I suppose here, please, do we believe and feel that the business is stabilized now with what we've got? I know that you gave projections -- you gave -- you're required to give certain cash flow and projections with the new bank agreement and that's not forward looking guidance I fully understand that, but that looked like we were suggesting that the -- the Company was suggesting that things would be on a more even keel for the rest of the year. Obviously, the quarterly results -- I believe the results certainly met with the -- requirement in the amounts you disclosed in that budget, correct? For the bank.

I'm sorry. I don't understand the question.

Well, I was leading to the question. I kind of interjected another question. My question is we had a lot of messiness of course with Coffman shutting down and coming back from a bad economy and everything. Do we feel that we're almost out of the woods so to speak or out of the woods now?

Yes. Well, I mean the way I could say it is I mean I think the results speak for themselves. We managed to make money for the second quarter so that's a good thing. And I think we have felt that the Company has stabilized, probably -- I'm thinking back now -- probably more than nine months ago, maybe almost a year ago. We thought that we had stabilized the Company and we still feel that way. Having said that, nobody has a crystal ball and you read enough reports from Washington and with what's going on, you don't know if the economy is stabilized yet. Actually I would say it's just quite the opposite. So barring anything repeating like it did in the past, things as they are, as we know them now, I would say without question the Company has stabilized. I don't know if that's the answer to your question, Tim, but --

Thank you. Our next question is from Andrew Shapiro. (Operator Instructions). Andrew Shapiro with Lawndale Capital Management. Please proceed with your question.

Thank you. I'm sorry to go over the point but, hopefully, I can just clarify. Joe, can you better explain here or explain why, after the Coffman liquidation is done, and it's not clear to me based on your press release comments and your script comments about they haven't added everything up about the secured creditors or not. Is the cost in liquidation with respect to P&F considered done?

Yes. I guess the answer to that is yes. The discussion about the machinery and equipment, that stuff has been liquidated. Really we're just waiting to see what the proceeds are. We have been told that the proceeds will exceed the value of the loan, the value of the machinery and equipment loan, and that's all we know. We don't --

(Overlapping speakers.) And then the excess proceeds go back to whom? Isn't there a subordinated lender in there or there could be some residual, a small amount of residual that comes back P&F.

I would say it goes to the unsecured creditors. I mean I'm not a lawyer, but from what we've been told, if there is a small amount of money left it will go to the unsecured creditors.

Okay. So as of June 30, the books weren't closed yet on all of this?

That's correct.

Okay. So that would be one reason why the liability remained as of June 30 on your balance sheet?

The bulk of the liability won't change a great deal. I mean. (Overlapping speakers.)

I want to get to that in a second.

Okay.

But as of June 30, the liability remained because the thing wasn't done and closed any way, is that right?

I'm in the sure what you mean by "the liability remained." What liability?

Well, we have -- the liability that you guys are talking about isn't $11 million or $12 million, but the liability of discontinued operations is $13 million, $12.9 million, as of June 30?

Yes, that's correct. The liability -- maybe you're referring to the liability on the M and E note which is certainly still will because it as of June 30 it hasn't been resolved. There won't be until the bank finish (Overlapping speakers.)

Well, I'm referring to $12,870,000 --

Okay.

-- at June 30, on your balance sheet on your press release, because your 10-Q is not yet out.

Okay and what's your question? The reason it's there is because you believe -- you're asking me (Overlapping speakers.)

Well, I'm trying to understand the reason it's there on June 30 is different than the reason that it's there now as we speak.

No. No, substantially the same reason and as I was trying to (Overlapping speakers.)

So that's my next question. I don't understand this reason as to why the liability remains and why it sounds as if the liability would never come off.

Because as I explained to you, per the research and per concurrence with our outside auditors, and the research that they've done there are only three ways to remove a liability. It gets paid, it gets forgiven, or it gets adjudicated. And we have done none of those three things, nor do we intend do any of these three things.

But the liability is consolidated in from a subsidiary, correct?

That is correct.

That subsidiary is called what?

Old Stairs Co. is what it's called now.

Old Stairs Co., and P&F is a 100% shareholder of Old Stairs Co., correct?

A subsidiary of P&F, or multiple subsidiaries of P&F are the shareholders.

So why on Earth -- why would you not then liquidate or dissolve those corporations?

Okay. If -- Andy, we've been told dissolving the Corporation does not absolve Olds Stairs Co. of those liabilities. They remain liabilities of the P&F entity. I understand -- (Overlapping speakers.)

If you dissolve those entities, P&F is no longer 100% shareholder of those entities.

Andy, we -- I hear you. We've had multiple conversations about this. We continue to research it. Unfortunately, running into the deadline of having to file this Q, we couldn't continue our research. We had to file. Is it possible that we will find a way of reducing that liability, yes, but right now what we have been told (overlapping speakers.)

Because it would seem that if you get rid of the entities and you're not consolidating it in, it leaves the balance sheet, comes through as, either straight off as an addition to your equity, or goes through the income statement as a gain on disposition of the discontinued ops, and it's a below the line gain and it's zeroed back out.

If the -- if one of those three things happened that I just described happened, that would be the case.

Okay.

What we have been told by legal counsel is that dissolving the entity does not absolve the subsidiary of that liability. Logically I hear everything you're saying and they're the same arguments we were having with accountants. I don't mean arguments in a bad way. Just (overlapping speakers.)

No, no.

We have at this point found no way to remove it from our balance sheet. We agree it doesn't look good, especially when you consider the fact it's never going to get paid. We continue to research it. There really isn't much else we can say. We hear you loud and clear.

What's worse is that you guys have it listed as a current liability. I don't understand on Earth, if it's never going to get paid, why would it ever be classified as a current liability.

I mean any -- well, first of all, as required by the lease agreement and the loan agreement with Visador by definition defaulting on those brings them current. Trade payables are always current.

It's never going to be paid. The items have been resolved.

We understand but GAAP requires that they be considered current liabilities.

Forever?

At this point apparently so.

Okay. Well, I mean I hope you're not just using Long Island Counsel on this issue. It doesn't seem -- it's illustrative of the Company being too small here. I just -- it is just a -- (overlapping speakers.)

I'm not sure what you mean by the Company being too small. What does that mean?

It is unfathomable for this to be considered a current liability in perpetuity.

I will say this about Long Island Counsel. They have 50 public companies that they represent so -- and something like 80 public companies are represented by our outside counsel.

Let's move on, okay? Is anyone affiliated with P&F part of the new ownership at Coffman?

No.

No.

No one affiliated with P&F at all as part of the new ownership? Okay.

No.

Okay. On the SG&A can you describe and quantify the aggregate amount here because you had a bunch of different items that were described, but can you quantify the aggregate amount in this quarter's $4.1 million SG&A that you would deem to be of a nonrecurring nature? (Overlapping speakers.)

Well, I indicated there was about $555,000 related to all the bank work that was spread through the first six months. (Overlapping speakers.)

Right. But what about this quarter? Because a lot of it was the first quarter. And I'm just trying to understand of the new lower level, in the Q2 what is kind of considered nonrecurring?

About a $100,000 in Q2.

That's it in aggregate?

Yes.

So we then have a $16 million a year SG&A run rate here, and it works out to be at present about 30% of the revenues.

No. I don't think that's right. You have to remember our second quarter is also one of our biggest quarters and I don't think you can simply take Q2 and multiply it by four because in SG&A, are freight expenses which are completely variable sales, commissions which are completely variable sales, and a number of other expenses that are completely variable with sales so you can't do that. You can't do that, what you're trying to do.

Your SG&A is not a $16 million run rate?

Not if you took $4 million and multiplied it by four, no, I don't think it is.

If these other items that you're referring to are variable, then where we're at right now is at 30% of revenues and as those things fluctuate they will fluctuate up and down with revenues.

Sure.

So, we're still running with a 30% of revenue SG&A cost business model. Would you --

Yes. I think within some range, yes.

So for your peer groups and all, that seems to be quite high. So what I'm trying to understand is how much of this higher than normal, we'll call it percent of your revenue business model here, how much of this is tied to excess capacity and underutilized overhead? (Overlapping speakers.) Are you running at 25%, 50% of capacity?

I would say we are running at -- for the whole entity, we'll call it 50% of capacity.

Okay. Now, is the only way you improve your cost margins here to peer levels through sales growth? Are there any capacity adjustments that can be made? (Overlapping speakers.) Underutilized overhead is not as great as it is?

I mean we've got three facilities -- you could talk about going to a small -- to two facilities, but that would be extremely difficult in that we have three different distinct businesses.

Okay.

As long as we have those three facilities I don't know that we can do much about the capacity.

Okay. And what if you sold any of those facilities and moved to smaller quarters? And (overlapping speakers.)

I suppose that might help temporarily, but, boy, I'm not sure that would be such a great decision two years from now or three years from now.

Okay. And that leads us to the issue, is the only way to improve your cost margins to peer levels then is through sales growth. The sales growth (overlapping speakers.)

I would say that's the best way.

And it sounds as if the sales growth is something you anticipate two years from now?

Yes. I feel pretty confident that sales will be higher two years from now. I think we're still near the bottom of the cycle. Is my personal opinion.

So what are the -- so you have this infrastructure in place, it's costing us a bunch of money, we're trying to grow our sales. What are this Company's sales growth opportunities and initiatives that you have mounted in the three -- we'll call it the three distinct businesses?

Well, without going into sort of future projections generally our strategy at Nationwide -- well, really at all three companies is a fairly serious R&D effort to develop new products. The reason that Nationwide is having such a bang up year is that we had a lot of R&D products that have just come online this year and we're having great success with them. So we think that's the right strategy overall. There's still some opportunity in the market to challenge some of the larger players in fencing who have some very nice products with high margins that we have an opportunity to take some of that share.

At Florida Pneumatic we will continue our strategy of development of industrial products as we've moved more and more in that direction, not that we're turning our back on Sears but really the effort in R&D and with our foreign partners is to develop more industrial tools. And at Hy-Tech I would say a similar strategy to Florida Pneumatic.

We think there is a fair amount of opportunity to take some share from some of the larger entrenched air tool players who seem to be not so keen on the market and we think they're leaving themselves open so we're attacking it that way. So those are the three main ways we're going to grow revenue and then on top of that we think the market does come back here at some point. So we would be reluctant to reduce capacity in any dramatic way.

Okay.

That we couldn't undo.

Okay. And the SG&A numbers, this $4 million -- $4.1 million, that includes the full amount of Richard 's salary though the banks have the cash payment amount scaled back because these things are being deferred, right?

Yes. It includes his -- well, full -- it's his salary post the salary reduction that was Company-wide. (Overlapping speakers.)

Yes, but that's only. Yes well, that's 5%, but (overlapping speakers.)

Yes, that is correct.

From the $950,000 or $925,000 down to $750,000, that amount is being expensed, it's just noncash at this time?

That's correct.

Okay. And then that builds up and is on the balance sheet as a liability where? Is it other accrued or in accounts payable?

I believe we have a line item that says compensation under the accruals. I don't have that in front of me.

Not in the press release.

Not in the press release. In the Q you will see that.

Okay. I have more questions I will back out of the question line but please come back to me.

Okay.

Thank you. Our next question is follow-up from Timothy Stabosz, private investor. Please proceed with your question.

Yes. What I was getting at in my question about the ongoing revenue with the remaining businesses and the size of our Company kind of ties in with what Andy was talking about, which is the SG&A, and so my concern first of all and my question is, if our Company is grabbing a number two thirds of the size that it was, and there's frankly been a lot of value destruction over the years, the acquisitions have in the main not worked out as well as we would like. Should the CEO be making less than he does because of the size of our Company and can we earn the type of profitability -- I guess I'm looking at a Company that in its peak earned $1.50 or something a share. I'm thinking that we're $1.00 a share tops now and I'm just wondering if, even though Richard's employment agreement doesn't end for a while if it's time to adjust the base pay on a larger basis from what it's been and perhaps permanently.

Tim, we've gone through that with you in the past and I don't really -- I hear you. I don't see any point in talking about that any more. We've discussed that comment and your feelings many, many times and I understand it. We all understand it. I mean there's nothing to be said.

Okay. Let me talk about the actions of the Board. I am modestly, but heartened to see the Board taking some actions, specifically you have appointed a new member to the Board and you changed the bylaw -- two bylaws I guess that -- the one that said that the Chairman of the Board, if there be one, must be the CEO. That's been taken out. And you've also -- I guess just the one bylaw there has been changed. But then you've also recomposed the compensation committee. Can you discuss, Richard, the Board's -- the basis for the Board's actions and the direction that it's gone in here as far as these actions the last couple months or whatever ?

We -- the Board listens to everybody -- all stockholders' comments as well as our legal counsel and there were some good points made. I don't recall if it was by you or by Andrew, whomever, about these things and the Board considered it and we made those changes in our last board meeting during the summer. So whatever we think -- we don't have to necessarily agree with what you say, but if we do agree with what you say, we're going to be proactive and make a fix to it and that's what we did.

Yes. Now I am correct I believe it was said in your press release or the 8-K filing that the new Board member was sourced from Lawndale?

Yes. I was remiss in not mentioning in my speech -- my text earlier that Howard Brownstein is now a member of the board and yes -- and he is going to be a very good, he has already become a very good addition to our board. He's a financial -- very strong financial guy with a lot of good connections and things and we think that he will begun a good addition to our board.

Yes. So there's been responsiveness, some responsiveness on the part of the Board. One the other requests that I made that was formally declined by the Board was the release of the details of the Nadel consulting group compensation study that verified or allegedly verified or validated the legitimacy of the CEO's pay and I'm wondering, I just -- now that we've got the new board member, and I know the board members listen to this call, I as a shareholder still have trust issues. That's why I was hoping to get on the Board myself. I am heartened by the appointment of a clearly independent outsider. I am grateful and heartened by that.

How far, I'm not on the Board, and I would like to ask the board members and the new board member specifically directly, through the call essentially, that they review the peer companies. And I'm asking them, and you as our chairman, to at the very least release the names of the companies that were used in the peer analysis because -- I want to emphasize that those of us who have trust issues are left out here wondering. I'm left wondering that -- because I have done my own peer analysis, which I submitted to the board that said that you are paid too much and we've -- you have taken out $18 million in pay over 15 years and we've had very little growth in shareholders' equity and technically the way the balance sheet reads right now, there's been net destruction of shareholder equity under your watch, so the basis for these concerns are not to harp on something, but to say that there's a better chance that if the chairman and the CEO were two separate people, that an independent chairman who's not the CEO might say, you know what, we maybe can hire someone who lives in Fortley, New Jersey, and he can make a lot less without having -- needing to make as much money through the Company and even with this new (overlapping speakers.)

Tim, is there -- I don't mean to interrupt you but is there a question -- is there a question you're asking.

Well, yes. I'm asking about independence I suppose. Even with a new board member I still have got that five out of nine board members are tied to the CEO and chairman and so one is great, but it's hard to see that there's the force to make changes here.

You have said these things many times. I don't know if there is a question. If there is a question, I'm happy to answer it. I'm sorry and I'm disappointed that you have a trust issue. We are very, very diligent about our jobs in this Company. I take great offense to that. I continue to take great offense to that comment but (overlapping speakers.)

I'm sorry, what do you --

Those are your comments, you can say what you want. If you have a question, I'll be happy to answer it.

Well, I'm --

Just ask me a question.

Okay. Well I'm --

There is not a soap box. This is not a soap box. This is a time for your questions on the results of the quarter and I'm happy to answer, we're happy to answer any questions you and anybody else has. (Overlapping speakers.)

I understand, I understand, we're trying to improve the results, and my concern is that we're, the Company, and my question for us is that, is the Company fundamentally structured in a way that precludes it from earning satisfactory returns for its outside investors and if so why aren't we selling the Company or why don't you buy it, since you get the lion's share of the benefits and have for the last 15 years.

This Company is doing better. Rome wasn't built in a day. I would think you would look at the second quarter as a step in the right direction and I'm sorry you don't trust us. I take great offense to that comment. And I don't know what else to say about it.

I'm puzzled by the offense and I probably should be offended by the offense. But I --

Next question. Next question, please.

I'll get back in the queue. Thank you.

Thank you. Our next question is another follow-up from Andrew Shapiro with Lawndale Capital Management. Please proceed with your question.

Thank you. Regarding the debt filing and collateral items, we had a nice discussion last quarter based on the balance sheet of the Company at the time and what you were pursuing. And this is over three months ago, and at that time you were pursuing mortgages on P&F's three buildings plus a working capital line of credit. Can you now three months later discuss what financing package terms and ranges you are narrowing down to and the likely timing of completing part or all of the package?

Andrew, I can't go into any specifics other than we have continued to move the ball forward, I guess I would say and we think we're closer to getting something done, but I really can't give you any specifics. I will say that we are happy that we're seeing what I'll call market proposals for this restructuring, if you will. That's about all we can say. (Overlapping speakers.)

I'll add, Andrew, that it's an every day project in this Company. We talk about it every single day, we deal with it every single day and as Joe said we're making progress but we have nothing to report yet.

So what I'm trying to understand then is, it's three months. What the particular delays are. Do the lenders require to see from you delivery and execution upon a stated business plan? Is it documentation issues, is it you didn't have lenders, that the debt crisis in this -- the credit crisis in this country still exists? What are the factors that are causing such a lengthy delay at basically structuring mortgages and a line of credit that is -- you guys can debate and argue -- are you arguing over terms that it's 70% of receivables versus 83% of receivables? Because you've got your tax refund. That made things a whole lot easier.

Yes. Well, let me try to answer, Andrew. Even in a situation where we had some sort of agreement in place it would take a couple of months to get something done.

Okay.

Second, in all the discussions we've had with many lenders they were all very curious to see what the resolution was of the WM Coffman situation, what the resolution was of our bank situation with Citi, and also wanted to see a couple of quarters of results. And really, we're just reporting Q2 now, and while we've shown various lenders projected data, filed data is a lot better to them and so I would say for three reasons it's taking a little longer than it might a year from now where we would probably have a lot more quarters of positive results under our belts and the whole WMC thing behind us and the Citibank restructuring behind us but given all those events, it moves probably a little more slowly and that's on top of the whole credit crisis that has nothing to do with us. (Overlapping speakers.)

The main issue is that they required quarters. So I don't mean -- Andrew, I don't mean to interrupt you, but I know that you're very, very well aware that -- of the financial crisis in this country and banks are not just like they were. They're not lending and they're not quick to lend and they ask many more questions and they do many more things than they have in the past. It's not like you and I grew up. It's a different world right now and I know you know that.

Right. No, I'm a former lender and -- (Overlapping speakers.)

All right. So you know that.

You didn't start this process last May when we last gathered for the phone call for the Q1. You've been in this process for quite some time. So (overlapping speakers) if it's a matter that they require, well look, we want X quarters well then basically you can't get a new loan until November or September.

Andrew, I would say -- I'm going to jump in. And there's one more complication in that any restructuring we do requires doing something with the real estate. And if it was just a straight revolver, maybe with an M and E component we would probably be done by now.

Okay.

But given the fact that the current lenders are have liens on both the inventory, the AR and the real estate, they are not going to accept a solution that just takes them out of their revolver. So we need a global solution and given the fact (overlapping speakers) let me finish, given the fact that we have two pieces of real estate in the state of Florida, that's been a problem. It's been a problem.

What makes Florida real estate more difficult?

It's been -- Andrew, (overlapping speakers) Ask your real estate people. It is what it is and there's no question about it.

But I continue to --

The Florida market is a much different market. The lenders and the insurance companies and everybody for some reason look at Florida as a different place. Do they get more hurricanes? More violent (overlapping speakers.)

Was it an issue that you want to get and you feel the Florida real estate has X dollars in value and you haven't found a lender who's willing to loan you X dollars in value because they want to loan you 60% of X?

Yes. (Overlapping speakers.)

Okay. So it's a valuation difference.

Well, look, lowering the loan to value ratio, as you continue to lower it, the loans get easier to come by.

Exactly.

So there is a point where it's not enough money that we can take care of everything and create enough availability under the line. I will stand by what I said. We have made significant progress in the last couple of months. We are not still at ground zero or square zero. We have made progress. We are way farther along than we were and we're hopeful that we will get something done but we just can't tell you much more than that right now.

Okay and whose -- and do you have a bank retained or an advisor retained that is assisting you in obtaining proposals and in evaluating the proposals and recommending on the proposals for the board?

We have various people we have consulted throughout this process, yes.

Okay. Are loan defaults rates still being charged against P&F and what rates are now being paid? Because that would be the other issue as to why -- or how P&F could get its financing is because you've been paying such high rates already, presumably getting financing that pays anything close to those rates should be easier than, AAA credit, because you're obviously not a AAA credit.

There's no -- we are not paying a default rate any longer.

Okay. And what rates are now, in aggregate, being paid and what kind of rates are being discussed with the new lenders? Would it be at the present rates? Or what you have been seeking and talking about are loan packages with lower rates, meaning less spread?

I can share with you what we're currently paying. I think the blended rate between the revolver and the term loan is like 5.5% range and it's a LIBOR based loan, but I'm not going to share with you anything else beyond that and I'm not going to talk about the range of deals that we're looking at. Its conjecture and we don't know where it's going to end up.

All right. Now, are you seeing opportunities, and I think you mentioned this. Let's get back into the business. You mentioned you're seeing opportunities, I guess from weakened players, that you can steel share? But these are actually from the big boys. (Overlapping speakers.)

Hey, I'm not sure I would call them weakened so much as I would call them vulnerable either due to their extremely high prices or lack of focus, what have you. We have opportunities, interestingly, with people that are larger and better positioned than us.

Okay. And what are you seeing at Sears in terms of inventory and promotions, in terms of the visibility you have there and the upcoming promotions as you get in towards year end?

We have visibility with Sears basically through year end. We feel pretty good about where we expect them to go the rest the year.

Okay. And the large client that gave you troubles last quarter in terms of year-over-year not being back in the market because they did so well -- this is Hy-Tech -- is that customer and their, I think it was primarily governmental business, back on track and returned to Hy-Tech buying product?

No.

No, they are not back on track. The government has not ordered a great deal of from them and they in turn have not ordered anything from us. So we -- that customer at this point we're not anticipating -- we don't know when they're going to come back. We just don't know.

Okay. And what is the status of your appeal of the -- I shouldn't say, not your appeal, because you won the lower court decision -- of the appeal of the losing party regarding your real estate escrowed monies? And because you won the lower court opinion does that amount accrue interest and what would be the potential award size if you were to win the appeal?

Well, we'll let -- Rich Goodman is here or I can answer and if I go astray he can jump in. The other side made their appeal, I think we filed a -- we're in the process of responding. Interest does continue to accrue so if and when this is finally adjudicated and we win, we would get the interest on top of where we are right now. (Overlapping speakers.)

The interest is 9%

What is the amount --

9%.

9%. And what is the amount built up to now?

We have a judgment right now for $800,000 and some -- a little over $800,000.

And then interest on top of that?

That's --

Well, interest would continue -- that number in and of itself contained interest at that time but interest would continue to accrue on that number.

Yes.

Okay. And so this judgment was a while ago. So as of the end of June, the quarter end, what is that number up to?

(Overlapping speakers.) I don't know. We don't calculate it because it's not a number we're required to -- it doesn't show up on the books anywhere.

Yes. Why wouldn't it be a contingent asset disclosed the in footnotes of your reports, given the amount is quite material.

There really is no such thing as a contingent asset in GAAP accounting. You're just not allowed to do that.

You're not allowed to put it in the footnotes as a descriptor of that you've won the judgement and it's pending?

No. The SEC frowns upon those sorts of disclosures.

Okay. All right. I will back out of the queue, thank you.

Andrew, if you have any other questions please get them, have them discussed now.

All right. Let me pull out my final question or two. You went through the breakout of the various subsegments on the -- I guess it's primarily the hardware side there, because there's four or five subsegments and you read them pretty quickly for the quarter, so it was hard to discern which of the subsegments were improving and which ones were -- had deteriorated from prior quarter, Q1 and all. Can you give a little more qualitative color on the various businesses within hardware, to just get a handle on being able to -- for us as investors to be able to focus on I guess problem areas and what are being done about them and areas of potential growth?

Yes. Well, I'll comment on that. In the hardware there's really four segments but only really two that matter. The fencing segment which is our largest piece of that business, which I'm going to say is 60% of the revenue, is doing very well. Year-over-year, quarter-over-quarter we've improved from last year, and as I said earlier it's new products and they're doing very well out there. The second biggest segment, which is really new to Nationwide, is the kitchen and bath unit that we had purchased from Woodmark which then became part of WM Coffman and then last year we moved over to Nationwide.

That is struggling a little bit year-over-year, quarter-over-quarter primarily because it's driven a great deal by manufactured housing, and that is a very slow market right now and we continue to pursue smaller opportunities but until that market comes back we're just not going to be able to do a whole lot. We don't have a great deal of opportunities through product development that we do in other parts of the business.

The other two parts of that business, the OEM line and the patio line. The OEM line is very much driven by new housing starts, door and window business primarily. I don't have to tell you what's going on with housing starts. While it's not a big part of the business, that is why that business is -- struggles. We do not focus on that a great deal, it's not an area where we draw a lot of margin, but we still have it, we have lots of legacy customers and we continue to service them. And lastly the very smallest part of Nationwide is the patio business which is basically a Florida based operation. And it's really -- we're just in a harvest mode there. In fact I think we might even be up just a hair but you would never notice because it's so small. Does that answer your question.

That leads me to the next one. Yes, it does. When you, inside of management, look at these segments, are they discrete segments where you are able to analyze the return on asset and a return on capital deployed for which you can take steps to maximize your return on capital deployed?

I would say yes. Of course, there's some sharing of overhead, but I would say the answer is yes, we can make those kinds of portfolio decisions if that's what you're asking.

Yes. Because we've got to do something here to better offset the sizeable SG&A for the core business. I mean being public is a substantial cost, but we're dealing with $1 million to $1.5 million out of $14 million to $16 million of annual SG&A and we have -- obviously salaries, that Tim is very concerned about, and I've expressed concerns about as well, and when that contract comes up for renewal, as to the optimal and best shareholder value-maximizing decisions for the board to make when it comes to renewal of the employment contracts, the terms of those contracts if renewed, as well as the maintenance of this Company as an ongoing public concern. But barring those bigger decisions then the rest is here managing these assets in an optimal way rather than just obviously waiting for the sales growth to absorb all of this cost that is a burden. And you mentioned I think at the annual meeting that you already feel that you're at the bone. Are there -- is the feeling still the case or have -- are there additional costs and restructuring opportunities within your three businesses available?

There's very little we can do on the personnel side. We have been informed, and I concur, by our Presidents that cutting -- making any further adjustments to personnel risks the future health of those enterprises.

Okay. And you can't source any better?

Well, we continue to improve sourcing. I mean we're much better than we were 24 months ago in our ability to source. I would say both at Florida Pneumatic specifically and Nationwide. I think we continue to improve our operations in Asia. So I'm not saying that we couldn't source a little -- continue to improve those, but I think it's relatively small increments.

Now to what extent, after the disposition of the businesses, it's kind of hard to know this on our part, maybe. But you guys should know it internally. To what extent are we at risk and subject to the vagaries of currency movements then with respect to our margins now?

Well, just to break the business into pieces, Hy-Tech purchases very little from outside the United States, just a few castings.

Okay.

Nationwide and Florida Pneumatic purchase almost exclusively overseas. I would say each of them is purchasing nothing really from Japan any more. Florida Pneumatic used to purchase a lot more from Japan, but I would say at this point, I'm going to say half from Taiwan, half from mainland China for those two entities in aggregate. So the Taiwanese currency movement, which I've watched here for 13 years, moves actually within a very small band, and that's been through a lot of ups and downs of the two economies.

I'm not overly concerned about that currency. The Chinese currency we do pay -- we bought -- excuse me. We pay in US dollars but as of course you know that really doesn't have much to do with the ultimate currency risk. Look, it's pretty simple. If the Chinese decide that their currency is going to float to a range that costs more money to bring stuff in from China, our costs are going to go up. Now, if that happens do we have alternatives? Absolutely. But it would be difficult for me to speculate on what that potential risk might be.

Are there any opportunities for P&F to sell its products that are made in China in China? Or are there plenty of indigenous makers that you can't compete with.

There are certainly plenty of indigenous manufacturers there. There's no question.

Okay. And --

Andrew, I don't mean to cut you short but we're on the stop here, so --

No. That's fine. I'm done.

Okay. All right. Thank you.

Thank you. Our next question is another follow-up from Timothy Stabosz with -- I'm sorry private investor. Please proceed with your question.

Okay. I'll try to make this fast here. Just to explain my mentality here, Richard, on this trust thing. I don't want the board to misunderstand it and I don't -- I'm not trying to be antagonistic personally or anything like that to you, but, you have taken a lot out of the Company and someone who bought the stock 15 years ago, it's just a fact, has made nothing and I hope you feel bad about that. We need to know that. That's not personal. If we know that we'll feel better. I feel better knowing that. Is that how you feel?

Tim, you've asked me that question at least a half a dozen times and every last time you've asked it had I've answered question the exact same way. Of course I feel bad about that.

Okay. Thank you.

Obviously I do and I want to be better for the Company.

I appreciate that. (Overlapping speaker.)

You've asked many times.

Do you -- I'll be very specific and brief here on these then. Do you believe -- one of the ways you can reassure me, because I'm not -- talking about a trust issue is not an attack. I'm seeking something from you, so let me tell you what I'm seeking and then ask you the question. Can you reassure me, I'm looking for reassurance, do you believe all the directors have now reviewed the peer group analysis of the compensation study, of peer group companies to P&F and your salary?

I'm not part of that process. I can't answer that question. I'm not on the compensation committee and I wouldn't be involved in that process. Honestly I can't answer that question. (Overlapping speakers.) The board members have been informed of it but I can't answer any more than that. I don't know.

You don't know the answer to it.

I don't. I'm not in the process, Tim.

Okay. I guess I will have to follow-up in writing and ask the board. That's fine. Because rather than being -- well, do you know why the board hasn't released the peer group study? The list of the peer group companies.

Again, that's not --

Okay.

It's not -- it's a compensation committee thing. We discussed that with you and I guess the answer from before still applies.

Okay. I thought you might know the answer.

I don't know the answer. I can't -- I'm not involved in that process.

Okay. I am again asking them to release it, at least a list of peer group companies.

Okay.

That way I as a shareholder can evaluate. There are some concerns whether the study is legitimate, frankly, and that's what I'm left wondering. I understand the compensation committee at the time was composed of -- it's since been changed, but two people who were fairly close to you. So that's the concern if they could release that, that would help validate to me, and rebuild trust specific to that so I could see what the peer group companies are.

Okay.

Now, let me just say one other thing, or ask one other thing here. Considering there's been a fair amount of value destruction as stated, another trust issue is this and here's the question. I'm left wondering, does the board ask the question of whether -- and, again, no personal -- nothing personal here. Does the board ask the question of whether the current CEO is the best person for this job and/or the best value as is going gotten for shareholders. And would it consider that question more seriously if the chairman of the board and the CEO were not the same person, especially with five of nine board members being rather tightly tied to the CEO professionally and/or businesswise. That's a legitimate question and I am asking it, and if you want to consider it rhetorical that's fine but if it was a bad idea for the compensation committee to have two people closely tied to the CEO, is it a bad idea for the board as a whole to be tied to the CEO. And I think even with the one addition, which is appreciated, there's still a question, rhetorical, whatever, of whether or not five of nine board members including yourself are frankly too close to you. So it would be nice if -- this is, what I'm asking for is more -- well, frankly, more independence.

Okay. I hear you.

So okay. Thank you.

Okay.

Thank you. Mr. Horowitz there are no further questions at this time. I would like to turn the floor back over to you for closing comments.

Okay. Thank you all for participating on the call today and we look forward to speaking to you with our third quarter results when they come out. Thank you so much.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.