P&F Industries Inc (PFIN) 2010 Q3 法說會逐字稿

Greetings and welcome to the P&F Industries third quarter 2010 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Richard Goodman, General Counsel for P&F Industries. Thank you, Mr. Goodman, you may now begin.

Thank you, operator. Good morning and welcome to P&F Industries third quarter 2010 conference call. With us today from management are 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 the comments of management 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, 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 those other risks and uncertainties described in the reports and statements filed by the Company with the Securities & Exchange Commission, including among others, as described in our Annual Report on Form 10-K for the fiscal year ended December 31st, 2009.

These risks could cause the Company's actual results for the fiscal 2010 year and beyond to differ materially from those expressed in any forward-looking statements made by 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 Horowitz. Good morning, Richard.

Good morning, Rich. And thank you so much. Good morning, everybody, and thank you all for joining us this morning on our third quarter 2010 conference call.

Since all of the information we routinely have given you over these many, many quarterly calls, is found either in the press release or the 10-Q, we have decided to modify the process, and shorten it going forward, so there can be more Q&A, which seems to be more the interest of our stockholders anyway. I will begin today's call with a brief summary of third quarter 2010 results of operations and earnings per share. I will then ask Joseph Molino to briefly discuss our year-to-date results and key balance sheet information, and then I will proceed to provide an update on key events affecting the Company, after which of course we will move to the Q&A session.

The Company's revenue from continuing operations was $14,267,000 for the 3-month period ended September 30, 2010, compared to revenue from operations of $13,144,000 for the same period in 2009. Revenues for our tool group during the third quarter of this year was $10,609,000, compared $9,753,000 in the third quarter of last year. Revenue from our Hardware group which today consists of only Nationwide industries was $3,658,000, compared to $3,390,000 last year.

Gross margin for the Company during the three-month period ended September 30 2010 was 33.2%,compared to 33.1% during the same period in 2009. Specifically for the Tools group, gross margin for the third quarter of this year was 32.5%, compared to 31.9% last year, and for the Hardware group, gross margin was 35.2% this year, compared to 36.4% a year ago.

Our Selling, General, & Administrative expenses for the three-month period ended September 30th were $3,845,000, or 27% as a percentage of revenue, compared to $3,909,000 last year and a percentage of 29.7% for that same period. Interest expense for the third quarter was $264,000, decreasing from $368,000 in the same period last year, this was primarily attributable to the tax refund we received in May of this year, which we discussed on our last call all being applied to bank debt reduction at the time.

The after-tax profit from continuing operations is $632,000, compared to $56,000 during the third quarter of 2009, and basic and diluted earnings per share from continuing operations this quarter were $0.17, compared to $0.02 per share from continuing operations for the second quarter of 2009. We are also reporting basic and diluted earnings per share from discontinued operations this quarter of $0.06, compared to a basic and diluted loss per share from continuing operations last year of $0.23.

At this time, I would ask Joe Molino to review further the year-to-date results. Joe?

Thank you Richard. The Company's revenue from continuing operations was $38.7 million for the nine-month period ended September 30 2010, compared to revenue from continuing operations of $39.4 million for the same period in 2009.

Briefly year-to-date revenue for our Tools group was $27.1 million, compared to $28.2 million in 2009, and revenue for the Hardware group was $11.6 million, compared to $11.2 million during the same period in 2009. Gross margin for the Company was 34.7% for the nine months ended September 30, 2010, compared to 31.5% for the same period in 2009. Gross margin for the Tools group was 33.5%, compared to 31.3%. And for the Hardware group, gross margin was 37.3%, as compared to 31.9% last year.

Selling, General & Administrative expenses were $12.2 million, or 31.6% as a percentage of revenue, compared to $11.9 million, or 30.3%. Last year. You may recall that during the second quarter earnings call, it was mentioned that we incurred over $500,000 in legal, consulting, bank fees, and accounting costs, related to banking issues with our then banks, including PNC Bank. Interest expense for the nine months was $990,000, compared to $995,000 for the same period a year ago.

For the first nine months of 2010, we had after-tax earnings from continuing operations of $194,000, compared to an after-tax loss from continuing operations of $354,000 during the same period in 2009. Basic and diluted earnings per share from continuing operations for the nine-month period was $0.05, compared to a basic and diluted loss per share of $0.10 reported in 2009. We are also reporting basic and diluted loss per share from discontinued operations for the nine months ended September 30 2009 of $3.44, compared to a basic and diluted loss per share from discontinued operations of $0.44 for the same period in 2009.

Capital expenditures for the three and nine-month periods ended September 30 2010 were $55,000 and $154,000 respectively, compared to $526,000 and $1,592,000 for the same period a year ago. Significant non-cash items affecting our cash flows of continuing operations for the nine-month period ended September 30th, were depreciation of $1,239,000 and amortization of other intangible assets of $263,000.

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

Thank you, Joe. And in closing, as most of you know by now, I am extremely pleased to report that on October 25th of this year, P&F entered into a new $22 million credit facility with Capital One Leveraged Finance Group. The facility consists of a term note of approximately $6.1 million, with repayment based upon a 15-year term, or approximately $34,000 per month, and a revolving credit agreement with a maximum borrowing capacity of approximately $15.9 million.

This facility of course is collateralized by the inventory, accounts receivable, and real property of P&F, Florida Pneumatic, Hy-Tech, and Nationwide. With this funding we were able to completely exit from our existing banking relationships with Citibank HSBC, paid them in their entirety, as well as paid in their entirety two mortgages with Wachovia Bank, and repay half of the outstanding obligation owing to the sellers of Hy-Tech. Subordinated notes payable of $750,000, of which I loaned the Company $250,000 of those dollars, remains. The Company was permitted to pay the note holders approximately $30,000 of accrued interest, and there are of course as with most banking arrangements, financial covenants, which we feel extremely confident in our ability to exceed during the three year life of this facility. I believe that this new facility will provide added flexibility, financially and stability to our Company, as well as giving us a three-year term.

That is the end of our report for today, and now I will be happy to answer any questions anybody may have. Operator?

Thank you. We will now be conducting a question and answer session. (Operator Instructions). One moment please while we poll for questions. Our first question comes from the line of Andrew Shapiro of Lawndale Capital Management. Please proceed with your question.

Good morning, I have a few questions, and I appreciate the expedited script a lot, but unfortunately your 10-Q has not been made available yet, so I have to ask a few questions that would have been answered in that document. In particular, you provided the gross margin percentages for your segments and the revenues, but can you provide the operating income numbers for the two segments, please?

Okay.

Just a second, Andrew.

Alright. Well, I will ask another question while we wait. The status, you have the escrow on the land sale litigation that was on appeal. You mentioned on the last conference call, it was an $800,000 legal claim plus accrued interest, and it was accruing at a very nice rate, what is the accrued interest up to, and basically the amount of legal claim up to, and what is the status of the appeal?

Firstly, it was not a land sale, it is a building sale, actually building and land sale. We owned, if you remember Andrew, we owned the building.

Right.

Right. So it was a land sale. So the judgment was for $650,000 plus interest, and we won that at the time, and that came to about $800,000 if I am not mistaken, and they chose to appeal that, and our estimates are that is it going to be something north of $900,000 when it gets resolved, when we get the ruling. But we have been told by our attorneys that it is probably six to nine more months before we will hear. Richard Goodman is here, he can comment further.

The latest is that we are waiting for the court to set a date for the actual arguments, and then that should be soon, but they haven't committed to a date yet, and after that there is anywhere between a few weeks and a few months for them to come up with their decision.

Okay. And in what court is the appeal in?

Suffolk County. Which is one of the counties on Long Island. It is in Riverhead.

Right. Is it State Appellate court?

I don't have the information.

I don't know specifically what court it is in, but the judgment was filed, so it is public record.

If you could email us what court it is in, that would be great.

I will get you that to you Andrew, no problem.

Okay. Great. You got those operating income numbers for the two segments?

Yes, Joe?

Yes, we have operating income for the Tool segment for the quarter of $1,593,000, and for Hardware $385,000, and for the nine months Tools would be $3,541,000 and Hardware $1,646,000.

Okay. On this debt deal, with the new debt package, I just want to clarify, the new simplified debt structure for the Company, since this was an October deal will show up in your 10-K, and it is basically the new three-year facility term and revolver. and $750 million of sub-debt, and that is it?

750 what?

I am sorry, $750,000.

$750,000. Yes.

Okay. And that is it. And then the terms of these loans when you add it all up together versus the punitive interest costs this past year applied to P&F, what is your estimate of I guess the annual interest rate now going forward, and the dollar savings to P&F's borrowings that you should enjoy this year versus prior year?

Andrew, the savings in terms of six charges, which would include the payments or principal and interest from where we were a month ago, to where we are now on an annualized basis exceed $1 million.

Okay.

And in terms of interest, these are rough numbers. Term-loan interest is a little over 6% all-in. The revolver interest is a little under 4.5%, but the numbers aren't identical, because we have a bigger term loan now and a smaller revolver, but hopefully that answers your question.

It does, but if I could pull out of you just a little bit more on that issue, of the $1 million or so of estimated annual cash savings, how much of that is principal savings versus interest savings?

It is primarily principal. Interest, there is a little bit of savings on interest, but we are paying a slightly higher rate on the term loan than we were before, and a lower rate on the revolver than we were paying before. It is a little bit less interest. I seem going to say a couple of hundred thousand dollars. But the substantial savings is in there.

That actually confirms our guesstimate of it anyway, about $200,000 of interest savings?

Yes, that sounds pretty close.

$200,000 what --

Yes, the interest savings, and about $800,000 is the principal, so maybe $0.05 a share pretax kind of range?

There you go. In that range.

Okay. So you are confirming that. I have some more questions, I will back out into the queue, but please come back to us.

You got it.

(Operator Instructions). One moment please while we poll for questions. (Operator Instructions). Our next question comes from the line of Andrew Shapiro with Lawndale Capital Management.

Okay. Well then I am going to ask a few more, and then I will back out again.

Andrew, if you don't mind just ask all of your questions so that we don't get confused.

Alright.

Okay?

I just have an extensive list, of course, because this is my one shot at you.

Sure, go ahead.

On your sales growth in Florida Pneumatic, what do you attribute this to? It is a promotion with Sears? A promotion with other customers, or is this an increase in what we will call the regular recurring revenues?

A little bit of everything.

Prior quarter?

It is a little of everything. We have had a nice increase in all of our customer base, really, basically.

Okay.

Which is a good thing. It has been not concentrated in one area.

Alright. And then the decline in the margin, which I would otherwise expect coming from promotions. Can you discuss a little bit more about then the decline in the margin in Florida Pneumatic, in light of the increase in revenues, and thus greater overhead absorption that would have otherwise been expected?

Let me answer this, for Q3, that is the quarter where we do the Sears promotions. So you will see a degradation in general, Florida Pneumatics margins in Q3, although I am not sure it was particularly significant, I believe it was pretty close to flat for this quarter.

And let me just interrupt you, the gross margin for the third quarter in our Tool group was up 0.6% actually.

Let me clarify for you guys. I am doing a sequential comparison right now, just versus your last quarter. So from June to September, you had a really nice, sizable, almost $2 million revenue bump over $2 million revenue bump in Florida Pneumatic, for which I expected there was at least a Sears promotion or something in there, but if you are just comparing to it to your June quarter the $5.1 million bump to $7.2 million bump in revenues, rather than prior-year now, has that been primarily promotional, and the gross margins dropped from 33.8 down to 32.5?

It is 100% driven by our direct shipments to Sears in the third quarter, which are at lower margins. We get no other benefits. There is no absorption as a result of that. So the underlying business is still the same between Q2 and Q3 other than those directs. So there has been no degradation in other margin. It is just simply a mix issue.

Okay. And then with respect to Hy-Tech, things started rebounding in the June quarter. They dropped a little bit from the June quarter on the revenue side, anything in particular going on there, as this current quarter has started, are things back on track, or did we just have a small blip of benefit in the June quarter, but otherwise things are constrained in September?

I don't think there is a particular trend there, Andrew up or down really, right now through the first three quarters, and I will say this, for their margin, we have had a very heavy push to reduce inventory there, and as you know, it is a full-blown manufacturing facility, so as we put less product through the plants, we are going to have less overhead absorption as we just pull product out of inventory, so that is going to hurt our overall margin, but it doesn't change, we haven't changed pricing, and there has been no change in the cost structure, if you will.

I will also say, Andrew, that for Hy-Tech last year in 2009 they started out of the box in the first quarter at record levels, and then the rest of the year, did what it did, and this year of course our first quarter was way, way off that record first quarter, and they have done a very, very good job of coming back to the next two quarters, because we don't look at it necessarily as one quarter, but we are looking at it for the year, they are basically just about even with last year at this point, and that is very good, that is a very good comeback for them, and they are experiencing good activity from customers.

Okay.

Continuing.

And then your Hardware side which is now, guess about 40%, maybe 30% of the business, the way this has been reconfigured, sizable drop-off from last quarter, but this is a seasonal business. I guess your June quarter is your seasonal peak for that side of the business?

Exactly.

Yes, it is.

Now margins dropped though, and the is that a function of overhead absorption, or other factors?

Yes. It is overhead absorption. It is a little bit of mix. But, again, there has really been no change in the underlying cost structure there.

Andrew, I don't really think that you can glean much from looking at one quarter to the next. I think you are better off, if you don't mind me saying so, you are better off comparing a quarter to last year's quarter. I think whatever seasonality and other things we have in the business, I think they match up better when you look at quarters. I mean, you certainly can ask any questions about last quarter to this quarter, but I think that if you want to try to get comparison to understanding, I think you have to look at 2009 versus 2010 or quarter-to-quarter if you don't mind me saying so.

Okay.

Do as you wish, but I am just telling you to try to make sense of it, that is what I suggest you do.

Yes. Yes. And in terms of the two divisions operating to get to the operating incomes and the margins here. It looks like, is all of your cost-cutting, it is done, because the SG&A for both of the two segments is pretty flat from prior quarter and the quarter before that?

It is always an ongoing effort. It is always an ongoing effort. I wouldn't say it is done. We always, we every month go over with every company our cost-cutting thing, so it is an ongoing process. I would say that the low hanging fruit is done. But that is not to say other things won't happen as time goes on.

Okay. So as we talked about on the other call, the prior quarter, we are $45 million or a $50 million company here in revenues, and you have the particular margins you have. The SG&A overall still has a substantial amount of unabsorbed overhead, are you still running around 50% of capacity as last quarter, or are there other things that we can be doing here to bring down the overhead cost as a percent of revenues other than simply sales growth?

As Richard said, there are a few things we can do to answer your question, we are still at relatively low percentages of capacity compared to historical norms. We look at things every month, but as Richard said, we hit the low-hanging fruit, and we believe we are very close to minimum headcounts at our three facilities. So I don't know that it is going to be able to come out of people.

We continue to press our suppliers, and have had some very good results even in the last few months in reducing some warranty expense by switching factories over with some of the Florida Pneumatic products, but I don't know how much more we can really cut from here. I think we will see some improvement going forward, as we still had a great deal of expense through the first six months at least dealing with the bank issues that will obviously not repeat.

Alright. We just made it clear that this has got to be sales growth that is going to be dropping money on the bottom line, so let me ask a few questions on your sales growth or prospective sales growth. Last quarter you said you were putting a serious R&D effort in to develop new products, and you are having some good success with some this year. How are those efforts going in this most recently reported quarter, and in the current quarter? Like what are the big wins? Where is your R&D effort in developing more industrial tools?At Florida Pneumatic, you talked about that. And Hy-Tech was trying to take share from larger entrenched air tool players, but can you talk about your sales and growing, and market-share gains, and R&D, and new product things?

Well that is an ongoing effort at all of our businesses, and all three of them, in each of them we go over the products that we have, and what is going on. In Florida Pneumatic, I would say the biggest thrust is a little bit with Sears, and mostly in the industrial side of that business. And they have had very good success as a percentage of their sales growth in that area. Same thing goes for Hy-Tech. And Nationwide, I guess the same thing goes for Nationwide, they have had very good as a percentage.

Things don't happen that quickly. In Nationwide it was probably an 18-month, two-year process from beginning to end before we really started seeing some of the fruits of our labor this year, so as they go, they will continue. I can't tell you anything miraculously that is going to happen from any one, two, or three-month period. It is an ongoing process. We have many projects in the hopper at all of our businesses, and we have many prospects for new customers, et cetera, in these very, very difficult times. Needless to say, we are not in good times here, and you know that as well as I do. As we have had some very good prospects of new customers as well in that area. I don't know if I am answering the question for you Andrew.

Joe, can you add anything to that?

I would just add that of the growth we have seen this year at Nationwide and Florida Pneumatic, it is driven by new products. September had the largest amount of industrial sales in the history of Florida Pneumatic, and we still have a great deal of opportunity out there. Some of it hampered by the government still being reluctant to complete some orders that they had discussed with us going back a year or so. Some of it being other large industrial distributors sort of waiting around for things to improve slightly. So we still have a lot of opportunity out there, a lot of bids out there, and are very poised for the market to rebound. We are still fighting a little bit of a headwind even though we have got a lot of the new products out there, and the same goes for Nationwide.

Okay. Because the issue is how long does one sit with the excess capacity if the revenue growth opportunities aren't there, or aren't being actively pursued to fill up the capacity stream?

My concern would be, if we all knew that this was going to be another five-year recession, I would agree with you. But I am not sure anybody knows that, and I think doing something drastic like shutting down a warehouse and combining facilities, while on paper might look interesting, I think that would backfire if this market were to return in the next 12 to 18 months, even 24 months. So I hear you, and not that we don't think about things like that, that could be a major shift in cost, but I think it would bite us if that is what we did.

I think we want to grow the business. That is what we are doing, and that is what we have been doing, and that is continuing to be our emphasis, and I think short-term, and short-sighted if we were to reduce our overhead by getting to a smaller facility, yes it may help us for the very, very short-term, but it would hurt us in the long term. And we are here for the long term.

Yes, I appreciate one is here for the long term. At the same time, you need to earn a certain return on assets in the interim term, and if you view it is going to be a V-based type of recession I understand the thinking, but if you want to view this as it is a long drawn-out process, how long does one run around with a lot of excess costs, that is like swimming with lead weights around your neck?

Again, I think what you need to focus on, or what we focus on here, is how much improvement we have had in just this nine-month period over last year, and we have had significant improvement to the bottom line here. Significant. And we think it is the beginning of a good things, and though Rome wasn't built in a day, I think that we have made some tremendous strides in that regard, and I think we are poised for better times when the economy gets better. Mind you, the economy is no better, and look at what has been accomplished in all of our subsidiaries. So I don't think I share a dour view about that as perhaps you and some others may.

That is why we are asking the questions on the call, to give us some insight.

And you are free to ask. I am happy to answer anything. But I am telling you how we view it.

Right. And I am trying to understand what are you seeing that gives you that comfort?

Yes. Yes, we see a tremendous improvement this year, in a still very stagnant economy.

Right.

So we feel that when the economy picks up, I think without projecting a future, because we don't know that, but we feel like we are in a very, very good place to take advantage of that improvement in the economy.

I don't want to dominate this call. Can you tell if there are others waiting to ask a question?

We can't. You can ask the operator.

Alright. I will jump off. I have some more --

We won't cut off without getting back to you.

Yes.

There are currently no further questions in the queue.

We will finish with Andrew then.

Mr. Shapiro, your line is still live.

Okay. Great. Thank you. P&F you are not liable for any debts or anything over at Coffman any more, right?

That is correct.

P&F is not obligated on any of those.

Of course we still have that liability on the books, which you know about.

That is what I am leading in to here.

Yes, maybe I can cut you short, I don't know if you have questions about it, I will do it. But I can only tell you it is a priority here, and we are doing everything within the constraints of the accounting, and the legal areas that we can, and we have made some progress. We see some possibilities of light at the end of the tunnel, but we haven't been able to get it there yet, and I don't know if we will be successful, though I am a little more optimistic than I was, even a month ago.

And Andrew, just so you know, we plan on speaking to the Commission regarding this, and getting some guidance, because our position is that it is never going to get paid, why does it need to be on the books. But it is not a situation that we have been successful in researching and finding a similar situation, as hard as it is to believe that. So we are trying to get some guidance from the Commission, and as soon as we hear back, we will let you know.

Needless to say, it is clearly a very high priority. The bank was clearly the highest priority, but we were doing both at the same time, of course, and now we are focusing on that even moreso, and I can't promise, Andrew, a good resolve though, though I am hopeful and optimistic that we can have one.

Well, a few questions then. First off I noticed that during this quarter ended September, the number changed and dropped from the June number. Was that just some residual, and it will stay at this number going forward, or what causes any change in it at all?

I don't want to say it will for sure stay, it will likely stay at this number going forward. What happened was when the bank foreclosed, it took all of the assets, so those were all wiped out, and we had a certain level of liabilities that were on the books, and that is the information we had. The bank subsequently informed us, and we know because Richard was one of these parties, that the subdebt holders got paid, which was $250,000. So in that scenario, the only thing we could do with the change, was record it as a reduction in the liability of $250,000 and a gain. That was all you can do, because we have no other assets. There is nothing, there is no other side to the entry other than a gain.

Where do you book your gain on the income statement during this quarter for the $250,000?

Discontinued operations.

So that is where the gain from discontinued ops comes from is the reduction or elimination of the liability that so far to date, you have been required to keep on the books, even though P&F doesn't owe and won't ever have to pay a dime on it?

That is our position, yes.

That is correct.

Okay. So you said you have made some progress, so is the issue that it can't be done until year end, or what is the light at the end of the tunnel, and what is, I am still, as you guys I guess internally are, at a shock as to why or how this Company, a public company representing its debt to equity ratios and its balance sheet, has to maintain on its balance sheet, not just a number, an extraordinarily material number, $12 million or $13 million of liabilities relating to a business that is gone, that you are never going to have to pay on?

Andrew, here is the way the accounting works. There are only three ways for a liability to come off of your books. One it gets paid. That is an easy one. Two, it gets forgiven. That is easy to understand. And the third is a legal adjudication, basically Chapter 11, with a plan of bankruptcy that is approved by a Judge where the old liabilities are discharged.

How about an assignment? Because isn't that what has happened?

An assignment to whom?

The new owners?

What new owners?

This business was transferred to new Coffman.

The assets were purchased, not the liabilities.

Okay. Then the liability got forgiven then?

By whom?

By the creditors who are no longer--

We still owe $4 million on a lease, we owe $4 million on a seller note, and then multiple, multiple vendors never got their money, so how were those debts forgiven?

That doesn't mean that we are paying them, of course we are not.

So who is liable on that lease right now?

WM Coffman.

Oh, old Coffman you are saying?

Yes.

So why can't you liquidate it or file that Chapter 7?

If you file a Chapter 7 that doesn't count, because the debts are not forgiven or adjudicated by some plan of bankruptcy. The only plan, the only way for it to be removed is a formal 11 with a discharge, a 7 doesn't do it. And again, this is just the guidance we have been given by the lawyers and the accountants. We understand your frustration, because it seems so logical to us as well. But this is where we are unless the Commission comes back under some theory that we are working on that will allow us to remove that liability, but until then it is there, and there is not really much we can do about it.

I mean Andrew certainly we looked at the Chapter 7 approach, of course. Everything that you are saying, I promise you we have looked into it. Not only ourselves, with experts. We want to get rid of it too. But we don't write the laws. We abide by the laws. Whatever they are. So we can all agree, and stand on a soap box about it every minute of the day, but that is the laws of the countries and the GAAPs and the SEC.

So what is the theory then, can you share the theory that you are now positing to the Commission for them to consider?

No, we are not comfortable doing that, Andrew, because it is just a theory. We are working on it.

It is just a theory. And they are willing to talk to us about it. That is all we can tell you.

In terms of timing and milestones, whose next step is it? It is your next step to provide input to them, or their step to get back to you, and when do you expect to have the next set of dialogue?

Weekly. We speak about it on a very regular basis with the SEC. We are close to We are a week away.

We are putting together the documentation with the help of outside consultants, and we will be putting that together, yes, I would say within a week or so.

So here we are in November, your next quarter, the one we are in now is Q4, where you won't report until some time late in March. If you get some adjudication on this in a manner that changes this liability to have it removed, can you or will you issue an 8-K that will provide more real-time updating that this is going to come off of the books, or do we have to sit and wait until March?

I don't see why we wouldn't Andrew. That is a pretty substantial change.

It is material, and of course we would. If we are lucky enough to do that, of course.

It is quite material, I think that we would do that.

It takes a $3.70 a share book value, and basically doubles it.

Okay.

We understand.

Yes, we understand very well. Very well. You will know, you and the public will know if there is any resolution positively. I promise you. You will know.

Alright. And lastly, in case you have some feedback for us, as you know I wrote a letter to the Board of Directors of P&F asking for further dialogue with respect to some incremental changes and improvements in the Board's composition, and its approach to some compensation and other strategic alternatives as it comes up in the coming fiscal year, and I need to know, I guess, where I should be following up with that, or to have that further dialogue? Will that be independently, Director Mr. Utay?

Yes, I would say that would be correct.

Okay. Great. Thanks, that is all the questions I have.

Okay. Thank you.

Thank you.

There are no further questions in the queue.

Okay. Then I thank you all for being on the call today, and have a good holiday. We wish everybody a good holiday, and we will be on our call with the fourth quarter in early 2011. Thank you so much for your time.

Ladies and gentlemen this concludes today's teleconference. You may disconnect your lines at this time. Thank you all for your participation.