P&F Industries Inc (PFIN) 2011 Q2 法說會逐字稿

Good day everyone. Thank you all for holding and welcome to the quarterly earnings conference call with your host Richard Goodman. Today's conference will begin with a presentation and a question and answer session. Instructions on that feature will follow later in the program. I'd now like to turn the call over to Mr. Goodman, please go ahead.

Thanks Operator. Good morning and welcome to P&F Industries second quarter 2011 earnings conference call. With us today for management are Richard Horowitz, Chairman, President and CEO and Joseph Molino, Chief Operating Officer and CFO.

Before we get started I'd like to remind you that any forward-looking statements discussed on today's call by management, including those related to the Company's future performance and outlook are based upon the Company's historical performance and current plans, estimates and expectations, which are subject to various risks and uncertainties. Including but not limited to the strength of the retail, industrial, housing and other markets in which we operate, the impact of competition, product demand, supply chain pricing, our debt and debt service requirements and those other risks and uncertainties described in the reports and statements filed by the Company with the SEC including among others as described in our annual report on Form 10-K for the fiscal year ended December 31, 2010 and our subsequent filings. These risks could cause the Company's actual results for future periods to differ materially from those expressed in any forward-looking statements made by or on behalf of the company.

Forward-looking statements speak only as of the date in 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 and good morning everybody else for joining us today. I will begin today's short presentation with a brief summary of the Company's results of operations and earnings per share for the 3 and 6 months period ending June 30, 2011 and 2010. I will then ask Joe Molino to briefly review the key cash flow information and provide update on key events affecting the Company. After which we will move toward Q&A session.

Firstly, I'm pleased to report the Company's revenue from continuing operations were $14.164 million and $27.617 million for the 3 and 6-month periods ended June 30, 2011 compared to revenue from continuing operations of $13.320 million and $24.467 million for the same periods in 2010.

Revenue for our tool groups during the second quarter 2011 were $9.459 million compared to $8.695 million in 2010. For the six month period ended June 30, 2011 tools revenue was $19.179 million compared to $16.515 million for the same period in 2010. Revenue for our Hardware group was today, of course consists only of Nationwide Industries for the 3 and 6-month period ended June 30, 2011 was $4.705 million and $8.438 million compared to $4.625 million and $7.952 million for the same periods in 2010. The Company's gross margin for the 3 and 6-month periods, ended June 30, 2011 with 38.7% and 38.4% respectively compared to 35.2% and 35.5% respectfully for the same periods in 2010. Specifically for the tools group, second quarter and year-to-date 2011 gross margins were 37.4% and 37.8% respectfully compared to 33.8% and 34.2% for the same periods last year. For the hardware group, second quarter and year-to-date gross margins also improved reporting 41.3% and 39.8% respectively for 3 and 6-month periods ended June 30, 2011 compared to 37.9% and 38.3% respectfully for the same periods in 2010.

Selling and general administrative expenses for 3 and 6 month periods ended June 30, 2011 were $4.458 million and $8.877 million respectfully compared to $4.084 million and $8.401 million respectfully for the 3 and 6 month periods ended June 30, 2010.

And lastly, interest expense incurred during the second quarter of 2011 was $198,000 compared to $337,000 during the second quarter of 2010. For the 6 month period ended June 30, 2011 interest expense was $419,000 compared to $726,000 for the same 6 month period last year. The above factors were contributed to the Company reporting in $828,000 after-tax profit from continuing operations for the second quarter compared to $269,000 during the second quarter last year and an after-tax profit of $1.307 million for the 6 months ended June 30, 2011 compared to an after-tax loss from continuing operations of $438,000 for the 6 month period ended June 30, 2010.

Translating onto basic earnings per share from continuing operations for the 3 and 6 month periods ended June 30, 2011 with $0.23 and $0.36 respectfully, compared to $0.07 and a loss of $0.12 for the same periods in 2010.

And lastly, diluted earnings per share from continuing operations for the 3 and 6-month periods ended June 30, 2011 were $0.22 and $0.35 respectively compared to $0.07 and a loss of [$0.10], -- $0.12 excuse me, for the same periods in 2010. That's my report and at this time I've asked Joe Molino to provide, briefly, some insight into our cash flow. Joe?

Thanks, Richard. Just a couple of items affecting cash flow for the 6 month period. Capital expenditures for the first 6 month of 2011 were $443,000, that was up from $99,000 in the same period of 2010. Other items of note, depreciation was $700 -- excuse me, $797,000 for the 6 month period and amortization of other intangible assets was $175,000 for the 6 month period ending June 30, 2011.

Other material components contributing to that cash provided by operating activities of continuing operations were, increases in accounts payable of approximately $847,000, which is typical for this time of the year. And second, we were also successful in continuing to reduce inventories for the first 6 months by $972,000. With that I'd like to turn the call back over to Richard. Richard?

Thank you Joe. Lastly I would be remiss if I did not acknowledge all of our employees and management for doing such outstanding job in these incredibly turbulent times. It is no small feat in this day and age. All of us always believe in our Company's products and customers and with our hard work and perseverance, P&F is getting stronger once again. That's the end of our report and I'd be happy to answer any questions anybody may have. Operator?

(Operator Instructions)

Our first question is from Andrew Shapiro, your line is open.

Hi, I have a bunch of questions I'll just ask a few and back out into the queue to let others in here to ask. So, in your press release in your description here, I have a query about Florida Pneumatic and year-over-year, was the lack of the Sears promotional orders this year or this quarter versus last year the function of a short-term timing issues? Or did Sears defer the promotion for a full year?

They deferred them.

Yes, they did not have -- I'm guessing, but I believe it was a Father's Day promotion. They skipped it this year.

Okay. And the Florida Pneumatic revenues, this quarter, dropped from last quarter, is that a seasonal issue? Because it seems last year Q2 was higher than the prior Q1. So what's going on between last quarter and this quarter within Florida Pneumatic?

Well again, I'll let Joe comment, but the obvious answer is we had that promotion in the second quarter of last year, the Father's Day promotion and that skewed the numbers and of course we didn't have that this year. But Joe's right here.

Yes, I mean, that's the basic answer, I don't know there's any particular seasonality issue between Q1 and Q2 for Florida Pneumatic that I'm aware of.

And also Andrew, I don't believe the revenue dropped. I believe it went from $5.115 million $5.117 million so it was flat. It wasn't down.

Oh, okay. Our spreadsheet had the -- (multiple speakers) I understand that then.

I would view it as it went up or flat.

Yes.

Without a promotion, which is very good for our people.

Now, the improvement in, again in the tools segment here, the improvement in gross margin in Hy-Tech that was described as two general categories, the category not the product mix, but the category related to lowering cost of manufacturing, to what extent is that lower cost of manufacturing was it due to increased absorption of fixed overhead at Hy-Tech? Versus other manufacturing margin enhancements?

It's almost exclusively overhead -- improved overhead absorption.

Okay. And with that in mind, in the past quarters I've asked about it, you have had improvement in revenue still, but trying to get a feel for in the past quarters you described the under utilization of overhead or capacity utilization to be around 50%. Where do we stand here now in the -- after the second quarter to get a feel for overhead absorption benefits as if you can ramp further revenue growth?

I would say that, that hasn't changed significantly, but I will say we are trying to put a second shift together. In that we have plenty of orders, but until we are able to do that I'm not sure we can grow revenue a whole lot more. But we are working on a second shift.

And that's at Hy-Tech or Florida?

I'm sorry Hy-Tech, yes.

Okay, and what about Florida Pneumatic? That has excess capacity too, right?

Yes it -- yes it does and I'd say the same thing goes Florida in terms of where they were, I don't think we've absorbed a whole lot more capacity between the first and second quarters.

Right. Now comparing Nationwide's gross margins of last year, can you quantify what those margins would likely have been without the extra cost last year caused by the last year's lender issues?

I mean I would -- it's a little bit of a fuzzy answer. I mean part of it is we expedited cost to get product here. We lost some absorption because we didn't have as much throughput because we couldn't -- we didn't have product. Cost us some money to air freight product out to customers because it was so late.

We also ended up having multiple shipments to customers because, as we got it we sent it to them so if they'd ordered 20 products, 20 items, and we only had five we shipped them 5, the next 5 came in we shipped them the next 5, the next 5 came in we shipped the next 5. In some cases, we had 4 shipments per 1 order so that was tremendously costly. (multiple speakers)

But you can't quantify, you haven't really done that for the board?

It's in the hun-- it's in the hundreds of thousands of dollars, is it a million? No.

Alright.

But I don't know if that helps you.

No, that helps. Now, did that last into Q3 at all, as well?

I would say we were getting out of it into Q3 but, yes, there was some in Q3.

Okay, I'm going to ask one more question then get out into the queue but I have more behind that. Regarding SG&A, you mentioned a few items of the SG&A, but one of them was increased wages year-over-year described as about $433,000 increase in compensation. Now some of that is the reinstatement of compensation from the across the board 5% cut that you guys took but obviously increase is a bit more than that. What I wanted to understand was can you tell us how much or what portion of the $433,000 is due to the accrued bonuses?

I would say I'm going to say half and half and the bulk of those bonuses are for the subsidiaries. That's where the biggest numbers coming. So I'm going to say half from wages and half from the bonuses.

Okay, so about $200,000 and we will call it $10,000 is on the bonuses and then you just referred to some of that being in the subsidiaries so that $210,000 --

It's almost all of it. The bulk of it is any subsidiaries.

In terms of accrued bonuses?

And wages, yes.

That's where the bulk of that money is.

So of the $210,000, then the accrued bonuses that are being paid out for this quarter not much of that is for the executive offices of Mr. Horowitz and you?

I mean, it is a formula based figure. It is a fraction of the total. The biggest chunk is the subsidiaries. They are the ones generating tremendous improvement and profit.

And it's not paid out, Andrew. It's paid out next year, obviously.

Yes, but there is a certain contract in accruals then it just subtracts -- I'm trying to understand pay equity and how much is going to those who created and how much is going to the Corporate Office in Long Island.

The Corporate Office creates it also, Andrew. But as he answered 5 times now, the majority of it is going to the subs.

Very good. I will back out in queue. I have more questions. Please come back to us.

Thank you. Our next question is from William [Kidstein], your line is open.

Hi, good morning, gentlemen.

Good morning.

I just have one question. Can I get a quick update on the property escrow and the litigation surrounding that?

You're referring to the lawsuit that we had, is that what you're asking about?

Absolutely.

Yes. Well, it's a timely question. A few days ago the court entered a judgment, which provides that our embassy subsidiary is entitled to the $650,000 deposit plus interest of approximately $50,000. We are still seeking -- we're in the process of seeking an appeal for us, for an additional interest in the amount in excess of $200,000. In excess of that, which we believe we are entitled to.

But we do not know at this time with the appellate courts will even grant our request for this appeal. They may not. And it is more circumspect that they do, actually, but in the meantime we believe the $700,000 will be coming to us sometime in this third quarter. But we -- I haven't mentioned to you that we -- I cannot guarantee you that, I cannot make any assurances about that it is a timing issue. But we plan to make a public announcement when we receive such amounts, whenever the time comes.

Perfect, thank you gentlemen.

Alright.

Thank you. Our next question is from Timothy [Stabosz], your line is open.

Oh, okay. Didn't think it registered. Joe, what do we have here in NOLs? I've notice where you didn't pay, what, really any taxes --

Yes.

Here this quarter to speak of?

Yes.

What do we have left in NOLs and they don't expire for a long time or what?

We -- I'm going to throw out a number, I'm looking at my Controller. It is in excess of $7 million in NOLs.

Okay.

So, I'm -- I'd be the first guy to tell you I'm not a tax guru, but in layman's terms I would say, roughly, that means for the next $7 million of profit that pretax income we will not be paying taxes. Approximately, now there are state tax issues and those we'll be paying some state taxes along the way, I'm sure. But you know I would say for federal purposes we won't be paying taxes for a number of years.

Okay. Thank you. What's the status of the -- is there a compensation study currently going on for the Executives?

Tim, as you know, the [Plument] is due to expire at the end of the year and we are in the middle of that process now. I don't know what else I can say to you.

I'm sorry, I just was asking a question. There is a firm that's doing an analysis, right? I'm not talking about the internal -- the Board of Directors that's the comp committee, I'm talking about the outside firm.

I don't know if I follow your question. Please say it again.

Sure. What's the name of the outside firm again, that's doing the comp analysis?

I can't discuss that. That's not my -- first of all, I don't know and second of all, it wouldn't be a purview of my comments. It is just not something I can talk about. (multiple speakers) What's that?

I thought we previously announced this, I just wasn't sure if --

No. We have not. No, no. But the comp committee is doing -- is in the middle of its middle of its job.

So, we're still waiting on a report from the outside firm, right?

I can't tell you. I don't know what the comp committee -- I can't answer that question. I don't have the knowledge to answer that question.

Okay.

I'm not being evasive, I just don't know the answer to it, I'm sorry.

Okay. But, you know that there's a firm that's -- we certainly announced that there's a firm that's doing an analysis, right? I thought we said it was [Natel], or you don't even know if it is Natel?

I can't -- I don't know.

Does anyone in that room know? (multiple speakers) Does the Attorney with the Company know?

Tim, again, the contract is up the end of the year and at that time there'll be a new contract. And that time -- the committee, the comp committee is doing its work. That's all -- this is now the beginning of August. That's all I can tell you. I can't comment any further.

How about Mr. Goodman?

Tim, we can't comment any further and this is a Q2 conference call. We're talking about the results of Q2.

Well --

So, please, please, please Tim and Andrew anybody else, let's keep the comments to the Q2 comp numbers. Thank you.

Well, that's fine, but executive salary's are relevant to the future profitability and what not.

I can't comment any further, Tim. Any other questions about the Q2?

Well, it would have been helpful if you would have simply said we're not going to talk about executive compensation period because that's what you're essentially saying. Right?

Any other questions about Q2, Tim?

I will get back in queue, I'm frustrated right now, Richard.

Okay, go ahead.

Thank you. Our next question is from Andrew Shapiro, your line is open.

Okay, a few follow-up questions from what had just been asked by the questioner before, Tim. On the litigation to recover the property escrow, you mentioned that the court finalized judgment just a few days ago, which we thought that would've happened sooner. And there's an appellate process for which you're deciding whether to appeal be compounded statutory interest for that extra money. Has the defendant, who lost this case, exhausted all of their appeals and this $700,000 at least is a final judgment?

I will let Richard comment on it, but the answer is we are not deciding. I will just clarify one thing. We are not deciding about going up to the appellate court for the $200,000. We have decided to do that and we submitted papers in that regard. So we are waiting to hear from the appellate court if they will look at our case or not. That's up to them but I will let Rich go forward.

Before you get to Richard -- before you get to Rich, does that mean we've already bourne the legal expense of that filing the papers in the appeal process so that if the appellate court says no, we have no more, at least, no more expense, of course were not getting the $200,000?

The expense so far to seek the appeal, is very minimal. There's just literally a filing. So if they say no then the expense are over obviously. If there's a process going forward there could be additional expense in that process.

And I'm sure you guys have weighed the prospective cost of that appeal to get the $200,000, right?

Absolutely.

So, let's go to the other part of the question, Rich then.

Okay, with a final judgment, we're going to the process now to the money out of escrow. As to whether the other side thinks they may have some avenue to delay or to push us back we don't but we think we should get the money out promptly. No, but if they, If they try to move, I don't know what would be, we have to react to that when it happens.

But are the rights to appeal expired?

We believe so.

Okay. So their right to appeal expires. And so you'd be issuing announcement, you'd be recognizing this in Q3. It is nowhere on the books, nowhere in the footnotes it would be a one time, nonrecurring gain on litigation, where you -- would it be below the line? Where do you -- be shoving this?

Andrew, the concept of below the line doesn't even really exist anymore. The circumstances under which you'd have an extraordinary gain, I can't even come up with a scenario anymore. Anything you'd of it is pretty much considered operational at this point. So it would be obviously one time, but would be above the line.

So you do a reduction of G&A or -- when you break out your results, you'll break that out in another row?

It'll be a reduction of G&A. We'll certainly break it out and make it clear in our filings what it is and how it separates from everything else.

But -- Let me just, let me just, I don't want to have to get on a Q3 call if we haven't -- if it hasn't been -- we haven't got it yet. I just want to tell you, that's where we're moving and that's -- but there are no assurances that it will be done but we expect it to be, it's a little out of our hands. Were in a good place on it and it will be resolved.

Well, if you're saying that their rights to appeal are exhausted, and we're are due the money and it is August and you have a court judgment it seems like the Sheriff can go there within the next six weeks and get you your escrow money.

I'm not a lawyer and Rich Goodman is but I've spoken to Rich and our Attorney on this matter many, many times and there are things that they could do to just hold out. They can't get it back, they can't get it back, it's just a timing issue.

And Andrew, the defendant in this case, the other side, I'm not sure it's a plaintiff or defendant, the whole way fought and exhausted every option to prevent us from getting that money. So we are just being cautious because of who we are dealing with.

Alright. Well, I'm assuming at some point this is going to find its way in your 10-Q and your disclosures and you'll keep us updated now that it's a final judgment?

Absolutely. 100%.

So, this gain would avoid taxation, courtesy of your $7 million NOL. This company is now, I think, generated four quarters of sustained profits from continuing operations? At what point do your auditors or does GAAP require you to book a differed tax asset related to the remaining NOL?

Well, we have a -- the deferred tax asset is already on the books. It is right there on the balance sheet. I'm not sure if it's in current or deferred, or excuse me, current or long-term, it is probably in both. It is there. It's been booked.

Okay, so you --

Let me make a statement. In it -- on our tax books, it exists at approximate $7 million. On our GAAP books, there is a significant valuation allowance that we were required to put into place pretty much as we were booking those NOLs. And what I mean by that is at the time of those losses, as you can imagine, the discussion with the accountants is the following. What is the likelihood that this Company will be profitable enough in the next X number of years to take advantage of those NOLs and I will be honest, the accountants were very conservative and firm about how we would go about booking that allowance.

And we put a substantial allowance in there, obviously at the time we were doing nearly as well. It is been my experience with those sorts of reserves that it is not as easy to unwind as it is to put on the books. But I've certainly -- those conversations have to take place at the very least annually, if not quarterly. We review the allowance and certainly if we feel that the probability of using -- utilizing them going forward grows and the allowance can come down and then the book value, their balance on the books will grow. But that $7 million I was referring to is a tax number, which is the cash number, the number that matters but for GAAP purposes it shows as a much lower figure, I think it is $1.7 million or something like that.

Right. Well that's why I -- (multiple speakers) You've had sustained profitability and GAAP may require the valuation reserve come down and the asset get book.

Yes, there's no doubt and that's an analysis that takes place every -- regularly. Continuously.

With receipt of the $700,000, when it comes, but even without it, the improvement in the Company's working capital, the improved or profitability that's creating recurring and sustainable cash flow, this Company has paid down its debt quite a bit and your debt to equity ratios are now getting down to your historic norms. Where you have been undertaken either acquisitions or you've undertaken Company stock buybacks because perennially the stock has been big discounts to book value. What kind of debt-to-equity level or are you getting near those debt-to-equity levels where the discussion in the Boardroom, Richard, turns to flipping on the opposition switch and, or buying back and retiring shares if they are at these very cheap and accretive levels?

Andrew, it is a good point. We will absolutely talk about it pretty much every Board meeting. And we will talk about it certainly at our next Board meeting. But I mean, I just think we've done our Company has come back from the throws of --

Bankruptcy?

Yes, exactly. It's a bad word, but we've done that and we are in a very good place, thank goodness. I think prudence and sustainability especially with Rome burning all around us everywhere, as we all read the headlines and see it every minute of the day, I don't know how -- the sustainability, hopefully will be there. And I think we just have to wait and see but I can assure you that it will be something that we will be discussing at our next Board meeting and it is something we talk about all the time. And you make a good point.

Right because the debt-to-equity levels are now down to those lower levels and maybe you take it a little bit lower because of what we've been through, but you're basically one quarter away especially with a one time escrow litigation recovery of $700,000. You are basically that recovery away from having a more conservative debt to equity ratio than this Company has seen maybe ever. And in light of that, then the question then arises about returning using that capital for accretion, retiring shares, I don't think you'd be doing a dividend, but dividends always a nice thing. But otherwise, are you ramping up the acquisition machinery again? And if so, what are you looking at because past acquisitions sometimes have got us in trouble.

Yes, right. And some have not gotten us in -- some of them have helped also as well. Not to be defensive, but just be honest on both sides. But the answer to that question also is yes, we are starting and we have started, actually, looking at acquisit -- we are in a better place to do that now. And that's what we -- that is absolutely part of our long-term -- I shouldn't say long-term, strategic plan going forward and we actually had a meeting last week or so with our strategic planning committee and that was exactly the subject of it. So the answer to your question is our eyes are open and we are pursuing it and it didn't just start, it started a couple months ago.

Well, if you have a strategic planning committee then you have a focus on certain things. Can you share where your focus is on looking for acquisitions?

When it's resolved and finished, I guess we can, perhaps at that point. It is a question for the lawyers but we are not at the point yet Andrew that you --

I have some more questions. I'll back out into the queue in case others are waiting but please come back to me.

Go ahead, I don't have any others in queue.

Okay, thank you. In light of what I raised, on the last quarterly conference call, in light of the fact we just reported quarterly earnings numbers you've now said that the litigation award is a final judgment, the timing of which when we get the money is only open to question. But you cannot put that out there on the table, the Director and Employee stock purchase window ought to open. Have my concerns about the definition of the Employee and Director stock purchase window then considered and better defined? And secondly, my concerns about inside ownership in particular, that of the Directors of been known and discussed because we saw no new form fours and no Director acquisitions of stock over the last quarter.

Yes, Andrew, we have been an acquired period for I guess the better part of four to six weeks or something like that. I'm not exactly sure what and the window opens up 48 hours after the earnings are released, now. And we've had a few of our Board members, independent of you, but have asked us for guidance and Rich has given them all the window that they can buy stock on. And I don't know what they are going to do but we've had them all ask -- not all but a few of them have asked and we've given them the information about the window, which is I guess about another four or five week window from here. So, Rich you want to comment further about that?

Just to reiterate that your concerns have been passed on to the Board.

We discussed it at the -- after the Annual Meeting -- and we discussed it with you. I've discussed many times, but again, I can't make people buy, I can only tell them what I feel and I do agree with you. And I've told them many times as recently as our last meeting and then we proactively contacted them all and told them when the window opens after this earnings call. So they know and few of them expressed interest.

Sounds good.

How it's going to play out, I don't -- I can't promise you what it's going to be but I can tell you I've had some inquiry about it.

Now, I know that you personally can't demand or require that of the Directors, but the Board of Directors as a whole can adopt a policy, that eligibility on the Board of Directors includes a stock ownership requirement of X number of shares. That actually has been adopted by many a company. Giving Directors time to get that higher place.

The same thing, frankly, goes for senior executives. Your share ownerships obviously not an issue, but frankly, I'd like to see Joe own some more shares rather than just have options that are out there and un-exercise. But it is something the Board can adopt as a policy. So please pass that along for --

I will pass -- I will certainly make a note and we will pass it along to our next meeting.

Great, now new product development. Last quarter, Joe talked about many different projects going on especially in expanding the industrial tool line primarily in Aerospace. And you had mentioned Richard, Ingersoll Rand then was struggling to meet demand and so Florida Pneumatic and Hy-Tech were facing maybe a potential opening. Have there been new products that have been introduced? And what is your new productive development going on now and is it still just in Aerospace or what areas are you getting traction and where are you focusing your resources?

I will let Joe answered a little more detail, but I can tell you that we have had traction as shown by the numbers that Florida and actually Hy- Tech also, but more specifically Florida in this case. You know, I've had the industrial line in the quarter and actually for the year the numbers are dramatically up as a percentage to small base, but it has been doing that. And we are focusing on it in both of our Companies actually, but Joe, you want to answer?

Yes, I would say it is not just Aerospace. We are still trying to figure out what Ingersoll Rand end game is in terms of what products they're planning to continue, which ones that they plan on abandoning. So while we are -- while we certainly have some product we can ship now we don't have at our disposal the full suite of Ingersoll Rand products.

I think we want to see how they sort things out a little bit before we go starting on the development, a specific development program. But those programs do continue, but I think we'll know a lot more the coming quarters with respect to what they are going to keep and what they are going to discard and that perhaps will drive some of our choices. But I wouldn't say it is just Aerospace. I mean, we're taking advantage of mutual sales really across the board.

Okay. And last quarter Florida Pneumatic had some revenues and rollouts of initial rollouts into a new retail partner tied to Sears. And you couldn't say who the new retail partner was then, I hope you can say now. One of the additional open items can you say who the new retail Partner is yet?

It is a part of Sears. We couldn't do that, I'm sorry.

Okay. The other thing you couldn't say last quarter, you just didn't know and maybe you have three months more visibility, was whether or not this initial rollout was just inventory stocking or it is already regular and recurring sell through. What have you seen this quarter with that new partner and you're conclusions from what happened last quarter now from that?

Yes, the last quarter was quiet with that other customer -- that new other customer. The first quarter was a little bit of stocking and getting into the system. They are talking about opening up more of their stores to the line, which that wasn't there before so they are looking to expand it but we haven't seen any significant orders since the first quarter.

We don't have access to that data. We just don't really know what the ultimate sell through is.

Right. Okay. And the same thing focusing on national -- the fence and hardware side. There were some new fence products that you guys introduced last quarter.

How did they get received and what are your thoughts about the segments, subsegments of -- that you've talked about that have been and remain weak? The prospects for the home construction, new builds maybe even the [Army] markets are not all that great. Are you guys still focused on holding out and riding out what could be a very long storm? Or are you considering making changes and taking proactive steps to enhance the profitability of that division?

I think we have taken some very good steps now regarding even in with this housing slump not growing, I think our return assets and margin are growing dramatically unless I'm missing something. Am I right? (multiple speakers)

I don't think -- does your disclosure allow us to be able to see the return on assets and equity in that segment, the fence and hardware segment and those subsegments in particular?

Yes, our fence and hardware, Andrew are up very nicely. So I don't know, I'm at a little bit of a loss.

Well, no, we're talking about the subsegments there that you have talked -- have in our -- (multiple speakers)

Your talking about the kitchen and bath? Is that what you're talking about?

Kitchen and bath, exactly.

Yes, okay, yes that's something we are absolutely looking at because it is not doing as well as we would like to for sure. And we are looking at it.

And its prospects are still very constrained so --

Yes, they are, they are, yes.

This quarter were there any nonrecurring costs to speak of, Joe?

No. Nothing that I can think of, of any material nature.

Okay.

What about Board members was commenting on the audit call that it was nice to see a shorter report with less ifs, ands and buts for a change.

Yes, yes it always is. You bet. Okay. I guess I look forward to your receipt of this money. Your debt-to-equity level is getting to be where we start asking and pounding on the table about either a dividend or a buy back. But you seem to be getting close to it already.

Yes. Thank you for your support, Andrew.

Thank you, good-bye.

Our next question is from Timothy Stabosz, your line is open.

Is the Company precluded from achieving, pressing question for Joe I would think or Richard, is the Company precluded from achieving previous peak earning levels? It seems like we've obviously done a lot or at least a fair amount on the cost side.

And Joe, do we have any sense of what our pro forma peak revenues are with the businesses that remain now that the old staircase division is out of the Company and stuff like that? What's the size of our Company now versus what it was back in '06 or '07? Can you talk philosophically or generally about my question?

I think so. What's our potential peak business? I would say the following, there remains lots of opportunity for growth for all of our businesses in relation to where they were back, we'll call it '06, '07 we didn't own Hy-Tech until '07 and while our revenue levels aren't back to the peak of '08, '07 was a short year, the profit level is actually higher.

Florida Pneumatic, the industrial business is quite a bit larger than it is ever been. And that we continue to have opportunity there. I don't see -- Sears will have some opportunities but that's not a growth customer, I don't think that's a big secret. So are there other parts of Florida Pneumatic can grow and Nationwide as I think we've stated, can grow substantially in a better housing market, but you know, I don't know when we will be back in a robust market or even a mediocre market.

I think -- I don't mean to interrupt you Joe, but I don't know if this is what you're asking but I will answer it the way I would understand it. I would say that despite housing prices still being in full blown bloom in the economy and the world still in a very, very bad place, our revenue for the six months have grown over 10%. And that's in a very bad climate. So we would look forward to when the climate improves, as the climate improves that the combination of our doing better with an improved climate and as well as our management with all the opportunities that we are working on in different areas even in these times -- are we $100 million Company with these companies?

The answer is no. But we are way more than a $50 million or $55 million Company when things get better, I think. And now that the cash flow is getting better I think that we are once again in a place of thinking about how else we grow the Company and that's what we are doing. I don't know if that answers the question but I hope it helps. (multiple speakers)

I guess you said, are we a $100 million Company no but $50 million is too low so that gives us a bit of the sense of parameters?

Okay. So, I'm happy I was able to help you some way.

I think given time, is it possible to be a $100 million Company? Sure, with some prudent acquisitions, yes absolutely.

Okay. That's all for now, thank you.

Thank you. And I have no further questions in queue.

Okay, thank you all for coming on the call today and spending an hour with us. We look forward to seeing you at our Q3 call. Thank you for your time.

That concludes today's conference. Thank you for your participation. Everybody may disconnect.