P&F Industries Inc (PFIN) 2020 Q2 法說會逐字稿

Good day, and welcome to the P&F Industries, Inc. Q2 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Richard Goodman, the company's General Counsel. Please go ahead, sir.

Thank you, operator. Good morning, and welcome to P&F Industries' second quarter 2020 conference call. With us today from management are Richard Horowitz, Chairman, President and Chief Executive Officer; and Joseph Molino, Chief Operating Officer and Chief Financial Officer.

Before we get started, I'd like to remind you that any forward-looking statements discussed on today's call by our management, including those related to the company's future performance and outlook, are based upon the company's historical performance and current plans, estimates and expectations, which are subject to various risks and uncertainties, including, but not limited to, risks related to the global outbreak of COVID-19 and other public health crises; exposure to fluctuations in energy prices, debt and debt service requirements, borrowing and compliance with covenants under our credit facility; disruption in the global capital and credit markets; the strength of the retail economy in the United States and abroad; risks associated with sourcing from overseas, importation delays; risks associated with Brexit; customer concentration; adverse changes in currency exchange rates; impairment of long-lived assets and goodwill; unforeseen inventory adjustments or changes in purchasing patterns; market acceptance of products; competition; price reductions; interest rates; litigation and insurance; retention of key personnel; acquisition of businesses; regulatory environment; the threat of terrorism and related political instability; and economic uncertainty; and information technology system failures and attacks; and those other risks and uncertainties described in the reports and statements filed by the company with the Securities and Exchange Commission including, among others, as described in our most recent annual report on Form 10-K, our quarterly reports on Form 10-Q and our other filings. These risks could cause the company's actual results for future periods to differ materially from those expressed in any forward-looking statements made by or on behalf of the company. Forward-looking statements speak only as of the date on which they are made, and the company undertakes no obligation to update publicly or revise any forward-looking statements whether as a result of new information, future developments or otherwise.

And with that, I would like to now turn the call over to Richard Horowitz. Good morning, Richard.

Good morning, Rich, thank you so much. And good morning, everybody. Thank you all for joining us this morning to discuss our second quarter 2020 results.

Before I get started, let me just apologize in advance with the -- in New York, where we -- where our home office is, there has still a week later -- there's been enormous outages, power outages, power surges, lack of other things. So our phone lines are very, very weak, believe it or not, after all this time, even. So we're going to try to speak up as much as we can. We may get interrupted in the middle of the phone call, hopefully not. But just to put you on notice about that.

I hope all of you are doing well under these most trying circumstances and times that we are living through. I'd like to acknowledge that this has been and continues to be extraordinarily challenging times in terms of health and the economy, and our thoughts are with all those who are affected by COVID-19.

I would like to direct you to -- your attention to the company's press release that was released earlier today, which includes the company's June 30, 2020, balance sheet, statement of operations and statements of cash flow.

In order to streamline today's call, I would like to note the following. First, instead of our management summarizing the company's results and other information from the press release, as we have done historically, we have decided to move directly to the question-and-answer session. Anybody who reads the press release gets all the information. There's no need for us to recite it over and over again.

And second, please be aware that we will only be answering questions relating to the company's results of operations and financial conditions. We must insist that you adhere to this procedure. Management will not be entertaining any questions that go beyond the scope of this call and this quarter.

And with that said, we'd be happy to answer any pertinent questions anybody may have at this time. Operator?

(Operator Instructions) We can go ahead and take our first question from Ken Fell from Fell Capital Management.

In your release, you talked about the 840...

I'm sorry, we're having troubles hearing you Ken. Could you speak a little louder, please?

Yes. On your release, you talked about the $840,000 reduction in SG&A. Can you give some of the detail of that? What goes into that $840,000 number?

Sure. Joe, you can answer that question.

Sure. That would include things like advertising, co-op -- co-op fees we pay to customers, freight reductions, compensation, anything related to compensation that would go down with compensation. Those are probably the bigger items.

And Joe, do you see any of those reductions being permanent for the rest of the year?

Yes, I would say it is likely that those reductions will hold throughout the rest of 2020. If this is going to be our revenue, it would be in that -- well, let's put it this way. I don't want to -- we don't anticipate a large rebound in revenue in the foreseeable future, certainly for 2020. So I would say, yes, those reductions are going to be -- I wouldn't call them permanent but certainly through the end of the year.

So I guess if we just said that it all ties to revenues, that would be a fair statement.

Yes. And there are some subject -- there are some -- variable and subjective expenses in there that were also reduced to try to save money.

Yes. Sure, sure. Do you maybe foresee any additional reductions going forward?

It is dependent on the revenue stream going forward. If things were to worsen in a significant way on the top side, yes, we'd have to make further changes.

Okay. Fair enough. The $1.6 million impairment charge -- can you give us some of the specifics for that? What was it in regard to?

The bulk of it is related to the high-tech subsidiary, and the bulk of that is related to an intangible labeled customer relationships, and we see probably a little more accounting detail than you need, but there is -- when revenue falls this dramatically, new projections are performed internally, and we work with a valuation consultant to try to develop what the impact would be on that intangible. To the extent revenue falls, kind of by definition where these valuations are done, customer relationship value also drops. It's just sort of the nature of how these valuations are done. So I don't know if that -- hopefully, that answers your question.

No, that is helpful. And I was always under -- at least I had the idea that these impairment charges were done at the end of the year and not quarterly. So is that a good --?

Yes. Well, management is actually required to review it quarterly. In the absence of dramatic changes in revenue, you typically don't make changes during the year. But as per GAAP, if there's a dramatic change in things, a significant event, i.e., COVID, will require to take a look at things each quarter. So we did obviously and felt that that was the appropriate adjustment.

Okay. And getting your crystal ball out, do you anticipate any more charges in the coming quarters?

Again, this is sort of the nature of the way these things work. If revenue is steady going forward, I would say no. In addition to that, we've taken a pretty big chunk out of the intangibles. In fact, I believe on the customer relationship side, I don't have it in front of me, but I'm not sure there's even much of that left on Hy-Tech. So I'd say the short answer is no, I don't anticipate, but the market will decide.

We can go ahead and take our next question from Andrew Shapiro from Lawndale Capital Management.

Okay. So in your comments in the press release, you had, I guess some -- we won't call it a forecast, but it's just some insight as to what you were seeing here because we're already in August. And I'm also trying to get a feel for how you came out of the quarter ended June, because obviously April and May were very bad, but I don't know if you saw any green shoots in June. On our last conference call, when I asked about different catalysts to look out for, for growth or that you guided to different catalysts to look out for growth, you mentioned a few items. And oil and gas prices are trending back up to $40 a barrel. Some planes are going back in the air, albeit the 737 is not -- MAX is not up there yet. But Boeing's even announced plans for some production, I think, reinstatement. And mobile jobbers are starting calling on garages again. So did you experience or see any green shoots starting in June? Or are you seeing them -- and are you partially seeing them now or more follow through going into August?

Well, the short answer is we did not see any of this in June, at all. And we did see -- we've seen and continue to see, but I don't want to overly emphasize, but we've seen a little bit of breathing room and a little more activity from our general customer base. Having said that, $42 a barrel price for the crude is nowhere near what there needs to be for there to be drilling.

If you look at the -- I believe it's the Baker Hughes rig count, I'm pretty sure that's what it is, the rig count is basically de minimis. It's like nothing. And it's been -- we went back and we looked -- we haven't seen this low a rig count since -- we stopped looking at 1968. That's when we stopped -- going back from today. All the way back to 1968, there hasn't been anywhere near this kind of a low number of drilling. People just simply, in America, aren't drilling because the pricing is just not there. We've been told -- we're not experts in the oilfield; we're experts in making tools for the oilfield, but we've been told that oil would have to be in the mid-50s for it to even be breathing, and not to be robust, but to just get started again where people would do it. So mid-50s. So we're far off those numbers, unfortunately. And then having said that, there is a little bit of activity in the tool -- we're seeing a little activity, and when I say little, little activity in that area.

As for aerospace, Boeing is virtually nonexistent. We are still waiting for them to be approved by the FAA for the 737. They have -- they passed all their tests, but they still have more things to do, and that hasn't happened. They say that -- they said that they were going to be making -- don't hold me to the exact number, but in the 20s, make 20 a month or something along those line where they were making --

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-- 4x that amount before this. And we've been getting sporadic, and I mean sporadic orders from Boeing, but not from Washington state, which is the big place. We've been getting sporadic orders from other places, even Europe, but nothing of any consequence. So there's been no activity, and they're not taking visitors in there, still. So there's just nothing going on there. It's amazing to us that the government hasn't really stepped in there because they keep saying how important Boeing is to the economy and the country, and they haven't done anything to be proactive about it. So that company is still floundering dramatically, and horribly.

As for mobile jobbers, I don't -- maybe Joe can give some color on that. We are finding AIRCAT to be fairly robust, I mean in a relative sense. I mean compared to where we were a couple of months ago. And we have found our retail business to be also fairly robust compared to where it was. But it's been for the last 6 weeks or something to that, since the midyear. And so we're cautiously optimistic that we're starting to our head in the right direction, but nothing to get crazy and excited about. Joe, do you want to add to any of this?

The only thing I would add is that on the automotive side, people aren't buying new cars right now. So they're repairing the old ones. And once the shops were open, people did have to bring the cars in. So that work continues. And people need to order their tools.

Right. And then with respect to the recently acquired gear business, when you integrated it in, you'd said there was obviously some maybe disruption and that things would then ramp up. Are you experiencing that kind of ramp up on the order volumes and -- or are those orders at depressed levels because of the pandemic as well? It seemed these gears, this custom work that you guys do might actually be in greater demand during this time.

Yes. Again, the short answer is yes, we're doing all this setting up and moving it and getting the glitches out and getting it all going in our new factory in Punxsutawney, that's all behind us in the first half. Really at the beginning of the second quarter, it was kind of like, behind us. So -- and we've been -- we are at -- I think we recited in the Q or perhaps even at my -- I believe in my press release, one of them we said that we are at the levels that when we bought the business, the pre-pandemic levels of sales. And if we could get out, if we were admitted into some customers that we've had, we would -- we are very confident we would be getting a lot of business. But unfortunately, they're not letting us in. So we're getting enough business to keep to the level that we were pre pandemic, but we feel that we can go much more as soon as we can get out and see people.

We talk to them, but it's an engineered product. You have to see things. And so we get some business, but not as much as we would get if we were able to get out there. And we're hoping to get out there very, very quickly. Joe, do you want to add on?

Yes. I would just add that it's an engineered sale. And in many cases, you need to work with another engineer on exactly what you're trying to accomplish. And while some of that can be done over the phone and the Internet, it's a lot easier in person. And certainly, we've been trying to grow the business and work with people we've never worked with before. It's really difficult to do without a face-to-face meeting. And some of our key target customers with lots of locations, just frankly aren't letting us even have a visit. So until that changes, we're probably stuck at this sales level, which, frankly, I'm not disappointed in considering where the world is and we're kind of flat from what we bought.

Yes. And we think the prognosis in that area is very, very promising when the world gets into some kind of a semblance of order.

Okay. And when you said things on the retail side had been holding up, are you referring when you use the phrase retail, that includes or is a Home Depot?

Home Depot.

Okay. It appears from the published balance sheet in your press release that maybe some of the PPP loan was reclassified as a current liability. And if so, can you explain? Is this due to headcount reduction or some other factor?

Joe? I mean, we're going to be -- as soon as we're able to -- in October, I hope -- Joe will explain that, but as soon as were able to in October, hopefully, because the loan forgiveness, we will be doing -- we intend to do that. We also want to do it. We don't -- we expect there to be no issues at all. But Joe, why don't you talk about it?

Yes. Here's sort of the mechanics, Andrew. Since we are not certain that the loan would be forgiven, the documentation right now states it's a 2-year loan, no interest until month 7. The -- so we basically developed an amortization schedule beginning in month 7 to pay the loan down over 8 -- the full amount of the loan down over 18 months. And the principal payments that are made between the date of the filing and the next 12 months is considered short term and wouldn't be long term. That's just how it is. So that number will move, obviously, each quarter.

So you're building an amortization of principal because of GAAP or --? Because the loan term itself doesn't require repayment until year 2.

No, no. You're required to start paying it down over an 18-month period. It is not all due at the end of 24 months.

Oh, it's not a bullet, okay. It starts amortizing in the seventh or whatever, 18 months.

Just like a mortgage -- they amortize it like a mortgage.

Yes. All right. And -- so then I understand why that would be the case because you definitely have to assume your -- it's not forgiven until it is. When you're choosing to seek your forgiveness, are you planning to use the 8-week period? And if so, have you submitted your forgiveness application yet? Or are you planning to use the 24-week measurement?

We're using the 24-week measure, so we won't be seeking forgiveness until sometime after the end of October.

Okay. Got it. And based on the fact that your facilities are -- were essential businesses and kept open and -- but with your reduced revenue stream, et cetera, have you had to do some headcount reduction and some of the forgiveness might not come in? Or have you been able to maintain your headcount sufficiently that you would expect at this point full forgiveness?

We had -- and I'll let -- Joe, you can say. But we had layoffs after the PPP was used up. We've had -- but Joe, why don't you give your specifics?

Yes. We had no choice but to lay off about 15% of the workforce nationally some time in June. And a few more people even after that. We just -- mathematically, given how the calculation is done, we were not better off by keeping them. And also, what we were finding was that having people around and being inefficient was actually causing the people that needed to be work- be inefficient and it's kind of -- it's just one of those strange things about manufacturing. So we felt it was in the best interest of the company to have a reduction in force and try to be efficient as we could. Having said all that, our preliminary estimate is that the vast majority of the loan will be forgiven.

Right. And if you do use the 24-week period, I think there is a window or an opportunity if there are -- if you are -- if you get the opportunity to ramp up and rehire, that you might even be able to expand that.

Yes. That is true. If we are able to -- if things turn around before, I think it's October 25 or so, I think that's the 24-week period. If we're able to bring back some people before that, that would actually improve our forgiveness.

Right. That's why they amended the legislation, to create the 24-week period where that makes it basically for hospitality, restaurants, other types where they didn't have any staff at all -- no reason to have staff, where you guys did, but you still had to make cuts. Okay.

But Andrew, that this -- I mean, we have to be honest. I mean, [be open with] this and say, we don't really have a crystal ball, nobody in the country -- in the world does, because we don't know how the government -- have never got through this before. So we're only giving you our own intelligence on this, but we don't have any clue how it's going to be treated or handled or anything else. So it's just a caveat now. Go on.

Yes. Now as a result of this circumstance and that there's going to be a new normal, have you stepped back or alternatively come up and pivoted your focus on new products as a result of the COVID situation and its potentially prolonged existence, of the way people will adapt? That probably is going to be a different way of doing things in lots of circumstances as a result of this pandemic experience. Are there new product opportunities or shifts that you have implemented or foresee doing?

In the Q, there is absolutely a section that we discussed that our engineering projects are still going on full steam ahead, actually more steam than before, actually. But I don't know if it's related necessarily to COVID. I think it's related to the fact that we're just doing things -- engineering can create new products, and we've discussed that. And there are things and there the will be more things coming on in that regard. Specifics, Joe, maybe you can give him, if you can answer that.

Andrew, I don't know that it changed anything dramatically. I think it may have just accelerated kind of the direction we were already setting in. And we are certainly looking at development with an eye towards, well, what things may change, what sorts of opportunities for tool sales exist in the post-COVID economy or possibly with some sort of stimulus infrastructure projects, things like that. So -- or how people buy tools. So nothing is really new, but I think it sort of moved us -- it's providing an accelerant to maybe move a little faster in some of those projects to take full advantage of when things turn around.

Right, right. I have other questions, let me back out and give others a chance. And please...

There's absolutely nobody else in the queue, Andrew. But you can back out, go back if you'd like.

I don't know how you...

(inaudible) there's nobody else in the queue.

(inaudible) but if you can tell, just let me know and I'll take a break. Okay. So on the last call, you said the majority of the Blaz-Man Gear products integration was accomplished in Q1, but that there were some small things to complete here in Q2 that just occurred. What would you estimate were the redundant or extra costs incurred during Q2 that were in this quarter? And can we expect Q3 operating results in the Blaz-Man Gear products area to kind of fully reflect the integration and costs at a level we should expect going forward?

Yes. The answer is yes. As I said earlier, it's behind us. The setting-up and all that stuff. The only caveat is what sales are we going to be getting without being able to see customers and all that stuff? So we expect things to stay at the level they're at right now. But we will see growth once we can go out there. Joe, do you want to add on to that?

I would say, Andrew, that the few things that were left in Q2 ended up being a little more challenging than we thought, and I fully expect Q3 to show better results -- profits in (inaudible) Q2. I think it's going to be up...

(technical difficulty)

Hello?

Can you hear me?

You kind of cut out there, Joe, at the end.

I'm sorry, I'll say it again. I fully expect in Q-...

(technical difficulty)

Cut out again.

Yes, he keeps cutting out.

What I was trying to get at if there was an estimate, especially since you said it was a little more challenging in Q2 than you thought it would be, would be likely the estimate will be redundant to extra costs that were incurred in Q2 that would at least be a tail in the profitability in Q3, assuming revenue streams are at the same?

Yes. That is a fair statement. Q2 was -- we had a few things in there that we didn't expect; nothing consequential, but some things in there. But in Q3, we don't see anything like that.

Right. And I was just trying to get an estimate of, is it $100,000, $200,000, what kind of size was it during Q2.

Joe would be better to give you that when he gets back on. And then you can get the...

I think -- I mean, I can't give you an exact answer, Andrew, but certainly, it's a 6-figure number of savings we would see in Q3 over Q2. So big enough to notice.

And taking into account the cost of capital and contingent purchase consideration, would you say this acquisition is now accretive to earnings already or not yet?

Joe?

I mean, certainly, on a go-forward basis, it's accretive. Yes, I guess the answer is yes. Obviously, there's a payback involved in our investment, but it's throwing off cash flow.

Definitely becoming accretive in the third quarter.

And can you remind me or us listeners here about the contingent purchase consideration? When is that testing that takes place? And either a payment? -- I think it's a payment that would be due.

Yes. First, it's a pretty immaterial number. We look at it every quarter. I mean, it is a very small fraction of the upfront purchase price. So I'm not -- I don't think it would be -- even if we'd all pay in one shot, it wouldn't be that material. And you're talking about something you'd be paid over 24 months. So I don't even think you're going to see it. It's not even going to be worth talking about. Too small.

Do you accrue for it? So this little miniscule buildup or...

Yes, the way we're required to do it is that at the closing, we actually do a projection of what we expect it to be. It's actually in the purchase price, kind of buried in there. And then all we do is try to -- and we tweak that every quarter if we feel we need to. So it's already in there. It's already baked in. The only way that you would see additional P&L expense would be if we had underestimated. And also in the other direction, if we significantly overestimated, we'd have a small pickup. But again, it's not even -- we're not even talking about $100,000 opportunity here over a couple of years. And even if I was off 10% or 20%, you just wouldn't see it. You just wouldn't see it.

Right. Now on prior calls, you guys spoke of many of your tools being used by Boeing on more than just the 737 MAX, but on other platforms. And while they have greatly reduced their production pace, they haven't completely shuttered. And so as they use tools, things break, they wear down, they get lost, et cetera, they have a tools inventory and that tool inventory gets eventually drained down, and they were certainly working the working capital as best they can, and that has -- that's a headwind that you and other suppliers face. Do you have any visibility into and get a feel for, we'll just call it some point of stabilization level of orders from Boeing, or you aren't getting any business from them at all?

Joe, go.

We probably get orders. In normal times, we would get orders from a dozen Boeing facilities, something like that. I might be off by a few, but it's certainly more than a couple. I would say, and this is an estimate, 60%, 70% come from 1 facility or 1 very closely grouped set of facilities up in Renton, Washington, which is just outside of Seattle. We are getting tool orders from everywhere else. Even some in the Washington state area, South Carolina, California. I don't know where all they're going since I can't remember where they all are. But -- so we do get some tool orders, but, call it, 70% of the infrastructure's off-line. So -- and that's millions of dollars of sales that are really kind of ground to a halt.

So -- and we don't have any more knowledge than you do about when we might start getting these orders again.

Right. So in another words, we just followed what they choose to do at Renton could be an indicator or a tailwind or something good for P&F. (multiple speakers)

Right; if you read in the newspaper that Renton was back up to making 50 planes a day, you -- absolutely a leading indicator of our sales to Boeing, without a question. If that -- if somebody could -- in 6 months, we're going to be at 50 planes a day, you can absolutely count on that having a significant impact on our revenue.

Even if they said 10 planes a day, that's something.

Yes. I mean, 10 would help. I'd take anything right now. But right now, it's right about 0.

Yes. I mean I don't think they hit a light switch and of a sudden you go to 50 anyway.

Yes, of course not. It will be a ramp-up.

On last quarter's call, you said you introduced a fastening tool for a new fastening system for military aircraft, and were just starting to get a little momentum when things got put on hold. Did the order book at all open up on military aircraft in this program? Or do you have better visibility now as to when that might happen?

We have orders. We've gotten orders for those tools, but we're not going along as nearly as quickly as we would be if the engineers and the production staff and the procurement people were in the office, in the building. So just not there full-time and it's a -- these orders require sort of a team of people to be involved. And some days, some are in the building, others aren't, others haven't coming back until -- for months. It's very difficult to gain any real momentum, but we absolutely have gotten some initial orders for that tool -- suite of tools.

Okay. Okay. And similarly, while things are slow and all that, but on a few of the pre-COVID calls, you spoke of concrete initiatives that were beginning to marry up Florida Pneumatic, Jiffy and Hy-Tech resources to go after the aerospace market in a bigger way, but with long lead times in this field, which could be several quarters to a few years before you saw the results. Does any of that at all move forward, either in the background at P&F or in the background without physical visits taking place between you and your customers?

I would say the answer to that is no. So far as I know.

Yes, I would agree. It's ground to a halt.

Right. And similarly, a couple of large aerospace customers that you were working on some of the R&D in connection with their -- those potential accounts. And you thought, for example...

Same story.

Unfortunately, they're not -- I mean, Airbus is starting to open up to Europe, started opening and we've been there actually, and we're talking. But in America, nothing. Nothing.

Speaking of Europe, you said progress was developing for AIRCAT, in addition to aerospace tools and distribution opportunities in Europe. Are these efforts back on track with the European economy reopening because are...

They're starting to get back on track, but you're starting from a dead halt. So it doesn't just -- you just don't flip a switch and it just goes on. But the answer to your question is yes, it's absolutely getting started there. And Europe is doing much, much better than America, as you know, in that regard.

Right. Now you've referred a few times to the 10-Q, and I've asked in the past, and unfortunately, it's still the case as your 10-Q comes out after this call. So we don't have the benefit of the 10-Q and some of the numbers in there. In this instance, you didn't have a script. Are there some depreciation and amortization numbers that you normally say in the script, Joe, that did not make it into the press release, that you could share? Or are they all in the press release that we can dig out?

We -- what we chose to do, Andrew, and hopefully it made it in there, is that while we dispensed with the script that had a few numbers in them, we tacked on the cash flow statement to the back of the press release. So the things that I would normally discuss are there in fact, in way, way more detail than I ever talk about. So -- and I would also say to that, a good deal of the management discussion and analysis that ends up in the Q is discussed in the press release. So you really do have a lot of the data from the Q here. In fact, I think you have, on a relative basis, what you really need. I don't know if there's much of any consequence that you're missing. Obviously, it's not a full 10-Q, but I think the bulk of what you need is there in the release.

Yes. It's in the release for sure.

Okay. Good. We'll look through it. We only had a few hours with it before the call began. And so that's -- it is what it is. But I don't think the press release makes mention of the current shares outstanding number, or does it? And even if the one used for EPS calculations, all we have is the March 10-Q to go off of. Is there any other meaningful change in the current outstanding number?

I don't have it in front of me, but I would have to say I can't think of a reason why there'd be a meaningful change.

I would say nothing that I could think of.

Okay. And in what ways do you have this on the Florida Pneumatic and the retail side -- in what ways do you have visibility of Home Depot sell-through and stocking?

They really -- I mean, they really don't give us much visibility at all. But I mean, Joe, do you think you -- I mean, can you say anything more -?

I think we have -- Andrew, was your question like is Home Depot stocked out? Are they overstocked? What are you trying to get at?

I -- to the extent you have some visibility, then I'd probably have a few more questions. To the extent you're in the dark, it's a negative and a risk...

I mean, I guess why don't you ask your question, and maybe I can answer it. I'll do my best.

So you had a newly refreshed product line. And I can't recall if it was pre-COVID or not, if you started to experience the reorders because remember, when we initially took it in, they took this big batch in. And it was a while or a slow period initially, even though you understood the products were selling, they weren't necessarily having a reorder because they had their initial stocking. And then kind of COVID kicked in. And so I'm just kind of wondering what the takeaway was from that newly refreshed product line. And have you -- had you experienced the reorders, et cetera? And how was it faring against the other Home Depot labels that were being offered, I guess, in different price points?

Yes, that is information we wouldn't really have. But let me remind you, Andrew, that the line review, the line refresh as you call it, was done in 2018, the end of 2018, not 2019. So it was way before COVID. So we had the whole year of '19 with the new line. And I'm sure that we discussed it on one of the calls, that they -- that Home Depot made a decision at that time to bring some named products into their product offering. So we expected, and in fact, we did have a reduction in our business slightly. Not -- well, meaningful. A little meaningful. There's definitely 7 figures of a drop in our earnings on their sales because they brought in other things.

That was last year. Right.

That was last year. And yes, this year, I guess, well, that's rough. We wouldn't know anything here this year. Though we've had in one particular thing, the spray gun, we will -- we're having a very big order flow to them from Home Depot for that, much more than we anticipated. I guess, people are using it. This is me talking, and I don't even know if I'm -- what we're talking about, but I guess they're using the spray guns for like spray cleaning materials and stuff like that. So that's being used for alternate uses than what it was actually intended for us, in the automotive area.

Yes. Well, to each his own, even though -- you may need some marketing and whatever, some follow-up with them in that new area and maybe even bump some sales up even further.

Right. But we haven't had any input this year from them as to, well, what's going on this year based on their expectations.

Operator, if there are any other questions. If not, then we'll continue with you.

(Operator Instructions)

As of now, there's no others, right?

No, not right now.

Andrew, then we can continue with you. Go ahead.

Yes. I only actually have a few more on this. In light of the economic challenges everyone is having, and the company's relatively low debt levels in a period of time when debt costs are -- interest rates are so low and especially when you assume substantial forgiveness on the PPP loan, where do you stand in your time allocation efforts of focus on synergistic acquisitions? And is that something that's on your plate? Is it something you're beginning to see, although you guys really aren't historically buyers of distressed assets. When you've done that, that's actually not worked out too well.

Right; that's correct.

But you do like these family businesses where the founder is maybe not having a good line of succession and wants to sell out.

I have to believe in this very challenging COVID time that there are going to be plenty of people who want to kind of pack it in and stop the slog and retire. Are you seeing that yet? And are you even spending time and resources looking at that? Or are you spending more time and resources at HQ looking at cost cuts because it sounds like your hands are tied on the marketing?

Yes, we're doing both. We're doing both. But we're -- we've been just talking about it for the last month or so that there had to be opportunities of companies who are breathing very heavy and may be much more in a place to advance going through the other things or selling of their business, whatever else. And we're starting to look into that much more carefully. But up until this point, we would just -- and we still are struggling to try to revive the business and be creative in our own world, trying to make things be proactive and make it better. But the answer to your question is, yes, we are at that point now, and we're looking. And you're right, distressed companies are not our forte, and we're not going to go down that road. But other kind of companies, little niche companies fit into our business like the gear business and other businesses that we bought, will be the focus.

Right. Now it's certainly not the right time, and they're -- until you see some of the unique headwinds for P&F to -- that are unique to you, such as the 737, et cetera, but when this thing starts bouncing back and humming, you've now experienced another economic recession of great depth, okay? Any thoughts on your end about what your views are on the exit? Because at the end of the day, P&F is a small little niche business as well.

I don't really know what you're asking.

What's the question?

Yes.

Well, I guess the question is, are you having any thoughts down the road upon the recovery of the biz, of saying you've had enough of this as well, of these cycles? Just like the founders and other executives...

Really, Andrew, I know you know this, but we really couldn't comment on that even if we did. So -- but it's -- I guess anything is possible as time goes on.

All right. Well, maybe we can have that discussion over dinner at some point.

That would be fine. I would look forward to that.

When we all can see each other again.

Yes. We can have a virtual dinner in the meantime, right?

We can go ahead and take our next question from [Thomas Hirschfeld] from (inaudible) Embroidery.

Yes. I'm just sitting here in the bleachers, listening to the heavy hitters here, and I am a stockholder. I tried to buy the stock for the last so many months, but there's no volume in the stock. I know this has nothing to do with the quarterly results. But when this conversation that you guys are having, you own over 50% of the company. So the liquidity is horrible. You just can't get any stock. I think the company has tremendous potential. But let me just give you one example that I'm trying to figure out. The AIRCAT, 3/8s drill that Home Depot sells, I contacted 19 Home Depots to get it. No one had it. The earliest you could get it was 2 weeks out. I think with the other tools, same thing.

Thomas, can I interrupt for a second? We don't sell any AIRCAT tools at Home Depot.

Right. We don't sell it.

AIRCAT is available through distribution or on Amazon.

Amazon.

Yes. We don't sell...

So the AIRCAT at Home Depot isn't yours?

I'm sorry?

The AIRCAT at Home Depot isn't yours?

I would be very surprised if there was an AIRCAT air tool available to sell at Home Depot. I would be shocked.

There's pages of it. There's pages, like, what I'm looking at right now.

That's Home Depot?

Yes, 3/8s, high torque, hammer impact drill. And I don't know how to pronounce it. There's S-Y-O-S-E-E-T New York?

We're not aware of any AIRCAT at Home Depot at all. (inaudible)

They're loaded with them.

I would be very curious to see that website.

Let's check into that, because we don't...

Yes. It's Home Depot? Thomas, let me ask you this question. Is it Home Depot online? Is it homedepot.com?

Yes. It's clearly Home Depot...

Maybe it's on their website?

No, no. I called to buy the drill. I said, you know what, I'm trying to figure something out here. I can't buy the stock because there's nothing there. They got great equipment, great tools, but you can't get the tools. So I called Home Depot. I said, listen, I'm a contractor, I want this drill. So I got to wait 2 weeks to get the drill sent to me, because you don't have inventory, but you're advertising it? So what is it? They go back after they sell it, and get it, and deliver it. So they get the money...

I really don't know. We'll have to check into that, but we sell AIRCAT through Amazon and through distribution. That's -- and if you want the AIRCATs, get it there, and you get it next day, really. But we'll check into...

You shouldn't have any trouble getting an AIRCAT tool on Amazon.

Okay. So I guess, if Home Depot is advertising your product without your knowledge, how could that happen?

Yes. I don't know the answer to that.

I don't know if we can answer that...

It's not only that one piece. They got pages of them and everything is the same. So I said I called them and I said, listen, I'm a contractor, I'm going to sit here 2 weeks for a drill? I want the drill. They go, that's the best we could do. So it seems a little crazy.

Tom, go to Amazon. If you want the tool, go to Amazon.

Okay. I do embroidery. If someone was selling my embroidery, I'd want some money out of it. 'd want to know what's going on. So if Home Depot is selling your product, and you don't know they're selling it, then it's like -- here's another one: Farmingdale, same thing.

They're not getting it from us. But we'll -- again, we can't talk about this 5x. We're talking past each other.

Okay. Well, I don't want to talk about it 5x. What I'm talking about was the 5x the margin gets lost along the way to the end product. So for instance, for instance, I went -- let's say I go to Home Depot and I get that drill. Who gets the information on the warranty?

Well, if you submit a warranty card, we would get that. That information would come to us.

So you have the end user of every single product. So when you say...

Well, no. Hold on. Let me fully answer the question. If someone submits a warranty card, that information ends up at Florida Pneumatic. If someone chooses not to submit a warranty card, we don't know who that customer is, in general.

Would you have the rough percentages of how many people do put a warranty card?

It's funny, I asked that same question of one of our people the other day. It's not a large percentage. I'd be guessing, I'm going to say 10%.

Well, it's like Mr. Lampert used to say with Sears, whoever controls the end user will control everything. So whoever knows who bought my AIRCAT, and Home Depot tells you to take a hot [totter] down the road, do a big deal? My thing is a contractor goes to buy it, they couldn't get it, I was shocked. I went to -- I called 19 of them. Anyhow, another quick question. I know we're running out of time so late in the call. The PPP from the Queen, was there a dollar figure to that?

Yes. The PPP loan is USD 2.9 million.

$2.9 million, a little over $2.9 million.

The U.S. was -- I understood. I saw that U.S. one. I'm talking about the one with Great Britain.

There's no PPP going on in Great Britain.

Wait, you listed something on the...

We had $30,000 for...

In the U.K. So just to be -- $30,000 for the U.K.

So to be clear, that's not a loan. The U.K. government provided many small companies a certain amount of money that did not have to be repaid. So I don't know what you want to call it. A forgiven loan upfront; a grant.

It was a grant. It was a grant.

Yes. $30,000. Okay. So yes. So I was just doing a quick number, 29, 24, you got 3 from the government. So you actually did very well, all things considered. And when I see the availability of the tools and everything else, I say, you know what, why can't I buy the stock? This is -- I know it's not something you're going to answer me, but it's crazy. There's absolutely no liquidity at all in this stock. I've been trying forever to buy it, and it's just -- you got to buy, what, 25 shares, 50 shares? Like, you know. It's really crazy. And then the last thing is, when do they meet again as far as discussing the dividend?

When do we meet again to discuss the dividends? Was that the question? I'm sorry.

So the Board of Directors...

Is that the question? I'm sorry.

Yes. So when do we meet again to talk about it again. There's nothing in the pipeline.

Yes. I would -- we talk about it at every Board meeting, and we review it every quarter, but there's nothing to report on as of now. When there is, certainly when we have something to report, we will. I can't -- I don't have that crystal ball. If you can tell us when the country is going to get back to normal, we can give you a better answer.

Well, I don't know when the country is getting back to normal, but I know this. If fracking didn't exist 20 years ago, so whatever the tools they use for the different things right now, they have to be applied to some of the industry, too. Whether a salesperson can find that industry, I don't know. But there's definitely other uses for the tools. My whole thing is, you can discuss everything until you're blue in the face and handle these regulations. The bottom line is there's no stock to buy in the company. So my feeling is, it's either -- should be a private company, I don't know, I don't understand it. What do you do? There's nothing there.

It's an age-old problem we've had for quite a while. You're mentioning something we've discussed many times.

It is a problem. But if I was upset like a negative analyst, I'd say geez, this company is terrible; they don't do this, they don't do that. But it's the opposite. I think the company is a good company. I think it's tremendously undervalued, but there's no stock to buy. I mean it's like the worst nightmare, but that's [the deal].

Okay. Well, I mean, there are a lot people who would buy the stock. I can't debate it with you. But there -- I mean, there are plenty of people who buy the stock because they accumulate it and they tell us what's going on.

Richard, Richard, if I went out to buy 5,000 shares...

I can't -- this is not part of -- I'm sorry, Tom, this is not really even part of this phone call. I can't possibly speculate on it with you.

But wait a second, can I ask my last question?

Go ahead.

If there was no stock and no price, there'd be no phone calls. You wouldn't have these meetings. You would have all these things. Everybody is interested in the stock price. That's all we're interested in. We're not interested in if you make more money, Joe makes more money, anybody makes more -- we're interested in the stock price. So if the stock price is depleted and there's no liquidity, it's like, okay, for the month of February, you traded under 10,000 shares for the whole month. But anyhow, there's no remedy. I understand that. Either buy it. I mean, you sell it, shut up or move on or what.

It appears there are no further questions at this time.

Okay. Thank you all. Have a good day, everybody, and stay safe and well. And we'll be back to you with our third quarter results when they are -- and towards the end of the year. Thank you all.

This concludes today's call. Thank you for your participation. You may now disconnect.