Good day, and welcome to the Q2 2022 earnings 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 2022 conference call. With us today from management are Richard Horowitz, Chairman, President, 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, and 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. These risks, factors, and uncertainties are described in today's press release under forward-looking statements, as well as in our most recent SEC filings, which you can find on the company's website, including our 2021 annual report on Form 10-K. 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. I would also like to remind all participants on this earnings conference call that with respect to the questions and answer portion of this call, it is the company's policy that the length of the questions from any particular stockholder or other caller, together with management's responses, are limited to 20 minutes. Additionally, please be aware that during the question and answer session, management will only answer questions directly related to the company's results of operations and financial condition relating to the second quarter of 2022. We must insist that you adhere to this procedure. Management will not be entertaining any questions that go beyond the scope of this call. With that, I would now like to turn the call over to Richard Horowitz. Good morning, Richard. Good morning, Rich, and thank you all for joining us today to discuss P&F results for the three months ended June 30th. I hope all of you are doing well as the country and the world are continuing to try to exit from these horrific ill effects of the global pandemic while navigating through difficult domestic and global economic headwinds as well. I would like to direct your attention to the company's press release that was released earlier today, which includes the company's June 30th balance sheet, statement of operations, cash flow, and a discussion related to the company's results for the three- and six-month periods ended June 30th, 2022, and how these results compared to the same periods in 2021. Furthermore, I wish to highlight a few key factors that impacted our second quarter results. The Jackson Gear business, which was acquired earlier in the first quarter, has significantly improved our PT revenues. The shipment to our largest retail customer, of the retail customer, the stocking rollout. The decline in total gross margin driven by, among other factors, rising costs of raw materials, labor, and outside processing, excessively high ocean freight costs and customer and product mix. Lastly, the persistent ill effects of the pandemic. Finally, in order to make better use of everyone's time, yet be mindful of the purpose of this call, I'd like to remind all of you of the following. First, as we have done for several conference calls, it has become our standard practice. We will move directly to a question and answer session and not restate what is already in this morning's press release. Secondly, please be aware that we will only be answering questions directly related to the company's results of operations and financial condition relating to the second quarter of this year. We must insist that you adhere to this procedure. Management will not be entertaining any questions that go beyond the scope of this call. Lastly, please be mindful of the 20-minute time limit that Richard Goodman previously noted, which we plan to enforce as always. To the extent shareholders or other callers with pertinent questions have multiple questions, please complete your portion of the Q&A, excuse me, within the 20-minute limit, and then we will move on to the next question here. With that, we would be happy to answer pertinent questions that you may have now. Please, operator, please open up the question and answer line. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll take our first caller from Timothy Stabosz. He's a private investor. Good morning. Good morning. Good morning. Congratulations on the revenue growth, material. Can you give some 60-50,000-ft commentary on whether, you know, the ability to recover the 400 basis points or whatever it is, gross margin shortfall. I mean, I'm looking at a company that, and I know some of the, you know, Home Depot perhaps has lower margin, but the, you know, a company finally looking at a company here that potentially, you know, would be at material profitability if you can pull the levers here to restore gross margin. What's your, broadly speaking, what's your level of optimism that. It's been a long time, but that we can move that needle and get the company back to material profitability. Historically, you know, we've earned $1+ in earnings per share. Not asking for specific guidance, but kind of a high-level qualitative sense of your optimism or potential. I will let Joe answer that for the most part, but I'll just start it by saying, Tim, I wish any of us had a crystal ball to be able to talk about the economy. If we weren't facing- Mm-hmm. The potential recession that, you know, that everyone keeps talking about every day in every publication, you know, thats what you read. You know, I try not to read them anymore because it's so they're so negative all the time. If that didn't have that, we could give you a very more concrete answer. There's so much unpredictability and the price increases are just so enormous and so erratic from our vendors and the materials and stuff like that. I mean, in the range of, you know, you can get a 40% increase in a product in a raw material and two weeks later get another 15%. It's just so crazy. How do you possibly, you know, combat that? Joe, maybe you can add more color to that. that, you know, just in general, if you're looking for a high level review, I don't think any one of us could give it to you because we don't know what's really going on in the world. We can only act on what we see today. Joe, you may wanna add on to that. Thanks, Richard. I think Richard's general comments are all true. I would say that it's a relatively short list of customers for us to really focus on to move those margins. I remind you in the quarter we did have that one large retail customer that shipped. You know, that's our lowest margin customer on the Florida Pneumatic side. So obviously that one order won't repeat, so the average will come up just mathematically. On the Hy-Tech side and the Florida side, we had fairly rapid input increases throughout the quarter. We were catching up with concurrent price increases. I think we were frankly a step behind because that's kind of the way it is sometimes when the, you know, you've got a committed price and then your input goes up and sometimes you get caught in a little bit of a squeeze. I think just mathematically we'll be catching up there just by, you know, the virtue of time passing. Having said that, we've got specific initiatives to address some of the input increases in costs. You know, I won't go into specifically what we're gonna do, but to answer your question, Tim, is yes, I'm pretty optimistic we can make a very big dent in that drop in margin. Some of it was mix, but some of it was also just still playing a little bit of catch up on these rapidly changing input costs. Specific to our view, our business as relates to the oil and gas market. Thank you. Specific to our business as relates to the oil and gas market. I'm not exactly clear. I'm not as much of a student of the company as another large shareholder on this call. But do we view ourself as the business related to that industry as being decent now or, you know, where it needs to be and growing or how would you characterize how, where we see our customer base and our. Are you satisfied with where that is now and where it's going, what its potential is actually for further improvement in sales and profits? Yeah. Tim, you had dropped out of the picture of P&F for a while, so perhaps you haven't done some of these phone calls, but the oil and gas part of our Hy-Tech business is dramatically different than it used to be. We have nowhere near as much business in that area. We've changed the scope of and the focus of our business and by doing so, it's become a less important factor in the business. We, you know, see sporadic orders and we definitely get orders. It's not that we don't get orders, but it's nowhere near as important as it once was, and a different kind of a mix to our products and our customers. Joe, you wanna expand on that at all, or is that basically my. Yeah. Just to break it down a little bit. There was a time, Tim, when I'd say oil and gas might have generated 30%-40% of the revenue for Hy-Tech sales. Now with the transformation of the company to Hy-Tech, I'd struggle to say that it's even 10%. Okay. Maybe 15 at most. For Florida it was never a significant piece. Maybe it's 5% of sales there at best. It's just not really much of a factor. Okay. Obviously to the extent there's robustness there, we still have those customers and they do well, but it's probably not gonna move the needle as much as it might have five or six years ago. Okay. Probably something that only another large shareholder would care about then, I would imagine. I'm going to get back in queue. I don't know what the policy is, but I would hope if something else comes up, you might come back to me. Thank you. Sure. Thank you. Okay. Thank you. Once again, that is star one if you would like to ask a question. Again, we'll pause for another moment for anybody that would like to ask a question. We'll take our next question from Henry Dubrow, Private Investor. Good morning, gentlemen. Good morning. Could you tell me what was the provision for doubtful accounts in the current quarter compared to a year ago? Joe? That is not a number we publish that I'm aware of. We probably have it somewhere in our Q files. If you'll give us a few minutes, we can probably dig that up. I mean, I would say in general, if maybe what you're getting at is how healthy are our receivables? Correct. I would say that we've seen minimal losses related to the pandemic and people not paying. I don't wanna say it's zero, but it's not very material. Someone's gonna dig that number up for you, and we can compare this June to the prior June, if that's a number you wanna know. December. December? Okay. We'll give you June- December. Any of the significant over 90-day receivables, are those handled in-house or are they out with collection agencies? It's generally. I'm sorry, Rich, go ahead. Yeah. Generally done in-house but go ahead. I can't say that we've never put them out to collections, but it's usually only something that's very minor. I did get the numbers for you. At December thirty-first, the provision was $267,000, and at the end of June, $300,000. Mind you, AR dramatically grew between those periods from $7.8 million-$10.7 million. I don't think that's unusual. You know, AR is very healthy. Okay. One last question relating to the compensation of the sales force. Is it a salary, a fixed amount per person, or is it salary plus an earned commission? It depends on the job description and the company that the person is in. I couldn't tell you that there's one specific thing. We have some people on salary, full salary. We have some people on commission, and we have some people on commission and salary. It's a mixed bag. Okay. I wanna back out. Thank you. All right. You're welcome. Thank you. Once again, ladies and gentlemen, if you would like to ask a question, press star one. Again, that is star one. We'll pause for another moment. It appears we have no questions at this time. Oh, my apologies. We do have a follow-up from Timothy Stabosz. One moment. I'm not sure what's going on with Shapiro. I thought he had questions of his own, that's strange. I got a follow-up here. I appreciate the announcement of the dividend, by the way. Thank you. Thank you for it, gentlemen. I presume that. Thank you, Richard. I presume that's also getting back to my first original question is a statement, a broader commentary on your confidence level of the business to be in a healthy enough state to, you know, we're not gonna be burning through capital to pay the dividend in the next several quarters. You don't need to respond to that. What was my follow-up on that? Well, I guess the other question would be, and I'll ask this in as friendly a way as possible because I know it sometimes is a raw nerve, but the buyback and we got the dividend, which is great. Has the board's attitude changed? Can you comment, Richard, on the board's attitude towards the buyback of the stock at, you know, $5.50 or wherever it is right now? Sure. It's we talk about it, as I've told Andrew and anybody else who asked the question, we talk about it at every board meeting, and if we have telephonic board meetings in between the formal board meetings, we talk about it then as well. It's all a function of what our cash commitments are, what our projections are for the future, what our priorities are. We felt at this time, right now, that we wanted to return to the stockholders, you know, start to try to return to the stockholders something. That's why we went to dividend. You know, if things improve, continue to improve, we would absolutely wanna buy back stock at that time. Right now, you know, we don't have any comment about it because we really can't say. We talk about it all the time, and that's all I can really tell you about that. Yes. So you paid the dividend, and as I'm reading the press release otherwise, I mean, we've had some demands on capital, and we are actually, I guess, borrowing some money now. I guess it goes without saying if you're declaring a dividend that you're Joe, you're very, very comfortable that to grow the business or otherwise here to fund growth or fund working capital needs that with the asset base, I guess that's what you said in the press release, that you know, you sleep perfectly well at night, right? I sleep. Well, maybe I don't sleep perfectly well, but it has nothing to do with P&F. Yeah, I mean, I'm very comfortable with our financial position, you know, our cash flow in the quarter, my expectations. Obviously, if I was uncomfortable with the $160,000 or so, I would have let the board know. Yes, to answer your question. Tim, let me remind you and anybody else in this call, this, we call this special dividend for a reason, because Special. Yeah. It's right. Oh. Because of the uncertainty in the world, we're gonna look next quarter. Our board's gonna look next quarter, and we'll do that for the foreseeable future. It'll depend on the company's operations and the financial condition and other relevant factors. It's a special dividend, and every quarter we will analyze the facts. Our hope and plan is that we will continue it, but we can't make that commitment at this time. Okay. Joe, is the accounting different for a special dividend versus a regular dividend in terms of, you know, the entry or whatever? No, not to my knowledge. It's been a long time since the CPA exam, but I would say no, there's no difference. Sure. It was taken from existing capital versus retained earnings or something like that. I guess you may have negative retained earnings, right? No, there's no difference. It just big. Oh, sure. You know, it's just what we're, you know, there's no difference financially. Okay. Moving on. Then finally, my final question is there a way that you could give us, again, at a qualitative level, a sense of, because of Boeing 737 MAX, what, you know, what foregone opportunities that could come? I mean, no one really has a way of knowing as a shareholder, and frankly, giving you guys the credit you may deserve for what you know, have been doing or achieving here, the eight ball you've been behind. Is there a way that you could qualitatively, Joe and Richard, give us a sense of, I guess, you know, not numbers, you know, but the potential of that return or that getting back to normal? Is there some way we could get a sense? Can you tackle? I think we answered that question earlier. I'm not being dismissive, but I mean, we just, we don't, nobody in the world has that answer right now. I don't think. You're not getting from GM, Ford predictions for the future. I can promise you we can't do it either. Nobody knows. It's a very big question mark as to where. Could you look into your crystal ball actually, though? Just kidding. I. Okay. That's. I wish I could. That's all for me. Okay. Thank you, Tim. Um. That was good. Mr. Shapiro had texted me. He said he's trying to get in, so I'm not sure. Hopefully, he's got, he's gotten in, but he wasn't being acknowledged somehow, even though he's trying to ask. Just as an FYI. Thank you very much. Okay. Yeah. You're welcome. Thank you. Next, we'll move on to Andrew Shapiro with Lawndale Capital Management. Hi. Thank you for allowing me in to ask some questions here. Following up on a few things that Tim raised, and just trying to get a little bit more color on some of this stuff. I just wanna make sure you guys are aware, under the legislation that the president's gonna sign this week, that an excise tax is going to begin imposition on buybacks, but it won't kick in until January first. That might be a consideration for the board, in the event it might want to get a buyback in before then and then continue on with the dividend policy, et cetera. Just an FYI. I promise you, we read the same newspapers you do. I promise you, we understand. Okay, great. On the last call, you said on the last call that it was only about 60%-70% of the customers where you were able to conduct on-site visits with current or prospective customers for both Hy-Tech PTG as well as existing North American Aerospace like Boeing and its suppliers, as well as prospective overseas aerospace customers like Airbus. Did that improve in Q2 and even further here halfway through the current Q3? Are you able to get into pretty much all the customers you wanna get into to start conversations? Yeah. I can't give you a percentage, but my general sense and my feeling is, and Joe can corroborate if it's correct. We're basically having no issues any longer with getting into customers. Okay. We've been to Airbus. Of course, Airbus is like moving the ten-ton gorilla, you know? Sure. It's gonna take to get there. You know, yeah, that's. It's pretty much we're able to get around. Joe, is there anything else you want to add on that? I don't anticipate whatever restrictions are in place are gonna have any material effect on our ability to grow the business. 'Cause that was a big issue for PTG. It was. in particular because it's such an engineered product that you needed to get in there on-site. It absolutely was, and that seems to have subsided. Awesome. Okay. Where is the under absorption of what you call the other manufacturing overhead costs occurring? Is it in Jiffy Air Tool and/or Hy-Tech? It's primarily Hy-Tech. With the sizable gains in the OEM-engineered solutions in Hy-Tech, are there any particular areas, industries, or products worthy of any call-out or elaboration at all? Go ahead, Joe. I would say it's primarily in heavy-duty tools and mechanisms, industrial, the industrial area. Any particular industry sector or anything that stands out? We're working with a wide range of industries. Okay. On the March quarter call, you thought that the opportunity for Jackson Gear and its synergies was still in transition, but there would be tangible progress in Q2, but with the bulk of the benefits kicking in for Q3. Can you provide a status update? Do you feel this progression of timing is still on schedule? Joe can give you more specifics again as well, but I would say it's probably more third quarter and fourth quarter that we will be at or where we would expect to be. Joe, you can chime in. Yeah, as I was saying a little bit earlier, or we were saying a little bit earlier, we really got caught up in some input squeeze, for lack of a better word, in Q2. Material cost increases, some labor issues, and also, you know, it's a pretty complex supply chain for Hy-Tech, and we do, while we do lots, we're very vertically integrated, we don't do everything. There are a number of outside processes required for us to get the tools complete. Our suppliers have struggled to meet our timelines and hit our target pricing. So that definitely slowed us down. I don't know that there was anything that could have been done about that. We are expanding our base of suppliers. In fact, in some cases, even considering bringing some things back in-house. To Richard's point, I'd say we're probably a quarter behind where I'd like to be. We have made progress, but we're probably a quarter behind where I thought we might have been if you would've asked me that question five or six months ago. On aerospace, your press release said this, and I think it was probably just written before this week's news. Boeing's large Boeing 787 Dreamliner inventory has just been cleared to begin delivery this week, and American Airlines took its first delivery yesterday. Production's expected to begin to ramp up in the coming months or quarters. Do you have tools that are approved and are being used in the production of the Boeing 787 or the Boeing 787 subassemblies? Go ahead, Joe. Yeah, we absolutely do. It is not a major part of our sales. It is there. And honestly, I'm not 100% sure that full production of the Boeing 787 actually halted. I know that they weren't approving any planes. No, it didn't. Right. I'm not sure. They cut it down to five. I mean, Yeah. I don't even know. I'm not even sure what full production is. Maybe it's not 50, it's probably 10. In any event, yes, we sell and we build that, we help build that aircraft with our tools, but it's not a big piece of the pie. I mean, the 737 MAX is the product. I mean, that's the one that would have a significant impact should that come back online to the way it was. Right. Are you beginning to see more order activity on your 737 tools? Not really. I mean. I mean, go ahead, Richard. It's a little bit, but not really. I mean, it's a little bit, but not enough to make a difference. Just, you know, just to Go ahead. Go ahead, Andrew. I think it probably needs the inventory of all the airplanes sitting on the, you know, in the desert to be brought down as well as, of course, the Chinese to recertify. Yeah. While we don't have a crystal ball, I would point out three things that are publicly available that you don't need to hear from us that can help you get a sense of where that's headed. One you just alluded to was the Chinese approval. Second would be getting the inventory cleared out. The third is, and they're related, going from the 30 a month they're building now to the mid-50s, which is where they were, you know, before the crashes and before the pandemic. You guys read what we read when we read it. We don't have any, really, frankly, no more advanced notice than the public does on when those things are going to happen. When you read about changes in any of those three items, then you'll know as much as we do about what happens next. Right. On the prior call, there was approximately $3 million or $1 a share, a little less, in various tax refunds coming to the company over the course of this year and next. About, I think it was $1.35 million, please correct me if I'm wrong, was a 2020 tax year refund for your NOL carryback. Around a little less than $2 million was for the Employee Retention Credit you thought wouldn't come in until 2023. What's the current visibility on the timing and receipt of those two cash payments? We did receive the first refund, the $1.3 million. I can't tell you exactly what month it happened, but it was sometime since the end of Q1. The $2,028,000, which is the refund for 2021, which was driven by the credit, it's in various pieces. We received a small portion related to one jurisdiction, but the vast majority is we're still waiting for. 2023 is still our assumption. Okay. Breaking that down, the amount that was already received for the 2020, while you couldn't recall what month it was, is it in Q2's numbers and balance sheet, or is it something that's? Yeah. It's in Q2. in current quarter? Mm-hmm. Okay. That's the important part. Okay. The amount that remains, the vast amount that remains, that you're not expecting till 2023 is approximately how much? Still approximately $2 million, a little less. $1.9 million something. Okay. We'll call it $1.9 million and be conservative. There you go. All right. Regarding potential acquisitions, on the prior calls, you said you were particularly interested in opportunities that might become available to further expand the company's gear business. Can you update us on if you are seeing opportunities to pursue that as of yet? Richard, you want me to answer? Yeah, go ahead. Go ahead. Yeah. I mean, opportunities abound. They're everywhere. I'll speak for the team saying right now we're focused on integrating Jackson. Okay. This is just my opinion. Till I'm comfortable that we're fully integrated, I think we're gonna sit on the sidelines. I don't think we're gonna miss anything. You know, our survey of the landscape there will be deals for us when we're ready. It is just. Mm-hmm. It's a target rich environment, if once we get to that point. Great. Regarding your mention on competing with newer battery-powered cordless products, can you provide us an update and some more color on your development of or incorporation of others' advanced technologies into your tool platforms to compete and perhaps color on the prospective time range in which these technologies would be integrated in part of products introduced by P&F? Go ahead, Joe. I don't know that I wanna tip our hand, frankly, 'cause some of these are fairly competitive markets, and I don't really know who's listening. Okay. We continue to evolve our analysis of those things, and everything is still on the table. When we have something to announce, we will. For strategic reasons, I frankly don't wanna say more than that. Okay. I mean, usually when you guys have had new products that you've like introduced and all, that hasn't been made via investor press releases. I've generally had to dig it out and find it on the web and, you know, in various corners of the web from the trade press. Well, I mean. Might you provide that to investors? Yes. I think should we make what I consider a significant splash in battery operated tools, I'm pretty certain we're gonna make a big deal about it. I really don't wanna say, we don't really wanna say what we're up to at the moment. No. That's completely understandable. Thank you. That's all I have for you this quarter. You answered a bunch of the rest in the call. Although if you have the share count number that we can't see until the 10-Q, 'cause you don't actually put it in your press release, that would be helpful. Yeah, 3,194,699 shares. 699. If there's any consideration you might give to a little bit more time gap between your press release and the timing of the conference call, that might be somewhat of an aid, because it's just, you know, very short turnaround time to do any analysis or incorporation, especially since you don't provide the breakouts that we find in the 10-Q until afterwards, 'cause you don't do this 10-Q concurrently. I don't know if you could do the 10-Q concurrently, that would be helpful, or provide a little more time between the start of the conference call and the timing of your press release. Just an investor suggestion. Okay. Thank you. We'll talk about that for sure. All right. Thanks, guys. Any other questions? Nope. No? All right. Okay. Stay well. Thanks. Bye. Thank you. Once again, that's star one if anyone would like to ask a question. It appears we have no further questions. I'd like to turn the conference back over to the company for any additional or closing remarks. Thank you all for your time today, and we look forward to our next phone call with Q3's results in the next coming months. Stay healthy and well, everybody, and thank you for your time today. That will conclude today's teleconference. We do appreciate your participation. You may now disconnect.