Q4 2019 Earnings Call
Good day and welcome to the TNF Industries 20, Nike Inc. earnings Conference call. Today's conference is being recorded at this time I would like to start the conference over to Richard Goodman. Please go ahead Sir.
Thank you operator.
Welcome to Tee it up into shoes 2019, your earnings conference call.
Today for management of Richard Horowitz, Chairman, President Chief Executive Officer, Joseph well, we know Chief operating officer.
Sure.
Before we get started like to remind you that any forward looking statements discussed on today's call Barbassa.
We didn't go was related to the company's future performance and outlook 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 risk associated with health crises, including epidemics and pandemics exposure to fluctuations energy price.
Yes got service requirements borrowing a compliance covenant under our credit facility disruption in the global capital and credit markets. The strength of the retail called me in the United States and abroad risk associated with sourcing from overseas implication delays risks associated with drugs that customer.
Concentration.
What's changes in currency exchange rates.
Urban long lived assets and goodwill.
On for Steve inventory adjustments or changes in purchasing patterns market acceptance of products competition.
Price reductions interest rates litigation that insurance.
You mentioned, a p. personnel acquisition of businesses regulatory environment kind of terrorism and the way the critical disabilities and economic uncertainty.
Nation technology systems values are attacks and there's other risks and uncertainty described in the reports and statements filed by the company.
Securities Exchange Commission, including among others I described in the most recent annual report on form 10-K.
Quarterly reports on form 10-Q, <unk> other filings these risks could cause the companys actual results for future periods to get the materially nodes expressing any forward looking statements made by around half of the company forward looking statements speak only as of the date, which they're made and the company undertakes no obligation to update publicly televised.
Any forward looking statements, whether as a result in new information future developments or otherwise, we got I would now like a turn call over to Richard Horowitz Good morning.
Hi, Thank you so much Richard good morning, everybody and it's actually the joining us great under these incredibly challenging.
Once in a lifetime conditions that were facing right now I.
I wish you a well continue to help.
Thank you all for joining us this morning, I, just hope that they want to say.
Uh huh.
I will begin today's call. It appears summaries, our 2019 results and how the state. It compares to 2018, however, I direct you to our pressure wisdom earlier today.
For more information this mornings release presented peanuts balance sheet statement of income per share data long with most of what will be on management's discussion and analysis I wish to emphasize it's principally as close as always this it doesn't have to discussion will.
Only the company's results for the year ended December 31, 29 days.
Currently you're touching the coal <unk> 19.
As such I ask that you. Please can find your questions to those topics.
After my brief summary, I'll just jump we know the briefly review is cash flow information provided an update on that and achieved inspecting the company as to which will move to our usual QNX session.
The company's 2019 consolidated revenue was $58.674 million compared to $64.995 million in 2018.
As discussed in the company's press release published earlier today, the most significant traffic to the revenue decline.
The reduction in retail revenue, which is primarily due to our shipping in the third quarter, probably 18 throw at inventory of the then new and refresh lighter than domestic air tools to the home depot with no similar tied to board is repeating in 29.
I should point out that it has been our experienced the home depot, we've licensed product offerings. Once every several years.
That's what happened in 28 the.
The released earlier today to discuss the fluctuation in Florida that I saw the launch of business revenues at high Tech increased slightly more than $1 billion was 7.3% this year, although corresponding here in 2018.
That's a problem occurred in this oh, we hadn't business being partially offset by a decline in our ATP sales.
The company's 2019 gross margin was 30 slide 27%, saying as reported in 2018.
Comparing this year to the prior year, Florida Pneumatics gross margin increased 2.7 percentage points at 39.3%.
This net increase was due primarily to a change in marketing strategy for aircraft friend and stronger gross margins are Jeffrey However, hi, techs gross margin reflect the declined to 32.5 to 25.5 or seven percentage points. This decline was driven by under absorption of manufacturing overheads higher direct labor.
Any material cost, we can mix of products and customers I've spent a slight increase in charges for obsolete slow moving inventory among other factors.
What's the point out that we have taken a number of strategic moves that we believe the logistics issues going forward such a sourcing several components to watch him overseas raw material cost reductions improved manufacturing and price increases.
Our selling in June.
Expenses to play 19, and 2018 with 21.869 million $21.705 million respectively.
And that increase was driven primarily by increases in professional fees due impart to the acquisition of like Twoq year businesses in October of last year.
And expansion of internal controls and non cash impairment charges, most of which was due to write down of right abuse assets yourself do some vacating a facility in talks 20, Pennsylvania dribbled into our newer larger manufactures to specially in the same Tom.
These increases were partially offset by decreases in compensation, both cash and noncash and variable expenses.
Our interest expense during 2019 was $198000 compared to $223000.
Got it in 2018. This decline was due to lower amortization of debt issue costs, partially offset by increased interest, resulting from increased short term borrowings and lastly in June of 2019 be complete itself to an unrelated third talk real property located in Jupiter, Florida. It was Florida pneumatic done done conduction.
Principal business to grow somebody class was $91 million you have to broker fees and other expenses related to the sale. We received approximately $8.7 million are recorded a gain of approximately $7.8 million.
Taking all the above into consideration, we have real reporting full year income before income taxes of $6.780 million compared to 1 billion $109000 and 2018.
On an after tax basis, we're reporting net income of $4.911 million compared to $856000 in the prior year.
We are reporting 2019 their screenings for sure at $1.53 compared to 24 cents and 2018.
20 diluted earnings per share for plenty, Nike, there's $1.51 cents compared to 23 cents.
As of March 20, 2020, plenty there were 3 million why don't you 43810 common shares outstanding.
So again I read threats as or more directly to this mornings press <unk> press release, where additional information now chill I'll give you the rest of the cool good.
Thank you Richard capital expenses during 2000, 19.1 million $524000 compared to one layne $878000 during 2018.
Let's get noncash items affecting 20, making capsules world depreciation and amortization of one thing in $566000 amortization of other intangible assets of $73000 amortization operating these assets are five of the maybe $2000.
Provision consideration payable bill customer $270000.
Stock based and restricted stock based compensation of $158000.
Net income taxes at $409000.
Additionally, significant components and impact cash used in operating activities during 2019 War.
Increasing inventory of inventories of $1.714 million increase of 339000 prepaid and other current assets.
Creates an accounts receivable $529000 decrease of $318000 and accrued compensation and benefits.
Accounts payable to crude other liabilities in aggregate decreased by $1.035 million in operating lease liabilities increased by $597000.
With that I'd like to turn the call back over to Richard Richard.
Hi, Thank you John.
At this time, everybody I'd like to briefly discuss how PFS, suggesting the club at 19 been done.
As you know during 2019, driven by Skyrocketing towers, we began sourcing many of the tools and parts that were being manufactured in China to other quality manufacturing facilities in other countries.
Despite this beneficial action to Corona buyers will have some in fact on or supply chain. At this time, you cannot reasonably estimate the duration I'll just potential business disruption and to the latest financial impact on our company is far too early to that.
Oh, we take the health and wellbeing of our employees customers and then there's very seriously at all locations.
Follow CDC and W. They show guidelines I'm sure you are aware several states, including New York location Peanuts corporate headquarters have directed all non essential businesses to close.
Actually, Pennsylvania, Nevada has severely restricted business activities. However, our businesses in those states are considered essential and that's really all remaining open as of now.
Currently the state of Florida has not oppose any business restrictions as of yet so as such many of you that's employees close to touch it and working remotely I remain hopeful at this point then it will soon be controlled but Oh, we heard just this morning that president Trump is notwithstanding.
So stay at home to like 30.
I'm going to just actually one of the thing in Orlando Airport today I'll. We're all working remotely. So we are on the school. So every questions answered it will start with me and I believe there answer it or I will hand, it over the Joe So you'll have just plug in the luck witness and upon involved here. So I appreciate your understanding.
Yeah, the bar playing to have to answer any questions anybody me.
Operator.
Thank you if he would like to ask a question. Please take note of by pressing star one on your telephone keypad using a speaker phone taking make sure. Your mute function is tight enough to allow you think now to rich I quickly.
Once again, please press star one to ask a question.
And now I would take off first question from the broke out who's a private investor. Please go ahead Tonight.
Yes, good morning.
And thank you.
I'd like to say if I.
Appreciate the constructive comment that you have in your press release regarding the cope at 19 I thought it was quite constructive.
I have.
Questions at the time allows me.
One relates to home depot.
What was the product that was sold to them in 18 that.
Second lien did not repeat in 19.
Yeah, I mean, that's that's done there's nothing specific like that it's it's an 18 they started from a zero inventory based so when they when they changed their line. They got rid of all their old inventory and now we had to replenish the whole and employee base with new tools they wouldn't until tools.
So there's no one specific tool that cause any decline. It's just that that was at opening Waterman 2018 for the new product line and probably not seen there's no. We doing of that it's already there. So that they were going into an empty channel and that's why you wouldn't that's what do you have the onetime big increase in 2018, Joe you want it anything that.
No I think that's that's exactly it.
And I couldn't be walking that that's exactly what went on.
Well.
Next question.
Cannot continue with home depot for its shop in shops, so S.K. use that you sell.
Is it a lot I'm sorry.
[laughter] multiple stock keeping units.
Oh sure of course, we haven't settled less could use yeah.
So what I'm not I'm not quite sure how many but more to more than deal.
Well, we even sale home depot in 19.
Hi, Joe.
I'm going to say around 12 million Bucks.
Okay.
And then it was around it if I'm correct.
Correct. It's about was about 60 million the year before.
As I said, it's the one time.
Replenishment of starting over with new product.
Okay and improved product.
And.
To that to it.
Those products selling so in the most recent varied.
Yeah, just selling as as predicted.
Out any issue.
Okay I'm Gonna go to my next question.
She did you do you and have you sold directly to Boeing.
Joe It answers, yes, but drug you can fill in the more we sell both directly to Boeing and indirectly abella true.
Consolidators, So we'll do we do it both ways.
And for the sale of those products is there any problem with outstanding receivables.
Not at this time.
No not at this time.
Okay and my last question relates to internal control.
Relating to what you said in your press release and the recent amendments.
Two for small companies to Socs for all four b.
I think you said in your press release she spent.
Somewhere of about 100000.
Or covenants relating to an internal controls.
Could you expand upon what has to be done.
Yeah, Chuck Jehl go ahead.
Sure I'm guessing you aware, we we have a.
We have work that's down every year.
Several times a year.
We work with an outside film to do an internal control about some years, we'd be more than than others. What we do we take we identified particular areas that we have.
Yeah, No reason to dig in a little deeper want to understand a little better because it's not something typically be there. They go auditor's won't do that work.
So.
Periodically whether it be related to changes in personnel changes in procedures last year change in ERP system, We may do a deeper dive and that's what we did that's what we did last year.
Deeper dive in that that's not something that should continue like that periodically go a little deeper it's not that we never did we always do it but last year, we get a much much deeper dive.
Okay. My last fall to the internal control, which here I believe earlier this month.
Cc four small.
Companies as they define it.
Relaxed the requirement for water terror attestation of internal controls.
You are aware of sense right.
Yes, I am not bought ahead, if I'm not aware that actually Jeremy I'm not aware of specifically, what you're talking about art I don't know the change you know testing from that.
For me.
I'm, sorry, I don't believe it I don't believe got effect size, Oh, yeah does not affect US yeah, correct, there's new guidance, but it doesn't affect us.
Right.
Okay. Okay next question Henry.
You mean restaurants.
Okay, if I have something sorry.
I will get back.
Oh God that go ahead.
Oh I don't know <unk> My reading you know portal for me is that the threshold for revenue.
Seems to be that you already being low revenue company, but I will I will.
He did a lot as tell us how lawyers tell us that four or four because not affect our company.
Okay. Okay.
Okay.
Thank you.
Thank you.
Well now take on next question from Andrew Shapiro from Ladell Capital Management. Please go ahead your line is.
Hi, Thank you.
Yeah, I think you guys in Henry should talk offline, because I think the new FCC rules might beneficially impact the companys costs all though.
Potentially reduce some of the internal control requirements set us shareholders often like to see.
Moving to a question.
Taking your fiscal year end disclosure from the press release.
If there isn't yet a 10-K that preceded this conference call.
Comparing with what we have for your nine months ended September.
Can you explain the sizable increase in SGN, a from Q3 and half guess somewhat from prior years.
Q4 levels. This is the you know the quarterly SGN a comparisons.
In particular would you quantify and explain what items, you feel or nonrecurring charges like the costs Expensed in the glassman acquisition.
Sure Joe Bad.
All right. So this is actually you know you're you're talking about so.
It would be a number of things in there we would have.
Some follow on costs related to.
The acquisition.
We would happened obviously that that recurring.
The prior callers question regarding internal controls the bulk of that expense fell into Q4 <unk>. In addition to that.
We had.
A transition expenses related to closing down.
So the in Chicago area, we acquired the T. Chicago businesses. They are working out of seven kids. So these our plan had been dipping track that one.
And then eventually whoa, a we accelerated that program in Q4 and actually would have been into Q1. So that's in there and then finally.
There was a.
Fairly material write down of some equipment.
But then we decided that it well.
Obsolete about coming up with better coaches to manufacturing some products. So that was also versus four items in there.
I would say just about all of them or not.
Yes.
And what in quantifying those you know all together I don't have that I mean.
I don't have that in front of B. I can get back to you that I can put that together, but I thought my head I don't have that.
Well the the number that you mentioned for the Blossman acquisition was you know sizable number almost 400000, but that was like in October acquisition. So was most of that in Q3 on most of that in Q4.
It was both [noise].
I I couldn't say that seems I think it's probably that's bad even than both alright, and actually I could I just like to know this I'd like to understand the recurring SGN a <unk>.
Sounds like it didnt it didn't increase all that much if maybe even potentially.
Decline and then you mentioned in your answer I'm, a sizeable a write off of some E quitman.
Right right right off just just see clear.
It did high tech its of equipment that we have which we still had its still functions, but we have other equipment that is more efficient, but we've got another equipments more efficient so while the equipment still has value.
We decided to reduce its value on the books not the euro but to reduce it something that's more in line with sexual about.
And that went through asked today.
Yes, it did.
Okay, and then you accelerated some of the.
Location consolidation.
Of glass minutes Blackman now I want to see now as to the end of December how many facilities, where you down to.
At the end of December [noise].
[noise] I believe we were down to two.
Okay, and where you where you know.
We're now down to we actually have doubts as of today, we're down to zero in Chicago, which we still we still are leasing that facility, but we are no longer operating out of it.
You know that lease runs through September.
We're negotiating with the landlord to the Pos will get a little break on them and they anymore as [noise].
As we plan to.
He completely out of there being all cleaned up meaning you know inventory or since drivers on equipment pull that out.
But effectively production is an alcohol and Punxatauney, Pennsylvania.
Okay, well that's it that's excellent the yeah, what happens I guess, if he could at least if the Atlanta can lease it quicker.
Since the covered thing probably get yeah that was your debt.
Yeah that was our answer I'll, just I'll just mention what I'm, saying the the movie hogs. This facilities from all the several plants in Chicago into one and talk to today was scheduled to be done over the you know as you say over a period of time here over the next six months. So we we basically have finished now so oh well those.
Expenses that were going to be journeys and correct me, if I'm mistaken, but all those expenses that were going to be spread out over the next couple of months. Several months. While we are moving you know well gonna be basically loaded into January a little bit February.
Because we will that be told is absolutely critical aimed at all I had a time. So that's that's a bad this but the good news is really one place now when everything and we should be moving forward and a good way.
Well it sounds like yesterday.
It sounds like the acquisition then will be accretive earlier than you had projected done as well.
Yes, I would think that would be correct wouldn't that be correct Joe.
Absolutely yes.
While we're not while we're on glassman and then ill back out into the queue I do have more questions, but walrod Blackman, a few questions if I could.
Can you elaborate a bit on the strategic benefits of of the acquisition in particular in your press release. She said the acquisition opens you up to a broader range of industries.
What are some of those new industries, and what sort of add on selling might you be able to do with p. enough previous tool offerings.
Into these new industries, and new customers and in particular in light of the current circumstances or any of these industries ones that are.
Essential in the current pandemic such as health care.
Yeah, a joke I had you can answer this it's easier for you.
Yes, certainly we are active in health care, we're active in transportation. We're active in food production. We're active in power generation. In addition to just sort of oil and gas exploration. So all of those are considered essentially businesses.
I don't say it in the press release, but.
We have confirmed that our Pennsylvania in Nevada operations.
In Florida, Florida doesn't have and stricter strict regulations at the moment, but.
Some manufacturing business had been <unk> closed in Pennsylvania, and the data.
We remain open as we qualify as.
Central are critical I'm, calling back to your original comment about.
Question about the.
The gears.
You know we now that is now rebranded our power transmission group in power transmission decentrally be anything with the motor and if you have said in it which really is almost any industry. You could think of just depending on you know what you're talking about so I guess my point is that.
While we had a pretty good.
Set of industry. We are looking at before would argue business now, it's even a broader set.
With that gears and motors, the things that glassman could help reverse engineer and that was one of the expertise that you acquired.
Would those be mechanisms that one would find in ventilators.
You know I Latin because I'm not specific that's not that's me with eventful year. My guess is it's probably got some plastic years, when it which isn't something we really do.
But.
We have not yeah, I'm not really looked into that.
I mean, just because it seems like everyone is trying to reverse engineer and do whatever they can.
Two yeah, all I wish I would say.
Yeah, I agree I would say that odd year, making ability is not one mix can be said the high volume that's just not our business.
Most high volume gears come out of Asia.
Right.
The press release didn't make any mentioned now in the past here of a multiple paid for blast in terms of.
Revenue or net income or cash flows are gross profit is there any sort of detail you can give us a information on the revenues earnings and again cash flows of the businesses that.
Does that what they were generating to have a better idea what we purchase for the three and a half million.
I mean I'm not sure.
Yeah I'm sorry.
Getting into the specifics, we probably played slightly more than market for actual cash for companies that are generating but our effective multiple is probably yeah castle half of what you would expect to pay you know depending on the industry.
So we think the return is gonna be tremendous.
On the dollar stuff.
And then actually accelerated because you put everything into Pennsylvania already.
Correct.
Okay.
Ah, Yes, George I have just couldn't be a clear.
That's moving you know we're getting it started.
It's it's just there's learning curve, so what's gonna be better than we expected to be put this year. It falls well under current conditions, but the next year, we would expect it to be much better than that because we'll be already had momentum and moving forward, but moving from a standstill inaugural facility and getting started so there was some learning curves with that.
Still are some but not much and end up it was expected you know very good this year, a better than we anticipated, it's all things being equal that the corona and everything else in the world.
Next year at 21, 2021 would be that much better. So just you know exactly.
So I have other questions.
I'll have other questions, but I want to back out in the queue in case, Henry or anyone else out of questions, but she goes back to me.
Sure. Thank you.
[noise] as a reminder, ladies and gentlemen, you May press star one to ask a question of other falling.
[laughter].
There's no other questions I'm Gonna take Andrew Shapiro.
Thank you.
So I'm, assuming again once the dust settles.
Which is going to be a awhile.
There may be some readjustments to valuation opportunities in terms of acquisitions wanted to ask a few questions if I could about the companies.
Balance sheet shifts again, there isn't to 10-K.
She did this call. So a few questions about the shifting your balance sheet liabilities. If you. If you can just so I can understand our purchasing power for acquisitions as they think they may come on the radar.
There was an elimination of contingent consideration of is is that off of jiffy or something else in as a temporary or permanent fund on measurement.
Joe God.
Let's get the.
And is that temporary or is that the permanent final measurement.
That's it it's done where were we made the final payment actually vital in only payment last July 1st I believe.
Okay.
And then there was a noticeably a sizable drop in the accounts payable and Nick and the accrued expenses I think your 10-K, they break out the detail, but again, it's not available but is there anything in particular to call out or explain on a this because it didnt seem necessarily seasonal.
What what period you comparing.
I'm comparing a december balance sheet to the September one so it's just the Q4 cash flows that when no pay down a bunch of these things.
Yeah, I would say a couple things the accounts payable on foreign payable so far the majdic tend to be tied to chunky and that can easily move by a million dollars depending on what they in the month. It is second if you can hearing.
Other accrued expenses.
Depending on the tax position at the end sender and the tax position at the end of.
September.
I can move and then lastly, it'd be a difference between you know where you know where bonuses are being accrued between those two periods. So those three things.
But I don't Theres no trend, there's no operation will lead to why those numbers.
Okay and it looks like you drew on the long term line of credit. In addition to your seasonal increase in your ship out your short term borrowing increase was plasma.
And then yeah, Doug drew on the long term line or is that a seasonal draw or anything in particular.
And that's where you mean by jewel in the long term worn.
Well it looks like the long term debt line went up from a zero, which would get paid off with the sale leaseback and all.
Two of 3 million dollar draw during the fourth quarter.
On the long term.
No long term fall, we did just see clearer and clearer in 2019 of the new sale season with the new lease guidance went into effect. So if you're just looking at December 31 of 18, beginning January 19.
The 842, which is the new leads guidance when it comes back where we would have put an asset on the balance sheet and liabilities on the.
For the asset in the asset section then you get about it right no. It would be matching the maybe that's what it is again I don't have the 10-K detailing and will follow up with you offline on that let's let's move into some questions I got on high check if I could.
So.
With the sizable gains in the OEM in engineered solutions are there any particular areas industries are products, where do you have any call out and elaboration at this time.
Nothing he I wouldn't say anything other than what we discussed a prior prior calls nothing new yet I think we as we get into the power transmission.
Market.
Much more detail in depth in our our salespeople start getting out there, making calls that will probably change, but probably not I don't think we'll have much he say for a couple of quarters.
Well he said.
You previously announced a new line of ATP Magnum Force industrial air impact tools.
Can you give a little bit more information now as to the success you've had so far and can you kind of reconcile this product line and the comments from your press release of.
Overall marketplace declines for pneumatic tools and replacement parts in the ATP area.
Yeah, well Magnum is it's getting good response in the marketplace, but it's a small small part of the overall and the real essentially how much of a clarifying slugger, but the real issue is that oil is now with a $25 range. So there's no drilling it already TP tools essentially goes.
That market. So it so that market as you've read I'm sure everywhere, it's basically shut down at this point. So are we getting orders, but not anywhere near where we would hope to get.
So Joe you can answer that.
Yeah, I would agree completely it it.
It's a leased up the law and we updated the tech you know tools, but it isn't going to change the long term trend Oh, you know that business being a one that we don't emphasize anymore anymore not as much because we've got in a much better opportunities elsewhere into.
Two.
With oil and gas in the low to mid Twentys and she is that a lot of production needs told definitely are used a great deal.
Oil and gas exploration.
Okay.
HM.
So in the event.
Oil and gas.
<unk>.
Came back it's not that pneumatic.
Technology or pneumatic tools are being a place themselves by anything else. It's yes, that's correct for the industry. Okay. I just want to ask that cleared up.
Now taking your limited fiscal yearend ER segment disclosure.
And again, unfortunately, having to compare it with what we have for your nine months ended September and we have asked in the past you guys and your fourth quarter in your fiscal year end could also provide a fourth quarter breakout I would be helpful. But comparing to what we have feeder nine months, we could come up with some some.
Figures for.
Your fourth quarter performance and I'd like to get a better handle on your sizable decline.
Gross margin it high tech.
From the third quarter and even prior years fourth quarter performance levels, and if you could quantify and explain what items you feel or nonrecurring charges that went through.
That calculation and gross profit and margin fourth that'd be helpful.
Jeremy.
Yes, so I would say three main areas are driving the drop in margin that hi Tech in Q4.
You know, we had a sizable increasing inventory reserve again relating to these.
Inventories.
In the.
What I'll call the old oil and gas legacy business. We did have a lot of inventory built up over the years and as that business has.
Fallen off while we still have movement on that product given the way we.
Create inventory reserves as it as moving flows into reserves go up second lose its not a very good mix in Q4 and high Tech, particularly lousy mix and then lastly.
A tremendous dropping in hours in November and December just not a lot of production required while we had backlog a lot of that product wasn't due to ship into Q1. So without hours you don't have as you would be overhead its just.
Hi Tech so I'd say in terms of the mix and in the hours.
Well really all three of these work.
I don't expect Q1, two to share some of these all of these.
But you know the cooling the virus is a bit about wildcard but.
I would think Q4 is a good at an outlier for those two things.
So I checked prior to this show had been had been humming back it had been back coming along where.
Overhead absorption was I guess it somewhat at full tilt again in India, the fourth quarter dropped off.
Yeah. So what's happening is you know we have lots of blanket orders from key customers large customers and then we'll get orders every day for things that we can build relatively quickly.
Yeah, Yeah, yeah get outdoor on those orders dried up in November and December that you know that she was up a lot hours and the plant. So without those we did our best the pulling some orders and satisfies and a larger customers early but what I'll call, some but the bread and butter basic.
Waters, and again, mostly the legacy business dried up dramatically so that doesn't do still off hours.
And then in terms of the inventory reserve a amount can you quantify that because arguably that somewhat nonrecurring.
Yeah, I mean, I would I mean, it's it's a complete gas not complete gas, but I'm going to say, it's 76 to six figures.
Certainly it's over 100 grant.
I don't think rational I noted that a lot of large and that's a lot of margin points. So that's yeah first quarter quarter. It is definitely yes.
Yeah, Okay now, there's a reference to vacating a facility in Pennsylvania was there more than one facility or it's a move of the only facility.
I, yeah with the move up the old so the gears foods the good business within one facility in Punxatauney.
Something like 12000, 13000 square feet and.
Would be simultaneously with the acquisition.
The two good businesses.
We signed a lease for logs that facility metal side of town and then initially mugard.
Our original gear business into there and as we've said we accelerated the.
In addition of this cargo businesses into there.
Our December January February.
So then as high Tech and two facilities and Punxatauney, then because everything here recently.
Weve vacated.
The other punxatauney facility, we still heavily.
And again, we're working with that man would try to do something there, but we're out of office.
So we've got the main facility in Cranberry.
It seems everything that bike years.
And then we have all the good stuff Punxatauney one location now.
Okay, I'm moving into Florida pneumatic.
It's my understanding that home depots are considered essential and they're up and running and your than selling through and doing whatever you're doing through them and said right Yep Yep Yep Yep.
And hence your visit build a de improved in terms of their sell through and stocking needs at all or are you still kind of running blind as to.
Their order rates and things like that in the sell through.
We generally never get get a vision there was just another get that from them off from Amazon of or anybody like that.
And especially in these times now they're looking to keep their head of the board of but even before this but they didn't they didn't ever get us visibility, but I can tell you that you know so far this year surprisingly home depot, you know is meeting our budgets as of now.
Okay, and then <unk> has your business via Amazon stepped up as a result of people or businesses more homeward bound.
No because Amazon if you read the dread the newspapers Amazon. They the policy decision I guess two weeks ago now that they are not ordering or really putting priority on anything other than essential items that they sell you know so they they are.
They are holding back presently right now, but it's continuing I believe Joe They said they were going to start up again in three weeks everyday said originally.
Put her suddenlink.
Yes, I remember April six there's something around that date was very good beginning to begin accepting orders again.
Yes.
Right.
Well make placing orders I guess, if she placing orders placing orders.
Right and.
That's kinda times Andrew.
Yeah, and how long it's been the.
How long as has the have they have been on hold as a few weeks. It's been two weeks, yeah spend should not scared weight.
So.
Oh gosh.
A few weeks Dollarsish again, and you don't have southern April.
Hopefully if they keep their plan.
Right and presumably that they've taken their inventory down as a result, and so we'll have some in Valerie correction. Okay. That's really will be thinking that's what we've been thinking but of course, you never know, but that's what they are going to aspect.
Okay.
And Ah you answered Henry's questions about how the new product lines performed and all of that and so.
Moving on to the aerospace side.
We talked about this on the last quarter.
How many of your tools.
Our well call it just like general tools, and part of a either boeing's or Boeing suppliers.
General inventory levels and forever, you want to get their working capital down to levels. They found appropriate because of their lower rate of business you know they.
We're adjusting their inventory, which means they aren't they weren't ordering from us.
[noise] have you seen the order rates.
Pick up and start kind of.
Having flow through so to speak in terms of like you know the supply chain is now.
You are running through and they you know they need some replenishment of whatever their inventory is as the user lose tools.
Got you can answer that I'm not I'm not sure on following a reflection on in terms of aerospace in general.
Oh, the Boeing orders are very like and that is our largest aerospace customer.
We're doing okay military.
But we have very weak order flow from Boeing right now.
I suppose that they closed Washington facility last week, you know that right yeah, yeah. They they had to close it totally clean it or do whatever and and writings.
And when the seven a 37 Max line.
Reopens and comes up do you anticipate then there would be I need in the surge in replenishing the tool supplies.
That's our hope.
That's our anticipation, but you have no visibility you have no see through a visibility to their inventory levels on the tool side no. There. Another one of these companies are you know it doesn't really ever get the vendor that information. Unfortunately.
Okay.
And then.
On the last couple of calls you spoke of concrete initiatives beginning to marry up Florida, pneumatic jiffy, and hi, techs resources such as pneumatic.
To go after the aerospace market in a bigger way, but with the long lead times in aerospace it could be several quarters.
Before you saw any results. This is a question that kind of asked throughout all of 2019. So here in March you know I I'm thinking they may still be there's a cold and cloud perhaps certainly the airlines are not utilizing aircraft as much.
Could you use or any further development on your initiatives in any signs of traction or six yet success, yet either that had occurred this last quarter pre co bid or your thoughts on the upcoming year with your efforts.
We haven't Jay you can add to it but we were getting very close to getting.
The getting Smith, some getting some good price from air Airbus going on but now with everything going on I I've lost track for the last two weeks frankly, Jody you have anything more on that.
Alluding to aerospace side.
For the military customers.
It appears that they have accepted or while offering in the.
I'll call it that the.
The alternate fastening system that is that is common per buildings. Yet. So there are kind of silly. If he would you look at jet production and and using you know intelligent fastening systems is really three ways to doubt was there is to proprietary ways one is called out.
Uh huh.
Hi, lock system, which I think we've discussed before where the fastener has.
This call or that snaps off when these fasteners its fourth.
So that the fasteners exactly the pulte engineered designed for that.
Whatever you're putting together there whether it's the fuselage or something internally there as an alternative system called and adding bowl, which was patent did until last April.
Came off patent we were in development on that and in the fourth quarter and now into Q1.
Several major military jet manufacturers have begun accepting that product.
Signed off on our approach and we're pretty excited about that and then the vote. The last approach is where the intelligence is not in the fastener that you put the intelligence in the be tool. So you would have what's called a torque controlled pool, where the tool itself knows exactly.
How much to tighten the fastener that is something we've had in development.
So there's nothing to say about that but eventually we expect that being a force in all three approaches and when we bought you. If he was just one.
So oh.
No I don't have much more to say that hope that answers your question.
No. The progress you had made with Airbus, whether its certifications or other things.
Does this give you the view that once things normalize in terms of demand for airframes.
If cetera that you would that be long before you could be.
Having a basically a major new customer in the in the form of Airbus or Airbus suppliers.
Come on board for Us.
And you're not not to a I like I don't think we could possibly answer that question, because who knows what the new normal is gonna be but we were hopeful that that would be the case, but I wouldn't even want to suggest that we could say yesterday.
Well I'm just trying to get as have you have you've crossed over certain milestones or certification requirements that you were gonna have to go through.
We've we've gone through some and I believe I would've expected that we have had another one or two when they were getting to do it now, but we didn't hear about because a lot held broke loose jochen you would actually today.
Yeah, I don't really have much more to add Richards I've said right. We they were testing some tools. They were in process. We had other tools on the way to them that literally.
Got to our folks and in Europe, and then that's where they are they aren't even to buy it to Airbus. So we're just weren't part one that we hit the pause button there they hit the pause button I should say.
Right.
Right, but if you've gotten a certain certifications, presumably you don't need to get them again.
No absolutely no I agree I got one that also trying to get out and then we're expecting that aspect to that we could pick up where we left off when the time comes yes.
Okay and.
With the limited debt and and should we talked about and you mentioned that that's not you know drawing on the their credit lines and all that and the stock at.
Enormous discount from the company's a.
Book value, which is around 15 is sharing your net tangible book value.
As a near $11 a share.
Now that you're quiet period is about to end and all of that where does the board and management lean to with respect to future capital allocation and and [noise].
And I guess, specifically D in stating the ability to be doing stock buybacks.
Again Andrew.
We spoke about this we had a board meeting I'm just a few weeks ago I just a few weeks ago now and the company's spend at the board spent a fair amount of time talking about this in New York I'm I'm going to sure you're aware I know, you're aware or anybody else, let's call. It just tell you that we bought back over 700000 shares over the last two and half year.
<unk>, which shows the I've already know obviously, we'd agree that there's a valuable repurchasing shares. However, as you know there are many other different factors that go into this analysis, including at this point now Corona Doris and cash flows for the company and.
All that other kind of stuff. So you know when we when we can gain.
You know that's around your meeting we will send them again, but as of now a there was no. There was no appetite to do anything until we see where the companys sits and where they are cash wise and everything else. So we'll.
To close on that as always.
That is that and the current circumstances I can certainly appreciate but it's been the companys practice in the past.
Only to consider such matters at regularly scheduled quarterly you know visits of the board.
Rather than having something pre authorized said of course, you would not or should not exercise.
Discretion on until there is visibility and comfort with.
The companys cash flows and the impact of.
Economic headlines as well as just closures yemen's called the virus starting okay.
Right.
If if you guys restrict your decision making on this to the you know the quarterly gatherings.
It just seems like that opportunities get mixed rather than providing.
Pre authorization to speak English because the execution for the board to provide the pre authorization. So that when the time is right or you guys establish a process of you know telephonically convening.
In order to do that it it just seems like the opportunity is even more compelling absent.
In Texas the virus that the opportunities more compelling then where you were accretively acquire insurers before.
Well I don't know where you've got the it's under the impression that'd be only be quarterly to discuss things, we read speech get-together whenever whenever we deem the need to and we often need in between meetings and have telephonic cools and talk about anything having said that the annual meeting is six weeks away and with everything going on in the world.
Right now I don't believe that there's going to be any.
Compelling reason for us to discuss this until that time, where you understand I would agree.
I totally or yes, yeah, I don't have to do better condition.
Yeah, Yeah embodied we certainly share your feelings about it but there are other things that sometimes come into it that perhaps you are not until involved with that I understand obviously, no big deal no big pending things Toby will absolutely examine it as they always do in between meetings, but this one is six or eight setbacks away. So Ah lisanti.
I hope you enjoy the rest of the and I Hope you in the rest of the board understand all the different rationale I put in in terms of course trying to clarify things Celesio third 13 de Souza Amendment no in light of the circumstances will your annual meeting this year be conducted a with a a hybrid and virtue.
We will component tree for shareholders to participate.
Women the process of exploring how we will hold around you'll meeting right now and our proxy statement will provide all that information when it comes out the we're not even and position spoke about it yet.
But we'll let you know as soon as soon as we know.
All right. That's the biggest Charlie generally hold held in the Wednesday before the Memorial day weekend as I'm sure you were even though of course.
Yes, and it's usually done or I would be travel <unk>, yeah, it's usually done to travel kind of hours, but it's certainly been can travel gone.
If it's certainly a travel conflict this year.
Right, Yes, yeah for sure everybody. So yeah. So we'll keep you probably will you be watching out with everybody. Okay, well I mean, it's just something a lot of companies have.
Adopted although I wouldn't want it to be adopted on a permanent basis to be virtual only Saturday night hybrid now.
Personal attendance along with virtual.
Thank you very much I back out in the queue. Thank you, Matt Thank you and you're going to stay well.
You too.
We have another question coming from Oh, why that rather than crimes Fund V. Please go ahead your line.
[laughter] I guys. Thank you I'm not all back or maybe what the story I I didn't exactly I'm, just saying green dot our is that.
I got on the call like sell my apologies if the right I mean, I think you did about 9 million Bucks and EBITDA is that include the game from.
From the land sale ARX <unk> because it was in the press release, if you read the press release, you'll see that yes, I did read the press release I just didn't know if you exclude are definitely EBITDA, but that's not an adjusted EBITDA.
Joe I am I right that's in the EBITDA.
Anything that he Mcdonnell Douglas.
Yep.
Okay. So anything that out you did likewise $2 million getting adopted the yards that sort of right yeah. They gain on the sales about 7.8 million.
Right and I think you have I think it was I don't have an impressive me now that youre about 9 million shopping Cody.
Right right that correctly about 9 million frankly.
I don't have that in front of me, but you just subtract that 7.8 and you'd get to be adjusted if you want to call it that EBITDA right.
Well I think a one farm it from ER.
Oh.
What would be a.
But sort of onetime or whatever you are calling on one probably not falling apart from the a inventory reserves.
Oh, I think we had I don't know if you listen in the earlier call you know as our.
As our legacy business Oh, you know.
Large impact business, the grades or the way, we calculate our inventory reserves you know acquired that even if there's some movement to beef up the reserves and the movement in the fourth quarter was particularly weak and required additional reserve and that's what they said they agree or are there.
As a six figure number in the core.
And ballpark what was it having here if any sort of random number. So we can get that's probably a quarter of a million dollars for the year roughly like that sounds like or any other one partner significant let's say 500000 aren't million dollars that got impacted pot pp being.
Let's just stick with EBITDA was there any other.
Not a half a million as Weve said earlier the acquisition expenses or you know in S. DNA that is not an inconsequential number.
Transition expenses after the acquisition earn those numbers. We also said that the bulk of the.
Internal control.
I would view or the additional internal control you that we did also ended up in the fourth.
So those are all I would say on a nonrecurring.
Okay, and you guys did not.
Like out in this release it fast I can tell you guys did not break out before quarter end you did not.
It said likely sort of isolate the operating contributions.
From the [laughter] or from the two acquisitions is that.
Correct and I don't know that I don't know that we're going to do that having said that when you get if you take a look at the 10-K when it comes out there is a footnote that's required where we do a pro forma that the acquisition took place on January 1st 2018. So.
You know it is the required disclosure in a certain way you go about it but you can glean from that some some information around the incremental impact can be quite nicely sector or do you guys expect five or 10-K.
Good day.
Okay later today.
Okay, setting or do they.
Yeah, I guess it it.
Okay. The due date.
Gotcha.
Okay.
Alright.
Thank you don't want good luck in say can help me. Thank you somebody actually if you check you okay Bye bye.
Yes.
[noise], we have another question from Canada, South from South Africa Management. Please go ahead.
Hi, good afternoon guidance. Thanks for taking my call I just wanted to go back to the acquisition questions.
And I was wondering if the company still active actively looking for.
Tuck ins or.
Central major acquisitions out there.
The.
We are at this point, we are not looking because right now where we're focusing on the businesses and we're focusing on generating the the the new companies that we just put it that we just put in but we're always we always have a rise article, but we're not actively pursuing.
Acquisitions, but not entirely as soon as the world quite astounding and this argues acquisition is running to what do you want it to them, we will be right back in that market. The answer is yes.
Okay, well I appreciate that Oh, I have and and shot they say because okay. That's it. Thank you.
[noise] everything else that question at this time.
Okay. Thank you everybody for your call today, and we all wish you all in all of US Oh, Good health and safety and we look forward to speaking to you at our next conference call next quarter. Thank you on out because they say well.
Ladies and gentlemen, and that's really concludes today's conference call. Thank you very much for your participation you may now disconnect.