Good day, and welcome to the P&F Industries Q3 2019 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Richard Goodman. Please go ahead.

Thank you, operator. Good morning, and welcome to P&F Industries third quarter 2019 conference call. With us today from management are Richard Horowitz, Chairman, President, and CEO; and Joseph Molino, Chief Operating Officer and CFO. Before we get started, I’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, 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 United States and abroad, risks associated with sourcing from overseas, including tariffs, 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 environments, the threat of terrorism and related political instability and economic uncertainty, and information technology systems failures and attacks, and those other risks and uncertainties described in the reports and statements filed by the company with the SEC, including, among others, as described in our 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. With that, I would now like to turn the call over to Richard Horowitz. Good morning, Richard.

Thank you so much, Rich, and good morning, everybody. Thank you all for joining us this morning. I will begin today’s call as always with a brief summary of our third quarter 2019 results and how this data compares to the same period last year. However, I direct you to our release submitted earlier today for more information, this morning’s press release presented P&S balance sheet, statement of income, per share data, along with most of our management’s discussion and analysis. Again, let me remind you that the purpose of today’s call is intended to solely discuss and review the company’s results for the three-month period ended September 30, 2019 only. As such, I must insist that you please confine your questions to the topics at hand. I will then ask Joe Molino to briefly review key cash flow information and provide an update on any events affecting the company. After which, we will move to our usual Q&A session. With respect to operations during the third quarter, the company – the company’s third quarter of 2019’s consolidated revenue was $14,776,000, compared to $17,662,000 in the third quarter of 2018. As discussed in the company’s press release published earlier today, the most significant factor to the revenue decline was a reduction in retail revenue, which was due to our shipping in the third quarter of 2018, the roll out inventory of the then and refurbished line of Pneumatic air tools to The Home Depot, with no similar opening order type repeating this year. I should point out that it has been our experience that The Home Depot revises its product offerings once every several years. The release earlier today discussed the fluctuations of Florida Pneumatic’s other lines of business. Revenue at Hy-Tech increased 5.5% this quarter compared to the third quarter in 2018. This improvement occurred mostly in its OEM business, partially offset by declines in ATP and its other product lines. The company’s third quarter 2019 gross margins was 36.2%, compared to 37.4% for the same period in the prior year. Comparing this quarter to the third quarter of 2018 Florida Pneumatic’s gross margin increased 2.4 percentage points. This net increase was due primarily to a change in our marketing strategy for the AIRCAT brand and stronger gross margins at Jiffy Tool. Gross margins at Hy-Tech was – were significantly affected – negatively affected this quarter by an increase in obsolete and slow moving inventory, as well as product and customer wish – mix, excuse me. I wish to point out that we have taken several actions, which we believe will address the customer and product mix issues going forward. Significant steps taken include such things as material cost reductions, improved manufacturing techniques and price increases. Our selling, general and administrative expenses for the three-month period ended September 30, 2019 and 2018 were $5,208,000 and $5,737,000, respectively. The decrease was driven by lower variable costs and to a lesser extent, lower compensation expenses. Lastly, the company’s interest expense during the third quarter of 2019 was $13,000, compared to $66,000 incurred during the same period a year ago. This decline is due to the reduction in our short-term borrowings. Taking all the above into consideration for the three-month period ended September 30, 2019, we are reporting pre-tax income of $128,000, compared to $767,000 for the same period in 2018. On an after-tax basis, we’re reporting net income of $136,000, compared to $541,000 in the third quarter of last year. And lastly, for the three-month period ended September 30, 2019 and 2018, we are reporting basic earnings per share of $0.04 and $0.15, respectively. Diluted earnings per share for the same periods are $0.04 and $0.14, respectively. The amount of common shares outstanding as of November 5 of this year were 3,143,810 shares. Again, as a reminder, I refer you to this morning’s press release for any other additional information. At this time, Joe Molino will discuss our cash flows. Joe?

Thank you, Richard. Capital expenditures during the nine-month period ended September 30, 2019 were $1,240,000, compared to $1,757,000 during the same nine-month period in 2018. Significant non-cash items affecting the nine-month period in September 30, 2019 cash flows were depreciation and amortization of $1,148,000, amortization of other intangible assets of $514,000, amortization of operating leased assets of $363,000, amortization of consideration payable to a customer of $202,000, stock-based compensation of $89,000, a change in deferred income taxes of $332,000 and the recognition of the gain on the sale of fixed assets, consisting primarily of the sale of the Jupiter, Florida facility for $7,817,000. Additionally, significant components that impacted cash used in operating activities during the nine-month period ended September 30, 2019 were an increase in inventories of $2,771,000; an increase of $314,000 in prepaid and other current assets; a decrease of $594,000 in accrued compensation and benefits, accounts payable, accrued other liabilities; and operating lease liabilities in the aggregate increased by $1,116,000. With that, I’d like to turn the call back over to Richard. Richard?

Thank you, Joe. And in closing, I would like to just thank and acknowledge all of our employees and our management for their continued outstanding dedication and efforts to keep P&F moving forward. That’s the end of our report today. And now, we’ll be happy to answer any questions anybody may have. Operator?

Thank you. [Operator Instructions] We will now take our first question from Andrew Shapiro with Lawndale Capital Management. Please go ahead.

Yes. Hi. First, to start it off I guess, I, obviously, have several questions. I’ll back out into the queue and then come back to me if you could. I wanted to ask some questions about the recently announced gear company, gear product acquisitions. Can you elaborate a bit on the strategic benefits of these acquisitions? Kind of based on your press release, it sounds as if in your acquisition release, you talked about the intended move a year or so down the line of consolidating a bunch of things into Hy-Tech. At the same time, in today’s release, you talk about – it sounds as if there were some personnel that were part of that business that are going to be value-added to the overall Hy-Tech business. Are they relocating and moving to, I guess, Pennsylvania or stay in that Chicago area? And can you kind of reconcile that?

Sure. As was stated, I guess, in the contract or the agreement, the two principals are staying on. I mean, there are contracts in place for them for certain periods of time. After that decisions will be made, both on their side and ours, whether we want to continue with them. They will stay in Chicago, most likely in the long, long run. And we’re not quite sure what the roles will be once we’ve moved the bulk of the manufacturing. But they’re key to, certainly, the transition, but they’ll be around really past the transition. In addition to that, a number of key employees with technical expertise will be coming on and moving to Pennsylvania with the production. And just about everything is going to move to our Punxsutawney facility, where we will combine our current gear-making operation, along with these two gear-making operations.

Right. So you have plenty of room in there for all that machinery and everything that they…

Well – no, actually, we don’t. We – at the closing, we entered into a lease for another – in another building with quite a bit more space. So yes…

Okay

…we needed more space for not only the combination of the three, but for what we think will be a growing business in the future.

Yes. So can you elaborate a little bit on the strategic benefits and what are like the new industries and sort of add-on selling that you might be able to do with P&F’s previous tool offerings into these new industries and new customers that – it seems like a great fit?

Yes, a couple of things. I guess, what we learned in the course of going down the road with our OEM business, our engineered solutions business is that, in a lot of cases our gear-making expertise ended up being kind of important to capturing some of these air motor systems customers. So we started looking around for gear companies that could do more than we could do. I mean, we have certain expertise, but we don’t know everything. For example, in our aerospace business, we used some spiral bevel gears, and just so that everybody understands what that means is a spiral bevel gear are just two gears that don’t approach each other straight on. So they approach each other at a bit of an angle. It’s a very different gear-making process. It’s much more complicated. It’s different equipment and different expertise. So we didn’t have that and we felt that that was important to add to our capabilities. So these two gear companies were available and – in that business. And so it now – we think we’ve got – I mean, I’m not a gear expert, but a pretty full complement of gear-making talent now in-house and a much more substantial gear-making operation once these things are all combined.

Okay. And the press release didn’t make any mention of a multiple paid for this business, whether it’s on revenue, cash flows, et cetera. Is there any sort of detail you can give us, information on the revenues or cash flows that the businesses were generating to have a better idea what was purchased for $3.5 million? And when do you expect this acquisition to become accretive to earnings?

Okay. So a couple of things here. We would – we will give more information out once we’ve got a full quarter of – well, close to a quarter’s worth of information, I think it’s a little bit in a vacuum otherwise. But once we close out Q4, I’ll have more to say about that. But what I will say is that – excuse me, we paid a reasonable price for the business to the sellers, but we have tremendous synergies and cost savings opportunities once everything is combined. So our effective multiple is going to be quite a bit less than standard multiples that are out there. That’s kind of all I’m willing to say at the moment, but we’ll have more to say about that as we give a little more flavor into the gear business in Q4. And we’ll – ultimately, this business will be broken out by itself on the filings. So we’ll have – we’ll be able to say a lot more once we start doing that.

And it will not be accretive in the fourth quarter, Andrew, to any degree, but we expect fully that it will be accretive after that.

Yes. So just to add on to that, we’ve got a lot of transition expenses that are one-time and a lot of that is upfront. So Rich is right, there won’t be a lot of accretiveness in Q4, but we certainly expect that in next year.

Excellent. Well, it seems very strategic. I have other questions, I’ll back out in the queue, in case there’s someone ready.

Okay.

Please come back to me.

Okay.

There’s no one waiting. You can go ahead, if you like.

Okay. Excellent. Moving into Aerospace, if I could. P&F’s Aerospace subsegment breakout there in Florida Pneumatic, maybe flat year-over-year. But how about this sizable $750,000 sequential increase in revenue this quarter from June’s quarter levels? Can you expand on if this is seasonal or clarify what areas from the previous quarter there has been a rebound and what areas have simply stabilized? And – or if there’s new business inroads that have contributed to this jump?

So we are a little bit in the dark as well, Andrew. I can tell you that the 737 has not regained any momentum yet. Though we’ve been reading and we just saw something yesterday that Boeing is going to be – going back full steam ahead in the next month or two. They haven’t told us that, but we read that in a newspaper. And they really don’t give us a lot of insight into everything. But in general industry and there’s other things other than the 737 with Boeing and other area – aerospace areas that have just come alive in the last quarter. And, Joe, I don’t know what else you can add to that. But it’s been pretty good.

I would just add two things. Q2 was incredibly low, and part of that was we had very little in the way of orders at the end of Q1, the beginning of Q2, very, very low. And while we do have a lot of long-term orders, we get a lot of orders that need to go out right away as well and we just didn’t get much of those in Q2. So some of that was that. And then second, some of the orders for Q3 were for a line of tools that we don’t sell as often, they’re in the repertoire. But we know we hadn’t really sold a lot recently and there was a fairly sizable order or maybe more for that product line. So that’s the best I can do in terms of an explanation, because I don’t – we don’t really have much in the way of explanation from our customers on why they order this stuff.

Right. And then expand a little bit on Boeing. I understand one can’t predict the 737 MAX issue. But as we discussed on the last conference call, you guys mentioned how the tools are more general in purpose and that the decline was obviously influenced by the 737 MAX and the reduction in production scheduling there. And if the production schedule was dropped further, there would be a headwind. But the discussion – the answers you gave on last quarter were discussing how it’s more of a broader, call it, inventory adjustment on the part of Boeing, bringing down their tools level to a point, reflecting their current reduced rates, et cetera. Do you feel that, that level has stabilized and now Boeing’s and frankly maybe others in the industry who are subcontractors, that their order levels and their inventory levels of what they need for tools are at a level now where you may be at a steady state until, of course, there’s either a production increase or a production decrease?

All right. I don’t know that I’ve got a great answer for you. I think that’s a very reasonable assumption. I think enough time has gone by and those production levels have been at these points for a couple of quarters. So I think that’s a very reasonable thing to assume, Andrew, but I’d be [Multiple Speakers]

So they are ordering – I mean, they’re making orders from you though, right? You’re getting orders…

Yes, every week, every week. Absolutely, every week.

And not just little orders, it’s pretty significant the past couple of months.

Okay. So maybe the mouse is through the python here. All right.

Perhaps. But again, it would be conjecture on our parts to say. And they’re not – they don’t volunteer us…

Okay.

… though we ask the questions, they don’t give us answers.

Fair enough. P&F Automotive, a subsegment in Florida Pneumatic, it may be up year-over-year. But I noted a sizable $450,000 sequential decrease this quarter from June’s quarter. Can you expand on this? And is it seasonal or what other factors are at work here? And what if anything is being done to address the drop-off?

It is seasonal. Summer is slower. It always is. In years where we had, maybe the first year or two when we were just getting into the business and changing our marketing programs, maybe that wasn’t as noticeable. But now that we’ve got a bit of an established brand and we’re well into the market, it’s just a little bit of seasonality and we anticipated that.

Okay. And on the last couple of calls, it’s been another three months, So I do want to ask about it. You spoke of initiatives that were marrying up Florida Pneumatic and Jiffy, and the Pneumatic and maybe other areas inside of Hy-Tech to go after the aerospace market in a broader and bigger way, but this was obviously long-lead times and we’re here now in November. Is there any initiatives you can discuss or signs of traction or success yet? And your thoughts on the upcoming year with these efforts?

We definitely have traction. We’ve got tools being tested, which is usually a great sign by the two big players or – and/or their Tier 1 suppliers. So it’s just an incredibly long process. Quarters go by while they test and retest, ask us to change things. We send them new tools. They test them some more. It’s just a while. But we’re very optimistic, given how deep we are in the testing process that something will come of the things we’re working on in 2020.

Right. And then when and if they, say – and when and if they settle down and they say, okay, now all this back and forth we like this tool. Are these generally meaningfully sized orders, or are they just long duration?

Yes, they would be.

They would be.

I mean, we’re not going to get a seven-figure order off the bat. But if these tools function as we expect them to, these will be meaningful opportunities, very meaningful opportunities at Boeing and Airbus.

Not just in Europe, I would add, domestically as well.

Right.

Okay, great. Obviously, I have other questions on the other segments in the corporate. Can – I’ll back out and just let me know if there’s someone wants to come in?

Sure.

We’re checking.

[Operator Instructions] There are no further questions.

Okay.

Mr. Shapiro, please go ahead.

Great, fine. On the last call, you said…

Andrew, why don’t you stay with your questions till the end, because nobody else seems to be yet on the call. And if there is they will wait.

Okay. On the last call, you said progress was developing for AIRCAT and Aerospace tools and distribution opportunities in Europe. You had the new person in place and hitting the ground, covering a lot of – you had to cover a lot of territory. Can you give us an update on your European efforts and the timing when inroads might grow to be something more meaningful?

I would – we – I just had a meeting with our European – Head of Europe last week. He was here. He’s here in the states visiting us and all of our other locations. I mean I think, meaningful would be next year. We’ve laid the groundwork for a lot of stuff across a lot of different product lines, but it’ll probably be 2020 before we see anything that we can talk about of a meaning – of a material nature.

Yes.

Yes. I’ll just add to that that the European market is something that we just tried to enter in the last year effectively with a concerted effort. And it’s a process just like the automotive – just like the aerospace. We’re making really good – laying really good bricks and we’re making really good progress. And we expect that next year there’ll be something meaningful coming out of Europe, not quite as meaningful, if I were to rate it, as the aerospace potentially. But certainly meaningful.

Okay. Excellent. On Florida Pneumatic, specifically, in Home Depot. Do you feel Home Depot is now on at least the normalized inventory? Or when is that expected timing of normalized inventory that gives you insight supporting the idea you had at a normal run rate, because ignoring the year-over-year issue which was last year’s big – filled the channel. You still had – they had excess levels and lower levels of orders last quarter than you thought they would be at. Have they normalized yet?

Yes. Essentially, they’ve normalized. But they – I would say they normalized at a lower level than what we had in the past, because they’ve made the decision to also bring in other brand names, not under the Husky label, but under the company’s label to influence that market. So some of – not dramatic, but some of it has affected us. So it’s at lower levels, but normalized lower levels and not dramatically lower levels, but lower. So…

Right. But do you feel you’re now at a steady state…

Yes. Having said that….

…and the new products have been favorably received?

Having said that, they – we can think that we get regular orders on specific dates and all that kind of stuff and then we’ll miss a week. And then the next week, they’ll double up, or the next week, they won’t double up. I mean so – it’s a fluid situation is best I can say. But we seem to think we’re at a more normalized situation now than we were earlier in the year. Yes.

Okay. And do you have a better sense at the store level, even if not at the tool or SKU level about how the new product line has performed? And I guess, are they generating similar or higher levels of revenues to P&F, or maybe I should think of cash flows to P&F than the present – than the legacy line of tools, because you do – you obviously have the other co-op and pricing issues to build in?

The expectations – we’ve met essentially their expectations. And that’s what they’ve shared with us a little bit. And, Joe, anything else you want to add to that?

I mean for the SKUs that we sell that replace the old SKUs, I think, we’re doing as well, if not a little bit better. The drop in revenue is the result of them bringing in another brand to cover part of the suite of tools that we used to provide.

Right. That was on the high-end, if I recall, right?

Mostly on the high-end. Yes.

Yes. Okay. The tariffs. On the previous call, we discussed how the impacts of several rounds of tariffs impacted the company, but were primarily successfully absorbed within your suppliers and customers and pricing. And that you said there was no visible unit volume declines that appeared to have resulted. Over the recent quarter, is that still the company’s experience with the announced – with the current tariffs to date?

Essentially, we’re in the same place.

Okay.

There’s no meaningful impact to the tariffs for us, thankfully.

And in the present schedule of various different tariff increases and you’re reading what we’re reading, I don’t think you have any other – greater insight. But with the present schedule of various proposed tariff increases, whether they’re on hold or not, which of the proposed increases, if any, are of the greatest concern if they were to be implemented? And/or are they of the sort that have so far again, scheduled or threatened to be implemented are not impacting or would not impact your line of products?

From what we can see right now there’s no impact to anything that’s forthcoming or anticipated or not anticipated. We seem to be in the same place we were three months ago or more, and we expect that, that will remain the same.

Okay. Can you update us on Universal’s local currency actual performance during the quarter and the year? A - Joseph Molino: I would say it’s close to plan. There’s – it’s a pretty small operation, but reasonably close to plan.

Okay. I’ll ask about Hy-Tech, unless you have other questions in the queue.

No. Go ahead, Andrew.

With such sizable gains in the OEM engineered solutions, are there any particular areas, industries, products worthy of any callout in elaboration yet?

Again, it’s a number of moderately sized ones that add up to a fair amount of growth. As I think I’ve said before, we’ve got products in transportation. We’ve got products in power transmission. We’ve got products in pipe cutting. We’ve got products in pipe cleaning. We’ve got products in food production. So I mean, I don’t know if that helps you, but those are some of the industries that we’ve gotten into.

Right. But nothing sizable enough – go ahead.

Go ahead.

Go ahead, Andrew.

…nothing size – I’m assuming if something became sizable enough, it might prove to be an area of focus for your acquisition strategy, or you wouldn’t be adding within the customs side – another – a bunch of stuff for food?

Yes. I would say, what we’re most – what we seem to – what we learned through the acquisition process, as we did our due diligence not only of the customers of the two acquired businesses, but customers of competitors. So there’s a generic term we like to use it’s called power transmission market, which could mean a lot of things, but essentially a gear with a motor at the end of the day. So gears and motors in certain combinations. So there’s a lot of opportunity there, and that could cover a lot of different industries. But that may end up being a focus, in fact, it will be a focus for us. There’s a lot of opportunity with current customers of the acquirees that weren’t being exploited nearly as much as we believe we can. And I think just in general, power transmission is an opportunity for us. But none of the ones I mentioned are seven-figure businesses right now. They’re all decent size, but none of them are seven figures.

They all add up. You previously announced a new line of ATP MAGNUM FORCE industrial air product tools. On last quarter, you said the products had only been on the distributor shelves for about 30 days. So here we are another 90 days later. So arguably, a quarter, half a year, can you give a little more information on the potential markets? The success or lack of success you have experienced with this new product line so far?

Sure. We’re very happy with the results so far. It’s products in the shelf – on the shelves at the distributor level. You have to remember here, this is a market where we’re much less of a player in a market where we can’t nearly control the interaction with the customer as much, because it’s going through distribution. We don’t touch the customers directly. So we’re working with distributors and developing programs with them to help us. And I would also remind you that while we did come out with a new line, we’ve been putting most – the vast majority of our resources in other areas. So while we’re happy with it, I don’t know that it’s – in the long run that’s where the business is going to head. But we like the product line. It’s doing well and I’m sure it will continue to grow and take some share, because we do have some unique technical features that we think the market is going to like.

Now you mentioned in your press release, you kind of talked about how the OEM, I think, was getting resources in ATP by non-event. What are the resources that you imply are constrained that might have contributed to less growth or weakness in the ATP side? I’m trying to understand the resource constraint, marketing…

The resources are – sure. The bulk of the engineers are focused on non-ATP, because that’s where the opportunity for growth is. It’s a chance for us to – these OEM customers, we get inside, we lock them down, we’ll never lose them. We’re not competing with anybody on price. But out in the channel, in ATP, just selling three quarter inch impact wrenches, people have 20 choices. And then they have the usual suspects with the big brand names. We’re competing with not a tremendous advantage in any area other than – again, we think we’ve got a little bit of a leg up with the current suite of impact wrenches we just put out. But the improvement is not game changing. It’s nice, it’s marginally better. So there’s no program that I could envision where we throw a lot of money at it and have tremendous growth in that market. It’s just – it’s a stagnant market…

It’s a mature market.

…it’s a mature market with not a lot of growth. So it doesn’t make sense to put a lot of money in it. So the constraint is engineering. bBut even if we threw a bunch of engineers at it, I don’t know what we would see. We don’t have a brand there of any consequence.

Right.

…and we’re at the mercy of distribution, whereas in the OEM business that’s not the case.

Are the returns of that business that you’re describing, then are these shareholder value additive?

Yes.

Yes.

There’s very nice margin on that product. We’re very good at making it.

Okay.

There’s no reason to abandon it. But…

It’s not going to see growth.

It’s a harvest, right? It’s a – we’re in harvest mode with that product line.

Okay. All right. Understand.

That probably changed the strategy of the business a few years ago. That’s where we started. We saw this coming and so we changed that strategy three, four years ago now, I guess.

Right. Okay. So…

So what – Andrew, let me just finish. What – where we’re seeing the win is where we can convince a customer of our engineering expertise and our ability to service their very unique needs. And that skill and service level is just not an advantage in distribution for three quarter inch impact wrenches and serving the oil and gas industry. There’s just not much we can do to differentiate ourselves, so…

Right. So with this increase in the sales mix to this higher value-add engineered component work, one would assume higher margins. But this quarter you had a pretty sizable decline in the Hy-Tech gross margin. So can you help break out to what extent the margin decline was due to the – what was the extent of the inventory reserve? So we might reverse that out and get a feel for what was a more normalized margin that we would compare to understand the decline in margin, if it’s meaningful or not even meaningful?

Okay. Yes, a couple of things. I would say half of the loss in margin is related to the inventory reserve adjustment. The other half is related to two, what I’ll call, legacy OEM customers that had an unusual amount of growth in year-to-date, who had legacy margins. So the margins weren’t as good or not as good as all the new stuff we brought in. So they kind of grew unusually. They have the lowest margin of all of our OEM business. And so that’s what drove that. Having said all that, and I think I put this in the MD&A or we put this in the MD&A, we are working on repricing a bunch of that product to these customers. And also, we have a significant cost reduction program going on. So we expect while those margins may never be – hit the average of the rest of the OEM business, they’re going to go up by a lot in the next couple of quarters.

Good. Excellent. Okay. And then capital allocation. Okay. With the – included with your 8-K regarding Blaz-Man Gear and Gear Products acquisitions was an amendment to your loan agreement, that appears – and if you could help clarify that a little bit better, it appears to provide the company with more blanket pre-approval versus what looked like you had to do prior repeated needs to amend. But more blanket pre-approval for purposes of when and if you were to reinstitute your share repurchase program. And is that a correct reading?

That is correct. That’s absolutely correct. We’ve gotten relief from immediate compliance with certain covenants. They are only in place – frankly, we only have covenants to address if we are borrowing the majority – the vast majority against our facility. To the extent, we’re nowhere near those levels. And depending on what it is, we’d have to be borrowing 75% or even, I think, 87% or 83% of the available line to trigger any of them. So if we’re not in that mode and we’re nowhere near that, nor do I expect us to be near that anytime soon, we don’t need approval on buybacks. We don’t need approval on dividend levels and things like that. So in terms of – I think, we were in a position of some leverage, and we’ve got a great relationship with our bank. And they were very easy to work with in getting those adjustments made. So we’re pretty happy about that.

Excellent. So with that being made easier, is the Board’s capital allocation view to focus more towards making new acquisitions, permanently lower the company’s average debt levels, or continue returning or even more aggressively returning capital to shareholders with either a bump in the dividend rate and/or reinstituting and getting in the market, adding liquidity buying your 400 to 1,000 shares a day?

Well, we have a – we don’t have a meeting until December sometime. And so now that the landscape has changed a bit since the acquisition, we will discuss it again at that point. But I would say, it’s fair to say that in the past and I believe it’s continuing that we want to continue to grow the company. And I think that’s where our main focus is. And that’s where we’re looking to go, I believe. Having said that, we’ll have another discussion, as we always do at every Board meeting, and we will discuss it at that time and we’ll figure it out, of course.

Right. Well, you guys could do something telephonically before then, if it made sense. And the reason I raise the issue is, unfortunately our stock price is down quite a bit. And thus, there will be year-end tax loss selling. And if one waits too late into December, the company might miss the opportunity of getting a steady state of cheap and very undervalued stock by waiting formally to the quarterly Board meeting.

Well, firstly, Andrew, this is not a Q3 subject with the earnings. But having said that, I’ll entertain this one question from you. And I’ll just tell you that clearly, the Board sees the value and understands the value of repurchasing the company’s shares at attractive prices, which, of course, right now they’re at. In fact, and just as a matter, of course, as of course, you’re well aware, the company has purchased over 700,000 shares over the last two years. The Board has authorized the repurchase of shares based on a multitude of factors, a lot of factors, financial, market, legal considerations. And so if the Board continues, if we look at it, and we determined that we’re going to authorize a market repurchase program at that time, we will do it. But I don’t see the need to – I don’t think any of us see the need to do this in advance of our next Board meeting. If the issue – if the landscape is there now, and I would imagine the landscape will be there in 30 days as well.

Yes. But again, you have 30 less days of tax loss selling, because once December passes those who have that particular motivation, providing the company those shares, or I should say, the market those shares, they’re going to sell those shares into the market to other buyers, because the company wasn’t there. But once December finishes, then that motivation is gone. I’m just trying to share realistic, what goes through the minds of investors and motivations for shares that are – as you know, they’re not the easiest to – for the company to acquire that much each day.

Right.

So just this opportunity. Just [Multiple Speakers]

I appreciate – we all appreciate your views and we share your views. But I don’t think there’s any more I can add to the conversation at this point. That’s pretty much where we’re heading at this point. But thank you.

Your press release made no mention of any current shares outstanding number, I think, or even the one used for the EPS calculation. So all we have is your June quarter’s 10-Q. Can you provide us with a more current outstanding shareholder share count?

I gave you, maybe you missed it, but I gave that number in my short preamble this morning. It was 3,143,810 shares as of November 5.

Okay. Excellent. I’m sorry, I did not catch that.

No, no, I’m sorry, 3,140,000 shares.

Okay. I think that’s all the questions I have for you this quarter. I guess, we won’t have another call until March. So until bye.

Okay. Well, thank you for your – always – you’re always there for us, Andrew, and thank you for your interest and cooperation with the company. Operator, any other questions? Anybody else?

[Operator Instructions] There are no further questions at this time. Mr. Horowitz, I’d like to turn it back to you for any additional or closing remarks.

Okay. Thank you, operator, and thank you, everybody, for being on the call today. And we look forward to speaking with you in late March. Have a good holiday, everybody. Bye-bye.

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