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Posts Tagged ‘P & F Industries Inc (NASDAQ:PFIN)’

On Tuesday last week I ran a post on Lawndale Capital Management’s campaign to have P & F Industries Inc (NASDAQ:PFIN), among other corporate governance initiatives, rein in the compensation paid to PFIN’s Chairman and CEO, Richard Horowitz for poor performance.

Lawndale’s May 26 amended 13D exhibited its May 25 letter to PFIN board, which also annexed Proxy Governance’s Comparative Performance Analysis of PFIN. Both are worth reading for the background.

PFIN held its annual meeting on June 3, 2010. Lawndale voted its fund’s shares to “Withhold” on all of PFIN’s director nominees. Lawndale’s President, Andrew Shapiro, attended the meeting and met with PFIN’s board to discuss Lawndale’s many concerns, including but not limited to, excessive executive compensation, the need for greater independent composition and functioning of PFIN’s board and oversight of management’s unsuccessful acquisition strategy and operational execution.

PFIN reported the results of the annual meeting late afternoon on June 8:

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On June 3, 2010, the Board of Directors (the “Board”) of P&F Industries, Inc. (the “Registrant”) held a Meeting (the “Board Meeting”) immediately following the Registrant’s 2010 Annual Meeting of Stockholders. At the Board Meeting, the Board reconstituted the composition of the Board’s Compensation Committee and Stock Option Committee, so that, effective immediately, the members of such committees were Kenneth M. Scheriff (who was appointed as Chairman of each such committee) and Jeffrey D. Franklin, who also remained Chairman of the Audit Committee. All other committees of the Board remained unchanged.

At the Board Meeting, the Board also established the position of Lead Independent Director to preside at executive sessions of the non-employee directors and to serve as the principal liaison between the non-employee directors and the Chairman of the Board. The Board appointed Marc A. Utay to serve as the initial Lead Independent Director in addition to his continuing role as Chairman of the Nominating Committee of the Board.

Voting results from PFIN’s annual meeting were as follows: Robert Dubofsky, Alan Goldberg and Chairman/CEO Richard Horowitz had 31.9%, 29.9% and 29.5% of the votes cast as “Withheld”, respectively.

[Full Disclosure:  I do no hold PFIN. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]

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Lawndale Capital Management, LLC filed an amended 13D on May 26 for its holding in P & F Industries Inc (NASDAQ:PFIN). Lawndale has been lobbying PFIN regarding “certain operational and corporate governance concerns that include, but are not limited to, what Lawndale believes to be excessive compensation paid to PFIN’s Chairman and CEO, Richard Horowitz, for poor performance. This further leads to serious concerns regarding the Board’s current composition and independence.”

Lawndale’s 13D exhibits its May 25 letter to PFIN board, which also annexes Proxy Governance’s Comparative Performance Analysis of PFIN. It is well worth reading.

Purpose of the Transaction

Extracted from the most recent 13D filing:

On May 25, 2010, Lawndale sent PFIN’s Board a letter (a copy of which is attached at Exhibit B hereto, and incorporated by reference to this filing) informing them of Lawndale’s intent to vote 272,812 shares, equal to 7.5% of eligible shares to “WITHOLD authority for ALL NOMINEES” on Proposal 1, Election of Directors, at PFIN’s annual meeting scheduled for June 3 2010 and noting independent proxy advisory services, Proxy Governance and RiskMetrics also recommended voting to “WITHHOLD ALL” and WITHHOLD Dubofsky”, respectively. (a copy of the Proxy Governance recommendation is attached as part of this exhibit)

As disclosed in greater detail in the letter, among the reasons for its vote, Lawndale cited the following:

· For P&F’s Small Size And Business Structure, Horowitz’ Compensation Is Wholly Inappropriate

· The Only Shareowner That Has Benefited From The Horowitz Era Has Been Horowitz

· P&F’s Board Requires Increased Independence Via New Directors From Outside “The Club”

At the invitation of the Nominating Committee Chairman, Marc Utay, in February 2010 Lawndale submitted the names and backgrounds of five highly qualified and independent individuals for possible addition to P&F’s Board. Although these nominations were made long before the deadline for setting PFIN’s slate and Proxy for the upcoming June 3 Annual Meeting, none of Lawndale’s suggested nominees appeared on PFIN’s final Proxy. Lawndale was recently informed that two of its nominees have been invited to meet with certain members of the Board in the week following PFIN’s Annual Meeting.

It is the view of Lawndale that a board comprised of qualified directors who are independent, and whose interests are better aligned with shareholders via meaningful purchased equity ownership, would more objectively and aggressively oversee the compensation and corporate acquisition decisions of PFIN.

Lawndale believes the public market value of PFIN is undervalued by not adequately reflecting the value of PFIN’s business segments and other assets, including certain long-held real estate.

While Lawndale acquired the Stock solely for investment purposes, Lawndale has been and may continue to be in contact with PFIN management, members of PFIN’s Board, other significant shareholders and others regarding alternatives that PFIN could employ to maximize shareholder value. Lawndale may from time to time take such actions, as it deems necessary or appropriate to maximize its investment in the Company’s shares. Such action(s) may include, but is not limited to, buying or selling the Company’s Stock at its discretion, communicating with the Company’s shareholders and/or others about actions which may be taken to improve the Company’s financial situation or governance policies or practices, as well as such other actions as Lawndale, in its sole discretion, may find appropriate.

About PFIN

PFIN operates in two primary lines of business, or segments: tools and other products (Tools) and hardware and accessories (Hardware). The Company conduct its Tools business through a wholly owned subsidiary, Continental Tool Group, Inc. (Continental), which in turn operates through its wholly owned subsidiaries, Florida Pneumatic Manufacturing Corporation (Florida Pneumatic) and Hy-Tech Machine, Inc. (Hy-Tech). The Company conducts its Hardware business through a wholly owned subsidiary, Countrywide Hardware Inc. (Countrywide), which in turn operates through its wholly owned subsidiaries, Nationwide Industries, Inc. (Nationwide), Woodmark International, L.P. (Woodmark) and Pacific Stair Products, Inc. (Pacific Stair).

[Full Disclosure:  I do no hold PFIN. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]

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