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Q.E.P. CO., INC. Reports Fiscal 2017 First Quarter Sales and Earnings

FIRST QUARTER SALES – $80.2 MILLION
FIRST QUARTER NET INCOME – $2.2 MILLION VS $1.3 MILLION LAST YEAR

FIRST QUARTER EPS - $0.68 VS $0.39 LAST YEAR

BOCA RATON, Fla., July 06, 2016 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (OTC:QEPC.PK) (the “Company”) today reported its consolidated results of operations for the first quarter of its fiscal year ending February 28, 2017.

The Company reported net sales of $80.2 million for the quarter ended May 31, 2016, an increase of $1.9 million or 2.4% from the $78.3 million reported in the same period of fiscal 2016.  As a percentage of net sales, gross margin was 28.2% in the first quarter of fiscal 2017 compared to 27.1% in the first quarter of fiscal 2016.

Lewis Gould, Chairman, commented: "I am encouraged by the progress we have made this quarter despite continuing headwinds with the strong US dollar, increases in health care costs and other items.  Despite this the Company has worked towards positive results this quarter, developing new and innovative products and sales growth in North America.  We are working very hard to continue to flatten our supply chain and lower our costs, while continuing to strengthen our balance sheet with improved working capital and lower debt.”

Net sales for the three month period ended May 31, 2016 as compared to the comparable period in the prior fiscal year reflect growth across multiple product lines in the US and Australia, partially offset by reduced sales in Europe. Foreign exchange rates weakened against the US dollar year over year and continue to affect the translation of the Company’s international operations.

The Company’s gross profit increased $1.4 million or 6.4% to $22.6 million and gross margin improved by 1.1%.  Gross margin benefited from cost reductions on certain products as well as favorable product mix.

Operating expenses for the first quarter of fiscal 2017 were $18.8 million or 23.5% of net sales, compared to $19.0 million or 24.2% of net sales in the comparable fiscal 2016 period.  Lower shipping cost was partially offset by the timing of increased marketing expenses associated with the introduction of new flooring products in North America and Australia.   

The decrease in interest expense during the first quarter of fiscal 2017 as compared to fiscal 2016 is principally the result of debt payments made under term loan facilities during fiscal 2016.

The provision for income taxes as a percentage of income before taxes for the first quarter of fiscal 2017 was 37.5%, compared to 35.0% for the comparable period of fiscal 2016. The effective tax rate in both fiscal years reflects the relative contribution of the Company’s earnings sourced from its international operations.

Net income for the first quarter of fiscal 2017 and 2016 was $2.2 million and $1.3 million, respectively, or $0.68 and $0.39, respectively, per diluted share.

For the first quarter of fiscal 2017, earnings before interest, taxes, depreciation and amortization (EBITDA) was $4.8 million, compared to $3.3 million for the first quarter of fiscal 2016.

    For the Three Months
    Ended May 31,
      2016
    2015  
Net income $ 2,185   $ 1,268  
Add: Interest expense, net   281     320  
  Provision for income taxes   1,311     683  
  Depreciation and amortization   1,016     1,070  
EBITDA   $ 4,793   $ 3,341  
 

/EIN News/ --  

Cash provided by operations during the first quarter of fiscal 2017 was $0.9 million as compared to $3.0 million in the first quarter of fiscal 2016.  During the first quarter of fiscal 2017, increased earnings were principally used to fund increases in working capital and pay down debt.  During the first quarter of fiscal 2016, earnings and changes in working capital were used, along with cash balances, to reduce debt. In both periods, the Company’s capital expenditures were funded through cash from operations.

Working capital at the end of the Company’s fiscal 2017 first quarter was $40.8 million compared to $38.7 million at the end of the 2016 fiscal year.  Aggregate debt, net of cash balances, at the end of the Company’s fiscal 2017 first quarter was $20.4 million or 28.8% of equity, an increase of $0.3 million compared to $20.1 million or 29.4% of equity at the end of the 2016 fiscal year.

The Company will be hosting a conference call to discuss these results and to answer your questions at 10:00 a.m. Eastern Time on Thursday, July 7, 2016. If you would like to join the conference call, dial 1-888-505-4368 toll free from the US or 1-719-325-2458 internationally approximately 10 minutes prior to the start time and ask for the Q.E.P. Co., Inc. First-Quarter Conference Call / Conference ID 9556342. A replay of the conference call will be available until midnight July 14, 2016 by calling 1-877-870-5176 toll free from the US and entering pin number 9556342; internationally, please call 1-858-384-5517 using the same pin number.

Q.E.P. Co., Inc., founded in 1979, is a world class, worldwide provider of innovative, quality and value-driven flooring and industrial solutions. As a leading manufacturer, marketer and distributor, QEP delivers a comprehensive line of hardwood and laminate flooring, flooring installation tools, adhesives and flooring related products targeted for the professional installer as well as the do-it-yourselfer. In addition, the Company provides industrial tools with cutting edge technology to the industrial trades. Under brand names including QEP®, ROBERTS®, Capitol®, Harris®Wood, Fausfloor®, Vitrex®, Homelux®, TileRite®, PRCI®, Nupla®, HISCO®, Plasplugs®, Ludell®, Porta-Nails®, Tomecanic®, Bénètiere® and Elastiment®, the Company sells its products to home improvement retail centers, specialty distribution outlets, municipalities and industrial solution providers in 50 states and throughout the world.

This press release contains forward-looking statements, including statements regarding economic conditions, sales growth, product development and marketing, operating expenses, cost savings, cash flow, debt and currency exchange rates. These statements are not guarantees of future performance and actual results could differ materially from our current expectations.

-Financial Information Follows-

 

       
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share data)
(Unaudited)
       
   For the Three Months 
   Ended May 31, 
    2016       2015  
       
Net sales $ 80,178     $ 78,267  
Cost of goods sold   57,569       57,025  
Gross profit   22,609       21,242  
       
Operating expenses:      
Shipping   6,657       7,310  
General and administrative   6,418       6,256  
Selling and marketing   5,921       5,491  
Other income, net   (164 )     (86 )
Total operating expenses   18,832       18,971  
       
Operating income   3,777       2,271  
       
Interest expense, net   (281 )     (320 )
       
Income before provision for income taxes   3,496       1,951  
       
Provision for income taxes   1,311       683  
       
Net income  $ 2,185     $ 1,268  
       
Net income per share:      
Basic $ 0.68     $ 0.39  
Diluted $ 0.68     $ 0.39  
       
Weighted average number of common      
shares outstanding:      
Basic   3,195       3,212  
Diluted   3,219       3,235  
       

 

       
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
       
  For the Three Months
  Ended May 31,
    2016       2015  
       
Net income $ 2,185     $ 1,268  
       
Unrealized currency translation adjustments   504       (118 )
       
Comprehensive income $ 2,689     $ 1,150  
       

 

       
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except per share values)
       
  May 31,
2016
(Unaudited)
  February 29,
2016
       
ASSETS      
Cash $ 14,053     $ 15,923  
Restricted Cash   1,724       -  
Accounts receivable, less allowance for doubtful accounts of $419      
and $377 as of May 31, 2016 and February 29, 2016, respectively   40,609       39,491  
Inventories   43,870       42,797  
Prepaid expenses and other current assets   2,711       2,234  
Current assets   102,967       100,445  
       
Property and equipment, net   19,113       19,538  
Deferred income taxes, net   5,291       5,288  
Intangibles, net   16,118       15,717  
Other assets   518       550  
       
Total Assets $ 144,007     $ 141,538  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
       
Trade accounts payable $ 20,462     $ 18,432  
Accrued liabilities   15,614       17,854  
Income taxes payable   356       383  
Lines of credit   23,701       23,093  
Current maturities of notes payable   2,026       2,032  
Current liabilities   62,159       61,794  
       
Notes payable   10,435       10,899  
Other long term liabilities   589       589  
Total Liabilities   73,183       73,282  
       
Preferred stock, 2,500 shares authorized, $1.00 par value; 337 shares      
issued and outstanding at May 31, 2016 and February 29, 2016   337       337  
Common stock, 20,000 shares authorized, $.001 par value; 3,802 and      
3,802 shares issued, and 3,190 and 3,198 shares outstanding at      
May 31, 2016 and February 29, 2016, respectively   4       4  
Additional paid-in capital   10,752       10,737  
Retained earnings   70,133       67,952  
Treasury stock, 612 and 604 shares held at cost at May 31, 2016      
and February 29, 2016, respectively   (7,016 )     (6,884 )
Accumulated other comprehensive income   (3,386 )     (3,890 )
Shareholders' Equity   70,824       68,256  
       
Total Liabilities and Shareholders' Equity $ 144,007     $ 141,538  
       

 

       
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
       
   For the Three Months 
   Ended May 31, 
    2016       2015  
       
Operating activities:      
Net income $ 2,185     $ 1,268  
Adjustments to reconcile net income to net cash      
provided by operating activities:      
Depreciation and amortization   1,016       1,070  
Other non-cash adjustments   35       70  
Changes in assets and liabilities, net of acquisition:      
Accounts receivable   (907 )     (4,726 )
Inventories   (836 )     (1,234 )
Prepaid expenses and other assets   (438 )     (235 )
Trade accounts payable and accrued liabilities   (140 )     6,763  
Net cash provided by operating activities   915       2,976  
       
Investing activities:      
Proceeds from sale of property   -       328  
Capital expenditures   (243 )     (536 )
Net cash used in investing activities   (243 )     (208 )
       
Financing activities:      
Net borrowings (repayments) under lines of credit   (463 )     1,457  
Net borrowings (repayments) of notes payable   (470 )     (6,096 )
Purchase of treasury stock   (30 )     (30 )
Dividends   (4 )     (3 )
Net cash provided by (used in) financing activities   (967 )     (4,672 )
       
Effect of exchange rate changes on cash   149       (2 )
       
Net (decrease) increase in cash   (146 )     (1,906 )
Cash at beginning of period   15,923       10,576  
Cash at end of period $ 15,777     $ 8,670  
       
CONTACT: 
Q.E.P. Co., Inc.
Mark S. Walter
Chief Financial Officer 
561-994-5550