Quarterly Sales – $79.7
Million
Quarterly Net Income – $1.1
Million
BOCA RATON, Fla., June 24, 2014 (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, 2015.
The Company reported net sales of $79.7 million for the three
months ended May 31, 2014, a decrease of $3.7 million from the
$83.4 million reported in the same period of fiscal 2014. As a
percentage of net sales, gross profit was 27.7% in the first three
months of fiscal 2015 compared to 28.4% in the first three months
of fiscal 2014.
Lewis Gould, Chairman of the Company's Board of Directors,
commented: "We believe that while we transition through some
significant changes in our businesses, the Company is making
substantial progress toward its strategic objectives. The Company
completed the purchase of Faus and is in the process of integrating
its operations with the Company's pre-existing U.S. operations, a
consolidation that is continuing and painful. We are also
modernizing our manufacturing plant in Clinton, Massachusetts, for
increased efficiency while we are continually adding new products.
We have expanded our credit facilities, which is reflected on our
balance sheet. All of this is occurring while we develop new
initiatives for the coming year." Mr. Gould concluded, "I am
confident that the results of our sales and consolidation
activities will result in better shareholder value over the coming
year while we continue this transition."
The change in net sales for the current fiscal quarter as
compared to the first quarter of fiscal year 2014 principally
reflects the beneficial impact of the fiscal 2014 acquisitions of
Faus and Plasplugs and growth in our European operations offset by
a decline from a significant North American customer's discontinued
purchases of certain products during the second quarter of fiscal
2014 and, to a lesser degree, the planned exit from certain low
profit products and the net negative translation impact from
changes in currency exchange rates.
The Company's gross margin was 27.7% for the first quarter of
fiscal 2015 as compared to 28.4% for the first quarter of the prior
fiscal year. The change in gross margin reflects both the
incremental contribution and generally more favorable product mix
of acquisitions and the increased purchasing power from overall
changes in currency exchange rates offset by discontinued purchases
of certain products by a significant customer and an increase in
the costs of certain raw materials.
Operating expenses for the first three months of fiscal 2015
were $20.1 million, compared to $20.2 million for the same period
in fiscal 2014, or 25.3% and 24.3% of net sales, respectively.
Operating expenses declined modestly within North America and were
positively affected internationally by overall movements in
currency exchange rates offset by increases in certain European
operating expenses principally associated with the integration of
acquisitions.
Non-operating income for the first three months of fiscal 2014
represents the gain related to the sale and leaseback of a Company
facility in Canada, net of selling costs and the present value of
future lease payments.
The provision for income taxes as a percentage of income before
taxes for the first three months of fiscal 2015 and 2014 was 33.7%
and 22.2%, respectively. The effective tax rate in fiscal 2014
reflected the impact of the sale of our Canadian property.
Net income for the first three months of fiscal 2015 and 2014
was $1.1 million and $5.1 million, respectively, or $0.33 and
$1.56, respectively, per diluted share.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) before non-operating income for the first quarter of
fiscal 2015 decreased to $3.3 million as compared to $4.6 million
for the fiscal 2014 first quarter:
| |
|
For the Three
Months Ended May 31, |
| |
|
2014 |
2013 |
| |
|
|
|
| Net income |
|
$ 1,088 |
$ 5,142 |
| Add back (deduct): |
Interest |
300 |
254 |
| |
Provision for income taxes |
554 |
1,466 |
| |
Depreciation and amortization |
1,319 |
1,082 |
| |
Non-operating income |
-- |
(3,379) |
| EBITDA before
non-operating income |
$ 3,261 |
$ 4,565 |
Cash used in operations was $0.2 million for the first quarter
of fiscal 2015 whereas operations provided $1.2 million of cash
flow during the first quarter of fiscal 2014 and reflected
additional investments in working capital in both periods. Funding
for the Company's acquisition activities as well as for capital
expenditures and its ongoing treasury stock program was provided by
borrowings and the proceeds from the sale of a Canadian
property.
During the first quarter of the current fiscal year the Company
borrowed $9.0 million under a new term loan facility in connection
with its Faus acquisition and used the proceeds to reduce the
balance outstanding under the Company's lines of credits. In
addition, during the first quarter of the current fiscal year, the
Company amended its principal loan agreements to provide further
new term loan facilities in the amount of $10.9 million, increase
its borrowing limit, reduce interest rates and extend the maturity
date of the loan agreements to June 2017.
Working capital at the end of the Company's fiscal 2015 first
quarter was $38.8 million, an increase of $10.0 million from $28.8
million at the end of the 2014 fiscal year, principally due to cash
held from the Company's new term loan facilities. Accordingly,
aggregate debt at the end of the Company's fiscal 2015 first
quarter rose to $52.4 million from $41.4 million at the end of the
2014 fiscal year. Total debt to equity stood at 0.77 as of May 31,
2014.
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, June 26, 2014. If you would like to join the
conference call, dial 1-888-461-2024 toll free from the US or
1-719-325-2429 internationally approximately 10 minutes prior to
the start time and ask for the Q.E.P. Co., Inc. First Quarter
Conference Call / Conference ID 1615576. A replay of the conference
call will be available until midnight July 3rd by calling
1-877-870-5176 toll free from the US and entering pin number
1615576; 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 markets over 7,000
products. 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 future market position and
profitability, potential acquisition opportunities and benefits,
capital availability and shareholder value. 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, |
| |
2014 |
2013 |
| |
|
|
| Net sales |
$ 79,707 |
$ 83,399 |
| Cost of goods sold |
57,628 |
59,676 |
| Gross profit |
22,079 |
23,723 |
| |
|
|
| Operating expenses: |
|
|
| Shipping |
7,516 |
7,941 |
| General and administrative |
6,588 |
6,426 |
| Selling and marketing |
6,155 |
6,038 |
| Other income, net |
(122) |
(165) |
| Total operating expenses |
20,137 |
20,240 |
| |
|
|
| Operating income |
1,942 |
3,483 |
| |
|
|
| Non-operating income |
-- |
3,379 |
| Interest expense, net |
(300) |
(254) |
| |
|
|
| Income before provision for income
taxes |
1,642 |
6,608 |
| |
|
|
| Provision for income taxes |
554 |
1,466 |
| |
|
|
| Net income |
$ 1,088 |
$ 5,142 |
| |
|
|
| Net income per share: |
|
|
| Basic |
$ 0.33 |
$ 1.57 |
| Diluted |
$ 0.33 |
$ 1.56 |
| |
|
|
| Weighted average number of common
shares outstanding: |
|
|
| Basic |
3,258 |
3,276 |
| Diluted |
3,280 |
3,300 |
| |
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME |
| (In thousands) |
| (Unaudited) |
| |
|
|
| |
For the Three
Months Ended May 31, |
| |
2014 |
2013 |
| |
|
|
| Net income |
$ 1,088 |
$ 5,142 |
| |
|
|
| Unrealized currency translation
adjustments |
286 |
(351) |
| |
|
|
| Comprehensive income |
$ 1,374 |
$ 4,791 |
| |
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED BALANCE
SHEETS |
| (In thousands) |
| |
|
|
| |
May 31, 2014
(Unaudited) |
February 28,
2014 |
| |
|
|
| ASSETS |
|
|
| Cash |
$ 12,759 |
$ 2,621 |
| Accounts receivable, less allowance for
doubtful accounts of $394 and $382 as of May 31, 2014 and February
28, 2014, respectively |
47,785 |
45,726 |
| Inventories |
41,960 |
42,906 |
| Prepaid expenses and other current
assets |
3,820 |
3,338 |
| Deferred income taxes |
744 |
744 |
| Current assets |
107,068 |
95,335 |
| |
|
|
| Property and equipment, net |
23,599 |
24,353 |
| Deferred income taxes |
3,933 |
3,926 |
| Intangibles, net |
21,437 |
21,697 |
| Other assets |
529 |
470 |
| |
|
|
| Total Assets |
$ 156,566 |
$ 145,781 |
| |
|
|
| LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
| |
|
|
| Trade accounts payable |
$ 19,008 |
$ 21,989 |
| Accrued liabilities |
16,311 |
14,613 |
| Lines of credit |
28,567 |
28,173 |
| Current maturities of notes payable |
4,387 |
1,746 |
| Current liabilities |
68,273 |
66,521 |
| |
|
|
| Notes payable |
19,444 |
11,487 |
| Other long term liabilities |
838 |
931 |
| Total Liabilities |
88,555 |
78,939 |
| |
|
|
| Preferred stock, 2,500 shares authorized,
$1.00 par value; 337 shares issued and outstanding at May 31, 2014
and February 28, 2014 |
337 |
337 |
| Common stock, 20,000 shares authorized, $.001
par value; 3,801 shares issued; 3,250 and 3,262 shares outstanding
at May 31, 2014 and February 28, 2014, respectively |
4 |
4 |
| Additional paid-in capital |
10,634 |
10,620 |
| Retained earnings |
63,215 |
62,130 |
| Treasury stock, 550 and 539 shares held at
cost at May 31, 2014 and February 28, 2014, respectively |
(5,917) |
(5,701) |
| Accumulated other comprehensive income |
(262) |
(548) |
| Shareholders' Equity |
68,011 |
66,842 |
| |
|
|
| Total Liabilities and Shareholders'
Equity |
$ 156,566 |
$ 145,781 |
| |
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CASH FLOWS |
| (In thousands) |
| (Unaudited) |
| |
|
|
| |
For the Three
Months Ended May 31, |
| |
2014 |
2013 |
| |
|
|
| Operating activities: |
|
|
| Net income |
$ 1,088 |
$ 5,142 |
| Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
| Depreciation and
amortization |
1,319 |
1,082 |
| Non-operating income |
-- |
(3,379) |
| Other non-cash adjustments |
26 |
55 |
| Changes in assets and liabilities, net of
acquisitions: |
|
|
| Accounts receivable |
(1,923) |
(5,323) |
| Inventories |
1,283 |
613 |
| Prepaid expenses and other
assets |
(383) |
(462) |
| Trade accounts payable and
accrued liabilities |
(1,611) |
3,518 |
| Net cash provided (used) by operating
activities |
(201) |
1,246 |
| |
|
|
| Investing activities: |
|
|
| Acquisitions |
(254) |
(23,495) |
| Proceeds from sale of
property |
52 |
4,630 |
| Capital expenditures |
(163) |
(188) |
| Net cash used in investing
activities |
(365) |
(19,053) |
| |
|
|
| Financing activities: |
|
|
| Net
borrowings (repayments) under lines of credit |
(8,724) |
20,321 |
| Borrowings of notes
payable |
19,880 |
-- |
| Repayments of notes
payable |
(331) |
(1,415) |
| Purchase of treasury stock |
(119) |
(57) |
| Dividends and other |
(3) |
14 |
| Net cash used in financing
activities |
10,703 |
18,863 |
| |
|
|
| Effect of exchange rate changes on
cash |
1 |
(5) |
| |
|
|
| Net increase in cash |
10,138 |
1,051 |
| Cash at beginning of
period |
2,621 |
737 |
| Cash at end of period |
$ 12,759 |
$ 1,788 |
CONTACT: Q.E.P. Co., Inc.
Richard A. Brooke
Senior Vice President and
Chief Financial Officer
561-994-5550
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