QEPC Q E P Company Inc (QX)

Q.E.P. CO., INC. (Pink Sheets:QEPC) (the "Company") today announced that on Friday, February 12, 2010, it completed the acquisition of substantially all of the assets and the assumption of certain liabilities of ArborCraft, LLC.

ArborCraft, formerly Harris-Tarkett, was founded in 1898 as The Harris Manufacturing Company and has evolved into a leading North American hardwood flooring manufacturer. ArborCraft produces a broad line of hardwood flooring including prefinished engineered plank, prefinished solid flooring and unfinished parquet along with related moldings and accessories sold under the Tarkett®, Genesis and Harris® brands. The ArborCraft operations employ approximately 190 people in three facilities located on approximately 67 acres in Johnson City, Tennessee, and Montpelier, Indiana. The facilities include over 500,000 square feet of manufacturing and drying space in addition to a 192,000 square foot lumber yard.

Mr. Lewis Gould, Chairman of the Company's Board of Directors, commented: "We are very pleased to report to our shareholders the completion of this important acquisition. The acquisition will be a key component of the Company's strategy to become a 'full line supplier' to the flooring industry. Q.E.P., under various brand names, supplies adhesives, underlayment, tools, chemicals and now flooring in this strategy."

ArborCraft had 2009 net sales of approximately $27.8 million. Consideration for the transaction included approximately $6.2 million of cash, subject to a post-closing working capital adjustment, and the issuance of a subordinated term note to the seller of approximately $3.8 million, which consideration is substantially equivalent to the fair value of the net assets acquired. 

In connection with the acquisition, the Company amended its domestic asset based loan agreement to increase its revolving credit facility from $27 million to $34 million, establish a $6.0 million term loan and extend the maturity of the loan agreement to May 2013. The interest rate applicable to the revolving credit facility was amended to a range of Libor plus 2.75% to 3.75% for advances with fixed maturities and to a range of the Base Rate plus 1.75% to 2.75% for all other advances. The term loan bears interest equal to, at the option of the Company, the Libor rate or Base Rate interest rates applicable to the revolving credit facility plus 0.25%, has a term that varies with the term of the loan agreement, and requires quarterly payments of principal of approximately $0.2 million with a balloon payment upon maturity. There were no changes to the financial covenants included in the loan agreement. Prior to completion of the ArborCraft transaction, the Company had borrowed approximately $11.7 million under its domestic revolving credit facility and approximately $11.0 million was available for future borrowings.

The subordinated term note issued to the seller matures in May 2013, requires quarterly payments of principal of approximately $0.3 million and bears interest at 6.75% per annum. The note is fully subordinated to the Company's domestic asset based loan agreement and is collateralized by certain property, plant and equipment and intangible assets acquired in the ArborCraft transaction.

Q.E.P. Co., Inc., founded in 1979, is a leading worldwide manufacturer, marketer and distributor of a comprehensive line of hardwood flooring, flooring installation tools, adhesives and flooring related products targeted at the professional installer as well as the do-it-yourselfer. Under brand names including QEP®, ROBERTS®, Capitol®, Vitrex®, PRCI®, BRUTUS® and Elastiment®, and now including Tarkett®, Genesis and Harris®, the Company markets over 3,000 flooring and flooring related products.  In addition to a complete hardwood flooring line, Q.E.P. products are used primarily for surface preparation and installation of wood, laminate, ceramic tile, carpet and vinyl flooring. The Company sells its products to home improvement retail centers and specialty distribution outlets in 50 states and throughout the world.

This press release contains forward-looking statements, including statements regarding the expected benefits resulting from the acquisition, our strategic plans and the fair value of net assets acquired, that involve risks and uncertainties.  These statements are not guarantees of future performance and actual results could differ materially from our current expectations.

CONTACT:  Q.E.P. Co., Inc.

          Richard A. Brooke, Senior Vice President and

           Chief Financial Officer

          561-994-5550