Six Month Sales – $135.6 Million
Second Quarter Sales – $67.9 Million
Six Month Net Income – $6.9
Million Second Quarter Net Income – $2.7
Million
Q.E.P. CO., INC. (Pink Sheets:QEPC) (the "Company") today announced
its financial results for the first six months and the second
quarter of its fiscal year ending on February 29, 2012.
The Company reported record net sales of $135.6 million for the
six months ended August 31, 2011, an increase of $14.4 million or
11.9% from the $121.2 million reported in the same period of fiscal
2011. As a percentage of net sales, gross profit was 31.4% in
the first six months of fiscal 2012 compared to 29.9% in the first
six months of fiscal 2011.
Net sales for the second quarter of fiscal 2012 also reached a
record $67.9 million and reflected a gross profit margin of 30.1%
compared to net sales of $60.6 million and a gross profit margin of
29.5% for the second quarter of fiscal 2011.
Lewis Gould, Chairman of the Company's Board of Directors,
commented: "This year's record results reflect positively on the
Company's continued progress in successfully expanding its business
while maintaining a diligent focus on cost control and operating
efficiencies. This quarter's restructuring of our Argentine
operations completes a transition of all of our Latin American
operations from direct distribution to strategic alliances with
distribution partners in those markets." Mr. Gould added, "We are
continuing our focus on opportunities to expand our market share
and non-core product lines and on responding to continuing changes
in economic circumstances. We believe both objectives are well
served by our continuing interest in synergistic acquisitions that
are complementary to our existing businesses."
The increase in net sales continues to reflect the growth of the
Company's hardwood flooring and international operations driven
both by an expansion of sales to existing customers and by an
expansion of the Company's product lines and customer base.
Additionally, the Company's international operations benefited from
the effects of the strengthening of local currencies against the
U.S. dollar during both the first and second quarters of fiscal
2012 as compared to the prior fiscal year.
The improvement in the Company's gross margin as compared to the
comparable periods in the prior fiscal year reflects an improved
product mix, increased production volumes in the Company's
manufacturing operations and the improved purchasing power of our
international operations associated with the strengthening of local
currencies against the US dollar. During the second quarter of
fiscal 2012, margin improvements were partially offset by cost
increases principally associated with changes in commodity
prices.
As a result of both the increase in net sales and the
improvement in gross margins, gross profit for the six months ended
August 31, 2011 and the second quarter of fiscal 2012 was $42.6
million and $20.4 million, respectively, an increase of 17.7% and
14.5%, respectively, from the gross profit of $36.2 million and
$17.8 million, respectively, during the comparable fiscal 2011
periods.
Operating expenses for the three and six months ended August 31,
2011 includes $1.3 million of non-cash restructuring charges
associated with the Company's Argentine operations, including $0.7
million of realized currency translation losses previously
reflected in accumulated other comprehensive income. The Company
also recognized a tax benefit totaling $1.0 million in connection
with the restructuring. This tax benefit is being realized over the
remainder of the fiscal year.
Operating expenses before the restructuring charges for the
first six months and second quarter of fiscal 2012 were $30.8
million and $15.2 million, respectively, or 22.7% and 22.5% of net
sales in those periods, compared to $29.4 million and $14.4
million, respectively, or 24.3% and 23.8% of net sales in the
comparable fiscal 2011 periods. While operating expenses have
increased with the growth in the Company's sales and with the
effects of changes in currency exchange rates, the decrease in
those expenses as a percentage of net sales reflects increased
leveraging of administrative costs and continuing cost
oversight.
The provision for income taxes as a percentage of income before
taxes for the first six months and second quarter of fiscal 2012
was 31.6% and 25.7% compared to 35.0% for both comparable periods
in fiscal 2011. The decrease in the effective tax rates principally
reflects the tax benefits associated with restructuring the
Company's Argentine operations.
Net income for the first six months and second quarter of fiscal
2012 was $6.9 million and $2.7 million, respectively, or $2.02 and
$0.80, respectively, per diluted share. Net income per diluted
share in each period is after a charge of $0.10 associated with
restructuring of the Company's Argentine operations net of related
tax benefits. For the comparable periods of fiscal 2011, net income
was $3.9 million and $2.0 million, respectively, or $1.15 and
$0.58, respectively, per diluted share.
Excluding the effects of restructuring our Argentine operations,
earnings before interest, taxes, depreciation and amortization
(EBITDA) for the first six months and second quarter of fiscal 2012
was $13.1 million and $5.8 million, respectively, an increase of
63% and 44% respectively, as compared to $8.0 million and $4.1
million, respectively, for the comparable periods of fiscal
2011.
Cash provided by operations during the first six months of
fiscal 2012 was $5.4 million as compared to $3.8 million in the
first six months of fiscal 2011, principally reflecting improved
operating results. Cash from operations during fiscal 2012 was used
primarily to reduce aggregate borrowings by $2.9 million, to
purchase the business of Porta-Nails, Inc. and additional treasury
shares, and for investments in new IT systems. By comparison, cash
provided by operations during the first six months of fiscal 2011
was $3.8 million and was used to fund capital expenditures
principally related to expanding the Company's manufacturing
capabilities, a reduction in aggregate debt and the purchase of
treasury stock.
Working capital at the end of the Company's fiscal 2012 second
quarter was $33.7 million, an increase from $27.6 million at the
end of the 2011 fiscal year. Aggregate debt at the end of the
Company's fiscal 2012 second quarter was reduced to $18.8 million
or 44% of equity from $21.7 million or 62% of equity at the end of
the 2011 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, September 22, 2011. If you would like to join the
conference call, approximately 10 minutes prior to the start time
please dial 1-877-941-1427 toll free from the US and ask for Q.E.P.
Co., Inc. Internationally, please dial 1-480-629-9664. A
replay of the conference call will be available until midnight
September 29th by calling 1-877-870-5176 toll free from the US and
entering pin number 4472525; internationally, please call
1-858-384-5517 using the same pin number.
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 for the professional installer
as well as the do-it-yourselfer. Under brand names including QEP®,
ROBERTS®, Capitol®, Harris®Wood, Vitrex®, PRCI®, BRUTUS® and
Elastiment®, 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 business expansion, productivity and
cost management, potential opportunities, growth and synergies
related to acquisitions, currency exchange rates, economic
conditions, new products and demand for Company products, Company
performance, and capital availability that involve risks and
uncertainties. 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 August 31, |
For the Six
Months Ended August 31, |
| |
2011 |
2010 |
2011 |
2010 |
| |
|
|
|
|
| Net sales |
$ 67,856 |
$ 60,603 |
$ 135,630 |
$ 121,176 |
| Cost of goods sold |
47,425 |
42,755 |
93,039 |
84,992 |
| Gross profit |
20,431 |
17,848 |
42,591 |
36,184 |
| |
|
|
|
|
| Operating expenses: |
|
|
|
|
| Shipping |
6,793 |
6,353 |
13,245 |
12,940 |
| General and administrative |
4,538 |
4,670 |
9,683 |
9,338 |
| Selling and marketing |
4,051 |
3,446 |
8,146 |
7,224 |
| Restructuring charges |
1,273 |
-- |
1,273 |
-- |
| Other income, net |
(138) |
(57) |
(312) |
(94) |
| Total operating expenses |
16,517 |
14,412 |
32,035 |
29,408 |
| |
|
|
|
|
| Operating income |
3,914 |
3,436 |
10,556 |
6,776 |
| |
|
|
|
|
| Interest expense, net |
(243) |
(371) |
(528) |
(727) |
| |
|
|
|
|
| Income before provision for income taxes |
3,671 |
3,065 |
10,028 |
6,049 |
| |
|
|
|
|
| Provision for income taxes |
943 |
1,073 |
3,168 |
2,117 |
| |
|
|
|
|
| Net income |
$ 2,728 |
$ 1,992 |
$ 6,860 |
$ 3,932 |
| |
|
|
|
|
| Net income per share: |
|
|
|
|
| Basic |
$ 0.82 |
$ 0.60 |
$ 2.07 |
$ 1.18 |
| Diluted |
$ 0.80 |
$ 0.58 |
$ 2.02 |
$ 1.15 |
| |
|
|
|
|
| Weighted average number of common
shares outstanding: |
|
|
| Basic |
3,332 |
3,325 |
3,308 |
3,329 |
| Diluted |
3,404 |
3,422 |
3,398 |
3,424 |
| |
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED BALANCE
SHEETS |
| (In thousands, except par
values) |
| |
|
|
| |
August 31, 2011
(Unaudited) |
February 28,
2011 |
| |
|
|
|
ASSETS |
|
|
| CURRENT ASSETS |
|
|
| Cash |
$ 1,413 |
$ 447 |
| Accounts receivable, less allowance for
doubtful accounts of $367 and $619 as of August 31, 2011 and
February 28, 2011, respectively |
34,985 |
31,350 |
| Inventories |
32,938 |
34,447 |
| Prepaid expenses and other current
assets |
1,213 |
2,638 |
| Deferred income taxes |
1,445 |
1,430 |
| Total current assets |
71,994 |
70,312 |
| |
|
|
| Property and equipment, net |
12,410 |
12,991 |
| Deferred income taxes, net |
1,102 |
1,084 |
| Intangibles, net |
2,760 |
2,499 |
| Other assets |
527 |
1,012 |
| |
|
|
| Total Assets |
$ 88,793 |
$ 87,898 |
| |
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
| |
|
|
| CURRENT LIABILITIES |
|
|
| Trade accounts payable |
$ 16,859 |
$ 16,887 |
| Accrued liabilities |
9,515 |
13,448 |
| Lines of credit |
10,323 |
9,568 |
| Current maturities of notes payable |
1,626 |
2,801 |
| Total current liabilities |
38,323 |
42,704 |
| |
|
|
| Notes payable |
6,848 |
9,294 |
| Other long term liabilities |
658 |
657 |
| Total Liabilities |
45,829 |
52,655 |
| |
|
|
| SHAREHOLDERS' EQUITY |
|
|
| Preferred stock, 2,500 shares
authorized, $1.00 par value; 337 shares issued and outstanding at
August 31, 2011 and February 28, 2011 |
337 |
337 |
| Common stock, 20,000 shares authorized, $.001
par value; 3,789 and 3,696 shares issued; 3,363 and 3,293 shares
outstanding at August 31, 2011 and February 28, 2011,
respectively |
4 |
4 |
| Additional paid-in capital |
10,782 |
10,406 |
| Retained earnings |
34,560 |
27,703 |
| Treasury stock, 426 and 403 shares held at
cost at August 31, 2011 and February 28, 2011, respectively |
(3,621) |
(3,219) |
| Accumulated other comprehensive income |
902 |
12 |
| Total Shareholders'
Equity |
42,964 |
35,243 |
| |
|
|
| Total Liabilities and Shareholders'
Equity |
$ 88,793 |
$ 87,898 |
| |
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CASH FLOWS |
| (In thousands) |
| (Unaudited) |
| |
|
|
| |
For the Six
Months Ended August 31, |
| |
2011 |
2010 |
| |
|
|
| Operating activities: |
|
|
| Net income |
$ 6,860 |
$ 3,932 |
| Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
| Depreciation and
amortization |
1,290 |
1,252 |
| Restructuring
charges |
1,273 |
-- |
| Other non-cash
adjustments |
30 |
99 |
| Changes in assets and liabilities: |
|
|
| Accounts receivable |
(3,537) |
(1,955) |
| Inventories |
1,951 |
2,104 |
| Prepaid expenses and
other assets |
1,829 |
799 |
| Trade accounts payable
and accrued liabilities |
(4,336) |
(2,413) |
| Net cash provided by operating
activities |
5,360 |
3,818 |
| |
|
|
| Investing activities: |
|
|
| Acquisition |
(959) |
-- |
| Capital expenditures |
(577) |
(1,273) |
| Cash used in investing
activities |
(1,536) |
(1,273) |
| |
|
|
| Financing activities: |
|
|
| Net borrowings under
lines of credit |
642 |
304 |
| Repayments of notes
payable |
(3,521) |
(1,285) |
| Purchase of treasury
stock |
(368) |
(1,042) |
| Proceeds from exercise of
stock options |
376 |
-- |
| Dividends paid |
(4) |
(4) |
| Net cash used in financing
activities |
(2,875) |
(2,027) |
| |
|
|
| Effect of exchange rate changes on
cash |
17 |
(22) |
| |
|
|
| Net increase in cash |
966 |
496 |
| |
|
|
| Cash at beginning of
period |
447 |
856 |
| |
|
|
| Cash at end of period |
$ 1,413 |
$ 1,352 |
| |
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| RECONCILIATION OF NET
INCOME TO EBITDA BEFORE RESTRUCTURING CHARGES |
| (In thousands) |
| (Unaudited) |
| |
|
|
|
|
| |
For the Three
Months Ended August 31, |
For the Six
Months Ended August 31, |
| |
2011 |
2010 |
2011 |
2010 |
| |
|
|
|
|
| Net income |
$ 2,728 |
$ 1,992 |
$ 6,860 |
$ 3,932 |
| Add back: |
|
|
|
|
| Restructuring charges |
1,273 |
-- |
1,273 |
-- |
| Interest |
243 |
371 |
528 |
727 |
| Provision for income taxes |
943 |
1,073 |
3,168 |
2,117 |
| Depreciation and amortization |
649 |
626 |
1,290 |
1,252 |
| EBITDA before restructuring charges |
$ 5,836 |
$ 4,062 |
$ 13,119 |
$ 8,028 |
CONTACT: Q.E.P. Co., Inc.
Richard A. Brooke
Senior Vice President and
Chief Financial Officer
561-994-5550
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