Q.E.P. Co., Inc., Reports Fiscal 2010 Six Month and Second Quarter Earnings




              Record Six Month Net Income - $4.3 Million
                   Quarterly Sales - $51.2 Million
                 Quarterly Net Income - $2.1 Million

BOCA RATON, Fla., Sept. 16, 2009 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (Pink Sheets:QEPC) (the "Company") today announced its financial results for the first six months and second quarter of its fiscal year ending on February 28, 2010.

The Company reported net sales of $101.8 million for the first six months of fiscal 2010, a decrease of $12.1 million from the $113.9 million reported in the same period of fiscal 2009. As a percentage of net sales, gross profit increased to 31.0% in the first six months of fiscal 2010 from 29.5% in the first six months of fiscal 2009.

Net sales for the second quarter of fiscal 2010 were $51.2 million with a gross profit margin of 31.4% compared to net sales of $61.0 million with a gross profit margin of 28.8% for the second quarter of fiscal 2009.

Sales to one of the Company's home center customers in the second quarter of fiscal 2009, associated with the initial penetration of existing products into new stores and the introduction of new products, accounted for a substantial portion of the sales decline for the six and three months ended August 31, 2009 compared to the corresponding periods in the prior year. In addition, prior fiscal year sales reflect the benefit of relatively stronger foreign currencies compared to the U.S. Dollar. Operating income for the first six months of fiscal 2010 was $7.4 million compared to $4.5 million for the first six months of fiscal 2009 while operating income for the second quarter of fiscal 2010 was $3.5 million compared to $2.0 million for the second quarter of fiscal 2009.

Operating income in the current fiscal year benefited primarily from the significant cost reduction measures implemented in the second half of fiscal 2009 and maintained through the second quarter of fiscal 2010, although the Company is beginning to experience an upward pressure on costs as a result of both price increases on purchased products and from the costs associated with meeting customer service levels.

Net income for the first six months and second quarter of fiscal 2010 was $4.3 million and $2.1 million, respectively, or $1.23 and $0.59 per diluted share. For the comparable periods of fiscal 2009, net income was $2.1 million and $0.8 million, respectively, or $0.59 and $0.23 per diluted share.

Cash provided by operations during the first six months of fiscal 2010 was $6.9 million, including cash provided from the Company's continuing cash management programs, substantially all of which was used to reduce debt during the period. By comparison, during the first six months of fiscal 2009 $9.5 million of cash was used in operations to fund working capital requirements and was financed by additional borrowings. Working capital at the end of the Company's fiscal year 2010 second quarter was $12.2 million, an increase of $6.3 million from $5.9 million at the Company's fiscal 2009 year-end.

The Company reiterated that significant economic uncertainties remain in each of the markets in which it operates. Accordingly, it remains extremely difficult for the Company to project how the global economic environment will perform and the extent to which, or whether, the improvements in the Company's results of operations will continue.

Q.E.P. Co., Inc., founded in 1979, is a leading worldwide manufacturer, marketer and distributor of a broad line of flooring tools and accessories for the home improvement market. Under brand names including QEP(R), ROBERTS(R), Smoothedge(R), Vitrex(R), PRCI(R), Capitol(R) and Elastiment(R), the Company markets over 3,000 specialty tools and flooring related products used primarily for surface preparation and installation of ceramic tile, carpet, vinyl and wood flooring. The Company sells its products to home improvement retail centers and specialty distribution outlets in 50 states and around the world.



                   Q.E.P. CO., INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share data)
                              (Unaudited)

                         For the Three Months     For the Six Months
                           Ended August 31,        Ended August 31,
                        ----------------------  ----------------------
                           2009        2008        2009        2008
                        ----------  ----------  ----------  ----------
 Net sales              $  51,153   $  61,000   $ 101,836   $ 113,885
 Cost of goods sold        35,081      43,456      70,242      80,305
                        ----------  ----------  ----------  ----------
 Gross profit              16,072      17,544      31,594      33,580


 Operating costs
  and expenses:
   Shipping                 5,811       7,211      11,151      12,818
   General and
    administrative          4,004       4,584       7,965       9,038
   Selling and
    marketing               2,799       3,773       5,124       7,398
   Other income, net          (50)        (33)        (76)       (145)
                        ----------  ----------  ----------  ----------
 Total operating
  costs and expenses       12,564      15,535      24,164      29,109
                        ----------  ----------  ----------  ----------


 Operating income           3,508       2,009       7,430       4,471

 Interest expense, net       (313)       (578)       (635)     (1,033)
                        ----------  ----------  ----------  ----------

 Income before
  provision for
  income taxes              3,195       1,431       6,795       3,438

   Provision for
    income taxes            1,125         618       2,461       1,387
                        ----------  ----------  ----------  ----------

 Net income             $   2,070   $     813   $   4,334   $   2,051
                        ==========  ==========  ==========  ==========


 Net income per share:
   Basic                $    0.59   $    0.24   $    1.23   $    0.60
                        ==========  ==========  ==========  ==========
   Diluted              $    0.59   $    0.23   $    1.23   $    0.59
                        ==========  ==========  ==========  ==========


 Weighted average
  number of common
  shares outstanding:
   Basic                    3,495       3,426       3,513       3,429
                        ==========  ==========  ==========  ==========
   Diluted                  3,496       3,463       3,514       3,479
                        ==========  ==========  ==========  ==========


                   Q.E.P. CO., Inc. and Subsidiaries
                      Consolidated Balance Sheets
                   (In thousands, except share data)

                                                Aug. 31,
                                                 2009       Feb. 28,
                                              (Unaudited)     2009
                                              -----------  -----------
                  ASSETS

  CURRENT ASSETS

 Cash and cash equivalents                    $      959     $    695
 Accounts receivable, less allowance for
  doubtful accounts of $673 and $561 as of
  August 31, 2009 and February 28, 2009,
  respectively                                    30,084       26,746
 Inventories                                      22,736       24,446
 Prepaid expenses and other current assets         1,647        2,026
 Deferred income taxes                             1,474        1,472
                                              -----------  -----------
 Total current assets                             56,900       55,385

 Property and equipment, net                       6,224        6,225
 Deferred costs                                    1,763        2,203
 Deferred income taxes                             2,072        2,072
 Goodwill                                            953          826
 Other intangible assets, net                      1,951        1,991
 Other assets                                        293          263
                                              -----------  -----------

   Total Assets                               $   70,156     $ 68,965
                                              ===========  ===========

    LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES

 Trade accounts payable                       $   15,806     $ 15,136
 Accrued liabilities                               8,443        8,228
 Lines of credit                                  19,668       24,832
 Current maturities of long term debt                737        1,292
                                              -----------  -----------
 Total current liabilities                        44,654       49,488

 Notes payable                                     3,990        3,442
 Other long term liabilities                         578          495
                                              -----------  -----------
 Total Liabilities                                49,222       53,425

 SHAREHOLDERS' EQUITY

 Preferred stock, 2,500,000 shares authorized,
  $1.00 par value; 336,660 shares issued and
  outstanding at August 31, 2009 and
  February 28, 2009                                  337          337
 Common stock, 20,000,000 shares authorized,
  $.001 par value; 3,695,841 and
  3,694,841 shares issued, and 3,485,445 and
  3,531,085 shares outstanding at August 31,
  2009 and February 28, 2009, respectively             4            4
 Additional paid-in capital                       10,419       10,406
 Retained earnings                                13,636        9,306
 Treasury stock, 210,396 and 163,756 shares
  (held at cost) outstanding at
  August 31, 2009 and February 28, 2009,
  respectively                                    (1,254)      (1,113)
 Accumulated other comprehensive loss             (2,208)      (3,400)
                                              -----------  -----------
   Total Shareholders' Equity                     20,934       15,540
                                              -----------  -----------
   Total Liabilities and Shareholders' Equity $   70,156     $ 68,965
                                              ===========  ===========


                   Q.E.P. CO., INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In Thousands)
                              (Unaudited)

                                                 For the Six Months
                                                   Ended Aug. 31,
                                              ------------------------
                                                 2009          2008
                                              -----------  -----------
 Cash flows from operating activities:
 Net income                                   $    4,334   $    2,051

 Adjustments to reconcile net income to net
  cash provided by (used in) operating
  activities:
   Depreciation and amortization                     706          922
   Bad debt expense                                   92          113
   Stock-based compensation expense                   13          (37)
 Changes in assets and liabilities:
   Accounts receivable                            (2,010)      (7,655)
   Inventories                                     3,036       (8,564)
   Prepaid expenses and other current assets         465          458
   Deferred costs and other assets                   410       (2,952)
   Trade accounts payable and accrued
    liabilities                                     (108)       6,208
                                              -----------  -----------
 Net cash provided by (used in)
  operating activities                             6,938       (9,456)
                                              -----------  -----------

 Cash flows from investing activities:
   Capital expenditures                             (137)        (360)
   Proceeds from sale of businesses                   --          335
                                              -----------  -----------
 Net cash used in investing activities              (137)         (25)
                                              -----------  -----------

 Cash flows from financing activities:
   Net (repayments) borrowings under
    lines of credit                               (6,011)      10,236
   Borrowings of long-term debt                      842          547
   Repayments of long-term debt                   (1,312)      (1,054)
   Purchase of treasury stock                       (130)        (154)
   Dividends                                          (4)          (7)
                                              -----------  -----------
 Net cash provided by (used in) financing
  activities                                      (6,615)       9,568
                                              -----------  -----------

 Effect of exchange rate changes on cash              78          (46)
                                              -----------  -----------

 Net increase in cash                                264           41

 Cash and cash equivalents at beginning
  of period                                          695          949
                                              -----------  -----------

 Cash and cash equivalents at end of period   $      959   $      990
                                              ===========  ===========


            

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