Net Sales - $205.9 Million
Net Income - $9.0 Million or $2.57 Per Diluted Share
BOCA RATON, Fla., May 17, 2010 (GLOBE NEWSWIRE) -- Q.E.P. Co., Inc. (Pink Sheets:QEPC) (the "Company") today reported its consolidated results of operations for the fiscal year ended February 28, 2010:
| Year Ended February 28 | ||
| (In thousands, except share data) | 2010 | 2009 |
| Net sales | $ 205,853 | $ 203,603 |
| Cost of goods sold | 140,486 | 147,571 |
| Gross profit | 65,367 | 56,032 |
| Costs and expenses: | ||
| Operating expenses | 51,655 | 52,530 |
| Impairment loss on goodwill | -- | 7,927 |
| Total costs and expenses | 51,655 | 60,457 |
| Operating income (loss) | 13,712 | (4,425) |
| Interest expense, net | (1,156) | (1,740) |
| Income (loss) before provision for income taxes | 12,556 | (6,165) |
| Provision for income taxes | 3,579 | 1,090 |
| Net income (loss) | $ 8,977 | $ (7,255) |
| Net income (loss) per share: | ||
| Basic | $ 2.59 | $ (2.13) |
| Diluted | $ 2.57 | $ (2.13) |
| Weighted average number of common shares outstanding: | ||
| Basic | 3,468 | 3,415 |
| Diluted | 3,496 | 3,415 |
Mr. Lewis Gould, Chairman of the Company's Board of Directors, commented: "Despite continuing economic uncertainties, we are delighted with this year's results of operations as well as our success in positioning the business for future growth. We have substantially improved operations, reduced working capital requirements, paid down debt to record low levels, increased our cash availability and, with the acquisition of ArborCraft, positioned ourselves to take advantage of expanded market opportunities." Mr. Gould added "We are continuing to consider new opportunities for expanding our product lines, increasing our market share and improving the productivity and efficiency of our operations."
After a challenging first half fiscal 2010 relative to the first half of fiscal 2009, sales strengthened during the second half of fiscal 2010 relative to the second half of the prior fiscal year as the effects of weakened economic environments appeared to moderate and the Company benefited from an apparent return to more regular inventory replenishment programs by its major customers. The Company's market share also increased as a result of the strategic targeting of industry opportunities.
Operating improvements started in late fiscal 2009 continued throughout fiscal 2010 in each of the Company's operations and included tighter purchasing, inventory and working capital management, workforce reductions, business restructurings and reductions in planned expenses. As a result, significant improvements in the Company's operating income for each of its worldwide segments were realized. The Company continues to focus on additional cost management opportunities, including the current consolidation of its domestic manufacturing and distribution operations.
Fiscal 2010 gross profit showed substantial improvement associated with the continuing benefit of operating improvements, improved product mix and reduced customer discounting. As a percent of sales, gross profit increased to 31.8% in fiscal 2010 from 27.5% in fiscal 2009.
Operating expenses for fiscal 2010 compared to fiscal 2009, excluding the non-cash fiscal 2009 goodwill impairment charge, decreased slightly. As a percentage of sales, operating expenses excluding the impairment charge were 25.1% in fiscal 2010 compared to 25.8% in fiscal 2009 - - also reflecting the cost reduction measures implemented in late fiscal 2009, although the Company is experiencing an upward pressure on costs as a result of costs associated with meeting customer service levels and supporting higher sales volume. The fiscal 2009 goodwill impairment charge, which substantially eliminated the carrying value of goodwill, principally resulted from the decline in the Company's market valuation at that time.
The Company's results of operations also were favorably impacted by the fiscal 2010 effective tax rate of 28.5%, principally reflecting the tax benefit of restructuring a foreign operation and of other foreign tax benefits. In fiscal 2009, the Company recorded an income tax provision associated with expenses that are not deductible for tax purposes, including the goodwill impairment charges, and valuation allowances related to certain foreign net operating losses.
The strategic acquisition of ArborCraft on February 12, 2010 expanded the Company's preexisting product offerings of glues, underlayments and installation tools to include a comprehensive line of hardwood flooring. The acquisition was completed for a purchase price equal to the estimated fair value of net assets acquired.
During fiscal 2010, the Company also restructured each of its significant credit facilities. In connection with the ArborCraft acquisition, the Company increased its domestic revolving credit facility from $27 million to $34 million, established a $6.0 million domestic term loan and issued a subordinated term note of approximately $3.8 million. Earlier in the 2010 fiscal year, the Company amended the revolving credit facility of its U.K. subsidiary and refinanced the revolving credit and term loan facilities of its Australian subsidiary. In combination, the Company's additional borrowing capacity at fiscal 2010 year-end increased to in excess of $19 million while interest expense decreased approximately $0.6 million for the year and the Company's outstanding debt - - after the issuance of the ArborCraft acquisition debt - - decreased approximately $2.7 to approximately $26.8 million at the end of fiscal 2010.
The Company also announced that it will post its annual consolidated fiscal 2010 audited financial statements on its website in the near future.
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 economic conditions, our strategic plans, benefits expected to result from the acquisition and the fair value of net assets acquired, new business opportunities, potential growth in sales for new products, customer asset management programs, expense management conditions 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.