Record Quarterly Sales – $60.6 Million
Net Income – $1.9 Million
BOCA RATON, Fla., June 22, 2010 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (Pink Sheets:QEPC) (the "Company") today announced its financial results for the first quarter of its fiscal year ending on February 28, 2011.
The Company reported record net sales of $60.6 million for the three months ended May 31, 2010, an increase of $9.9 million from the $50.7 million reported in the comparable period of the prior fiscal year. As a percentage of net sales, gross profit was 30.3% for the first quarter of fiscal 2011 as compared to 30.6% for the first quarter of fiscal 2010.
Lewis Gould, Chairman of the Company's Board of Directors, commented: "The first quarter of our fiscal 2011 year presented new challenges to our business from the integration of our acquired Harris®Wood operations to the continuing uncertainty of economic circumstances in our worldwide markets. I am pleased to report that we have successfully met these challenges."
The increase in net sales principally reflects the expansion of the Company's operations to include a comprehensive line of hardwood flooring through its February 2010 acquisition of ArborCraft's operations -- now doing business as Harris®Wood. While the majority of the increase in net sales was the result of the Harris®Wood business, the Company also achieved organic growth in net sales during the quarter. Nonetheless, uncertainties continue to surround the worldwide markets that the Company serves.
The reduction in margin reflects the lower margin at our Harris®Wood operations, which is partially offset by the strengthening of the U.S. dollar during the current quarter. As a result of the Company's substantial increase in net sales, gross profit for the first quarter of fiscal 2011 was $18.3 million, up $2.8 million from $15.5 million in the first quarter of fiscal 2010.
Operating expenses for first quarter of fiscal 2011 were $15.0 million or 24.8% of net sales, an increase of $3.4 million from the $11.6 million or 22.9% of net sales reported in the same quarter of fiscal 2010. The increase in operating expenses is the result of the addition of the Harris®Wood operations as well as the impact resulting from the strengthening of the U.S. dollar. Since the second quarter of fiscal 2010 and consistent with its growth strategy, the Company has been adding personnel which also contributed to the increase in operating expenses as well as shipping costs associated with increased net sales.
Net income for the first quarter of fiscal 2011 was $1.9 million ($0.56 per diluted share) as compared to $2.3 million ($0.64 per diluted share) for the first quarter of fiscal 2010. While the Company's Harris®Wood operations were modestly accretive to first quarter earnings, net income was down as a result of increases in operating expenses as discussed above.
Cash used in operations during the first quarter of fiscal 2011 was $0.2 million as compared to $3.2 million provided by operations during the first quarter of fiscal 2010 reflecting positive operating results and the benefit of a reduction in inventories offset by the growth in customer receivables resulting from increased sales. Aggregate borrowings increased modestly associated with the Company purchase of additional treasury shares. Working capital at the end of the Company's fiscal 2011 first quarter was $20.0 million, an increase from $19.7 million at the end of the Company's 2010 fiscal year.
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 worldwide economic conditions, future growth, benefits expected to result from acquisitions, company performance, business opportunities, 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.
| Q.E.P. CO., INC. AND SUBSIDIARIES | ||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (In thousands, except per share data) | ||
| (Unaudited) | ||
|
For the Three Months Ended May 31, |
||
| 2010 | 2009 | |
| Net sales | $ 60,573 | $ 50,683 |
| Cost of goods sold | 42,237 | 35,161 |
| Gross profit | 18,336 | 15,522 |
| Costs and expenses: | ||
| Shipping | 6,587 | 5,340 |
| General and administrative | 4,669 | 3,961 |
| Selling and marketing | 3,778 | 2,325 |
| Other income, net | (37) | (26) |
| Total costs and expenses | 14,997 | 11,600 |
| Operating income | 3,339 | 3,922 |
| Interest expense, net | (356) | (322) |
| Income before provision for income taxes | 2,983 | 3,600 |
| Provision for income taxes | 1,044 | 1,336 |
| Net income | $ 1,939 | $ 2,264 |
| Net income per share: | ||
| Basic | $ 0.58 | $ 0.64 |
| Diluted | $ 0.56 | $ 0.64 |
|
Weighted average number of common shares outstanding: |
||
| Basic | 3,333 | 3,531 |
| Diluted | 3,427 | 3,532 |
| Q.E.P. CO., INC. AND SUBSIDIARIES | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (In thousands, except par values) | ||
| May 31, 2010 | February 28, | |
| (Unaudited) | 2010 | |
| ASSETS | ||
| CURRENT ASSETS | ||
| Cash | $ 752 | $ 856 |
|
Accounts receivable, less allowance for doubtful accounts of $680 and $621 as of May 31, 2010 and February 28, 2010, respectively |
34,950 | 32,792 |
| Inventories | 28,838 | 30,485 |
| Prepaid expenses and other current assets | 2,874 | 2,497 |
| Deferred income taxes | 1,387 | 1,386 |
| Total current assets | 68,801 | 68,016 |
| Property and equipment, net | 11,892 | 12,385 |
| Deferred costs | 1,102 | 1,322 |
| Deferred income taxes | 1,776 | 1,776 |
| Intangibles, net | 2,688 | 2,788 |
| Other assets | 166 | 237 |
| Total Assets | $ 86,425 | $ 86,524 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| CURRENT LIABILITIES | ||
| Trade accounts payable | $ 19,338 | $ 19,555 |
| Accrued liabilities | 12,598 | 13,547 |
| Lines of credit | 14,022 | 12,443 |
| Current maturities of notes payable | 2,981 | 2,749 |
| Total current liabilities | 48,939 | 48,294 |
| Notes payable | 10,698 | 11,639 |
| Other long term liabilities | 563 | 566 |
| Total Liabilities | 60,200 | 60,499 |
| SHAREHOLDERS' EQUITY | ||
|
Preferred stock: 2,500 shares authorized, $1.00 par value; 337 shares issued and outstanding at May 31, 2010 and February 28, 2010 |
337 | 337 |
|
Common stock: 20,000 shares authorized, $.001 par value; 3,696 shares issued; 3,331 shares and 3,402 shares outstanding at May 31, 2010 and February 28, 2010, respectively |
4 | 4 |
| Additional paid-in capital | 10,419 | 10,419 |
| Retained earnings | 20,212 | 18,276 |
|
Treasury stock: 365 and 294 shares held at cost at May 31, 2010 and February 28, 2010, respectively |
(2,724) | (1,823) |
| Accumulated other comprehensive loss | (2,023) | (1,188) |
| Total Shareholders' Equity | 26,225 | 26,025 |
| Total Liabilities and Shareholders' Equity | $ 86,425 | $ 86,524 |
| Q.E.P. CO., INC. AND SUBSIDIARIES | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In Thousands) | ||
| (Unaudited) | ||
|
For the Three Months Ended May 31, |
||
| 2010 | 2009 | |
| Cash flows from operating activities: | ||
| Net income | $ 1,939 | $ 2,264 |
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
||
| Depreciation and amortization | 626 | 346 |
| Bad debt expense | 88 | 43 |
| Other non-cash adjustments | -- | 11 |
| Changes in assets and liabilities: | ||
| Accounts receivable | (2,877) | (3,993) |
| Inventories | 1,084 | (1,103) |
| Prepaid expenses and other assets | (332) | 794 |
| Trade accounts payable and accrued liabilities | (698) | 4,839 |
| Net cash (used in) provided by operating activities | (170) | 3,201 |
| Cash used in investing activities - Capital expenditures | -- | (66) |
| Cash flows from financing activities: | ||
| Net borrowings (repayments) under lines of credit | 1,799 | (2,977) |
| Borrowings of notes payable | -- | 802 |
| Repayments of notes payable | (656) | (1,019) |
| Purchase of treasury stock | (900) | (30) |
| Dividends paid | (3) | (3) |
| Net cash provided by (used in) financing activities | 240 | (3,227) |
| Effect of exchange rate changes on cash | (49) | 67 |
| Net decrease in cash | 21 | (25) |
| Cash at beginning of period | 856 | 695 |
| Cash at end of period | $ 877 | $ 670 |