Q.E.P. Co., Inc. Reports Fiscal 2015 Results of Operations

Net Sales - $297.7 Million

Net Income - $1.9 Million or $0.57 Per Diluted Share

BOCA RATON, Fla., June 3, 2015 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (OTC:QEPC.PK) (the "Company") today reported its consolidated results of operations for the fiscal year ended February 28, 2015:

Lewis Gould, Chairman of the Board, commented, "This has been a challenging year for your company. The continuing integration efforts associated with our Homelux acquisition in the UK proved to be more difficult than expected, the roll-out of our Faus laminate program has been slower than planned, the US dock strike put stress on our supply chain, and the purchasing power of our international operations was particularly impacted by the strengthening of the US dollar during the second half of the year." Mr. Gould added, "We continue to believe in a strategy focused on seeking acquisitions to diversify our product range and customer base. At the same time, in the near term, we are particularly focused on revaluating market pricing, controlling operating expenses and product costs, and leveraging our existing infrastructure." Mr. Gould concluded, "Challenges remain, but we are confident in our strategic direction and the focus of our near term initiatives; and, throughout these challenges, our balance sheet has remained strong."

Net sales decreased during fiscal year 2015 as compared to the prior fiscal year reflecting both the expansion of our product lines with existing customers in the Company's international operations and the contribution of our Faus and Plasplugs acquisitions offset by the impact of a significant North American customer's discontinued purchases of certain products during the second quarter of fiscal 2014, other moderations in US sales activity and adverse changes in currency exchange rates, especially during the second half of fiscal year 2015.

The decrease in the Company's gross profit as a percentage of net sales for the current fiscal year as compared to the prior fiscal year principally reflects changes in product mix, reduced pricing in our North American mass merchant channel, decreased purchasing power of the Company's international operations as a result of adverse changes in currency exchange rates, and increases in the cost of raw materials.

Operating expenses for fiscal 2015 and fiscal 2014 were $75.6 million and $75.3 million, respectively, or 25.4% and 24.9%, respectively, of net sales in those periods. The change in operating expenses primarily reflects increased costs associated with growth in international sales and acquired operations, including integration costs associated with the acquisitions in Europe, offset by decreased costs associated with changes in US sales activity and corporate compensation expenses. In addition, currency exchange rates had a modest net favorable effect on operating expenses of the Company's international operations compared to the prior fiscal year.

Non-operating income for fiscal year 2014 primarily resulted from the excess of $8.3 million of the fair value of net assets acquired in the Faus Group, Inc. acquisition over the related purchase price and the $3.4 million net gain realized on the sale and leaseback of a facility in Canada.

The increase in interest expense for fiscal 2015 as compared to fiscal 2014 is primarily the result of new term loan facilities.

The provision for income taxes as a percentage of income before taxes for fiscal 2015 was 35.4% compared to 21.1% for fiscal 2014. The effective tax rate in both fiscal years reflects the benefit of earnings sourced from the Company's international operations offset by non-deductible amortization costs of acquired intangible assets. Fiscal 2015 also reflects the benefit of a reduction in certain tax valuation allowances while fiscal 2014 reflects non-operating income that is not subject to tax.

As a result, fiscal 2015 net income decreased to $1.9 million from $16.1 million in fiscal 2014 and net income per diluted share decreased to $0.57 per share from $4.88 per share, respectively.

Earnings before interest, taxes, depreciation and amortization (EBITDA) excluding the effects of non-operating income were $9.3 million in fiscal 2015 as compared to $14.2 million for fiscal 2014:

The increase in depreciation and amortization in fiscal 2015 as compared to fiscal 2014 was principally associated with the impact of the Faus assets acquired on February 28, 2014.

Cash provided by operations for fiscal 2015 was $4.2 million compared to $7.7 million in fiscal 2014 reflecting both the decrease in operating results and an overall increased investment in working capital. During fiscal 2015, the Company's increased cash balances as well as funding for capital expenditures, acquisitions and the Company's continuing treasury stock program were provided from borrowings and cash from operations. During fiscal 2014, investments in acquisitions totaled $32.4 million; these acquisitions, combined with capital expenditures and the Company's treasury stock purchases were funded through a combination of borrowings, proceeds from the sale of a Canadian property and cash from operations.

Working capital at the end of the Company's fiscal year 2015 increased to $34.5 million from $28.8 million at the end of the 2014 fiscal year and total debt increased to $45.4 million from $41.4 million during the same period primarily due to expanded credit facilities. In May 2015, $5.6 million of existing cash balances were used to pay-off one of the Company's term loans.

The Company will be hosting a conference call to discuss these results and to answer your questions at 2:00 p.m. Eastern Time on Monday, June 8, 2015. If you would like to join the conference call, dial 1-888-481-2877 toll free from the US or 1-719-325-2402 internationally approximately 10 minutes prior to the start time and ask for the Q.E.P. Co., Inc. Fiscal Year 2015 Conference Call / Conference ID 8277008. A replay of the conference call will be available until midnight June 15, 2015 by calling 1-877-870-5176 toll free from the US and entering pin number 8277008; internationally, please call 1-858-384-5517 using the same pin number.

The Company is posting its consolidated fiscal 2015 audited financial statements on the Investor section of its website at www.qepcorporate.com today.

Q.E.P. Co., Inc., founded in 1979, is a world class, worldwide provider of innovative, quality and value-driven flooring and industrial solutions. As a leading manufacturer, marketer and distributor, QEP delivers a comprehensive line of hardwood and laminate flooring, flooring installation tools, adhesives and flooring related products targeted for the professional installer as well as the do-it-yourselfer. In addition, the Company provides industrial tools with cutting edge technology to the industrial trades. Under brand names including QEP®, ROBERTS®, HarrisWood®, Fausfloor®, Capitol®, Nupla®, HISCO®, Ludell®, Porta-Nails®, Elastiment®, Vitrex®, Homelux®, Tilerite®, PRCI®, Plasplugs®, Tomecanic® and Benetiere®, the Company sells its products to home improvement retail centers, specialty distribution outlets, municipalities and industrial solution providers in 50 states and throughout the world.

This press release contains forward-looking statements, including statements regarding future sales growth, international and domestic market position, pricing and profitability, acquisition integration activities, potential acquisition opportunities and benefits, logistics developments, product development and introduction efforts, and potential cost savings. These statements are not guarantees of future performance and actual results could differ materially from our current expectations.