FIRST QUARTER SALES – $80.2 MILLION
FIRST QUARTER NET INCOME – $2.2 MILLION VS $1.3 MILLION LAST YEAR
FIRST QUARTER EPS - $0.68 VS $0.39 LAST YEAR
BOCA RATON, Fla., July 06, 2016 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (OTC:QEPC.PK) (the “Company”) today reported its consolidated results of operations for the first quarter of its fiscal year ending February 28, 2017.
The Company reported net sales of $80.2 million for the quarter ended May 31, 2016, an increase of $1.9 million or 2.4% from the $78.3 million reported in the same period of fiscal 2016. As a percentage of net sales, gross margin was 28.2% in the first quarter of fiscal 2017 compared to 27.1% in the first quarter of fiscal 2016.
Lewis Gould, Chairman, commented: "I am encouraged by the progress we have made this quarter despite continuing headwinds with the strong US dollar, increases in health care costs and other items. Despite this the Company has worked towards positive results this quarter, developing new and innovative products and sales growth in North America. We are working very hard to continue to flatten our supply chain and lower our costs, while continuing to strengthen our balance sheet with improved working capital and lower debt.”
Net sales for the three month period ended May 31, 2016 as compared to the comparable period in the prior fiscal year reflect growth across multiple product lines in the US and Australia, partially offset by reduced sales in Europe. Foreign exchange rates weakened against the US dollar year over year and continue to affect the translation of the Company’s international operations.
The Company’s gross profit increased $1.4 million or 6.4% to $22.6 million and gross margin improved by 1.1%. Gross margin benefited from cost reductions on certain products as well as favorable product mix.
Operating expenses for the first quarter of fiscal 2017 were $18.8 million or 23.5% of net sales, compared to $19.0 million or 24.2% of net sales in the comparable fiscal 2016 period. Lower shipping cost was partially offset by the timing of increased marketing expenses associated with the introduction of new flooring products in North America and Australia.
The decrease in interest expense during the first quarter of fiscal 2017 as compared to fiscal 2016 is principally the result of debt payments made under term loan facilities during fiscal 2016.
The provision for income taxes as a percentage of income before taxes for the first quarter of fiscal 2017 was 37.5%, compared to 35.0% for the comparable period of fiscal 2016. The effective tax rate in both fiscal years reflects the relative contribution of the Company’s earnings sourced from its international operations.
Net income for the first quarter of fiscal 2017 and 2016 was $2.2 million and $1.3 million, respectively, or $0.68 and $0.39, respectively, per diluted share.
For the first quarter of fiscal 2017, earnings before interest, taxes, depreciation and amortization (EBITDA) was $4.8 million, compared to $3.3 million for the first quarter of fiscal 2016.
| For the Three Months | |||||||
| Ended May 31, | |||||||
| 2016 | 2015 | ||||||
| Net income | $ | 2,185 | $ | 1,268 | |||
| Add: | Interest expense, net | 281 | 320 | ||||
| Provision for income taxes | 1,311 | 683 | |||||
| Depreciation and amortization | 1,016 | 1,070 | |||||
| EBITDA | $ | 4,793 | $ | 3,341 | |||
Cash provided by operations during the first quarter of fiscal 2017 was $0.9 million as compared to $3.0 million in the first quarter of fiscal 2016. During the first quarter of fiscal 2017, increased earnings were principally used to fund increases in working capital and pay down debt. During the first quarter of fiscal 2016, earnings and changes in working capital were used, along with cash balances, to reduce debt. In both periods, the Company’s capital expenditures were funded through cash from operations.
Working capital at the end of the Company’s fiscal 2017 first quarter was $40.8 million compared to $38.7 million at the end of the 2016 fiscal year. Aggregate debt, net of cash balances, at the end of the Company’s fiscal 2017 first quarter was $20.4 million or 28.8% of equity, an increase of $0.3 million compared to $20.1 million or 29.4% of equity at the end of the 2016 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, July 7, 2016. If you would like to join the conference call, dial 1-888-505-4368 toll free from the US or 1-719-325-2458 internationally approximately 10 minutes prior to the start time and ask for the Q.E.P. Co., Inc. First-Quarter Conference Call / Conference ID 9556342. A replay of the conference call will be available until midnight July 14, 2016 by calling 1-877-870-5176 toll free from the US and entering pin number 9556342; internationally, please call 1-858-384-5517 using the same pin number.
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®, Capitol®, Harris®Wood, Fausfloor®, Vitrex®, Homelux®, TileRite®, PRCI®, Nupla®, HISCO®, Plasplugs®, Ludell®, Porta-Nails®, Tomecanic®, Bénètiere® and Elastiment®, 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 economic conditions, sales growth, product development and marketing, operating expenses, cost savings, cash flow, debt and currency exchange rates. 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 May 31, | |||||||
| 2016 | 2015 | ||||||
| Net sales | $ | 80,178 | $ | 78,267 | |||
| Cost of goods sold | 57,569 | 57,025 | |||||
| Gross profit | 22,609 | 21,242 | |||||
| Operating expenses: | |||||||
| Shipping | 6,657 | 7,310 | |||||
| General and administrative | 6,418 | 6,256 | |||||
| Selling and marketing | 5,921 | 5,491 | |||||
| Other income, net | (164 | ) | (86 | ) | |||
| Total operating expenses | 18,832 | 18,971 | |||||
| Operating income | 3,777 | 2,271 | |||||
| Interest expense, net | (281 | ) | (320 | ) | |||
| Income before provision for income taxes | 3,496 | 1,951 | |||||
| Provision for income taxes | 1,311 | 683 | |||||
| Net income | $ | 2,185 | $ | 1,268 | |||
| Net income per share: | |||||||
| Basic | $ | 0.68 | $ | 0.39 | |||
| Diluted | $ | 0.68 | $ | 0.39 | |||
| Weighted average number of common | |||||||
| shares outstanding: | |||||||
| Basic | 3,195 | 3,212 | |||||
| Diluted | 3,219 | 3,235 | |||||
| Q.E.P. CO., INC. AND SUBSIDIARIES | |||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||
| (In thousands) | |||||||
| (Unaudited) | |||||||
| For the Three Months | |||||||
| Ended May 31, | |||||||
| 2016 | 2015 | ||||||
| Net income | $ | 2,185 | $ | 1,268 | |||
| Unrealized currency translation adjustments | 504 | (118 | ) | ||||
| Comprehensive income | $ | 2,689 | $ | 1,150 | |||
| Q.E.P. CO., INC. AND SUBSIDIARIES | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (In thousands except per share values) | |||||||
| May 31, 2016 (Unaudited) | February 29, 2016 | ||||||
| ASSETS | |||||||
| Cash | $ | 14,053 | $ | 15,923 | |||
| Restricted Cash | 1,724 | - | |||||
| Accounts receivable, less allowance for doubtful accounts of $419 | |||||||
| and $377 as of May 31, 2016 and February 29, 2016, respectively | 40,609 | 39,491 | |||||
| Inventories | 43,870 | 42,797 | |||||
| Prepaid expenses and other current assets | 2,711 | 2,234 | |||||
| Current assets | 102,967 | 100,445 | |||||
| Property and equipment, net | 19,113 | 19,538 | |||||
| Deferred income taxes, net | 5,291 | 5,288 | |||||
| Intangibles, net | 16,118 | 15,717 | |||||
| Other assets | 518 | 550 | |||||
| Total Assets | $ | 144,007 | $ | 141,538 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
| Trade accounts payable | $ | 20,462 | $ | 18,432 | |||
| Accrued liabilities | 15,614 | 17,854 | |||||
| Income taxes payable | 356 | 383 | |||||
| Lines of credit | 23,701 | 23,093 | |||||
| Current maturities of notes payable | 2,026 | 2,032 | |||||
| Current liabilities | 62,159 | 61,794 | |||||
| Notes payable | 10,435 | 10,899 | |||||
| Other long term liabilities | 589 | 589 | |||||
| Total Liabilities | 73,183 | 73,282 | |||||
| Preferred stock, 2,500 shares authorized, $1.00 par value; 337 shares | |||||||
| issued and outstanding at May 31, 2016 and February 29, 2016 | 337 | 337 | |||||
| Common stock, 20,000 shares authorized, $.001 par value; 3,802 and | |||||||
| 3,802 shares issued, and 3,190 and 3,198 shares outstanding at | |||||||
| May 31, 2016 and February 29, 2016, respectively | 4 | 4 | |||||
| Additional paid-in capital | 10,752 | 10,737 | |||||
| Retained earnings | 70,133 | 67,952 | |||||
| Treasury stock, 612 and 604 shares held at cost at May 31, 2016 | |||||||
| and February 29, 2016, respectively | (7,016 | ) | (6,884 | ) | |||
| Accumulated other comprehensive income | (3,386 | ) | (3,890 | ) | |||
| Shareholders' Equity | 70,824 | 68,256 | |||||
| Total Liabilities and Shareholders' Equity | $ | 144,007 | $ | 141,538 | |||
| Q.E.P. CO., INC. AND SUBSIDIARIES | |||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (In thousands) | |||||||
| (Unaudited) | |||||||
| For the Three Months | |||||||
| Ended May 31, | |||||||
| 2016 | 2015 | ||||||
| Operating activities: | |||||||
| Net income | $ | 2,185 | $ | 1,268 | |||
| Adjustments to reconcile net income to net cash | |||||||
| provided by operating activities: | |||||||
| Depreciation and amortization | 1,016 | 1,070 | |||||
| Other non-cash adjustments | 35 | 70 | |||||
| Changes in assets and liabilities, net of acquisition: | |||||||
| Accounts receivable | (907 | ) | (4,726 | ) | |||
| Inventories | (836 | ) | (1,234 | ) | |||
| Prepaid expenses and other assets | (438 | ) | (235 | ) | |||
| Trade accounts payable and accrued liabilities | (140 | ) | 6,763 | ||||
| Net cash provided by operating activities | 915 | 2,976 | |||||
| Investing activities: | |||||||
| Proceeds from sale of property | - | 328 | |||||
| Capital expenditures | (243 | ) | (536 | ) | |||
| Net cash used in investing activities | (243 | ) | (208 | ) | |||
| Financing activities: | |||||||
| Net borrowings (repayments) under lines of credit | (463 | ) | 1,457 | ||||
| Net borrowings (repayments) of notes payable | (470 | ) | (6,096 | ) | |||
| Purchase of treasury stock | (30 | ) | (30 | ) | |||
| Dividends | (4 | ) | (3 | ) | |||
| Net cash provided by (used in) financing activities | (967 | ) | (4,672 | ) | |||
| Effect of exchange rate changes on cash | 149 | (2 | ) | ||||
| Net (decrease) increase in cash | (146 | ) | (1,906 | ) | |||
| Cash at beginning of period | 15,923 | 10,576 | |||||
| Cash at end of period | $ | 15,777 | $ | 8,670 | |||