Q.E.P. CO., Inc. Reports Fiscal 2025 Six Month and Second Quarter Financial Results

Six Month Adjusted Net Income Grows to $7.7 Million or $2.34 per Share


BOCA RATON, Fla., Oct. 15, 2024 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (OTCQX: QEPC) (the “Company” or “QEP”) today reported its consolidated results of operations for the first six months and second quarter of fiscal year 2025, which ended on August 31, 2024.

Results of Operations

During the prior fiscal year, QEP completed the sale of its Harris Flooring Group in North America and its businesses in the United Kingdom, Australia and New Zealand in order to streamline operations and concentrate resources on its core product lines in the North American market. These divested operations have been classified as discontinued operations in our financial statements for all periods presented.

QEP reported net sales of $126.1 million for the six months ended August 31, 2024, a decrease of $3.9 million or 3.0% from the $130.0 million reported in the same period of fiscal 2024. The Company reported net sales of $62.6 million for the quarter ended August 31, 2024, a decrease of $1.4 million or 2.2% from the $64.0 million reported in the same period of fiscal 2024.   The decrease in net sales was primarily due to the ongoing moderation of consumer spending on home improvement projects due to elevated interest rates, inflationary pressures and broader economic uncertainty.

The Company’s gross profit for the first six months of fiscal 2025 was $44.8 million compared to $41.0 million in the corresponding fiscal 2024 period, an increase of $3.8 million or 9.3%. Gross profit for the second quarter of fiscal 2025 was $22.3 million, representing an increase of $1.4 million or 6.4%, from $20.9 million in the corresponding fiscal 2024 period. The Company’s gross margin as a percentage of net sales for the first six months and second quarter of fiscal 2025 was 35.5% and 35.6%, respectively, which increased from 31.5% and 32.7% in the same periods of the prior fiscal year. The increase in gross margin as a percentage of net sales was largely due to lower inbound freight costs, improved product sourcing and other cost reduction initiatives.

Leonard Gould, President & Chief Executive Officer, commented on the Company’s results, “QEP continues to lean into product innovation by investing in people, processes, and the latest technology to bring products to market that are meaningful to the Professional Installer. This is the lifeblood of remaining ‘The Product Authority’ within our categories.   We have more work ahead of us, but the Pro has noticed.  

Lastly, I’d like to acknowledge the tremendous efforts of our people to successfully ship our customers complete and on-time despite the challenging marketplace.”

Operating expenses for the first six months and second quarter of fiscal 2025 were $34.5 million and $17.2 million, respectively, or 27.3% and 27.5% of net sales in those periods, compared to $33.3 million and $16.3 million, respectively, or 25.6% and 25.5% of net sales in the comparable fiscal 2024 periods. The increase in operating expenses was due to higher personnel costs in the current period.

Interest income for the first six months and second quarter of fiscal 2025 was $0.4 million and $0.2 million, respectively, compared to interest expense of $1.1 million and $0.5 million, respectively, in the comparable fiscal 2024 periods. This change is due to the Company’s significant repayment of debt in the latter part of fiscal 2024 and the investment of the Company’s cash surplus in fiscal 2025.

The provision for income taxes as a percentage of income before taxes remained unchanged at 28.0% for the first six months and second quarter for both fiscal 2025 and fiscal 2024.

Net income from continuing operations for the first six months and second quarter of fiscal 2025 was $7.7 million and $3.8 million, respectively, or $2.34 and $1.17, respectively, per diluted share. For the comparable periods of fiscal 2024, net income from continuing operations was $4.8 million and $3.0 million, respectively, or $1.43 and $0.88, respectively, per diluted share.

Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations for the first six months and second quarter of fiscal 2025 was $11.0 million and $5.5 million, respectively, or 8.7% of net sales for both periods. For the comparable periods of fiscal 2024, EBITDA was $8.4 million and $4.9 million, respectively, or 6.5% and 7.7% of net sales, respectively.

       
  For the Three Months Ended
 For the Six Months Ended
  August 31, 2024 August 31, 2023 August 31, 2024 August 31, 2023
         
Net income from continuing operations$3,832  $2,954 $7,735  $4,774
         
Add:Interest (income) expense, net (223)  496  (406)  1,099
 Provision for income taxes 1,495   1,149  3,003   1,857
 Depreciation and amortization 348   348  686   704
EBITDA from continuing operations$5,452  $4,947 $11,018  $8,434
 

Cash provided by operations during the first six months of fiscal 2025 was $11.2 million as compared to $23.5 million in the first six months of fiscal 2024, reflecting the reduction in inventory to more normalized levels during the prior year period.   In the first six months of fiscal 2025, cash provided by operations, along with proceeds from the sale of businesses, were used to pay a stockholder dividend, repurchase stock and increase the Company’s cash surplus. In the first six months of fiscal 2024, cash provided by operations was used to reduce borrowings under the Company’s lines of credit and increase cash balances.

Working capital as of August 31, 2024 was $61.4 million compared to $60.0 million at the end of fiscal 2024. Aggregate available cash, net of outstanding debt at August 31, 2024 was $29.8 million compared to $21.7 million at the end of fiscal 2024.

The Company welcomes investor inquiries via email at ir@qep.com.

About QEP

Founded in 1979, Q.E.P. Co., Inc. is a leading designer, manufacturer and distributor of a broad range of best-in-class flooring installation solutions for commercial and home improvement projects. QEP offers a comprehensive line of specialty installation tools, adhesives, and underlayment. QEP sells its products throughout the world to home improvement retail centers, and professional specialty distribution outlets, under brand names including QEP®, LASH®, ROBERTS®, Capitol®, Premix-Marbletite® (PMM), Brutus®, Homelux®, PRCI®, and Tomecanic®.

QEP is headquartered in Boca Raton, Florida with other facilities in the United States, Canada, Europe and Asia. Please visit our website at www.qepcorporate.com.

Forward-Looking Statements

All statements contained in this press release, other than statements of historical facts, may constitute forward-looking statements within the meaning of the federal securities laws. These statements can be identified by words such as "expects," "plans," "projects," "will," "may," "anticipates," "believes," "should," "intends," "estimates," and other words of similar meaning. These forward-looking statements include, but are not limited to, statements regarding implementation of the Company’s strategies and increasing profitability and stockholder value. Any forward-looking statements contained herein are based on current expectations and beliefs, and are subject to a number of risks and uncertainties, including those listed in the Company’s annual report, as such risk factors may be amended, supplemented or superseded from time to time by other reports and disclosures made by the Company. Forward-looking statements may also be adversely affected by general market factors, competitive product development, product availability, federal and state regulations and legislation, manufacturing issues that may arise, patent positions and litigation, scarcity and rising cost for raw materials, shifts in global sourcing patterns, and general inflationary pressures, economic conditions, sales growth, price increases, maintaining and improving profitability, product development and marketing, operating expenses, cost savings, the successful completion of acquisitions and dispositions, acquisition integration, operational synergy realization, global sourcing, political uncertainty, cash flow, debt and currency exchange rates, among other factors.  The forward-looking statements contained in this press release speak only as of the date the statements were made, and the Company does not undertake any obligation to update forward-looking statements, except as required by law.

-Financial Information Follows-

        
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
        
 For the Three Months Ended For the Six Months Ended
 August 31, August 31, August 31, August 31,
  2024   2023   2024  2023 
        
Net sales$62,559  $63,988  $126,084 $129,966 
Cost of goods sold 40,271   43,050   81,292  88,978 
Gross profit 22,288   20,938   44,792  40,988 
        
Operating expenses:       
Shipping 6,909   7,168   13,989  14,178 
General and administrative 6,952   6,249   13,236  12,375 
Selling and marketing 3,278   3,110   7,184  6,981 
Other income, net 45   (188)  51  (276)
Total operating expenses 17,184   16,339   34,460  33,258 
        
Operating income 5,104   4,599   10,332  7,730 
        
Interest income (expense), net 223   (496)  406  (1,099)
        
Income before provision for income taxes 5,327   4,103   10,738  6,631 
        
Provision for income taxes 1,495   1,149   3,003  1,857 
        
Net income from continuing operations operations 3,832   2,954   7,735  4,774 
        
Gain/(Loss) from discontinued operations, net of tax (27)  (1,272)  538  (2,167)
        
Net income$3,805  $1,682  $8,273 $2,607 
        
Basic earnings (loss) per share:       
From continuing operations 1.17   0.88   2.34  1.43 
From discontinued operations (0.01)  (0.38)  0.17  (0.65)
Basic earnings per share 1.16   0.50   2.51  0.78 
        
Diluted earnings (loss) per share:       
From continuing operations 1.17   0.88   2.34  1.43 
From discontinued operations (0.01)  (0.38)  0.16  (0.65)
Diluted earnings per share 1.16   0.50   2.50  0.78 
        
Weighted average number of common       
  shares outstanding:       
Basic 3,276   3,342   3,300  3,343 
Diluted 3,280   3,347   3,307  3,348 
        


Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
    
 August 31,
2024
 February 29,
2024
 (Unaudited) (Audited)
    
ASSETS   
Cash$29,944  $22,369 
Accounts receivable, less allowance for credit losses of $213 and   
$134 at August 31, 2024 and February 29, 2024, respectively 30,283   30,338 
Inventories, net 32,196   29,913 
Prepaid expenses and other current assets 2,810   7,491 
Prepaid income taxes -   1,375 
Discontinued operations 721   693 
Current assets 95,954   92,179 
    
Property and equipment, net 11,352   9,894 
Right of use operating lease assets 18,816   19,852 
Deferred income taxes, net 2,548   2,548 
Intangibles, net 4   99 
Other assets 823   1,276 
Total assets$129,497  $125,848 
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
    
Trade accounts payable$14,821  $14,438 
Accrued liabilities 16,010   13,352 
Current operating lease liabilities 3,289   3,210 
Income taxes payable 373   - 
Lines of credit 50   601 
Current maturities of debt 32   74 
Discontinued operations -   479 
Current liabilities 34,575   32,154 
    
Long term debt 14   - 
Non-current operating lease liabilities 18,463   19,855 
Other long term liabilities 740   1,209 
Total liabilities 53,792   53,218 
    
Preferred stock, 2,500 shares authorized, $1.00 par value; 0 shares   
issued and outstanding at August 31, 2024 and February 29, 2024, -   - 
respectively   
Common stock, 20,000 shares authorized, $.001 par value;   
4,005 shares issued: 3,265 and 3,286 shares outstanding at   
August 31, 2024 and February 29, 2024, respectively 4   4 
Additional paid-in capital 10,361   11,901 
Retained earnings 78,215   73,211 
Treasury stock, 740 and 719 shares held at cost at August 31, 2024   
and February 29, 2024, respectively (10,008)  (9,517)
Accumulated other comprehensive income (2,867)  (2,969)
Shareholders' equity 75,705   72,630 
Total liabilities and shareholders' equity$129,497  $125,848 
    


Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
    
 For the Six Months Ended
 August 31,
2024
 August 31,
2023
    
Operating activities:   
Net income$8,273  $2,607 
Adjustments to reconcile net income to net cash   
provided by (used in) operating activities:   
Depreciation and amortization 686   1,708 
Gain on disposal of businesses (512)  - 
Gain on sale of property (1)  (10)
Gain from insurance recoveries -   (1,293)
Proceeds from settlement of insurance claims -   537 
Impairment of long-lived asset 85   - 
Other non-cash adjustments 82   223 
Changes in assets and liabilities:   
Accounts receivable 103   (82)
Inventories (2,233)  22,101 
Prepaid expenses and other assets 1,678   1,468 
Trade accounts payable and accrued liabilities 3,019   (3,788)
Net cash provided by operating activities 11,180   23,471 
    
Investing activities:   
Capital expenditures (2,121)  (1,603)
Proceeds from sale of businesses 4,305   - 
Proceeds from sale of property 1   36 
Proceeds from settlement of insurance claims -   1,456 
Net cash provided by (used in) investing activities 2,185   (111)
    
Financing activities:   
Net repayments under lines of credit (548)  (8,104)
Net repayments of term loan facilities -   (6,910)
Repurchase of equity-based awards (1,540)  - 
Purchase of treasury stock (403)  (87)
Principal payments on finance leases (55)  (58)
Dividends paid (3,269)  - 
Net cash used in financing activities (5,815)  (15,159)
    
Effect of exchange rate changes on cash 25   55 
    
Net increase in cash 7,575   8,256 
Cash at beginning of period 22,369   3,060 
Cash at beginning of the period from discontinued
operations
 -   1,936 
Cash at end of period$29,944  $13,252 


Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except shares data)
(Unaudited)
                    
The following table shows the changes in the shareholder's equity for the first six months ended August 31, 2024 and 2023.           
               Accumulated    
           Other  Total 
 Preferred Stock Common Stock Paid-in Retained Treasury Comprehensive  Shareholders' 
 Shares Amount Shares Amount Capital Earnings Stock Income  Equity 
                    
Balance at February 28, 2023- $- 4,005,370 $4 $11,449  $81,205  $(9,410) $(5,408)  $77,840  
Net income           2,607        2,607  
Unrealized currency translation adjustments             306    306  
Purchase of treasury stock             (26)     (26) 
Stock-based compensation expense         186          186  
Balance at August 31, 2023- $- 4,005,370 $4 $11,635  $83,812  $(9,436) $(5,102)  $80,913  
                    
               Accumulated    
           Other  Total 
 Preferred Stock Common Stock Paid-in Retained Treasury Comprehensive  Shareholders' 
 Shares Amount Shares Amount Capital Earnings Stock Income  Equity 
                    
Balance at February 29, 2024- $- 4,005,370 $4 $11,901  $73,211  $(9,517) $(2,969)  $72,630  
Net income           8,273        8,273  
Unrealized currency translation adjustments             102    102  
Repurchase of equity-based awards         (1,540)         (1,540) 
Purchase of treasury stock             (491)     (491) 
Dividends paid           (3,269)       (3,269) 
Balance at August 31, 2024- $- 4,005,370 $4 $10,361  $78,215  $(10,008) $(2,867)  $75,705  
                    

CONTACT:
Q.E.P. Co., Inc.
Enos Brown
Executive Vice President and
Chief Financial Officer
561-994-5550