Record Six Month Net Income - $4.3 Million
Quarterly Sales - $51.2 Million
Quarterly Net Income - $2.1 Million
BOCA RATON, Fla., Sept. 16, 2009 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (Pink Sheets:QEPC) (the "Company") today announced its financial results for the first six months and second quarter of its fiscal year ending on February 28, 2010.
The Company reported net sales of $101.8 million for the first six months of fiscal 2010, a decrease of $12.1 million from the $113.9 million reported in the same period of fiscal 2009. As a percentage of net sales, gross profit increased to 31.0% in the first six months of fiscal 2010 from 29.5% in the first six months of fiscal 2009.
Net sales for the second quarter of fiscal 2010 were $51.2 million with a gross profit margin of 31.4% compared to net sales of $61.0 million with a gross profit margin of 28.8% for the second quarter of fiscal 2009.
Sales to one of the Company's home center customers in the second quarter of fiscal 2009, associated with the initial penetration of existing products into new stores and the introduction of new products, accounted for a substantial portion of the sales decline for the six and three months ended August 31, 2009 compared to the corresponding periods in the prior year. In addition, prior fiscal year sales reflect the benefit of relatively stronger foreign currencies compared to the U.S. Dollar. Operating income for the first six months of fiscal 2010 was $7.4 million compared to $4.5 million for the first six months of fiscal 2009 while operating income for the second quarter of fiscal 2010 was $3.5 million compared to $2.0 million for the second quarter of fiscal 2009.
Operating income in the current fiscal year benefited primarily from the significant cost reduction measures implemented in the second half of fiscal 2009 and maintained through the second quarter of fiscal 2010, although the Company is beginning to experience an upward pressure on costs as a result of both price increases on purchased products and from the costs associated with meeting customer service levels.
Net income for the first six months and second quarter of fiscal 2010 was $4.3 million and $2.1 million, respectively, or $1.23 and $0.59 per diluted share. For the comparable periods of fiscal 2009, net income was $2.1 million and $0.8 million, respectively, or $0.59 and $0.23 per diluted share.
Cash provided by operations during the first six months of fiscal 2010 was $6.9 million, including cash provided from the Company's continuing cash management programs, substantially all of which was used to reduce debt during the period. By comparison, during the first six months of fiscal 2009 $9.5 million of cash was used in operations to fund working capital requirements and was financed by additional borrowings. Working capital at the end of the Company's fiscal year 2010 second quarter was $12.2 million, an increase of $6.3 million from $5.9 million at the Company's fiscal 2009 year-end.
The Company reiterated that significant economic uncertainties remain in each of the markets in which it operates. Accordingly, it remains extremely difficult for the Company to project how the global economic environment will perform and the extent to which, or whether, the improvements in the Company's results of operations will continue.
Q.E.P. Co., Inc., founded in 1979, is a leading worldwide manufacturer, marketer and distributor of a broad line of flooring tools and accessories for the home improvement market. Under brand names including QEP(R), ROBERTS(R), Smoothedge(R), Vitrex(R), PRCI(R), Capitol(R) and Elastiment(R), the Company markets over 3,000 specialty tools and flooring related products used primarily for surface preparation and installation of ceramic tile, carpet, vinyl and wood flooring. The Company sells its products to home improvement retail centers and specialty distribution outlets in 50 states and around the world.
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
For the Three Months For the Six Months
Ended August 31, Ended August 31,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net sales $ 51,153 $ 61,000 $ 101,836 $ 113,885
Cost of goods sold 35,081 43,456 70,242 80,305
---------- ---------- ---------- ----------
Gross profit 16,072 17,544 31,594 33,580
Operating costs
and expenses:
Shipping 5,811 7,211 11,151 12,818
General and
administrative 4,004 4,584 7,965 9,038
Selling and
marketing 2,799 3,773 5,124 7,398
Other income, net (50) (33) (76) (145)
---------- ---------- ---------- ----------
Total operating
costs and expenses 12,564 15,535 24,164 29,109
---------- ---------- ---------- ----------
Operating income 3,508 2,009 7,430 4,471
Interest expense, net (313) (578) (635) (1,033)
---------- ---------- ---------- ----------
Income before
provision for
income taxes 3,195 1,431 6,795 3,438
Provision for
income taxes 1,125 618 2,461 1,387
---------- ---------- ---------- ----------
Net income $ 2,070 $ 813 $ 4,334 $ 2,051
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Net income per share:
Basic $ 0.59 $ 0.24 $ 1.23 $ 0.60
========== ========== ========== ==========
Diluted $ 0.59 $ 0.23 $ 1.23 $ 0.59
========== ========== ========== ==========
Weighted average
number of common
shares outstanding:
Basic 3,495 3,426 3,513 3,429
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Diluted 3,496 3,463 3,514 3,479
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Q.E.P. CO., Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)
Aug. 31,
2009 Feb. 28,
(Unaudited) 2009
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 959 $ 695
Accounts receivable, less allowance for
doubtful accounts of $673 and $561 as of
August 31, 2009 and February 28, 2009,
respectively 30,084 26,746
Inventories 22,736 24,446
Prepaid expenses and other current assets 1,647 2,026
Deferred income taxes 1,474 1,472
----------- -----------
Total current assets 56,900 55,385
Property and equipment, net 6,224 6,225
Deferred costs 1,763 2,203
Deferred income taxes 2,072 2,072
Goodwill 953 826
Other intangible assets, net 1,951 1,991
Other assets 293 263
----------- -----------
Total Assets $ 70,156 $ 68,965
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 15,806 $ 15,136
Accrued liabilities 8,443 8,228
Lines of credit 19,668 24,832
Current maturities of long term debt 737 1,292
----------- -----------
Total current liabilities 44,654 49,488
Notes payable 3,990 3,442
Other long term liabilities 578 495
----------- -----------
Total Liabilities 49,222 53,425
SHAREHOLDERS' EQUITY
Preferred stock, 2,500,000 shares authorized,
$1.00 par value; 336,660 shares issued and
outstanding at August 31, 2009 and
February 28, 2009 337 337
Common stock, 20,000,000 shares authorized,
$.001 par value; 3,695,841 and
3,694,841 shares issued, and 3,485,445 and
3,531,085 shares outstanding at August 31,
2009 and February 28, 2009, respectively 4 4
Additional paid-in capital 10,419 10,406
Retained earnings 13,636 9,306
Treasury stock, 210,396 and 163,756 shares
(held at cost) outstanding at
August 31, 2009 and February 28, 2009,
respectively (1,254) (1,113)
Accumulated other comprehensive loss (2,208) (3,400)
----------- -----------
Total Shareholders' Equity 20,934 15,540
----------- -----------
Total Liabilities and Shareholders' Equity $ 70,156 $ 68,965
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Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
For the Six Months
Ended Aug. 31,
------------------------
2009 2008
----------- -----------
Cash flows from operating activities:
Net income $ 4,334 $ 2,051
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 706 922
Bad debt expense 92 113
Stock-based compensation expense 13 (37)
Changes in assets and liabilities:
Accounts receivable (2,010) (7,655)
Inventories 3,036 (8,564)
Prepaid expenses and other current assets 465 458
Deferred costs and other assets 410 (2,952)
Trade accounts payable and accrued
liabilities (108) 6,208
----------- -----------
Net cash provided by (used in)
operating activities 6,938 (9,456)
----------- -----------
Cash flows from investing activities:
Capital expenditures (137) (360)
Proceeds from sale of businesses -- 335
----------- -----------
Net cash used in investing activities (137) (25)
----------- -----------
Cash flows from financing activities:
Net (repayments) borrowings under
lines of credit (6,011) 10,236
Borrowings of long-term debt 842 547
Repayments of long-term debt (1,312) (1,054)
Purchase of treasury stock (130) (154)
Dividends (4) (7)
----------- -----------
Net cash provided by (used in) financing
activities (6,615) 9,568
----------- -----------
Effect of exchange rate changes on cash 78 (46)
----------- -----------
Net increase in cash 264 41
Cash and cash equivalents at beginning
of period 695 949
----------- -----------
Cash and cash equivalents at end of period $ 959 $ 990
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