NET SALES – $310.1 MILLION
NET INCOME – $7.4 MILLION
EARNINGS PER SHARE (DILUTED) – $ 2.29
BOCA RATON, Fla., May 15, 2017 (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, 2017.
The Company reported net sales of $310.1 million for the year ended February 28, 2017, an increase of $0.9 million or 0.3% from the $309.2 million reported in the same period of fiscal 2016. As a percentage of net sales, gross margin was 28.0% in fiscal 2017 compared to 26.4% in fiscal 2016.
Lewis Gould, Chairman of the Board of Directors, commented on Q.E.P.’s full year results, “In the past year we grew our top line sales despite adverse foreign currency impact and a changing product mix. We anticipate that these challenges will continue in to the new fiscal year but are taking actions to deliver improved sales growth and profitability to our shareholders. Our improved gross profit and operating income performance was achieved through the hard work of our associates worldwide by both containing costs and rationalizing our product offerings. Our balance sheet continues to improve through the servicing of our debt and by making strategic additions to our portfolio of businesses.” Mr. Gould continued, “We believe the recently announced additions to the Company’s product portfolio demonstrates our commitment to professional installers and will be a catalyst for future growth.”
Mr. Gould concluded, “While we know there is much more work to do, I continue to be confident in our strategic direction and our associates’ ability to execute on key near term initiatives.”
Net sales for fiscal year 2017 reflect growth across a range of product categories and customers, net of the impact of the negative effects of foreign currency rate changes, primarily in the UK as well as the exit of certain product lines in Australia.
The Company’s gross margin as a percentage of net sales increased compared to the prior fiscal year. The Company benefited from changes in the product mix and the management of product costs, which were partially offset by the negative impact from changes in foreign currency rates, primarily in the UK.
Operating expenses for fiscal 2017 were $74.8 million or 24.1% of net sales, compared to $73.5 million or 23.8% of net sales in fiscal 2016. The increase in operating expenses reflects increased domestic selling and marketing expenses made as an investment to foster future sales growth.
Non-operating income for fiscal 2017 represents a gain on the sale of certain non-core assets of the Company.
The decrease in interest expense during fiscal 2017 as compared to fiscal 2016 is principally the result of the repayment of outstanding debt.
The provision for income taxes as a percentage of income before taxes for fiscal 2017 was 33.4%, compared to 41.9% for 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 fiscal 2017 was $7.4 million or $2.29 per diluted share. For fiscal 2016, net income was $4.0 million or $1.23 per diluted share.
Earnings before interest, taxes, depreciation and amortization (EBITDA) and non-operating income for fiscal 2017 was $16.2 million as compared to $12.4 million for fiscal 2016.
| Fiscal Year | |||||||
| 2017 | 2016 | ||||||
| Net income | $ | 7,366 | $ | 3,976 | |||
| Add back: | |||||||
| Interest expense, net | 1,060 | 1,152 | |||||
| Provision for income taxes | 3,691 | 2,865 | |||||
| Depreciation and amortization | 4,087 | 4,404 | |||||
| Non-operating income | (49 | ) | - | ||||
| EBITDA | $ | 16,155 | $ | 12,397 | |||
Cash provided by operations during fiscal 2017 was $11.8 million as compared to $13.6 million in fiscal 2016, reflecting the improvement in operating results offset by an overall use of working capital. During fiscal 2017, the Company used cash from operations to increase cash balances as well as fund debt repayments, capital expenditures, acquisitions and purchases of treasury stock. During fiscal 2016, the Company used cash from operations to also increase cash balances as well as fund debt repayments, capital expenditures and purchases of treasury stock.
Working capital at the end of fiscal 2017 was $45.0 million compared to $38.6 million at the end of the 2016 fiscal year. Aggregate debt, net of available cash balances at the end of fiscal 2017 was $10.4 million or 13.9% of equity, a decrease of $9.6 million compared to $20.0 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, May 18, 2017. If you would like to join the conference call, dial 1-877-545-1402 toll free from the US or 1-719-325-4747 internationally approximately 10 minutes prior to the start time and ask for the Q.E.P. Co., Inc. Fiscal Year 2017 Year-end Conference Call / Conference ID 2380820. A replay of the conference call will be available until midnight May 25, 2017 by calling 1-844-512-2921 toll free from the US and entering pin number 2380820; internationally, please call 1-412-317-6671 using the same pin number.
The Company is posting its consolidated fiscal 2017 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®, 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, profit improvements, 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. Certain prior period amounts have been reclassified to conform with current presentation.
-Financial Information Follows-
| Q.E.P. CO., INC. AND SUBSIDIARIES | |||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||
| (In thousands except per share data) | |||||||
| For the Year Ended | |||||||
| February 28, | February 29, | ||||||
| 2017 | 2016 | ||||||
| Net sales | $ | 310,111 | $ | 309,237 | |||
| Cost of goods sold | 223,203 | 227,698 | |||||
| Gross profit | 86,908 | 81,539 | |||||
| Operating expenses: | |||||||
| Shipping | 26,913 | 27,104 | |||||
| General and administrative | 25,928 | 25,450 | |||||
| Selling and marketing | 22,534 | 21,399 | |||||
| Other income, net | (535 | ) | (407 | ) | |||
| Total operating expenses | 74,840 | 73,546 | |||||
| Operating income | 12,068 | 7,993 | |||||
| Non-operating income | 49 | - | |||||
| Interest expense, net | (1,060 | ) | (1,152 | ) | |||
| Income before provision for income taxes | 11,057 | 6,841 | |||||
| Provision for income taxes | 3,691 | 2,865 | |||||
| Net income | $ | 7,366 | $ | 3,976 | |||
| Net income per share: | |||||||
| Basic | $ | 2.30 | $ | 1.24 | |||
| Diluted | $ | 2.29 | $ | 1.23 | |||
| Weighted average number of common | |||||||
| shares outstanding: | |||||||
| Basic | 3,204 | 3,206 | |||||
| Diluted | 3,211 | 3,228 | |||||
| Q.E.P. CO., INC. AND SUBSIDIARIES | ||||||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||
| (In thousands) | ||||||||||
| For the Year Ended | ||||||||||
| February 28, | February 29, | |||||||||
| 2017 | 2016 | |||||||||
| Net income | $ | 7,366 | $ | 3,976 | ||||||
| Unrealized currency translation adjustments | (58 | ) | (1,270 | ) | ||||||
| Comprehensive income | $ | 7,308 | $ | 2,706 | ||||||
| Q.E.P. CO., INC. AND SUBSIDIARIES | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (In thousands except per share values) | |||||||
| February 28, 2017 | February 29, 2016 | ||||||
| ASSETS | |||||||
| Cash | $ | 19,152 | $ | 15,923 | |||
| Accounts receivable, less allowance for doubtful accounts of $274 | |||||||
| and $377 as of February 28, 2017 and February 29, 2016, respectively | 38,493 | 39,491 | |||||
| Inventories | 40,826 | 42,797 | |||||
| Prepaid expenses and other current assets | 2,858 | 2,171 | |||||
| Current assets | 101,329 | 100,382 | |||||
| Property and equipment, net | 19,072 | 19,538 | |||||
| Deferred income taxes | 5,726 | 5,288 | |||||
| Intangibles, net | 10,997 | 12,764 | |||||
| Goodwill | 2,745 | 2,953 | |||||
| Other assets | 372 | 550 | |||||
| Total Assets | $ | 140,241 | $ | 141,475 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
| Trade accounts payable | $ | 18,106 | $ | 18,432 | |||
| Accrued liabilities | 17,819 | 17,854 | |||||
| Income taxes payable (prepaid) | (845 | ) | 383 | ||||
| Lines of credit | 18,683 | 23,093 | |||||
| Current maturities of notes payable | 2,573 | 2,011 | |||||
| Current liabilities | 56,336 | 61,773 | |||||
| Notes payable | 8,284 | 10,857 | |||||
| Deferred income taxes | 294 | - | |||||
| Other long term liabilities | 555 | 589 | |||||
| Total Liabilities | 65,469 | 73,219 | |||||
| Preferred stock, 2,500 shares authorized, $1.00 par value; 18 and 337 shares | |||||||
| issued and outstanding at February 28, 2017 and February 29, 2016 | 18 | 337 | |||||
| Common stock, 20,000 shares authorized, $.001 par value; 3,821 and | |||||||
| 3,802 shares issued, and 3,189 and 3,198 shares outstanding at | |||||||
| February 28, 2017 and February 29, 2016, respectively | 4 | 4 | |||||
| Additional paid-in capital | 10,796 | 10,737 | |||||
| Retained earnings | 75,308 | 67,952 | |||||
| Treasury stock, 632 and 604 shares held at cost at February 28, 2017 | |||||||
| and February 29, 2016, respectively | (7,406 | ) | (6,884 | ) | |||
| Accumulated other comprehensive income | (3,948 | ) | (3,890 | ) | |||
| Shareholders' Equity | 74,772 | 68,256 | |||||
| Total Liabilities and Shareholders' Equity | $ | 140,241 | $ | 141,475 | |||
| Q.E.P. CO., INC. AND SUBSIDIARIES | |||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (In thousands) | |||||||
| For the Year Ended | |||||||
| February 28, 2017 | February 29, 2016 | ||||||
| Operating activities: | |||||||
| Net income | $ | 7,366 | $ | 3,976 | |||
| Adjustments to reconcile net income to net cash | |||||||
| provided by operating activities: | |||||||
| Depreciation and amortization | 4,087 | 4,404 | |||||
| Other non-cash adjustments | (25 | ) | 155 | ||||
| Changes in assets and liabilities, net of acquisition: | |||||||
| Accounts receivable | 306 | (1,180 | ) | ||||
| Inventories | 2,008 | (103 | ) | ||||
| Prepaid expenses and other assets | (631 | ) | (36 | ) | |||
| Trade accounts payable and accrued liabilities | (1,306 | ) | 6,457 | ||||
| Net cash provided by operating activities | 11,805 | 13,673 | |||||
| Investing activities: | |||||||
| Proceeds from sale of business | 1,050 | - | |||||
| Proceeds from sale of property | 75 | 359 | |||||
| Capital expenditures | (2,133 | ) | (1,214 | ) | |||
| Acquisition | (1,710 | ) | - | ||||
| Net cash used in investing activities | (2,718 | ) | (855 | ) | |||
| Financing activities: | |||||||
| Net borrowings (repayments) under lines of credit | (2,712 | ) | 471 | ||||
| Net repayments of notes payable | (2,032 | ) | (7,609 | ) | |||
| Purchase of treasury stock | (509 | ) | (291 | ) | |||
| Dividends | (10 | ) | (7 | ) | |||
| Redemption of preferred stock | (319 | ) | - | ||||
| Net cash used in financing activities | (5,582 | ) | (7,436 | ) | |||
| Effect of exchange rate changes on cash | (276 | ) | (35 | ) | |||
| Net increase in cash | 3,229 | 5,347 | |||||
| Cash at beginning of period | 15,923 | 10,576 | |||||
| Cash at end of period | $ | 19,152 | $ | 15,923 | |||