updated 6/21/2011 10:17:31 AM ET 2011-06-21T14:17:31

Record Quarterly Sales – $67.8 Million

Record Quarterly Net Income – $4.1 Million

BOCA RATON, Fla., June 21, 2011 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (Pink Sheets:QEPC) (the "Company") today announced its financial results for the first quarter of its fiscal year ending on February 29, 2012.

The Company reported net sales of $67.8 million for the three months ended May 31, 2011, an increase of $7.2 million from the $60.6 million reported in the comparable period of the prior fiscal year. As a percentage of net sales, gross profit increased to 32.7% for the first quarter of fiscal 2012 as compared to 30.3% for the first quarter of fiscal 2011.

Mr. Lewis Gould, Chairman of the Company's Board of Directors, commented: "We are exceptionally pleased with the Company's continued growth, especially the growth in our domestic Harris Wood manufacturing operations and in our overseas operations. The company is seeking to expand its presence in flooring-related markets while continuing to improve on the performance of our other businesses. Our President, Leonard Gould, is overseeing several new initiatives, including the implementation of an advanced distribution system and a cost control strategy to continue our progress." Mr. Gould added, "Our recent acquisition of Porta-Nails in combination with these operating initiatives reflects our strategy in the current stressful economic environment that includes the constant pressure of commodity cost increases."

The increase in net sales principally reflects the growth of the Company's Harris Wood and international operations driven by both an expansion of sales to existing customers and an expansion of the Company's customer base and product lines. Additionally, the Company's international operations benefited from the effects of the strengthening of local currencies against the U.S. dollar during the first quarter of fiscal 2012 as compared to the first quarter of fiscal 2011. Net sales for the first quarter of fiscal 2012 also include the benefit of a $0.6 million decrease in certain accumulated sales allowances.

The Company's gross margin was 32.7% for the first quarter of fiscal 2012 as compared to 30.3% for the first quarter of the prior fiscal year and 30.9% for the Company's 2011 fiscal year. The improvement in margin reflects an improved product mix, increased production volumes in the Company's manufacturing operations and the improved purchasing power of our international operations associated with the strengthening of local currencies against the US dollar. These margin improvements were partially offset by cost increases during the first quarter of fiscal 2012 principally associated with changes in commodity prices. As a result of both the increase in net sales and the improvement in gross margins, gross profit for the first quarter of fiscal 2012 was $22.2 million, up $3.9 million or 20.9% from $18.3 million in the first quarter of fiscal 2011.

Operating expenses for first quarter of fiscal 2012 were $15.5 million, slightly higher than the prior year first quarter of $15.0 million. Operating expenses as a percentage of net sales decreased to 22.9% for the first quarter of fiscal 2012 as compared to 24.8% for the same quarter of fiscal 2011. By comparison, operating expenses for the Company's 2011 fiscal year were 24.5% of net sales.

Net income for the first quarter of fiscal 2012 was $4.1 million ($1.22 per diluted share) as compared to $1.9 million ($0.56 per diluted share) for the first quarter of fiscal 2011.

Cash provided by operations during the first quarter of fiscal 2012 was $3.6 million as compared to cash used in operations of $0.2 million during the first quarter of fiscal 2011, principally reflecting improved operating results in fiscal 2012 and reduced inventory levels that offset the traditional growth in accounts receivable during the first quarter of the Company's fiscal year. Cash from operations was used primarily to reduce aggregate borrowings by $1.7 million, to purchase the business of Porta-Nails Inc. and additional treasury shares, and for investments in new systems. Working capital at the end of the Company's fiscal 2012 first quarter was $29.9 million, an increase from $27.6 million at the end of the 2011 fiscal year. Aggregate debt at the end of the Company's fiscal 2012 first quarter was reduced to $20.0 million or 50.0% of equity from $21.7 million or 61.5% of equity at the end of the 2011 fiscal year.

Q.E.P. Co., Inc., founded in 1979, is a leading worldwide manufacturer, marketer and distributor of a comprehensive line of flooring installation tools, hardwood flooring, flooring adhesives and flooring related products targeted for the professional installer as well as the do-it-yourselfer. Under brand names that include QEP®, Harris®Wood, ROBERTS®, Capitol®, Vitrex®, PRCI®, BRUTUS® and Elastiment®, the Company markets over 3,000 flooring and flooring related products.  In addition to a complete hardwood flooring line, Q.E.P. products are used primarily for surface preparation and installation of wood, laminate, ceramic tile, carpet and vinyl flooring. The Company sells its products to home improvement retail centers and specialty distribution outlets in 50 states and throughout the world.

This press release contains forward-looking statements that are subject to risks and uncertainties including current and potential future growth, Company performance, expense control, raw materials costs, new products and customers, potential growth and integration associated with acquisitions, global economic conditions, and currency fluctuations.  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,
  2011 2010
     
Net sales  $ 67,774  $ 60,573
Cost of goods sold  45,614  42,237
Gross profit  22,160  18,336
     
Operating expenses:    
Shipping  6,452  6,587
General and administrative  5,145  4,669
Selling and marketing  4,095  3,778
Other income, net  (174)  (37)
Total operating expenses  15,518  14,997
     
Operating income  6,642  3,339
     
Interest expense, net  (285)  (356)
     
Income before provision for income taxes  6,357  2,983
     
Provision for income taxes  2,225  1,044
     
Net income   $ 4,132  $ 1,939
     
Net income per share:    
Basic  $ 1.26  $ 0.58
Diluted  $ 1.22  $ 0.56
     
Weighted average number of common    
shares outstanding:    
Basic  3,285  3,333
Diluted  3,392  3,427
     
     
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except per share values)
     
  May 31, 2011

(Unaudited)
February 28,

2011
     
ASSETS    
CURRENT ASSETS    
Cash  $ 871  $ 447
Accounts receivable, less allowance for doubtful    
accounts of $936 and $841 as of May 31, 2011    
and February 28, 2011, respectively  34,899  31,350
Inventories  32,084  34,447
Prepaid expenses and other current assets  1,625  2,638
Deferred income taxes  1,454  1,430
Total current assets  70,933  70,312
     
Property and equipment, net  12,849  12,991
Deferred income taxes, net  1,100  1,084
Intangibles, net  2,816  2,499
Other assets  817  1,012
     
Total Assets  $ 88,515  $ 87,898
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
     
CURRENT LIABILITIES    
Trade accounts payable   $ 17,269  $ 16,887
Accrued liabilities  10,887  13,448
Lines of credit  11,239  9,568
Current maturities of notes payable  1,642  2,801
Total current liabilities  41,037  42,704
     
Notes payable  7,151  9,294
Other long term liabilities  658  657
Total Liabilities  48,846  52,655
     
SHAREHOLDERS' EQUITY    
Preferred stock, 2,500 shares authorized, $1.00 par value;    
337 shares issued and outstanding at May 31, 2011    
and February 28, 2011  337  337
Common stock, 20,000 shares authorized, $.001 par value;    
3,696 shares issued; 3,280 and 3,293 shares outstanding    
at May 31, 2011 and February 28, 2011, respectively  4  4
Additional paid-in capital  10,406  10,406
Retained earnings  31,832  27,703
Treasury stock, 416 and 403 shares held at cost at    
May 31, 2011 and February 28, 2011, respectively  (3,432)  (3,219)
Accumulated other comprehensive income  522  12
Total Shareholders' Equity 39,669 35,243
     
Total Liabilities and Shareholders' Equity  $ 88,515  $ 87,898
     
     
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
     
   For the Three Months Ended May 31, 
  2011 2010
     
Cash flows from operating activities:    
Net income  $ 4,132  $ 1,939
     
Adjustments to reconcile net income to net cash    
provided by (used in) operating activities:    
Depreciation and amortization  640  626
Other non-cash adjustments  127  88
Changes in assets and liabilities:    
Accounts receivable  (3,046)  (2,877)
Inventories  3,333  1,084
Prepaid expenses and other assets  1,313  (332)
Trade accounts payable and accrued liabilities  (2,856)  (698)
Net cash provided by (used in) operating activities  3,643  (170)
     
Cash flows from investing activities:    
Acquisition  (959)  -- 
Capital expenditures  (371)  (125)
Net cash used in investing activities  (1,330)  (125)
     
Cash flows from financing activities:    
Net borrowings under lines of credit  1,550  1,799
Repayments of notes payable  (3,205)  (656)
Purchase of treasury stock  (243)  (900)
Dividends  (3)  (3)
Net cash (used in) provided by financing activities  (1,901)  240
     
Effect of exchange rate changes on cash  12  (49)
     
Net increase (decrease) in cash  424  (104)
     
Cash at beginning of period  447  856
     
Cash at end of period  $ 871  $ 752
     
CONTACT: Q.E.P. Co., Inc.
         Richard A. Brooke
         Senior Vice President and
         Chief Financial Officer
         561-994-5550

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