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Press release content from Globe Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Q.E.P. Co., Inc. Reports Fiscal 2022 Nine Month and Third Quarter Financial Results

January 10, 2022 GMT

Record Nine Month Net Sales of $339.2 million
Nine Month Net Income of $7.7 million

BOCA RATON, Fla., Jan. 10, 2022 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (OTCQX: QEPC) (the “Company” or “QEP”) today reported its consolidated results of operations for the first nine months and third quarter of its fiscal year 2022, which ended on November 30, 2021.

QEP reported net sales of $339.2 million for the nine months ended November 30, 2021, an increase of $51.2 million or 17.8% from the $288.0 million reported in the same period of fiscal 2021. The Company reported net sales of $111.9 million for the quarter ended November 30, 2021, an increase of $13.0 million or 13.1% from the $98.9 million reported in the same period of fiscal 2021. The increase in net sales for the first nine months and third quarter of fiscal 2022 compared to the prior year reflects strong economic activity in the current year and the adverse impact of the worldwide economic downturn caused by the COVID-19 pandemic during the first quarter of the prior year.

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Lewis Gould, Executive Chairman, commented on the Company’s results, “Despite significant inflationary pressures and unprecedented disruption in the global supply chain, demand for the Company’s products remains strong in all geographic segments and channels. The Company, in close collaboration with our customers, continues to monitor the impact of rising product costs, and has implemented appropriate price increases to moderate margin erosion. We have also increased our investment in inventory to ensure product availability and service levels to our customers and continue to invest in the sales support infrastructure necessary to drive our market expansion initiatives.”

The Company’s gross profit for the first nine months of fiscal 2022 was $92.8 million compared to $81.8 million in the corresponding fiscal 2021 period, an increase of $11.0 million or 13.5%. Gross profit for the third quarter of fiscal 2022 was $30.5 million, representing an increase of $1.8 million or 6.4%, from $28.7 million in the corresponding fiscal 2021 period. The Company’s gross margin as a percentage of net sales for the first nine months and third quarter of fiscal year 2022 was 27.4% and 27.2%, respectively, which decreased from 28.4% and 29.0% in the corresponding prior fiscal year periods, respectively. The decrease in gross margin as a percentage of net sales was due to increased inbound freight and product costs that have not been fully recovered through customer price increases during the first nine months and third quarter of fiscal 2022.

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Operating expenses for the first nine months and third quarter of fiscal 2022 were $81.1 million and $26.4 million, respectively, or 23.9% and 23.6% of net sales in those periods, compared to $72.8 million and $25.4 million, respectively, or 25.3% and 25.6% of net sales in the comparable fiscal 2021 periods. The increase in operating expenses was due to higher shipping costs related to sales volume, along with higher personnel and market costs from the Company’s reinvestment in sales support infrastructure that was suspended or reduced during the prior year’s economic downturn caused by the COVID-19 pandemic. Additionally, during the prior year, the Company’s non-US based operations benefited from non-recurring local government subsidies received for maintaining certain employment levels during the pandemic.

The lower interest expense during the first nine months and third quarter of fiscal 2022 compared to the same periods in the prior fiscal year was principally due to a reduction in borrowings under the Company’s credit facilities.

The provision for income taxes as a percentage of income before taxes was 28.0% for the first nine months and third quarter for both fiscal 2022 and fiscal 2021.

Net income for the first nine months and third quarter of fiscal 2022 was $7.7 million and $2.7 million, respectively, or $2.31 and $0.81, respectively, per diluted share. For the comparable periods of fiscal 2021, net income was $5.5 million and $2.1 million, respectively, or $1.66 and $0.63, respectively, per diluted share.

Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) before restructuring charges for the first nine months and third quarter of fiscal 2022 was $14.8 million and $5.1 million, respectively as compared to $13.5 million and $4.8 million for the first nine months and third quarter of fiscal 2021, respectively.

        
   For the Three Months Ended For the Nine Months Ended
   November 30, 2021 November 30, 2020 November 30, 2021 November 30, 2020
          
Net income$2,721  $2,104  $7,740  $5,535 
          
Add: Interest expense, net 343   391   993   1,253 
  Provision for income taxes 1,058   818   3,009   2,153 
  Depreciation and amortization 1,019   1,180   3,093   3,402 
  Restructuring charges -   301   -   1,110 
EBITDA before restructuring charges$5,141  $4,794  $14,835  $13,453 
          

Cash provided by operations during the first nine months of fiscal 2022 was $5.1 million as compared to $30.6 million in the first nine months of fiscal 2021, principally reflecting an increase in investment in inventory to mitigate delays in stock replenishment caused by supply chain disruptions and the rising cost of inbound freight from Asia. During the first nine months of fiscal 2021, cash from operations was used primarily to fund capital expenditures and increase cash balances.   In the prior fiscal year period, cash provided by operations was used primarily to pay down debt.  

Working capital as of November 30, 2021 was $51.4 million compared to $44.7 million at the end of fiscal 2021.   Aggregate debt, net of available cash balances at the end of the third quarter of fiscal 2022 was $17.6 million or 22.8% of equity, a decrease of $5.4 million compared to $23.0 million or 32.4% of equity at the end of fiscal 2021.

Conference Call Information

The Company will be hosting the following conference call to discuss its financial results and answer questions.

Date: Thursday, January 13, 2022
Time: 10:00 a.m. Eastern Time
Dial-in Numbers: 888-220-8451 (US or Canada)
  +1 646-828-8193 (International)
Confirmation Code: 1589898
   
Replay: 719-457-0820; Passcode: 1589898
   

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 and installation solutions for commercial and home improvement projects worldwide. QEP offers a comprehensive line of specialty installation tools, adhesives, and underlayment as well as a complete line of hardwood, luxury vinyl, and modular carpet tile. QEP sells its products throughout the world to home improvement retail centers, professional specialty distribution outlets, and flooring dealers under brand names including QEP®, LASH®, ROBERTS®, Vitrex®, Brutus®, PRCI®, Plasplugs®, Tomecanic®, Premix-Marbletite® (PMM), Apple Creek®, Homelux®, Capitol® and XPS Foam™.   Brand names featured under QEP’s Harris Flooring Group® include Harris®, Kraus® and Naturally Aged Flooring™.

QEP is headquartered in Boca Raton, Florida with offices in Canada, Europe, Asia, Australia and New Zealand. Please visit our website at www.qepcorporate.com.

Forward-Looking Statements

This press release contains forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 emergence of the world from the COVID-19 pandemic and the Company’s belief that it is positioned to respond to evolving uncertainties related thereto, the Company’s shifting of its focus to new challenges presented by (i) scarcity and rising cost for raw materials and transcontinental freight, (ii) the weakening U.S. Dollar, (iii) shifts in global sourcing patterns and (iv) general inflationary pressures, economic conditions, sales growth, price increases, profit improvements, product development and marketing, operating expenses, cost savings, acquisition integration, operational synergy realization, global sourcing, political uncertainty, cash flow, debt and currency exchange rates. Any forward-looking statements contained herein are based on current expectations and beliefs, and are subject to a number of risks and uncertainties. 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, 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 Nine Months Ended
 November 30, November 30, November 30, November 30,
 2021 2020 2021 2020
        
Net sales$111,942  $98,941  $339,211  $288,008 
Cost of goods sold 81,455   70,277   246,396   206,257 
Gross profit 30,487   28,664   92,815   81,751 
        
Operating expenses:       
Shipping 12,248   11,544   37,461   32,516 
General and administrative 7,467   6,897   22,453   20,858 
Selling and marketing 6,723   6,687   21,524   18,780 
Restructuring 1   301   58   1,110 
Other income, net (74)  (78)  (423)  (454)
Total operating expenses 26,365   25,351   81,073   72,810 
        
Operating income 4,122   3,313   11,742   8,941 
        
Interest expense, net (343)  (391)  (993)  (1,253)
        
Income before provision for income taxes 3,779   2,922   10,749   7,688 
        
Provision for income taxes 1,058   818   3,009   2,153 
        
Net income$2,721  $2,104  $7,740  $5,535 
        
Earnings per share:       
Basic$0.82  $0.63  $2.32  $1.66 
Diluted$0.81  $0.63  $2.31  $1.66 
        
Weighted average number of common       
shares outstanding:       
Basic 3,335   3,335   3,335   3,335 
Diluted 3,344   3,343   3,345   3,338 
        
 
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
        
 For the Three Months Ended For the Nine Months Ended
 November 30, November 30, November 30, November 30,
 2021  2020
 2021  2020
        
Net income$2,721  $2,104  $7,740  $5,535 
        
Unrealized currency translation adjustments (612)  160   (1,281)  835 
        
Comprehensive income$2,109  $2,264  $6,459  $6,370 
        
    
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except per share values)
    
 November 30, 2021 February 28, 2021
 (Unaudited) (Audited)
    
ASSETS   
Cash$15,015  $10,905 
Accounts receivable, less allowance for doubtful accounts of $888   
and $1,059 as of November 30, 2021 and February 28, 2021, respectively 52,959   53,183 
Inventories 85,406   67,032 
Prepaid expenses and other current assets 4,409   6,829 
Prepaid income taxes -   736 
Current assets 157,789   138,685 
    
Property and equipment, net 10,415   11,398 
Right of use operating lease assets 16,447   16,417 
Deferred income taxes, net 3,402   3,436 
Intangibles, net 10,686   12,454 
Goodwill 2,375   2,493 
Other assets 3,333   2,840 
    
Total Assets$204,447  $187,723 
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
    
Trade accounts payable$48,513  $40,900 
Accrued liabilities 26,220   23,475 
Current operating lease liabilities 5,067   5,196 
Income taxes payable 1,480   - 
Lines of credit 21,754   21,010 
Current maturities of notes payable 3,343   3,417 
Current liabilities 106,377   93,998 
    
Notes payable 7,519   9,438 
Non-current operating lease liabilities 12,478   12,336 
Deferred income taxes 172   172 
Other long term liabilities 679   851 
Total Liabilities 127,225   116,795 
    
Preferred stock, 2,500 shares authorized, $1.00 par value; 0 shares   
issued and outstanding at November 30, 2021 and February 28, 2021 -   - 
Common stock, 20,000 shares authorized, $.001 par value;   
4,005 shares issued, and 3,309 shares outstanding at   
November 30, 2021 and February 28, 2021 4   4 
Additional paid-in capital 11,251   11,251 
Retained earnings 79,360   71,785 
Treasury stock, 696 shares held at cost at November 30, 2021   
and February 28, 2021 (9,082)  (9,082)
Accumulated other comprehensive income (4,311)  (3,030)
Shareholders' Equity 77,222   70,928 
    
Total Liabilities and Shareholders' Equity$204,447  $187,723 
    
    
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
    
 For the Nine Months Ended
 November 30, November 30,
  2021   2020 
    
Operating activities:   
Net income$7,740  $5,535 
Adjustments to reconcile net income to net cash   
provided by operating activities:   
Gain on sale of property (88)  - 
Restructuring -   (260)
Depreciation and amortization 3,093   3,402 
Other non-cash adjustments (27)  132 
Changes in assets and liabilities, net of acquisitions:   
Accounts receivable (522)  526 
Inventories (19,806)  6,999 
Prepaid expenses and other assets 5,401   2,155 
Trade accounts payable and accrued liabilities 9,264   12,090 
Net cash provided by operating activities 5,055   30,579 
    
Investing activities:   
Acquisitions -   (448)
Capital expenditures (819)  (576)
Proceeds from sale of property 1,173   252 
Net cash provided by (used in) investing activities 354   (772)
    
Financing activities:   
Net borrowings (repayments) under lines of credit 1,369   (18,634)
Net borrowings (repayments) of notes payable (2,047)  857 
Purchase of treasury stock (90)  (90)
Principal payments on finance leases (82)  (68)
Dividend paid (165)  - 
Net cash used in financing activities (1,015)  (17,935)
Effect of exchange rate changes on cash (284)  413 
    
Net increase in cash 4,110   12,285 
Cash at beginning of period 10,905   4,999 
Cash at end of period$15,015  $17,284 
    
                    
  Q.E.P. CO., INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 (In thousands, except shares data)
                    
                 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, 2020-  $-  3,826,642  $4  $11,087  $64,887  $(8,869) $(4,368) $62,741 
                    
Net income             6,898       6,898 
Unrealized currency translation adjustments                 1,338   1,338 
Purchase of treasury stock               (213)    (213)
Stock-based compensation expense           164         164 
Stock dividend     178,728             - 
Balance at February 28, 2021-  $-  4,005,370  $4  $11,251  $71,785  $(9,082) $(3,030) $70,928 
                    
Net income             7,740       7,740 
Unrealized currency translation adjustments                 (1,281)  (1,281)
Dividend paid             (165)      (165)
Balance at November 30, 2021-  $-  4,005,370  $4  $11,251  $79,360  $(9,082) $(4,311) $77,222 
                    

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