Q.E.P. Co., Inc. Reports Fiscal 2022 Six Month and Second Quarter Financial Results

Record Six Month Net Sales of $227.3 million
Six Month Net Income of $5.0 million

BOCA RATON, Fla., Oct. 14, 2021 (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 its fiscal year 2022, which ended on August 31, 2021.

QEP reported net sales of $227.3 million for the six months ended August 31, 2021, an increase of $38.2 million or 20.2% from the $189.1 million reported in the same period of fiscal 2021. The Company reported net sales of $112.9 million for the quarter ended August 31, 2021, an increase of $9.8 million or 9.5% from the $103.1 million reported in the same period of fiscal 2021. The increase in net sales for the first six months and second 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.

Lewis Gould, Executive Chairman, commented on the Company’s results, “We continue to be pleased with the Company’s year-over-year sales growth in both the second quarter and first six months of the current fiscal year. Demand for the Company’s products remains strong in all geographic segments and channels, despite significant inflationary pressure and unprecedented disruptions in the global supply chain. The Company, in collaboration with its customers, has implemented a series of price increases to moderate the impact of rising product costs. We continue to relentlessly follow our growth plan.”       

Mr. Gould concluded, “The Company remains steadfast in balancing the need to maintain profitability while investing in the resources necessary to continue our market expansion.”

The Company’s gross profit for the first six months of fiscal 2022 was $62.3 million compared to $53.1 million in the corresponding fiscal 2021 period, an increase of $9.2 million or 17.4%. Gross profit for the second quarter of fiscal 2022 was $31.0 million, representing an increase of $1.6 million or 5.4%, from $29.4 million in the corresponding fiscal 2021 period. The Company’s gross margin as a percentage of net sales for the first six months and second quarter of fiscal year 2022 was 27.4% and 27.5%, respectively, which decreased from 28.1% and 28.5% in the corresponding prior fiscal year periods, respectively. The decrease in gross margin as a percentage of net sales was due to inbound freight and product cost increases that have not been fully recovered through customer price negotiations during the first six months and second quarter of fiscal 2022.

Operating expenses for the first six months and second quarter of fiscal 2022 were $54.7 million and $27.4 million, respectively, or 24.1% and 24.3% of net sales in those periods, compared to $47.5 million and $25.2 million, respectively, or 25.1% and 24.4% 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 as the Company reinvested in sales support infrastructure that was eliminated or reduced during the prior year in response to the economic downturn caused by the COVID-19 pandemic. Additionally, during the prior year, the Company’s non-US based operations benefited from local government subsidies received for maintaining certain employment levels during the pandemic.

The lower interest expense during the first six months and second 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 incomes before taxes was 28.0% for the first six months and second quarter for both fiscal 2022 and fiscal 2021.

Net income for the first six months and second quarter of fiscal 2022 was $5.0 million and $2.4 million, respectively, or $1.50 and $0.71, respectively, per diluted share. For the comparable periods of fiscal 2021, net income was $3.4 million and $2.7 million, respectively, or $1.03 and $0.82, respectively, per diluted share.

Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) for the first six months and second quarter of fiscal 2022 was $9.7 million and $4.6 million, respectively as compared to $7.8 million and $5.3 million for the first six months and second quarter of fiscal 2021, respectively.

    For the Three Months Ended   For the Six Months Ended  
    August 31, 2021   August 31, 2020   August 31, 2021   August 31, 2020  
                   
Net income $ 2,380   $ 2,743   $ 5,019   $ 3,431  
                   
Add: Interest expense, net   306     442     633     845  
  Provision for income taxes   926     1,067     1,951     1,334  
  Depreciation and amortization   1,021     1,082     2,074     2,222  
EBITDA $ 4,633   $ 5,334   $ 9,677   $ 7,832  
                   

Cash provided by operations during the first six months of fiscal 2022 was $1.7 million as compared to $20.8 million in the first six 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 six 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 August 31, 2021 was $48.4 million compared to $44.7 million at the end of fiscal 2021.   Aggregate debt, net of available cash balances at the end of the second quarter of fiscal 2022 was $22.0 million or 29.3% of equity, a decrease of $1.0 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, October 21, 2021
Time: 10:00 a.m. Eastern Time
Dial-in Numbers: 800-353-6461 (US or Canada)
  +1 334-323-0501 (International)
Confirmation Code: 3331272
   
Replay: 719-457-0820; Passcode: 3331272

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.

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

-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,
      2021       2020       2021       2020  
                 
  Net sales $ 112,865     $ 103,051     $ 227,269     $ 189,067  
  Cost of goods sold   81,850       73,632       164,941       135,980  
  Gross profit   31,015       29,419       62,328       53,087  
                 
  Operating expenses:              
       Shipping   12,592       11,251       25,213       20,973  
       General and administrative   7,911       8,000       15,043       14,770  
       Selling and marketing   7,073       6,189       14,801       12,093  
       Other income, net   (173 )     (273 )     (332 )     (359 )
       Total operating expenses   27,403       25,167       54,725       47,477  
                 
  Operating income   3,612       4,252       7,603       5,610  
                 
  Interest expense, net   (306 )     (442 )     (633 )     (845 )
                 
  Income before provision for income taxes   3,306       3,810       6,970       4,765  
                 
  Provision for income taxes   926       1,067       1,951       1,334  
                 
  Net income $ 2,380     $ 2,743     $ 5,019     $ 3,431  
                 
  Earnings per share:              
       Basic $ 0.71     $ 0.82     $ 1.50     $ 1.03  
       Diluted $ 0.71     $ 0.82     $ 1.50     $ 1.03  
                 
  Weighted average number of common              
       shares outstanding:              
       Basic   3,335       3,335       3,335       3,335  
       Diluted   3,346       3,337       3,346       3,336  
                 
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
                       
        For the Three Months Ended     For the Six Months Ended
        August 31,   August 31,     August 31,   August 31,
          2021       2020       2021       2020
                       
Net income       $ 2,380     $ 2,743     $ 5,019     $ 3,431
                       
Unrealized currency translation adjustments       (543 )     815       (669 )     675
                       
Comprehensive income       $ 1,837     $ 3,558     $ 4,350     $ 4,106
                       
       
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except per share values)
       
  August 31, 2021   February 28, 2021
  (Unaudited)   (Audited)
       
ASSETS      
Cash $ 12,139     $ 10,905  
Accounts receivable, less allowance for doubtful accounts of $847      
     and $1,059 as of August 31, 2021 and February 28, 2021, respectively   53,960       53,183  
Inventories   76,931       67,032  
Prepaid expenses and other current assets   5,906       6,829  
Prepaid income taxes   384       736  
Current assets   149,320       138,685  
       
Property and equipment, net   10,863       11,398  
Right of use operating lease assets   17,305       16,417  
Deferred income taxes, net   3,408       3,436  
Intangibles, net   11,367       12,454  
Goodwill   2,454       2,493  
Other assets   2,932       2,840  
       
Total Assets $ 197,649     $ 187,723  
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
       
Trade accounts payable $ 40,009     $ 40,900  
Accrued liabilities   29,122       23,475  
Current operating lease liabilities   5,424       5,196  
Lines of credit   21,289       21,010  
Current maturities of notes payable   5,107       3,417  
Current liabilities   100,951       93,998  
       
Notes payable   7,722       9,438  
Non-current operating lease liabilities   12,985       12,336  
Deferred income taxes   172       172  
Other long term liabilities   706       851  
Total Liabilities   122,536       116,795  
       
Preferred stock, 2,500 shares authorized, $1.00 par value; 0 shares      
     issued and outstanding at August 31, 2021 and February 28, 2021          
Common stock, 20,000 shares authorized, $.001 par value;      
     4,005 shares issued, and 3,309 shares outstanding at      
     August 31, 2021 and February 28, 2021   4       4  
Additional paid-in capital   11,251       11,251  
Retained earnings   76,639       71,785  
Treasury stock, 696 shares held at cost at August 31, 2021      
     and February 28, 2021   (9,082 )     (9,082 )
Accumulated other comprehensive income   (3,699 )     (3,030 )
Shareholders’ Equity   75,113       70,928  
       
Total Liabilities and Shareholders’ Equity $ 197,649     $ 187,723  
       
       
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
       
  For the Six Months Ended
  August 31,   August 31,
    2021       2020  
       
Operating activities:      
Net income $ 5,019     $ 3,431  
Adjustments to reconcile net income to net cash      
     provided by operating activities:      
     Gain on sale of property   (59 )      
     Depreciation and amortization   2,074       2,222  
     Other non-cash adjustments   (106 )     63  
Changes in assets and liabilities, net of acquisitions:      
     Accounts receivable   (1,095 )     (3,259 )
     Inventories   (10,552 )     7,831  
     Prepaid expenses and other assets   3,914       3,419  
     Trade accounts payable and accrued liabilities   2,488       7,076  
Net cash provided by operating activities   1,683       20,783  
       
Investing activities:      
     Acquisitions         (436 )
     Capital expenditures   (603 )     (364 )
     Proceeds from sale of property   264       168  
Net cash used in investing activities   (339 )     (632 )
       
Financing activities:      
     Net borrowings (repayments) under lines of credit   391       (18,709 )
     Net borrowings (repayments) of notes payable   (102 )     1,658  
     Purchase of treasury stock   (60 )     (60 )
     Principal payments on finance leases   (55 )     (39 )
     Dividends   (165 )      
Net cash provided by (used in) financing activities   9       (17,150 )
Effect of exchange rate changes on cash   (119 )     226  
       
Net increase in cash   1,234       3,227  
     Cash at beginning of period   10,905       4,999  
Cash at end of period $ 12,139     $ 8,226  
                                     
       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 dividends         178,728                            
Balance at February 28, 2021   $   4,005,370   $ 4   $ 11,251   $ 71,785     $ (9,082 )   $ (3,030 )     $ 70,928  
                                     
Net income                       5,019                 5,019  
Unrealized currency translation adjustments                               (669 )       (669 )
Dividends paid                       (165 )               (165 )
Balance at August 31, 2021   $   4,005,370   $ 4   $ 11,251   $ 76,639     $ (9,082 )   $ (3,699 )     $ 75,113  
                                     

close

Sign up for the New Frontier Report

Get regularly updated reports detailing stocks recommendations and new economic shifting industries and technologies.

We don’t spam! Read our privacy policy for more info.