Record Quarterly Sales – $83.4
Million
Quarterly Net Income – $5.1
Million
Q.E.P. CO., INC. (OTC:QEPC.PK) (the "Company")
today reported its consolidated results of operations for the first
quarter of its fiscal year ending February 28, 2014.
The Company reported record net sales of $83.4 million for the
three months ended May 31, 2013, an increase of $13.6 million or
19.4% from the $69.8 million reported in the same period of fiscal
2013. As a percentage of net sales, gross profit was 28.4% in the
first three months of fiscal 2014 compared to 28.9% in the first
three months of fiscal 2013.
Lewis Gould, Chairman of the Company's Board of Directors,
commented: "Sales continue to grow quarter over quarter reflecting
the positive contribution of our recent acquisitions as well as
modest growth in our core operations in spite of challenging market
conditions. With an eye on building net asset value for the
long-term, we are continuing to target strategic acquisitions that
expand our sales and earnings base. The acquisition of Homelux at
the beginning of this fiscal quarter certainly contributed to that
objective." Mr. Gould concluded that: "With a focus on further
optimizing cash flow, working capital and shareholder value, during
the first quarter of the current fiscal year we also completed a
sale and leaseback of a facility in Canada and used the cash
proceeds to pay down debt."
The growth in net sales for the quarter as compared to the
fiscal year 2013 first quarter principally reflects the
contribution of both North American and European acquisitions
completed during the past twelve months. Excluding acquisitions,
net sales increased 3.3% quarter over quarter due to modest sales
growth in both North America and certain international operations
partially offset by the effects of competitive pricing pressures in
North America and, to a lesser degree, international markets.
The Company's gross margin was 28.4% for the first quarter of
fiscal 2014 as compared to 28.9% for the first quarter of the prior
fiscal year. The decrease in margin as compared to the first
quarter of the prior fiscal year principally reflects price
reductions and product mix changes coupled with cost increases on
certain raw materials. In addition, the purchasing power of our
international operations weakened as the US dollar strengthened
during the first quarter of fiscal 2014.
Operating expenses for the first three months of fiscal 2014 and
2013 were $20.2 million and $16.4 million, respectively, or 24.3%
and 23.5% of net sales, respectively. The increase in operating
expenses is principally associated with acquisitions, while the
increase in operating expenses as a percentage of net sales also
reflects increased US direct media marketing costs and increases in
personnel costs implemented in the prior fiscal year.
Non-operating income for the first three months of fiscal 2014
represents the gain related to the sale and leaseback of a Company
facility in Canada, net of selling costs and the present value of
future lease payments.
The provision for income taxes as a percentage of income before
taxes for the first three months of fiscal 2014 and 2013 was 22.2%
and 36.5%, respectively. The effective tax rate in fiscal 2014
reflects the favorable rate impact of the sale of our Canadian
property and the impact of a larger portion of the Company's
earnings being sourced in jurisdictions with lower tax rates.
Net income for the first three months of fiscal 2014 and 2013
was $5.1 million and $2.3 million, respectively, or $1.56 and
$0.68, respectively, per diluted share.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) before non-operating income for the first quarter of
fiscal 2014 increased to $4.6 million as compared to $4.4 million
for the fiscal 2013 first quarter:
| |
|
For the Three
Months Ended May 31, |
| |
|
2013 |
2012 |
| |
|
|
|
| Net income |
$ 5,142 |
$ 2,286 |
| Add back (deduct): |
Interest |
254 |
165 |
| |
Provision for income taxes |
1,466 |
1,314 |
| |
Depreciation and amortization |
1,082 |
602 |
| |
Non-operating income |
(3,379) |
-- |
| EBITDA before
non-operating income |
$ 4,565 |
$ 4,367 |
Increased depreciation and amortization charges during fiscal
2014 principally related to acquisitions.
Cash provided by operations was $1.2 million in both the first
three months of fiscal 2014 and 2013. Funding for the acquisition
of Homelux during the first quarter of fiscal 2014, as well as
capital expenditures and the Company's continuing treasury stock
program, was provided from a combination of cash from operations,
borrowings and proceeds from the sale of a Canadian property.
Cash from operations during the first quarter of fiscal 2013 was
used to pay down debt and fund the purchase of treasury shares and
capital expenditures.
Working capital at the end of the Company's fiscal 2014 first
quarter was $24.8 million, a decrease of $13.2 million from $38.0
million at the end of the 2013 fiscal year due to the use of lines
of credit to fund the Homelux acquisition. Similarly,
aggregate debt at the end of the Company's fiscal 2014 first
quarter rose to $34.3 million from $15.3 million at the end of the
2013 fiscal year as a result of the Homelux acquisition. Total debt
to equity stood at 0.61 as of May 31, 2013.
Continuing our focus on building net asset value through
targeted acquisitions, earlier this week, the Company announced
that its UK subsidiary had completed the purchase of the Plasplugs®
trade name and other assets of the Plasplugs business. Founded in
the early 1970s, the Plasplugs product range includes general
purpose wall anchors, fasteners, sharpeners, tiling tools and
spacers, tile cutters and saws, knives, abrasives, electrical
products and power tools.
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 Friday, June 28, 2013. If
you would like to join the conference call, dial 1-877-941-1427
toll free from the US or 1-480-629-9664 internationally
approximately 10 minutes prior to the start time and ask for the
Q.E.P. Co., Inc. First Quarter Conference Call / Conference ID
4627120. A replay of the conference call will be available until
midnight July 5th by calling 1-877-870-5176 toll free from the US
and entering pin number 4627120; internationally, please call
1-858-384-5517 using the same pin number.
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 worldwide manufacturer, marketer
and distributor, QEP delivers a comprehensive line of hardwood
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 all of the industrial trades.
Under brand names including QEP®, ROBERTS®, Capitol®, Harris
Wood®, Vitrex®, Homelux®, PRCI, Plasplugs®,
Nupla®, HISCO™, Ludell™, Porta-Nails™ and
Elastiment®, the Company markets over 5,000 products. 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 sales growth, the benefits of
acquisitions and success in completing and integrating
transactions, economic conditions, future growth, net asset and
shareholder value, pricing pressures, cost increases, the effects
of changes in foreign exchange rates and personnel costs, the tax
impact of changes in the sources of profits, and capital
availability. 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, |
| |
2013 |
2012 |
| |
|
|
| Net sales |
$ 83,399 |
$ 69,835 |
| Cost of goods sold |
59,676 |
49,669 |
| Gross profit |
23,723 |
20,166 |
| |
|
|
| Operating expenses: |
|
|
| Shipping |
7,941 |
6,870 |
| General and administrative |
6,426 |
5,144 |
| Selling and marketing |
6,038 |
4,423 |
| Other income, net |
(165) |
(36) |
| Total operating expenses |
20,240 |
16,401 |
| |
|
|
| Operating income |
3,483 |
3,765 |
| |
|
|
| Non-operating income |
3,379 |
-- |
| Interest expense, net |
(254) |
(165) |
| |
|
|
| Income before provision for income
taxes |
6,608 |
3,600 |
| |
|
|
| Provision for income taxes |
1,466 |
1,314 |
| |
|
|
| Net income |
$ 5,142 |
$ 2,286 |
| |
|
|
| Net income per share: |
|
|
| Basic |
$ 1.57 |
$ 0.69 |
| Diluted |
$ 1.56 |
$ 0.68 |
| |
|
|
| Weighted average number of common
shares outstanding: |
|
|
| Basic |
3,276 |
3,330 |
| Diluted |
3,300 |
3,367 |
| |
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME |
| (In thousands) |
| (Unaudited) |
| |
|
|
| |
For the Three
Months Ended May 31, |
| |
2013 |
2012 |
| |
|
|
| Net income |
$ 5,142 |
$ 2,286 |
| |
|
|
| Unrealized currency translation adjustments,
net of tax |
351 |
779 |
| |
|
|
| Comprehensive income |
$ 5,493 |
$ 3,065 |
| |
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED BALANCE
SHEETS |
| (In thousands except per share
values) |
| |
|
|
| |
May 31, 2013
(Unaudited) |
February 28,
2013 |
| |
|
|
|
ASSETS |
|
|
| Cash |
$ 1,788 |
$ 737 |
| Accounts receivable, less allowance for
doubtful accounts of $369 and $298 as of May 31, 2013 and February
28, 2013, respectively |
48,499 |
39,581 |
| Inventories |
38,981 |
37,299 |
| Prepaid expenses and other current
assets |
3,119 |
2,586 |
| Deferred income taxes |
1,238 |
1,238 |
| Current assets |
93,625 |
81,441 |
| |
|
|
| Property and equipment, net |
14,017 |
14,018 |
| Deferred income taxes, net |
1,134 |
1,152 |
| Intangibles, net |
21,234 |
4,119 |
| Other assets |
354 |
386 |
| |
|
|
| Total Assets |
$ 130,364 |
$ 101,116 |
| |
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
| |
|
|
| Trade accounts payable |
$ 22,520 |
$ 19,650 |
| Accrued liabilities |
16,024 |
13,641 |
| Lines of credit |
29,254 |
8,872 |
| Current maturities of notes payable |
1,010 |
1,246 |
| Current liabilities |
68,808 |
43,409 |
| |
|
|
| Notes payable |
4,035 |
5,222 |
| Other long term liabilities |
1,037 |
647 |
| Total Liabilities |
73,880 |
49,278 |
| |
|
|
| Preferred stock, 2,500 shares authorized,
$1.00 par value; 337 shares issued and outstanding at May 31, 2013
and February 28, 2013 |
337 |
337 |
| Common stock, 20,000 shares authorized, $.001
par value; 3,801 and 3,799 shares issued; 3,274 and 3,282 shares
outstanding at May 31, 2013 and February 28, 2013,
respectively |
4 |
4 |
| Additional paid-in capital |
10,656 |
10,639 |
| Retained earnings |
51,187 |
46,049 |
| Treasury stock, 526 and 517 shares held at
cost at May 31, 2013 and February 28, 2013, respectively |
(5,463) |
(5,305) |
| Accumulated other comprehensive income |
(237) |
114 |
| Shareholders' Equity |
56,484 |
51,838 |
| |
|
|
| Total Liabilities and Shareholders'
Equity |
$ 130,364 |
$ 101,116 |
| |
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CASH FLOWS |
| (In thousands) |
| (Unaudited) |
| |
|
|
| |
For the Three
Months Ended May 31, |
| |
2013 |
2012 |
| |
|
|
| Operating activities: |
|
|
| Net income |
$ 5,142 |
$ 2,286 |
| Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
| Depreciation and
amortization |
1,082 |
602 |
| Non-operating income |
(3,379) |
-- |
| Other non-cash adjustments |
55 |
15 |
| Changes in assets and liabilities, net of
acquisition: |
|
|
| Accounts receivable |
(5,323) |
(2,762) |
| Inventories |
613 |
(2,667) |
| Prepaid expenses and other
assets |
(462) |
135 |
| Trade accounts payable and
accrued liabilities |
3,518 |
3,597 |
| Net cash provided by operating
activities |
1,246 |
1,206 |
| |
|
|
| Investing activities: |
|
|
| Acquisitions |
(23,495) |
-- |
| Proceeds from sale of
property |
4,630 |
-- |
| Capital expenditures |
(188) |
(180) |
| Net cash used in investing
activities |
(19,053) |
(180) |
| |
|
|
| Financing activities: |
|
|
| Net borrowings (repayments)
under lines of credit |
20,321 |
(379) |
| Repayments of notes
payable |
(1,415) |
(310) |
| Purchase of treasury stock |
(57) |
(280) |
| Dividends and other |
14 |
5 |
| Net cash used in financing
activities |
18,863 |
(964) |
| |
|
|
| Effect of exchange rate changes on
cash |
(5) |
(59) |
| |
|
|
| Net increase in cash |
1,051 |
3 |
| Cash at beginning of
period |
737 |
976 |
| Cash at end of period |
$ 1,788 |
$ 979 |
CONTACT: Q.E.P. Co., Inc.
Richard A. Brooke
Senior Vice President and
Chief Financial Officer
561-994-5550
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