QEPC Q E P Company Inc (QX)

Q.E.P. Co., Inc. (Nasdaq:QEPC) today announced that it has entered into an asset purchase agreement with Halex Corporation of Pomona, California. Pursuant to the agreement, Q.E.P. acquired the Capitol USA adhesives division, located in Dalton, Georgia. Mr. Lewis Gould, Chairman and Chief Executive Officer of Q.E.P. commented, "The acquisition of the Capitol USA adhesives division will add an enormous amount of synergy to Q.E.P. Capitol USA is a prime manufacturer of adhesives for the flooring industry with annual sales of approximately $10 million, and is a premier brand name in the flooring industry. Capitol USA's adhesives manufacturing facility will be fully integrated into Q.E.P.'s supply chain and augment Q.E.P.'s current capacity to manufacture critically needed adhesives for Q.E.P.'s expanding business." Mr. Gould further stated that "Capitol USA's 104,000 square foot warehouse in Dalton will provide a strategic location to support Q.E.P.'s continued growth. Q.E.P. will now have under its corporate umbrella the Q.E.P., Roberts, and Capitol brands for its customers. With the acquisition of the Capitol USA adhesives division, Q.E.P. is now one of the largest leading manufacturers of adhesives for the flooring industry." In exchange for the Capitol USA adhesives division, Q.E.P. paid cash, entered into a four year promissory note and transferred all of the assets of its Roberts carpet seaming tape manufacturing business to Halex, including a license to use the Roberts trademark in Halex's distribution carpet seaming tape business. Q.E.P. will continue to sell carpet seaming tape to its Home Center Customers. The cash portion of the purchase was financed through the utilization of Q.E.P's existing credit facility. Q.E.P. Co., Inc., founded in 1979, is a leading manufacturer, marketer and distributor of a broad line of flooring tools and accessories for the home improvement and professional installer markets. Under brand names Q.E.P., Roberts, Q-Set and O'Tool, Q.E.P. markets approximately 3,000 products used primarily for surface preparation and installation of ceramic tile, carpet, vinyl and wood flooring. The Company sells its products to large home improvement retail centers, as well as traditional distribution outlets in 50 states and around the world. Certain statements in this press release, including statements regarding the success of our integration of the Capitol USA adhesives manufacturing facility into our supply chain, the amount of synergies our expected as a result of the acquisition of the Capitol USA adhesives division, our expected sales, benefits for our 2006 fiscal year as well as our gross sales for our 2006 fiscal year, and regarding our ability to increase prices and improve our gross margins are forward-looking statements, which are made pursuant to the safe-harbor provisions of the Securities Litigation Reform Act of 1995. The forward-looking statements are made only as of the date of this report and are subject to risks and uncertainties which could cause actual results to differ materially from those discussed in the forward-looking statements. Among the risks and uncertainties that could cause such a difference are the Company's assumptions relating to the expected growth in sales of its products, its ability to effectively integrate the Capitol USA adhesives division and other acquired businesses, the success of the Company's sales and marketing efforts, improvements in productivity and cost reductions, changes in prices of raw materials and our inability to effect price increases, as well as certain other risks. A more detailed discussion of risks attendant to the forward-looking statements included in this press release are set forth in the "Forward-Looking Statements" section of the Company's Annual Report on Form 10-K for the year ended February 29, 2004, filed with the Securities and Exchange Commission ("SEC"), and in other reports already filed with the SEC.