Record Nine Month Sales – $214.0
Million
Record Third Quarter Sales – $73.1
Million
Nine Month Net Income – $6.9
Million
Third Quarter Net Income – $2.7
Million
Q.E.P. CO., INC. (Pink Sheets:QEPC) (the
"Company") today reported its consolidated results of operations
for the first nine months and third quarter of its fiscal year
ending February 28, 2013 and announced that it had filed a notice
with the Office of Fair Trading in England of its proposed
acquisition of the Homelux Limited, Tile Accessories Limited and
Homelux BV businesses.
Fiscal Year 2013 Results of Operations
The Company reported record net sales of $214.0 million for the
nine months ended November 30, 2012, an increase of $13.4 million
or 6.7%, including the impact of completed acquisitions, from the
$200.6 million reported in the same period of fiscal 2012. As a
percentage of net sales, gross profit was 29.0% in the first nine
months of fiscal 2013 compared to 30.7% in the first nine months of
fiscal 2012.
Net sales for the third quarter of fiscal 2013 totaled $73.1
million, an increase of $8.2 million or 12.6% from the $64.9
million reported for the third quarter of fiscal 2012, reflecting a
gross profit in both periods of 29.2%.
Lewis Gould, Chairman of the Board of Directors, commented, "We
are pleased with our sales for fiscal 2013 which included our
recent acquisitions and growth with our existing customer base. Our
margins, however, reflect continuing competitive pressure, along
with increases in costs. As a result, the Company is redoubling its
efforts to increase sales by acquisitions and new product
launches." Mr. Gould continued, "The Company's balance sheet is
extremely strong as is our cash flow to permit us to pursue our
strategic objectives."
The increase in net sales for the nine months ended November 30,
2012 principally reflects an increase in sales from the recent US
acquisitions of Nupla Corporation, Imperial Industries, Inc. and
our US injection molding operations. Also contributing to the
increase was an expansion of product lines with existing customers
in the Company's operations outside North America.
The decrease in the Company's gross margin percentage on a
fiscal year-to-date basis principally reflects reduced pricing in
our mass merchant channels, changes in our methods of distributing
products and the strengthening of the US dollar relative to
European currencies. During the third quarter of fiscal 2013, these
margin percentage pressures were offset by an improved product mix
and certain product cost decreases.
In combination, the increase in net sales and the margin
pressures experienced during the first nine months of fiscal 2013
resulted in a modest increase in gross profit to $62.0 million from
$61.5 million for the nine months ended November 30, 2012 and 2011,
respectively. During the third quarter of fiscal 2013, gross profit
increased $2.4 million as net sales increased.
Operating expenses for the first nine months and third quarter
of fiscal 2013 were $51.7 million and $18.2 million, respectively,
or 24.2% and 24.8% of net sales in those periods. By comparison,
operating expenses before restructuring charges for the first nine
months and third quarter of fiscal 2012 were $46.1 million and
$15.4 million, respectively, or 23.0% and 23.7% of net sales. The
increase in operating expenses as a percentage of net sales
principally reflects an increased investment in personnel,
increased freight rates in certain markets and net transaction
costs associated with the Company's acquisition activities.
Restructuring charges included in operating expenses for the nine
months ended November 30, 2011 relate to non-cash charges
associated with the Company's Argentine operations.
In addition to pricing changes realized to date, recently, the
Company agreed to a price reduction related to a product
distributed exclusively through a significant customer. In
addition, the Company has been notified by that customer of its
intent to discontinue its purchases of certain other products
during fiscal 2014. The pricing change in combination with the
scope and timing of the reduction in purchases, if they occur as
expected, will have a material adverse effect on the Company's
future sales and operating income.
Non-operating income for fiscal 2013 represents the provisional
estimate of the fair value of net assets acquired in excess of the
purchase price associated with certain of the Company's acquisition
activities.
The Company's effective tax rate for the first nine months and
third quarter of fiscal 2013 was 34.2% and 29.3%, respectively. The
Company's effective tax rate for the first nine months and third
quarter of fiscal 2012 was 32.6% and 35.8%, respectively. The
fluctuation in the Company's effective tax rate principally is the
result of changes in the proportion of the Company's earnings
sourced in jurisdictions with different statutory tax rates, the
impact of fiscal 2013 non-operating income, which is not included
in taxable income, and a fiscal 2012 tax benefit from the
restructuring of the Company's Argentine operations.
Net income for the first nine months and third quarter of fiscal
2013 was $6.9 million and $2.7 million, respectively, or $2.07 and
$0.80, respectively, per diluted share. For the comparable periods
of fiscal 2012, net income was $9.0 million and $2.2 million,
respectively, or $2.66 and $0.64, respectively, per diluted
share.
Operating earnings before interest, taxes, depreciation,
amortization and restructuring charges (EBITDAR) for the first nine
months and third quarter of fiscal 2013 was $12.4 million and $4.0
million, respectively, as compared to $17.4 million and $4.2
million, respectively, for the comparable periods of fiscal
2012.
| |
For the Three Months |
For the Nine Months |
| |
Ended November
30, |
Ended November
30, |
| |
2012 |
2011 |
2012 |
2011 |
| Net income |
$ 2,678 |
$ 2,167 |
$ 6,925 |
$ 9,028 |
| Non-operating income |
(786) |
-- |
(786) |
-- |
| Restructuring charges |
-- |
-- |
-- |
1,273 |
| Interest |
188 |
212 |
546 |
740 |
| Provision for income taxes |
1,112 |
1,206 |
3,605 |
4,374 |
| Depreciation and amortization |
798 |
663 |
2,125 |
1,952 |
| EBITDAR |
$ 3,990 |
$ 4,248 |
$ 12,415 |
$ 17,367 |
Cash provided by operations during the first nine months of
fiscal 2013 was $6.2 million as compared to $9.6 million in the
first nine months of fiscal 2012, reflecting both the decrease in
income and an additional investment in working capital. During
fiscal 2013 the Company made investments totaling $9.7 million
which include the completion of four acquisitions. The investments
were funded through a combination of cash from operations and from
the Company's domestic revolving credit facility. By comparison,
the cash provided by operations during the first nine months of
fiscal 2012 of $9.6 million was used to fund the acquisition of
Porta-Nails, Inc. and capital expenditures while reducing aggregate
borrowings.
Working capital at the end of the Company's fiscal 2013 third
quarter was $36.9 million compared to $35.9 million at the end of
the 2012 fiscal year. Aggregate debt at the end of the
Company's fiscal 2013 third quarter was $16.8 million or 33% of
equity compared to $12.7 million or 28% of equity at the end of the
2012 fiscal year. The increase in debt is associated with the
funding of acquisitions during fiscal 2013.
Acquisitions
The Company also reported that today it is notifying the UK
Office of Fair Trading (the "OFT") of its proposed acquisition of
the Homelux® and TileRite® distribution businesses ("Homelux") of
Homelux Nenplas Limited. The OFT reviews proposed acquisitions as
part of its responsibility to enforce consumer protection laws and
competition laws in the UK. Homelux is a full range, worldwide
supplier of tiling accessories. The parties have agreed that
execution of the Homelux acquisition agreements will not occur
until after completion of the OFT's review and receipt of a
favorable tax ruling. There can be no assurance that the
transaction will be consummated.
Separately, the Company noted that after consideration of the
bids placed during the auction of the assets of Harper Brush Works,
Inc., in which the Company was the initial "stalking horse bidder",
the Company withdrew from the transaction.
Investor Call
The Company further reported that it will be
hosting a conference call to discuss these results
and to answer your questions at 10:00 a.m. Eastern Time on
Thursday, December 20, 2012. 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. Third Quarter
Conference Call / Conference ID 4582213. A replay of the conference
call will be available until midnight December 27, 2012 by calling
1-877-870-5176 toll free from the US and entering pin number
4582213; 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,
Nupla®, HISCO®, Vitrex®, PRCI®, Porta-Nail® 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 and sales growth, increased
pricing pressures, future market position and profitability,
changes in future pricing and product offerings to a significant
customer, potential acquisition opportunities, benefits and timing,
cost and product mix changes, and capital availability. These
statements are not guarantees of future performance and actual
results could differ materially from our current
expectations. We do not undertake to update our
forward-looking statements.
-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 November 30, |
For the Nine Months
Ended November 30, |
| |
2012 |
2011 |
2012 |
2011 |
| |
|
|
|
|
| Net sales |
$ 73,097 |
$ 64,939 |
$ 213,974 |
$ 200,569 |
| Cost of goods sold |
51,741 |
45,993 |
152,001 |
139,032 |
| Gross profit |
21,356 |
18,946 |
61,973 |
61,537 |
| |
|
|
|
|
| Operating expenses: |
|
|
|
|
| Shipping |
7,525 |
6,516 |
21,609 |
19,760 |
| General and administrative |
6,029 |
4,829 |
16,577 |
14,512 |
| Selling and marketing |
4,700 |
4,071 |
13,751 |
12,216 |
| Restructuring charges |
-- |
-- |
-- |
1,273 |
| Other income, net |
(90) |
(55) |
(254) |
(366) |
| Total operating expenses |
18,164 |
15,361 |
51,683 |
47,395 |
| |
|
|
|
|
| Operating income |
3,192 |
3,585 |
10,290 |
14,142 |
| |
|
|
|
|
| Non-operating income |
786 |
-- |
786 |
-- |
| Interest expense, net |
(188) |
(212) |
(546) |
(740) |
| |
|
|
|
|
| Income before provision for income
taxes |
3,790 |
3,373 |
10,530 |
13,402 |
| |
|
|
|
|
| Provision for income taxes |
1,112 |
1,206 |
3,605 |
4,374 |
| |
|
|
|
|
| Net income |
$ 2,678 |
$ 2,167 |
$ 6,925 |
$ 9,028 |
| |
|
|
|
|
| Net income per share: |
|
|
|
|
| Basic |
$ 0.81 |
$ 0.64 |
$ 2.09 |
$ 2.71 |
| Diluted |
$ 0.80 |
$ 0.64 |
$ 2.07 |
$ 2.66 |
| |
|
|
|
|
| Weighted average number of
common |
|
|
|
|
| shares
outstanding: |
|
|
|
|
| Basic |
3,309 |
3,353 |
3,316 |
3,323 |
| Diluted |
3,337 |
3,395 |
3,347 |
3,397 |
| |
|
|
|
|
| |
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME |
| (In thousands) |
| (Unaudited) |
| |
|
|
|
|
| |
For the Three
Months Ended November 30, |
For the Nine
Months Ended November 30, |
| |
2012 |
2011 |
2012 |
2011 |
| |
|
|
|
|
| Net income |
$ 2,678 |
$ 2,167 |
$ 6,925 |
$ 9,028 |
| |
|
|
|
|
| Unrealized currency translation adjustments,
net of tax |
137 |
(762) |
(167) |
128 |
| |
|
|
|
|
| Comprehensive income |
$ 2,815 |
$ 1,405 |
$ 6,758 |
$ 9,156 |
| |
|
|
| |
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED BALANCE
SHEETS |
| (In thousands except per share
values) |
| |
|
|
| |
November 30, 2012
(Unaudited) |
February 29,
2012 |
| |
|
|
| ASSETS |
|
|
| Cash |
$ 960 |
$ 976 |
| Accounts receivable, less allowance for
doubtful accounts of $335 and $314 as of November 30, 2012 and
February 29, 2012, respectively |
41,601 |
35,386 |
| Inventories |
36,327 |
31,441 |
| Prepaid expenses and other current
assets |
2,882 |
2,596 |
| Deferred income taxes |
1,467 |
1,484 |
| Current assets |
83,237 |
71,883 |
| |
|
|
| Property and equipment, net |
14,351 |
11,546 |
| Deferred income taxes, net |
676 |
686 |
| Intangibles, net |
4,004 |
2,542 |
| Other assets |
851 |
552 |
| |
|
|
| Total Assets |
$ 103,119 |
$ 87,209 |
| |
|
|
| LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
| |
|
|
| Trade accounts payable |
$ 18,554 |
$ 17,437 |
| Accrued liabilities |
15,473 |
10,954 |
| Lines of credit |
10,029 |
5,215 |
| Current maturities of notes payable |
2,325 |
2,343 |
| Current liabilities |
46,381 |
35,949 |
| |
|
|
| Notes payable |
4,495 |
5,102 |
| Other long term liabilities |
723 |
723 |
| Total Liabilities |
51,599 |
41,774 |
| |
|
|
| Preferred stock, 2,500 shares authorized,
$1.00 par value; 337 shares issued and outstanding at November
30, 2012 and February 29, 2012 |
337 |
337 |
| Common stock, 20,000 shares authorized, $.001
par value; 3,799 and 3,793 shares issued; 3,309 and 3,338 shares
outstanding at November 30, 2012 and February 29, 2012,
respectively |
4 |
4 |
| Additional paid-in capital |
10,651 |
10,666 |
| Retained earnings |
44,835 |
37,917 |
| Treasury stock, 490 and 455 shares held at
cost at November 30, 2012 and February 29, 2012, respectively |
(4,852) |
(4,201) |
| Accumulated other comprehensive income |
545 |
712 |
| Shareholders' Equity |
51,520 |
45,435 |
| |
|
|
| Total Liabilities and Shareholders'
Equity |
$ 103,119 |
$ 87,209 |
| |
|
|
| |
|
|
| |
|
|
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CASH FLOWS |
| (In thousands) |
| (Unaudited) |
| |
|
|
| |
For
the Nine Months Ended November 30, |
|
| |
2012 |
2011 |
| |
|
|
| Operating activities: |
|
|
| Net income |
$ 6,925 |
$ 9,028 |
| Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
| Depreciation and amortization |
2,125 |
1,952 |
| Non-operating income |
(786) |
-- |
| Restructuring charges |
-- |
1,273 |
| Other non-cash adjustments |
85 |
55 |
| Changes in assets and liabilities, net of
acquisitions: |
|
|
| Accounts receivable |
(3,950) |
(4,189) |
| Inventories |
(2,128) |
3,828 |
| Prepaid expenses and other
assets |
260 |
1,242 |
| Trade accounts payable and accrued
liabilities |
3,651 |
(3,608) |
| Net cash provided by operating
activities |
6,182 |
9,581 |
| |
|
|
| Investing activities: |
|
|
| Acquisitions |
(8,935) |
(959) |
| Capital expenditures |
(739) |
(858) |
| Net cash used in investing
activities |
(9,674) |
(1,817) |
| |
|
|
| Financing activities: |
|
|
| Net borrowings (repayments) under
lines of credit |
4,884 |
(3,087) |
| Repayments of notes payable |
(726) |
(3,802) |
| Purchase of treasury stock |
(641) |
(652) |
| Stock options (repurchased)
exercised, net |
(15) |
245 |
| Dividends |
(7) |
(7) |
| Net cash provided by (used in)
financing activities |
3,495 |
(7,303) |
| |
|
|
| Effect of exchange rate changes on
cash |
(19) |
(4) |
| |
|
|
| Net (decrease) increase in
cash |
(16) |
457 |
| Cash at beginning of period |
976 |
447 |
| Cash at end of period |
$ 960 |
$ 904 |
CONTACT: Q.E.P. Co., Inc.
Richard A. Brooke
Senior Vice President and Chief Financial Officer
561-994-5550
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