Nine Month Sales – $231.3
Million Third Quarter Sales – $74.6
Million
Nine Month Net Income – $2.1
Million Third Quarter Net Income – $0.5
Million
Q.E.P. CO., INC. (OTC: QEPC.PK) (the "Company")
today reported its consolidated results of operations for the first
nine months and third quarter of its fiscal year ending February
28, 2015.
The Company reported net sales of $231.3 million for the nine
months ended November 30, 2014 compared to $232.3 million reported
for the same period of fiscal 2014. As a percentage of net sales,
gross profit was 27.4% in the first nine months of fiscal 2015
compared to 28.6% in the first nine months of fiscal 2014.
Net sales for the third quarter of fiscal 2015 totaled $74.6
million, an increase of $2.1 million over the $72.4 million
reported for the third quarter of fiscal 2014. Gross profit as a
percent of net sales in the third quarter of fiscal 2015 was 27.5%
compared to 29.0% for the third quarter of fiscal 2014.
Lewis Gould, the Company's chairman, commented: "Although the
quarter was less than expected, we have continued to make
significant changes in our operations directed at improving future
profitability. Importantly, Brian Kura recently joined the QEP
organization as an Executive Vice President with the task of
increasing sales and profits while overhauling our sales and
marketing activities. Separately, we are in the early stages of
moving our primary Canadian operation to a new lower-cost facility.
This is occurring in the midst of a continuing strengthening of the
American dollar that has the effect of reducing the purchasing
power of our international operations." Mr. Gould concluded, "In
the face of these challenges, our sales continue at a strong pace
and we are continuing our capital improvement projects. I am
personally very confident of your company's future."
Net sales for the nine-month period ended November 30, 2014
compared to the comparable period in the prior fiscal year reflects
the expansion of our product lines with existing customers in the
Company's international operations and the contribution of our Faus
and Plasplugs acquisitions offset by the impact of a significant
North American customer's discontinued purchases of certain
products during the second quarter of fiscal 2014. Overall, changes
in currency exchange rates had a modest negative impact on reported
sales for the nine-month period ended November 30, 2014 compared to
the comparable period in the prior fiscal year.
The growth in net sales for the third quarter of fiscal 2015
compared to the third quarter of prior fiscal year also reflects
the expansion of our product lines with existing customers in the
Company's international operations and the contribution of our Faus
acquisition offset by the net unfavorable impact on reported sales
from changes in currency exchange rates.
The decrease in the Company's gross profit as a percentage of
net sales for both the quarter and year-to-date as compared to the
comparable periods in the prior fiscal year principally reflects
changes in product mix, reduced pricing in our North American mass
merchant channel and increases in the cost of raw materials. In
addition, during the third quarter currency exchange rates more
adversely affected the purchasing power of the Company's
international operations.
Operating expenses for the first nine months and third quarter
of fiscal 2015 were $59.1 million and $19.4 million, respectively,
or 25.5% and 25.9%, respectively, of net sales in those periods,
compared to $57.5 million and $18.3 million, respectively, or 24.7%
and 25.3%, respectively, for the comparable periods of fiscal 2014.
The increase in operating expenses is primarily the result of
growth in international sales, integration costs associated with
the acquisitions in Europe, and certain U.S. general and
administrative expenses, partially offset by decreases in U.S.
selling expenses and corporate compensation expenses. In addition,
during the first nine months and the third quarter, currency
exchange rates had a net favorable effect on operating expenses of
the Company's international operations compared to the comparable
periods of the prior fiscal year.
Non-operating income for the first nine months of fiscal 2014
reflects the gain on the sale and leaseback of the Company's
primary Canadian facility. Non-operating expenses for the first
nine months of fiscal 2015 and for the three months ended November
30, 2014 and 2013 include the impact of a settlement of a third
party obligation associated with a prior year acquisition and
modest additional costs associated with a fire at our main
Australian facility during the last fiscal year.
The increase in interest expense for fiscal 2015 as compared to
fiscal 2014 is primarily the result of new term loan
facilities.
The provision for income taxes as a percentage of income before
taxes for the first nine months and third quarter of fiscal 2015
was 33.2% and 36.0%, respectively, compared to 26.0% and 31.0%,
respectively, for the comparable periods of fiscal 2014. The
effective tax rate in both fiscal years reflects the relative
contribution of the Company's earnings sourced from its
international operations. The effective tax rate in fiscal 2015
also reflects the second quarter benefit of certain employment
related U.S. state income tax credits while the effective tax rate
in fiscal 2014 also reflects the favorable rate impact of the sale
of our Canadian property.
Net income for the first nine months and third quarter of fiscal
2015 was $2.1 million and $0.5 million, respectively, or $0.65 and
$0.16, respectively, per diluted share. For the comparable periods
of fiscal 2014, net income was $8.6 million and $1.6 million,
respectively, or $2.59 and $0.50 per diluted share.
Earnings before interest, taxes, depreciation, amortization,
non-operating income and restructuring charges (EBITDAR) for the
first nine months and third quarter of fiscal 2015 was $8.2 million
and $2.5 million, respectively, as compared to $12.2 million and
$3.8 million, respectively, for the comparable periods of fiscal
2014.
| |
For the Three Months |
For the Nine Months |
| |
Ended November
30, |
Ended November
30, |
| |
2014 |
2013 |
2014 |
2013 |
| Net income |
$ 516 |
$ 1,648 |
$ 2,121 |
$ 8,555 |
| Add (deduct): |
|
|
|
|
| Restructuring charges |
-- |
60 |
-- |
60 |
| Non-operating items |
14 |
19 |
146 |
(3,360) |
| Interest expense, net |
357 |
234 |
1,007 |
722 |
| Provision for income taxes |
290 |
740 |
1,052 |
3,000 |
| Depreciation and
amortization |
1,282 |
1,070 |
3,873 |
3,189 |
| EBITDAR |
$ 2,459 |
$ 3,771 |
$ 8,199 |
$ 12,166 |
Cash provided by operations during the first nine months of
fiscal 2015 was $3.3 million compared to $3.7 million for the same
period in the prior year reflecting both the decrease in cash from
operations offset by lower investments in working capital. During
fiscal 2015, the Company's increased cash balances as well as
funding for acquisitions, capital expenditures and the Company's
continuing treasury stock program were provided from borrowings and
cash from operations. During the first nine months of fiscal 2014,
investments in acquisitions totaled $23.8 million. These
acquisitions, combined with capital expenditures and the Company's
treasury stock purchases were funded through a combination of
borrowings, proceeds from the sale of a Canadian property and cash
from operations.
Working capital at the end of the Company's fiscal 2015 third
quarter was $39.3 million compared to $28.8 million at the end of
the 2014 fiscal year. Aggregate debt at the end of the Company's
fiscal 2015 third quarter was $47.2 million or 70.0% of equity
compared to $41.4 million or 61.9% of equity at the end of the 2014
fiscal year.
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 Wednesday, January 14,
2015. If you would like to join the conference call, dial
1-888-401-4668 toll free from the U.S. or 1-719-325-2402
internationally approximately 10 minutes prior to the start time
and ask for the Q.E.P. Co., Inc. Third Quarter Conference Call /
Conference ID 7372075. A replay of the conference call will be
available until midnight January 21, 2015 by calling 1-877-870-5176
toll free from the U.S. and entering pin number 7372075;
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 manufacturer, marketer and
distributor, QEP delivers a comprehensive line of hardwood and
laminate 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 the industrial
trades. Under brand names including QEP®, ROBERTS®, HarrisWood®,
Fausfloor®, Capitol®, Nupla®, HISCO®, Ludell®, Porta-Nails®,
Elastiment®, Vitrex®, Homelux®, Tilerite®, PRCI®, Plasplugs®,
Tomecanic® and Benetiere®, the Company markets over 7,000 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 future profitability, operating
efficiencies, sales and marketing activities, cost savings,
currency exchange movements and capital improvements. 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 November 30, |
For the Nine
Months Ended November 30, |
| |
2014 |
2013 |
2014 |
2013 |
| |
|
|
|
|
| Net sales |
$ 74,572 |
$ 72,449 |
$ 231,327 |
$ 232,266 |
| Cost of goods sold |
54,045 |
51,468 |
167,918 |
165,888 |
| Gross profit |
20,527 |
20,981 |
63,409 |
66,378 |
| |
|
|
|
|
| Operating expenses: |
|
|
|
|
| Shipping |
7,224 |
6,727 |
22,320 |
21,691 |
| General and
administrative |
6,522 |
6,179 |
19,124 |
19,111 |
| Selling and
marketing |
5,705 |
5,530 |
17,959 |
17,074 |
| Other income, net |
(101) |
(96) |
(320) |
(415) |
| Total operating
expenses |
19,350 |
18,340 |
59,083 |
57,461 |
| |
|
|
|
|
| Operating income |
1,177 |
2,641 |
4,326 |
8,917 |
| |
|
|
|
|
| Non-operating income (expense), net |
(14) |
(19) |
(146) |
3,360 |
| Interest expense, net |
(357) |
(234) |
(1,007) |
(722) |
| |
|
|
|
|
| Income before provision for income
taxes |
806 |
2,388 |
3,173 |
11,555 |
| |
|
|
|
|
| Provision for income taxes |
290 |
740 |
1,052 |
3,000 |
| |
|
|
|
|
| Net income |
$ 516 |
$ 1,648 |
$ 2,121 |
$ 8,555 |
| |
|
|
|
|
| Net income per share: |
|
|
|
|
| Basic |
$ 0.16 |
$ 0.50 |
$ 0.65 |
$ 2.61 |
| Diluted |
$ 0.16 |
$ 0.50 |
$ 0.65 |
$ 2.59 |
| |
|
|
|
|
| Weighted average number of common
shares outstanding: |
|
|
|
|
| Basic |
3,224 |
3,274 |
3,243 |
3,274 |
| Diluted |
3,248 |
3,294 |
3,265 |
3,298 |
| |
|
|
|
|
| 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, |
| |
2014 |
2013 |
2014 |
2013 |
| |
|
|
|
|
| Net income |
$ 516 |
$ 1,648 |
$ 2,121 |
$ 8,555 |
| |
|
|
|
|
| Unrealized currency translation adjustments,
net of tax |
(812) |
286 |
(941) |
(489) |
| |
|
|
|
|
| Comprehensive income |
$ (296) |
$ 1,934 |
$ 1,180 |
$ 8,066 |
| |
|
|
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED BALANCE
SHEETS |
| (In thousands except per share
values) |
| |
|
|
| |
November 30, 2014
(Unaudited) |
February 28,
2014 |
| |
|
|
| ASSETS |
|
|
| Cash |
$ 11,542 |
$ 2,621 |
| Accounts receivable, less allowance for
doubtful accounts of $670 and $ 382 as of November 30, 2014 and
February 28, 2014, respectively |
43,640 |
45,726 |
| Inventories |
46,195 |
42,906 |
| Prepaid expenses and other current
assets |
3,237 |
3,338 |
| Deferred income taxes |
745 |
744 |
| Current assets |
105,359 |
95,335 |
| |
|
|
| Property and equipment, net |
22,382 |
24,353 |
| Deferred income taxes, net |
3,917 |
3,926 |
| Intangibles, net |
19,403 |
21,697 |
| Other assets |
448 |
470 |
| |
|
|
| Total Assets |
$ 151,509 |
$ 145,781 |
| |
|
|
| LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
| |
|
|
| Trade accounts payable |
$ 20,122 |
$ 21,989 |
| Accrued liabilities |
16,055 |
14,613 |
| Lines of credit |
25,537 |
28,173 |
| Current maturities of notes payable |
4,386 |
1,746 |
| Current liabilities |
66,100 |
66,521 |
| |
|
|
| Notes payable |
17,252 |
11,487 |
| Other long term liabilities |
805 |
931 |
| Total Liabilities |
84,157 |
78,939 |
| |
|
|
| Preferred stock, 2,500 shares authorized,
$1.00 par value; 337 shares issued and outstanding at November 30,
2014 and February 28, 2014 |
337 |
337 |
| Common stock, 20,000 shares authorized, $.001
par value; 3,801 shares issued; 3,224 and 3,262 shares outstanding
at November 30, 2014 and February 28, 2014, respectively |
4 |
4 |
| Additional paid-in capital |
10,664 |
10,620 |
| Retained earnings |
64,244 |
62,130 |
| Treasury stock, 577 and 539 shares held at
cost at November 30, 2014 and February 28, 2014, respectively |
(6,408) |
(5,701) |
| Accumulated other comprehensive income |
(1,489) |
(548) |
| Shareholders' Equity |
67,352 |
66,842 |
| |
|
|
| Total Liabilities and Shareholders'
Equity |
$ 151,509 |
$ 145,781 |
| |
|
|
| Q.E.P. CO., INC. AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CASH FLOWS |
| (In thousands) |
| (Unaudited) |
| |
|
|
| |
For the Nine
Months Ended November 30, |
| |
2014 |
2013 |
| |
|
|
| Operating activities: |
|
|
| Net income |
$ 2,121 |
$ 8,555 |
| Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
| Depreciation and
amortization |
3,873 |
3,189 |
| Gain on sale of
property |
-- |
(3,379) |
| Other non-cash
adjustments |
392 |
301 |
| Changes in assets and liabilities, net of
acquisition: |
|
|
| Accounts receivable |
447 |
(2,968) |
| Inventories |
(3,965) |
(870) |
| Prepaid expenses and
other assets |
53 |
(1,214) |
| Trade accounts payable
and accrued liabilities |
423 |
76 |
| Net cash provided by operating
activities |
3,344 |
3,690 |
| |
|
|
| Investing activities: |
|
|
| Acquisitions |
(401) |
(23,814) |
| Proceeds from sale of
property |
144 |
4,630 |
| Capital expenditures |
(914) |
(782) |
| Net cash used in
investing activities |
(1,171) |
(19,966) |
| |
|
|
| Financing activities: |
|
|
| Net (repayments)
borrowings under lines of credit |
(968) |
19,728 |
| Net borrowings
(repayments) of notes payable |
8,405 |
(1,921) |
| Purchases of treasury
stock |
(670) |
(315) |
| Stock options repurchased
net of options exercised |
-- |
(31) |
| Dividends |
(7) |
(7) |
| Net cash provided by
financing activities |
6,760 |
17,454 |
| |
|
|
| Effect of exchange rate changes on
cash |
(12) |
(4) |
| |
|
|
| Net increase in cash |
8,921 |
1,174 |
| Cash at beginning of
period |
2,621 |
737 |
| Cash at end of period |
$ 11,542 |
$ 1,911 |
CONTACT: Q.E.P. Co., Inc.
Richard A. Brooke
Senior Vice President and
Chief Financial Officer
561-405-4600
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