GlobeNewswire
Six Month Net Sales of $232.6 million
Six Month Net Income of $0.5 million
BOCA RATON, Fla., Oct. 17, 2022 (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 2023, which ended on August 31, 2022.
QEP reported net sales of $232.6 million for the six months ended August 31, 2022, an increase of $5.3 million or 2.3% from the $227.3 million reported in the same period of fiscal 2022. The Company reported net sales of $115.5 million for the quarter ended August 31, 2022, an increase of $2.6 million or 2.4% from the $112.9 million reported in the same period of fiscal 2022. The increase in net sales for the first six months and second quarter of fiscal 2023 compared to the prior year reflects year-over-year price increases that were implemented to mitigate the impact of inflationary pressures. These price increases were partially offset by lower sales volume and the currency translation impact of the stronger U.S. Dollar during the current period.
Lewis Gould, Executive Chairman, commented on the Company’s results, “While the inflationary pressures and volatile global supply chain that adversely impacted our financial results during the first half of the year are showing some signs of abating, economic conditions remain challenging. As the operating environment continues to evolve, our team of dedicated employees remains committed to implementing our strategic plan, which includes channel and product expansion, distribution facilities consolidation and investment in core product categories.”
The Company’s gross profit for the first six months of fiscal 2023 was $60.1 million compared to $62.3 million in the corresponding fiscal 2022 period, a decrease of $2.2 million or 3.5%. Gross profit for the second quarter of fiscal 2023 was $29.2 million, representing a decrease of $1.8 million or 5.7%, from $31.0 million in the corresponding fiscal 2022 period. The Company’s gross margin as a percentage of net sales for the first six months and second quarter of fiscal year 2023 was 25.8% and 25.3%, respectively, which decreased from 27.4% and 27.5% 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 other product cost increases that have not been fully recovered through customer price increases and other cost reduction initiatives implemented during the first six months and second quarter of fiscal 2023.
Operating expenses for the first six months and second quarter of fiscal 2023 were $58.5 million and $29.4 million, respectively, or 25.1% and 25.4% of net sales in those periods, compared to $54.7 million and $27.4 million, respectively, or 24.1% and 24.3% of net sales in the comparable fiscal 2022 periods. The increase in operating expenses was due to higher outbound freight costs directly related to higher fuel costs. Additionally, the Company had higher personnel and marketing costs as it continues to reinvest in sales support infrastructure, including marketing displays and samples, to support the recent launch of certain flooring product lines.
The higher interest expense during the first six months and second quarter of fiscal 2023 compared to the same periods in the prior fiscal year was due to an increase in borrowings under the Company’s credit facilities and higher interest rates during the current period.
The provision for income taxes as a percentage of income before taxes was 28.0% for the first six months and second quarter for both fiscal 2023 and fiscal 2022.
Net income and net loss for the first six months and second quarter of fiscal 2023 was $0.5 million and minus $0.5 million, respectively, or $0.14 and minus $0.15, respectively, per diluted share. For the comparable periods of fiscal 2022, net income was $5.0 million and $2.4 million, respectively, or $1.50 and $0.71, respectively, per diluted share.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first six months and second quarter of fiscal 2023 was $3.6 million and $0.8 million, respectively, as compared to $9.7 million and $4.7 million for the first six months and second quarter of fiscal 2022, respectively.
For the Three Months Ended
For the Six Months Ended
Net income (loss)
$
(513
)
$
2,380
$
475
$
5,019
Add:
Interest expense, net
589
306
965
633
Provision (benefit) for income taxes
(199
)
926
185
1,951
Depreciation and amortization
935
1,050
1,927
2,132
EBITDA
$
812
$
4,662
$
3,552
$
9,735
Cash used in operating activities during the first six months of fiscal 2023 was $14.7 million as compared to cash provided by operating activities of $1.7 million in the first six months of fiscal 2022, principally reflecting the payment to suppliers that previously funded the increase in inventory and lower operating income in the current period. During the first six months of fiscal 2023, borrowings under the Company’s lines of credit were used to fund operating activities and capital expenditures. In the prior fiscal year period, cash provided by operations was used primarily to fund capital expenditures and increase cash balances.
Working capital as of August 31, 2022 was $52.6 million compared to $55.0 million at the end of fiscal 2022. Aggregate debt, net of available cash balances at the end of the second quarter of fiscal 2023, was $49.1 million or 63.1% of equity, an increase of $15.7 million compared to $33.4 million or 42.0% of equity at the end of fiscal 2022.
Conference Call Information
The Company will be hosting the following conference call to discuss its financial results and answer questions.
Date:
Wednesday, October 26, 2022
Dial-in Numbers:
800-274-8461 (US or Canada)
+1-203-518-9843 (International)
Replay:
800-654-1563 (Toll Free)
862-902-0129 (Toll)
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 the Company's shifting of its focus to new challenges presented by (i) scarcity and rising cost of raw materials and transcontinental freight, (ii) shifts in global sourcing patterns; and (iii) general inflationary pressures, economic conditions, sales growth, price increases, maintaining and improving profitability, 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-
For the Three Months Ended
For the Six Months Ended
August 31,
August 31,
August 31,
August 31,
Net sales
$
115,519
$
112,865
$
232,602
$
227,269
Cost of goods sold
86,280
81,850
172,485
164,941
Gross profit
29,239
31,015
60,117
62,328
Operating expenses:
Shipping
13,565
12,592
27,183
25,213
General and administrative
7,589
7,911
15,156
15,043
Selling and marketing
8,169
7,073
16,273
14,801
Other (income) expense, net
39
(173
)
(120
)
(332
)
Total operating expenses
29,362
27,403
58,492
54,725
Operating income (loss)
(123
)
3,612
1,625
7,603
Interest expense, net
(589
)
(306
)
(965
)
(633
)
Income (loss) before provision for income taxes
(712
)
3,306
660
6,970
Provision (benefit) for income taxes
(199
)
926
185
1,951
Earnings (loss) per share:
Basic
$
(0.15
)
$
0.71
$
0.14
$
1.50
Diluted
$
(0.15
)
$
0.71
$
0.14
$
1.50
Weighted average number of common shares outstanding:
Basic
3,338
3,335
3,340
3,335
Diluted
3,338
3,346
3,349
3,346
August 31,
August 31,
August 31,
August 31,
Net income (loss)
$
(513
)
$
2,380
$
475
$
5,019
Unrealized currency translation adjustments
(1,191
)
(543
)
(1,989
)
(669
)
(In thousands, except par values)
(Unaudited)
(Audited)
Cash
$
6,165
$
3,203
Accounts receivable, less allowance for doubtful accounts of $748 and $807 at August 31, 2022 and February 28, 2022, respectively
55,608
55,990
Inventories, net
97,690
98,087
Prepaid expenses and other current assets
4,951
3,711
Prepaid income taxes
1,107
-
Property and equipment, net
11,659
10,529
Right of use operating lease assets
26,761
15,485
Deferred income taxes, net
3,577
3,578
Intangibles, net
8,719
10,233
Goodwill
2,101
2,390
Other assets
5,127
3,150
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable
$
39,347
$
47,715
Accrued liabilities
20,135
24,919
Current operating lease liabilities
4,644
4,942
Income taxes payable
-
634
Lines of credit
46,117
26,449
Current maturities of debt
2,668
1,321
Long term debt
6,463
8,797
Non-current operating lease liabilities
23,768
11,643
Other long term liabilities
2,528
534
Preferred stock, 2,500 shares authorized, $1.00 par value; 0 shares issued and outstanding at August 31, 2022 and February 28, 2022, respectively
-
-
Common stock, 20,000 shares authorized, $.001 par value; 4,005 shares issued: 3,303 and 3,307 shares outstanding at August 31, 2022 and February 28, 2022, respectively
4
4
Additional paid-in capital
11,449
11,449
Retained earnings
81,743
81,268
Treasury stock, 702 and 698 shares held at cost at August 31, 2022
and February 28, 2022, respectively
(9,217
)
(9,124
)
Accumulated other comprehensive income
(6,184
)
(4,195
)
Shareholders' Equity
77,795
79,402
Operating activities:
Net income
$
475
$
5,019
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
(Gain) loss on sale of property
135
(59
)
Depreciation and amortization
1,927
2,132
Other non-cash adjustments
(171
)
(106
)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable
(1,245
)
(1,095
)
Inventories
(2,215
)
(10,552
)
Prepaid expenses and other assets
2,580
3,856
Trade accounts payable and accrued liabilities
(16,137
)
2,488
Net cash provided by (used in) operating activities
(14,651
)
1,683
Investing activities:
Capital expenditures
(2,519
)
(603
)
Proceeds from sale of property
49
264
Financing activities:
Net borrowings under lines of credit
21,286
391
Net repayments of term loan facilities
(720
)
(102
)
Purchase of treasury stock
(153
)
(60
)
Principal payments on finance leases
(56
)
(55
)
Dividends paid
-
(165
)
Effect of exchange rate changes on cash
(274
)
(119
)
Net increase in cash
2,962
1,234
Cash at beginning of period
3,203
10,905
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 28, 2021
-
$
-
4,005,370
$
4
$
11,251
$
71,785
$
(9,082
)
$
(3,030
)
$
70,928
Net income
9,648
9,648
Unrealized currency translation adjustments
(1,165
)
(1,165
)
Purchase of treasury stock
(42
)
(42
)
Stock-based compensation expense
198
198
Dividends paid
(165
)
(165
)
Net income
475
475
Unrealized currency translation adjustments
(1,989
)
(1,989
)
Purchase of treasury stock
(93
)
(93
)
source: https://www.morningstar.com/news/globe-newswire/8666601/qep-co-inc-reports-fiscal-2023-six-month-and-second-quarter-financial-results
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