Q.E.P. CO., Inc. Reports Fiscal 2025 Six Month And Second Quarter Financial Results

(MENAFN- GlobeNewsWire - Nasdaq) Six Month Adjusted Net Income Grows to $7.7 Million or $2.34 per Share

BOCA RATON, Fla., Oct. 15, 2024 (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 fiscal year 2025, which ended on August 31, 2024.

Results of Operations

During the prior fiscal year, QEP completed the sale of its Harris Flooring Group in North America and its businesses in the United Kingdom, Australia and New Zealand in order to streamline operations and concentrate resources on its core product lines in the North American market. These divested operations have been classified as discontinued operations in our financial statements for all periods presented.

QEP reported net sales of $126.1 million for the six months ended August 31, 2024, a decrease of $3.9 million or 3.0% from the $130.0 million reported in the same period of fiscal 2024. The Company reported net sales of $62.6 million for the quarter ended August 31, 2024, a decrease of $1.4 million or 2.2% from the $64.0 million reported in the same period of fiscal 2024. The decrease in net sales was primarily due to the ongoing moderation of consumer spending on home improvement projects due to elevated interest rates, inflationary pressures and broader economic uncertainty.

The Company's gross profit for the first six months of fiscal 2025 was $44.8 million compared to $41.0 million in the corresponding fiscal 2024 period, an increase of $3.8 million or 9.3%. Gross profit for the second quarter of fiscal 2025 was $22.3 million, representing an increase of $1.4 million or 6.4%, from $20.9 million in the corresponding fiscal 2024 period. The Company's gross margin as a percentage of net sales for the first six months and second quarter of fiscal 2025 was 35.5% and 35.6%, respectively, which increased from 31.5% and 32.7% in the same periods of the prior fiscal year. The increase in gross margin as a percentage of net sales was largely due to lower inbound freight costs, improved product sourcing and other cost reduction initiatives.

Leonard Gould, President & Chief Executive Officer, commented on the Company's results,“QEP continues to lean into product innovation by investing in people, processes, and the latest technology to bring products to market that are meaningful to the Professional Installer. This is the lifeblood of remaining 'The Product Authority' within our categories. We have more work ahead of us, but the Pro has noticed.

Lastly, I'd like to acknowledge the tremendous efforts of our people to successfully ship our customers complete and on-time despite the challenging marketplace.”

Operating expenses for the first six months and second quarter of fiscal 2025 were $34.5 million and $17.2 million, respectively, or 27.3% and 27.5% of net sales in those periods, compared to $33.3 million and $16.3 million, respectively, or 25.6% and 25.5% of net sales in the comparable fiscal 2024 periods. The increase in operating expenses was due to higher personnel costs in the current period.

Interest income for the first six months and second quarter of fiscal 2025 was $0.4 million and $0.2 million, respectively, compared to interest expense of $1.1 million and $0.5 million, respectively, in the comparable fiscal 2024 periods. This change is due to the Company's significant repayment of debt in the latter part of fiscal 2024 and the investment of the Company's cash surplus in fiscal 2025.

The provision for income taxes as a percentage of income before taxes remained unchanged at 28.0% for the first six months and second quarter for both fiscal 2025 and fiscal 2024.

Net income from continuing operations for the first six months and second quarter of fiscal 2025 was $7.7 million and $3.8 million, respectively, or $2.34 and $1.17, respectively, per diluted share. For the comparable periods of fiscal 2024, net income from continuing operations was $4.8 million and $3.0 million, respectively, or $1.43 and $0.88, respectively, per diluted share.

Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations for the first six months and second quarter of fiscal 2025 was $11.0 million and $5.5 million, respectively, or 8.7% of net sales for both periods. For the comparable periods of fiscal 2024, EBITDA was $8.4 million and $4.9 million, respectively, or 6.5% and 7.7% of net sales, respectively.


		For the Three Months Ended		For the Six Months Ended
		August 31, 2024		August 31, 2023		August 31, 2024		August 31, 2023

Net income from continuing operations	$	3,832			$	2,954		$	7,735			$	4,774

Add:	Interest (income) expense, net		(223	)			496			(406	)			1,099
	Provision for income taxes		1,495				1,149			3,003				1,857
	Depreciation and amortization		348				348			686				704
EBITDA from continuing operations	$	5,452			$	4,947		$	11,018			$	8,434

Cash provided by operations during the first six months of fiscal 2025 was $11.2 million as compared to $23.5 million in the first six months of fiscal 2024, reflecting the reduction in inventory to more normalized levels during the prior year period. In the first six months of fiscal 2025, cash provided by operations, along with proceeds from the sale of businesses, were used to pay a stockholder dividend, repurchase stock and increase the Company's cash surplus. In the first six months of fiscal 2024, cash provided by operations was used to reduce borrowings under the Company's lines of credit and increase cash balances.

Working capital as of August 31, 2024 was $61.4 million compared to $60.0 million at the end of fiscal 2024. Aggregate available cash, net of outstanding debt at August 31, 2024 was $29.8 million compared to $21.7 million at the end of fiscal 2024.

The Company welcomes investor inquiries via email at ... .

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 installation solutions for commercial and home improvement projects. QEP offers a comprehensive line of specialty installation tools, adhesives, and underlayment. QEP sells its products throughout the world to home improvement retail centers, and professional specialty distribution outlets, under brand names including QEP®, LASH®, ROBERTS®, Capitol®, Premix-Marbletite® (PMM), Brutus®, Homelux®, PRCI®, and Tomecanic®.

QEP is headquartered in Boca Raton, Florida with other facilities in the United States, Canada, Europe and Asia. Please visit our website at .

Forward-Looking Statements

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 implementation of the Company's strategies and increasing profitability and stockholder value. Any forward-looking statements contained herein are based on current expectations and beliefs, and are subject to a number of risks and uncertainties, including those listed in the Company's annual report, as such risk factors may be amended, supplemented or superseded from time to time by other reports and disclosures made by the Company. 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, scarcity and rising cost for raw materials, shifts in global sourcing patterns, and general inflationary pressures, economic conditions, sales growth, price increases, maintaining and improving profitability, product development and marketing, operating expenses, cost savings, the successful completion of acquisitions and dispositions, acquisition integration, operational synergy realization, global sourcing, political uncertainty, cash flow, debt and currency exchange rates, 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.

-Financial Information Follows-


Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)

	For the Three Months Ended		For the Six Months Ended
	August 31,		August 31,	August 31,		August 31,
		2024			2023			2024		2023

Net sales	$	62,559		$	63,988		$	126,084	$	129,966
Cost of goods sold		40,271			43,050			81,292		88,978
Gross profit		22,288			20,938			44,792		40,988

Operating expenses:
Shipping		6,909			7,168			13,989		14,178
General and administrative		6,952			6,249			13,236		12,375
Selling and marketing		3,278			3,110			7,184		6,981
Other income, net		45			(188	)		51		(276	)
Total operating expenses		17,184			16,339			34,460		33,258

Operating income		5,104			4,599			10,332		7,730

Interest income (expense), net		223			(496	)		406		(1,099	)

Income before provision for income taxes		5,327			4,103			10,738		6,631

Provision for income taxes		1,495			1,149			3,003		1,857

Net income from continuing operations operations		3,832			2,954			7,735		4,774

Gain/(Loss) from discontinued operations, net of tax		(27	)		(1,272	)		538		(2,167	)

Net income	$	3,805		$	1,682		$	8,273	$	2,607

Basic earnings (loss) per share:
From continuing operations		1.17			0.88			2.34		1.43
From discontinued operations		(0.01	)		(0.38	)		0.17		(0.65	)
Basic earnings per share		1.16			0.50			2.51		0.78

Diluted earnings (loss) per share:
From continuing operations		1.17			0.88			2.34		1.43
From discontinued operations		(0.01	)		(0.38	)		0.16		(0.65	)
Diluted earnings per share		1.16			0.50			2.50		0.78

Weighted average number of common
shares outstanding:
Basic		3,276			3,342			3,300		3,343
Diluted		3,280			3,347			3,307		3,348

Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)

	August 31, 2024		February 29, 2024
	(Unaudited)		(Audited)

ASSETS
Cash	$	29,944		$	22,369
Accounts receivable, less allowance for credit losses of $213 and
$134 at August 31, 2024 and February 29, 2024, respectively		30,283			30,338
Inventories, net		32,196			29,913
Prepaid expenses and other current assets		2,810			7,491
Prepaid income taxes		-			1,375
Discontinued operations		721			693
Current assets		95,954			92,179

Property and equipment, net		11,352			9,894
Right of use operating lease assets		18,816			19,852
Deferred income taxes, net		2,548			2,548
Intangibles, net		4			99
Other assets		823			1,276
Total assets	$	129,497		$	125,848

LIABILITIES AND SHAREHOLDERS' EQUITY

Trade accounts payable	$	14,821		$	14,438
Accrued liabilities		16,010			13,352
Current operating lease liabilities		3,289			3,210
Income taxes payable		373			-
Lines of credit		50			601
Current maturities of debt		32			74
Discontinued operations		-			479
Current liabilities		34,575			32,154

Long term debt		14			-
Non-current operating lease liabilities		18,463			19,855
Other long term liabilities		740			1,209
Total liabilities		53,792			53,218

Preferred stock, 2,500 shares authorized, $1.00 par value; 0 shares
issued and outstanding at August 31, 2024 and February 29, 2024,		-			-
respectively
Common stock, 20,000 shares authorized, $.001 par value;
4,005 shares issued: 3,265 and 3,286 shares outstanding at
August 31, 2024 and February 29, 2024, respectively		4			4
Additional paid-in capital		10,361			11,901
Retained earnings		78,215			73,211
Treasury stock, 740 and 719 shares held at cost at August 31, 2024
and February 29, 2024, respectively		(10,008	)		(9,517	)
Accumulated other comprehensive income		(2,867	)		(2,969	)
Shareholders' equity		75,705			72,630
Total liabilities and shareholders' equity	$	129,497		$	125,848

Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	For the Six Months Ended
	August 31, 2024		August 31, 2023

Operating activities:
Net income	$	8,273		$	2,607
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization		686			1,708
Gain on disposal of businesses		(512	)		-
Gain on sale of property		(1	)		(10	)
Gain from insurance recoveries		-			(1,293	)
Proceeds from settlement of insurance claims		-			537
Impairment of long-lived asset		85			-
Other non-cash adjustments		82			223
Changes in assets and liabilities:
Accounts receivable		103			(82	)
Inventories		(2,233	)		22,101
Prepaid expenses and other assets		1,678			1,468
Trade accounts payable and accrued liabilities		3,019			(3,788	)
Net cash provided by operating activities		11,180			23,471

Investing activities:
Capital expenditures		(2,121	)		(1,603	)
Proceeds from sale of businesses		4,305			-
Proceeds from sale of property		1			36
Proceeds from settlement of insurance claims		-			1,456
Net cash provided by (used in) investing activities		2,185			(111	)

Financing activities:
Net repayments under lines of credit		(548	)		(8,104	)
Net repayments of term loan facilities		-			(6,910	)
Repurchase of equity-based awards		(1,540	)		-
Purchase of treasury stock		(403	)		(87	)
Principal payments on finance leases		(55	)		(58	)
Dividends paid		(3,269	)		-
Net cash used in financing activities		(5,815	)		(15,159	)

Effect of exchange rate changes on cash		25			55

Net increase in cash		7,575			8,256
Cash at beginning of period		22,369			3,060
Cash at beginning of the period from discontinued operations		-			1,936
Cash at end of period	$	29,944		$	13,252

Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except shares data)
(Unaudited)

The following table shows the changes in the shareholder's equity for the first six months ended August 31, 2024 and 2023.
														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, 2023	-	$	-		4,005,370		$	4		$	11,449			$	81,205		$	(9,410	)		$	(5,408	)	$	77,840
Net income											2,607								2,607
Unrealized currency translation adjustments													306				306
Purchase of treasury stock													(26	)					(26	)
Stock-based compensation expense									186										186
Balance at August 31, 2023	-	$	-		4,005,370		$	4		$	11,635			$	83,812		$	(9,436	)		$	(5,102	)	$	80,913

														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 29, 2024	-	$	-		4,005,370		$	4		$	11,901			$	73,211		$	(9,517	)		$	(2,969	)	$	72,630
Net income											8,273								8,273
Unrealized currency translation adjustments													102				102
Repurchase of equity-based awards									(1,540	)									(1,540	)
Purchase of treasury stock													(491	)					(491	)
Dividends paid											(3,269	)							(3,269	)
Balance at August 31, 2024	-	$	-		4,005,370		$	4		$	10,361			$	78,215		$	(10,008	)		$	(2,867	)	$	75,705

CONTACT:
Q.E.P. Co., Inc.
Enos Brown
Executive Vice President and
Chief Financial Officer
561-994-5550

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