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     104  0 Kommentare Q.E.P. Co., Inc. Reports Fiscal 2021 Six Month and Second Quarter Financial Results

    BOCA RATON, Fla., Sept. 29, 2020 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (OTC: QEPC.PK) (the “Company” or “QEP”) today reported its consolidated results of operations for the first six months and second quarter of its fiscal year ending February 28, 2021.

    QEP reported net sales of $189.1 million for the six months ended August 31, 2020, a decrease of $13.3 million or 6.6% from the $202.4 million reported in the same period of fiscal 2020. The Company reported net sales of $103.1 million for the quarter ended August 31, 2020, an increase of $3.3 million or 3.3% from the $99.8 million reported in the same period of fiscal 2020. The fiscal 2021 six month decline in sales compared to the prior year reflects the adverse impact of the worldwide economic downturn caused by the COVID-19 pandemic during the first quarter of the current year.

    Lewis Gould, Chairman & CEO, commented on the Company’s results, “I am pleased with the Company’s return to sales growth during the current quarter, which partially offset the sales decline in the previous quarter that was the results of Stay in Place Orders that were enacted in all of our sales territories. The sales increase during the quarter was driven by retail channels in North America, despite COVID-19 related challenges in the dealer and distributor channels, and growth in the Company’s overseas operations. During the quarter, the Company continued to implement and maintain aggressive cost reduction measures, which included reductions in personnel, overhead and general expenses. Additionally, the Company continued to access government subsidy and support programs that were available to our non-US based operations. Collectively, these actions resulted in the Company’s increased profitability during the quarter and for the first six months of the year.”       

    Mr. Gould concluded, “The Company is diligently monitoring and adjusting its response to the challenges presented during these unparalleled times. We are committed to the well-being and success of our associates, customers, suppliers, shareholders and the broader communities in which we operate. We believe the Company is emerging from the current crisis better positioned for sustainable long-term profitability and shareholder value.”

    The Company’s gross profit for the first six months of fiscal 2021 was $53.1 million compared to $53.0 million in the corresponding fiscal 2020 period. Gross profit for the second quarter of fiscal 2021 was $29.4 million, representing an increase of $3.2 million or 12.3%, from $26.2 million in the fiscal 2020 period. The Company’s gross margin as a percentage of net sales for the first six months and second quarter of fiscal year 2021 was 28.1% and 28.5%, respectively, which increased from 26.2% in each of the prior fiscal year periods, respectively. The gross margin as a percentage of net sales improvement is due to favorable changes in product mix and timely actions taken by the Company to reduce manufacturing overhead during the second quarter and first half of fiscal 2021.

    Operating expenses for the first six months and second quarter of fiscal 2021 were $47.5 million and $25.2 million, respectively, or 25.1% and 24.4% of net sales in those periods, compared to $58.6 million and $28.2 million, respectively, or 29.0% and 28.3% of net sales in the comparable fiscal 2020 periods. The reduction in operating expenses is due to year-over-year synergies realized through the integration and rationalization of fiscal 2019 acquisitions, lower personnel costs through reduction-in-force and employee furlough activities during the COVID-19 economic downturn, lower marketing and travel expenses, along with government subsidies received for maintaining employment levels at the Company’s international operations.

    The lower interest expense during the first six months and second quarter of fiscal 2021 compared to the same periods in the prior fiscal year was principally due to a reduction in borrowings under the Company’s credit facilities during the current period.

    The provision for income taxes as a percentage of incomes before taxes was 28.0% for the first six months and second quarter of fiscal 2021 compared to a benefit for income taxes as a percentage of the loss before taxes of 28.0% for the related fiscal 2020 periods.

    Net income for the first six months and second quarter of fiscal 2021 was $3.4 million and $2.7 million, respectively, or $1.08 and $0.87, respectively, per diluted share. For the comparable periods of fiscal 2020, net loss was $3.3 million and $1.9 million, respectively, or $1.03 and $0.62, respectively, per diluted share.

    Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) as adjusted for non-operating income for the first six months and second quarter of fiscal 2021 was $7.8 million and $5.3 million, respectively as compared to a loss of $3.2 million and $0.8 million for the first six months and second quarter of fiscal 2020, respectively.

        For the Three Months Ended
    August 31,
      For the Six Months Ended
    August 31,
         2020    2019    2020    2019
                     
    Net income (loss) $ 2,743     $ (1,947 )   $ 3,431     $ (3,267 )
                     
    Add: Interest expense, net   442       623       845       1,302  
      Provision/(benefit) for income taxes   1,067       (757 )     1,334       (1,271 )
      Depreciation and amortization   1,082       1,204       2,222       2,394  
      Non-operating income   -       28       -       (2,370 )
    EBITDA as adjusted for non-operating income $ 5,334     $ (849 )   $ 7,832     $ (3,212 )

    Cash provided by operations during the first six months of fiscal 2021 was $20.8 million as compared to $4.7 million in the first six months of fiscal 2020, reflecting an increase in operating income and a reduction in net investments in working capital. During the first six months of fiscal 2020, the Company sold a certain non-core product line and recorded a gain on the sale of $2.4 million before income taxes, which was recorded in non-operating income.   In the first six months of fiscal 2021, cash from operations was used primarily to pay down $17.1 million of debt. In the prior fiscal year period, cash provided by operations and proceeds from the sale of a non-core product line was used to pay down debt.  

    Working capital at the end of the Company’s second quarter of fiscal 2021 was $35.5 million compared to $29.1 million at the end of fiscal 2020.   Aggregate debt, net of available cash balances at the end of the second quarter of fiscal 2021 was $26.6 million or 39.8% of equity, a decrease of $19.8 million compared to $46.4 million or 73.9% of equity at the end of fiscal 2020.

    On June 29, 2020, the Company’s Canadian operating subsidiary, Roberts Company Canada Limited, was granted an Order by the Ontario Superior Court of Justice (Commercial List) to commence a restructuring proceeding under the Companies’ Creditor Arrangement Act (CCAA). This filing was initiated to allow the subsidiary to be able to continue operating while it efficiently restructures its business. The subsidiary expects to complete its reorganization and emerge from the CCAA protection before the end of the calendar year. The Company is not a party to this proceeding.

    Conference Call Information

    The Company will be hosting the following conference call to discuss its second quarter financial results and answer questions.

    Date: Friday, October 2, 2020
    Time: 10:00 a.m. Eastern Time
    Dial-in Numbers: 800-367-2403 (US or Canada)
      +1 334-777-6978 (International)
    Confirmation Code: 3866019
       
    Replay: 719-457-0820; Passcode: 3866019

    About QEP

    Founded in 1979, Q.E.P. Co., Inc. is a leading global provider of high quality, innovative and value-driven flooring and flooring installation solutions. QEP manufactures, markets and sells a comprehensive line of flooring installation tools, adhesives, and underlayment for both consumers as well as professional installers. Under the Harris Flooring Group , QEP manufactures and offers 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, Harris Flooring Group, Capitol, HarrisWood, Kraus, Naturally Aged Flooring, Vitrex, Homelux, Brutus, PRCI, Plasplugs, Tomecanic, Premix-Marbletite (PMM), Apple Creek and Elastiment.

    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. Any forward-looking statements contained herein are based on current expectations and beliefs, and are subject to a number of risks and uncertainties. These forward-looking statements include, but are not limited to, statements regarding economic conditions, sales growth, price increases, profit improvements, product development and marketing, operating expenses, cost savings, acquisition integration, operational synergy realization, cash flow, debt and currency exchange rates. Forward-looking statements may also be adversely affected by general market factors, competitive product development, product availability, federal and state regulations and legislation, CCAA proceedings, 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.

    -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
    August 31,
      For the Six Months Ended
    August 31,
      2020   2019   2020   2019
                   
    Net sales $ 103,051     $ 99,773     $ 189,067     $ 202,377  
    Cost of goods sold   73,632       73,586       135,980       149,364  
    Gross profit   29,419       26,187       53,087       53,013  
                   
    Operating expenses:              
    Shipping   11,251       10,669       20,973       21,908  
    General and administrative   8,000       8,893       14,770       18,748  
    Selling and marketing   6,189       8,903       12,093       18,366  
    Other income, net   (273 )     (225 )     (359 )     (403 )
    Total operating expenses   25,167       28,240       47,477       58,619  
                   
    Operating income (loss)   4,252       (2,053 )     5,610       (5,606 )
                   
    Non-operating income   -       (28 )     -       2,370  
    Interest expense, net   (442 )     (623 )     (845 )     (1,302 )
                   
    Income (loss) before provision for income taxes   3,810       (2,704 )     4,765       (4,538 )
                   
    Provision (benefit) for income taxes   1,067       (757 )     1,334       (1,271 )
                   
    Net income (loss) $ 2,743     $ (1,947 )   $ 3,431     $ (3,267 )
                   
    Earnings (loss) per share:              
    Basic $ 0.87     $ (0.62 )   $ 1.08     $ (1.03 )
    Diluted $ 0.87     $ (0.62 )   $ 1.08     $ (1.03 )
                   
    Weighted average number of common shares outstanding:              
    Basic   3,171       3,160       3,163       3,160  
    Diluted   3,171       3,160       3,163       3,160  
                   


    Q.E.P. CO., INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    (In thousands)
    (Unaudited)
                   
      For the Three Months Ended
    August 31,
      For the Six Months Ended
    August 31,
      2020   2019   2020   2019
                   
    Net income (loss) $ 2,743     $ (1,947 )   $ 3,431     $ (3,267 )
                   
    Unrealized currency translation adjustments   815       (281 )     675       (829 )
                   
    Comprehensive income (loss) $ 3,558     $ (2,228 )   $ 4,106     $ (4,096 )
                   


    Q.E.P. CO., INC. AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    (In thousands except per share values)
           
      August 31,
    2020
      February 29,
    2020
      (Unaudited)   (Audited)
           
    ASSETS      
    Cash $ 8,226     $ 4,999  
    Accounts receivable, less allowance for doubtful accounts of $739 and $475 as of August 31, 2020 and February 29, 2020, respectively   52,984       49,264  
    Inventories   62,544       69,061  
    Prepaid expenses and other current assets   3,803       4,280  
    Prepaid income taxes   -       740  
    Current assets   127,557       128,344  
           
    Property and equipment, net   14,388       15,168  
    Right of use operating lease assets   17,673       18,320  
    Deferred income taxes, net   4,153       4,135  
    Intangibles, net   13,167       13,871  
    Goodwill   2,390       2,288  
    Other assets   2,840       2,824  
           
    Total Assets $ 182,168     $ 184,950  
           
    LIABILITIES AND SHAREHOLDERS' EQUITY      
           
    Trade accounts payable $ 38,625     $ 31,114  
    Accrued liabilities   22,124       19,366  
    Current operating lease liabilities   5,542       5,262  
    Income taxes payable   107       -  
    Lines of credit   21,757       40,107  
    Current maturities of notes payable   3,909       3,399  
    Current liabilities   92,064       99,248  
           
    Notes payable   9,162       7,854  
    Non-current operating lease liabilities   13,201       14,121  
    Deferred income taxes   56       114  
    Other long term liabilities   838       872  
    Total Liabilities   115,321       122,209  
           
    Preferred stock, 2,500 shares authorized, $1.00 par value; 0 shares issued and outstanding at August 31, 2020 and February 29, 2020   -       -  
    Common stock, 20,000 shares authorized, $.001 par value; 3,827 shares issued, and 3,139 shares outstanding at August 31, 2020 and February 29, 2020   4       4  
    Additional paid-in capital   11,087       11,087  
    Retained earnings   68,318       64,887  
    Treasury stock, 688 shares held at cost at August 31, 2020 and February 29, 2020   (8,869 )     (8,869 )
    Accumulated other comprehensive income   (3,693 )     (4,368 )
    Shareholders' Equity   66,847       62,741  
           
    Total Liabilities and Shareholders' Equity $ 182,168     $ 184,950  
           


    Q.E.P. CO., INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands)
    (Unaudited)
           
      For the Six Months Ended
      August 31,
       2020    2019
           
    Operating activities:      
    Net income (loss) $ 3,431     $ (3,267 )
    Adjustments to reconcile net income to net cash provided by operating activities:      
    Gain on sale of business   -       (2,370 )
    Gain on sale of property   -       6  
    Depreciation and amortization   2,222       2,394  
    Other non-cash adjustments   63       183  
    Changes in assets and liabilities, net of acquisitions:      
    Accounts receivable   (3,259 )     4,190  
    Inventories   7,831       11,030  
    Prepaid expenses and other assets   3,419       4,361  
    Trade accounts payable and accrued liabilities   7,076       (11,787 )
    Net cash provided by operating activities   20,783       4,740  
           
    Investing activities:      
    Acquisitions   (436 )     (875 )
    Capital expenditures   (364 )     (472 )
    Proceeds from sale of business   -       4,663  
    Proceeds from sale of property   168       203  
    Purchase of equity securities   -       (1,900 )
    Net cash provided by (used in) investing activities   (632 )     1,619  
           
    Financing activities:      
    Net repayment under lines of credit   (18,709 )     (9,537 )
    Net borrowings of notes payable   1,658       1,294  
    Purchase of treasury stock   (60 )     (60 )
    Principal payments on finance leases   (39 )     -  
    Net cash used in financing activities   (17,150 )     (8,303 )
    Effect of exchange rate changes on cash   226       (331 )
           
    Net decrease in cash   3,227       (2,275 )
    Cash at beginning of period   4,999       6,467  
    Cash at end of period $ 8,226     $ 4,192  
           


                                                 
    Q.E.P. CO., INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
           (In thousands, except shares data)
                                                 
                                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, 2019 -     $ -     3,820,785     $ 4     $ 10,963     $ 77,029     $ (8,700 )
      $ (3,774 )
      $ 75,522  
                                                 
    Net loss                                 (12,142 )             (12,142 )
    Other comprehensive income (loss)                                         (594 )
        (594 )
    Issuance of common stock in connection with exercise of stock options             5,857       -       124                   124  
    Purchase of treasury stock                                     (169 )
            (169 )
    Balance at February 29, 2020 -     $ -     3,826,642     $ 4     $ 11,087     $ 64,887     $ (8,869 )
      $ (4,368 )
      $ 62,741  
                                                 
    Net income                                 3,431               3,431  
    Other comprehensive income (loss)                                         675       675  
    Balance at August 31, 2020 -     $ -     3,826,642     $ 4     $ 11,087     $ 68,318     $ (8,869 )
      $ (3,693 )
      $ 66,847  
                                                 

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





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    Q.E.P. Co., Inc. Reports Fiscal 2021 Six Month and Second Quarter Financial Results BOCA RATON, Fla., Sept. 29, 2020 (GLOBE NEWSWIRE) - Q.E.P. CO., INC. (OTC: QEPC.PK) (the “Company” or “QEP”) today reported its consolidated results of operations for the first six months and second quarter of its fiscal year ending February 28, …