Quarterly Sales -- $52.9 Million
Million Net Income -- $1.2 Million
BOCA RATON, Fla., July 15, 2008 (PRIME NEWSWIRE) -- Q.E.P. Co., Inc. (Nasdaq:QEPC) (the "Company" or "Q.E.P."), today filed a Form 10-Q with the SEC to announce its financial results for the first quarter of its fiscal year ending on February 28, 2009.
The Company reported net sales of $52.9 million for the first quarter of fiscal 2009, a decrease of $4.1 million from the $57.0 million reported in the same quarter of fiscal 2008.
A better product mix at the Company's North American operations resulted in the gross margin increasing by 126 basis points from 29.1% in the first quarter of fiscal 2008 to 30.3% in the first quarter of fiscal 2009. Gross profit for the first quarter of fiscal 2009 was $16.0 million, a decrease of only $0.5 million from the first quarter of fiscal 2008 despite the $4.1 million decrease in net sales.
By controlling operating expenses, incurring less interest costs because of lower debt levels and a decreased average interest rate and returning to a more normalized effective income tax rate, the Company reported quarterly net income of $1.2 million, or $0.35 per diluted share, compared to net income of $0.9 million, or $0.23 per diluted share for the first quarter of fiscal 2008.
Certain statements in this press release are forward-looking statements, which are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are made only as of the date of this report and are subject to risks and uncertainties which could cause actual results to differ materially from those discussed in the forward-looking statements and from historical results of operations. A more detailed discussion of risks attendant to the forward-looking statements included in this press release are set forth in the "Forward-Looking Statements" section of our Annual Report on Form 10-K for the year ended February 29, 2008, filed with the SEC, and in our quarterly reports filed with the SEC.
Q.E.P. CO., Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)
May 31, February 29,
2008 2008
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(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,294 $ 949
Accounts receivable, less allowance for
doubtful accounts of $474 and $431 as of
May 31, 2008 and February 29, 2008,
respectively 29,353 32,543
Inventories 28,073 26,496
Prepaid expenses and other current assets 1,938 2,505
Deferred income taxes 746 754
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Total current assets 61,404 63,247
Property and equipment, net 7,524 7,851
Deferred costs 3,168 --
Deferred income taxes 1,787 1,787
Goodwill 9,707 9,685
Other intangible assets, net 2,659 2,717
Other assets 333 339
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Total Assets $ 86,582 $ 85,626
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 16,038 $ 15,968
Accrued liabilities 9,439 11,690
Lines of credit 27,127 24,537
Current maturities of long term debt 1,630 1,977
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Total current liabilities 54,234 54,172
Notes payable 4,243 4,472
Other long term debt 250 250
Other long term liabilities 425 377
----------- -----------
Total Liabilities 59,152 59,271
Commitments and Contingencies -- --
SHAREHOLDERS' EQUITY
Preferred stock, 2,500,000 shares authorized,
$1.00 par value; 336,660 shares issued and
outstanding at May 31, 2008 and February 29,
2008 337 337
Common stock; 20,000,000 shares authorized,
$.001 par value; 3,528,341 shares issued
and 3,433,363 shares outstanding at May 31,
2008 and February 29, 2008 3 3
Additional paid-in capital 10,190 10,154
Retained earnings 17,806 16,574
Treasury stock; 94,978 shares (held at cost)
outstanding at May 31, 2008 and February 29,
2008 (756) (756)
Accumulated other comprehensive income (loss) (150) 43
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Total Shareholders' Equity 27,430 26,355
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Total Liabilities and Shareholders' Equity $ 86,582 $ 85,626
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Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
For the Three Months
Ended May 31,
--------------------
2008 2007
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Net sales $ 52,885 $ 56,963
Cost of goods sold 36,849 40,410
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Gross profit 16,036 16,553
Operating costs and expenses:
Shipping 5,607 6,099
General and administrative 4,454 4,690
Selling and marketing 3,625 3,100
Other expense (income), net (112) 1
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Total operating costs and expenses 13,574 13,890
--------- ---------
Operating income 2,462 2,663
Change in put warrant liability -- (39)
Interest expense, net (455) (660)
--------- ---------
Income before provision for income taxes 2,007 1,964
Provision for income taxes 769 1,107
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Net income $ 1,238 $ 857
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Net income per share:
Basic $ 0.36 $ 0.25
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Diluted $ 0.35 $ 0.23
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Weighted average number of common shares
outstanding
Basic 3,433 3,440
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Diluted 3,496 3,601
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Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
For the Three Months
Ended May 31,
--------- ---------
2008 2007
--------- ---------
Cash flows from operating activities:
Net income $ 1,238 $ 857
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 463 553
Change in fair value of put warrant liability -- 39
Bad debt expense 34 90
Gain on sale of businesses -- 41
Stock-based compensation expense (35) 37
Deferred income taxes -- 701
Changes in assets and liabilities:
Accounts receivable 3,098 713
Inventories (1,964) 111
Prepaid expenses and other current assets 564 (9)
Deferred costs and other assets (3,176) 62
Trade accounts payable and accrued liabilities (2,025) 1,596
--------- ---------
Net cash provided by (used in) operating
activities (1,803) 4,791
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Cash flows from investing activities:
Capital expenditures (131) (206)
Proceeds from sale of businesses 335 250
--------- ---------
Net cash provided by investing activities 204 44
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Cash flows from financing activities:
Net borrowings under lines of credit 2,568 (4,117)
Borrowings of long-term debt -- 1,400
Repayments of long-term debt (573) (918)
Repayments of acquisition debt -- (871)
Purchase of treasury stock (40) (30)
Dividends (6) (11)
--------- ---------
Net cash provided by (used in) financing
activities 1,949 (4,547)
--------- ---------
Effect of exchange rate changes on cash (5) 40
--------- ---------
Net increase in cash 345 328
Cash and cash equivalents at beginning of period 949 822
--------- ---------
Cash and cash equivalents at end of period $ 1,294 $ 1,150
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