Q.E.P. Co., Inc. Reports Fiscal 2012 Record Sales and Earnings

Net Sales - $261.4 Million

Net Income - $10.2 Million or $3.01 Per Diluted Share

BOCA RATON, Fla., May 7, 2012 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (OTC:QEPC.PK) (the "Company") today reported its consolidated results of operations for the fiscal year ended February 29, 2012:

Lewis Gould, Chairman of the Company's Board of Directors, commented: "We are very pleased with this fiscal year's results for both net sales and earnings. During the last quarter, however, results were affected by pricing pressures within our major distribution channels and by the continuing impact of elevated cost levels." Mr. Gould continued, "Retailers throughout the world are increasingly looking for every opportunity to reduce the costs of products they buy. We expect these pressures on pricing to continue." Mr. Gould added, "We will continue to make every effort to moderate the influence of changes in both market pricing and cost conditions by enhancing our sales and marketing programs outside of our traditional channels and through aggressive management of our supply chain. Perhaps most importantly, however, we will pursue synergistic acquisitions that strategically reposition our sales base beyond our existing core business. As always, we will focus our efforts on growth in net assets, strong cash flow and increased share value."

Net sales during fiscal year 2012 increased in every quarter as compared to fiscal year 2011 resulting in a year over year increase of $23.5 million or 9.9%. The year over year increase reflects the growth of the Company's U.S.-based flooring products as well as growth in its European operations from an expansion of its market share. Each of the Company's international operations also benefited from the effects of the strengthening of local currencies against the US dollar, although the relative strength of those currencies during the second half of the fiscal year moderated.

The Company's gross margin improved during the first half of fiscal year 2012 as compared to the comparable periods in fiscal year 2011 from an overall improvement in product mix, increased production volumes in certain manufacturing operations and the improved purchasing power of our international operations associated with the strengthening of local currencies against the US dollar. During the second half of fiscal 2012, however, margins declined as compared to the comparable periods in fiscal year 2011 primarily as a result of the impact of commodity and other cost increases as well as reduced pricing in major distribution channels late in the year.

Operating expenses for fiscal year 2012 include $1.3 million of non-cash restructuring charges associated with the Company's Argentine operations. Similarly, prior year operating expenses include $0.9 million of primarily non-cash restructuring charges associated with other Latin American operations. The Company realized tax benefits related to these restructurings totaling $1.0 million in the current fiscal year and $0.7 million in the last fiscal year.

Operating expenses before the restructuring charges for fiscal 2012 were $61.4 million or 23.5% of net sales compared to $57.5 million or 24.2% of net sales in fiscal 2011. While operating expenses have increased with the growth in the Company's sales and with changes in currency exchange rates, the fiscal year-to-date decrease in those expenses as a percentage of net sales principally reflects increased leveraging of fixed costs. 

The Company's results of operations also benefited from a decrease in interest expense resulting from continued decreases in outstanding borrowings throughout fiscal year 2012.

The provision for income taxes as a percentage of income before taxes for fiscal 2012 was 32.9% compared to 31.7% for fiscal 2011. The change in effective tax rate during the current fiscal year as compared to fiscal 2011 principally reflects changes in prior year tax accruals and benefits associated with our international operations.

Net income for fiscal 2012 increased 8.3% to $10.2 million from $9.4 million in fiscal 2011. Net income per diluted share for fiscal 2012 increased to $3.01 from $2.77 in fiscal 2011.

Earnings before interest, taxes, depreciation and amortization (EBITDA) excluding the effects of restructuring charges increased 7.6% in fiscal 2012 to $20.1 million as compared to $18.6 million for fiscal 2011, a return on net sales of approximately 7.7% in both years:

Cash provided by operations for fiscal 2012 was $12.2 million as compared to $9.5 million in fiscal 2011, reflecting both improved operating results and improved management of working capital. Cash from operations during fiscal 2012 was used to reduce debt by $8.9 million, to purchase both additional treasury shares and the business of Porta-Nails, Inc., and for investments in new IT systems to improve productivity.

Working capital at the end of the Company's fiscal year 2012 was $35.9 million, an increase of $8.3 million from $27.6 million at the end of the 2011 fiscal year. Aggregate debt at the end of the Company's fiscal year 2012 was reduced to $12.7 million or 28.0% of equity from $21.7 million or 61.5% of equity at the end of the 2011 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 Tuesday, May 8, 2012. If you would like to join the conference call, dial 1-888-846-5003 toll free from the U.S. or 1-480-629-9856 internationally approximately 10 minutes prior to the start time and ask for the Q.E.P. Co., Inc. Fiscal Year 2012 Conference Call / Conference ID 4535314. A replay of the conference call will be available until midnight May 15th by calling 1-877-870-5176 toll free from the U.S. and entering pin number 4535314; internationally, please call 1-858-384-5517 using the same pin number.

The Company is posting its consolidated fiscal 2012 audited financial statements on the Investor section of its website at www.qepcorporate.com today. The Company expects to announce its first quarter fiscal year 2013 results during the week beginning June 18, 2012.

Q.E.P. Co., Inc., founded in 1979, is a leading worldwide manufacturer, marketer and distributor of a comprehensive line of hardwood flooring, flooring installation tools, adhesives and flooring related products targeted for the professional installer as well as the do-it-yourselfer. Under brand names including QEP®, ROBERTS®, Capitol®, Harris®Wood, Vitrex®, PRCI®, BRUTUS® Porta-Nailer® and Elastiment®, the Company markets over 3,000 flooring and flooring related products.  In addition to a complete hardwood flooring line, Q.E.P. products are used primarily for surface preparation and installation of wood, laminate, ceramic tile, carpet and vinyl flooring. The Company sells its products to home improvement retail centers and specialty distribution outlets in 50 states and throughout the world.

This press release contains forward-looking statements, including statements regarding pricing pressures, cost increases, efforts to moderate the influence of changes in market pricing and cost conditions, demand for our products, potential sales growth associated with new customers and products, potential acquisitions, the ability to realize synergies from and other benefits of acquisitions, access to financing, the availability of product supply, and operating expenses levels. These statements are not guarantees of future performance and actual results could differ materially from our current expectations.