Net Sales - $302.7 Million
Net Income - $16.1 Million or $4.88 Per Diluted Share
BOCA RATON, Fla., May 20, 2014 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (OTC:QEPC.PK) (the "Company") today reported its consolidated results of operations for the fiscal year ended February 28, 2014:
|Net sales||$ 302,706||$ 283,699|
|Cost of goods sold||217,481||202,404|
|Interest expense, net||(963)||(718)|
|Income before provision for income taxes||20,399||12,116|
|Provision for income taxes||4,311||3,977|
|Net income||$ 16,088||$ 8,139|
|Net income per share:|
|Basic||$ 4.92||$ 2.46|
|Diluted||$ 4.88||$ 2.44|
|Weighted average number of common shares outstanding:|
Lewis Gould, Chairman of the Board, commented, "This was a transitional year for your company. Our sales are up substantially as a result of the continuing implementation of our acquisition strategy and our expanded market penetration. Through this process, we also are addressing the concentration of our business with a major customer. As this transition takes place, there is always some pain with associated margin erosion while we build our business in new areas. That was the case this year."
Mr. Gould continued "To further advance our transformation, the Company purchased Faus Group, Inc. on February 28th. Faus is a manufacturer of very high end laminate flooring. The laminate will help to round out our offering along with our previous Harris Wood acquisition, so that we now have wood, laminate and a comprehensive bundle of installation accessories. This makes us a more complete supplier and adds to our stable of industry recognized brands. This strategy also can be seen in the overseas acquisitions of Homelux and Plasplugs that the company completed this past year and its purchase of the Tomecanic and Bénètiere trade names subsequent to our fiscal year-end."
Mr. Gould concluded "The Faus acquisition also provided the Company with significant tax advantages and a superior manufacturing and distribution facility with over 380,000 square feet in Calhoun, Georgia. This provides the Company with an opportunity to consolidate some of its operations within the Calhoun facility. This consolidation will continue throughout the coming year."
Net sales during fiscal year 2014 increased by $19.0 million, or 6.7% as compared to the prior fiscal year. This increase is a result of the fiscal 2014 acquisitions of Homelux and Plasplugs in Europe, the impact of including a full year of the fiscal 2013 investments in Nupla, Imperial and a US injection molding operation, and organic growth in most of our businesses. These increases were partially offset by the impact of a significant North American customer's discontinued purchases of certain products during the second quarter of fiscal 2014, changes in foreign currency exchange rates and the impact of a fire in the Company's Australian operations during fiscal year 2014.
Gross profit increased during fiscal 2014 by $3.9 million or 4.8% to $85.2 million from $81.3 million in the prior fiscal year. As a percentage of net sales, gross margin decreased modestly to 28.2% in fiscal 2014 compared to 28.7% in fiscal 2013. The change in gross profit reflects the incremental contribution of acquisitions with overall higher gross margins and a somewhat more favorable product mix offset by discontinued sales of certain products, increases in raw material costs associated with wood flooring manufacturing operations, changes in foreign currency exchange rates that impact both the purchasing power of the Company's foreign operations and the translation of foreign results, and the opportunity costs of the Australian fire.
Operating expenses for fiscal 2014 were $75.3 million or 24.9% of net sales compared with operating expenses for fiscal 2013 of $69.7 million or 24.6% of net sales. The increase of $5.6 million was principally attributable to the expenses of acquired operations offset by decreases in shipping costs associated with the loss of certain North American sales and decreases from the impact of changes in foreign currency exchange rates.
Non-operating income for fiscal year 2014 primarily resulted from the excess of $8.3 million of the fair value of net assets acquired in the Faus Group, Inc. acquisition over the related purchase price and the $3.4 million net gain realized on the sale and leaseback of a facility in Canada. The non-operating income for fiscal year 2013 represents the excess of the fair value of net assets acquired in the Imperial Industries, Inc. acquisition over the related purchase price.
Interest expense increased from $0.7 million in fiscal 2013 to $1.0 million in fiscal 2014 principally due to an increase in average outstanding borrowings driven by the Company's acquisition activities.
The provision for income taxes as a percentage of income before taxes for fiscal 2014 was 21.1% compared to 32.8% for fiscal 2013. In both fiscal years, the reduction in the effective tax rate below the US statutory tax rate is principally associated with non-operating income that is not subject to tax and lower foreign tax rates offset by state and local US taxes and certain non-deductible amortization costs of acquired intangible assets.
As a result, fiscal 2014 net income increased to $16.1 million from $8.1 million in fiscal 2013 and net income per diluted share increased to $4.88 per share from $2.44 per share, respectively.
Earnings before interest, taxes, depreciation and amortization (EBITDA) excluding the effects of non-operating income were $14.2 million in fiscal 2014 as compared to $14.5 million for fiscal 2013:
|Net income||$ 16,088||$ 8,139|
|Add back (deduct):|
|Provision for income taxes||4,311||3,977|
|Depreciation and amortization||4,270||2,959|
|EBITDA before non-operating income||$ 14,171||$ 14,533|
The increase in depreciation and amortization in fiscal 2014 as compared to fiscal 2013 was principally associated with the amortization of acquired intangible assets.
Cash provided by operations for fiscal 2014 was $7.7 million as compared to $8.2 million in fiscal 2013. The modest decrease in cash from operations was entirely attributable to an increase in the funding of working capital. Cash from operations during fiscal 2014 and net proceeds from the sale and leaseback of a Canadian facility principally were used to contribute approximately $7.8 million toward the funding of acquisitions, to increase cash balances, and to fund capital expenditures and the purchase of treasury shares. The remaining funding for acquisition activities was provided from existing credit facilities. Subsequent to its fiscal 2014 year-end, the Company expanded its existing credit facilities to include new term loan facilities.
Working capital at the end of the Company's fiscal year 2014 decreased to $29.2 million from $38.0 million at the end of the 2013 fiscal year and total debt increased to $41.4 million from $15.3 million during the same period primarily due to changes associated with acquisition activities. During fiscal year 2014, book value per share of common stock increased 29.8% to $20.49 at February 28, 2014 from $15.79 at February 28, 2013.
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 Thursday, May 22, 2014. If you would like to join the conference call, dial 1-877-941-1427 toll free from the US or 1-480-629-9664 internationally approximately 10 minutes prior to the start time and ask for the Q.E.P. Co., Inc. Fiscal Year 2014 Conference Call / Conference ID 4683751. A replay of the conference call will be available until midnight May 29th by calling 1-877-870-5176 toll free from the US and entering pin number 4683751; internationally, please call 1-858-384-5517 using the same pin number.
The Company is posting its consolidated fiscal 2014 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 2015 results during the week beginning June 23, 2014.
Q.E.P. Co., Inc., founded in 1979, is a world class, worldwide provider of innovative, quality and value-driven flooring and industrial solutions. As a leading manufacturer, marketer and distributor, QEP delivers a comprehensive line of hardwood and laminate flooring, flooring installation tools, adhesives and flooring related products targeted for the professional installer as well as the do-it-yourselfer. In addition, the Company provides industrial tools with cutting edge technology to the industrial trades. Under brand names including QEP®, ROBERTS®, Capitol®, Harris®Wood, Fausfloor®, Vitrex®, Homelux®, TileRite®, PRCI®, Nupla®, HISCO®, Plasplugs, Ludell®, Porta-Nails®, Tomecanic®, Bénètiere® and Elastiment®, the Company markets over 7,000 products. The Company sells its products to home improvement retail centers, specialty distribution outlets, municipalities and industrial solution providers in 50 states and throughout the world.
This press release contains forward-looking statements, including statements regarding future market position and profitability, potential acquisition opportunities and benefits, capital availability and shareholder value. These statements are not guarantees of future performance and actual results could differ materially from our current expectations.
Q.E.P. Co., Inc. Richard A. Brooke Senior Vice President and Chief Financial Officer 561-994-5550