BOCA RATON, Fla., Jan. 14, 2008 (PRIME NEWSWIRE) --
Quarterly Sales -- $54.6 Million
Operating Income -- $2.0 Million
BOCA RATON, Fla., Jan. 14, 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 third quarter of fiscal 2008 ended on November 30, 2007.
Lewis Gould, Q.E.P.'s Chairman and Chief Executive Officer, stated: "I am pleased with our performance in the third quarter of fiscal 2008. Our quarterly sales of $54.6 million were higher than the $54.3 million achieved in the third quarter of fiscal 2007 even though the Company sold Q.E.P. O'Tool, Inc. (in May 2007) and Q.E.P. Stone Holdings (in July 2007). More importantly, our gross profit percentage increased to 28.8% from 26.8% primarily due to product mix. For the first nine months of fiscal 2008, our record sales volume was $168.7 million with a gross profit percentage of 28.7% as compared to $162.7 million with a gross profit percentage of 27.3% for the first nine months of fiscal 2007.
"Maintaining our quarterly revenue at higher margins along with keeping a tight hold on our operating costs and expenses produced operating income of $2.0 million for the third quarter of fiscal 2008 and $8.2 million for the first nine months of fiscal 2008.
"The Company reported quarterly net income of $0.8 million or $.22 per diluted share for the third quarter of fiscal 2008, compared to net income of $0.4 million or $0.10 per diluted share for the third quarter of fiscal 2007. For the nine months ended November 30, 2007, the Company reported net income of $1.7 million or $.47 per diluted share, compared to a loss of $6.0 million or a loss of $1.78 per diluted share for the nine months ended November 30, 2006.
"When you exclude the change in the put warrant liability and other non-recurring items, the Company reported quarterly adjusted net income of $1.1 million or $.31 per diluted share for the third quarter of fiscal 2008, compared to adjusted net income of $0.3 million or $.08 per diluted share for the third quarter of fiscal 2007. Excluding those same items for the nine months ended November 30, 2007, the Company reported adjusted net income of $3.1 million or $.85 per diluted share, compared to adjusted net income of $1.0 million or $.26 per diluted share for the nine months ended November 30, 2006.
"Also, for the first nine months of fiscal 2008, the Company generated $3.1 million of cash from operations, compared to $2.5 million of cash from operations in the first nine months of fiscal 2007. With the cash generated from operations and the sale of the Company's O'Tool and Stone Holdings operations, the Company paid the $2.3 million put warrant settlement, purchased the new Adelanto, CA facility and paid down debt by $1.3 million."
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. Among the risks and uncertainties that could cause such a difference are our assumptions relating to the expected growth in sales of our products, the continued success of our manufacturing processes, continued increases in the cost of raw materials and finished goods, improvements in productivity and cost reductions, the continued success of initiatives with certain of our customers, the success of our initiatives, the success of our sales and marketing efforts and other business and economic factors. 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 28, 2007, 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)
Nov. 30, Feb. 28,
2007 2007
--------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,344 $ 822
Accounts receivable, less allowance
for doubtful accounts of
$480 and $354 as of November 30,
2007 and February 28, 2007,
respectively 33,578 34,491
Inventories 28,997 27,042
Prepaid expenses and other current assets 1,623 1,349
Deferred income taxes 605 1,299
--------- ---------
Total current assets 66,147 65,003
Property and equipment, net 7,969 6,770
Deferred income taxes 1,153 2,764
Goodwill 9,533 9,563
Other intangible assets, net 2,740 2,831
Other assets 247 225
--------- ---------
Total Assets $ 87,789 $ 87,156
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 15,407 $ 17,705
Accrued liabilities 10,719 9,868
Lines of credit 28,373 27,405
Current maturities of long term debt 5,056 4,085
Put warrant liability -- 861
--------- ---------
Total current liabilities 59,555 59,924
Notes payable 1,264 2,398
Other long term debt 1,288 2,551
Other long term liabilities 346 --
--------- ---------
Total Liabilities 62,453 64,873
Commitments and Contingencies -- --
SHAREHOLDERS' EQUITY
Preferred stock, 2,500,000 shares authorized,
$1.00 par value; 336,660 shares issued
and outstanding at November 30, 2007 and
February 28, 2007 337 337
Common stock; 20,000,000 shares authorized,
$.001 par value; 3,528,341 and
3,523,341 shares issued, and 3,433,363
and 3,440,401 shares outstanding at
November 30, 2007 and February 28, 2007,
respectively 3 3
Additional paid-in capital 10,118 9,981
Retained earnings 16,320 15,003
Treasury stock; 94,978 and 82,940 shares
(held at cost) outstanding at
November 30, 2007 and February 28, 2007,
respectively (756) (639)
Accumulated other comprehensive loss (686) (2,402)
--------- ---------
Total Shareholders' Equity 25,336 22,283
--------- ---------
Total Liabilities and Shareholders' Equity $ 87,789 $ 87,156
========= =========
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
For the Three Months For the Nine Months
Ended November 30, Ended November 30,
------------------- ---------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Net sales $ 54,590 $ 54,345 $168,715 $162,748
Cost of goods sold 38,874 39,760 120,276 118,238
--------- --------- --------- ---------
Gross profit 15,716 14,585 48,439 44,510
Operating costs
and expenses:
Shipping 5,473 5,903 17,252 17,721
General and administrative 5,014 4,430 13,827 14,565
Selling and marketing 3,444 3,098 9,974 9,471
Impairment loss on
goodwill and other
intangibles -- (78) -- 7,520
Other expense
(income), net (167) (38) (853) (41)
--------- --------- --------- ---------
Total operating costs
and expenses 13,764 13,315 40,200 49,236
--------- --------- --------- ---------
Operating income (loss) 1,952 1,270 8,239 (4,726)
Change in put warrant
liability -- 3 (1,439) 1,319
Interest expense, net (656) (711) (1,954) (2,167)
--------- --------- --------- ---------
Income (loss) before
provision for
income taxes 1,296 562 4,846 (5,574)
Provision for
income taxes 502 192 3,136 457
--------- ---------- --------- ---------
Net income (loss) $ 794 $ 370 $ 1,710 $ (6,031)
========= ========= ========= =========
Net income (loss) per share:
Basic $ 0.23 $ 0.10 $ 0.49 $ (1.78)
========= ========= ========= =========
Diluted $ 0.22 $ 0.10 $ 0.47 $ (1.78)
========= ========= ========= =========
Weighted average number
of common shares outstanding
Basic 3,430 3,423 3,436 3,402
========= ========= ========= =========
Diluted 3,567 3,623 3,603 3,402
========= ========= ========= =========
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Nine Months
Ended November 30,
-------- --------
2007 2006
-------- --------
Cash flows from operating activities:
Net income (loss) $ 1,710 $(6,031)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 1,565 1,895
Impairment loss on goodwill and other intangibles -- 7,520
Change in fair value of put warrant liability 1,439 (1,319)
Write-off of realized accumulated foreign
translation adjustment 323 447
Bad debt expense 159 171
Gain on sale of equipment (135) --
Gain on sale of businesses (605) -
Stock-based compensation expense 254 191
Deferred income taxes 2,283 (42)
Changes in assets and liabilities:
Accounts receivable 935 1,482
Inventories (2,463) 3,782
Prepaid expenses and other current assets (235) 318
Other assets 22 4
Trade accounts payable and accrued liabilities (2,196) (5,930)
-------- --------
Net cash provided by operating activities 3,056 2,488
-------- --------
Cash flows from investing activities:
Capital expenditures (2,754) (485)
Proceeds from sale of equipment 244 --
Proceeds from sale of businesses 3,589 --
-------- --------
Net cash provided by (used in)
investing activities 1,079 (485)
-------- --------
Cash flows from financing activities:
Net borrowings under lines of credit 530 1,552
Borrowings of long-term debt 1,683 --
Repayments of long-term debt (2,267) (2,087)
Repayments of acquisition debt (1,253) (1,834)
Settlement of put warrant liability (2,300) --
Purchase of treasury stock (100) (90)
Proceeds from exercise of stock options 34 257
Dividends (22) (22)
-------- --------
Net cash used in financing activities (3,695) (2,224)
-------- --------
Effect of exchange rate changes on cash 82 480
-------- --------
Net increase in cash 522 259
Cash and cash equivalents at beginning of period 822 852
-------- --------
Cash and cash equivalents at end of period $ 1,344 $ 1,111
======== ========
Net Income Adjusted for the Change in the Put Warrant Liability and Other Non-Recurring Items and Earnings Per Share Adjusted for the Change in the Put Warrant Liability and Other Non-Recurring Items are Non-GAAP financial measures. The Company has included these Non-GAAP financial measures because it believes that the measures provide an indicator of profitability and performance of the Company's operations and provide a meaningful comparison of its current operating performance with its historical results. The Company uses Net Income Adjusted for the Change in the Put Warrant Liability and Other Non-Recurring Items and Earnings Per Share Adjusted for the Change in the Put Warrant Liability and Other Non-Recurring Items as internal measures of its business. Net Income Adjusted for the Change in the Put Warrant Liability and Other Non-Recurring Items and Earnings Per Share Adjusted for the Change in the Put Warrant Liability and Other Non-Recurring Items are not meant to be considered a substitute or replacement for Net Income and Earnings Per Share as prepared in accordance with generally accepted accounting principles. The reconciliation of Net Income to Net Income Adjusted for the Change in the Put Warrant Liability and Non-Recurring Items and Earnings Per Share to Earnings Per Share Adjusted for the Change in the Put Warrant Liability and Other Non-Recurring Items is as follows:
For the For the
Three Months Nine Months
Ended Ended
November 30, November 30,
----------------- -----------------
2007 2006 2007 2006
-------- -------- -------- --------
Net income (loss),
as reported (a) $ 794 $ 370 $ 1,710 $(6,031)
Add back (deduct):
(Gain) loss on sale of
businesses, net of tax -- -- (383) 354
Impairment loss on goodwill and
other intangible assets -- (78) -- 7,520
Realization of currency
translation loss related
to the disposition of certain
assets and obligations of the
foreign subsidiaries 323 -- 323 447
Change in put warrant liability -- (3) 1,439 (1,319)
-------- -------- -------- --------
Net income adjusted for the
change in the put warrant
liability and other
non-recurring items (b) $ 1,117 $ 289 $ 3,089 $ 971
======== ======== ======== ========
Earnings (loss) per share,
as reported:
Basic ((a)/(c)) $ 0.23 $ 0.10 $ 0.49 $ (1.78)
Diluted ((a)/(d)) $ 0.22 $ 0.10 $ 0.47 $ (1.78)
Weighted average number of shares
outstanding, as reported:
Basic (c) 3,430 3,423 3,436 3,402
Diluted (d) 3,567 3,623 3,603 3,402
Earnings per share adjusted for
the change in the put warrant
liability and
non-recurring items:
Basic ((b)/(e)) $ 0.32 $ 0.08 $ 0.89 $ 0.28
Diluted ((b)/(f)) $ 0.31 $ 0.08 $ 0.85 $ 0.26
Weighted average number of shares
outstanding as adjusted for the
change in the put warrant
liability and
non-recurring items:
Basic (e) 3,430 3,423 3,436 3,402
Diluted (f) 3,567 3,623 3,603 3,679