QEPC - Q.E.P. CO. Inc. Reports Fiscal 2021 Year-End Sales and Earnings
BOCA RATON, Fla., June 14, 2021 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (OTC: QEPC.PK) (the “Company” or “QEP”) today reported its consolidated results of operations for its fiscal year ended February 28, 2021.
QEP reported net sales of $387.6 million for the year ended February 28, 2021, a decrease of $6.3 million or 1.6% from the $393.9 million reported in fiscal 2020. Net sales decline for fiscal 2021 as compared to the prior fiscal year reflects the adverse impact of the worldwide economic downturn caused by the COVID-19 pandemic during the first quarter of the current year. All subsequent quarters reflect increased year-over-year net sales. As a percentage of net sales, gross margin was 28.0% in fiscal 2021, as compared to 26.4% in fiscal 2020.
Lewis Gould, Executive Chairman, commented on the Company’s results, “I am pleased that the Company was able to generate year-over-year sales growth for the third consecutive quarter, which has significantly offset the sales decline in the first quarter that was the result of the COVID-19 related economic downturn. The recent sales increase was driven by retail channels in North America, despite COVID-19 related challenges in the dealer and distributor channels, as well as growth in the Company’s overseas operations. During the year, the Company introduced aggressive cost control measures, which included the reduction of personnel costs, overhead and marketing expenses. Additionally, the Company was able to successfully navigate the integration and restructuring of the Company’s recent wood flooring acquisitions. Collectively, these actions resulted in the Company’s return to profitability during the year.”
Mr. Gould concluded, “As the world gradually begins to emerge from the COVID-19 pandemic, we are shifting our focus to new challenges presented by the scarcity and rising cost for raw materials and transcontinental freight, the weakening U.S. Dollar, shifts in global sourcing patterns and general inflationary pressures. We believe that the Company is positioned to respond to these evolving uncertainties.”
The Company’s gross profit for fiscal 2021 was $108.7 million, representing an increase of $4.8 million, or 4.6% from $103.9 million in fiscal 2020, which resulted from fiscal 2019 acquisitions. The improvement in gross margin as a percentage of net sales was due to favorable changes in product mix and timely actions taken by the Company to reduce manufacturing overhead during the first half of the current year.
Operating expenses, excluding restructuring charges and the impairment loss on goodwill, for fiscal 2021 and 2020 were $96.7 million or 25.0% of net sales and $112.6 million or 28.6% of net sales, respectively. The reduction in operating expenses was due to year-over-year synergies realized through the integration and rationalization of fiscal 2019 acquisitions, lower personnel costs resulting from the reduction-in-force and furlough of employees 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.
Operating expenses for 2021 include restructuring charges of $0.8 million relating to the Company’s Canadian subsidiary, which consisted of legal, administrative and asset impairment charges, net of the benefit related to the Plan of Compromise and Arrangement approved by the subsidiary’s unsecured creditors. Operating expenses in fiscal 2020 include a non-cash impairment charge for goodwill of $4.0 million resulting from the decline in the Company’s market valuation.
Non-operating loss in fiscal 2021 and income in fiscal 2020 represents the sale of assets related to non-core business unit and product lines, respectively.
The decrease in interest expense during fiscal 2021 as compared to fiscal 2020 was principally due to the reduction in borrowings under the Company’s credit facilities during the current year.
The provision for income taxes as a percentage of income before taxes was 27.3% for fiscal 2021, as compared to a benefit for income taxes of 5.0% for fiscal 2020. The effective tax rate in fiscal 2020 reflects a valuation allowance of $2.7 million on deferred tax assets related to the Company’s Canadian subsidiary.
Net income for fiscal 2021 was $6.9 million or $2.06 per diluted share, as compared to a net loss of $12.1 million or $3.64 per diluted share for fiscal 2020.
Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted for impairment charges, non-operating income, gain on sale of real property, corporate development and other one-time expenses for fiscal 2021, was $15.4 million as compared to minus $3.3 million for fiscal 2020.
| For the Year Ended |
| February 28, |
| February 29, |
| 2021 |
| 2020 |
| Net income (loss) |
| $ 6,898 |
| $ (12,142 |
| ) |
| Add: |
| Interest expense, net |
| 1,603 |
| 2,441 |
| Provision (benefit) for income taxes |
| 2,584 |
| (641 |
| ) |
| Depreciation and amortization |
| 4,492 |
| 4,754 |
| Non-operating income |
| 24 |
| (2,370 |
| ) |
| Corporate development and other expenses |
| 840 |
| 637 |
| Gain on sale of real property |
| (1,063 |
| ) |
| - |
| Impairment loss on goodwill |
| - |
| 4,041 |
| EBITDA, as adjusted (1) |
| $ 15,378 |
| $ (3,280 |
| ) |
(1) EBITDA, as adjusted for impairment charges, non-operating income, gain on sale of real property, corporate development and other one-time expenses represent non-GAAP measures and exclude charges or credits not indicative of our core operations, which may include but are not limited to corporate development expenses, restructuring costs and divestiture expenses.
Cash provided by operations during fiscal 2021 was $24.8 million as compared to $8.3 million in fiscal 2020, reflecting an increase in operating income and a reduction in the net investment in working capital. In fiscal 2021 and fiscal 2020, cash provided by operations, along with proceeds from the sale of property and the sale of non-core business lines were used to fund capital expenditures, pay for prior period acquisitions and repay borrowings under the Company’s credit facility.
Working capital as of February 28, 2021 was $44.7 million compared to $29.1 million at the end of the 2020 fiscal year. Aggregate debt, net of available cash balances at the end of fiscal 2021, was $23.0 million or 32.4% of equity, a decrease of $23.4 million compared to $46.4 million or 73.9% of equity at the end of the 2020 fiscal year.
Leadership Changes
On July 20, 2020, the Company’s Board of Directors appointed Enos Brown as Executive Vice President, Chief Financial Officer and Treasurer of the Company. On January 5, 2021, the Company’s Board of Directors appointed Leonard Gould as President & Chief Executive Officer, The Americas, Paul Boyce as Chief Executive Officer of International Operations, and reappointed Lewis Gould as Executive Chairman of the Company.
Conference Call Information
The Company will be hosting the following conference call to discuss its financial results and answer questions.
| Date: |
| Thursday, June 17, 2021 |
| Time: |
| 10:00 a.m. Eastern Time |
| Dial-in Numbers: |
| 800-367-2403 (US or Canada) |
| +1 334-777-6978 (International) |
| Confirmation Code: |
| 271610 |
The Company’s consolidated fiscal 2021 audited financial statements are available on the Investor section of its website at www.qepcorporate.com .
About QEP
Founded in 1979, Q.E.P. Co., Inc. is a leading designer, manufacturer and distributor of a broad range of best-in-class flooring and installation solutions for commercial and home improvement projects worldwide. QEP offers a comprehensive line of specialty installation tools, adhesives, and underlayment as well as 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®, Vitrex®, Brutus®, PRCI®, Plasplugs®, Tomecanic®, Premix-Marbletite® (PMM), Apple Creek®, Homelux®, Capitol® and XPS Foam™. Brand names featured under QEP’s Harris Flooring Group® include Harris®, Kraus® and Naturally Aged Flooring™.
QEP is headquartered in Boca Raton, Florida with offices in Canada, Europe, Asia, Australia and New Zealand.
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. These forward-looking statements include, but are not limited to, statements regarding emergence of the world from the COVID-19 pandemic and the Company's belief that it is positioned to respond to evolving uncertainties related thereto, the Company's shifting of its focus to new challenges presented by (i) scarcity and rising cost for raw materials and transcontinental freight, (ii) the weakening U.S. Dollar, (iii) shifts in global sourcing patterns and (iv) general inflationary pressures, economic conditions, sales growth, price increases, profit improvements, product development and marketing, operating expenses, cost savings, acquisition integration, operational synergy realization, global sourcing, political uncertainty, cash flow, debt and currency exchange rates. Any forward-looking statements contained herein are based on current expectations and beliefs, and are subject to a number of risks and uncertainties. Forward-looking statements may also be adversely affected by general market factors, competitive product development, product availability, federal and state regulations and legislation, 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.
CONTACT:
Q.E.P. Co., Inc.
Enos Brown
Executive Vice President and
Chief Financial Officer
561-994-5550
-Financial Information Follows-
Q.E.P. CO., INC. AND SUBSIDIARES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share data)
| For the Year Ended |
| February 28, |
| February 29, |
| 2021 |
| 2020 |
| Net sales |
| $ |
| 387,597 |
| $ |
| 393,901 |
| Cost of goods sold |
| 278,904 |
| 289,983 |
| Gross profit |
| 108,693 |
| 103,918 |
| Operating expenses: |
| Shipping |
| 44,595 |
| 43,986 |
| General and administrative |
| 28,402 |
| 33,778 |
| Selling and marketing |
| 25,340 |
| 35,860 |
| Impairment loss on goodwill |
| - |
| 4,041 |
| Restructuring |
| 840 |
| - |
| Other income, net |
| (1,593 |
| ) |
| (1,035 |
| ) |
| Total operating expenses |
| 97,584 |
| 116,630 |
| Operating income (loss) |
| 11,109 |
| (12,712 |
| ) |
| Non-operating income (loss) |
| (24 |
| ) |
| 2,370 |
| Interest expense, net |
| (1,603 |
| ) |
| (2,441 |
| ) |
| Income (loss) before provision for income taxes |
| 9,482 |
| (12,783 |
| ) |
| Provision (benefit) for income taxes |
| 2,584 |
| (641 |
| ) |
| Net income (loss) |
| $ |
| 6,898 |
| $ |
| (12,142 |
| ) |
| Earnings (loss) per share: |
| Basic |
| $ |
| 2.07 |
| $ |
| (3.64 |
| ) |
| Diluted |
| $ |
| 2.06 |
| $ |
| (3.64 |
| ) |
| Weighted average number of common |
| shares outstanding: |
| Basic |
| 3,336 |
| 3,340 |
| Diluted |
| 3,341 |
| 3,340 |
Q.E.P. CO., INC. AND SUBSIDIARES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
| For the Year Ended |
| February 28, |
| February 29, |
| 2021 |
| 2020 |
| Net income (loss) |
| $ |
| 6,898 |
| $ |
| (12,142 |
| ) |
| Unrealized currency translation adjustments |
| 1,338 |
| (594 |
| ) |
| Comprehensive income (loss) |
| $ |
| 8,236 |
| $ |
| (12,736 |
| ) |
Q.E.P. CO., INC. AND SUBSIDIARES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
| February 28, 2021 |
| February 29, 2020 |
| ASSETS |
| Cash |
| $ |
| 10,905 |
| $ |
| 4,999 |
| Accounts receivable, less allowance for doubtful accounts of $1,059 |
| and $475 as of February 28, 2021 and February 29, 2020, respectively |
| 53,183 |
| 49,264 |
| Inventories |
| 67,032 |
| 69,061 |
| Prepaid expenses and other current assets |
| 6,829 |
| 4,280 |
| Prepaid income taxes |
| 736 |
| 740 |
| Current assets |
| 138,685 |
| 128,344 |
| Property and equipment, net |
| 11,398 |
| 15,168 |
| Right of use operating lease assets |
| 16,417 |
| 18,320 |
| Deferred income taxes, net |
| 3,436 |
| 4,135 |
| Intangibles, net |
| 12,454 |
| 13,871 |
| Goodwill |
| 2,493 |
| 2,288 |
| Other assets |
| 2,840 |
| 2,824 |
| Total Assets |
| $ |
| 187,723 |
| $ |
| 184,950 |
| LIABILITIES AND SHAREHOLDERS' EQUITY |
| Trade accounts payable |
| $ |
| 40,900 |
| $ |
| 31,114 |
| Accrued liabilities |
| 23,475 |
| 19,366 |
| Current operating lease liabilities |
| 5,196 |
| 5,262 |
| Lines of credit |
| 21,010 |
| 40,107 |
| Current maturities of notes payable |
| 3,417 |
| 3,399 |
| Current liabilities |
| 93,998 |
| 99,248 |
| Notes payable |
| 9,438 |
| 7,854 |
| Non-current operating lease liabilities |
| 12,336 |
| 14,121 |
| Deferred income taxes |
| 172 |
| 114 |
| Other long term liabilities |
| 851 |
| 872 |
| Total Liabilities |
| 116,795 |
| 122,209 |
| Preferred stock, 2,500 shares authorized, $1.00 par value; 0 shares |
| issued and outstanding at February 28, 2021 and February 29, 2020 |
| - |
| - |
| Common stock, 20,000 shares authorized, $.001 par value; |
| 4,005 and 3,827 shares issued, and 3,309 and 3,139 shares outstanding |
| at February 28, 2021 and February 29, 2020, respectively |
| 4 |
| 4 |
| Additional paid-in capital |
| 11,251 |
| 11,087 |
| Retained earnings |
| 71,785 |
| 64,887 |
| Treasury stock, 696 and 688 shares held at cost at February 28, 2021 |
| and February 29, 2020, respectively |
| (9,082 |
| ) |
| (8,869 |
| ) |
| Accumulated other comprehensive income |
| (3,030 |
| ) |
| (4,368 |
| ) |
| Shareholders' Equity |
| 70,928 |
| 62,741 |
| Total Liabilities and Shareholders' Equity |
| $ |
| 187,723 |
| $ |
| 184,950 |
Q.E.P. CO., INC. AND SUBSIDIARES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| For the Year Ended |
| February 28, 2021 |
| February 29, 2020 |
| Operating activities: |
| Net income (loss) |
| $ |
| 6,898 |
| $ |
| (12,142 |
| ) |
| Adjustments to reconcile net income to net cash |
| provided by operating activities: |
| (Gain)/loss on sale of businesses |
| 24 |
| (2,370 |
| ) |
| Gain on sale of property |
| (1,066 |
| ) |
| (10 |
| ) |
| Impairment loss on goodwill |
| - |
| 4,041 |
| Restructuring |
| (453 |
| ) |
| - |
| Depreciation and amortization |
| 4,492 |
| 4,754 |
| Other non-cash adjustments |
| 523 |
| 273 |
| Changes in assets and liabilities, net of acquisitions: |
| Accounts receivable |
| (3,168 |
| ) |
| 2,975 |
| Inventories |
| 2,102 |
| 19,480 |
| Prepaid expenses and other assets |
| (3,137 |
| ) |
| 9,331 |
| Trade accounts payable and accrued liabilities |
| 18,632 |
| (18,018 |
| ) |
| Net cash provided by operating activities |
| 24,847 |
| 8,314 |
| Investing activities: |
| Acquisitions |
| (461 |
| ) |
| (1,324 |
| ) |
| Capital expenditures |
| (811 |
| ) |
| (1,339 |
| ) |
| Proceeds from sale of businesses |
| 200 |
| 4,663 |
| Proceeds from sale of property |
| 3,285 |
| 401 |
| Purchase of equity securities |
| - |
| (1,900 |
| ) |
| Net cash provided by investing activities |
| 2,213 |
| 501 |
| Financing activities: |
| Net repayments under lines of credit |
| (20,621 |
| ) |
| (8,397 |
| ) |
| Net repayments of notes payable |
| (599 |
| ) |
| (1,408 |
| ) |
| Purchase of treasury stock |
| (120 |
| ) |
| (155 |
| ) |
| Principal payments on finance leases |
| (96 |
| ) |
| (21 |
| ) |
| Net cash used in financing activities |
| (21,436 |
| ) |
| (9,981 |
| ) |
| Effect of exchange rate changes on cash |
| 282 |
| (302 |
| ) |
| Net decrease in cash |
| 5,906 |
| (1,468 |
| ) |
| Cash at beginning of period |
| 4,999 |
| 6,467 |
| Cash at end of period |
| $ |
| 10,905 |
| $ |
| 4,999 |
| 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 |
| 6,898 |
| 6,898 |
| Other comprehensive income (loss) |
| 1,338 |
| 1,338 |
| Purchase of treasury stock |
| (213 |
| ) |
| (213 |
| ) |
| Stock-based compensation expense |
| 164 |
| 164 |
| Stock dividends |
| 178,728 |
| - |
| - |
| Balance at February 28, 2021 |
| - |
| $ |
| - |
| 4,005,370 |
| $ |
| 4 |
| $ |
| 11,251 |
| $ |
| 71,785 |
| $ |
| (9,082 |
| ) |
| $ |
| (3,030 |
| ) |
| $ |
| 70,928 |