Q.E.P. Co., Inc. Reports Fiscal 2022 Year-End Sales and Earnings
Full Year Net Sales of $445.5 million and Net Income of $9.6 million
BOCA RATON, Fla., June 01, 2022 (GLOBE NEWSWIRE) — Q.E.P. CO., INC. (OTCQX: QEPC) (the “Company” or “QEP”) today reported its consolidated results of operations for its fiscal year ended February 28, 2022.
QEP reported net sales of $445.5 million for the year ended February 28, 2022, an increase of $57.9 million or 14.9% from the $387.6 million reported in fiscal 2021. The fiscal 2022 increase in net sales compared to the prior fiscal year reflects strong economic activity in the current year and the adverse impact of the worldwide economic downturn caused by the COVID-19 pandemic during the first quarter of fiscal 2021. As a percentage of net sales, gross margin was 27.1% in fiscal 2022, as compared to 28.0% in fiscal 2021.
Lewis Gould, Executive Chairman, commented on the Company’s results, “Despite significant inflationary pressures and unprecedented disruption in the global supply chain throughout fiscal 2022, the Company was able to achieve year-over-year net sales growth of 15% and adjusted EBITDA growth of 18%. The Company closely monitors the impact of rising costs on our profitability, and, where appropriate, has implemented price increases to mitigate margin erosion. In the latter part of the year, we also increased our investment in inventory to offset supply chain risk and ensure product availability to meet customer service levels.”
Mr. Gould concluded, “With increased volatility and uncertainty in global markets, the Company is focused on preserving profitability by managing overhead costs while still making the necessary investments to support our strategic priorities.”
The Company’s gross profit for fiscal 2022 was $120.7 million, representing an increase of $12.0 million, or 11.1% from $108.7 million in fiscal 2021. The decrease in gross margin as a percentage of net sales was due to increased inbound freight and cost of goods, that were not fully recovered through price increases to customers or cost reduction initiatives.
Operating expenses, excluding restructuring charges, were $106.7 million or 23.9% of net sales for fiscal 2022 and $96.7 million or 25.0% of net sales for fiscal 2021. The increase in operating expenses was due to higher shipping costs related to sales volume, along with higher personnel and marketing costs from the Company’s reinvestment in sales support infrastructure. The Company was able to leverage the 14.9% year-over-year net sales growth, resulting in 110 basis points decline in operating expenses as a percentage of net sales.
Operating expenses for fiscal 2022 and 2021 include restructuring charges related to the Company’s Canadian subsidiary of $0.2 million and $0.8 million, respectively, 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.
Non-operating loss in fiscal 2021 represents the sale of assets related to a non-core business unit.
The decrease in interest expense during fiscal 2022 as compared to fiscal 2021 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 23.4% for fiscal 2022, as compared to 27.3% for fiscal 2021.
Net income for fiscal 2022 was $9.6 million or $2.88 per diluted share, as compared to $6.9 million or $2.06 per diluted share for fiscal 2021.
Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted for restructuring charges, non-operating income and gain on sale of real property was $18.3 million for fiscal 2022 as compared to $15.5 million for fiscal 2021.
| For the Year Ended | ||||||||
| February 28, 2022 | February 28, 2021 | |||||||
| Net income | $ | 9,648 | $ | 6,898 | ||||
| Add: | Interest expense, net | 1,258 | 1,603 | |||||
| Provision for income taxes | 2,949 | 2,584 | ||||||
| Depreciation and amortization | 4,176 | 4,594 | ||||||
| Non-operating loss | – | 24 | ||||||
| Restructuring charges | 240 | 840 | ||||||
| Gain on sale of real property | – | (1,063 | ) | |||||
| EBITDA, as adjusted (1) | $ | 18,271 | $ | 15,480 | ||||
(1) EBITDA, as adjusted for restructuring charges, non-operating income and gain on sale of real property represent non-GAAP measures and exclude charges or credits not indicative of our core operations.
Cash used by operations during fiscal 2022 was $11.0 million as compared to cash provided by operations of $24.8 million in fiscal 2021, reflecting an increase in operating income and an increase net investment in working capital, principally in inventory to mitigate the impact of supply chain disruptions during fiscal 2022. In fiscal 2022, cash used in operations was funded by borrowings under the Company’s credit facility and proceeds from the sale of property. In fiscal 2021, cash provided by operations, along with proceeds from the sale of property and the sale of a non-core business line were used to fund capital expenditures and repay borrowings under the Company’s credit facility.
Working capital as of February 28, 2022 was $55.0 million compared to $44.7 million at the end of the 2021 fiscal year. Aggregate debt, net of available cash balances at the end of fiscal 2022 was $33.4 million or 42.0% of equity, an increase of $10.0 million compared to $23.4 million or 32.9% of equity at the end of the 2021 fiscal year.
Conference Call Information
The Company will be hosting the following conference call to discuss its financial results and answer questions.
| Date: | Tuesday, June 7, 2022 | |
| Time: | 10:00 a.m. Eastern Time | |
| Dial-in Numbers: | 888-220-8451 (US or Canada) +1 646-828-8193 (International) |
|
| Confirmation Code: | 8162366 | |
| Replay: | 719-457-0820; Passcode: 8162366 | |
The Company’s consolidated fiscal 2022 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, and the Company’s shifting of its focus to new challenges presented by (i) scarcity and rising cost of raw materials and transcontinental freight, (ii) shifts in global sourcing patterns; and (iii) general inflationary pressures, economic conditions, sales growth, price increases, maintaining and improving profitability, 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.
-Financial Information Follows-
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
| For the Year Ended | |||||||
| February 28, | February 28, | ||||||
| 2022 | 2021 | ||||||
| Net sales | $ | 445,531 | $ | 387,597 | |||
| Cost of goods sold | 324,786 | 278,904 | |||||
| Gross profit | 120,745 | 108,693 | |||||
| Operating expenses: | |||||||
| Shipping | 49,533 | 44,595 | |||||
| General and administrative | 29,861 | 28,402 | |||||
| Selling and marketing | 27,914 | 25,340 | |||||
| Restructuring | 240 | 840 | |||||
| Other income, net | (658 | ) | (1,593 | ) | |||
| Total operating expenses | 106,890 | 97,584 | |||||
| Operating income | 13,855 | 11,109 | |||||
| Non-operating loss | – | (24 | ) | ||||
| Interest expense, net | (1,258 | ) | (1,603 | ) | |||
| Income before provision for income taxes | 12,597 | 9,482 | |||||
| Provision for income taxes | 2,949 | 2,584 | |||||
| Net income | $ | 9,648 | $ | 6,898 | |||
| Earnings per share: | |||||||
| Basic | $ | 2.89 | $ | 2.07 | |||
| Diluted | $ | 2.88 | $ | 2.06 | |||
| Weighted average number of common shares outstanding: | |||||||
| Basic | 3,336 | 3,336 | |||||
| Diluted | 3,346 | 3,341 | |||||
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
| For the Year Ended | |||||||
| February 28, | February 28, | ||||||
| 2022 | 2021 | ||||||
| Net income | $ | 9,648 | $ | 6,898 | |||
| Unrealized currency translation adjustments | (1,165 | ) | 1,338 | ||||
| Comprehensive income | $ | 8,483 | $ | 8,236 | |||
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
| February 28, 2022 |
February 28, 2021 |
||||||
| ASSETS | |||||||
| Cash | $ | 3,203 | $ | 10,905 | |||
| Accounts receivable, less allowance for doubtful accounts of $807 and $1,059 as of February 28, 2022 and 2021, respectively | 55,990 | 53,183 | |||||
| Inventories, net | 98,087 | 67,032 | |||||
| Prepaid expenses and other current assets | 3,711 | 6,829 | |||||
| Prepaid income taxes | – | 736 | |||||
| Current assets | 160,991 | 138,685 | |||||
| Property and equipment, net | 10,529 | 11,804 | |||||
| Right of use operating lease assets | 15,485 | 16,417 | |||||
| Deferred income taxes, net | 3,578 | 3,436 | |||||
| Intangibles, net | 10,233 | 12,454 | |||||
| Goodwill | 2,390 | 2,493 | |||||
| Other assets | 3,150 | 2,434 | |||||
| Total Assets | $ | 206,356 | $ | 187,723 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| Trade accounts payable | $ | 47,715 | $ | 40,900 | |||
| Accrued liabilities | 24,919 | 23,365 | |||||
| Current operating lease liabilities | 4,942 | 5,196 | |||||
| Income taxes payable | 634 | – | |||||
| Lines of credit | 26,449 | 21,010 | |||||
| Current maturities of debt | 1,321 | 3,527 | |||||
| Current liabilities | 105,980 | 93,998 | |||||
| Long term debt | 8,797 | 9,735 | |||||
| Non-current operating lease liabilities | 11,643 | 12,336 | |||||
| Deferred income taxes | – | 172 | |||||
| Other long term liabilities | 534 | 554 | |||||
| Total Liabilities | 126,954 | 116,795 | |||||
| Preferred stock, 2,500 shares authorized, $1.00 par value; 0 shares issued and outstanding at February 28, 2022 and 2021, respectively | – | – | |||||
| Common stock, 20,000 shares authorized, $.001 par value; 4,005 shares issued: 3,307 and 3,309 shares outstanding at February 28, 2022 and 2021, respectively | 4 | 4 | |||||
| Additional paid-in capital | 11,449 | 11,251 | |||||
| Retained earnings | 81,268 | 71,785 | |||||
| Treasury stock, 698 and 696 shares held at cost at February 28, 2022 and 2021, respectively | (9,124 | ) | (9,082 | ) | |||
| Accumulated other comprehensive income | (4,195 | ) | (3,030 | ) | |||
| Shareholders’ Equity | 79,402 | 70,928 | |||||
| Total Liabilities and Shareholders’ Equity | $ | 206,356 | $ | 187,723 | |||
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| For the Year Ended | |||||||
| February 28, 2022 |
February 28, 2021 |
||||||
| Operating activities: | |||||||
| Net income | $ | 9,648 | $ | 6,898 | |||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
| Loss on sale of business | – | 24 | |||||
| Gain on sale of property | (131 | ) | (1,066 | ) | |||
| Restructuring | 157 | (453 | ) | ||||
| Depreciation and amortization | 4,176 | 4,594 | |||||
| Other non-cash adjustments | 18 | 523 | |||||
| Changes in assets and liabilities, net of acquisitions: | |||||||
| Accounts receivable | (3,331 | ) | (3,168 | ) | |||
| Inventories | (32,362 | ) | 2,102 | ||||
| Prepaid expenses and other assets | 6,247 | (3,239 | ) | ||||
| Trade accounts payable and accrued liabilities | 4,541 | 18,632 | |||||
| Net cash provided by (used in) operating activities | (11,037 | ) | 24,847 | ||||
| Investing activities: | |||||||
| Acquisitions | – | (461 | ) | ||||
| Capital expenditures | (1,094 | ) | (811 | ) | |||
| Proceeds from sale of business | – | 200 | |||||
| Proceeds from sale of property | 2,104 | 3,285 | |||||
| Net cash provided by investing activities | 1,010 | 2,213 | |||||
| Financing activities: | |||||||
| Net borrowings (repayments) under lines of credit | 5,974 | (20,621 | ) | ||||
| Net repayments of term loan facilities | (2,946 | ) | (599 | ) | |||
| Purchase of treasury stock | (162 | ) | (120 | ) | |||
| Principal payments on finance leases | (110 | ) | (96 | ) | |||
| Dividends paid | (165 | ) | – | ||||
| Net cash provided by (used in) financing activities | 2,591 | (21,436 | ) | ||||
| Effect of exchange rate changes on cash | (266 | ) | 282 | ||||
| Net increase (decrease) in cash | (7,702 | ) | 5,906 | ||||
| Cash at beginning of period | 10,905 | 4,999 | |||||
| Cash at end of period | $ | 3,203 | $ | 10,905 | |||
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 29, 2020 | – | $ | – | 3,826,642 | $ | 4 | $ | 11,087 | $ | 64,887 | $ | (8,869 | ) | $ | (4,368 | ) | $ | 62,741 | |||||||||||||||
| Net Income | 6,898 | 6,898 | |||||||||||||||||||||||||||||||
| Unrealized currency translation adjustments | 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 | ||||||||||||||||||||||
| Net income | 9,648 | 9,648 | |||||||||||||||||||||||||||||||
| Unrealized currency translation adjustments | (1,165 | ) | (1,165 | ) | |||||||||||||||||||||||||||||
| Purchase of treasury stock | (42 | ) | (42 | ) | |||||||||||||||||||||||||||||
| Stock-based compensation expense | 198 | 198 | |||||||||||||||||||||||||||||||
| Dividends paid | (165 | ) | (165 | ) | |||||||||||||||||||||||||||||
| Balance at February 28, 2022 | – | – | 4,005,370 | $ | 4 | $ | 11,449 | $ | 81,268 | $ | (9,124 | ) | $ | (4,195 | ) | $ | 79,402 | ||||||||||||||||
CONTACT:
Q.E.P. Co., Inc.
Enos Brown
Executive Vice President and
Chief Financial Officer
561-994-5550
