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Q.E.P. Co., Inc. Reports Fiscal 2024 Full Year Financial Results

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Q.E.P. Co. (OTCQX: QEPC) announced its fiscal 2024 results, highlighting significant financial shifts. Adjusted net income surged to $9.1 million, or $2.73 per share, from $4.5 million or $1.34 per share in fiscal 2023. Despite net sales falling 6.5% to $252.0 million due to reduced consumer demand, gross profit rose 12% to $82.0 million, driven by cost-cutting and a better product mix.

The company completed strategic divestments, including North American flooring brands and businesses in the UK, Australia, and New Zealand. These moves, along with debt reductions, resulted in lower interest expenses and a cash surplus, allowing for special dividends in 2024. Operating expenses increased due to higher personnel and divestiture-related costs. The net loss was $4.7 million, or $1.40 per share, compared to $0.1 million or $0.02 per share the previous year.

Cash from operations was $29.5 million, compared to a net use of $0.1 million in fiscal 2023, improving working capital to $60.0 million. The company’s EBITDA from continuing operations improved to $14.7 million from $10.6 million in fiscal 2023.

Positive
  • Adjusted net income increased to $9.1 million or $2.73 per share.
  • Gross profit rose 12% to $82.0 million.
  • Gross margin improved to 32.5% from 27.2%.
  • Significant reduction in debt leading to lower interest expenses.
  • Cash from operations was $29.5 million, compared to net use of $0.1 million in fiscal 2023.
  • EBITDA from continuing operations improved to $14.7 million from $10.6 million.
  • Provision for income taxes decreased to 23.4% from 37.6%.
Negative
  • Net sales declined 6.5% to $252.0 million.
  • Operating expenses increased to $68.7 million from $63.9 million.
  • Net loss was $4.7 million, or $1.40 per share, compared to $0.1 million, or $0.02 per share.
  • Softening consumer demand impacted sales.
  • Divestitures led to classification of operations as discontinued, impacting net results.

Adjusted Net Income More than Doubles to $9.1 Million or $2.73 per Share

BOCA RATON, Fla., June 13, 2024 (GLOBE NEWSWIRE) -- Q.E.P. CO., INC. (OTCQX: QEPC) (the “Company” or “QEP”) today reported its consolidated results of operations for its full year ended February 29, 2024.

During fiscal 2024, QEP completed several strategic divestments to streamline operations and concentrate resources on its core product lines in the North American market. These divestments included the sale of our North American hard surface flooring business, which consisted of the Harris®, Kraus®, Naturally Aged Flooring™ and Heritage Mills® brands, as well as a wood flooring manufacturing facility in Johnson City, Tennessee. This was followed by the divestment of QEP’s businesses in the United Kingdom, Australia and New Zealand.

As of fiscal 2024, these divested operations have been classified as discontinued operations in our financial statements. Amounts for prior periods, including sales and operating income, have been reclassified to conform to this presentation.

QEP reported net sales of $252.0 million for the year ended February 29, 2024, a decrease of $17.5 million or 6.5% from the $269.5 million reported in fiscal 2023, which was primarily due to softening consumer demand across multiple product categories. To mitigate this impact, the Company is expanding its regional sales coverage in order to penetrate new and existing sales channels.

The Company’s gross profit for fiscal 2024 increased $8.8 million or 12.0% to $82.0 million, from $73.2 million in fiscal 2023. As a percentage of net sales, gross margin was 32.5% in fiscal 2024, as compared to 27.2% in fiscal 2023.   The increase in gross margin as a percentage of net sales was largely due to lower inbound freight, improved product mix, and multiple cost-reduction and streamlining initiatives.

Leonard Gould, President & Chief Executive Officer, commented on the Company’s results, “I would like to personally thank all of our QEP associates for their noteworthy contributions which have enabled QEP to ‘return to its roots’ and fuel our ongoing transformation. The massive efforts underway to better serve our customers and our innovation/patent roadmap over the next few years makes me incredibly proud. Our retail and distribution partners are our lifeblood and together we continue to implement initiatives to drive volume and profitability of their QEP business. We are also grateful for the ongoing support of our vendor and banking partners.”

Lewis Gould, Executive Chairman, added, “We are pleased with our continuing transformation which has resulted in significant repayment of our debt and generated a healthy cash surplus. The Company has shared this success with its stockholders through two special dividends in 2024. We hope to continue to reward all of our stakeholders in concert with the Company’s success.”

Operating expenses were $68.7 million or 27.3% of net sales for fiscal 2024 as compared to $63.9 million or 23.7% of net sales for fiscal 2023. The increase in operating expenses was due to higher personnel and one-time transaction costs related to the divestitures in fiscal 2024.

Interest expense declined in the latter part of fiscal 2024 as the Company’s significant repayment of debt offset higher interest rates during the earlier part of the fiscal year and during fiscal 2023.  

The provision for income taxes as a percentage of income before taxes was 23.4% for fiscal 2024, as compared to 37.6% for fiscal 2023. Fiscal 2023 includes a full valuation allowance on operating losses generated by the Company’s Canadian operation.

Net loss for fiscal 2024 was $4.7 million or $1.40 per diluted share, as compared to $0.1 million or $0.02 per diluted share for fiscal 2023. Excluding discontinued operations, adjusted net income for fiscal 2024 was $9.1 million or $2.73 per diluted share, as compared to $4.5 million or $1.34 per diluted share for fiscal 2023.

Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations for fiscal 2024 was $14.7 million or 5.8% of net sales, as compared to $10.6 million or 3.9% of net sales for fiscal 2023.

  For the Year Ended
  February 29,
2024
 February 28,
2023
     
Net income from continuing operations$9,131  $4,485 
     
Add:Interest expense, net 1,386   2,087 
 Provision for income taxes 2,787   2,701 
 Depreciation and amortization 1,364   1,357 
EBITDA, as adjusted$14,668  $10,630 
     

Cash provided by operating activities during fiscal 2024 was $29.5 million as compared to cash used in operating activities of $0.1 million in the fiscal 2023 period, reflecting the reduction in inventory to more normalized levels from the elevated levels of the previous year. During the fiscal 2024 period, cash provided by operations, along with proceeds from the sale of businesses, was used to reduce borrowings under the Company’s credit facilities, fund capital expenditures, pay a dividend to stockholders and increase cash balances. During the fiscal 2023 period, borrowings under the Company’s lines of credit were used to fund operating activities and capital expenditures.

Working capital as of February 29, 2024 was $60.0 million compared to $55.0 million at the end of fiscal 2023. Aggregate available cash, net of outstanding debt at the end of fiscal 2024 was $21.7 million compared to aggregate debt, net of available cash of $26.1 million or 33.5% of equity at the end of fiscal 2023.

The Company will not be hosting a conference call to discuss these results and welcomes inquiries from investors via email at ir@qep.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 installation solutions for commercial and home improvement projects. QEP offers a comprehensive line of specialty installation tools, adhesives, and underlayment. QEP sells its products throughout the world to home improvement retail centers, and professional specialty distribution outlets, under brand names including QEP®, LASH®, ROBERTS®, Capitol®, Premix-Marbletite® (PMM), Brutus®, Homelux®, PRCI®, and Tomecanic®.

QEP is headquartered in Boca Raton, Florida with other facilities in the United States, Canada, Europe and Asia. Please visit our website at www.qepcorporate.com.

Forward-Looking Statements

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 implementation of the Company’s strategies and increasing profitability and stockholder value. Any forward-looking statements contained herein are based on current expectations and beliefs, and are subject to a number of risks and uncertainties, including those listed in the Company’s annual report, as such risk factors may be amended, supplemented or superseded from time to time by other reports and disclosures made by the Company. 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, scarcity and rising cost for raw materials, shifts in global sourcing patterns, and general inflationary pressures, economic conditions, sales growth, price increases, maintaining and improving profitability, product development and marketing, operating expenses, cost savings, the successful completion of acquisitions and dispositions, acquisition integration, operational synergy realization, global sourcing, political uncertainty, cash flow, debt and currency exchange rates, 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 SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
 
 For the Year Ended
 February 29, February 28,
  2024   2023 
    
Net sales$251,986  $269,448 
Cost of goods sold 169,989   196,246 
Gross profit 81,997   73,202 
    
Operating expenses:   
Shipping 28,129   30,208 
General and administrative 26,135   20,176 
Selling and marketing 13,633   13,680 
Other (income) expense, net 796   (135)
Total operating expenses 68,693   63,929 
    
Operating income 13,304   9,273 
    
Interest expense, net (1,386)  (2,087)
    
Income before provision for income taxes 11,918   7,186 
    
Provision for income taxes 2,787   2,701 
    
Net income from continuing operations 9,131   4,485 
    
Loss from discontinued operations (13,839)  (4,548)
    
Net loss$ (4,708) $ (63)
    
Basic earnings (loss) per share:   
From continuing operations 2.73   1.34 
From discontinued operations (4.14)  (1.36)
Basic earnings (loss) per share (1.41)  (0.02)
    
Diluted earnings (loss) per share:   
From continuing operations 2.73   1.34 
From discontinued operations (4.13)  (1.36)
Diluted earnings (loss) per share (1.40)  (0.02)
    
Weighted average number of common shares outstanding:   
Basic 3,343   3,335 
Diluted 3,350   3,343 
    


 
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
    
 February 29,
2024
 February 28,
2023
    
ASSETS   
Cash$22,369  $3,060 
Accounts receivable, less allowance for credit losses of $134 and   
$306 at February 29, 2024 and February 28, 2023, respectively 30,338   37,492 
Inventories, net 29,913   37,176 
Prepaid expenses and other current assets 7,491   2,939 
Prepaid income taxes 1,375   - 
Discontinued operations 693   58,332 
Current assets 92,179   138,999 
    
Property and equipment, net 9,894   7,840 
Right of use operating lease assets 19,852   24,155 
Deferred income taxes, net 2,548   3,751 
Intangibles, net 99   118 
Other assets 1,276   2,256 
Discontinued operations -   19,271 
Total assets$ 125,848  $ 196,390 
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
    
Trade accounts payable$14,438  $8,147 
Accrued liabilities 13,352   12,555 
Current operating lease liabilities 3,210   2,983 
Income taxes payable -   384 
Lines of credit 601   21,718 
Current maturities of debt 74   1,908 
Discontinued operations 479   36,299 
Current liabilities 32,154   83,994 
    
Long term debt -   5,513 
Non-current operating lease liabilities 19,855   23,007 
Other long term liabilities 1,209   2,240 
Discontinued operations -   3,796 
Total liabilities 53,218   118,550 
    
Preferred stock, 2,500 shares authorized, $1.00 par value; 0 shares   
issued and outstanding at February 29, 2024 and February 28, 2023, -   - 
respectively   
Common stock, 20,000 shares authorized, $.001 par value;   
4,005 shares issued: 3,286 and 3,293 shares outstanding at   
February 29, 2024 and February 28, 2023, respectively 4   4 
Additional paid-in capital 11,901   11,449 
Retained earnings 73,211   81,205 
Treasury stock, 719 and 712 shares held at cost at February 29, 2024   
and February 28, 2023, respectively (9,517)  (9,410)
Accumulated other comprehensive income (2,969)  (5,408)
Shareholders' equity 72,630   77,840 
Total liabilities and shareholders' equity$ 125,848  $ 196,390 
    


Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
 For the Year Ended
 February 29,
2024
 February 28,
2023
    
Operating activities:   
Net loss$(4,708) $(63)
Adjustments to reconcile net income to net cash   
provided by (used in) operating activities:   
Depreciation and amortization 2,656   3,796 
Loss on disposal of businesses 9,278   285 
Loss on sale of property 34   (14)
Gain from insurance recoveries (134)  - 
Proceeds from settlement of insurance claims 537   911 
Impairment of right of use operating lease asset 1,221   - 
Other non-cash adjustments 317   (71)
Changes in assets and liabilities:   
Accounts receivable 5,098   5,593 
Inventories 21,295   14,469 
Prepaid expenses and other assets 4,568   6,809 
Trade accounts payable and accrued liabilities (10,682)  (31,787)
Net cash provided by (used in) operating activities 29,480   (72)
    
Investing activities:   
Capital expenditures (3,808)  (4,994)
Proceeds from sale of businesses 32,842   - 
Proceeds from sale of property 108   1,413 
Proceeds from sale of equity investment -   209 
Proceeds from settlement of insurance claims 285   - 
Net cash provided by (used in) investing activities 29,427   (3,372)
    
Financing activities:   
Net borrowings (repayments) under lines of credit (30,549)  6,368 
Net repayments of term loan facilities (7,250)  (709)
Purchase of treasury stock (227)  (249)
Principal payments on finance leases (108)  (112)
Dividends paid (3,286)  - 
Net cash provided by (used in) financing activities (41,420)  5,298 
    
Effect of exchange rate changes on cash (114)  (61)
    
Net increase in cash 17,373   1,793 
Cash at beginning of period 3,060   1,055 
Cash at beginning of the period from discontinued operations 1,936   2,148 
Cash at end of period$ 22,369  $ 4,996 
    


                  
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, 2022- $ - 4,005,370 $ 4 $ 11,449 $ 81,268  $ (9,1) $ (4,195) $ 79,402 
                  
Net loss           (63)      (63)
Unrealized currency translation adjustments               (1,213)  (1,213)
Purchase of treasury stock             (286)    (286)
Balance at February 28, 2023- $ - 4,005,370 $ 4 $ 11,449 $ 81,205  $ (9,410) $ (5,408) $ 77,840 
                  
Net loss           (4,708)      (4,708)
Reclassification of currency translation adjustments to earnings               2,376   2,376 
Unrealized currency translation adjustments               63   63 
Purchase of treasury stock             (107)    (107)
Stock-based compensation expense         452        452 
Dividends paid           (3,286)      (3,286)
Balance at February 29, 2024- $ - 4,005,370-$ 4 $ 11,901 $ 73,211  $ (9,517) $ (2,969) $ 72,630 
                  

FAQ

What were Q.E.P. Co.'s financial results for fiscal 2024?

Q.E.P. Co. reported adjusted net income of $9.1 million or $2.73 per share for fiscal 2024.

How did Q.E.P. Co.'s net sales perform in fiscal 2024?

Net sales for fiscal 2024 were $252.0 million, a 6.5% decrease from the previous year's $269.5 million.

What caused the increase in Q.E.P. Co.'s gross margin in fiscal 2024?

Gross margin increased due to lower inbound freight, improved product mix, and cost-reduction initiatives.

Did Q.E.P. Co. report any net losses for fiscal 2024?

Yes, Q.E.P. Co. reported a net loss of $4.7 million or $1.40 per share for fiscal 2024.

How much cash did Q.E.P. Co. generate from operations in fiscal 2024?

Q.E.P. Co. generated $29.5 million in cash from operations during fiscal 2024.

What was Q.E.P. Co.'s EBITDA from continuing operations for fiscal 2024?

The EBITDA from continuing operations was $14.7 million or 5.8% of net sales for fiscal 2024.

What strategic actions did Q.E.P. Co. take in fiscal 2024?

Q.E.P. Co. completed several strategic divestments, including North American flooring brands and operations in the UK, Australia, and New Zealand.

How did Q.E.P. Co.'s operating expenses change in fiscal 2024?

Operating expenses increased to $68.7 million, up from $63.9 million the previous year, due to higher personnel and divestiture costs.

Q.E.P. CO INC

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113.46M
3.31M
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Tools & Accessories
Industrials
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United States of America
Boca Raton