BOCA RATON, FLORIDA — July 23, 2018 — Q.E.P. CO., INC. (OTC: QEPC.PK) (the “Company”) today reported its consolidated results of operations for the first quarter of its fiscal year ending February 28, 2019.

The Company reported net sales of $87.9 million for the quarter ended May 31, 2018, an increase of $5.9 million or 7.2% from the $82.0 million reported in the same period of fiscal 2018. As a percentage of net sales, gross margin was 27.5% in the first quarter of fiscal 2019 compared to 28.6% in the first quarter of fiscal 2018.

Lewis Gould, Chairman of the Board of Directors, commented on Q.E.P.’s three month results, “Despite a tough organic sales comparison to last year, we grew our top line sales through two strategic acquisitions in the quarter, which have performed as we expected, but negatively impacted operating expenses. We continue to invest resources in new acquisition searches. The overall business continues to experience cost pressures as product, manufacturing and shipping costs increase. QEP will look to offset and contain these costs where possible, as well as pursue market-based price increases when practical to maximize our earnings.”

Mr. Gould continued, “As you already know, QEP has taken on a number of transformational initiatives to proactively mitigate the effect of cost increases and improve overall operational efficiency. I am extremely pleased that since the beginning of our fiscal year we successfully relocated two of our West Coast facilities and began shipping from our Phoenix-area hub. Our initiatives will continue to require investments throughout this year but will result in a much more streamlined and efficient operation in the future.”

Net sales for the first quarter of fiscal 2019 were $87.9 million reflecting an increase of $5.9 million, or 7.2%, from $82.0 million in fiscal 2018. This increase reflects the impact of acquired businesses during the quarter and the positive translation effects of foreign currency rate changes on the Company’s foreign operations that more than offset a net decrease in a range of product categories that experienced one-time initial sales orders in the prior year period, particularly in Europe and Australia.

The Company’s gross profit for the first quarter of fiscal 2019 was $24.2 million, an increase of $0.7 million, or 3.1%, from $23.4 million in fiscal 2018. The Company’s gross margin as a percentage of net sales for first quarter of fiscal year 2019 of 27.5% decreased from 28.6% in the prior fiscal year period. The Company experienced changes in its product mix and increased product and manufacturing costs, which were partially offset by the positive purchasing impact of changes in foreign currency rates compared to the first quarter in the prior year.

Operating expenses for the first quarter of fiscal 2019 and fiscal 2018 were $22.0 million and $19.5 million, respectively, or 25.0% and 23.8% of net sales in those periods. The increase was due to operating expenses of the acquired businesses, acquisition and integration costs, higher freight costs, as well as the timing of marketing program spending in Australia.

The decrease in interest expense during fiscal 2019 as compared to fiscal 2018 is due to repayment of outstanding debt, which more than offset increases to interest rates and utilization of credit facilities to support sales growth and fund acquisitions.

The provision for income taxes as a percentage of income before taxes was 28.0% for the first quarter of fiscal 2019 and 37.5% for the first quarter of fiscal 2018. The effective tax rate in first quarter fiscal 2019 reflects the estimated impact of the enacted U.S. tax legislation, Tax Cuts and Jobs Act. Both fiscal years reflect the relative contribution of the Company’s earnings sourced from its international operations.

Net income for the first quarter of fiscal 2019 and 2018 was $1.4 million and $2.3 million, respectively, or $0.44 and $0.71, respectively, per diluted share.

Earnings before interest, taxes, depreciation and amortization (EBITDA) as adjusted for corporate development and other one-time expenses for the first quarter of fiscal 2019 was $3.3 million as compared to $4.9 million for the first quarter of fiscal 2018.

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