BOCA RATON, FLORIDA — July 10, 2019 — Q.E.P. CO., INC. (OTC: QEPC.PK) (the “Company” or “Q.E.P.”) today reported its consolidated results of operations for its fiscal year ended February 28, 2019.

Q.E.P. reported net sales of $379.4 million for the year ended February 28, 2019, an increase of $57.0 million or 17.7% from the $322.4 million reported in fiscal 2018. Net sales growth for fiscal 2019 as compared to the prior fiscal year reflects the positive impact of businesses acquired during fiscal 2019, offset by sales declines in certain core product categories. As a percentage of net sales, gross margin was 26.5% in fiscal 2019, as compared to 27.7% in fiscal 2018.

Lewis Gould, Chairman of the Board of Directors, commented on the Company’s results, “We are pleased with the Company’s sales growth that has been achieved through our ongoing acquisition strategy with the acquisition of three businesses during fiscal 2019. During the second half of the year, the costs of integrating these new businesses as well as our significant investments in new products, samples, displays and streamlining our supply chain, negatively impacted fiscal 2019 results, but are expected to provide benefits in the future. Our expansion and consolidation into a new West Coast distribution center located in Arizona was completed in the fourth quarter. This facility provides manufacturing capacity for adhesives, new glue cartridge filling capability, and West Coast distribution for Kraus Flooring products. In the fourth quarter, we completed the consolidation and enhancement of our wood manufacturing operations with the transition from our former Indiana facility. We also sold the non-core product lines of Nupla and Halex in February and March 2019, respectively, in order to focus our efforts on our core flooring, tools and accessories businesses.”

Mr. Gould continued, “The core business continues to experience cost pressures as product, manufacturing and shipping costs increase, along with the absorption of higher tariffs imposed on imports from China. Q.E.P. continues to work with our customers to pass along market-based price increases. We continue to monitor our cost structure and use of working capital, adjusting our plans to achieve the best return on these investments.”

Mr. Gould concluded, “The Company has been deliberate in making strategic investments in our future. We believe that these investments, along with the expansion of our distribution channels, will create significant opportunities for sales growth and increased profitability.”

The Company’s gross profit for fiscal 2019 was $100.6 million, representing an increase of $11.1 million, or 12.5% from $89.5 million in fiscal 2018, which resulted from fiscal 2019 acquisitions. Gross margin as a percentage of net sales was negatively impacted by changes in product mix; costs related to facility, production and product rationalization, increased inbound transportation, product and manufacturing costs; and higher tariffs placed on the products the Company imports from China.

Operating expenses, excluding the net gain on the disposal of long-lived assets, for fiscal 2019 and 2018 were $106.3 million or 28.0% of net sales and $79.8 million or 24.8% of net sales, respectively. The increase in operating expenses was due to the incremental costs assumed with the businesses acquired during fiscal 2019, one-time costs related to acquisition activity and increases in outbound shipping costs.

The increase in interest expense during fiscal 2019 as compared to fiscal 2018 was due to incremental borrowings under the Company’s credit facilities to fund acquisitions and support sales growth, along with increases in interest rates.

The benefit for income taxes as a percentage of income before taxes was 23.9% for fiscal 2019, as compared to a provision for income taxes of 44.3% for fiscal 2018. The effective tax rate in fiscal 2019 and 2018 reflects the impact of the enacted U.S. tax legislation, Tax Cuts and Jobs Act, and the relative contribution of the Company’s earnings sourced from its international operations.

Net loss for fiscal 2019 was $3.0 million or $0.95 per diluted share, as compared to net income of $7.9 million or $2.49 per diluted share for fiscal 2018.

Earnings before interest, taxes, depreciation and amortization (EBITDA) as adjusted for impairment of long-lived assets, corporate development and other one-time expenses for fiscal 2019 was $2.0 million as compared to $15.3 million for fiscal 2018.

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