Q.E.P. CO., INC. REPORTS FISCAL 2021 YEAR-END SALES AND EARNINGS
Full Year Net Sales of $387.6 million and Net Income of $6.9 million
BOCA RATON, FLORIDA — June 14, 2021 — 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, nonoperating 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.