Q.E.P. CO., INC. REPORTS FISCAL 2022 NINE MONTH AND THIRD QUARTER FINANCIAL RESULTS

Record Nine Month Net Sales of $339.2 million
Nine Month Net Income of $7.7 million

BOCA RATON, FLORIDA — January 10, 2022 — Q.E.P. CO., INC. (OTCQX: QEPC) (the “Company” or “QEP”) today reported its consolidated results of operations for the first nine months and third quarter of its fiscal year 2022, which ended on November 30, 2021.

QEP reported net sales of $339.2 million for the nine months ended November 30, 2021, an increase of $51.2 million or 17.8% from the $288.0 million reported in the same period of fiscal 2021. The Company reported net sales of $111.9 million for the quarter ended November 30, 2021, an increase of $13.0 million or 13.1% from the $98.9 million reported in the same period of fiscal 2021. The increase in net sales for the first nine months and third quarter of fiscal 2022 compared to the prior 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 the prior year.

Lewis Gould, Executive Chairman, commented on the Company’s results, “Despite significant inflationary pressures and unprecedented disruption in the global supply chain, demand for the Company’s products remains strong in all geographic segments and channels. The Company, in close collaboration with our customers, continues to monitor the impact of rising product costs, and has implemented appropriate price increases to moderate margin erosion. We have also increased our investment in inventory to ensure product availability and service levels to our customers and continue to invest in the sales support infrastructure necessary to drive our market expansion initiatives.”

The Company’s gross profit for the first nine months of fiscal 2022 was $92.8 million compared to $81.8 million in the corresponding fiscal 2021 period, an increase of $11.0 million or 13.5%. Gross profit for the third quarter of fiscal 2022 was $30.5 million, representing an increase of $1.8 million or 6.4%, from $28.7 million in the corresponding fiscal 2021 period. The Company’s gross margin as a percentage of net sales for the first nine months and third quarter of fiscal year 2022 was 27.4% and 27.2%, respectively, which decreased from 28.4% and 29.0% in the corresponding prior fiscal year periods, respectively. The decrease in gross margin as a percentage of net sales was due to increased inbound freight and product costs that have not been fully recovered through customer price increases during the first nine months and third quarter of fiscal 2022.

Operating expenses for the first nine months and third quarter of fiscal 2022 were $81.1 million and $26.4 million, respectively, or 23.9% and 23.6% of net sales in those periods, compared to $72.8 million and $25.4 million, respectively, or 25.3% and 25.6% of net sales in the comparable fiscal 2021 periods. The increase in operating expenses was due to higher shipping costs related to sales volume, along with higher personnel and market costs from the Company’s reinvestment in sales support infrastructure that was suspended or reduced during the prior year’s economic downturn caused by the COVID-19 pandemic. Additionally, during the prior year, the Company’s non-US based operations benefited from non-recurring local government subsidies received for maintaining certain employment levels during the pandemic.

The lower interest expense during the first nine months and third quarter of fiscal 2022 compared to the same periods in the prior fiscal year was principally due to a reduction in borrowings under the Company’s credit facilities.

The provision for income taxes as a percentage of income before taxes was 28.0% for the first nine months and third quarter for both fiscal 2022 and fiscal 2021.

Net income for the first nine months and third quarter of fiscal 2022 was $7.7 million and $2.7 million, respectively, or $2.31 and $0.81, respectively, per diluted share. For the comparable periods of fiscal 2021, net income was $5.5 million and $2.1 million, respectively, or $1.66 and $0.63, respectively, per diluted share.

Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) before restructuring charges for the first nine months and third quarter of fiscal 2022 was $14.8 million and $5.1 million, respectively as compared to $13.5 million and $4.8 million for the first nine months and third quarter of fiscal 2021, respectively.

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