Boca Raton, FL, January 12, 2006--Q.E.P. Co., in its third fiscal quarter reported net income of $283,000, or $0.08 per diluted share, compared with $1.2 million, or $0.33 per diluted share in the third quarter last fiscal year.
Analyst had forecast earnings per share for the quarter of $0.09.
For the quarter net sales increased 25.6 percent to $54.3 million, compared with $43.2 million in the fiscal 2005 third quarter.
Sales of flooring adhesives, including acquired operations, accounted for $4.0 million of the increase in sales for the fiscal 2006 third quarter and $13.2 million of the increase in sales for the fiscal 2006 nine months. Acquisitions other than flooring adhesives contributed an additional $1.0 million to the increase in sales for the fiscal 2006 third quarter and $3.6 million to the increase in sales for the nine months of fiscal 2006. Changes in foreign currency exchange rates accounted for approximately $139,000 of the sales increase in the fiscal 2006 third quarter and approximately $1.7 million in the fiscal 2006 nine months.
Gross profit for the quarter was 29.1 percent of net sales as compared with 32.1 percent for the same period a year ago. The gross profit for the fiscal 2006 nine months was 29.6 percent compared to 33.2 percent in the same period last year. The decline in gross profit for both the third quarter and nine months continued to include the effects of increases in the costs of raw materials and finished goods related to, among other matters, higher costs for crude oil and other industrial commodities, and the relative increase in flooring adhesives sales that have lower overall margins than specialty tools.
The company's pricing of individual product offerings have modestly increased throughout the fiscal year to offset a portion of cost increases. While the company's ability to increase pricing is traditionally behind cost increases, the company remains committed to seeking additional price increases that reflect the impact of continued cost increases.
In addition, the company's third quarter gross profit was impacted by costs associated with the disposal of inventories related to the restructuring of one of the company's foreign operations. The restructuring also included $490,000 of operating expenses principally related to personnel reductions.
Net income for the fiscal 2006 nine months declined to $1.4 million, or $0.39 per diluted share, from $3.6 million, or $0.98 per diluted share, in the same period last fiscal year.
For the fiscal 2006 nine months, net sales increased 24.1 percent to $159.9 million, compared with $128.9 million for the same period last fiscal year.
Lewis Gould, Q.E.P.'s chairman and chief executive officer, stated: "We remain pleased with the consistent strength of our top-line growth. We have recorded year-over-year increases in sales in 33 of the last 35 quarters. Though our profitability continues to be impacted by the increased costs of purchases, we remain focused on realizing price increases that fairly reflect those cost increases and ensuring that we control the growth in operating costs.
"During the quarter we were successful in raising prices on some of our products that have been under pressure from higher commodity prices. We integrated our Dalton manufacturing facility and distribution center into our North American operations. We began a direct shipping program that we believe will result in improvements in operating profitability. Our balance sheet is healthy. We are committed to our business plan and believe that increases in profitability will follow improvements in pricing and the continued management of operating expenses," concluded Mr. Gould.
