Boca Raton, FL, October 24, 2006--Q.E.P. Co. today announced financial results for its fiscal 2007 second quarter and six months ended August 31, 2006.
All May 31, 2006 and prior financial results have been restated for the change in the accounting of the Company's put warrant liability. The Company's amended February 28, 2006 Form 10-K and amended May 31, 2006 Form 10-Q have been filed with the SEC.
For the fiscal 2007 second quarter, net sales increased 2.9 percent to $54.5 million, compared with $52.9 million for the fiscal 2006 second quarter. For the first six months of fiscal 2007, net sales increased 5.6 percent to $108.6 million, compared with $102.8 million for the same period last fiscal year.
Sales outside North America accounted for approximately 21 percent of sales in the fiscal 2007 second quarter and 22 percent of year-to-date sales.
The gross profit for the fiscal 2007 second quarter increased to $14.9 million from $14.4 million in the same period last year. Gross profit, as a percentage of sales for the fiscal 2007 second quarter, was 27.3 percent, compared to 27.2 percent for the fiscal 2006 second quarter. For the first six months of fiscal 2007, gross profit increased 4.8 percent to $30.1 million, compared with $28.8 million for the comparable period last fiscal year. As a percentage of sales, gross profit was 27.7 percent for the first six months of fiscal 2007, compared to 28.0 percent for the same period last fiscal year.
For the fiscal 2007 second quarter, the Company reported a net loss of $6.7 million, or a loss of $1.94 per share, compared to a net loss of $375,000, or a loss of $0.11 per share for the second quarter last fiscal year. The net loss for the first six months of fiscal 2007 was $6.4 million, or a loss of $1.85 per share, compared to net income of $2.2 million, or $0.58 per diluted share for the same period last year.
The fiscal 2007 results for the three and six month periods ending August 31, 2006 include a goodwill impairment charge of $7.6 million. The goodwill impairment adjustment was necessary under accounting standards as the Company's equity market capitalization during the second quarter of fiscal 2007 was less than the fair value of the Company's net assets.
While net income adjusted for the change in the put warrant liability, and non-recurring items is not a measure of financial performance under generally accepted accounting principles, the Company believes that the measure provides meaningful comparisons of the Company's current and projected operating performance with its historical results.
The Company reported net income for the fiscal 2007 second quarter, after adjusting for the change in the put warrant liability and other non-recurring items, of $437,000, or $0.12 per diluted share, compared with $6,000, or $0.00 per diluted share in the fiscal 2006 second quarter. For the fiscal 2007 six month period, the Company reported net income, after the previously announced non-recurring items, of $682,000, or $0.18 per diluted share, compared to $572,000, or $0.15 per diluted share in the fiscal 2006 comparable period. A reconciliation of net income to net income adjusted for the change in the put warrant liability and non-recurring items is included within the financial information at the end of this press release.
The Company reported $671,000 of cash and cash equivalents at August 31, 2006. The Company's working capital increased $205,000 to $8.1 million as of August 31, 2006 compared to $7.9 million at February 28, 2006, our previous fiscal year end.
For the second quarter of fiscal 2007, the Company generated over $1.3 million of cash from operations as compared to cash used in operations of $1.7 million in the second quarter of fiscal 2006. For the first six months of fiscal 2007, the Company generated $83,000 as compared to $342,000 for the same period last year.
