Boca Raton, FL, October 12, 2005--Q.E.P. CO., Inc, in the second quarter of fiscal 2006 second quarter reported net income was $352,000, or $0.10 per diluted share, compared with $1.2 million, or $0.33 per diluted share, for the second quarter last fiscal year.
Net income for the fiscal 2006 first half declined to $1.1 million, or $0.31 per diluted share from $2.4 million, or $0.65 per diluted share in the same period last fiscal year.
For the fiscal 2006 second quarter, net sales increased 27.8 percent to a quarterly record $54.4 million, compared with $42.6 million in the fiscal 2005 second quarter.
For the fiscal 2006 first half, net sales increased 23.3 percent to $105.7 million, compared with $85.7 million for the same period last fiscal year. Sales of flooring adhesives, including acquired operations, represented $5.3 million of the fiscal 2006 second quarter growth and $9.2 million of the fiscal 2006 first half growth.
Acquisitions other than flooring adhesives added an additional $1.1 million in sales to the fiscal 2006 second quarter and $2.6 million in sales to the first half of fiscal 2006. Changes in foreign currency exchange rates accounted for approximately $616,000 of the sales increase in the fiscal 2006 second quarter and approximately $1.5 million in the fiscal 2006 first half.
Gross profit for the quarter was 29.2% of net sales as compared with 33.6% for the same period a year ago. The gross margin for the fiscal 2006 first half was 29.9% compared to 33.8% in the same period last year.
The decline in gross margin for both the second quarter and first half was primarily a result 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 is seeking additional price increases that reflect recent cost increases and is actively managing its flooring adhesives business in order to raise overall adhesives margins.
Lewis Gould, Q.E.P.'s chairman and chief executive officer, stated: "We are pleased with the strength in top-line growth. Our continued increases in sales is a testament to the strong brand names and marketing, as more and more professionals and do-it-yourselfers rely on Q.E.P.'s products for their flooring needs.
"We are not pleased that escalating costs have masked the price increases, productivity improvements, and tighter controls on operating expenses we implemented over the past six months. Earlier this month, we announced a series of additional price increases on certain adhesive products and, along with the integration of our Dalton manufacturing facility and distribution center, we are cautiously optimistic that improvements in gross profit margins should be realized during the second half compared with the first six months," concluded Gould.
