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Quality Products Announces Results For the Three and Six Months Ended March 31, 2009

Dépèche transmise le 7 mai 2009 par Business Wire

COLUMBUS, Ohio--(BUSINESS WIRE)--Quality Products, Inc. (Pink Sheets: QPDC), a manufacturer and distributor of aircraft ground support equipment (“Columbus Jack & Regent Manufacturing”) and hydraulic press machine tools (“Multipress”), today reported fiscal 2009 second quarter and six months operating results.

QUARTERLY RESULTS

Net income was $1,118,793 compared to $946,788 earned last year, an increase of $172,005 or 18.2%. Revenues were $5,469,518 compared to $5,066,833 last year, an increase of $402,685 or 7.9%. The gross margin decreased to 40.4% this year from 44.8% last year. Last year’s gross margin was unusually strong and was not representative of typical performance for our business. As with most manufacturers, our margins can vary significantly depending on product mix and pricing pressures in the marketplace. Due to these factors, we consider the range of 30 – 35% to be normal for gross margins, indicating even the most recent quarter was at the high end of our expectations.

The Multipress segment struggled during the quarter. Although shipments increased by more than $145,000 or 10.8% compared to last year, gross profit decreased by $60,000 or (13.6)%. Additionally, incoming orders remained weak as a result of the slowdown in the economy, and were down 41% compared to last year. Historically, the visibility of future business for this segment has rarely exceeded six months, making it difficult to predict long-term trends.

The ground support equipment segment held steady with an increase in shipments of approximately $256,000 or 6.9% compared to last year, and gross profit remaining unchanged. Incoming orders increased by approximately 31% compared to last year. The slowdown in the general economy appears to be having an effect on this segment’s commercial business, but the government defense business remains strong. However, if the U.S. government reduces defense spending, it is likely that this segment would be unfavorably impacted.

S G & A expenses decreased to 16.4% of sales in the current quarter compared to 17.4% last year. In terms of dollars, S G & A increased by approximately $16,000 primarily due to employee wages and benefits.

Other income in the latest quarter includes $341,000 of royalties for our joint participation in certain military contracts.

Income tax expense increased by approximately $131,000 primarily due to higher federal income tax estimates.

Basic EPS was $0.31, down from $0.34 and diluted EPS increased to $0.31 from $0.24.

FISCAL YTD RESULTS

Net income was $2,094,002 compared to $1,796,659 earned last year, an increase of $297,343 or 16.5%. Revenues were $10,496,904 compared to $9,019,837 last year, an increase of $1,477,067,or 16.4%. Gross margins decreased to 37.8% this year from 43.9% last year. While the gross margin in the current year is very strong, it should not be considered representative of future performance. As with most manufacturers, our margins can vary significantly depending on product mix and pricing pressures in the marketplace. Due to these factors, we consider the range of 30 – 35% to be normal for gross margins.

The Multipress segment has performed reasonably well in fiscal 2009, primarily due to the first quarter. Shipments increased by $542,000 or 28.8% compared to last year. Gross profit increased by $84,000 or 12.6%. Although shipments were higher in the first six months, incoming orders continue to weaken. Historically, the visibility of future business for this segment has rarely exceeded six months, making it difficult to predict long-term trends.

The ground support equipment segment has remained steady in fiscal 2009, a surprising result in the current economy. Shipments increased by approximately $934,000 or 13.1% compared to last year while gross profit decreased by $69,000 or (2.1)%. Even more surprising is the fact that incoming orders have remained very strong. However, if the U.S. government reduces defense spending, it is likely that this segment would be unfavorably impacted.

S G & A expenses decreased to 16.3% of sales in 2009 compared to 17.2% in 2008. In terms of dollars, S G & A increased by approximately $163,000 primarily due to employee wages and benefits, commissions for external sales reps, and consulting fees.

2009 other income includes $792,000 of royalties for our joint participation in certain military contracts.

Income tax expense increased by approximately $353,000 primarily due to higher federal income tax estimates.

Basic EPS decreased to $0.57 from $0.65 and diluted EPS increased to $0.57 from $0.46.

Backlog

On May 7th, the order backlog for Multipress was approximately $292,000, up slightly from the previous quarter’s reported level of $267,000, but down significantly from last year’s level of $1.4 million. Furthermore, $207,000 of the current backlog represents one order.

The backlog for Columbus Jack was approximately $7.5 million, down slightly from the previous quarter’s reported level of $7.8 million, and down significantly from last year’s level of $9.7 million.

We do not provide financial estimates for future periods.

Liquidity & Cash Uses for the Six months Ended March 31, 2009

As shown in the March 31, 2009 balance sheet, cash, short-term investments, accounts receivable and inventories totaled $9.0 million compared to approximately $2.6 million of total liabilities. The balance outstanding under our credit lines was $0, leaving us with borrowing capacity of $4,900,000 at March 31, 2009.

We generated positive operating cash flow of $2,803,876. Capital expenditures were $187,620. We used cash of $871,849 to purchase investments and $382,893 to repay debt. We also used $40,195 to repurchase shares of our common stock during the quarter. Through May 7th we have repurchased 374,739 shares, or 74.9%, of the 500,000 shares authorized by the Board on March 26, 2007.

Other Information

Quality Products currently has 73 employees down from 76 in the previous report.

As discussed in previous reports, Columbus Jack will occasionally be a joint participant in certain military contracts which are awarded in the name of the other participating entity. As such, we will not recognize revenues associated with those contracts, but instead will recognize our share of the contract profits as miscellaneous income.

For more information on products and services please visit: www.columbusjack.com, www.multipress.com, and www.regentgse.com.

This press release, other than the historical information, consists of "forward-looking statements" (as defined in the Private Securities Litigation Reform Act of 1995), which are identified by the use of words such as "believes", "expects", "projects", and similar expressions. While these statements reflect the Company's current beliefs and are based on assumptions that the Company believes are reasonable, they are subject to uncertainties and risks that could cause actual results to differ materially from anticipated results.

QUALITY PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED) MARCH 31, 2009
ASSETS
CURRENT ASSETS:
Cash		$	1,453,352
Short-term Investments			476,887
Accounts receivable, less allowance for doubtful accounts of $55,328			2,442,828
Inventories, less reserve of $449,814			4,668,020
Deferred taxes, current			930,161
Prepaid expenses and other current assets			272,969
Total current assets			10,244,217
PROPERTY AND EQUIPMENT, less accumulated depreciation of $1,311,426			1,215,817
INVESTMENTS, non-current			2,223,964
DEFERRED TAXES, non-current			896,612
INTANGIBLE ASSETS, less accumulated amortization of $1,298,227			1,060,209
GOODWILL, Less accumulated amortization of $19,174			2,723,247
TOTAL ASSETS		$	18,364,066
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable		$	243,750
Accounts payable			869,811
Accrued payroll and payroll related expenses			294,970
Other accrued expenses and current liabilities			286,502
Taxes payable			88,668
Customer deposits			459,401
Total current liabilities			2,243,102
PENSION OBLIGATION			164,053
LONG-TERM DEBT:
Notes payable, net of current portion			231,563
TOTAL LIABILITIES			2,638,718
STOCKHOLDERS' EQUITY:
Convertible preferred stock, Series A			-
Convertible preferred stock, Series B			-
Common stock			31
Additional paid-in capital			22,921,236
Accumulated other comprehensive loss			(215,813	)
Accumulated deficit			(5,975,045	)
Less cost of treasury stock (202,923 shares of common stock)			(1,005,061	)
Total stockholders' equity			15,725,348
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	18,364,066

QUALITY PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2009 AND 2008
		Three Months								Six Months
		(UNAUDITED)								(UNAUDITED)
		2009				2008				2009				2008
NET SALES		$	5,469,518			$	5,066,833			$	10,496,904			$	9,019,837
COST OF GOODS SOLD			3,259,320				2,796,369				6,525,558				5,063,697
GROSS PROFIT			2,210,198				2,270,464				3,971,346				3,956,140
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
		896,298				880,459				1,714,078				1,550,960
INCOME FROM OPERATIONS			1,313,900				1,390,005				2,257,268				2,405,180
OTHER INCOME (EXPENSE):
Interest expense			(10,023	)			(35,510	)			(21,602	)			(61,152	)
Interest income			10,024				--				27,252				--
Miscellaneous other income			352,513				8,691				824,729				92,652
Other income (expense), net			352,514				(26,819	)			830,379				31,500
INCOME BEFORE PROVISION FOR INCOME TAXES
		1,666,414				1,363,186				3,087,647				2,436,680
PROVISION FOR INCOME TAXES			547,621				416,398				993,645				640,021
NET INCOME		$	1,118,793			$	946,788			$	2,094,002			$	1,796,659
UNREALIZED LOSS ON INVESTMENTS
		(18,715	)			--				(51,223	)			--
COMPREHENSIVE INCOME		$	1,100,078			$	946,788			$	2,042,779			$	1,796,659
BASIC INCOME PER SHARE:		$	.31			$	.34			$	.57			$	.65
DILUTED INCOME PER SHARE:		$	.31			$	.24			$	.57			$	.46
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic			3,666,392				2,663,873				3,668,759				2,683,831
Diluted			3,666,392				3,897,206				3,668,759				3,917,164

QUALITY PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED MARCH 31, 2009 AND 2008
		2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	2,094,002			$	1,796,659
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			228,665				357,216
Inventory reserve			1,070				104,724
Bad Debt Expense			--				9,019
Deferred taxes			897,425				463,373
Pension expense			21,650				--
Provision for warranty liability			2,039				11,371
Loss on disposal of assets			--				657
Loss on sale of investments			1,719				--
Changes in operating assets and liabilities:
Accounts receivable			(258,003	)			(889,581	)
Inventories			390,231				(1,599,069	)
Other assets			(101,107	)			102,683
Accounts payable			(134,336	)			131,690
Accrued payroll			(121,947	)			(61,024	)
Accrued expenses			(123,516	)			9,766
Taxes payable			(76,066	)			(3,770	)
Customer deposits			(17,950	)			95,321
Net cash provided by operating activities			2,803,876				529,035
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(187,620	)			(395,741	)
Cash received from sale of investments			17,000				--
Purchase of investments			(871,849	)			(802,058	)
Net cash (used) by investing activities			(1,042,469	)			(1,197,799	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on non-related party debt			(284,893	)			(243,716	)
Proceeds from (Payments on) Line of Credit			(98,000	)			1,295,000
Common Stock Repurchased			(40,195	)			(322,270	)
Dividends paid to preferred stockholders			--				(60,250	)
Net cash (used) by financing activities			(423,088	)			(668,764	)
NET INCREASE IN CASH AND CASH EQUIVALENTS			1,338,319				0
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			115,033				0
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	1,453,352			$	0
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest		$	24,626			$	50,946
Cash paid for income taxes		$	172,285			$	180,268