Thursday, Zep Inc. (ZEP), a provider of cleaning and maintenance solutions, reported an increase in earnings for the third quarter. The prior-year period's results were dented by restructuring charges and other special items. On an adjusted basis, earnings per share declined as weakened demand and unfavorable foreign currency translation impacted revenue.
Net income for the quarter surged to $5.4 million or $0.25 per share from $0.2 million or $0.01 per share in the corresponding period last year. Results for the prior-year period included $5.9 million or $0.27 per share of charges related to restructuring and other special items.
Adjusted net income for the quarter declined to $5.4 million or $0.25 per share from $6.0 million or $0.28 per share in the same period last year, yet topped the $0.14 per share projected by four analysts polled by Thomson Reuters. Analysts' estimates typically exclude special items.
Quarterly net sales were $123.0 million, down 15.3% from $145.2 million in the same period last year. Two Street analysts expected the company to report sales of $127 million for the quarter.
During the quarter, the company realized higher year-over-year selling prices of about $4.7 million, mainly from domestic operations. However, weakened demand in each of its markets resulted in volume-related sales declines of $21.5 million. Foreign currency translation negatively impacted total net sales by $5.4 million compared with the year-ago quarter.
Operating profit surged to $8.8 million from $0.9 million in the year-ago quarter. Charges for restructuring and other special items on a pretax basis totaled $9.3 million during the prior year's third quarter. Operating profit margins, adjusted for restructuring and other special items, for the most recent quarter increased to 7.2% from 7.0% in the same period last year.
For the nine month period, net income dropped to $2.9 million or $0.14 per share, from $8.4 million or $0.39 per share, reported in the prior-year period. Net sales declined to $366.7 million from $421.9 million in the prior year.
Looking ahead, John Morgan, chairman, president and chief executive officer of Zep Inc. said "Economic forecasts suggest GDP may not recover until well into our fiscal year 2010. Absent significant further deterioration in current economic conditions, we expect profitability in all four quarters of our next fiscal year and believe we are well positioned for an eventual economic rebound."
Zep consolidated five branches in the last 90 days and expects to consolidate another four branches before the conclusion of the calendar year. The company said it continues to pursue new industrial distribution partnerships with its Zep Professional product line, and remains committed to growing its Zep Commercial product line with both existing and new retailers.
ZEP closed Wednesday's regular trading session at $13.91.
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