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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 5, 2003
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-7023
QUAKER FABRIC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-1933106
(State of incorporation) (I.R.S. Employer Identification No.)
941 Grinnell Street, Fall River, Massachusetts 02721
(Address of principal executive offices)
(508) 678-1951
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of May 15, 2003, 16,760,026 shares of Registrant's Common Stock, $0.01
par value, were outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
QUAKER FABRIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
April 5, January 4,
2003 2003
----------- ----------
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 1,053 $ 1,098
Accounts receivable, less reserves of $1,807 and $1,826 at
April 5, 2003 and January 4, 2003, respectively 48,676 42,346
Inventories 51,367 50,407
Prepaid and deferred income taxes 3,100 4,080
Production supplies 1,616 1,634
Prepaid insurance 1,658 2,130
Other current assets 5,529 6,250
-------- --------
Total current assets 112,999 107,945
Property, plant and equipment, net 170,742 173,790
Other assets:
Goodwill 5,432 5,432
Other assets 1,405 1,519
-------- --------
Total assets $290,578 $288,686
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt $ 5,000 $ 5,000
Accounts payable 17,074 15,559
Accrued expenses 15,192 12,578
-------- --------
Total current liabilities 37,266 33,137
Long-term debt 55,200 61,200
Deferred income taxes 31,559 30,643
Other long-term liabilities 1,969 1,901
Redeemable preferred stock:
Series A convertible, $0.01 par value per share, liquidation preference
$1,000 per share, 50,000 shares authorized, none issued -- --
Stockholders' equity:
Common stock, $0.01 par value per share, 40,000,000 shares authorized;
16,680,398 and 16,146,026 shares issued and outstanding as of
April 5, 2003 and January 4, 2003, respectively 167 161
Additional paid-in capital 88,550 87,668
Unearned compensation (853) (901)
Retained earnings 78,860 76,964
Accumulated other comprehensive loss (2,140) (2,087)
-------- --------
Total stockholders' equity 164,584 161,805
-------- --------
Total liabilities and stockholders' equity $290,578 $288,686
======== ========
The accompanying notes are an integral part of these
consolidated financial statements
1
QUAKER FABRIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
Three Months Ended
--------------------
April 5, March 30,
2003 2002
-------- ---------
(Unaudited)
Net sales $90,225 $100,032
Cost of products sold 71,258 77,432
------- --------
Gross profit 18,967 22,600
Selling, general and administrative expenses 14,251 14,497
------- --------
Operating income 4,716 8,103
Other expenses:
Interest expense 1,069 1,069
Other, net (24) 5
------- --------
Income before provision for income taxes 3,671 7,029
Provision for income taxes 1,358 2,601
------- --------
Net income $ 2,313 $ 4,428
======= ========
Earnings per common share - basic (Note 1) $ 0.14 $ 0.28
======= ========
Earnings per common share - diluted (Note 1) $ 0.14 $ 0.26
======= ========
Dividends per common share $ 0.025 $ --
======= ========
Weighted average shares outstanding - basic (Note 1) 16,416 15,858
======= ========
Weighted average shares outstanding - diluted (Note 1) 16,764 16,744
======= ========
QUAKER FABRIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
Three Months Ended
--------------------
April 5, March 30,
2003 2002
-------- ---------
(Unaudited)
Net income $2,313 $4,428
------ ------
Other compensation income (loss)
Foreign currency translation adjustments (35) 2
Unrealized loss on hedging instruments (18) (50)
------ ------
Other compensation loss (53) (48)
------ ------
Comprehensive income $2,260 $4,380
====== ======
The accompanying notes are an integral part of these
consolidated financial statements
2
QUAKER FABRIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended
--------------------
April 5, March 30,
2003 2002
-------- ---------
(Unaudited)
Cash flows from operating activities:
Net income $ 2,313 $ 4,428
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 4,943 4,188
Amortization of unearned compensation 48 --
Deferred income taxes 916 1,293
Tax benefit related to exercise of common stock options 397 65
Changes in operating assets and liabilities:
Accounts receivable (6,384) (6,901)
Inventories (980) (3,433)
Prepaid expenses and other assets 2,292 252
Accounts payable and accrued expenses 4,129 2,770
Other long-term liabilities 68 87
------- -------
Net cash provided by operating activities 7,742 2,749
------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,882) (9,843)
------- -------
Cash flows from financing activities:
Change in revolving credit facility (6,000) 2,500
Repayments of capital lease obligations -- (69)
Proceeds from exercise of common stock options and
issuance of shares under the employee stock purchase plan 491 124
Proceeds from issuance of long-term debt -- 5,000
Capitalization of deferred financing costs -- (130)
Cash dividends (417)
------- -------
Net cash provided by (used in) financing activities (5,926) 7,425
------- -------
Effect of exchange rates on cash 21 (48)
------- -------
Net increase in cash (45) 283
Cash and cash equivalents, beginning of period 1,098 600
------- -------
Cash and cash equivalents, end of period $ 1,053 $ 883
======= =======
The accompanying notes are an integral part of these
consolidated financial statements
3
QUAKER FABRIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts)
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements reflect all
normal and recurring adjustments that are, in the opinion of management,
necessary to present fairly the financial position of Quaker Fabric Corporation
and Subsidiaries (Company) as of April 5, 2003 and January 4, 2003 and the
results of their operations and cash flows for the three months ended April 5,
2003 and March 30, 2002. The unaudited consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with accounting
principles generally accepted in the United States have been omitted pursuant to
those rules and regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading. Operating results
for the three months ended April 5, 2003 are not necessarily indicative of the
results expected for the full fiscal year or any future period. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
January 4, 2003.
Earnings Per Common Share
Basic earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. For
diluted earnings per share, the denominator also includes dilutive outstanding
stock options determined using the treasury stock method. The following table
reconciles weighted average common shares outstanding to weighted average common
shares outstanding and dilutive potential common shares.
Three Months Ended
--------------------
April 5, March 30,
2003 2002
-------- ---------
(In thousands)
Weighted average common shares outstanding 16,416 15,858
Dilutive potential common shares 348 886
------ ------
Weighted average common shares outstanding
and dilutive potential common shares 16,764 16,744
====== ======
Antidilutive options 1,838 581
====== ======
4
Note 2 - INVENTORIES
Inventories are stated at the lower of cost or market and include
materials, labor and overhead. A standard cost system is used and approximates
cost on a first in, first out (FIFO) basis. Cost for financial reporting
purposes is determined by the last-in, first-out (LIFO) method.
Inventories at April 5, 2003 and January 4, 2003 consisted of the
following:
April 5, January 4,
2003 2003
-------- ----------
Raw materials $24,143 $24,984
Work-in-process 10,153 8,930
Finished goods 15,984 13,786
------- -------
Inventory at FIFO 50,280 47,700
LIFO adjustment 1,087 2,707
------- -------
Inventory at LIFO $51,367 $50,407
======= =======
LIFO inventory values are higher than FIFO costs because current
manufacturing costs are lower than the older historical costs used to value
inventory on a LIFO basis.
Note 3 - SEGMENT REPORTING
The Company operates as a single business segment consisting of sales of
two products, upholstery fabric and specialty yarns. Management evaluates the
Company's financial performance in the aggregate and allocates the Company's
resources without distinguishing between yarn and fabric products.
Gross foreign and export sales from the United States to unaffiliated
customers by major geographical area were as follows:
Three Months Ended
--------------------
April 5, March 30,
2003 2002
-------- ---------
(In thousands)
North America (excluding USA) $ 6,336 $ 6,908
Middle East 457 2,018
South America 617 772
Europe 1,051 1,089
All Other 843 645
------- -------
$ 9,304 $11,432
======= =======
5
Gross sales by product category are as follows:
Three Months Ended
--------------------
April 5, March 30,
2003 2002
-------- ---------
(In thousands)
Fabric $87,928 $ 97,616
Yarn 3,023 3,608
Other 364 325
------- --------
$91,315 $101,549
======= ========
Note 4 - ACCOUNTING FOR STOCK BASED COMPENSATION
Accounting for Stock Based Compensation. The Company discloses stock-based
compensation information in accordance with SFAS 148 and SFAS 123. SFAS 148 does
not change the provisions of SFAS 123 that permit entities to continue to apply
the intrinsic value method of APB 25. The Company has elected to continue to
account for its stock option plans under APB 25 and related interpretations as
well as to provide disclosure of stock based compensation as outlined in SFAS
123 as amended by SFAS 148. SFAS 123 requires disclosure of pro forma net
income, EPS and other information as if the fair value method of accounting for
stock options and other equity instruments described in SFAS 123 had been
adopted. SFAS 123 does not apply to awards made prior to June 24, 1995, and so
all pro forma disclosures include the effects of all options granted after June
24, 1995. Additional awards in future years are anticipated. The effects of
applying SFAS 123 in this pro forma disclosure are not indicative of future
expectations.
The following table illustrates the effect on net income and earnings per
share as if the Black-Scholes fair value method described in SFAS No. 123,
"Accounting for Stock-Based Compensation," as amended, had been applied to the
Company's stock option plans.
6
Three Months Ended
--------------------
April 5, March 30,
2003 2002
-------- ---------
(In thousands)
(Unaudited)
Net income, as reported $2,313 $4,428
Add: Stock-based employee compensation
expense included in net income, net of
related tax effects 30 --
Less: Stock-based employee compensation
expense determined under Black-Scholes
option pricing model, net of related tax effects 252 231
------ ------
Pro forma net income: $2,091 $4,197
====== ======
Earnings per common share - basic
As reported $ 0.14 $ 0.28
Pro forma $ 0.13 $ 0.26
Earnings per common share - diluted
As reported $ 0.14 $ 0.26
Pro forma $ 0.12 $ 0.25
Note 5 - SUBSEQUENT EVENTS
On April 24, 2003, the Board of Directors approved and announced the
payment of a cash dividend of $0.025 per common share payable on May 23, 2003 to
stockholders of record on May 9, 2003.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's fiscal year is a 52 or 53 week period ending on the Saturday
closest to January 1. "Fiscal 2002" was a 53 week period ended January 4, 2003
and "Fiscal 2003" will be a 52 week period ending January 3, 2004. The first
three months of Fiscal 2002 and Fiscal 2003 ended March 30, 2002 and April 5,
2003, respectively.
7
Critical Accounting Policies
The Company considered the disclosure requirements of Financial Reporting
Release No. 60 regarding critical accounting policies and Financial Reporting
Release No. 61 regarding liquidity and capital resources, certain trading
activities and related party/certain other disclosures, and concluded that there
were no material changes during the first three months of 2003 that would
warrant further disclosure beyond those matters previously disclosed in the
Company's Annual Report on Form 10-K for the year ended January 4, 2003.
Results of Operations
Net sales for the first quarter of 2003 decreased $9.8 million or 9.8%, to
$90.2 million from $100.0 million for the first quarter of 2002. The overall
weighted average gross sales price per yard decreased 1.4%, to $5.51 for the
first quarter of 2003 from $5.59 for the first quarter of 2002. The average
gross sales price per yard of middle to better-end fabrics increased by 1.9%, to
$6.51 in the first quarter of 2003 as compared to $6.39 in the first quarter of
2002. The average gross sales price per yard of promotional-end fabric was $4.04
in the first quarters of 2003 and 2002. The gross volume of fabric sold
decreased 8.7%, to 15.9 million yards for the first quarter of 2003 from 17.5
million yards for the first quarter of 2002. Middle to better-end fabrics
represented 70.6% of fabric sales during the first quarter of 2003 compared to
75.4% in the first quarter of 2002. The Company sold 17.2% fewer yards of middle
to better-end fabrics and 7.8% more yards of promotional-end fabrics in the
first quarter of 2003 than in the first quarter of 2002.
The Company's new order rate declined approximately 19% during the first
quarter of 2003 as compared to the first quarter of 2002, and the Company's
backlog decreased by approximately 49% to $26.3 million at the end of the first
quarter of 2003 as compared to $51.5 million at the end of the first quarter of
2002. The decline in the new order rate and backlog position resulted primarily
from slow growth in the domestic economy as well as steps taken to significantly
reduce the Company's average delivery lead time to customers.
Gross fabric sales within the United States decreased 8.8%, to $78.6
million in the first quarter of 2003 from $86.2 million in the first quarter of
2002. Foreign and Export sales decreased 18.6%, to $9.3 million in the first
quarter of 2003 from $11.4 million in the first quarter of 2002. Gross yarn
sales decreased 16.2%, to $3.0 million in the first quarter of 2003 from $3.6
million in the same period of 2002.
The gross profit margin for the first quarter of 2003 decreased to 21.0%,
as compared to 22.6% for the first quarter of 2002. Due to a decline in orders
during the quarter, the Company adjusted its production rates to levels
consistent with the lower order rates. The decrease in the gross margin
percentage resulted primarily from higher fixed costs per unit attributable to
lower production volumes as well as fairly significant quarter over quarter
increases in energy, insurance and depreciation costs which were partially
offset by a decrease in manufacturing overtime costs.
Selling, general and administrative expenses decreased to $14.3 million for
the first quarter of 2003 from $14.5 million for the first quarter of 2002.
Selling, general and
8
administrative expenses as a percentage of net sales increased to 15.8% in the
first quarter of 2003 from 14.5% in the first quarter of 2002. The increase in
selling, general and administrative expenses as a percentage of sales was due to
lower sales volume in combination with higher sampling expenses and higher
professional fees.
Interest expense was $1.1 million for the first quarters of 2003 and 2002.
Lower levels of variable rate debt in the first quarter of 2003 were offset by
higher average senior debt with higher fixed interest rates.
The Company provides for income taxes on an interim basis, using the
estimated annual effective income tax rate. The Company's estimated tax rate was
37.0% for the first quarter of 2003 and 2002. The effective income tax rate is
lower than the combined federal and state statutory rates, due primarily to
certain tax benefits related to extraterritorial income at the federal level and
investment tax credits at the state level.
Net income for the first quarter of 2003 decreased to $2.3 million or $0.14
per common share-diluted, from $4.4 million or $0.26 per common share-diluted
for the first quarter of 2002.
Liquidity and Capital Resources
The Company historically has financed its operations and capital
requirements through a combination of internally generated funds, borrowings
under the Credit Agreement (as hereinafter defined), and debt and equity
offerings. The Company's capital requirements have arisen principally in
connection with (i) the purchase of equipment to expand production capacity,
introduce new technologies to broaden and differentiate the Company's products,
and improve the Company's quality and productivity performance, (ii) increases
in the Company's working capital needs related to its sales growth, and (iii)
investments in the Company's information technology systems.
The primary source of the Company's liquidity and capital resources has
been operating cash flow. The Company's net cash provided by operating
activities was $7.7 million and $2.7 million in the first three months of 2003
and 2002, respectively. As necessary, the Company supplements its operating cash
flow with borrowings. Net borrowings (repayments) were ($6.0) million in the
first quarter of 2003 and $7.4 million in the first quarter of 2002.
Capital expenditures in the first three months of 2003 and 2002 were $1.9
million and $9.8 million, respectively. Capital expenditures during the first
three months of 2003 were funded by operating cash flow. Management anticipates
that capital expenditures for new projects will total approximately $9.0 million
in 2003, consisting principally of $5.0 million for various manufacturing
equipment, $2.0 million for IT projects and $2.0 million for various other
capital projects. Additionally, the Company is analyzing several financing
alternatives in connection with the possible development of additional
manufacturing and warehousing facilities in the Fall River area. Management
believes that operating income and borrowings under the Credit Agreement (as
hereinafter defined) will provide sufficient funding for the Company's capital
expenditures and working capital needs for the foreseeable future.
The Company issued $45.0 million of Senior Notes due October 2005 and 2007
(the Senior Notes) during 1997. The Senior Notes bear interest at a fixed rate
of 7.09% on $15.0 million and 7.18% on $30.0 million. Annual principal payments
begin on October 10, 2003 with
9
a final payment due October 10, 2007. Annual principal payment amounts are three
payments of $5.0 million beginning in 2003 followed by two payments of $15.0
million beginning in 2006.
On February 14, 2002, the Company issued $5.0 million of 7.56% Series A
Notes due February 2009 (the "Series A Notes"). The Series A Notes are unsecured
and bear interest at a fixed rate of 7.56%, payable semiannually. The Series A
Notes may be prepaid in whole or in part prior to maturity, at the Company's
option, subject to a yield maintenance premium, as defined. In addition and also
on February 14, 2002, the Company entered into a $45.0 million non-committed
shelf note agreement with an insurance company pursuant to which the Company may
issue additional senior notes prior to February 14, 2005 with maturity dates of
up to ten years.
The Company also has a $60.0 million Credit Agreement with a bank which
expires January 31, 2007 (the Credit Agreement). As of April 5, 2003, the
Company had $10.2 million outstanding under the Credit Agreement and unused
availability of $49.6 million. See Note 5 of Notes to Consolidated Financial
Statements included in the Company's 2002 Annual Report on Form 10-K.
The Company is required to comply with a number of affirmative and negative
convenants under the Credit Agreement, the Senior Notes, and the Series A Notes,
including, but not limited to, maintenance of certain financial tests and ratios
(including interest coverage ratios, net worth related ratios, and net worth
requirements); limitations on certain business activities of the Company;
restrictions on the Company's ability to declare and pay dividends, incur
additional indebtedness, create certain liens, incur capital lease obligations,
make certain investments, engage in certain transactions with stockholders and
affiliates, and purchase, merge, or consolidate with or into any other
corporation. The Company is currently in compliance with all the affirmative and
negative convenants in the Credit Agreement, the Series A Notes, and the Senior
Notes and management believes the Company's continued compliance will not
prevent the Company from operating in the normal course of business.
The Company has historically not paid dividends, instead using earnings to
fuel growth and capital equipment requirements. On March 3, 2003, the Company's
Board of Directors adopted a new dividend policy reflecting Quaker's intention
to pay quarterly dividends going forward, with the level of each dividend
payment, if any, to be determined by Quaker's Board of Directors based on a
number of factors, including the Company's financial performance, cash flows and
cash requirements. On April 24, 2003, the Board of Directors approved and
announced the payment of a cash dividend of $0.025 per common share payable on
May 23, 2003 to stockholders of record on May 9, 2003.
Inflation
The Company does not believe that inflation has had a significant impact on
the Company's results of operations for the periods presented. Historically, the
Company believes it has been able to minimize the effects of inflation by
improving its manufacturing and purchasing efficiency, by increasing employee
productivity, and by reflecting the effects of inflation in the selling prices
of the new products it introduces each year.
10
Cautionary Statement Regarding Forward-Looking Information
Statements contained in this report, as well as oral statements made by the
Company that are prefaced by the words "may," "will," "expect," "anticipate,"
"continue," "estimate," "project," "intend," "designed" and similar expressions,
are intended to identify forward-looking statements regarding events, conditions
and financial trends that may affect the Company's future plans of operations,
business strategy, results of operations and financial position. These
statements are based on the Company's current expectations and estimates as to
prospective events and circumstances about which the Company can give no firm
assurance. Further, any forward-looking statement speaks only as of the date on
which such statement is made, and the Company undertakes no obligation to update
any forward-looking statement to reflect events or circumstances after the date
on which such statement is made. As it is not possible to predict every new
factor that may emerge, forward-looking statements should not be relied upon as
a prediction of the Company's actual future financial condition or results.
These forward-looking statements like any forward-looking statements, involve
risks and uncertainties that could cause actual results to differ materially
from those projected or unanticipated. Such risks and uncertainties include
product demand and market acceptance of the Company's products, regulatory
uncertainties, the effect of economic conditions, the impact of competitive
products and pricing, foreign currency exchange rates, changes in customer
ordering patterns, and the effect of uncertainties in markets outside the U.S.
(including Mexico and South America) in which the Company operates.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(In thousands)
Derivative Financial Instruments, Other Financial Instruments, and Derivative
Commodity Instruments
Quantitative and Qualitative Disclosures About Market Risk
The Company's exposures relative to market risk are due to foreign exchange
risk and interest rate risk.
Foreign currency risk
Approximately 2.8% of the Company's revenues are generated outside the U.S.
from sales which are not denominated in U.S. dollars. Foreign currency risk
arises because the Company engages in business in certain foreign countries in
local currency. Accordingly, in the absence of hedging activities whenever the
U.S. dollar strengthens relative to the other major currencies, there is an
adverse affect on the Company's results of operations, and alternatively,
whenever the U.S. dollar weakens relative to the other major currencies, there
is a positive affect on the Company's results of operations.
11
It is the Company's policy to minimize, for a period of time, the
unforeseen impact on its results of operations of fluctuations in foreign
exchange rates by using derivative financial instruments to hedge the fair value
of foreign currency denominated intercompany payables. The Company's primary
foreign currency exposures in relation to the U.S. dollar are the Mexican peso
and the Brazilian real.
At April 5, 2003, the Company has the following derivative financial
instruments to hedge the anticipated cash flows from the repayment of foreign
currency denominated intercompany payables outstanding:
Notional Weighted Notional
Amount in Average Amount in
Type of Local Contract U.S. Fair
Instrument Currency Currency Rate Dollars Value Maturity
- ---------------- -------------- ------------ -------- ------------ --------- ---------
Forward Contract Mexican Peso 12.0 million 11.10 $1.1 million $(25,000) Jun. 2003
Forward Contract Brazilian Real 1.0 million 3.60 $0.3 million $(28,000) Jun. 2003
Interest Rate Risk
Approximately 83.0% of the Company's long-term debt is at fixed rates.
Accordingly, a change in interest rates has an insignificant effect on the
Company's interest expense. The fair value of the Company's long-term debt,
however, would change in response to interest rate movements due to its fixed
rate nature.
The Company has evaluated the impact on all long-term maturities of
changing the interest rate 10% from the rate levels that existed at April 5,
2003 and has determined that such a rate change would not have a material impact
on the Company.
12
QUAKER FABRIC CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Controls and Procedures
During the 90-day period prior to the filing date of this report,
management, including the Company's Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based upon, and as of the date of
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures were effective, in all
material respects, to ensure that information required to be disclosed in the
reports the Company files and submits under the Exchange Act is recorded,
processed, summarized and reported as and when required.
There have been no significant changes in the Company's internal controls
or in other factors which could significantly affect internal controls
subsequent to the date the Company carried out its evaluation. There were no
significant deficiencies or material weaknesses identified in the evaluation
and, therefore, no corrective actions were taken.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
None
(B) There were no reports on Form 8-K filed during the three months
ended April 5, 2003.
13
QUAKER FABRIC CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUAKER FABRIC CORPORATION
Date: May 15, 2003 By: /s/ Paul J. Kelly
--------------------------------
Paul J. Kelly
Vice President - Finance
and Treasurer
14
CERTIFICATIONS
I, Larry A. Liebenow, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Quaker Fabric
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
By: /s/ Larry A. Liebenow
--------------------------------
Larry A. Liebenow
Chief Executive Officer
Date: May 15, 2003
15
I, Paul J. Kelly, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Quaker Fabric
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
By: /s/ Paul J. Kelly
--------------------------------
Paul J. Kelly
Chief Financial Officer
Date: May 15, 2003
16
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
In connection with this quarterly report on Form 10-Q of Quaker Fabric
Corporation for the quarterly period ended April 5, 2003 (the "Periodic
Report"), I, Larry A. Liebenow, Chief Executive Officer of the Company, hereby
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that the Periodic Report fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that the information contained in the Periodic Report fairly presents,
in all material respects, the financial condition and results of operations of
the Company.
Date: : May 15, 2003 /s/ Larry A. Liebenow
------------------------------------
Larry A. Liebenow
Chief Executive Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
In connection with this quarterly report on Form 10-Q of Quaker Fabric
Corporation for the quarterly period ended April 5, 2003 (the "Periodic
Report"), I, Paul J. Kelly, Chief Financial Officer of the Company, hereby
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that the Periodic Report fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that the information contained in the Periodic Report fairly presents,
in all material respects, the financial condition and results of operations of
the Company.
Date: May 15, 2003 /s/ Paul J. Kelly
------------------------------------
Paul J. Kelly
Chief Financial Officer
17