Exhibit 99.1
Quaker Fabric Reports Second Quarter Financial Results and Dividend
FALL RIVER, Mass.--(BUSINESS WIRE)--July 22, 2004--QUAKER FABRIC
CORPORATION (NASDAQ Symbol: QFAB) today reported net sales of $73.1
million, a net loss of $482,000, and a diluted loss per share of
($0.03) for the three-month period ended July 3, 2004; compared to net
sales of $73.9 million, net income of $165,000, and diluted earnings
per share of $0.01 for the corresponding period of fiscal 2003. Basic
earnings (loss) per share for the second quarters of 2004 and 2003
were ($0.03) and $0.01, respectively.
Results of operations for the first six months of fiscal year 2004
were net sales of $157.5 million, net income of $2.0 million, and
diluted earnings per share of $0.11; compared to net sales of $164.1
million, net income of $2.5 million, and diluted earnings per share of
$0.15 for the corresponding period of fiscal 2003. Basic earnings per
share for the first six months of 2004 and 2003 were $0.12 and $0.15,
respectively.
"The overall weakness in domestic demand for upholstered furniture
that negatively affected our first quarter financial results continued
to affect our financial performance during the second quarter. In
addition, consumer demand for leather and suede furniture coverings
remained strong, competing with the Jacquard and plain woven fabrics
Quaker produces. Although total revenues for the second quarters of
this year and last year were similar, this year's second quarter
reflects 13 weeks of operations, and 13 weeks of fixed manufacturing
costs, versus last year's 12 weeks - due to a difference in the timing
of our annual plant vacation period. As a result, this year's lower
weekly production and shipping rates account for most of the 130 basis
point decline seen in our quarter-to-quarter gross margin performance,
with additional pressure placed on our margins by increases in certain
payroll-related expenses, primarily unemployment taxes, throughout the
quarter and a decline in our manufacturing performance toward the end
of the quarter," commented Larry Liebenow, Quaker's President and CEO.
Mr. Liebenow continued, "While our domestic fabric sales for the
quarter and first half were down 8% and 10%, respectively, compared to
last year, our export sales were essentially the same and our yarn
sales were up 180% for the quarter and 133% for the six months as a
result of our new initiatives in this area. Our balance sheet remains
a source of strength, with our total net debt to capital ratio now at
17.8%.
"Our backlog position was about $21.6 million at the end of the
second quarter, down about $2.9 million in comparison to last year. By
developing additional programs to take further advantage of our
product and service strengths, we intend to build volume at the top
line to levels that will allow us to run our operations effectively
and produce the strong bottom line results we all want to see," Mr.
Liebenow added.
"Meanwhile, we intend to maintain a sound cost structure and are
evaluating several initiatives designed to bring our costs in line
with our current demand levels and operating requirements. We will
make the adjustments necessary to tackle current and short-term
conditions, without losing sight of the importance of investing in the
Company's future," Mr. Liebenow said.
"Looking ahead, two of the factors that can be expected to have a
significant effect on our performance during the balance of this year
are the retail environment, which has been difficult, and the strength
of this year's Fall season, which typically drives up demand levels
throughout the industry toward the end of the third quarter and
continuing through year-end. Everyone at Quaker remains excited about
the fundamental strength of our Company and dedicated to leading
Quaker to a stronger performance as conditions improve," Mr. Liebenow
concluded.
Quaker also today announced the declaration of a cash dividend in
an amount equal to $0.03 per common share payable on August 18, 2004
to shareholders of record on August 4, 2004.
Quaker Fabric Corporation is a leading manufacturer of woven
upholstery fabrics for furniture markets in the United States and
abroad, and the largest producer of Jacquard upholstery fabric in the
world. For the year ended January 3, 2004, the Company had net sales
of $325.3 million, net income of $7.9 million, and diluted and basic
earnings per share of $0.47 and $0.48, respectively.
THIS PRESS RELEASE CONTAINS "FORWARD LOOKING STATEMENTS," AS THAT
TERM IS DEFINED IN THE FEDERAL SECURITIES LAWS. THE READER IS
CAUTIONED THAT SUCH STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND THAT, AS A RESULT OF VARIOUS FACTORS, INCLUDING, BUT
NOT LIMITED TO, THE LEVEL OF CUSTOMER DEMAND FOR THE COMPANY'S
PRODUCTS, HIGHER THAN ANTICIPATED COSTS AND LOWER THAN ANTICIPATED
PRODUCTION RATES, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
PROJECTED. FOR A FURTHER DISCUSSION OF THESE FACTORS, SEE THE
COMPANY'S 2003 FORM 10-K.
QUAKER FABRIC CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
STATEMENTS OF INCOME
Second Quarter Ended Six Months Ended
(Unaudited) (Unaudited)
July 3, July 5, Percent July 3, July 5, Percent
2004 2003 Change 2004 2003 Change
------- ------- -------- --------- -------- -------
Net sales $73,132 $73,886 (1.0)% $157,516 $164,111 (4.0)%
Cost of products
sold 59,733 59,401 125,422 130,659
------- -------- -------- ---------
Gross profit 13,399 14,485 (7.5)% 32,094 33,452 (4.1)%
Selling, general
and admin.
expenses 13,381 13,298 27,406 27,549
------- -------- -------- ---------
Operating income 18 1,187 (98.5)% 4,688 5,903 (20.6)%
Other expenses
Interest expense 860 991 1,707 2,060
Other expenses,
(income) (36) 113 (52) 89
Income before
provision for
income taxes (806) 83 (1,071.1)% 3,033 3,754 (19.2)%
------- -------- -------- ---------
Provision for
income taxes (324) (82) 1,077 1,276
------- -------- -------- ---------
Net income ($482) $165 (392.1)% $1,956 $2,478 (21.1)%
======= ======== ======== =========
Earnings per common
share - basic ($0.03) $0.01 (400.0)% $0.12 $0.15 (20.0)%
======= ======== ======== =========
Weighted average
shares outstanding
- basic 16,820 16,724 16,815 16,570
Earnings per common
share - diluted ($0.03) $0.01 (400.0)% $0.11 $0.15 (26.7)%
======= ======== ======== =========
Weighted average
shares outstanding
- diluted 17,141 16,950 17,224 16,857
Note: Earnings per common share amounts for the quarters and for the
six month periods presented have each been calculated
separately. Accordingly, quarterly amounts may not add to the
six month period amounts.
Ratio analysis:
- -------------------
Gross profit margin 18.3% 19.6% 20.4% 20.4%
S.G. & A. as a
percentage of net
sales 18.3% 18.0% 17.4% 16.8%
Operating margin 0.0% 1.6% 3.0% 3.6%
Net margin -0.7% 0.2% 1.2% 1.5%
Order backlog $21,596 $24,510
- -------------------
CONDENSED BALANCE SHEETS
July 3, January 3,
2004 2004
----------- -----------
(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents $8,101 $5,591
Accounts receivable 42,686 44,374
Inventories 46,890 43,987
Prepaid expenses and other current assets 12,888 12,739
----------- -----------
Total current assets 110,565 106,691
Property, plant and equipment, net 160,455 162,293
Goodwill, net of amortization 5,432 5,432
Other assets 1,820 1,862
----------- -----------
$278,272 $276,278
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities $32,718 $32,523
Long-term debt and capital leases 40,000 40,000
Deferred income taxes and other
liabilities 35,076 34,250
Stockholders' equity 170,478 169,505
----------- -----------
$278,272 $276,278
=========== ===========
This document contains "forward looking statements," as that term is
defined in the federal securities laws. The reader is cautioned that
such statements are not guarantees of future performance and that, as
a result of various factors, including, but not limited to, the level
of customer demand for the Company's products, higher than anticipated
costs and lower than anticipated production rates, actual results may
differ materially from those projected. For a further discussion of
these factors, see the Company's 2003 10-K.
CONTACT: Quaker Fabric Corporation
Larry A. Liebenow, 508-646-2264
Paul J. Kelly, 508-646-2251
Cynthia L. Gordan, 508-646-2261