Exhibit 99.1
Quaker Fabric Reports Third Quarter Financial Results
FALL RIVER, Mass.--(BUSINESS WIRE)--Oct. 21, 2004--QUAKER FABRIC
CORPORATION (NASDAQ Symbol: QFAB) today reported net sales of $63.6
million, a net loss of $2.1 million, and diluted and basic losses per
share of ($0.13) for the three-month period ended October 2, 2004;
compared to net sales of $80.8 million, net income of $2.2 million,
and diluted and basic earnings per share of $0.13 for the
corresponding period of fiscal 2003.
Results of operations for the first nine months of fiscal 2004
were net sales of $221.1 million, a net loss of $0.2 million, and
diluted and basic losses per share of ($0.01); compared to net sales
of $244.9 million, net income of $4.7 million, and diluted and basic
earnings per share of $0.28 for the corresponding period of fiscal
2003.
"This was a difficult and disappointing quarter for us. Total
revenues for the quarter of $63.6 million were off 21.3% compared to
last year, significantly lower than we would have expected to see
based solely on the one week of additional operations built into last
year's numbers as a result of the difference in the timing of our
annual two week shutdown period. As a result of the lower throughput,
we experienced significant deterioration in our quarter-to-quarter
gross and net margin performance. In addition, our SG&A expenses as a
percentage of net sales for the quarter increased to 22.3%, due to
lower revenues and approximately $600,000 of unusual expenses that hit
the P&L during the quarter, including certain expenses incurred in
connection with the termination of our efforts to buy a new
manufacturing and warehousing facility in Fall River, our
Sarbanes-Oxley Act compliance efforts and the reduction in our
staffing levels that we completed during the quarter," commented Larry
Liebenow, Quaker's President and CEO.
Mr. Liebenow continued, "Weaker than anticipated overall demand
and the continued penetration of leather and suede furniture coverings
contributed to relatively soft demand during the third quarter. As a
result, at $51.8 million, domestic fabric sales for the quarter were
down 25.1% versus the comparable period of last year. Export sales
were also off, at $7.5 million for the quarter, down 24.1%. Our
repositioned yarn business is, however, demonstrating considerable
strength, due primarily to the rapid growth of our sales into the
craft yarn segment, with yarn sales for the quarter at $4.5 million,
up 83.1%. In addition, our balance sheet remains solid, with a total
net debt to capitalization ratio of 18.3% at quarter-end."
"Sluggish domestic furniture demand also led to a 31% drop in new
fabric orders during the quarter, resulting in a total production
backlog valued at approximately $19.6 million at the end of the third
quarter, down 35% in comparison to last year's $30.2 million," Mr.
Liebenow added.
"To address the weak sales environment, we took a number of steps
during the third quarter to reduce our cost structure, including
staffing reductions in both our production and administrative areas
intended to decrease our annual operating costs by approximately $4.0
million," Mr. Liebenow said.
"In addition, we are determined to grow our sales in the domestic
and international fabric markets by leveraging the quality,
performance and service advantages built into our strong product
offerings. In that regard, we have developed and introduced a new
range of products to compete directly in the general suede category,
and we were delighted to see at last week's High Point Furniture Show
that they had successfully captured strong placements there. As a
result, we expect that this product family, as well as the innovative
textured products we introduced to meet the needs of our
middle-to-better end customers and the value-products we have
developed for the promotional-end of the market, will be important
sources of revenue for us next year," Mr. Liebenow continued.
"While demand at retail continues to be lackluster and higher
energy costs are putting pressure on both our utility costs and our
petroleum-based raw material costs, everyone at Quaker is very focused
on the things we need to do to improve our financial performance,
including a review of our marketing strategies and additional
adjustments in our cost structure, and all of us remain excited about
the company's fundamental strengths, leadership position in the
industry and long-term success," Mr. Liebenow concluded.
Quaker also reported that no dividend would be paid with respect
to the company's third quarter operations.
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
Third Quarter Ended
(Unaudited)
Oct. 2, Oct. 4, Percent
2004 2003 Change
--------- -------- -------
Net sales $63,585 $80,765 (21.3) %
Cost of products sold 51,870 62,922
--------- --------
Gross margin 11,715 17,843 (34.3) %
Selling, general and admin. expenses 14,185 13,581
--------- --------
Operating income (loss) (2,470) 4,262 (158.0) %
Other expenses
Interest expense 860 968
Other expenses (income) (31) (5)
Income (loss) before provision for --------- --------
income taxes (3,299) 3,299 (200.0) %
Provision (benefit) for income taxes (1,171) 1,122
--------- --------
Net income (loss) ($2,128) $2,177 (197.7) %
========= ========
Earnings (loss) per common share - basic ($0.13) $0.13 (200.0) %
========= ========
Weighted average shares
outstanding - basic 16,821 16,769
========= ========
Earnings (loss) per common share -
diluted ($0.13) $0.13 (200.0) %
========= ========
Weighted average shares
outstanding - diluted 17,035 16,986
========= ========
Note: Earnings per common share amounts for the quarters and for the
nine month periods presented have each been calculated separately.
Accordingly, quarterly amounts may not add to the nine month period
amounts.
QUAKER FABRIC CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
STATEMENTS OF INCOME
Nine Months Ended
(Unaudited)
Oct. 2, Oct. 4, Percent
2004 2003 Change
--------- --------- -------
Net sales $221,101 $244,876 (9.7)%
Cost of products sold 177,292 193,581
--------- ---------
Gross margin 43,809 51,295 (14.6)%
Selling, general and admin. expenses 41,591 41,130
--------- ---------
Operating income (loss) 2,218 10,165 (78.2)%
Other expenses
Interest expense 2,567 3,028
Other expenses (income) (83) 84
Income (loss) before provision for --------- ---------
income taxes (266) 7,053 (103.8)%
Provision (benefit) for income taxes (94) 2,398
--------- ---------
Net income (loss) ($172) $4,655 (103.7)%
========= =========
Earnings (loss) per common share - basic ($0.01) $0.28 (103.6)%
========= =========
Weighted average shares
outstanding - basic 16,817 16,636
========= =========
Earnings (loss) per common share - diluted ($0.01) $0.28 (103.6)%
========= =========
Weighted average shares
outstanding - diluted 17,161 16,900
========= =========
Note: Earnings per common share amounts for the quarters and for the
nine month periods presented have each been calculated separately.
Accordingly, quarterly amounts may not add to the nine month period
amounts.
Third Quarter Ended
(Unaudited)
Oct. 2, Oct. 4,
2004 2003
--------- --------
Ratio analysis:
- ------------------------------
Gross profit margin 18.4% 22.1%
S.G. & A. as a percentage of net sales 22.3% 16.8%
Operating margin -3.9% 5.3%
Net margin -3.3% 2.7%
Order backlog
Nine Months Ended
(Unaudited)
Oct. 2, Oct. 4,
2004 2003
--------- ---------
Ratio analysis:
- -------------------------------
Gross profit margin 19.8% 20.9%
S.G. & A. as a percentage of net sales 18.8% 16.8%
Operating margin 1.0% 4.2%
Net margin -0.1% 1.9%
Order backlog $19,602 $30,239
CONDENSED BALANCE SHEETS
October 2, January 3,
2004 2004
------------------------
(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents $7,351 $5,591
Accounts receivable 42,902 44,374
Inventories 47,857 43,987
Prepaid expenses and other current assets 11,868 12,739
------------------------
Total current assets 109,978 106,691
Property, plant and equipment, net 160,373 162,293
Goodwill, net of amortization 5,432 5,432
Other assets 1,967 1,862
------------------------
$277,750 $276,278
========================
Liabilities and Stockholders' Equity
Current liabilities $35,263 $32,523
Long-term debt 40,000 40,000
Deferred income taxes and other
liabilities 34,379 34,250
Stockholders' equity 168,108 169,505
------------------------
$277,750 $276,278
========================
Note: The indebtedness classified as long-term in the table above will be
required, under generally accepted accounting principles, to be
classified as current on the October 2, 2004 balance sheet that will
be included in the Company's Quarterly Report on Form 10-Q if the
Company is unable to reach appropriate amendments to the agreements
with, or obtain appropriate waivers from, its lenders prior to the
filing of the Form 10-Q. For additional information, see the
Company's Form 8-K dated October 12, 2004.
CONTACT: Quaker Fabric Corporation
Larry A. Liebenow, 508-646-2264
or
Paul J. Kelly, 508-646-2251
or
Cynthia L. Gordan, 508-646-2261