Exhibit 99.1
Quaker Fabric Reports Fiscal 2004 Financial Results
FALL RIVER, Mass.--(BUSINESS WIRE)--Feb. 22, 2005--QUAKER FABRIC
CORPORATION (NASDAQ Symbol: QFAB) today reported net sales of $68.0 million, a
net loss of $1.9 million, and diluted and basic losses per share of ($0.11) for
the three-month period ended January 1, 2005; compared to net sales of $80.5
million, net income of $3.3 million, and diluted and basic earnings per share of
$0.19 and $0.20, respectively, for the corresponding period of fiscal 2003.
Favorable settlement of the company's claim for certain federal R&D tax credits
added approximately $2.0 million, or $0.12 per share, to the company's net
income for the quarter.
Results of operations for fiscal 2004 were net sales of $289.1 million, a
net loss of $2.0 million, and diluted and basic losses per share of ($0.12);
compared to 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, for fiscal 2003.
"While 2004 got off to a reasonably strong start, it was a major
disappointment for Quaker. Weakness at the revenue line was our biggest issue,
with net sales for the year down 11.1%. Our new yarn sales initiatives showed
significant strength, with 2004 net sales of $20.4, up 92%. Our international
net fabric sales were down approximately 10.2% for the year, 12.2% for the
quarter. Net sales into the domestic residential market, however, at $232.8
million for the year, were down 15.3%. This revenue loss reflects a continuation
of intense competition in the domestic market, including market share gains from
furniture coverings, particularly leather and faux suede, coming into the U.S.
from Asia. The current popularity of those products at the consumer level has
reduced the size of the market for the woven plain and Jacquard fabrics Quaker
makes," commented Larry Liebenow, Quaker's President and CEO.
"For Quaker, in addition to lower sales, weak demand in the domestic
residential market led to a 17.2% drop in new fabric orders during the fourth
quarter, a significant deterioration in our margin performance and pushed our
SG&A expenses as a percentage of revenue up to 19.1% for the year. Higher energy
and raw material prices and the more than $700,000 of professional fees we
incurred in connection with our Sarbanes-Oxley Act compliance efforts
exacerbated the other problems created by our revenue shortfall," added Mr.
Liebenow.
"The deterioration in our financial results led us to seek waivers from our
two major financing sources to deal with various covenant issues in our loan
documents. We are currently working to put new loan agreements in place
consistent with our operating and financing needs," Mr. Liebenow said.
Mr. Liebenow continued, "We took aggressive action during the second half
of the year to reduce our operating costs going forward. These actions included
staffing reductions intended to both reduce overhead and bring our production
rates in line with demand as well as the execution of a lease on an additional
540,000 square feet of manufacturing and warehousing space in Fall River that
will allow us to consolidate operations at four of the facilities we are
currently leasing under a single roof. Additional company-wide cost cutting
measures intended to further reduce our annual fixed operating costs by
approximately $6.0 million, plus a reduction in force affecting approximately
275 members of our production staff, are being implemented now."
"At the same time, we are working hard to build volume in both the domestic
and international residential markets, to continue the growth of our yarn and
contract programs and to introduce a new range of products for the outdoor
furniture segment. Also, the new family of products we developed to compete in
the general suede category is selling well. And so are the innovative textured
products we introduced to meet the needs of our middle to better end customers.
We also intend to expand our business by bringing fabrics into the U.S. market
that we don't have the equipment to make ourselves, as a complement to our
overall product offering," Mr. Liebenow added.
"In addition, we will be using the results of a market study we
commissioned during December to refine our strategy going forward so that the
core competencies we have developed in the design, technology, supply chain and
new product development areas can be used to best advantage to further our
profitability objectives. We are also planning to move ahead with some
adjustments in our pricing to deal with the pressure placed on our margins by
significant raw material and other cost increases," Mr. Liebenow added.
"It is clear that domestic market conditions are likely to remain both
challenging and highly dynamic. At the same time, we believe that we are
aggressively dealing with the cost and pricing issues in our core business. We
have also made substantial progress in addressing the raw material sourcing
issues raised by Solutia's recent decision to exit the acrylic business. We
believe we are taking the additional product/market initiatives necessary to
achieve our longer-term objectives. And we are excited about the potential these
efforts - together with Quaker's low debt levels and strong development, design
and service capabilities - represent for our company's future," Mr. Liebenow
concluded.
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.
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, ANY INTERRUPTION IN THE
SUPPLY OF RAW MATERIALS USED BY THE COMPANY 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)
(Unaudited)
STATEMENTS OF INCOME
Fourth Quarter Ended Twelve Months Ended
Jan. 1, Jan. 3, Percent Jan. 1, Jan. 3, Percent
2005 2004 Change 2005 2004 Change
-------- -------- -------- --------- --------- --------
Net sales $68,044 $80,461 (15.4)% $289,145 $325,337 (11.1)%
Cost of
products
sold 58,978 61,621 236,270 255,202
-------- -------- --------- ---------
Gross margin 9,066 18,840 (51.9)% 52,875 70,135 (24.6)%
Selling,
general and
admin.
expenses 13,724 14,204 55,315 55,334
Non-recurring
(income) 0 (1,426) 0 (1,426)
-------- -------- --------- ---------
Operating
income (loss) (4,658) 6,062 (176.8)% (2,440) 16,227 (115.0)%
Other expenses
Interest
expense 760 859 3,327 3,887
Other
expenses
(income) 91 (33) 8 51
-------- -------- --------- ---------
Income (loss)
before
provision for
income taxes (5,509) 5,236 (205.2)% (5,775) 12,289 (147.0)%
Provision
(benefit) for
income taxes (3,639) 1,952 (3,733) 4,350
-------- -------- --------- ---------
Net income
(loss) ($1,870) $3,284 (156.9)% ($2,042) $7,939 (125.7)%
======== ======== ========= =========
Earnings (loss)
per common
share - basic ($0.11) $0.20 (155.0)% ($0.12) $0.48 (125.0)%
======== ======== ========= =========
Weighted
average shares
outstanding -
basic 16,824 16,777 16,819 16,671
======== ======== ========= =========
Earnings (loss)
per common
share -
diluted ($0.11) $0.19 (157.9)% ($0.12) $0.47 (125.5)%
======== ======== ========= =========
Weighted
average
shares
outstanding -
diluted 16,824 17,133 16,819 16,958
======== ======== ========= =========
Note: Earnings per common share amounts for the quarters and for
the twelve month periods presented have each been calculated
separately. Accordingly, quarterly amounts may not add to the twelve
month period amounts.
Other data:
- -------------
Gross profit
margin 13.3% 23.4% 18.3% 21.6%
S.G. & A. as a
percentage of
net sales 20.2% 17.7% 19.1% 17.0%
Operating
margin -6.8% 7.5% -0.8% 5.0%
Net margin -2.7% 4.1% -0.7% 2.4%
Order backlog $14,584 $26,541
CONDENSED BALANCE SHEETS
January 1, January 3,
2005 2004
------------- -------------
Assets
Current assets:
Cash and cash equivalents $4,134 $5,591
Accounts receivable 40,708 44,374
Inventories 43,533 43,987
Prepaid expenses and other current
assets 12,200 12,739
------------- -------------
Total current assets 100,575 106,691
Property, plant and equipment, net 158,480 162,293
Goodwill, net of amortization 5,432 5,432
Other assets 2,088 1,862
------------- -------------
$266,575 $276,278
============= =============
Liabilities and Stockholders' Equity
Current liabilities $66,125 $32,523
Long-term debt and capital leases 0 40,000
Deferred income taxes and other
liabilities 33,958 34,250
Stockholders' equity 166,492 169,505
------------- -------------
$266,575 $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
or
Paul J. Kelly, 508-646-2251
or
Cynthia L. Gordan, 508-646-2261