Exhibit 99.1
QUAKER FABRIC Reports First Quarter Financial Results
FALL RIVER, Mass.--(BUSINESS WIRE)--April 20, 2005--QUAKER FABRIC
CORPORATION (NASDAQ Symbol: QFAB) today reported net sales of $59.2
million, a net loss of ($3.1 million), and diluted and basic losses
per share of ($0.18) for the three-month period ended April 2, 2005;
compared to net sales of $84.4 million, net income of $2.4 million,
and diluted and basic earnings per share of $0.14 and $0.15,
respectively, for the corresponding period of fiscal 2004.
"Weakness at the revenue line continues to be our biggest issue,
with net sales for the quarter down 29.8%. Domestic and international
fabric sales of $46.3 million and $7.2 million, respectively, were off
33.2% and 21.1%, respectively, versus last year - largely because of
the continued strength of imported leather and faux suede products in
the U.S. market, which has reduced demand for the woven fabrics we
make, and general economic weakness in a number of the export markets
we serve, particularly Europe and Mexico. Yarn sales, primarily into
the craft yarn segment, remained very strong, however, with first
quarter sales of $5.7 million," commented Larry Liebenow, Quaker's
President and CEO.
"We have been working diligently to reduce our costs, and our
monthly financial performance so far this year reflects sequential
improvement, however, most of the benefits associated with our
cost-cutting efforts are not yet evident in our financials. Indeed, a
number of non-recurring factors put substantial pressure on our first
quarter margin performance, including significant increases in our raw
material, overtime and inventory carrying costs related to Solutia's
decision to exit the acrylic fiber business and the liquidation of
Du-Re, both of which have historically been important suppliers for
us. In addition, a number of other expenses related to our overall
cost reduction and refinancing efforts also hit the P&L during the
first quarter, including various banking and professional fees, as
well as certain one-time charges associated with the reduction in
force we completed during the quarter. Moving our numbers in the other
direction was an adjustment in certain assumptions used to value
benefits due Quaker's executives under the terms of our non-qualified
deferred compensation plan, as well as a waiver of certain accrued
plan benefits by four senior officers of the company, including me,
that together reduced the company's first quarter net loss by
approximately $337,000 or $0.02 per share, but that are not expected
to have a material effect on the company's financial results going
forward," Mr. Liebenow continued.
"New orders during the first quarter were down 15.2%, however, we
ended the quarter with an order backlog valued at approximately $28.0
million, compared to $14.6 million at year-end 2004 and $25.8 million
at the end of last year's first quarter," added Mr. Liebenow.
"Because of our disappointing financial performance over the past
several quarters, we are currently operating with the benefit of
waivers from our two principal lenders with respect to certain of the
financial covenants in our loan documents. We have been working to put
new financing arrangements in place, and the commitment letter from
Bank of America, N.A. that we executed earlier this week reflects the
achievement of an important milestone in this process," Mr. Liebenow
said.
Mr. Liebenow continued, "We are continuing to focus on building
volume in all of the markets we have traditionally served, including
the development and introduction of new sueded products for the
residential market intended to compete with the faux suede products
coming into the U.S. - and a program to further expand our residential
business by distributing certain imported fabrics that we don't have
the equipment to make ourselves. We are also moving forward with a
brand-new and very aggressive program to penetrate the outdoor
furniture segment. We are using the results of the market study we
commissioned late last year to refine our market-facing strategies and
are generally encouraged by the response our newest product
introductions received at this month's High Point Furniture Market
which is just now winding down."
"Looking ahead, we anticipate that our margin performance should
begin to benefit shortly from the effects of the price increase we
announced last month and the aggressive cost-cutting measures we
implemented during the first quarter. We also believe that the raw
material sourcing issues that affected our costs and service levels
during the first quarter are largely behind us, that our cost
structure is now consistent with current demand and that the
additional product/market initiatives needed to achieve our
longer-term objectives are in place. We look forward to tackling the
challenges that lie ahead as we continue to do our very best to serve
our customers, shareholders, employees and other stakeholders well,"
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. For the year ended January 1, 2005, the Company had net sales
of $289.1 million, a net loss of ($2.0 million), and diluted and basic
losses per share of ($0.12).
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 2004 FORM 10-K.
QUAKER FABRIC CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
STATEMENTS OF INCOME
First Quarter Ended
April 2, April 3, Percent
2005 2004 Change
--------- --------- --------
Net sales $59,215 $84,384 (29.8)%
Cost of products sold 51,534 65,689
--------- ---------
Gross margin 7,681 18,695 (58.9)%
Selling, general and admin. expenses 12,149 14,025
--------- ---------
Operating income (loss) (4,468) 4,670 (195.7)%
Other expenses
Interest expense 748 847
Other expenses (income) 88 (16)
--------- ---------
Income (loss) before provision for
income taxes (5,304) 3,839 (238.2)%
Provision (benefit) for income taxes (2,214) 1,401
--------- ---------
Net income (loss) ($3,090) $2,438 (226.7)%
========= =========
Earnings (loss) per common share -
basic ($0.18) $0.15 (220.0)%
========= =========
Weighted average shares outstanding -
basic 16,826 16,810
========= =========
Earnings (loss) per common share -
diluted ($0.18) $0.14 (228.6)%
========= =========
Weighted average shares outstanding -
diluted 16,826 17,307
========= =========
Other data:
- ------------------------------------
Gross profit margin 13.0% 22.2%
S.G. & A. as a percentage of net sales 20.5% 16.6%
Operating margin -7.5% 5.5%
Net margin -5.2% 2.9%
Order backlog $27,969 $25,829
CONDENSED BALANCE SHEETS
April 2, Jan. 1,
2005 2005
--------- ---------
Assets
Current assets:
Cash and cash equivalents $1,588 $4,134
Accounts receivable 39,682 40,708
Inventories 49,591 43,533
Prepaid expenses and other
current assets 12,031 12,130
--------- ---------
Total current assets 102,892 100,505
Property, plant and equipment, net 154,962 158,480
Goodwill, net of amortization 5,432 5,432
Other assets 2,383 2,088
--------- ---------
$265,669 $266,505
========= =========
Liabilities and Stockholders' Equity
Current liabilities $71,152 $67,197
Deferred income taxes and other
liabilities 31,077 32,816
Stockholders' equity 163,440 166,492
--------- ---------
$265,669 $266,505
========= =========
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 2004 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