Exhibit 99.1
Quaker Fabric Reports Second Quarter Financial Results
FALL RIVER, Mass.--(BUSINESS WIRE)--July 28, 2005--QUAKER FABRIC
CORPORATION (NASDAQ Symbol: QFAB) today reported net sales of $68.9 million, a
net loss of ($10.3 million), and diluted and basic losses per share of ($0.61)
for the three-month period ended July 2, 2005; compared to net sales of $73.1
million, a net loss of ($0.5 million), and diluted and basic losses per share of
($0.03) for the corresponding period of fiscal 2004. Quaker's financial results
for the second quarter of fiscal year 2005 include after-tax asset impairment,
restructuring and related charges of $9.4 million, as well as a $1.2 million tax
credit related to the favorable settlement of a state income tax refund claim.
Excluding these charges and tax credit, net loss for the second fiscal quarter
of 2005 was ($2.1 million), or ($0.12) per diluted share.
Results of operations for the first six months of fiscal year 2005 were net
sales of $128.1 million, a net loss of ($13.4 million), and diluted and basic
losses per share of ($0.80); compared to net sales of $157.5 million, net income
of $2.0 million, and diluted and basic earnings per share of $0.11 and $0.12,
respectively, for the corresponding period of fiscal 2004. Excluding asset
impairment, restructuring and related charges and the tax credit recorded in the
second quarter, net loss for the first six months of fiscal 2005 was ($5.2
million), or ($0.31) per share.
"Domestic market conditions - particularly the strength of imported leather
and faux suede products, excess inventory throughout the distribution chain and
the deflationary effects of heavy competition from both domestic and foreign
fabric suppliers - continue to negatively affect our top-line performance, with
net sales for the quarter down 5.8% and domestic fabric sales of $50.4 million
off 13.3% versus last year. International fabric sales, at $8.4 million for the
quarter, essentially held their own in comparison to last year, and yarn sales,
at $10.2 million for the quarter, continued to show significant growth. New
orders during the second quarter were down 18.2%, and we ended the quarter with
an order backlog valued at approximately $15.4 million, compared to $14.6
million at year-end 2004 and $21.6 million at the end of last year's second
quarter," commented Larry Liebenow, Quaker's President and CEO.
"Despite a slight pick-up in our gross margin percentage during the second
quarter, declining sales, together with higher energy and raw material costs -
in particular, costs related to the problems we had earlier in the year ensuring
a reliable supply of acrylic yarns and fibers - continued to take their toll on
our margin performance, and it is clear that we still have considerable work to
do when it comes to getting our margins back to where they need to be. In
addition, our second quarter operating margin reflects approximately $9.4
million of asset impairment and restructuring expenses, including a $5.4 million
write-off of goodwill and a $3.7 million asset impairment charge. A $2.2 million
charge related to the prepayment of debt in connection with our May refinancing
effort, various banking and professional fees related to that deal and certain
charges associated with the reduction in force we completed in June were also
recorded during the quarter," Mr. Liebenow added.
"We remain determined to restore the company to profitability as quickly as
possible. To that end, we took steps during the second quarter to reduce our
annual costs by an additional $6.0 million. We are also continuing to
consolidate our Fall River manufacturing operations into fewer facilities, and
we are actively marketing our excess real estate, including the sixty acres of
undeveloped land we own in Fall River. These steps, along with the $26.0 million
of annual variable and fixed costs we have taken out of our cost structure since
last August, are part of a broader restructuring process intended to bring our
operating costs in line with current market conditions, including continued
heavy competition from Chinese imports in certain segments, and to generate cash
flows sufficient to reduce further our already low debt load," Mr. Liebenow
added.
"The overall goal of our restructuring effort is to build volume, cut costs
and allocate our resources in a way that will enable us to reach both our
financial and strategic objectives, and with respect to growing our top-line, we
are very pleased by the response our newest product introductions received at
the High Point Showtime Fabric Fair held earlier this month. We were
particularly encouraged by the excitement generated by our major new collection
of domestically-produced sueded products. These products are intended to give
Quaker's customers a range of new high performance and differentiated
alternatives to imported commodity faux suedes - and to give us a highly
competitive entree in that market segment. We believe they're a success on both
counts. We are also making good progress on our efforts to expand our presence
in the novelty yarn markets, with second quarter sales into that market up 64.0%
and demonstrating strong potential for continued growth. And we are very excited
about taking our first steps into the outdoor fabric market, with our first-ever
product line for that market slated for introduction later this year," Mr.
Liebenow concluded.
The company also reported amending its $70.0 million senior secured credit
facility; a process that Quaker management noted had been completed earlier in
the week.
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 2004 FORM 10-K.
(Tables Follow)
QUAKER FABRIC CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
STATEMENTS OF OPERATIONS
Second Quarter Six Months Ended
Ended
July 2, July 3, July 2, July 3,
2005 2004 2005 2004
--------- --------- --------- ---------
Net sales $68,885 $73,132 $128,100 $157,516
Cost of products sold 58,751 59,733 110,285 125,422
--------- --------- --------- ---------
Gross profit 10,134 13,399 17,815 32,094
Selling, general and admin.
expenses 12,566 13,381 24,715 27,406
Goodwill impairment 5,432 5,432
Restructuring charges and
asset impairments 3,662 3,662
--------- --------- --------- ---------
Operating income (loss) (11,526) 18 (15,994) 4,688
Other expenses
Interest expense 695 860 1,443 1,707
Early extinguishment of
debt 2,232 2,232
Other expenses,
(income) 44 (36) 132 (52)
--------- --------- --------- ---------
Income (loss) before
provision for income taxes (14,497) (806) (19,801) 3,033
Provision (benefit) for
income taxes (4,155) (324) (6,369) 1,077
--------- --------- --------- ---------
Net income (loss) $(10,342) $(482) $(13,432) $1,956
========= ========= ========= =========
Earnings (loss) per common
share - basic $(0.61) ($0.03) $(0.80) $0.12
========= ========= ========= =========
Weighted average shares
outstanding - basic 16,826 16,820 16,826 16,815
========= ========= ========= =========
Earnings (loss) per common
share - diluted $(0.61) ($0.03) $(0.80) $0.11
========= ========= ========= =========
Weighted average shares
outstanding - diluted 16,826 17,141 16,826 17,224
========= ========= ========= =========
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 14.7% 18.3% 13.9% 20.4%
S.G. & A. as a percentage of
net sales 18.2% 18.3% 19.3% 17.4%
Operating margin -16.7% 0.0% -12.5% 3.0%
Net margin -15.0% -0.7% -10.5% 1.2%
Order backlog $15,431 $21,596
- -------------
QUAKER FABRIC CORPORATION
Reconciliation of Operating Income (loss) as Reported to
Pro Forma Operating Income (loss)
Second Quarter Six Months
Ended Ended
July 2, July 2,
2005 2005
--------- ---------
Operating loss, as reported $(11,526) $(15,994)
Restructuring charges
and asset impairments 3,662 3,662
Goodwill impairment 5,432 5,432
Plant relocation and
duplicate occupancy
costs 371 371
--------- ---------
Pro forma operating loss $(2,061) $(6,529)
========= =========
QUAKER FABRIC CORPORATION
Reconciliation of Net Loss as Reported to
Pro Forma Net Loss
Second Quarter Six Months
Ended Ended
July 2, July 2,
2005 2005
--------- ---------
Net loss, as reported $(10,342) $(13,432)
Early extinguishment of
debt, net of income
taxes 1,424 1,424
Restructuring charges
and asset impairments,
net of income taxes 2,336 2,336
Goodwill impairment 5,432 5,432
Plant relocation and
duplicate occupancy
costs, net of income
taxes 237 237
Tax benefit from settlement
of R&D claims (1,167) (1,167)
--------- ---------
Pro forma net loss $(2,080) $(5,170)
========= =========
Pro forma net loss, per
share $(0.12) $(0.31)
========= =========
CONDENSED BALANCE SHEETS
July 2, January 1,
2005 2005
--------- ---------
Assets
Current assets:
Cash and cash equivalents $1,077 $4,134
Accounts receivable 41,123 40,708
Inventories 46,323 43,533
Prepaid expenses and
other current assets 11,788 12,130
--------- ---------
Total current assets 100,311 100,505
Property, plant and equipment, net 149,946 158,480
Goodwill, net of amortization 0 5,432
Other assets 3,475 2,088
--------- ---------
$253,732 $266,505
========= =========
Liabilities and Stockholders' Equity
Current maturities of long term
debt and short term debt $29,900 $40,000
Accounts payable and accrued
expenses 21,378 26,055
--------- ---------
Total current liabilities 51,278 66,055
Total debt 51,900 40,000
Less: current maturities of
long term debt (3,000) 0
Less: short term debt (26,900) (40,000)
--------- ---------
Total long-term debt 22,000 0
Deferred income taxes and
other liabilities 26,901 33,958
Stockholders' equity 153,553 166,492
--------- ---------
$253,732 $266,505
========= =========
CONTACT: Quaker Fabric Corporation
Larry A. Liebenow, 508-646-2264
Paul J. Kelly, 508-646-2251
Cynthia L. Gordan, 508-646-2261