Exhibit 99.1
Quaker Fabric Reports Third Quarter Financial Results
FALL RIVER, Mass.--(BUSINESS WIRE)--Oct. 18, 2005--QUAKER FABRIC
CORPORATION (NASDAQ Symbol: QFAB) today reported net sales of $46.5 million, a
net loss of ($7.2 million), and diluted and basic losses per share of ($0.43)
for the three-month period ended October 1, 2005; compared to 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 corresponding period of fiscal 2004. Quaker's financial results
for the third quarter of fiscal year 2005 include after-tax restructuring,
including asset impairment, and related charges of $3.8 million, as well as $0.3
million of after-tax plant relocation expenses. Excluding these charges and
expenses, net loss for the third fiscal quarter of 2005 was ($3.1 million), or
($0.18) per diluted share.
Results of operations for the first nine months of fiscal year 2005 were
net sales of $174.6 million, a net loss of ($20.6 million), and diluted and
basic losses per share of ($1.22); compared to net sales of $221.1 million, a
net loss of ($0.2 million), and diluted and basic losses per share of ($0.01)
for the corresponding period of fiscal 2004. Excluding restructuring charges,
including asset and goodwill impairment and related charges recorded in the
second and third quarters, as well as a $1.2 million tax credit related to the
favorable settlement of a state income tax refund claim recorded in the second
quarter, net loss for the first nine months of fiscal 2005 was ($8.2 million),
or ($0.49) per share.
"Restructuring Quaker's operations in order to restore the company to
profitability remains our top priority. To that end, during the third quarter,
we implemented approximately $17.0 million of additional cost-cutting measures,
on an annualized basis, including further staffing reductions directly affecting
about 160 company employees and a reduction of approximately $3.0 million in our
annualized SG&A costs. These cuts bring aggregate planned reductions in the
company's cost structure since the second quarter of last year to approximately
$46.0 million on an annualized basis. As part of this effort, we also achieved
during the third quarter reductions versus the second quarter of $1.5 million in
the fixed component of our SG&A costs and of $2.6 million in our fixed
manufacturing costs - and cash flows during the quarter allowed us to reduce our
bank debt by approximately $11.0 million," commented Larry Liebenow, Quaker's
President and CEO.
"We are continuing to make further progress on our efforts to consolidate
our operations and sell off excess real estate. So far this year, we have moved
operations at three of our Fall River-based facilities into one of our other
Fall River plants, and before the end of the year, we will be completing the
transfer of our remaining operations at a fourth facility into that same plant.
While the related restructuring charges we recorded during the second and third
quarters of this year have taken their toll on our year-to-date financial
results, they will benefit the P&L going forward," Mr. Liebenow added.
"Falling consumer confidence levels in the wake of hurricane-related energy
cost increases, coupled with continued strong competition from leather and faux
suede imports, led to a 26.9% quarter-to-quarter fall off in our net sales for
the period - which due to our annual two-week July shutdown period actually had
only eleven weeks of operations. We ended the quarter with a total order
backlog, including both yarn and fabric, valued at approximately $15.8 million,
compared to $15.4 million at the end of this year's second quarter," Mr.
Liebenow continued.
"We implemented a surcharge earlier this month on all fabric and yarn
products to compensate for some of the significant increases we saw during the
third quarter in our raw material and energy costs, and we will be continuing to
aggressively attack our costs during the balance of this year, as well as
remaining focused on our efforts to reduce inventory levels. At the same time,
we are determined to strengthen our revenues and are pursuing a number of new
product and new market initiatives intended to do that, including the
introduction next month of our initial collection of fabrics designed and
developed by Quaker but manufactured outside the U.S., as well as a planned
launch right after the first of the year of an extensive line of products for
the outdoor market," Mr. Liebenow continued.
"While we remain concerned about the impact of imported product,
specifically from China, on the domestic market, there does appear to be a
somewhat lesser level of demand for sueded products recently. With respect to
our yarn sales business, revenues from that segment were running well ahead of
last year through the first eight months of the year, but order momentum slowed
significantly in September in the face of a slowdown in orders from our largest
yarn customer," 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 2004 FORM 10-K.
QUAKER FABRIC CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
STATEMENTS OF OPERATIONS
Third Quarter Ended Nine Months Ended
October October October October
1, 2, 1, 2,
2005 2004 2005 2004
--------- --------- --------- ---------
Net sales $46,457 $63,585 $174,557 $221,101
Cost of products sold 40,382 51,870 150,667 177,292
--------- --------- --------- ---------
Gross profit 6,075 11,715 23,890 43,809
Selling, general and admin.
expenses 10,533 14,185 35,248 41,591
Goodwill impairment 5,432
Restructuring charges and
asset impairments 5,990 9,652
--------- --------- --------- ---------
Operating income (loss) (10,448) (2,470) (26,442) 2,218
Other expenses
Interest expense 754 860 2,197 2,567
Early extinguishment of
debt 2,232
Other expenses, (income) 13 (31) 145 (83)
--------- --------- --------- ---------
Income (loss) before
provision for income taxes (11,215) (3,299) (31,016) (266)
Provision (benefit) for
income taxes (4,060) (1,171) (10,429) (94)
--------- --------- --------- ---------
Net income (loss) $(7,155) $(2,128) $(20,587) $(172)
========= ========= ========= =========
Earnings (loss) per common
share - basic $(0.43) ($0.13) $(1.22) ($0.01)
========= ========= ========= =========
Weighted average shares
outstanding - basic 16,826 16,821 16,826 16,817
========= ========= ========= =========
Earnings (loss) per common
share - diluted $(0.43) ($0.13) $(1.22) ($0.01)
========= ========= ========= =========
Weighted average shares
outstanding - diluted 16,826 16,821 16,826 16,817
========= ========= ========= =========
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.
Ratio analysis:
- ----------------------------
Gross profit margin 13.1% 18.4% 13.7% 19.8%
S.G. & A. as a percentage of
net sales 22.7% 22.3% 20.2% 18.8%
Operating margin -22.5% -3.9% -15.1% 1.0%
Net margin -15.4% -3.3% -11.8% -0.1%
Order backlog $15,830 $19,602
- ----------------------------
QUAKER FABRIC CORPORATION
Reconciliation of Operating Income (loss) as Reported to
Pro Forma Operating Income (loss)
Third Quarter Nine Months
Ended Ended
October 1, October 1,
2005 2005
-------------- ----------
Operating loss, as reported $(10,448) $(26,442)
Restructuring charges and asset
impairments 5,990 9,652
Goodwill impairment 0 5,432
Plant relocation and duplicate
occupancy costs 430 801
-------------- ----------
Pro forma operating loss $(4,028) $(10,557)
============== ==========
QUAKER FABRIC CORPORATION
Reconciliation of Net Loss as Reported to
Pro Forma Net Loss
Third Quarter Nine Months
Ended Ended
October 1, October 1,
2005 2005
------------ -----------
Net loss, as reported $(7,155) $(20,587)
Early extinguishment of debt, net of
income taxes 1,424
Restructuring charges and asset
impairments, net of income taxes 3,822 6,158
Goodwill impairment 5,432
Plant relocation and duplicate
occupancy costs, net of income taxes 275 511
Tax benefit from settlement of R&D claims (1,167)
----------- ----------
Pro forma net loss $(3,058) $(8,229)
=========== ==========
Pro forma net loss, per share $(0.18) $(0.49)
=========== ==========
CONDENSED BALANCE SHEETS
October 1, January 1,
2005 2005
--------- ---------
Assets
Current assets:
Cash and cash equivalents $739 $4,134
Accounts receivable 33,617 40,708
Inventories 41,923 43,858
Prepaid expenses and other current assets 10,694 11,893
--------- ---------
Total current assets 86,973 100,593
Property, plant and equipment, net 141,585 158,480
Goodwill, net of amortization 0 5,432
Other assets 3,521 2,000
--------- ---------
$232,079 $266,505
========= =========
Liabilities and Stockholders' Equity
Current maturities of long term debt and short
term debt $20,022 $40,000
Accounts payable and accrued expenses 20,551 27,197
--------- ---------
Total current liabilities 40,573 67,197
Total debt 41,022 40,000
Less: current maturities of long term debt (4,000) 0
Less: short term debt (16,022) (40,000)
--------- ---------
Total long-term debt 21,000 0
Deferred income taxes and other liabilities 23,923 32,816
Stockholders' equity 146,583 166,492
--------- ---------
$232,079 $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