Exhibit 99.1
Quaker Fabric Reports Fiscal 2005 Financial Results
FALL RIVER, Mass.--(BUSINESS WIRE)--Feb. 14, 2006--QUAKER FABRIC
CORPORATION (NASDAQ:QFAB) today reported net sales of $50.1 million, a
net loss of ($4.8 million), and diluted and basic losses per share of
($0.28) for the three-month period ended December 31, 2005; compared
to 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 corresponding
period of fiscal 2004. Quaker's financial results for the fourth
quarter of fiscal year 2005 include after-tax restructuring, including
asset impairment and related charges of $0.1 million, as well as $0.3
million of after-tax plant relocation expenses. Excluding these
charges and expenses, net loss for the fourth fiscal quarter of 2005
was ($4.4 million), or ($0.26) per diluted share.
Net sales for the 52-week fiscal year ended December 31, 2005 were
$224.7 million, with a net loss of ($25.4 million), and diluted and
basic losses per share of ($1.51); compared to net sales of $289.1
million, a net loss of ($2.0 million), and diluted and basic losses
per share of ($0.12) for the 52-week fiscal year ended January 1,
2005. Favorable settlement of the Company's claim for certain federal
research and development tax credits added approximately $2.0 million,
or $0.12 per share, to the Company's net income for fiscal 2004.
Quaker's 2005 financial results reflect a number of one-time
charges related to the Company's ongoing restructuring efforts,
including approximately $13.9 million of after-tax asset impairment
and restructuring expenses, consisting of a $5.4 million write-off of
goodwill, a $6.3 million asset impairment charge, $0.8 million of
plant relocation expenses, a $1.4 million charge related to the
prepayment of debt in connection with the Company's May 2005
refinancing effort, banking and professional fees related to that
transaction and certain other charges associated with several
reductions in force completed during the course of the year. Excluding
these asset and goodwill impairment, restructuring and related
charges, 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 fiscal 2005 was ($12.6 million), or ($0.75) per
diluted and basic share.
"Last year was a major disappointment for Quaker. Our biggest
problem was sales. The continued strength of imported leather, faux
suede and woven fabric products in the U.S. market led to a 22.3%
fall-off in our total revenues - with domestic and international
fabric sales for the year of $173.6 million and $29.3 million, down
25.4% and 18.4%, respectively. Net yarn sales, at $21.8 million, were
up 6.7%, and for the first eight months of the year were running well
ahead of 2004, but craft yarn orders slowed significantly in September
and remained weak through the balance of the year," commented Larry A.
Liebenow, Quaker's President and CEO.
"Our primary goal during 2005 was to achieve a fundamental
reshaping of our company to restore the company to profitability and
ensure its long-term success. We had three major objectives. First,
reducing our costs and employed assets to reflect our lower volumes.
Second, refocusing our U.S.-based operations to concentrate on those
segments least sensitive to imported products and expanding our base
to include contract and outdoor fabrics. And finally, completing a
strategic alliance for the sourcing of certain products offshore to
allow us to recapture a portion of the business we'd lost to foreign
imports," Mr. Liebenow said.
"And we did achieve a number of important objectives last year. We
took approximately $40.0 million out of our cost structure on an
annualized basis - through significant staffing cuts and other
reductions of approximately $3.0 million and $14.3 million in our
annualized SG&A and manufacturing costs, respectively. We consolidated
operations at four of our manufacturing and warehousing facilities
into a fifth plant. We put a new senior secured credit facility in
place, and cash flows during the year allowed us to reduce our total
funded debt by approximately $2.1 million. And we put through a price
increase last March - and implemented a surcharge in October - to
compensate for some of last year's significant increases in our energy
and raw material costs. At the end of the day, however, the 22.3% drop
in our revenues outpaced the cost reduction measures we were able to
implement," Mr. Liebenow added.
"We are determined that 2006 will see a significant improvement in
our financial results - and we believe that the steps we took during
2005 and so far this year have set the stage for that. On the sales
front - a key objective is to stabilize revenues from our core
domestic residential business while simultaneously working to generate
incremental sales from the new product and market initiatives we have
been pursuing, including the launch of our initial collections of
outsourced fabrics. We will also be continuing to aggressively develop
other products that for both strategic and economic reasons are best
produced in our U.S. plants, including our outdoor and contract fabric
lines - and fabrics for those customers needing a strong US-based
fabric mill to meet their requirements for high quality, innovative
products with relatively short delivery lead times. On the cost
reduction front, we will be continuing to consolidate our Fall River
manufacturing operations into fewer facilities, actively marketing our
excess real estate and implementing additional cost reduction
programs," Mr. Liebenow continued.
"Quaker is committed to continuing to be a strong and growing
manufacturer of home and office fabrics in the U. S. and to using the
global fabric sourcing capability we are building to generate
incremental sales. We are also committed to doing so profitably. We
are determined to stay focused on improving our quality performance
and productivity levels, keeping our operating costs as low as
possible and being increasingly innovative and flexible. We look
forward to tackling the challenges that lie ahead as we continue to do
our very best to serve all of our 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.
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
Fourth Quarter Twelve Months
Ended Ended
December January December January
31, 1, 31, 1,
2005 2005 2005 2005
-------- --------- --------- ---------
Net sales $50,127 $68,044 $224,684 $289,145
Cost of products sold 45,132 58,978 195,799 236,270
-------- --------- --------- ---------
Gross profit 4,995 9,066 28,885 52,875
Selling, general and admin.
expenses 10,828 13,724 46,076 55,315
Goodwill impairment 0 0 5,432 0
Restructuring charges and asset
impairments 165 0 9,817 0
-------- --------- --------- ---------
Operating loss (5,998) (4,658) (32,440) (2,440)
Other expenses
Interest expense 787 760 2,984 3,327
Early extinguishment of
debt 2,232 0
Other expenses 51 91 196 8
Loss before provision for
-------- --------- --------- ---------
income taxes (6,836) (5,509) (37,852) (5,775)
Provision (benefit) for income
taxes (2,068) (3,639) (12,497) (3,733)
-------- --------- --------- ---------
Net loss $(4,768) $(1,870) $(25,355) $(2,042)
======== ========= ========= =========
Loss per common share - basic $(0.28) ($0.11) $(1.51) ($0.12)
======== ========= ========= =========
Weighted average shares
outstanding - basic 16,826 16,824 16,826 16,819
======== ========= ========= =========
Loss per common share - diluted $(0.28) ($0.11) $(1.51) ($0.12)
======== ========= ========= =========
Weighted average shares
outstanding - diluted 16,826 16,824 16,826 16,819
======== ========= ========= =========
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.
Ratio analysis:
- ---------------
Gross profit margin 10.0% 13.3% 12.9% 18.3%
S.G. & A. as a percentage of
net sales 21.6% 20.2% 20.5% 19.1%
Operating margin -12.0% -6.8% -14.4% -0.8%
Net margin -9.5% -2.7% -11.3% -0.7%
Order backlog $11,270 $14,584
- -------------
QUAKER FABRIC CORPORATION
Reconciliation of Operating Income (loss) as Reported to
Pro Forma Operating Income (loss)
Fourth Quarter Twelve Months
Ended Ended
December 31, December 31,
2005 2005
--------------- --------------
Operating loss, as reported $(5,998) $(32,440)
Restructuring charges and asset
impairments 165 9,817
Goodwill impairment 0 5,432
Plant relocation and duplicate
occupancy costs 402 1,203
--------------- --------------
Pro forma operating loss $(5,431) $(15,988)
=============== ==============
QUAKER FABRIC CORPORATION
Reconciliation of Net Loss as Reported to
Pro Forma Net Loss
Fourth Twelve
Quarter Months
Ended Ended
December December
31, 31,
2005 2005
-------- ---------
Net loss, as reported $(4,768) $(25,355)
Early extinguishment of debt, net of income
taxes 1,424
Restructuring charges and asset impairments,
net of income taxes 107 6,265
Goodwill impairment 5,432
Plant relocation and duplicate occupancy costs,
net of income taxes 261 772
Tax benefit from settlement of R&D claims (1,167)
-------- ---------
Pro forma net loss $(4,400) $(12,629)
======== =========
Pro forma net loss, per share $(0.26) $(0.75)
======== =========
CONDENSED BALANCE SHEETS
December 31, January 1,
2005 2005
------------ -------------
Assets
Current assets:
Cash and cash equivalents $725 $4,134
Accounts receivable 31,822 40,708
Inventories 37,827 43,858
Prepaid expenses and other current
assets 8,070 11,893
------------ -------------
Total current assets 78,444 100,593
Property, plant and equipment, net 131,806 158,480
Goodwill, net of amortization 0 5,432
Assets held for sale 6,483 0
Other assets 3,743 2,000
------------ -------------
$220,476 $266,505
============ =============
Liabilities and Stockholders' Equity
Current maturities of long term debt and
short term debt $17,880 $40,000
Accounts payable and accrued expenses 21,760 27,197
------------ -------------
Total current liabilities 39,640 67,197
Total debt 37,880 40,000
Less: current maturities of long term debt (4,000) 0
Less: short term debt (13,880) (40,000)
------------ -------------
Total long-term debt 20,000 0
Deferred income taxes and other
liabilities 18,771 32,816
Stockholders' equity 142,065 166,492
------------ -------------
$220,476 $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