Exhibit 99.1
Quaker Fabric Reports Second Quarter Financial Results
FALL RIVER, Mass.--(BUSINESS WIRE)--July 20, 2006--QUAKER FABRIC
CORPORATION (NASDAQ Symbol: QFAB) today reported net sales of $42.9
million, a net loss of ($12.1 million), and diluted and basic losses
per share of ($0.72) for the three-month period ended July 1, 2006;
compared to 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
corresponding period of fiscal 2005. Quaker's financial results for
the second quarter of fiscal year 2006 include $9.1 million of
after-tax restructuring and asset impairment charges ($8.3 million of
which were non-cash) associated with the Company's current
restructuring activities. Excluding these charges, net loss for the
second fiscal quarter of 2006 was ($3.1 million) or ($0.18) per
diluted share.
Results of operations for the first six months of fiscal year 2006
were net sales of $89.2 million, a net loss of ($16.3 million), and
diluted and basic losses per share of ($0.96); compared to net sales
of $128.1 million, a net loss of ($13.4 million), and diluted and
basic losses per share of ($0.80) for the corresponding period of
fiscal 2005. Excluding asset impairment, and restructuring and related
charges, net loss for the first six months of fiscal 2006 was ($6.4
million), or ($0.38) per share.
"The 7.3% drop in our sales versus the first quarter of this year
was disappointing. At the same time, our second quarter margin
performance, variable costs, fixed costs and SG&A expenses indicate a
sequential improvement in our operating performance compared to the
first three months of this year - reflecting the restructuring plan
and cost cutting measures we have put in place, and allowing us to
remain in compliance with the financial covenants in our loan
documents while we simultaneously continue working on our financial
structure and focusing on restoring the company to profitability.
Building sales continues to be one of our biggest challenges.
Competition from imported fabric rolls and kits remains intense, and
the second quarter of this year saw a 37.8% drop in our total revenues
versus the comparable period of last year - with domestic and
international fabric sales for the quarter of $34.9 million and $6.4
million, down 30.8% and 23.4%, respectively. Net yarn sales, at $1.6
million, were down 84.0%," commented Larry A. Liebenow, Quaker's
President and CEO.
"We are focused on achieving major long-term reductions in our
cost structure through the comprehensive consolidation of our
manufacturing operations. This involves the disposition of machinery
and equipment no longer needed to support our operations and the sale
of excess real estate. This program to achieve a major consolidation
of our operations going forward by reducing the number of facilities
we use to conduct our business, in combination with the drop we have
seen in our volume, resulted in the $9.1 million after-tax
restructuring and asset impairment charge reflected in our second
quarter financial results. The successful sale of two of our idled
Fall River area manufacturing facilities since the end of the first
quarter, including the sale of our Somerset, Massachusetts plant
earlier this month, are part of this overall plan," Mr. Liebenow
added.
"An integral part of our ongoing restructuring plan includes
focusing on those domestic markets least sensitive to imported
products; building profitable volume in the outdoor fabric, contract
fabric and specialty yarns markets; and developing strategically
important commercial relationships with a limited number of carefully
chosen offshore fabric mills. And, since the end of the first quarter,
we have continued to make a lot of progress versus those objectives,
including - a 66.2% increase in our second quarter sales into the
contract market versus the comparable period of last year - the
successful launch and first sales of our new line of decorative
outdoor fabrics to upscale outdoor furniture manufacturers and the
jobber and high-end residential markets - and incremental sales to
specialty furniture retailers that helped to increase our average
selling price per yard," Mr. Liebenow added.
"Since the end of the first quarter, we have also made
considerable progress in further developing the strategically
important, offshore sourcing arrangement we put in place earlier this
year with Zhongwang, including assisting Zhongwang with the
installation of state-of-the-art finishing and post-finishing
capability. Customer response to our outsourced products continues to
be great," Mr. Liebenow said.
"Since the second quarter of 2005, we have also implemented
further significant reductions in our cost structure. In addition,
during the twelve-month period which began at the end of fiscal June
2005, operating improvements and tight controls on inventory levels
and capital spending generated operating cash flow of approximately
$17.0 million. This cash flow allowed us to reduce debt from $51.9
million at the end of fiscal June 2005 to $34.8 million at the end of
this year's second quarter," Mr. Liebenow added.
"Between now and the end of this year, we will remain focused on
effective execution of our restructuring plan, including - continued
aggressive marketing of both our offshore fabric programs as well as
the fabrics that it makes more sense, to us and to our customers, for
us to make here in the U.S. - the consolidation of our Fall River
manufacturing operations into fewer facilities - active marketing of
our excess real estate and other assets - and implementation of
additional substantial cost reduction programs," 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, ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THOSE PROJECTED. FOR A FURTHER DISCUSSION
OF THESE FACTORS, SEE THE COMPANY'S 2005 FORM 10-K.
(Tables Follow)
QUAKER FABRIC CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
STATEMENTS OF OPERATIONS
Second Quarter Ended Six Months Ended
------------------- -------------------
July 1, July 2, July 1, July 2,
2006 2005 2006 2005
--------- --------- --------- ---------
Net sales $ 42,880 $ 68,885 $ 89,160 $128,100
Cost of products sold 37,655 58,751 78,494 110,285
--------- --------- --------- ---------
Gross profit 5,225 10,134 10,666 17,815
Selling, general and admin.
expenses 8,847 12,565 19,179 24,714
Goodwill impairment - 5,433 - 5,433
Restructuring charges and
asset impairments 13,744 3,662 14,040 3,662
--------- --------- --------- ---------
Operating loss (17,366) (11,526) (22,553) (15,994)
Other expenses
Interest expense 913 695 1,682 1,443
Early extinguishment of
debt - 2,232 - 2,232
Other expenses 97 44 503 132
- -
--------- --------- --------- ---------
Loss before provision for
income taxes (18,376) (14,497) (24,738) (19,801)
Benefit from income taxes (6,246) (4,155) (8,473) (6,369)
--------- --------- --------- ---------
Net loss $(12,130) $(10,342) $(16,265) $(13,432)
========= ========= ========= =========
Loss per common share - basic $ (0.72) ($0.61) $ (0.96) ($0.80)
========= ========= ========= =========
Weighted average shares
outstanding - basic 16,877 16,826 16,860 16,826
========= ========= ========= =========
Loss per common share -
diluted $ (0.72) ($0.61) $ (0.96) ($0.80)
========= ========= ========= =========
Weighted average shares
outstanding - diluted 16,877 16,826 16,860 16,826
========= ========= ========= =========
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 12.2% 14.7% 12.0% 13.9%
S.G. & A. as a percentage of
net sales 20.6% 18.2% 21.5% 19.3%
Operating margin -40.5% -16.7% -25.3% -12.5%
Net margin -28.3% -15.0% -18.2% -10.5%
Order backlog $ 8,732 $ 15,431
- -------------
QUAKER FABRIC CORPORATION
Reconciliation of Operating Loss as Reported to
Pro Forma Operating Loss
Second Quarter Ended Six Months Ended
------------------- -------------------
July 1, July 2, July 1, July 2,
2006 2005 2006 2005
--------- --------- --------- ---------
Operating loss, as reported $(17,366) $(11,526) $(22,553) $(15,994)
Restructuring charges and
asset impairments 13,744 3,662 14,040 3,662
Goodwill impairment - 5,432 - 5,432
Consulting professional
fees - - 303 -
Plant relocation and
duplicate occupancy
costs - 371 162 371
--------- --------- --------- ---------
Pro forma operating loss $ (3,622) $ (2,061) $ (8,048) $ (6,529)
========= ========= ========= =========
QUAKER FABRIC CORPORATION
Reconciliation of Net Loss as Reported to
Pro Forma Net Loss
Second Quarter Ended Six Months Ended
------------------- -------------------
July 1, July 2, July 1, July 2,
2006 2005 2006 2005
--------- --------- --------- ---------
Net loss, as reported $(12,130) $(10,342) $(16,265) $(13,432)
Early extinguishment of
debt, net of income
taxes - 1,424 - 1,424
Restructuring charges and
asset impairments,
net of income taxes 9,071 2,336 9,231 2,336
Goodwill impairment 5,432 - 5,432
Plant relocation and
duplicate occupancy
costs,
net of income taxes - 237 107 237
Consulting professional
fees - - 199 -
Write off of deferred
financing costs - - 296 -
Tax benefit from settlement
of R&D claims - (1,167) - (1,167)
--------- --------- --------- ---------
Pro forma net loss $ (3,059) $ (2,080) $ (6,432) $ (5,170)
========= ========= ========= =========
Pro forma net loss, per share $ (0.18) $ (0.12) $ (0.38) $ (0.31)
========= ========= ========= =========
CONDENSED BALANCE SHEETS
July 1, December 31,
2006 2005
--------- ---------
Assets
Current assets:
Cash and cash
equivalents $ 398 $ 725
Accounts receivable 28,451 31,822
Inventories 32,143 37,827
Prepaid expenses and
other current assets 6,844 8,070
--------- ---------
Total current assets 67,836 78,444
Property, plant and
equipment, net 111,867 131,177
Assets held for sale 5,097 6,483
Other assets 3,498 3,758
--------- ---------
$188,298 $219,862
========= =========
Liabilities and Stockholders'
Equity
Current maturities of long
term debt and short term debt $ 34,834 $ 37,880
Current portion of capital
lease obligations 148 143
Accounts payable and accrued
expenses 18,184 21,760
--------- ---------
Total current liabilities 53,166 59,783
Total debt 34,834 37,880
Less: current maturities of
long term debt - -
Less: short term debt (34,834) (37,880)
--------- ---------
Total long-term debt - -
Capital lease obligations,
less current portion 554 629
Deferred income taxes and
other liabilities 9,561 18,286
Stockholders' equity 125,017 141,164
--------- ---------
$188,298 $219,862
========= =========
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 2005 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