EXHIBIT 99.1
Quaker Fabric Reports Fiscal 2006 Financial Results
FALL RIVER, Mass.--(BUSINESS WIRE)--Feb. 26, 2007--QUAKER FABRIC
CORPORATION (NASDAQ Symbol: QFAB) today reported net sales of $32.2
million, a net loss of ($12.9 million), and diluted and basic losses
per share of ($0.77) for the three-month period ended December 30,
2006; compared to net sales of $50.1 million, a net loss of ($5.7
million), and diluted and basic losses per share of ($0.34) for the
corresponding period of fiscal 2005. Quaker's financial results for
the fourth quarter of fiscal year 2006 include after-tax
restructuring, including asset impairment and related charges of $6.1
million, as well as approximately $1.3 million of after-tax expenses
related to the early extinguishment of debt and inventory and deferred
financing cost write-offs. Excluding these charges and expenses, net
loss for the fourth fiscal quarter of 2006 was ($5.5 million), or
($0.32) per diluted share.
Net sales for the 52-week fiscal year ended December 30, 2006 were
$151.7 million, with a net loss of ($37.6 million), and diluted and
basic losses per share of ($2.23); compared to net sales of $224.7
million, a net loss of ($26.3 million), and diluted and basic losses
per share of ($1.56) for the 52-week fiscal year ended December 31,
2005.
Quaker's 2006 financial results reflect significant one-time
charges related to the Company's ongoing restructuring plan, including
after-tax asset impairment and associated charges of $18.4 million, as
well as approximately $1.9 million of after-tax expenses related to
the early extinguishment of debt and inventory and deferred financing
cost write-offs. Excluding these charges, net loss for fiscal 2006 was
($17.4 million), or ($1.03) per share.
"Pre-tax restructuring and asset impairment charges related to the
execution of our restructuring plan accounted for $26.5 million, or
more than half, of last year's $48.5 million operating loss. These
charges are primarily non-cash and include the write-down to estimated
realizable value of assets, including manufacturing plants and
machinery and equipment, that we have put up for sale as part of our
consolidation strategy," commented Larry A. Liebenow, Quaker's
President and CEO.
"The market for upholstery fabric in the United States is
continuing to experience unprecedented change, with imports, in a
variety of forms, now representing a very large percentage of total
consumption. For us, this meant a 29% drop in last year's domestic
fabric sales and an 18% drop in export fabric sales. This fall-off in
our sales outpaced the speed with which we were able to take costs out
of our operations. Continued implementation of our restructuring plan
is intended to bring our cost structure in line with projected
revenues, and we believe that the steps we took last year to reshape
and restructure the company represent progress toward returning the
company to profitability," Mr. Liebenow said.
"To counter the decline in our sales, we have made repositioning
our marketing efforts towards segments less vulnerable to Chinese
imports one of our top priorities - and we believe that we made
important strides in that area during 2006, including the development
and introduction of new products for the outdoor, jobber and contract
markets in addition to our core line of products for the residential
market. This effort will remain a major focus for us again this year.
To further our dual strategy of striking the right balance between
domestic production and global sourcing, we also developed and
implemented a China strategy intended to give us a strategic advantage
in the global sourcing arena. In addition, during 2006, we sold two
manufacturing plants and about $5.0 million of machinery and equipment
we no longer needed, and reduced annualized SG&A and manufacturing
costs by approximately $10.0 million and $20.0 million, respectively.
And finally, we reduced inventory by about $9.7 million, senior debt
by a little over $4.0 million and put new financing agreements in
place during November of last year, " Mr. Liebenow continued.
"While we believe that much of our consolidation effort and the
related asset impairment charges are now behind us, this year's
primary focus will be on rebuilding our sales line and aligning our
costs with our sales expectations. The strategic alliance we put in
place with our China-based partner in January of last year is on its
way to becoming the strong and effective outsourcing arrangement we
had hoped it would be, with the products we have designed for
production at their plant in China achieving widespread market
acceptance. We are also continuing to build demand for fabrics slated
for production in our Fall River manufacturing plants, including the
new products we have developed for the contract, jobber, outdoor and
residential markets. And, of course, during the rest of this year, we
will be continuing to actively market the facilities and equipment we
no longer need. Within the past week, we have entered into two asset
sale agreements. The first involves a pending sale at $4.7 million and
partial leaseback of our corporate headquarters building in Fall River
- - the second covers the ongoing sale of additional excess machinery
and equipment and calls for an initial payment to the company of $1.3
million. The net proceeds from both of these deals will be used to
reduce the outstanding balance of our term loan. This is a very
important transition year for us, with much work behind us, a clear,
focused strategy in place for the future, and much work still to be
done," Mr. Liebenow concluded.
Quaker Fabric Corporation is a leading designer, manufacturer and
distributor of woven upholstery fabrics for furniture markets in the
United States and abroad.
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 2005 FORM 10-K.
(Tables Follow)
QUAKER FABRIC CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
STATEMENTS OF OPERATIONS
Fourth Quarter Ended Twelve Months Ended
-------------------- -------------------
December December December December
30, 31, 30, 31,
2006 2005 2006 2005
---------- --------- --------- ---------
Net sales $32,193 $50,127 $151,664 $224,684
Cost of products sold 30,001 45,097 136,809 195,764
---------- --------- --------- ---------
Gross profit 2,192 5,030 14,855 28,920
Selling, general and admin.
expenses 8,713 10,828 37,053 46,076
Goodwill impairment - - - 5,432
Restructuring charges and
asset impairments 7,670 1,551 26,458 11,203
Loss (gain) on sale of
assets, net 187 - (190) -
---------- --------- --------- ---------
Operating loss (14,378) (7,349) (48,466) (33,791)
Other
Interest expense 966 822 3,727 3,019
Early extinguishment of
debt 628 - 628 2,232
Other expenses 541 51 1,264 196
Loss before provision for
income taxes ---------- --------- --------- ---------
(16,513) (8,222) (54,085) (39,238)
Benefit from income taxes (3,584) (2,553) (16,453) (12,982)
---------- --------- --------- ---------
Net loss $(12,929) $(5,669) $(37,632) $(26,256)
========== ========= ========= =========
Loss per common share - basic $(0.77) ($0.34) $(2.23) ($1.56)
========== ========= ========= =========
Weighted average shares
outstanding - basic 16,877 16,826 16,869 16,826
========== ========= ========= =========
Loss per common share -
diluted $(0.77) ($0.34) $(2.23) ($1.56)
========== ========= ========= =========
Weighted average shares
outstanding - diluted 16,877 16,826 16,869 16,826
========== ========= ========= =========
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 6.8% 10.0% 9.8% 12.9%
S.G. & A. as a percentage of
net sales 27.1% 21.6% 24.4% 20.5%
Operating margin -44.7% -14.7% -32.0% -15.0%
Net margin -40.2% -11.3% -24.8% -11.7%
Order backlog $8,439 $11,270
- -----------------------------
QUAKER FABRIC CORPORATION
Reconciliation of Operating Loss as Reported to
Pro Forma Operating Loss
Fourth Quarter Ended Twelve Months Ended
-------------------- -------------------
December December December December
30, 31, 30, 31,
2006 2005 2006 2005
----------- -------- --------- ---------
Operating loss, as reported $(14,378) $(7,349) $(48,466) $(33,791)
Restructuring charges and
asset impairments 7,670 1,551 26,458 11,203
Loss (gain) on sale of
assets, net 187 - (190) -
Goodwill impairment - - - 5,432
Consulting professional
fees - - 303 -
Occupancy costs of closed
facilities 173 - 173 -
Inventory writedown 765 - 765 -
Plant relocation and
duplicate occupancy
costs - 402 162 1,203
----------- -------- --------- ---------
Pro forma operating loss $(5,583) $(5,396) $(20,795) $(15,953)
=========== ======== ========= =========
QUAKER FABRIC CORPORATION
Reconciliation of Net Loss as Reported to
Pro Forma Net Loss
Fourth Quarter Ended Twelve Months Ended
-------------------- -------------------
December December December December
30, 31, 30, 31,
2006 2005 2006 2005
----------- -------- --------- ---------
Net loss, as reported $(12,929) $(5,669) $(37,632) $(26,256)
Early extinguishment of
debt, net of income tax 437 - 437 1,424
Restructuring charges and
asset impairments, net
of income taxes 6,062 990 18,415 7,147
Loss (gain) on sale of
assets, net 116 - (132) -
Goodwill impairment - - - 5,432
Plant relocation and
duplicate occupancy
costs, net of income
taxes - 261 107 772
Occupancy costs of closed
facilities 120 - 120 -
Inventory writedown 532 - 532 -
Consulting professional
fees - 199 -
Write-off of deferred
financing costs 211 - 507 -
Tax benefit from
settlement of R&D claims - - - (1,167)
----------- -------- --------- ---------
Pro forma net loss $(5,451) $(4,418) $(17,447) $(12,648)
=========== ======== ========= =========
Pro forma net loss, per share $(0.32) $(0.26) $(1.03) $(0.75)
=========== ======== ========= =========
CONDENSED BALANCE SHEETS
December 30, December 31,
2006 2005
------------ ------------
Assets
Current assets:
Cash and cash equivalents $724 $725
Accounts receivable 21,512 31,822
Inventories 28,122 37,827
Prepaid expenses and other current
assets 5,620 8,070
------------ ------------
Total current assets 55,978 78,444
Property, plant and equipment, net 77,413 131,177
Assets held for sale 21,811 6,483
Other assets 5,642 3,758
------------ ------------
$160,844 $219,862
============ ============
Liabilities and Stockholders' Equity
Current maturities of long term debt and
short term debt $11,280 $37,880
Current portion of capital lease obligations 152 143
Accounts payable and accrued expenses 21,248 21,760
------------ ------------
Total current liabilities 32,680 59,783
Total debt 33,720 37,880
Less: current maturities of long term debt (1,800) -
Less: short term debt (9,480) (37,880)
------------ ------------
Total long-term debt 22,440 -
------------
Capital lease obligations, less current
portion 477 629
Deferred income taxes and other
liabilities 2,318 18,286
Stockholders' equity 102,929 141,164
------------ ------------
$160,844 $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
PAUL J. KELLY, 508-646-2251
CYNTHIA L. GORDAN, 508-646-2261