EX-99.1 2 a4997984ex991.txt EXHIBIT 99.1 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