Quaker Reports 2Q Numbers

July 20, 2006  by in UnCategorized   

By Home Furnishings Business in on July 2006 Quaker Fabric Corp. on Thursday reported second-quarter 2006 net sales of $42.9 million, down $37.8 percent from the prior-year period, and a net loss of $12.1 million. Quaker lost $10.3 million in second-quarter 2005.

Second-quarter 2006 results include $9.1 million of after-tax restructuring and asset impairment charges ($8.3 million of which were non-cash) associated with Quaker’s current restructuring activities. Excluding these charges, net loss for the period was $3.1 million.

Through 2006’s first six months, Quaker had net sales of $89.2 million and a net loss of $16.3 million, compared to last year’s net sales of $128.1 million, a net loss of $13.4 million.

“The 7.3% drop in our sales versus the first quarter of this year was disappointing,” said Larry Liebenow, president and chief executive officer. “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 percent 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 percent and 23.4 percent, respectively. Net yarn sales, at $1.6 million, were down 84 percent.”

Liebenow said Quaker is focused on achieving major long-term cost-structure reductions through the comprehensive consolidation of its manufacturing operations, which involves disposition of machinery and equipment no longer needed to support operations, and the sale of excess real estate.

“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,” Liebenow added.

Quaker will focus on domestic fabric markets least sensitive to imports; 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.

“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,” Liebenow said.

“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,” 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.