Quaker grows profits as one-time charges pass
October 28, 2002-- Home Textiles Today,
Third-quarter profits more than quadrupled at Quaker Fabrics Corp., to $1.5 million from $331,000 last year, as the fabric producer left behind a one-time charge of $800,000, stemming from the bust-up of acquisition talks, that held earnings in check a year ago.
Quaker sales rose by 6.0 percent — less than originally expected and well beneath the 20 percent gain put up during the second quarter — to $81.0 million from $76.4 million a year ago, as U.S. sales lagged behind exports and yarn sales fell off sharply.
Earnings in the third quarter rose by 350.8 percent as the fabric producer put behind it an $800,000 charge that dogged the bottom line a year ago, when the company rang up the one-time charge after it called off negotiations with a potential acquisition target.
In another lift to the bottom line, Quaker continued to whittle down its overhead costs. Measured as a percentage of sales, costs were cut by 160 basis points, to 15.3 percent from 16.9 percent a year ago. Measured in absolute dollars, costs were pared by 3.8 percent, to $12.4 million from $12.9 million, generating a cash savings of almost half-a-million dollars.
Average gross margin held relatively steady, slipping by just 10 basis points, to 19.8 percent from 19.9 percent the prior year.
Buoyed by stronger sales and lower costs, operating profits jumped up by 56.9 percent, to $3.6 million from $2.3 million the preceding year.
Larry Liebenow, Quaker president and ceo, commented, "Put in context, our third-quarter financial results confirm that the strategic platform we've built for Quaker is fundamentally correct. Overall, our fabric sales for the quarter were up 9.4 percent compared to last year, with domestic fabric sales up 6.5 percent and international fabric sales up 29.4 percent. However, gross yarn sales for the quarter at $4.0 million, were down 27.7 percent compared to last year's $5.5 million."
Liebenow added, "We entered this year's third quarter with a backlog that was 22 percent higher than last year, but slow growth in the domestic economy as a whole, together with the steps we took to reduce our average delivery lead to approximately 4.5 weeks, caused our new order rate during the quarter to decline approximately 30 percent vs. the comparable period of last year and our backlog at the end of the quarter to come in at approximately $29.0 million."
Ordinarily, Liebenow added, "orders rebound during August following the seasonal summer slowdown the industry generally experiences."
With the near-term outlook still clouded, Liebenow said Quaker has scaled back capital spending plans for the fourth quarter, and now expects to spend about $5 million less than it had originally planned.
Quaker Fabrics Corp.
|Qtr. 9/28 (x000)||2002||2001||% change|
|a-Earnings in the year-ago third-quarter and nine-months were reduced by a non-recurring charge of $800,000 stemming from the termination of a potential acquisitions.
|Oper. income (EBIT)||3,639||2,320||56.9|
|Per share (diluted)||0.09||0.02||350.0|
|Average gross margin||19.8%||19.9%||—|
|Oper. income (EBIT)||19,983||14,006||42.7|
|Per share (diluted)||0.62||0.39||59.0|
|Average gross margin||21.8%||20.9%||—|
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