Quaker Fabric Reports $17.2 Million '05 Loss

Don Hogsett, Staff Staff, February 20, 2006

Fall River, Mass. — Hobbled by a deep slide in sales and thinning margins, Quaker Fabric Corp. recorded a worsening $4.8 million loss for the final quarter of fiscal 2005, compared with a smaller year-before deficit of $1.9 million.

Hit hard by steadily rising imports, quarterly sales at the decorative fabrics producer skidded down by 26.3%, to $50.1 million from $68.0 million last year, a daunting shortfall of more than $17 million.

With the top line under unrelenting pressure, average gross margin contracted by 330 basis points, to 10.0% from 13.3% during the same period a year ago.

Providing some relief to the bottom line, costs were pared substantially, by 21.1%, to $10.8 million from $13.7 million a year ago, yielding a cash savings of $2.9 million. But when measured as a percentage of fallen sales, the expense ratio climbed by 140 basis points, or 1.4 percentage points, to 21.6% from 20.2% the preceding year.

For all of last year, beset by falling sales and squeezed by a fistful of one-time charges for restructuring and early retirement of debt, Quaker put up a loss of $17.2 million, compared with the loss of $2.4 million the year before.

Included were a $5.4 million goodwill impairment charge; a $9.8 million charge for restructuring and asset impairment; and a $2.2 million charge for the early retirement of debt. Acting as a partial offset, Quaker received a $12.5 million income-tax benefit.

Sales for all of 2005 dropped off by 22.3%, to $224.7 million from $289.1 million.

Quaker Fabric Corp.

Qtr. 12/31 (x000) 2005 2004 % change
(loss)
a. Fourth quarter results include a $165,000 restructuring and asset impairment charge; $51,000 in miscellaneous expenses, compared with $91,000 during the same period a year ago; and an income tax benefit of $2.1 million, compared with $3.6 million during the prior-year quarter.
b. 12-month results include a $5.4 million goodwill impairment charge; a $9.8 million restructuring and asset impairment charge; a $2.2 million charge for the early retirement of debt; miscellaneous expenses of $196,000 vs. $8,000 last year; and an income tax benefit of $12.5 million, compared with a year-before tax benefit of $3.7 million.
Sales $50,127 $68,044 -26.3
Oper. income (EBIT) (5,833) (4,658)
Net income (4,768)a (1,870)a
Per share (diluted) (0.28) (0.11)
Average gross margin 10.0% 13.3%
SG&A expenses 21.6% 20.2%
12 months
Sales $224,684 $289,145 -22.3
Oper. income (EBIT) (17,191) (2,440)
Net income (25,355)b (2,042)b
Per share (diluted) (1.51) (0.12)
Average gross margin 12.9% 18.3%
SG&A expenses 20.5% 19.1%


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