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Quaker Shaken in Third Quarter

Don Hogsett, Staff Staff -- Home Textiles Today, November 1, 2004

With sales falling more than 20 percent, margins thinning, and costs climbing, Quaker Fabric Corp. recorded a third quarter loss of $2.1 million, reversing a prior-year profit of $2.2 million.

Doing most of the damage to the bottom line, sales tumbled 21.3 percent during the period, to $63.6 million from $80.8 million last year, a daunting shortfall of $17.2 million.

“This was a difficult and disappointing quarter for us,” said Larry Liebenow, president and CEO. Sales, he said, came in “significantly lower than we would have expected to see based solely on the one week of additional operations built into last year's numbers as a result of the difference in the timing of our annual two-week shutdown period.”

Hobbled by the drop in sales, average gross margin was throttled down 370 basis points, or 3.7 percentage points, to 18.4 percent of sales from 22.1 percent a year ago.

At the same time, costs climbed sharply, 550 basis points, or 5.5 percentage points, to 22.3 percent of sales from 16.8 percent the prior year. Measured in absolute dollars, costs rose 4.4 percent, to $14.2 million from $13.6 million.

The increase, said Liebenow, included about $600,000 in unusual expenses, including costs tied to the termination of its effort to buy a new plant building, and the additional cost of a reduction in staffing.

Addressing the sales issues, Liebenow said fabric sales in the period declined 25.1 percent, and export sales fell 24.1 percent.

On the upside, the company's small and repositioned yarn business grew by 83.1 percent.

Quaker Fabrics

Qtr. 10/2 (x000) 2004 2003 % change
a - Third quarter results include miscellaneous income of $31,000, compared with miscellaneous income of $5,000 during the prior-year period; and a $1.2 million income tax benefit versus a year-before tax provision of $1.1 million.
b - Nine-month results include miscellaneous income of $83,000, compared with miscellaneous expense of $84,000 during the same period a year ago; and an income tax benefit of $94,000, compared with a year-before tax provision of $7.1 million.
Sales $63,585 $80,765 -21.3
Oper. Income (EBIT) (2,470) 4,262
Net income (2,128) a 2,177 a
Per share (diluted) (0.13) 0.13
Average gross margin 18.4% 22.1%
SG&A expenses 22.3% 16.8%
Nine months
Sales 221,101 244,876 -9.7
Oper. Income (EBIT) 2,218 10,165 -78.2
Net income (172) b 4,655 b
Per share (diluted) (0.01) 0.28
Average gross margin 19.8% 20.9%
SG&A expenses 18.8% 16.8%

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