Cuts help Quaker triple profits

Don Hogsett, February 23, 2004

Extending an earnings turnaround begun in the third quarter, Quaker Fabric Corp. bulked up margins and aggressively cut costs to virtually triple its fourth-quarter profits, despite a modest slide in sales.

Earnings at the decorative fabrics producer jumped by 184.3 percent, to $3.3 million from $1.2 million last year. Sales in the closing quarter slipped by 2.5 percent, to $80.5 million from $82.5 million last year, as export sales continued to decline.

Largely driving the earnings turnaround, Quaker continued to hack away at overhead. Costs were cut by 5.9 percent during the period, to $14.2 million from $15.1 million last year, generating a cash savings of $891,000. Measured as a percentage of sales, costs were pared by 60 basis points, or six-tenths of a percentage point.

At the same time, interest expense was whittled down by 30.1 percent, to $859,000 from $1.2 million last year, a savings of another $370,000.

In a further boost to the bottom line, margins improved by 140 basis points, or 1.4 percentage points, to 23.4 percent from 22 percent a year ago.

With the drop-off in sales neutralizing much of the margin improvement, gross margin dollars edged up by 3.6 percent, to $18.8 million from $18.2 million.

Quaker Fabric Corp.

Qtr. 1/3 (x000) 2003 2002 % chg
a-Fourth-quarter results include $33,000 in miscellaneous income, compared with miscellaneous expense of $21,000 last year.
b-12-month results include miscellaneous expense of $51,000 vs. $91,000 a year ago.
Sales $80,461 $82,492 -2.5
Oper. income (EBIT) 4,636 3,084 50.3
Net income 3,284a 1,155a 184.3
Per share (diluted) 0.19 0.07 171.4
Average gross margin 23.4% 22.0%
SG&A expenses 17.7% 18.3% --
12 months 2003 2002 % chg
Sales 325,337 365,445 -11.0
Oper. income (EBIT) 14,801 23,067 -35.8
Net income 7,939b 11,556b -31.3
Per share (diluted) 0.47 0.69 -31.9
Average gross margin 21.6% 21.9% --
SG&A expenses 17.0% 5.6%

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