Quaker hit in Q2 profit freefall
Ray Allegrezza -- Furniture Today, July 28, 2003
With sales tumbling down by more than 27 percent, and with margins under heavy pressure, second quarter profits at Quaker Fabric Corp. plunged by 96.2 percent, to just $165,000 from $4.5 million in the same period last year.
In the midst of a broad textiles industry slowdown, sales fell by 27.5 percent, to $73.9 million from $101.9 million weakening substantially after an earlier 9.8 percent drop in sales during the opening quarter.
"Quaker's overall financial performance during the second quarter reflected continued weakness in both the domestic and international markets as a result of the difficult global macroeconomic environment," said Larry Liebenow, president and ceo.
Drawing even more dollars away from the top line, this year's second quarter included only 12 full weeks of full operations, compared with 13 last year, due to the timing of the company's annual slowdown for planned maintenance, Liebenow said.
Particularly hard hit were domestic sales, Liebenow said, which declined by $21.7 million, while export sales were off by $3.6 million "The volume of our export business was essentially unchanged from this year's first quarter, however, and demonstrates that Quaker's commitment to growing its business internationally has allowed us to remain competitive in that arena even in the face of difficult conditions," Liebenow added.
Average gross margin narrowed substantially, contracting by 310 basis points, or 3.1 percentage points. Acting to shore up the bottom line, Quaker cut expenses by 10.7 percent. But measured as a percentage of sales, costs still climbed higher, to 18.0 percent from 14.6 percent a year ago.
In another assist to the bottom line, Quaker paid down debt and reduced its interest expense by 13.0 percent, to $991,000 from $1.1 million, saving $148,000. "Significantly, Quaker's balance sheet remains a source of strength, and we made additional improvements in that area during this period, including a reduction in total debt of $7.7 million." Saving even more money, Quaker whittled down its inventories by 12.9 percent.
Going forward, said Liebenow, "our backlog position was about $24.5 million at the end of the second quarter, and that was down about $14.1 million from last year, which, in part, reflects our reduced delivery lead times. The average price point in our backlog was essentially unchanged from last year and increased slightly from the first quarter. It remains absolutely critical that we build volume at the top line, and we will remain focused on that core piece of our strategy."
Quaker also announced a quarterly cash dividend of 2.5 cents per share of common stock, payable Aug. 22 to shareholders of record as of Aug. 8.
Quaker Fabric Corp.
|Qtr. 7/5 (x000)||2003||2002||% chg|
|a-Second-quarter results include $113,000 in miscellaneous expense, compared with $11,000 in miscellaneous income during the year-ago period; and an income-tax benefit of $82,000, compared with a prior-year income-tax provision of $2.6 million.
b-Six-month results include $89,000 in miscellaneous expenses, compared with miscellaneous income of $6,000 in the 2002 first half.
|Oper. income (EBIT)||1,187||8,241||-85.6|
|Per share (diluted)||0.01||0.26||-96.2|
|Average gross margin||19.6%||22.7%||—|
|Six months||2003||2002||% chg|
|Oper. income (EBIT)||5,903||16,344||-63.9|
|Per share (diluted)||0.15||0.53||-71.7|
|Average gross margin||20.4%||22.6%||—|
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