LIBERTY CORNER, N.J., Nov. 9 /PRNewswire-FirstCall/ -- Fedders Corporation, (OTC: FJCC, FJCCP) a leading global manufacturer of air treatment products, including air conditioners, furnaces, air cleaners and humidifiers for residential, commercial and industrial markets, today announced results for the third quarter of fiscal year 2006. The company reported a considerably smaller loss, due to operating improvements, compared with the fiscal 2005 third quarter, despite lower sales.
Net sales of $51.2 million in the 2006 third quarter declined 18.9% from $63.1 million in the third quarter of 2005. For the first nine months of 2006, net sales declined 4.8% to $246.4 million compared with $258.7 million in the prior-year period. Net loss for the 2006 third quarter was reduced by 36.6% to $11.6 million ( $0.41 per share) from $18.4 million ( $0.63 per share) in the 2005 third quarter. For the 2006 nine-month period, the net loss was $29.3 million ( $1.06 per share) compared with $27.8 million ( $1.02 per share) during the comparable 2005 period.
The company's decision to discontinue sales to The Home Depot retail stores in the U.S. in fiscal 2006 was the primary reason for the sales decline and the decision by certain customers to accelerate room air conditioner purchases to earlier in the year further affected quarterly comparisons. Partially offsetting the declines were an increase in sales of room air conditioners through other distribution channels and higher sales of commercial air conditioners. Despite these sales declines, the net loss was reduced during the third quarter as a result of increased gross margins due to an improving product and customer mix, a 25% reduction in SG&A expenses and lower restructuring costs. Although the net loss in the nine-month period approximated that of the prior year, the operating loss improved by 12% as a result of an 18% reduction in SG&A expense, benefits from the prior year restructuring of manufacturing operations and lower restructuring costs, despite added commodity costs incurred year-to-date of $10.5 million , which could not be passed along in higher pricing.
The company previously announced its planned sale of its IAQ business and other non-core holdings and anticipates proceeds in excess of $100 million which will be used to reduce debt, improve liquidity, and invest in its profitable core HVAC business. In line with this strategic direction and as previously announced, the company has discontinued sales to Wal-Mart.
Presented below are nine-month operating results for 2006 on a pro forma basis, taking into consideration the elimination of sales to Wal-Mart and the remaining Home Depot non-retail store business in the U.S., and in Canada , since the company has also stopped selling to these accounts. In addition, the company has discontinued the sale of dehumidifiers. The pro forma statement also excludes unfavorable manufacturing variances due to excess manufacturing capacity related to Wal-Mart and The Home Depot and adjusts SG&A expenses to current levels.
Fedders Corporation
Selected Pro Forma Financial Information
Nine Months Ended
September 30, 2006
($ in millions) As Reported Pro Forma
Net sales $246.4 $170.3
Gross profit 35.1 37.5
% of net sales 14.2% 22.0%
SG&A 44.1 37.4
% of net sales 17.9% 2.0%
Operating income (loss) before
restructuring expenses (9.0) 0.1
% of net sales (3.7%) 0.1%
EBITDA (3.8) 5.3
FEDDERS CORPORATION
RESULTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED
SEPTEMBER 30, 2006 AND 2005
(amounts in thousands, except per share data)
Period Ended September 30 Third Quarter Nine Months
(Unaudited) 2006 2005 2006 2005
Net sales $51,178 $63,110 $246,446 $258,740
Cost of sales 42,447 55,197 211,331 214,115
Gross profit 8,731 7,913 35,115 44,625
Selling, general and
administrative expense 12,593 16,823 44,142 53,802
Restructuring expense 2,153 3,874 2,764 4,246
Total operating expenses 14,746 20,697 46,906 58,048
Operating loss (6,015) (12,784) (11,791) (13,423)
Interest expense, net 5,285 5,492 16,098 16,538
Partners' net interest in
joint venture results 167 151 235 844
Other expense 395 877 984 355
Loss from continuing operations
before income taxes (11,528) (19,002) (28,638) (29,472)
Income tax expense/(benefit) 115 (84) 707 263
Loss from continuing operations (11,643) (18,918) (29,345) (29,735)
Income from discontinued
operations - 561 - 1,894
Net loss (11,643) (18,357) (29,345) (27,841)
Preferred stock dividends 1,143 1,145 3,430 3,294
Net loss applicable to common
stockholders $(12,786) $(19,502) $(32,775) $(31,135)
Basic and diluted net loss
per common share $(0.41) $(0.63) $(1.06) $(1.02)
Basic and diluted weighted
average shares outstanding 31,270 30,688 31,011 30,608
Selected balance sheet items as of
September 30, 2006 and 2005 (unaudited) 2006 2005
Cash and cash equivalents $16,387 $16,946
Accounts receivable 41,721 53,318
Inventories 48,898 83,952
Accounts payable 51,638 45,354
Short-term notes payable 45,765 66,438
Long-term debt, including current portion 159,944 160,925
This news release includes forward-looking statements that are covered under the 'Safe-Harbor' clause of the Private Securities Litigation Reform Act of 1995. Such statements are based upon current expectations and assumptions. Actual results could differ materially from those currently anticipated as a result of known and unknown risks and uncertainties including, but not limited to, weather and economic, political, market and industry conditions and reliance on key customers. Such factors are described in Fedders' SEC filings, including its most recently filed annual report on Form 10-K. The company disclaims any obligation to update any forward-looking statements to incorporate developments occurring after release of announcement. Visit the Fedders investor information website at http://www.fedders.com to access additional information on Fedders.
SOURCE Fedders Corporation
