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Fedders Q1 Sales Drop 10.6%

By Jeff Malester -- TWICE, 1/6/2001

LIBERTY CORNER, N.J. -Air conditioner manufacturer Fedders Corp. said reduced demand for room air conditioners-due to cool weather during the summer of 2000 in the Midwest, Northeast and Mid-Atlantic regions-reduced sales 10.6 percent in the first quarter of fiscal 2001.

Sales for the three months ended Nov. 30 were $39.9 million, compared with $44.7 million in the same period last year.

Gross profit margin at Fedders dropped to 21.7 percent in the first quarter, down 800 basis points from the 29.7 percent recorded in the year-ago three months. The lower gross profit margin was mainly a result of unabsorbed overhead due to reduced production at Fedders' three major room air conditioner factories to correct inventory imbalances caused by the cold summer.

This led to an operating loss for the first quarter of $7.4 million, compared with nearly break-even results in the same quarter last year, when the factories were at normal production levels.

"We moved swiftly to correct the inventory imbalances by curtailing production at our three major room air conditioner factories during the quarter," said Sal Giordano Jr., vice chairman/CEO. "Unfortunately, the effects of the factory shutdowns [contributed to] a greater-than-normal loss in the first quarter."

The net loss for the quarter was $7.5 million, compared with a net loss of $2.1 million in the first three months of fiscal 2000.

For the trailing 12 months ended Nov. 31 net sales were $405.1 million, about 8 percent above the $375 million recorded in the same year-ago 12-month period. Net income for the trailing 12 months was $15 million, compared to $21.5 million in the period.

Going forward, Fedders expects its acquisition strategy to drive additional growth in new and existing air treatment markets. n

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