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Fedders Q3 Sales Cool Off By 12%, Takes Loss

11/02/2004 09:42:00 AM Eastern

Liberty Corner, N.J. — Adverse weather conditions in North America put a damper on sales of room air conditioners at Fedders during the third quarter, cooling off overall company sales by 12 percent, down to $69.2 million from a year-ago $78.7 million.

Much chillier-than-normal weather conditions prevented in-season sales re-orders, said Fedders, but also resulted in significant customer returns. For this reason, Fedders’ air conditioning and dehumidifier segment recorded third-quarter sales of $59.6 million, down from a year-earlier $70.4 million.

For the third quarter, ended Sept. 30, consolidated gross profit declined to $7.6 million, or 11 percent of sales, compared with $15.5 million, or 19.6 percent of sales in the prior-year period. Gross profit was adversely affected by higher component and raw materials costs and unabsorbed manufacturing costs associated with the transfer of production from several U.S. factories to China.

Operating loss at Fedders soared to $10.4 million in the third quarter, compared with a loss of $755,000 year-on-year, while net loss for the three months nearly tripled to $9.7 million from $3.7 million in the same quarter in 2003.

Expenses at Fedders increased to $18 million in the third quarter, compared with a year-ago $16.3 million, due mainly to higher selling expenses as a result of increased sales activity globally and higher warehousing costs to support higher inventory levels.

For the nine months, consolidated third-quarter sales dropped to $366.6 million from $388.8 million in the same period the previous year. Sales in the company’s air conditioning and dehumidification segment declined to $335.5 million, compared with a year-earlier $363.9 million, due to the cold North American summer depressing air conditioner sales.

Fedders consolidated operating income slid to $4 million for the nine months, down from $38 million in the same time frame last year, while the company reported a net loss of $12.6 million for the nine months, compared with net income of $16.8 million in the same period in 2003.