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Fedders Q4 Sales Down 9.4%

4/03/2006 08:42:00 AM Eastern

Liberty Corner, N.J. — Unfavorable weather in key North American markets during the summer of 2004 affected financial results at Fedders in both 2004 and 2005, due to reduced air conditioner sales that left excess inventory levels in the distribution system.

In the fourth quarter, ended last Dec. 31, sales dropped 9.4 percent, down to $39 million, from $43 million in the year-ago period. The slide was due primarily to lower sales of dehumidifiers and sales accruals for charge-backs related to a large customer, offset in part by higher sales of commercial heating, ventilation and air conditioning (HVAC) products.

Fedders continued to reduce inventories in the fourth quarter, from $84 million to $74.3 million, yet the company posted a fourth quarter net loss from continuing operations of $45.8 million, including $18.7 million of impairment and restructuring charges, compared with a loss of $13.7 million, excluding an $8.1 million income tax benefit.

Expenses for the three months declined 17.1 percent year-over-year, as the company began to benefit from cost-savings measures during the quarter.

Net loss in the fourth quarter more than doubled, reaching $34.2 million, up from a year-on-year $13.5 million.

The impact of higher inventory levels sharply reduced customer orders and factory production for 2005. However, during the 12 months, hot weather depleted most inventories at retail distribution channels, creating demand for room air conditioners entering 2006. During 2005, the company sharply lowered its inventory levels by 43 percent, or $56.3 million.

Sales for the 12 months, ended Dec. 31, decreased 25.5 percent, to $297.7 million, from $399.5 million the previous year. Net sales in Fedders’ heating, ventilation, air conditioning and refrigeration (HVACR) segment dropped 28.1 percent for the year, down from $372 million, primarily due to lower sales of room air conditioners and to increased room air conditioner inventory levels.

Operating loss from continuing operations for the 12 months hit $52.8 million, compared with a loss of $15.5 million in 2004. This increased slide reflects lower sales and production of room air conditioners, which impacted gross profit, and to restructuring charges.

Expenses for the 12 months were 23.9 percent of net sales, compared with 18 percent of net sales the previous year.

Net loss for the year climbed to $62.1 million, up from a net loss of $26.1 million in 2004. The company’s net loss for 2005 includes $13.5 million in income from discontinued operations.

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