Fedders Announces Results for the Second Quarter and First Six Months of 2006
LIBERTY CORNER, N.J., Aug. 8 /PRNewswire-FirstCall/ -- Fedders Corporation (NYSE: FJC), a leading global manufacturer of air treatment products, including air conditioners, furnaces, air cleaners, dehumidifiers, and humidifiers for residential, commercial and industrial markets, today announced its results for the second quarter and first six months of 2006.
Net sales of $95.6 million in the 2006 second quarter declined 22.1% from $122.7 million in the second quarter of 2005. Sales of $195.3 million in the first six months of 2006 were essentially even with sales of $195.6 million in the first six months of 2005 despite lower sales of approximately $32 million of room air conditioners to The Home Depot, as a result of no longer selling to its U.S. retail stores. Sales in the Engineered Products segment declined 11.0% in the second quarter and 5.4% for the first six months of 2006, due to fewer cleanroom projects in China. Sales in the Heating, Ventilating, Air Conditioning, and Refrigeration (HVACR) segment declined by 23.0% during the second quarter due to lower sales of room air conditioners as a result of customers purchasing product directly from the company's China facilities during the first quarter of 2006 rather than from the company's domestic warehouses, nearer to the summer season, as occurred in the second quarter of 2005. For the six months, HVACR sales were essentially flat as a slight decline in appliance sales was offset by growth in commercial and residential unitary air conditioner sales.
Gross profit for the second quarter of 2006 declined to $13.7 million or 14.3% of net sales compared with $23.1 million or 18.8% of net sales in the prior-year quarter. Gross profit declined as a result of lower sales and increased commodity costs of $5.6 million during the second quarter that could not be passed along in the form of price increases to customers with fixed- price contracts for room air conditioners and dehumidifiers. For the 2006 six-month period, gross profit declined to $26.4 million or 13.5% of net sales compared with $36.7 million or 18.8% of net sales in the prior-year period. For the six-month period, $9.8 million of commodity cost increases could not be passed on. The lower margin on sales under fixed-price contracts was partly offset by increased gross margins of commercial and residential unitary air conditioners.
Selling, general and administrative (SG&A) expenses declined by 14.9% to $16.5 million in the second quarter of 2006, compared with $19.4 million in the prior-year quarter. For the first six months of 2006, SG&A expenses declined by 14.7% to $31.5 million compared with $37.0 million in the 2005 period. The reduction in SG&A expenses is the result of cost-savings programs initiated in late 2005 and 2006 as well as management's continued focus on reducing costs.
Operating loss for the second quarter of 2006 was $3.4 million compared with income of $3.5 million in the 2005 quarter. Net loss applicable to common stockholders for the quarter was $10.0 million, or 32 cents per diluted share, compared to a net loss applicable to common stockholders of $2.5 million, or eight cents per diluted share, in the 2005 quarter. For the first six months of 2006, the operating loss was $5.8 million compared with an operating loss of $0.6 million for the first six months of 2005. Net loss applicable to common stockholders for the 2006 period was $20.0 million, or 65 cents per diluted share, versus $11.6 million, or 38 cents per diluted share, in the prior period.
The company has made significant year-over-year improvements in working capital, resulting in inventories decreasing from $103.7 million to $61.7 million and short-term debt decreasing from $90.5 million to $45.8 million.
Subsequent to the second quarter, the company announced it was exploring the possible sale of its global indoor air quality (IAQ) businesses, which are not core to the company's principal residential and commercial HVAC businesses and amount to approximately $50 million in sales.
FEDDERS CORPORATION
RESULTS FOR THE SECOND QUARTER AND FIRST SIX MONTHS ENDED
JUNE 30, 2006 AND 2005
(amounts in thousands, except per share data)
Period Ended June 30 (Unaudited) Second Quarter Six Months
2006 2005 2006 2005
Net sales $95,567 $122,732 $195,268 $195,630
Cost of sales 81,878 99,632 168,884 158,918
Gross profit 13,689 23,100 26,384 36,712
Selling, general and administrative
expense 16,509 19,410 31,549 36,979
Restructuring (income)/expense 611 197 611 372
Total operating expenses 17,120 19,607 32,160 37,351
Operating income/(loss) (3,431) 3,493 (5,776) (639)
Interest expense, net 5,340 5,688 10,813 11,046
Partners' net interest in joint
venture results 215 314 68 693
Other (income)/expense 30 85 589 (522)
Income/(loss) from continuing
operations (8,586) (1,966) (17,110) (10,470)
before income taxes
Income tax expense/(benefit) 315 119 592 347
Income/(loss) from continuing
operations (8,901) (2,085) (17,702) (10,817)
Income/(loss) from discontinued
operations net of 2005 tax of
$0 and $14 - 698 - 1,333
Net income/(loss) (8,901) (1,387) (17,702) (9,484)
Preferred stock dividends 1,144 1,144 2,287 2,149
Net income/(loss) applicable to
common stockholders $(10,045) $(2,531) $(19,989) $(11,633)
Basic and diluted net income/(loss)
per common share $(0.32) $(0.08) $(0.65) $(0.38)
Basic and diluted weighted average
shares outstanding 30,927 30,603 30,879 30,568
Selected balance sheet items as of
June 30, 2006 and 2005 (unaudited) 2006 2005
Cash and cash equivalents $11,754 $17,773
Accounts receivable 57,175 88,413
Inventories 61,731 103,740
Accounts payable 65,676 55,527
Short-term notes 45,774 90,492
Long-term debt, including current portion 160,169 161,288
