HVAC manufacturer Fedders Corporation reiterated that as has been previously reported, the company has not yet filed its Annual Report on Form 10-K for 2004 or its Quarterly Report on Form 10-Q for the first quarter of 2005. Until those two filings are completed, the company will not be able to file its report for the second quarter and 6 months of 2005.
Fedders anticipates that, as a result of increased inventory of room air-conditioners in key North American markets carried over from 2004, which was caused by cooler than normal weather in 2004, net sales in the second quarter ended June 30, 2005 will decrease 29 percent to approximately U.S. $127 million from net sales of $178.1 million in the second quarter of 2004.
In addition Fedders expects that this inventory has also caused a reduction in net sales for the six months ended June 30, 2005 of 31 percent to approximately $205 million from net sales of $297.4 million in the 6 months ended June 30, 2004. The more favorable weather in key North American markets during 2005 is having the effect of clearing inventories through distribution channels and positioning the industry well going into 2006.
During the period, the company said that it manufactured fewer room air-conditioners than in the prior-year in order to reduce inventories. Reduced production has the effect of increasing costs as a result of lower overhead absorption. Fedders anticipates that, despite increased costs related to lower overhead absorption and inflationary pressures on raw materials, its gross profit margin as a percentage of net sales has increased as a result of more favorable product mix and price increases initiated to offset material cost increases realized during 2004.
Fedders said that it anticipates a net loss of approximately $0.6 million during the quarter ended June 30, 2005, compared to net income of $2.3 million in the quarter ended June 30, 2004. For the 6-month period ended June 30, 2005, the company anticipates a loss of $5.4 million versus a loss of $2.9 in the 6 months ended June 30, 2004, which included a charge related to the extinguishment of debt of $8.1 million.
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