<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(XX) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period ended May 31, 1994 or
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____________ to ____________
Commission file number 1-8831
FEDDERS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 22-2572390
(State of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
158 Highway 206, Peapack, New Jersey 07977
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: 908/234-2100
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The registrant has outstanding 18,959,232 shares of Common Stock
and 2,267,906 shares of Class B Stock (which is immediately
convertible into Common Stock on a share-for-share basis) as of
June 30, 1994.
<PAGE> 2
FEDDERS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4-5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE
11
</TABLE>
<PAGE> 3
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED MAY 31, ENDED MAY 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $ 95,812 $ 50,464 $143,298 $100,366
Cost of sales 75,943 42,138 113,645 84,148
Selling, general and
administrative expense 6,591 6,407 17,198 17,945
________________________________________
82,534 48,545 130,843 102,093
_________________________________________
Operating income (loss) 13,278 1,919 12,455 (1,727)
Interest expense (1,278) (1,132) (3,303) (3,180)
________________________________________
Income (loss) before
income taxes 12,000 787 9,152 (4,907)
Federal, state and foreign
income tax (benefit) 360 307 275 (1,940)
________________________________________
Income (loss) before
cumulative effect of
an accounting change 11,640 480 8,877 (2,967)
Cumulative effect of an
accounting change - - 1,780 -
_________________________________________
Net income (loss) $ 11,640 $ 480 $ 10,657 $ (2,967)
Earnings per share:
Income (loss) before
cumulative effect of
an accounting change $ 0.55 $ 0.02 $ 0.43 $ (0.15)
Cumulative effect of an
accounting change - - 0.08 -
_________________________________________
Net income (loss)
per share $ 0.55 $ 0.02 $ 0.51 $ (0.15)
</TABLE>
See accompanying notes
<PAGE> 4
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
May 31, August 31, May 31,
1994 1993 1993
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash $ 4,323 $ 8,553 $ 1,787
Accounts receivable (less
allowance of $959,
$1,143 and $1,143 at
May 31, 1994, August 31,
1993 and May 31, 1993,
respectively) 48,900 8,901 31,004
Inventories:
Finished goods 26,568 11,597 22,271
Work in process 2,074 842 2,290
Raw materials and supplies 11,141 6,831 12,011
Net inventory 39,783 19,270 36,572
Deferred income taxes - 3,882 4,196
Prepaid expenses 948 917 937
Total current assets 93,954 41,523 74,496
Property, plant and equipment
at cost:
Land and improvements 1,356 1,393 1,419
Buildings 11,955 11,844 11,784
Machinery and equipment 47,525 44,799 43,762
60,836 58,036 56,965
Less accumulated
depreciation 28,816 26,399 26,389
Net property, plant and
equipment 32,020 31,637 30,576
Other assets 7,860 8,125 9,632
$133,834 $ 81,285 $114,704
</TABLE>
See accompanying notes
<PAGE> 5
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
May 31, August 31, May 31,
1994 1993 1993
<S> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Short-term borrowing $ 22,473 - $ 15,321
Current portion of
long-term debt 7,040 $ 2,206 1,869
Accounts payable 19,575 5,174 23,257
Accrued expenses 26,023 17,184 19,494
Total current
liabilities 75,111 24,564 59,941
Long-term debt 17,646 23,384 23,649
Deferred income taxes - 6,019 5,714
Other long-term liabilities 3,136 3,089 2,790
Stockholders' equity:
Common Stock, $1 par value,
30,000,000 shares authorized,
19,518,559, 18,613,559
and 18,402,359 issued at
May 31, 1994, August 31,
1993 and May 31, 1993,
respectively 19,519 18,614 18,402
Class B Stock, $1 par value,
30,000,000 shares authorized,
2,267,906 issued at
May 31, 1994 and
August 31, 1993, and 2,268,206
issued at May 31, 1993,
respectively 2,268 2,268 2,268
Additional paid-in capital 49,790 47,571 46,861
Retained earnings (deficit) (24,471) (35,128) (36,320)
Cumulative translation
adjustment (199) (130) 365
46,907 33,195 31,576
Less-treasury stock,
at cost (8,966) (8,966) (8,966)
Total stockholders'
equity 37,941 24,229 22,610
$133,834 $ 81,285 $114,704
</TABLE>
See accompanying notes
<PAGE> 6
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MAY 31,
1994 1993
<S> <C> <C>
Cash flows from operations:
Net income (loss) $ 10,657 $ (2,967)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation and amortization 3,666 3,491
Changes in operating assets and liabilities:
Accounts receivable (39,999) (16,529)
Inventories (20,513) 8,562
Other current assets 3,851 (769)
Other assets (503) (849)
Accounts payable 14,401 (4,968)
Accrued expenses 8,839 (13,129)
Long-term liabilities (5,972) (163)
Other (69) (283)
Net cash used in operations (25,642) (27,604)
Cash flows from investing activities:
Additions to property, plant and equipment (2,950) (1,469)
Disposals of property, plant and equipment 150 418
Net cash used in investing activities (2,800) (1,051)
Cash flows from financing activities:
Increase in short-term borrowings 22,473 15,321
Repayments of long-term debt (1,385) (438)
Proceeds from stock options exercised 3,124 6,821
Net cash provided by financing
activities 24,212 21,704
Net decrease in cash and cash equivalents (4,230) (6,951)
Cash and cash equivalents at
beginning of period 8,553 8,738
Cash and cash equivalents at end of period $ 4,323 $ 1,787
Supplemental disclosure:
Interest paid $ 2,733 $ 2,592
Net income taxes refunded (306) (679)
</TABLE>
See accompanying notes
<PAGE> 7
FEDDERS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. In the first fiscal quarter of 1994, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes," which resulted in a one-time
favorable cumulative effect of an accounting change amounting to
$1,780,000. It also resulted in an effective tax rate of 3% in
fiscal 1994 due to the utilization of tax loss carryforwards.
B. Earnings per share are computed by dividing net income by the
weighted average number of shares of Common Stock, Class B Stock
and other common stock equivalents outstanding: 21,298,000 and
20,972,000 in the third quarter of 1994 and 1993, and 20,885,000
and 19,892,000 for the nine-month period ending May 31, 1994 and
1993, respectively.
C. Pursuant to the Company's stock option plans, options to
purchase 904,000 shares of Common Stock were exercised during the
first nine months of fiscal 1994.
D. The financial information included herein is unaudited;
however, such information reflects all adjustments which, other
than the cumulative effect of an accounting change, consists
solely of normal recurring adjustments which are, in the opinion
of management, necessary for a fair statement of results for the
interim periods.
<PAGE> 8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
The following is management's discussion and analysis of certain
significant factors which affected the Company's financial
position and operating results during the periods included in the
accompanying consolidated financial statements.
Results of Operations
Net sales in the third quarter ended May 31, 1994 amounted to
$95.8 million, an increase of 90.0% from $50.5 million in the
same period a year earlier. The sales gain was due to both
larger purchases by existing customers and sales to new accounts.
Large-volume retailers increasingly are requiring delivery of
room air conditioners during the peak selling season (April-July)
which boosts sales in the second half of Fedders' fiscal year and
minimizes unit shipments in the first half, compared with
previous shipping patterns.
The gross profit margin for the third quarter increased to 20.7%
from 16.5% in the same period a year ago. The gross profit
margin improvement resulted from continuous cost reductions and
higher production volume.
Selling, general and administrative expenses declined as a
percentage of sales to 6.9% from 12.7% as a result of seasonally
strong sales volume.
Interest expense increased slightly to $1.3 million and decreased
as a percentage of net sales to 1.3% from 2.2% in the prior year.
Pre-tax income for the quarter increased to $12.0 million, or
12.5% of net income, compared to $787,000, or 1.6% of net sales
in the prior year.
The effective tax rate in fiscal 1994 decreased to 3% from 39.0%
in fiscal 1993. The reduction is due to the utilization of tax
loss carryforwards in fiscal 1994.
Nine Months
For the first nine months of fiscal 1994, sales were $143.3
million, an increase of 43.0% from $100.4 million for the same
period in fiscal 1993.
Gross profit margin increased to 20.7% of net sales during the
fiscal 1994 period compared with 16.2% in fiscal 1993 as a result
of cost reductions and higher production volume.
<PAGE> 9
Selling, general and administrative expenses of $17.2 million,
versus $17.9 million in 1993, declined as a percentage of sales
to 12.0% from 17.9% as a result of expense reductions and
seasonally strong sales volume.
Interest expense increased slightly to $3.3 million in fiscal
1994 and decreased as a percentage of sales to 2.3% from 3.2% in
the prior year period.
Pre-tax income increased to $9.2 million, or 6.4% of net sales
compared to a pre-tax loss of $5.0 million in prior year.
In the nine month period, the Company's net income was $10.6
million compared with a loss of $3.0 million a year ago. Net
income for the 1994 period included a one-time favorable
cumulative effect amounting to $1.8 million from the adoption of
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." A reduced effective tax rate of
3% reflects the utilization of tax loss carryforwards in fiscal
1994.
Liquidity and Capital Resources
The Company's working capital requirements are seasonal, with
cash peaking in the fourth fiscal quarter and the Company
utilizing its credit line primarily in the second and third
fiscal quarters. The seasonality of the room air conditioner
business increased inventories, short-term borrowing and accounts
payable at May 31, 1994 compared with August 31, 1993. Accounts
receivable increased to $40.9 from $31.0 12 twelve months earlier
due to the increased sales volume. Investing activities for the
nine-month period were for capital expenditures of $3.0 million
of which $950,000 is being treated as a capital lease.
Principal outstanding of $1.9 million of the 8 7/8% subordinated
debentures matured and was redeemed in full in May 1994. In
October, the Company received a two-year renewal, with certain
more favorable terms, on its revolving credit facility of $30.0
million. On June 29, 1994, the Company paid all outstanding
amounts under its revolving line of credit. The Company received
proceeds of $3.1 million from the exercise of employee stock
options during the nine months of fiscal 1994. Management
believes that the Company's earnings and borrowing capacity are
adequate to meet the needs of its operations and its long-term
requirements, including capital expenditures.
<PAGE>
<PAGE> 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b)Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
<PAGE>
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
FEDDERS CORPORATION
By /s/Robert L. Laurent, Jr.
Robert L. Laurent, Jr.
Executive Vice President,
Finance & Administration
Date July 7, 1994_ Signing both in his capacity as
Executive Vice President on
behalf of the Registrant and as
Chief Financial Officer of the
Registrant
