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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 November 30, 1993 or
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( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 1-8831
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FEDDERS CORPORATION
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(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 22-2572390
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(State of incorporation) (I.R.S. Employer Identification No.)
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<S> <C>
158 Highway 206, Peapack, New Jersey 07977
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (908) 234-2100
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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
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The registrant has outstanding 17,959,149 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 December 31, 1993.
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FEDDERS CORPORATION
INDEX
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Page
Number
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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
Part II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURE 10
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PART I FINANCIAL INFORMATION
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share
data) (unaudited)
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<CAPTION>
FIRST QUARTER
ENDED NOVEMBER 30,
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1993 1992
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Net sales and other income $ 10,527 $ 13,277
Cost and expenses:
Cost of sales 8,453 10,887
Selling, general and administrative
expense 5,198 5,343
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13,651 16,230
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Operating loss (3,124) (2,953)
Interest expense (887) (1,200)
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Loss before income taxes (4,011) (4,153)
Federal, state and foreign income
tax benefit (120) (1,592)
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Loss before cumulative effect of
an accounting change (3,891) (2,561)
Cumulative effect of an
accounting change 1,780 -
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Net loss $ (2,111) $ (2,561)
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Earnings per share:
Loss before cumulative effect of an
accounting change $ (0.19) $ (0.13)
Cumulative effect of an accounting change 0.09 -
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Net loss per share $ (0.10) $ (0.13)
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See accompanying notes
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FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
(unaudited)
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<CAPTION>
Nov. 30, Aug. 31, Nov. 30,
1993 1993 1992
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<S> <C> <C> <C>
ASSETS:
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Current assets:
Cash - $ 8,553 $ 5,675
Accounts receivable (less allowance of
$905 at November 30, 1993 and $1,078
at August 31, 1993, respectively) $ 5,646 8,901 9,039
Inventories:
Finished goods 26,787 11,597 24,124
Work in process 2,027 842 2,170
Raw materials and supplies 7,805 6,831 10,282
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36,619 19,270 36,576
Deferred income taxes - 3,882 4,279
Prepaid expenses 783 917 502
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Total current assets 43,048 41,523 56,071
Property, plant and equipment at cost:
Land and improvements 1,385 1,393 1,727
Buildings 11,857 11,844 11,827
Machinery and equipment 46,480 44,799 42,631
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59,722 58,036 56,185
Less accumulated depreciation 27,093 26,399 25,023
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Net property, plant and equipment 32,629 31,637 31,162
Other assets 7,942 8,125 9,493
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$ 83,619 $81,285 $96,726
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See accompanying notes
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FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
(unaudited)
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<CAPTION>
Nov. 30, Aug. 31, Nov. 30,
1993 1993 1992
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<S> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY:
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Current liabilities:
Short-term borrowing $ 10,544 - -
Current portion of long-term debt 2,220 $ 2,206 -
Accounts payable 8,147 5,174 $25,806
Accrued expenses 12,517 17,184 20,598
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Total current liabilities 33,428 24,564 46,404
Long-term debt 24,395 23,384 25,138
Deferred income taxes - 6,019 5,714
Other long-term liabilities 3,058 3,089 3,329
Stockholders' equity:
Common Stock, $1 par value, 30,000,000
shares authorized, 18,694,559 and
18,613,559 issued at November 30, 1993
and August 31, 1993, respectively 18,695 18,614 16,838
Class B Stock, $1 par value, 30,000,000
shares authorized, 2,267,906 issued and
outstanding at November 30, 1993
and August 31, 1993, respectively 2,268 2,268 2,268
Additional paid-in capital 47,846 47,571 41,583
Retained earnings (deficit) (37,239) (35,128) (35,914)
Cumulative translation adjustment 134 (130) 311
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31,704 33,195 25,086
Less-treasury stock, at cost (8,966) (8,966) (8,945)
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Total stockholders' equity 22,738 24,229 16,141
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$ 83,619 $ 81,285 $96,726
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See accompanying notes
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FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
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FIRST QUARTER ENDED
NOVEMBER 30,
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1993 1992
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Cash flows from operations:
Net loss $ (2,111) $ (2,561)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,150 1,726
Deferred income taxes (1,780) -
Changes in operating assets and liabilities:
Accounts receivable 3,255 5,436
Inventories (17,349) 8,558
Prepaid expenses 140 (417)
Other assets (114) (629)
Accounts payable 2,973 (2,419)
Accrued expenses (5,030) (12,025)
Other long-term liabilities (31) -
Other 264 (161)
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Net cash used in operations (18,633) (2,492)
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Cash flows from investing activities:
Additions to property, plant and equipment (1,698) (210)
Disposals of property, plant and equipment 12 139
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Net cash used in investing activities (1,686) (71)
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Cash flows from financing activities:
Increase in short-term borrowings 10,544 -
Repayments of long-term debt 866 (500)
Proceeds from stock options exercised 356 -
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Net cash provided by (used in)
financing activities 11,766 (500)
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Net decrease in cash and cash equivalents (8,553) (3,063)
Cash and cash equivalents at beginning
of period 8,553 8,738
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$ - $ 5,675
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Supplemental disclosure:
Interest paid $ 806 $ 959
Income taxes paid - -
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See accompanying notes
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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." The adoption of SFAS No. 109 resulted in a one-time
favorable cumulative effect of an accounting change amounting to
$1,780,000. It also resulted in a decrease in the effective tax rate
from 38% in the first fiscal quarter of 1993 to 3% in fiscal 1994,
reducing the tax benefit in the 1994 first quarter.
B. The financial information included herein is unaudited; however, such
information reflects all adjustments which, other than the cumulative
effect of an accounting change, consist solely of normal recurring
adjustments which are, in the opinion of management, necessary for a
fair statement of results for the interim periods.
C. In October, 1993, the Company received a two-year renewal of its
revolving credit facility with a commercial financial institution
effective December 23, 1993. Borrowing under this credit facility
amounted to $10,544,000 at November 30, 1993.
D. 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: 20,376,000 and 19,379,000 in
the three month period ended November 30, 1993 and 1992, respectively.
E. Pursuant to the Company's stock option plans, options to purchase
81,800 shares of Common Stock were exercised during the three months
ended November 30, 1993.
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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 have 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 first quarter of fiscal 1994 of $10.5 million were 21.1% below
sales of $13.3 million for the first quarter of 1993, as a result of new
leaders in room air conditioner retailing taking delivery of inventory
primarily during the peak season from April to July rather than purchasing
product in the preseason, which was the past practice. The Company's order
rate is higher than in fiscal 1993.
Gross profit margin as a percentage of net sales increased to 19.7% from 18.0%
during the prior year period, primarily due to decreased costs and improved
overhead absorption as a result of the Company beginning production in
September compared with January in the prior fiscal year.
Selling, general and administrative expense decreased from $5.3 million in the
prior-year quarter to $5.2 million in the first quarter of 1994 as a result of
further consolidation during the fourth quarter of 1993.
Interest expense of $887,000 in the current quarter decreased 26.1% from $1.2
million in the prior year period, as a result of reduced borrowing following
the Company's restructuring in September, 1992 and due to lower interest rates.
In the first quarter, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." This resulted in a
decrease in the effective tax rate from 38% in the prior year quarter to 3% in
fiscal 1994 reducing the first quarter tax benefit. The adoption of SFAS No.
109 also resulted in a one-time favorable cumulative effect of an accounting
change for prior periods amounting to $1.8 million.
LIQUIDITY AND CAPITAL RESOURCES
Working capital requirements of the Company are seasonal, with cash balances
peaking in August and the Company's greatest utilization of its lines of credit
occurring during the spring months. During the first fiscal quarter, with
sales seasonally low and the industry's inventory pipeline normalized, the
Company utilized cash to begin production of finished goods in September
compared with January in fiscal 1993. This increased inventories by $17.3
million and accounts payable by $3 million from August 31, 1993.
In October 1993, the Company received a two-year renewal, with certain more
favorable terms, on its revolving credit facility of $30 million. Borrowing
under the facility amounted to $10,544,000 at November 30, 1993. Management
believes that the Company's earnings and credit available will be sufficient to
meet the needs of its operations and long term credit requirements, including
capital expenditures.
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PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on December 21, 1993 to:
(i) elect two (2) directors to serve for a term of three (3) years and until
their successors shall be elected and shall have qualified; and (ii) to ratify
the appointment of Ernst & Young as the Company's independent auditors for the
ensuing fiscal year. Messrs. Sal Giordano, Jr. and S. A. Muscarnera were
elected directors at the Annual Meeting. After the Annual Meeting, Messrs.
William J. Brennan, Salvatore Giordano, Joseph Giordano, Howard S. Modlin, and
Clarence Russel Moll continued to serve as directors of the Company.
On all matters considered at the Annual Meeting, the vote required was a
majority of the shares of Common Stock and Class B Stock, voting in person or
by proxy together as a single class. The final results of the voting are as
follows:
1. Sal Giordano, Jr. nominee for Director: 17,571,235 for, and 585,949
withheld;
2. S. A. Muscarnera nominee for Director: 17,581,553 for, and 575,631
withheld;
3. Ratification of Ernst & Young as independent auditors: 17,916,850
for, 130,618 against, and 109,716 abstained.
The proxies tabulated represented 18,157,184 shares of Common and Class B
stock, or 89% of the total outstanding Common and Class B shares.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(SECTION 249.308 OF THIS CHAPTER).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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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.
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Robert L. Laurent, Jr.
Executive Vice President,
Finance & Administration
Date January 12, 1994 Signing both in his
---------------- capacity as Executive Vice
President on behalf of the
Registrant and as Chief
Financial Officer of the
Registrant
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