<PAGE>
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FEDDERS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 22-2572390
(State of Incorporation) (I.R.S. Employer Identification No.)
505 MARTINSVILLE ROAD, LIBERTY CORNER, NJ 07938-0813
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (908) 604-8686
-------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, $1 par value New York Stock Exchange, Inc.
Philadelphia Stock Exchange, Inc.
Class A Stock, $1 par value New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
TITLE OF EACH CLASS
-------------------
None
------------------
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
As of the close of business on October 31, 1994, there were outstanding
18,988,099 shares of the Registrant's Common Stock, 10,627,879 shares of Class A
Stock and 2,267,906 shares of its Class B Stock. The approximate aggregate
market value (based upon the closing price on the New York Stock Exchange) of
these shares held by non-affiliates of the Registrant as of October 31, 1994 was
$148,190,144. (The value of a share of Common Stock is used as the value for a
share of Class B Stock as there is no established market for Class B Stock and
it is convertible into Common Stock on a share-for-share basis.)
<PAGE>
FEDDERS CORPORATION
FORM 10-K ANNUAL REPORT
SEPTEMBER 1, 1993
TO
AUGUST 31, 1994
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
PART I
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of
Security Holders 8
PART II
Item 5. Market for Registrant's Common Equity
and Related Matters 10
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10
Item 8. Financial Statements and Supplementary Data 10
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 10
PART III
Item 10. Directors and Executive Officers of the
Registrant 11
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial
Owners and Management 11
Item 13. Certain Relationships and Related
Transactions 11
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 12
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
Fedders Corporation (the "Company" or the "Registrant") is a holding
company which, through its wholly owned operating subsidiaries, is engaged in
the manufacture and sale of a complete line of room air conditioners and
dehumidifiers, principally for the residential market. Based upon industry
statistics compiled by a trade association, the Company believes it is the
largest manufacturer of room air conditioners in North America. Unless
otherwise indicated, all references herein to the "Company" or the "Registrant"
include Fedders Corporation and its principal operating subsidiaries, Fedders
North America, Inc. ("Fedders NA"), Emerson Quiet Kool Corporation ("EQK"),
Columbia Specialties, Inc. ("CSI"), Fedders, Inc., RTXX Corporation ("RTXX") and
Fedders International, Inc. ("FI"). EQK, CSI, RTXX and Fedders, Inc. are wholly
owned subsidiaries of Fedders NA. In 1994, Fedders NA also established a
Mexican sales subsidiary, Fedders de Mexico and FI established a Singapore
subsidiary, Fedders Asia Pte. Ltd. ("Fedders Asia").
In August 1992, the Company discontinued production in New Jersey and
agreed to sell its compressor business to NYCOR Acquisition Corp. ("NYCOR") see
Notes 2 and 12 of the Notes to Consolidated Financial Statements on pages 11 and
14 of the Annual Report, which notes are incorporated herein by reference. The
Company, under a ten year supply agreement, continues to rely upon NYCOR for a
significant portion of its requirements for rotary compressors, one of the most
important components of the air conditioners manufactured by the Company.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in one industry segment. See Note 8 of the Notes to
Consolidated Financial Statements at page 13 of the Annual Report, which Note is
incorporated herein by reference.
(c) NARRATIVE DESCRIPTION OF BUSINESS
Products and Markets
The Company manufactures and sells a complete line of window and through-
the-wall room air conditioners, principally for the residential market, and also
markets split ductless room air conditioners for international markets. The
Company's air conditioners are manufactured in models ranging in capacity from
5,000 BTU (British Thermal Units) per hour to 32,000 BTU per hour. These models
comprise product lines marketed by the Company under the brands FEDDERS, EMERSON
QUIET KOOL and AIRTEMP. The Company also manufactures products under various
private labels.
<PAGE>
The Company manufactures and markets, under the EMERSON QUIET KOOL brand, a
line of household dehumidifiers ranging in capacity from 30 to 60 pints per 24
hours.
In North America, the Company markets its products to retail chains, retail
buying groups and others representing over 10,000 retail outlets. The
distribution of appliances and electronics in North America has changed
significantly in the last several years. Most of the Company's sales, are now
made directly to retailers, in contrast to the early 1980s when distributors
accounted for the majority of the Company's business. In addition, in recent
periods the Company's customers have changed their purchasing patterns to
minimize inventories. In response, the Company has increased its manufacturing
flexibility, thereby improving its capabilities, especially in the areas of
just-in-time delivery.
In fiscal 1993, the Company consolidated all Fedders NA marketing, service
and accounting management into a Whitehouse, New Jersey headquarters location.
FNA serves many of its customers through regional sales offices and distribution
centers.
To support and service its customers and the ultimate consumer, the Company
has a network of third-party service centers throughout the United States and
regional parts depots to expedite repairs by local service companies during peak
demand periods.
The Company promotes its EMERSON QUIET KOOL and FEDDERS brands of air
conditioners through advertising, primarily in trade publications and also on
radio and television. The Company offers an advertising allowance to assist
retailers in advertising locally.
The Company's future business development activities are focused primarily
outside of North America. The Company believes that the market for room air
conditioners outside of North America is approximately four times the size of
the North American market. Demand for air conditioners outside of North America
accelerated in the 1980's with the increase in disposable income of populous
nations in hot weather climates. The Company has participated in international
markets for more than 30 years and has licensees in several countries.
The Company expects to participate in overseas production through strategic
alliances primarily under production and joint venture agreements, with
participation based on its expertise, technological capability and well
established global sourcing program. The Company currently has production
agreements in Taiwan, India and the People's Republic of China. Financing, if
required, is expected to be obtained locally. The Company is accelerating
development activities to penetrate the international markets in order to
realize greater growth potential than is afforded by the mature U.S. market and
to moderate its dependence
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<PAGE>
on summer weather in North America. In 1994, Fedders International created a new
subsidiary, Fedders Asia, Pte. Ltd. in Singapore for research, development,
testing and coordination of production of the Company's product at facilities
where production agreements are in place. The Company also has consolidated its
international headquarters with its executive offices in a single facility in
Liberty Corner, New Jersey. The Company believes it can compete cost-
effectively abroad based on its global sourcing network that currently delivers
components from around the world to two U.S. plants.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The most important materials purchased by the Company are steel, copper and
aluminum, which are obtained from domestic and foreign suppliers. The Company
also purchases from other domestic and foreign manufacturers certain components,
including thermostats, compressors, motors and electrical controls, used in its
products. The Company endeavors to obtain the lowest possible cost in its
purchases of raw materials and components, which must meet specified quality
standards, through an active global sourcing program. The Company is not
dependent upon any one source for major components of its manufactured products,
except that it purchases compressors primarily from NYCOR. The Company
presently has a supply agreement with NYCOR through the year 2003 which provides
the Company a dependable source of rotary compressors. The Company has
additional suppliers of compressors. However, in the event that NYCOR were
unable to deliver the Company's requirements, the Company might have difficulty
obtaining substitute sources of supply.
PATENTS, TRADEMARKS, LICENSES AND CONCESSIONS HELD
The Company owns a number of trademarks. While the Company believes that
its trademarks, such as, FEDDERS, EMERSON QUIET KOOL and AIRTEMP, are well known
and enhance the marketing of its products, the Company does not consider the
successful conduct of its business to be dependent upon such trademarks.
SEASONALITY OF BUSINESS
The Company's results of operations and financial condition are entirely
dependent on the manufacture and sale of room air conditioners and
dehumidifiers, the demand for which is highly seasonal in North American
markets. Seasonally low volume sales are not sufficient to offset fixed costs,
resulting in seasonal operating losses at certain times of the year. In
addition, the Company's working capital needs are seasonal, with the Company's
greatest utilization of its lines of credit occurring early in the calendar
year. See "Management`s Discussion and Analysis of Results of Operations and
Financial Condition," at pages 4 and 5 of the Annual Report, which is
incorporated herein by reference.
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<PAGE>
See also the discussion under "Working Capital Practices."
WORKING CAPITAL PRACTICES
The Company regularly reviews working capital components with a view to
maintaining the lowest level consistent with requirements of anticipated levels
of operations. The Company's sales are predominantly made directly to
retailers, who typically require just-in-time delivery, primarily in April
through July. Production is weighted towards the retail selling season to
minimize borrowing earlier in the fiscal year, although room air conditioners
may be produced throughout much of the rest of the year at a lower rate of
production.
Information with respect to the Company's warranty and return policy is
provided in Note 1 of the Notes to Consolidated Financial Statements at page 10
of the Annual Report, which Note is incorporated herein by reference.
See also the information entitled "Management's Discussion and Analysis of
Results of Operations and Financial Condition" at pages 4 and 5 of the Annual
Report, which is incorporated herein by reference.
BACKLOG
The Company's fiscal year end (August 31) coincides with the end of the
seasonal room air conditioner sales cycle. Accordingly, backlog at this time of
the year is insignificant.
COMPETITION
The Company's competitors include a number of domestic and foreign
manufacturers of air conditioners and appliances, including Frigidaire Company,
Whirlpool Corporation and Matsushita Electric Industrial Company, Ltd. Many of
the Company's competitors are substantially larger and have greater resources
than the Company. The Company competes principally on the basis of price and
quality. Competitive factors could require price reductions or increased
spending on product development, marketing and sales that could adversely affect
the Company's profit margins.
RESEARCH AND DEVELOPMENT
Information with respect to amounts spent on research and development is
provided in Note 1 of the Notes to Consolidated Financial Statements at page 11
of the Annual Report, which Note is incorporated herein by reference.
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<PAGE>
ENVIRONMENTAL PROTECTION
It is the Company's policy to take all practical measures to minimize air
and water pollution resulting from its operations. The Company did not make
capital expenditures on environmental protection related items during the period
September 1, 1993 through August 31, 1994 that are material to its total capital
expenditures, earnings and competitive position and does not anticipate making
material capital expenditures on such items in the fiscal year ending August 31,
1995.
EMPLOYEES
The Company has approximately 1,800 employees. The current contracts with
two unions representing employees of the Effingham, Illinois plant are scheduled
to expire in October 1998. The Company considers its relations with its
employees to be generally satisfactory.
INTERNATIONAL SALES
For information with respect to international sales of the Company's
products, see Note 8 of the Notes to Consolidated Financial Statements at page
13 of the Annual Report, which Note is incorporated herein by reference. Future
sales are subject to the risks inherent in such activities, such as foreign
regulations, unsettled political conditions and exchange rate fluctuations.
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<PAGE>
ITEM 2. PROPERTIES
The Company owns or leases the following facilities:
<TABLE>
<CAPTION>
Approximate Square
Location Principal Function Feet of Floor Area
- - -------- ------------------ ------------------
<S> <C> <C>
Liberty Corner, Corporate and 25,000
New Jersey International
(leased) Headquarters
Effingham, Illinois Manufacturing of 650,000
(Owned) Room Air Conditioners
Columbia, Tennessee Manufacturing of 232,000
(Owned) Plastic Components and
Room Air Conditioners
Dover, New Jersey Storage 50,000
(Owned)
Orangeville, (1) 106,000
Ontario (Owned)
Whitehouse, Fedders NA Headquarters 17,000
New Jersey (Leased)
</TABLE>
(1) Facility available for sale or lease
The Effingham, Illinois facility is subject to a mortgage securing a $4.9
million, 1% promissory note payable to the State of Illinois.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-8-
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
First Became an
Name and Age Position Held Executive Officer
- - ------------ ------------- -----------------
<S> <C> <C>
Salvatore Giordano, 84 Chairman of the Board 1945
Sal Giordano, Jr., Vice Chairman, President 1965
56 (1) and Chief Executive Officer
Robert L. Laurent, Jr., Executive Vice President, 1989
39 Finance and Administration
and Chief Financial Officer
S. A. Muscarnera, Senior Vice President and 1988
54 (2) Secretary
Norman W. Swartz, 55 Senior Vice President and 1992
President, Fedders
North America
Gary J. Nahai, 43 Vice President and 1993
President, Fedders
International, Inc.
</TABLE>
________
(1) Son of Salvatore Giordano
(2) Nephew of Salvatore Giordano
BUSINESS EXPERIENCE DURING LAST FIVE YEARS
Messrs. Salvatore Giordano, Sal Giordano, Jr., Robert L. Laurent, Jr. and
Mr. Muscarnera have been associated in executive capacities with the Company for
more than five years.
Mr. Swartz was elected to his position in January 1992. Previously he was
Senior Vice President of Fedders North America and joined Fedders in 1989 as
Vice President of Private Label Products.
Mr. Nahai was elected to his position in March 1993. Previously he was
Vice President of Sales - New York Metro Region and, prior thereto, was Manager
of International Sales and Licenses. Mr. Nahai has been with the Company for
more than five years.
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<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT`S COMMON EQUITY AND
RELATED MATTERS
The Company's Common Stock is listed on the New York Stock Exchange and the
Philadelphia Stock Exchange. The Company's Class A Stock is listed on the New
York Stock Exchange. There is no established public trading market for the
Company's Class B Stock, as there are restrictions on its transfer. As of
October 31, 1994, there were 5,369 holders of Common Stock, 5,422 holders of
Class A Stock and 50 holders of Class B Stock. For information with respect to
the Company's Common Stock, Class A Stock and Class B Stock, see Notes 9 and 10
on page 13 of the Annual Report, which Notes are incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
See the table entitled "Selected Financial Data" at page 5 of the Annual
Report, which table is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
See the information entitled "Management's Discussion and Analysis of
Results of Operations and Financial Condition" at pages 4 and 5 of the Annual
Report, which information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company at August 31, 1994 and
1993, and for the years ended August 31, 1994, 1993 and 1992, the notes thereto
and the report of the Company's independent auditors thereon are included at
pages 6 through 15 of the Annual Report, which pages are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the Company's directors, see the section
entitled "Election of Directors" in the Company's Proxy Statement to be filed in
connection with the Annual Meeting of Stockholders of the Company to be held on
December 20, 1994, which section is incorporated herein by reference. For
additional information with respect to the Company's executive officers, see
Page 9 herein.
Through inadvertence, Dr. Clarence R. Moll reported, in an untimely manner,
one transaction on Form 4 covering one sale of shares of the Common Stock of the
Company during the fiscal year. The Company is not aware of any failure of Dr.
Moll to file any required Form.
Through inadvertence, Mr. Norman W. Swartz was late in filing a required
report on Form 4. covering one sale of shares of the Common Stock of the Company
during the fiscal year. The Company is not aware of any failure on Mr. Swartz's
part to file any required Form.
ITEM 11. EXECUTIVE COMPENSATION
See the section entitled "Executive Compensation" in the Company's Proxy
Statement, to be filed in connection with the Annual Meeting of Stockholders of
the Company to be held on December 20, 1994, which section is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
See the sections entitled "Security Ownership of Directors and Officers"
and "Principal Stockholders" in the Company's Proxy Statement, to be filed in
connection with the Annual Meeting of Stockholders of the Company to be held on
December 20, 1994, which sections are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the section entitled "Election of Directors" in the Company's Proxy
Statement, to be filed in connection with the Annual Meeting of Stockholders of
the Company to be held on December 20, 1994, which section is incorporated
herein by reference.
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<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
Index to Financial Statements and Financial Statement Schedules
(a) 1. Financial Statements
The following Consolidated Financial Statements of the Company and its
subsidiaries are included at pages 6 through 15 of the Annual Report
and incorporated hereby reference:
Consolidated Statements of Operations and Stockholders' Equity for the
years ended August 31, 1994, 1993 and 1992.
Consolidated Balance Sheets at August 31, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended August 31,
1994, 1993 and 1992.
Notes to Consolidated Financial Statements
Report of Independent Auditors
(a) 2. Financial Statement Schedules
Consolidated Schedules as of and for the years ended August 31, 1994,
1993 and 1992.
Form 10-K Page
II. Accounts Receivable from
Related Parties S-1
V. Property, Plant and Equipment S-2
VI. Accumulated Depreciation of
Property, Plant and Equipment S-3
VIII. Valuation and Qualifying Accounts
and Reserves S-4
IX. Short-term Borrowings S-5
X. Supplementary Income Statement
Information S-6
All other schedules have been omitted because of the absence of the
conditions under which they are required or because the required
information is included in the Consolidated Financial Statements or the
Notes thereto.
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<PAGE>
(a) 3. Exhibits
(Note: With respect to incorporation by reference to exhibits filed by
RTXX Corporation (formerly Rotorex Corporation), reference is hereby made to
Commission File No. 1-2150)
(3) (i) Restated Certificate of Incorporation, filed as Exhibit 3.1 to the
Company's Annual Report on Form 10-K for 1984 and incorporated hereby reference.
(ii) Amendment to Restated Certificate of Incorporation, filed as
Exhibit 4a to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1985 and incorporated herein by reference.
(iii) Correction of Restated Certificate of Incorporation, filed as
Exhibit 4b to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1985 and incorporated herein by reference.
(iv) Amendment of Certificate of Incorporation, filed as Exhibit (3)
(i) to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1987 and incorporated herein by reference.
(v) Amendment of Certificate of Incorporation, filed as Exhibit (3)
(ii) to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1987 and incorporated herein by reference.
(vi) Amendment to Certificate of Incorporation, filed as Exhibit (3)
(vi) to the Company's Annual Report on Form 10-K for the year ended August 31,
1992 and incorporated herein by reference.
(vii) By-Laws, amended through January 16, 1988, filed as Exhibit (3)
(vii) to the Company's Annual Report on Form 10-K for 1987 and incorporated
herein by reference.
(4) (i) Indenture dated April 22, 1971 with Chemical Bank as Trustee
covering Rotorex Corporation's 5% Convertible Subordinated Debentures due 1996,
filed as Exhibit (4) (i) to Annual Report on Form 10-K for 1985 of Fedders, and
incorporated herein by reference.
(ii) Appointment of Bradford Trust Company as successor trustee to
Chemical Bank, filed as Exhibit 13C to Annual Report on Form 10-K for 1977 of
Rotorex Corporation and incorporated herein by reference.
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<PAGE>
(iii) First Supplemental Indenture with Bradford Trust Company, filed
as Exhibit 12C to Annual Report on Form 10-K for 1978 of Rotorex Corporation and
incorporated herein by reference.
(iv) Appointment of Schroder Trust Company as successor trustee to
Bradford Trust Company, filed as Exhibit 4.3 to Annual Report on Form 10-K for
1983 of Rotorex Corporation and incorporated herein by reference.
(v) Second Supplemental Indenture dated as of January 1, 1985 with J.
Henry Schroder Bank & Trust Company filed as Exhibit (iv) to Quarterly Report on
Form 10-Q of Rotorex Corporation for the quarter ended March 31, 1985 and
incorporated herein by reference.
(vi) Third Supplemental Indenture dated as of June 12, 1989 between
Rotorex Acquisition Corp. and IBJ Schroder Bank & Trust Company, filed as
Exhibit 10 (v) to Fedders Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989 and incorporated herein by reference.
(vii) Indenture dated May 23, 1974 with The Chase Manhattan Bank, N.A.
as Trustee covering Rotorex Corporation's 8-7/8% Subordinated Debentures due
1994, filed as Exhibit 4.4 to Annual Report on Form 10-K for 1981 of Rotorex
Corporation and incorporated herein by reference.
(viii) Appointment of J. Henry Schroder Bank & Trust Company as
successor trustee to The Chase Manhattan Bank, N.A., filed as Exhibit 13B to
Annual Report on Form 10-K for 1977 of Rotorex Corporation and incorporated
herein by reference.
(ix) First Supplemental Indenture with J. Henry Schroder Bank & Trust
Company, filed as Exhibit 12B to Annual Report on Form 10-K for 1978 of Rotorex
Corporation and incorporated herein by reference.
(x) Second Supplemental Indenture dated as of June 12, 1989 between
Rotorex Acquisition Corp. and IBJ Schroder Bank & Trust Company, filed as
Exhibit 10 (iv) to Fedders Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989 and incorporated here by reference.
(xiv) Second Supplemental Indenture dated as of June, 1989 between
Rotorex Acquisition Corp. and Mellon Bank, N.A., filed as Exhibit (10) (iii) to
Fedders Corporation's Quarterly Report on Form 10-Q for the quarter ended June
30, 1989 and incorporated herein by reference.
(10) (i) Stock Option Plan II, filed as Exhibit 10.4 to the Company's
Annual Report on Form 10-K for 1984 and incorporated herein by reference.
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<PAGE>
(ii) Stock Option Plan III, filed as Exhibit 10 (iv) to the Company's
Annual Report on Form 10-K for 1985 and incorporated herein by reference.
(iii) Stock Option Plan IV, filed as Exhibit 10 (iv) to the Company's
Annual Report on Form 10-K for 1987 and incorporated herein by reference.
(iv) Stock Option Plan V, filed as Exhibit 10 (v) to the Company's
Annual Report on Form 10-K for 1988 and incorporated herein by reference.
(v) Stock Option Plan VI, filed as Exhibit 10 (vi) to the Company's
Annual Report on Form 10-K for 1989 and incorporated herein by reference.
(vi) Stock Option Plan VII, filed as Exhibit 10 (vi) to the Company's
Annual Report on Form 10-K for 1990 and incorporated herein by reference.
(vii) Promissory Note of Salvatore Giordano, Jr. dated July 27, 1992,
filed as Exhibit 10 (viii) to the Company's Annual Report on Form 10-K for 1992
and incorporated herein by reference.
(viii) Employment Contract between The Corporation and Salvatore
Giordano dated March 23, 1993, filed as Exhibit 10 (viii) to the Company's
Annual Report on Form 10-K 1993 and incorporated herein by reference.
(ix) Promissory Note of Salvatore Giordano, Jr., dated August 4, 1994
for stock purchases.
(x) Promissory Note of Robert Laurent, Jr. dated August 31, 1994 for
stock purchases.
(xi) Promissory Note of Joseph Giordano dated August 31, 1994 for stock
purchases.
(xii) Promissory Note of N.W. Swartz dated August 31, 1994 for stock
purchases.
(xiii) Promissory Note of N.W. Swartz dated September 30, 1994 for
relocation assistance.
(11) Statement re computation of per share earnings.
(13) 1994 Annual Report to Stockholders.
(21) Subsidiaries.
(23) Consent of Ernst & Young
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended August 31, 1994.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.
FEDDERS CORPORATION
By /s/Robert L. Laurent, Jr.
-----------------------------
Robert L. Laurent, Jr.
Executive Vice President,
Finance and Administration and
Date: November 4, 1994 Chief Financial
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - --------- ----- ------
<S> <C> <C>
/s/Salvatore Giordano
------------------
Salvatore Giordano Chairman of the Board November 4, 1994
/s/Salvatore Giordano, Jr.
-----------------------
Salvatore Giordano, Jr. Vice Chairman, President November 4, 1994
and Chief Executive
Officer and a Director
(Principal Executive
Officer)
/s/Joseph Giordano
---------------
Joseph Giordano Director November 4, 1994
/s/Howard S. Modlin
----------------
Howard S. Modlin Director November 4, 1994
/s/Clarence Russel Moll
--------------------
Clarence Russel Moll Director November 4, 1994
/s/William J. Brennan
------------------
William J. Brennan Director November 4, 1994
/s/S.A. Muscarnera
---------------
S.A. Muscarnera Director November 4, 1994
/s/Robert L. Laurent, Jr.
----------------------
Robert L. Laurent, Jr. Executive Vice President November 4, 1994
- Finance and
Administration
(Principal Financial and
Accounting Officer)
</TABLE>
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<PAGE>
FEDDERS CORPORATION
AMOUNTS RECEIVABLE FROM RELATED PARTIES
SCHEDULE II
For The Years Ended August 31, 1994, 1993 and 1992
(Amounts in thousands)
<TABLE>
<CAPTION>
Deductions Balance at end of period
----------------- ---------------------------
Balance
at Amounts
beginning Amounts written Not
of period Additions collected off Current current
Name of Debtor --------- --------- --------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Year ended: August
31,1994:
Sal Giordano, Jr. $429 $270(1) -- -- $270 $429
Joseph Giordano -- 187(1) -- -- 187 --
Robert Laurent, Jr. -- 143(1) -- -- 143 --
N.W. Swartz -- 195(1&2) -- $30 45 120
---- ---- ---- --- ------------ ------------
$429 $795 -- $30 $645 $549
==== ==== ==== === ============ ============
Year ended: August 31,
1994:
Sal Giordano, Jr. (3) $429 -- -- -- -- $429
==== ==== ==== === ============ ============
Year ended: August 31,
1992:
Sal Giordano, Jr. (3) -- $429 -- -- -- $429
==== ==== ==== === ============ ============
</TABLE>
(1) For stock options exercised during a six-week period in early 1994,
optionees were given the opportunity to pay two-thirds of the exercise price
upon exercise and to defer the remaining balance until the earlier of July
31, 1995 or upon the sale of capital stock of the Company received from the
exercise of such options. Such optionees executed non-recourse interest-
bearing notes.
(2) Includes a $150 relocation assistance loan which is secured by a non-
interest bearing note due August 30, 1998, and a second mortgage on his
residence. The Company has forgiven $30 in 1994.
(3) Promissory note, payable upon the sale of capital stock received from
exercised stock options but no later then July 1997, which bears interest at
the prevailing prime rate
S-1
<PAGE>
FEDDERS CORPORATION
PROPERTY, PLANT AND EQUIPMENT
SCHEDULE V
For The Years Ended August 31, 1994, 1993 and 1992
(Amounts in Thousands)
<TABLE>
<CAPTION>
Balance at Additions Balance
beginning at Other at end
of period cost Retirements changes of period
---------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended August 31,
1994
Land and improvements $ 1,393 -- -- ($30) $1,363
Buildings 11.844 $244 $60 (23) 12,005
Machinery and equipment 44,799 2,390 911 (83) 46,195
Machinery and equipment -- 951 -- -- 951
under capital lease -------- ------ ---- -------- --------
$58,036 $3,585 $971 ($136)(1) $60,514
======== ====== ==== ======== ========
Year Ended August 31,
1993
Land and improvements $5,378 -- -- ($3,985) $1,393
Buildings 19,791 $122 -- (8,069) 11,844
Machinery and equipment 63,756 2,602 $257 (21,302) 44,799
Machinery and equipment 12,626 -- -- (12,626) --
under capital lease -------- ------ ---- -------- --------
$101,551 $2,724 $257 ($45,982)(1&2) $58,036
======== ====== ==== ======== ========
Year Ended August 31,
1992
Land and improvements $5,417 -- -- ($39) $5,378
Buildings 19,848 -- -- (57) 19,791
Machinery and Equipment 61,019 $3,695 $958 -- 63,756
Machinery and equipment 12,629 -- 3 -- 12,626
under capital lease -------- ------ ---- -------- --------
$98,913 $3,695 $961 ($96)(1) $101,551
======== ====== ==== ======== ========
</TABLE>
(1) Decrease due to computation of cumulative translation adjustment for assets
at the Ontario, Canada facility amounting to $136, $345 and $96 in 1994, 1993
and 1992, respectively (see note 1 of the Notes to Consolidated Financial
Statements in the Annual Report).
(2) Decrease due to sale of compressor operations including property, plant and
equipment in the amount of $45,637 on September 28, 1992 (see note 12 of the
Notes to Consolidated Financial Statements in the Annual Report).
S-2
<PAGE>
FEDDERS CORPORATION
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
SCHEDULE VI
For the Years Ended August 31, 1994, 1993 and 1992
(Amounts in Thousands)
<TABLE>
<CAPTION>
Balance at Charges Balance
beginning to cost Other at end
of period and expenses Retirements Changes of period
---------- ------------ ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended August 31,
1994
Land and improvements $ 58 $ 12 -- -- $ 70
Buildings 4,869 996 $ 41 $ 78 5,902
Machinery and equipment 21,472 2,429 603 3,824 27,122
Machinery and equipment
under -- 48 -- -- 48
capital lease ------- ------ ---- -------- -------
$26,399 $3,485 $644 $ 3,902 (1) $33,142
======= ====== ==== ======== =======
Year Ended August 31,
1993
Land and improvements $ 46 $ 12 -- -- $ 58
Buildings 4,999 459 -- ($589) 4,869
Machinery and equipment 26,567 1,877 $168 (6,804) 21,472
Machinery and equipment
under 4,325 108 -- (4,433) --
capital lease ------- ------ ---- -------- -------
$35,937 $2,456 $168 ($11,826)(2) $26,399
======= ====== ==== ======== =======
Year Ended August 31,
1992
Land and improvements $ 29 $ 17 -- -- $ 46
Buildings 3,730 1,269 -- -- 4,999
Machinery and equipment 22,737 4,116 $286 -- 26,567
Machinery and equipment
under 3,025 1,301 1 -- 4,325
capital lease ------- ------ ---- -------- -------
$29,521 $6,703 $287 -- $35,937
======= ====== ==== ======== =======
</TABLE>
- - --------
(1) Reduction due to write down of certain idled equipment to estimated net
realizable value (see note 1 to the Notes to Consolidated Financial
Statements in the Annual Report).
(2) Reduction due to sale of the compressor operation (see note 12 to the Notes
to Consolidated Financial Statements in the Annual Report).
S-3
<PAGE>
FEDDERS CORPORATION
VALUATION & QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE VIII
For The Years Ended August 31, 1994, 1993 and 1992
(Amounts in thousands)
<TABLE>
<CAPTION>
Balance Additions Balance
at charged at end
beginning to of
of period expense Deductions period
--------- --------- ---------- -------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Year ended:August 31, 1994 $1,078 $171 $ 505 $ 744
====== ==== ======= ======
August 31, 1993 $3,356 $ 63 $2,341 (1) $1,078
====== ==== ======= ======
August 31, 1992 $3,496 $242 $ 382 $3,356
====== ==== ======= ======
</TABLE>
- - --------
(1) Deductions include $474 related to the sale of the compressor operations
(see note 12 of the Notes to Consolidated Financial Statements in the
Annual Report).
S-4
<PAGE>
FEDDERS CORPORATION
SHORT-TERM BORROWING
SCHEDULE IX
For The Years Ended August 31, 1994, 1993 and 1992
(Amounts In Thousands)
<TABLE>
<CAPTION>
Maximum Average (3) Weighted (2)
Balance Weighted Amount Amount Average
at End Average Outstanding Outstanding Interest
of Interest During the During the Rate During
Category of Aggregate Period Rate Period Period the Period
Short-term Borrowing(1) ------- -------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended: August 31, 1994 -- -- $28,404 $11,425 8.7%
======= ==== ======= ======= ====
August 31, 1993 -- -- $20,479 $ 7,419 9.0%
======= ==== ======= ======= ====
August 31, 1992 $40,000 10.5% $68,597 $50,657 11.4%
======= ==== ======= ======= ====
</TABLE>
- - --------
(1) For a description of credit facilities see note 4 of the Notes to
Consolidated Financial Statements in the Annual Report.
(2) Aggregate interest expense divided by daily average loans outstanding
during the period.
(3) Aggregate month-end balance divided by twelve months.
S-5
<PAGE>
FEDDERS CORPORATION
SUPPLEMENTARY INCOME STATEMENT INFORMATION(1)
SCHEDULE X
For The Years Ended August 31, 1994, 1993 and 1992
(Amounts in thousands)
Charged to Costs and Expenses
<TABLE>
<CAPTION>
Years ended August 31,
------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Advertising costs $2,272 $1,452 $2,944
====== ====== ======
Maintenance and repairs $1,860 $1,326 $1,889
====== ====== ======
Amortization:
Intangibles $1,334 $2,550 $6,927
Debt discount 631 640 1,246
------ ------ ------
Total amortization $1,965 $3,190 $8,173
====== ====== ======
</TABLE>
- - --------
(1) All other information required by this schedule has been omitted because
the amounts involved are not in excess of 1% of total sales and revenues.
S-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- - ----------- ----------- ----
<C> <S> <C>
(3) (i) Restated Certificate of Incorporation, filed as Exhibit 3.1 to the
Company's Annual Report on Form 10-K for 1984 and incorporated hereby
reference.
(ii) Amendment to Restated Certificate of Incorporation, filed as Exhibit
4a to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1985 and incorporated herein by reference.
(iii) Correction of Restated Certificate of Incorporation, filed as Exhibit
4b to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1985 and incorporated herein by reference.
(iv) Amendment of Certificate of Incorporation, filed as Exhibit (3) (i) to
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1987 and incorporated herein by reference.
(v) Amendment of Certificate of Incorporation, filed as Exhibit (3) (ii)
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1987 and incorporated herein by reference.
(vi) Amendment to Certificate of Incorporation, filed as Exhibit (3)(vi) to
the Company's Annual Report on Form 10-K for the year ended August 31, 1992
and incorporated herein by reference.
(vii) By-Laws, amended through January 26, 1988, filed as Exhibit (3) (vii)
to the Company's Annual Report on Form 10-K for 1987 and incorporated
herein by reference.
(4) (i) Indenture dated April 22, 1971 with Chemical Bank as Trustee covering
Rotorex Corporation's 5% Convertible Subordinated Debentures due 1996,
filed as Exhibit (4) (i) to Annual Report on Form 10-K for 1985 of
Fedders, and incorporated herein by reference.
(ii) Appointment of Bradford Trust Company as successor trustee to Chemical
Bank, filed as Exhibit 13C to Annual Report on Form 10-K for 1977 of
Rotorex Corporation and incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
(iii) First Supplemental Indenture with Bradford Trust Company, filed as
Exhibit 12C to Annual Report on Form 10-K for 1978 of Rotorex
Corporation and incorporated herein by reference.
(iv) Appointment of Schroder Trust Company as successor trustee to Bradford
Trust Company, filed as Exhibit 4.3 to Annual Report on Form 10-K for
1983 of Rotorex Corporation and incorporated herein by reference.
(v) Second Supplemental Indenture dated as of January 2, 1985 with J.
Henry Schroder Bank & Trust Company filed as Exhibit (iv) to Quarterly
Report on Form 10-Q of Rotorex Corporation for the quarter ended March
31, 1985 and incorporated herein by reference.
(vi) Third Supplemental Indenture dated as of June 12, 1989 between Rotorex
Acquisition Corp. and IBJ Schroder Bank & Trust Company, filed as
Exhibit 10 (v) to Fedders Corporation's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1989 and incorporated herein by
reference.
(vii) Indenture dated May 23, 1974 with The Chase Manhattan Bank, N.A. as
Trustee covering Rotorex Corporation's 8-7/8% Subordinated Debentures
due 1994, filed as Exhibit 4.4 to Annual Report on Form 10-K for 1981
of Rotorex Corporation and incorporated herein by reference.
(viii) Appointment of J. Henry Schroder Bank & Trust Company as successor
trustee to The Chase Manhattan Bank, N.A., filed as Exhibit 13B to
Annual Report on Form 10-K for 1977 of Rotorex Corporation and
incorporated herein by reference.
(ix) First Supplemental Indenture with J. Henry Schroder Bank & Trust
Company, filed as Exhibit 12B to Annual Report on Form 10-K for 1978
of Rotorex Corporation and incorporated herein by reference.
(x) Second Supplemental Indenture dated as of June 12, 1989 between
Rotorex Acquisition Corp. and IBJ Schroder Bank & Trust Company, filed
as Exhibit 10 (iv) to Fedders Corporation's Quarterly Report on Form
10-Q for the quarter
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
ended June 30, 1989 and incorporated here by reference.
(xi) Indenture dated as of January 1, 1983 with Bradford Trust Company as
Trustee covering Rotorex Corporation's 11-7/8% Senior Subordinated
Debentures due 1995, filed as Exhibit 4.10 to Annual Report on From
10-K for 1983 of Rotorex Corporation and incorporated herein by
reference.
(xii) First Supplemental Indenture with Bradford Trust Company covering
Rotorex Corporation's 11-7/8% Senior Subordinated Debentures due 1995,
filed as an exhibit to Quarterly Report on Form 10-Q of Rotorex
Company for the quarter ended June 30, 1984 and incorporated herein by
reference.
(xiii) Instrument or Resignation, Appointment and Acceptance dated October 4,
1987 among Rotorex Corporation, Fidata Trust Company New York and
Mellon Bank, N.A. appointing Mellon Bank, N.A. successor trustee of
Rotorex Corporation's 11-7/8% Senior Subordinated Debentures due 1995,
filed as Exhibit (4) (xii) to Annual Report on Form 10-K on NYCOR,
Inc. for 1987 and incorporated herein by reference.
(xiv) Second Supplemental Indenture dated as of June, 1989 between Rotorex
Acquisition Corp. and Mellon Bank, N.A., filed as Exhibit (10) (iii)
to Fedders Corporation's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1989 and incorporated herein by reference.
(10) (i) Stock Option Plan II, filed as Exhibit 10.4 to the Company's Annual
Report on Form 10-K for 1984 and incorporated herein by reference.
(ii) Stock Option Plan III, filed as Exhibit 10 (iv) to the Company's
Annual Report on Form 10-K for 1985 and incorporated herein by
reference.
(iii) Stock Option Plan IV, filed as Exhibit 10 (iv) to the Company's Annual
Report on Form 10-K for 1987 and incorporated herein by reference.
(iv) Stock Option Plan V, filed as Exhibit 10 (v) to the Company's Annual
Report on Form 10-K for 1988 and incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
(v) Stock Option Plan VI, filed as Exhibit 10 (vi) to the Company's Annual
Report on Form 10-K for 1989 and incorporated herein by reference.
(vi) Stock Option Plan VII, filed as Exhibit 10 (vi) to the Company's
Annual Report on Form 10-K for 1990 and incorporated herein by
reference.
(vii) Promissory Note of Salvatore Giordano, Jr. dated July 27, 1992, filed
as Exhibit 10 (viii) to the Company's Annual Report on Form 10-K for
1992 and incorporated herein by reference,.
(viii) Employment Contract between The Corporation and Salvatore Giordano
dated March 23, 1993, filed as Exhibit 10 (viii) to the Company's
Annual Report on Form 10-K 1993 and incorporated herein by reference.
(ix) Promissory Note of Salvatore Giordano, Jr., dated August 4, 1994.
(x) Promissory Note of Robert Laurent, Jr. dated August 4, 1994.
(xi) Promissory Note of Joseph Giordano dated August 4, 1994.
(xii) Promissory Note of N. W. Swartz dated August 4, 1994.
(xiii) Promissory Note of N. W. Swartz dated September 30, 1994.
(11) Statement re computation of per share earnings.
(13) 1994 Annual Report to Stockholders.
(21) Subsidiaries.
(23) Consent of Ernst & Young
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended August 31,
1994.
</TABLE>
<PAGE>
Exhibit 10 (ix)
DATE: August 4, 1994
TO: Sal Giordano, Jr.
FROM: Robert L. Laurent, Jr.
SUBJECT: Loan to Exercise Options
===============================================================
Our records indicate that you took advantage of a program instituted by the
Board of Directors of Fedders Corporation (the "Company") on January 3, 1994,
whereby you were permitted to exercise some or all of your stock options and pay
two thirds of the amount due on exercise at the time of the exercise, and the
remaining one third on or before July 31, 1994 or within 10 days of the date of
the sale of the stock whichever occurred first (the "Program").
On July 26, 1994, the Board passed a resolution allowing each Optionee who has
not yet paid the remaining one third balance from their participation in the
Program, to immediately convert such balance into a loan from the Company with
the loan becoming due and payable on or before July 31, 1995, or within 10 days
after sale of the underlying shares of stock, whichever occurs first. The loan
will bear interest at the prime rate in effect at the beginning of each month
(as published in Wall Street Journal), and interest will be payable monthly to
the Company.
If you would like to convert your remaining one third balance from the Program
into a loan under the terms and conditions stated above, kindly countersign this
memo in the space provided below and return it to Anne Reed on or before August
12, 1994. If you do not desire to convert your balance into a loan, kindly
remit the balance of $269,730.00 to the Company.
ACCEPTANCE OF LOAN:
I, Sal Giordano, Jr., promise to pay the remaining balance of $269,730.00 to the
Company under the terms and conditions stated above.
/s/S. Giordano, Jr.
- - -------------------
Dated: August 5, 1994
<PAGE>
Exhibit 10 (x)
DATE: August 4, 1994
TO: Robert L. Laurent, Jr.
FROM: S. A. Muscarnera
SUBJECT: Loan to Exercise Options
===============================================================
Our records indicate that you took advantage of a program instituted by the
Board of Directors of Fedders Corporation (the "Company") on January 3, 1994,
whereby you were permitted to exercise some or all of your stock options and pay
two thirds of the amount due on exercise at the time of the exercise, and the
remaining one third on or before July 31, 1994 or within 10 days of the date of
the sale of the stock whichever occurred first (the "Program").
On July 26, 1994, the Board passed a resolution allowing each Optionee who has
not yet paid the remaining one third balance from their participation in the
Program, to immediately convert such balance into a loan from the Company with
the loan becoming due and payable on or before July 31, 1995, or within 10 days
after sale of the underlying shares of stock, whichever occurs first. The loan
will bear interest at the prime rate in effect at the beginning of each month
(as published in Wall Street Journal), and interest will be payable monthly to
the Company.
If you would like to convert your remaining one third balance from the Program
into a loan under the terms and conditions stated above, kindly countersign this
memo in the space provided below and return it to Anne Reed on or before August
12, 1994. If you do not desire to convert your balance into a loan, kindly
remit the balance of $143,397.00 to the Company.
ACCEPTANCE OF LOAN:
I, Robert L. Laurent, Jr., promise to pay the remaining balance of $143,397.00
to the Company under the terms and conditions stated above.
/s/Robert L. Laurent, Jr.
- - -------------------------
Dated: August 21, 1994
<PAGE>
Exhibit 10 (xi)
DATE: August 4, 1994
TO: Joe Giordano
FROM: Robert L. Laurent, Jr.
SUBJECT: Loan to Exercise Options
===============================================================
Our records indicate that you took advantage of a program instituted by the
Board of Directors of Fedders Corporation (the "Company") on January 3, 1994,
whereby you were permitted to exercise some or all of your stock options and pay
two thirds of the amount due on exercise at the time of the exercise, and the
remaining one third on or before July 31, 1994 or within 10 days of the date of
the sale of the stock whichever occurred first (the "Program").
On July 26, 1994, the Board passed a resolution allowing each Optionee who has
not yet paid the remaining one third balance from their participation in the
Program, to immediately convert such balance into a loan from the Company with
the loan becoming due and payable on or before July 31, 1995, or within 10 days
after sale of the underlying shares of stock, whichever occurs first. The loan
will bear interest at the prime rate in effect at the beginning of each month
(as published in Wall Street Journal), and interest will be payable monthly to
the Company.
If you would like to convert your remaining one third balance from the Program
into a loan under the terms and conditions stated above, kindly countersign this
memo in the space provided below and return it to Anne Reed on or before August
12, 1994. If you do not desire to convert your balance into a loan, kindly
remit the balance of $186,584.00 to the Company.
ACCEPTANCE OF LOAN:
I, Joe Giordano, promise to pay the remaining balance of $186,584.00 to the
Company under the terms and conditions stated above.
/s/Joseph Giordano
- - ------------------
Dated: August 9, 1994
<PAGE>
Exhibit 10 (xii)
DATE: August 4, 1994
TO: N. W. Swartz
FROM: Robert L. Laurent, Jr.
SUBJECT: Loan to Exercise Options
===============================================================
Our records indicate that you took advantage of a program instituted by the
Board of Directors of Fedders Corporation (the "Company") on January 3, 1994,
whereby you were permitted to exercise some or all of your stock options and pay
two thirds of the amount due on exercise at the time of the exercise, and the
remaining one third on or before July 31, 1994 or within 10 days of the date of
the sale of the stock whichever occurred first (the "Program").
On July 26, 1994, the Board passed a resolution allowing each Optionee who has
not yet paid the remaining one third balance from their participation in the
Program, to immediately convert such balance into a loan from the Company with
the loan becoming due and payable on or before July 31, 1995, or within 10 days
after sale of the underlying shares of stock, whichever occurs first. The loan
will bear interest at the prime rate in effect at the beginning of each month
(as published in Wall Street Journal), and interest will be payable monthly to
the Company.
If you would like to convert your remaining one third balance from the Program
into a loan under the terms and conditions stated above, kindly countersign this
memo in the space provided below and return it to Anne Reed on or before August
12, 1994. If you do not desire to convert your balance into a loan, kindly
remit the balance of $45,052.50 to the Company.
ACCEPTANCE OF LOAN:
I, N. W. Swartz, promise to pay the remaining balance of $45,052.50 to the
Company under the terms and conditions stated above.
/s/N. W. Swartz
- - ---------------
Dated: August 8, 1994
<PAGE>
Exhibit (10) (xiii)
PROMISSORY NOTE
U.S. $120,000 September 30, 1994
FOR VALUE RECEIVED, receipt and sufficiency of which are hereby acknowledged,
the undersigned hereby promise to pay to the order of FEDDERS CORPORATION, or
its designee, (the "Payee") the sum of ONE HUNDRED TWENTY THOUSAND DOLLARS
($120,000) in such coin of the United States of America as shall be legal tender
for the payment of public and private debts, at the offices of FEDDERS
CORPORATION in the State of New Jersey, payable in yearly installments, without
interest, as follows:
Schedule of Payments
--------------------
$30,000 on or before August 30, 1995
$30,000 on or before August 30, 1996
$30,000 on or before August 30, 1997
$30,000 on or before August 30, 1998
Loan payments will be forgiven at the rate indicated on each anniversary date
provided the undersigned, Norman W. Swartz, is employed by the Payee or any of
its subsidiaries on each such date. If Mr. Swartz voluntarily terminates his
employment with the Payee or any of its subsidiaries, the undersigned will be
obligated to pay the full balance of this Note within thirty (30) days of such
termination.
In the event Mr. Swartz's employment is involuntarily terminated, for any reason
other than cause, the balance of this Note will be due and payable in full three
(3) years from the date of such termination or upon the sale of the
undersigned's home at 74 Alder Lane, Bernards Township, New Jersey 07921,
whichever occurs first.
The makers, endorsers and all guarantors of this Note severely waive demand,
protest, and presentation of payment and notice of non-payment and protest, and
also waive any and all defenses on the ground of any extensions or partial
payments which may be granted or accepted by the holder before or after the
maturity of this Note or any part thereof.
/s/ Robert N. Edwards /s/ Norman W. Swartz
- - ---------------------- --------------------
Witness Norman W. Swartz
/s/ Robert N. Edwards /s/ Linda P. Swartz
- - ---------------------- -------------------
Witness Linda P. Swartz
<PAGE>
EXHIBIT 11
FEDDERS CORPORATION
COMPUTATION OF PER SHARE EARNINGS
For The Years Ended August 31, 1994, 1993 and 1992
(Amounts in thousand except per share data)
<TABLE>
<CAPTION>
1994 1993 1992
------- -------- ---------
<S> <C> <C> <C>
Average number of common,
class A and other common
equivalent shares
outstanding 31,509 29,838 28,313
======= ======= ========
Net income (loss) $20,989 $(1,775) $(24,931)
======= ======= ========
Net income (loss) per share $0.67 $(0.06) $(0.88)
======= ======= ========
Fully diluted:
Average number of common,
class A and other common
equivalent shares
outstanding 31,509 29,838 28,313
Additional average number
of common shares assuming
the conversion of the 5%
convertible subordinated
debentures due 1996 582 582 582
------- ------- --------
Average common, class A and
common other equivalent
shares outstanding 32,091 30,429 28,895
======= ======= ========
Net income (loss) $20,989 $(1,775) $(24,931)
Interest relating to the 5%
convertible subordinated
debentures due 1996 net
of applicable taxes and
tax credits 661 661 661
Net income (loss) assuming
full dilution $21,650 $(1,114) $(24,270)
======= ======= ========
Net income (loss) per share $ 0.67 $ (0.04) $ (0.84)
======= ======= ========
Fully diluted income (loss)
per share excluding anti-
dilutive effect of
conversion of debentures $ 0.67 $ (0.06) $ (0.88)
======= ======= ========
</TABLE>
<PAGE>
EXHIBIT 13
Fedders Corporation
- - --------------------------------------------------------------------------------
Management's Discussion and Analysis of Results of Operations and Financial
Condition
For the second consecutive year, Fedders Corporation significantly improved its
profitability, following a period marked by cool summer weather and
consolidation in the room air conditioner industry in the early 1990's. The
improved profitability in 1994 and 1993 is the result of lower fixed costs,
higher sales and the Company's concentration on flexible manufacturing to
accommodate customers' increasingly seasonal delivery requirements.
The Company's business is affected by summer weather in major markets, with
product now shipped primarily in the second half of the fiscal year. New retail
leaders in room air conditioners prefer frequent, just-in-time deliveries during
their peak selling season (April through July), rather than the past practice of
pre-season inventory build-up. Favorable weather in 1994 and 1993 virtually
depleted industry inventories at manufacturers and retailers. Abnormally cool
summer weather in 1992 and 1990 -- compounded by retailers' credit constraints
and consolidation in that industry -- reduced room air conditioner
manufacturers' sales and created significant excess inventories industrywide
from August 1990 into the 1993 season. Manufacturers' shipments of room air
conditioners during Fedders' fiscal periods totaled 3.8 million units in 1994
and 3.0 million in 1993 and 1992.
Results of Operations
Entering 1994, Fedders carried minimal inventories as a consequence of the
Company's transition to flexible manufacturing. With industry inventories
depleted, Fedders' sales increased 46% in 1994 due to increased orders from
existing customers in addition to orders from new accounts, including heat-
generated orders that were produced and shipped during the retailers' selling
season. Fiscal 1993 sales declined 17.6% from the 1992 level due to the impact
of excess industry inventories carried over from 1992 and a 1.2 million-unit
reduction in those inventories during the 1993 season. Unfavorable weather
affected 1992 sales.
Operating Results as a Percent of Net Sales
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- -----
<S> <C> <C> <C>
Gross profit 21.3% 17.5% 13.3%
Selling, general and
administrative expense 11.0 16.3 16.5
Operating income (loss) 10.3 1.2 (4.9)
Interest expense 1.8 2.7 8.1
Pre-tax income (loss) 8.6 (1.5) (13.0)
==== ==== =====
</TABLE>
The gross profit margin increased in fiscal 1994 due to efficiencies in
plant utilization due to higher sales and continuous cost reduction. The 1993
gross profit margin reflects lower costs than in prior years as a result of a
1992 restructuring, offset, in part, by low sales volume. The 1992 gross profit
margin was reduced by an extended period of shutdown due to excess industry
inventories.
Selling, general and administrative expense decreased as a percent of net
sales in fiscal 1994 due to the higher sales volume and further consolidation of
the Fedders North America sales and marketing functions during the fourth
quarter of fiscal 1993. Selling, general and administrative expense decreased as
a percent of net sales during fiscal 1993, despite lower sales, as a result of
expense reduction associated with the restructuring. In fiscal 1992, selling,
general and administrative expense included lower marketing costs, reflecting
the shift in the Company's mix of customers, which are now primarily retailers.
Interest expense decreased as a percent of net sales in the past two years
as long-term debt declined, the interest rate on the working capital line of
credit was reduced and just-in-time manufacturing minimized borrowing for
working capital even as sales increased in 1994.
Income before income taxes in 1994 totaled 8.6% of net sales compared with
losses in the two prior years.
The 1992 results included a net restructuring charge of $3.3 million,
reflecting a $10.4 million provision to close two New Jersey plants, offset, in
part, by a $7.1 million profit on the sale of the Company's compressor
operations. The plant closings permanently laid off approximately 600 employees,
and the Company consolidated production into two remaining facilities. The
restructuring reduced costs of production, operating expense and interest
expense.
During fiscal 1994, the Company adopted Financial Accounting Standard
("SFAS") No. 109, "Accounting for Income Taxes," which resulted in a one-time
cumulative effect of an accounting change amounting to $1.8 million. The Company
had a 3% tax rate during fiscal 1994 reflecting utilization of tax loss
carryforwards resulting in a net tax provision of $594,000 in 1994. The Company
had net tax benefits of $565,000 in fiscal 1993 and $34,000 in fiscal 1992 due
to pre-tax losses.
Earnings per share information was restated to reflect a 50% Class A Stock
dividend distributed in September 1994.
Liquidity and Capital Resources
Working capital requirements of the Company historically have been seasonal with
cash balances peaking in August and the greatest utilization of its lines of
credit occurring early in the calendar year. The Company's cash flow in 1994 was
strong with cash increasing to $34.9 million at August 31, from $8.6 million in
the prior year. Accounts receivable are also seasonal and at August 31 are
typically near the low point of the year as most collections occur prior to
August 31.
Ending inventories were further reduced by $1.2 million from August 31,
1993 to August 31, 1994 as the Company
4
<PAGE>
Fedders Corporation
- - --------------------------------------------------------------------------------
has increased its manufacturing flexibility to produce in-season to customer
requirements and to minimize its year end inventory. During fiscal 1994, the
Company's accounts payable increased modestly as the Company operated its
factories longer in 1994, into August. Investing activities during fiscal 1994
were for capital expenditures of $2.6 million, excluding a capital lease of
$951,000.
The Company received proceeds of $4.1 million from the exercise of employee
stock options during fiscal 1994.
As a result of strong cash flow, the Company fully redeemed at par $6.7
million of principal, plus accrued interest outstanding, of its 11 7/8% senior
subordinated debentures due in May 1995. The Company also redeemed $1.9 million
of 8 7/8% subordinated debentures during the year. Remaining total long-term
debt of $19.0 million has an average rate of interest of 4.2%.
The Company's revolving credit facility of $30 million is renewable in
December 1995. The credit facility is collateralized by substantially all of the
Company's assets. Management believes that the Company's earnings and borrowing
capacity are adequate to meet the needs of its operation and long-term credit
requirements, including capital expenditures and debt maturities.
- - --------------------------------------------------------------------------------
Selected Financial Data (a)
<TABLE>
<CAPTION>
Eight
Months
Ended Years Ended
Years Ended August 31, August 31, December 31,
------------------------------------ -------- -----------------------
(Amounts in thousands,
except per share data) 1994 1993 1992 1991 (e) 1990 1989 (h)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales $231,572 $158,602 $192,365 $191,423 $241,383 $367,637
Gross profit 49,263 27,744 25,607 27,750 41,037 69,419
Percent of net sales 21.3 17.5 13.3 14.5 17.0 18.9
Operating income (loss) 23,905 1,907 (9,392) (1,883) (4,370) 41,513
Percent of net sales 10.3 1.2 (4.9) (.01) (1.8) 11.3
Pre-tax income (loss) 19,803 (2,340) (24,965) (13,666) (16,980) 35,757
Percent of net sales 8.6 (1.5) (12.7) (7.1) (7.0) 9.7
-------- -------- -------- -------- -------- --------
Net income (loss) $ 20,989 (c) $ (1,775) $(24,931) (d) $(11,178) (f) $(15,566) (g) $ 23,654
Per share (b) $ 0.67 (c) $ (0.06) $ (0.88) $ (0.40) $ (0.56) $ 0.83
======== ======== ======== ======== ======== ========
Cash dividends declared per
share:
Common Stock -- -- -- $ 0.360 $ 0.480 $ 0.400
Class B Stock -- -- -- 0.324 0.432 0.360
======== ======== ======== ======== ======== ========
Cash $ 34,869 $ 8,553 $ 8,738 $ 2,908 -- --
Total assets 100,653 81,285 179,249 197,243 $215,367 $281,275
Short-term borrowing -- -- 40,000 29,900 31,781 43,275
Long-term debt, including
current portion 17,943 25,590 49,588 65,073 90,641 83,654
Stockholders' equity 49,317 24,229 19,039 44,181 61,524 82,616
Capital expenditures 2,634 (i) 2,379 3,599 3,607 7,118 8,879
Depreciation and amortization 9,374 5,646 14,876 10,580 16,481 9,991
Earnings before interest,
taxes, depreciation and
amortization 32,252 6,317 2,675 6,269 10,719 50,758
======== ======== ======== ======== ======== ========
</TABLE>
(a) The selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
and the consolidated financial statements and the notes thereto.
(b) Per share data are restated to reflect a 50% stock dividend distributed in
September 1994.
(c) In 1994, the Company adopted SFAS No. 109, Accounting for Income Taxes,
which resulted in income of $1,780,000 or $0.06 per share from the
cumulative effect of an accounting change.
(d) Includes a net restructuring charge of $3,300,000 for costs associated with
the shutdown of the Company's New Jersey production facilities offset, in
part, by the benefit from the sale of its compressor business.
(e) In 1991, the Company changed to a fiscal year ending August 31 in order to
conform financial reporting to the room air conditioner season.
(f) Includes a pre-tax provision of $5,000,000 for a product recall.
(g) Includes a restructuring charge of $14,311,000 related to the shutdown of
assembly operations at the Ontario facility, including a write-off of $10.1
million of intangible assets.
(h) The 1989 net income includes $1,516,000 of extraordinary income from the
utilization of tax loss carryforwards. The cash dividends do not reflect
Preferred Stock dividends of $0.438 per share paid in 1989 prior to
conversion of the Convertible Exchangeable Preferred Stock into Common
Stock.
(i) Excludes $951,000 of equipment under capital lease.
5
<PAGE>
Fedders Corporation
- - --------------------------------------------------------------------------------
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years Ended August 31,
------------------------------
(Amounts in thousands, except per share data) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net sales $231,572 $158,602 $192,365
Costs and expenses:
Cost of sales 182,309 130,858 166,758
Selling, general and administrative
expense 25,358 25,837 31,699
Restructuring charge (note 12) -- -- 3,300
-------- -------- --------
207,667 156,695 201,757
-------- -------- --------
Operating income (loss) 23,905 1,907 (9,392)
Interest expense (4,102) (4,247) (15,573)
-------- -------- --------
Income (loss) before income taxes 19,803 (2,340) (24,965)
Federal, state and foreign income tax
(benefit) (note 7) 594 (565) (34)
-------- -------- --------
Income (loss) before cumulative effect of an
accounting change 19,209 (1,775) (24,931)
Cumulative effect of an accounting change
(note 7) 1,780 -- --
-------- -------- --------
Net income (loss) $ 20,989 $ (1,775) $(24,931)
======== ======== ========
Earnings per share:
Income (loss) before cumulative effect
of an accounting change $ 0.61 $ (0.06) $ (0.88)
Cumulative effect of an accounting change 0.06 -- --
-------- -------- --------
Net income (loss) per share $ 0.67 $ (0.06) $ (0.88)
======== ======== ========
</TABLE>
See accompanying notes
6
<PAGE>
Fedders Corporation
- - --------------------------------------------------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION> August 31,
-------------------
(Amounts in thousands, except per share data) 1994 1993
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash $ 34,869 $ 8,553
Accounts receivable (less allowance of $744 in 1994
and $1,078 in 1993) 12,840 8,901
Inventories 18,048 19,270
Deferred income taxes (note 7) -- 3,882
Other current assets 674 917
-------- --------
Total current assets 66,431 41,523
Net property, plant and equipment 27,372 31,637
Other assets 6,850 8,125
-------- --------
$100,653 $ 81,285
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt (note 5) $ 616 $ 2,206
Accounts payable 5,315 5,174
Accrued expenses 22,127 17,184
-------- --------
Total current liabilities 28,058 24,564
Long-term debt (note 5) 17,327 23,384
Deferred income taxes (note 7) 1,175 6,019
Other long-term liabilities:
Warranty 2,852 2,473
Other 1,924 616
Commitments and contingencies (notes 3, 4, 6 and 11)
Stockholders' equity (notes 9 and 10):
Common Stock, $1 par value, 60,000,000 shares
authorized, 19,641,659 and 18,613,559 issued at
August 31, 1994 and 1993, respectively 19,642 18,614
Class A Stock, $1 par value, 30,000,000 shares
authorized, 10,625,029 shares issued on September
9, 1994 10,625 --
Class B Stock, $1 par value, 7,500,000 shares
authorized, 2,268,206 issued and outstanding at
August 31, 1994 and 1993, respectively 2,268 2,268
Additional paid-in capital 51,423 47,571
Accumulated deficit (24,764) (35,128)
Cumulative translation adjustment (169) (130)
Notes due on Common Stock purchases (note 10) (742) --
-------- --------
58,283 33,195
Less treasury stock, at cost, 654,410 shares of Common
Stock (8,966) (8,966)
-------- --------
Total stockholders' equity 49,317 24,229
-------- --------
$100,653 $ 81,285
======== ========
</TABLE>
See accompanying notes
7
<PAGE>
Fedders Corporation
- - --------------------------------------------------------------------------------
Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
Years Ended August 31,
------------------------------
(Amounts in thousands) 1994 1993 1992
------- -------- ---------
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss) $20,989 $ (1,775) $ (24,931)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization 9,374 5,646 14,876
Deferred income taxes (962) 566 1,781
Changes in operating assets and liabilities:
Accounts receivable (3,939) 5,574 (534)
Current income tax receivable -- -- 2,291
Inventory 1,222 25,864 11,994
Other current assets 243 (832) 1,611
Other assets (59) (1,156) (2,642)
Accounts payable 141 (23,051) 14,376
Accrued expenses 4,943 (15,439) (2,852)
Other long-term liabilities 1,687 272 (373)
Other (39) (778) (342)
------- -------- ---------
Net cash provided by (used in) operations 33,600 (5,109) 15,255
------- -------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment
(excludes $951 of equipment acquired
under capital lease in 1994) (2,634) (2,379) (3,599)
Disposal of property, plant and equipment 441 89 674
------- -------- ---------
Net cash used in investing activities (2,193) (2,290) (2,925)
------- -------- ---------
Cash flows from financing activities:
Increase in short-term borrowing -- -- 40,000
Proceeds from long-term debt -- -- 107,167
Repayments of long-term debt (9,229) (529) (153,798)
Proceeds from stock options exercised 4,138 7,743 131
------- -------- ---------
Net cash (used in) provided by financing
activities (5,091) 7,214 (6,500)
------- -------- ---------
Net increase (decrease) in cash and cash
equivalents 26,316 (185) 5,830
Cash and cash equivalents at beginning of year 8,553 8,738 2,908
------- -------- ---------
Cash and cash equivalents at end of year $34,869 $ (8,553) $ 8,738
======= ======== =========
Supplemental disclosure:
Interest paid $ 3,766 $ (3,248) $ 12,781
Income taxes refunded (1,196) (1,155) (4,166)
</TABLE>
See accompanying notes
8
<PAGE>
Fedders Corporation
- - --------------------------------------------------------------------------------
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Notes Due
Additional Retained Cumulative on Com-
Common Class A Class B Paid-in Earnings Translation mon Stock Treasury
(Amounts in thousands) Stock Stock Stock Capital (Deficit) Adjustment Purchases Stock
------- ------- ------- ---------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
August 31, 1991 $16,836 -- $2,270 $41,657 $ (8,422) $990 -- $(9,150)
======= ======= ======= ========== ========= =========== ========== ========
Net loss -- -- -- -- (24,931) -- -- --
Conversion of Class B Stock
to Common Stock 2 -- (2) -- -- -- -- --
Stock options exercised -- -- -- (74) -- -- -- 205
Foreign currency translation -- -- -- -- -- (342) -- --
------- ------- ------- ---------- --------- ----------- ---------- --------
August 31, 1992 $16,838 -- $2,268 $41,583 $(33,353) $648 -- $(8,945)
======= ======= ======= ========== ========= =========== ========== ========
Net loss -- -- -- -- (1,775) -- -- --
Stock options exercised 1,776 -- -- 5,988 -- -- -- (21)
Foreign currency translation -- -- -- -- -- (778) -- --
------- ------- ------- ---------- --------- ----------- ---------- --------
August 31, 1993 $18,614 -- $2,268 $47,571 $(35,128) $(130) -- $(8,966)
======= ======= ======= ========== ========= =========== ========== ========
Net income -- -- -- -- 20,989 -- -- --
Stock dividend -- $10,625 -- -- (10,625) -- -- --
Stock options exercised 1,028 -- -- 3,852 -- -- $(742) --
Foreign currency translation -- -- -- -- -- (39) -- --
------- ------- ------- ---------- --------- ----------- ---------- --------
August 31, 1994 $19,642 $10,625 $2,268 $51,423 $(24,764) $(169) $(742) $(8,966)
======= ======= ======= ========== ========= =========== ========== ========
</TABLE>
See accompanying notes
9
<PAGE>
Fedders Corporation
- - --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Dollar amounts in tables, except per share, stock option and market data, are
in thousands)
1. Summary of Significant Accounting Policies
Principles of consolidation
The accompanying consolidated financial statements include the accounts of the
Company and all of its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.
Net sales
Sales are recorded net of provisions for sales allowances, warranty and similar
items.
Restructuring charge
In 1992, the Company recorded a net restructuring charge of $3,300,000 for costs
associated with the shutdown of its two New Jersey manufacturing facilities
offset, in part, by the benefit from the sale of its compressor business to
NYCOR, Inc. (note 12).
Warranty and return policy
The Company's warranty policy provides five-year coverage for sealed systems
including compressors, two-year coverage on motors and one-year coverage on all
other parts and labor related to air conditioners sold in North America. The
policy with respect to sales returns generally provides that a customer may not
return inventory except at the Company's option.
Foreign currency translation
Assets and liabilities of the Company's foreign subsidiaries are translated at
the rate of exchange in effect at the end of the period. Net sales and expenses
are translated at the average rate of exchange for the period. Translation
adjustments are reflected as a separate component of stockholders' equity.
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of the first-in, first-out (FIFO) cost or
market. Inventories consist of the following at August 31:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Finished goods $ 9,596 $11,597
Work in process 1,242 842
Raw materials and supplies 7,210 6,831
------- -------
$18,048 $19,270
======= =======
</TABLE>
Property, plant and equipment
Replacements, betterments and additions to property, plant and equipment are
capitalized at cost. Expenditures for maintenance and repairs are charged to
expense as incurred. Upon sale or retirement of property, plant and equipment,
the cost and related accumulated depreciation are removed from the respective
accounts and any gain or loss is reflected in income. Property, plant and
equipment at cost consist of the following at August 31:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Land and improvements $ 1,363 $ 1,393
Buildings 12,005 11,844
Machinery and equipment 47,146 44,799
------- -------
Property, plant and equipment 60,514 58,036
Accumulated depreciation 33,142 26,399
------- -------
$27,372 $31,637
======= =======
</TABLE>
Depreciation is provided on the straight-line basis over the estimated
useful life of each item. In 1994, depreciation includes $3,902,000 related to a
write down of certain idle fixed assets to estimated realizable value.
Other assets
Other assets consist primarily of intangible assets which, other than goodwill,
are amortized over periods from one to nine years using the straight-line
method. Goodwill is amortized over 40 years using the straight-line method.
Long-term receivables include receivables from employees including an officer.
Other assets are net of accumulated amortization of $8,072,000 and $6,738,000 at
August 31, 1994 and 1993, respectively, and consist of the following at August
31:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Goodwill $5,669 $5,823
Other 631 1,345
------ ------
Intangible assets 6,300 7,168
Long-term receivables 550 957
------ ------
$6,850 $8,125
====== ======
</TABLE>
Accrued expenses
Accrued expenses consist of the following at August 31:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Warranty $ 6,393 $ 5,016
Marketing programs 5,946 4,482
Salaries and benefits 3,082 2,430
Other 6,706 5,256
------- -------
$22,127 $17,184
======= =======
</TABLE>
10
<PAGE>
Fedders Corporation
- - --------------------------------------------------------------------------------
Income taxes
During the first quarter of fiscal 1994, the Company adopted Statement of
Financial Accounting Standard ("SFAS") No. 109, "Accounting for Income Taxes."
The cumulative effect of adopting the new standard as of September 1, 1993
resulted in a tax benefit of $1,780,000. Prior years' financial statements have
not been restated to apply the provisions of SFAS No. 109. Deferred income taxes
for fiscal 1994 are provided to reflect the tax effects of "temporary
differences" between assets and liabilities for financial reporting purposes and
income tax purposes. Provisions are also made for U.S. income taxes on
undistributed earnings of foreign subsidiaries not considered to be indefinitely
reinvested (note 7).
Research and development costs
All research and development costs are charged to expense as incurred and amount
to $2,233,000, $2,164,000 and $2,995,000 in 1994, 1993 and 1992, respectively.
Amounts per share
Earnings per share are computed by dividing net income by the weighted average
number of shares of Common, Class A and Class B Stock and other common stock
equivalents outstanding during the year: 31,509,000, 29,838,000, and 28,313,000
in 1994, 1993, and 1992, respectively. Prior-period earnings per share have been
restated to reflect the Class A Stock dividend distributed in September 1994
(notes 9 and 10).
2. Transactions with NYCOR
On September 28, 1992, the Company sold the assets and business related to its
rotary compressor operations to NYCOR, Inc. ("NYCOR"). In conjunction with the
sale, $60,000,000 of notes due to NYCOR from the Company were eliminated (note
12). Interest paid to NYCOR under these notes amounted to $6,025,000 in 1992.
The Company has an agreement with NYCOR for the supply of compressors. Total
purchases from NYCOR amounted to $52,108,000 and $28,801,000 in 1994 and 1993,
respectively. Certain officers and directors of the Company are also officers
and/or directors of NYCOR and have significant stockholdings in both companies.
3. Litigation
The Company is involved in litigation, both as plaintiff and defendant,
incidental to the conduct of its business. It is the opinion of management,
after consultation with counsel, that the outcome of such litigation will not
have a material adverse effect on the accompanying financial statements.
4. Short-term Borrowing
At August 31, 1994 and 1993, the Company had no short-term borrowing under its
$30,000,000 revolving credit facility with a commercial finance company.
Availability under the facility is based on accounts receivable and inventory
and requires maintenance of certain financial covenants. The maximum amount
outstanding under the credit facility was $28,404,000 during fiscal 1994. The
credit facility is collateralized by substantially all of the Company's assets
and is in effect until December 1995. The rate of interest on the facility is at
the prime rate plus 2.5%.
5. Long-term Debt
Aggregate amounts of long-term debt, excluding capital leases of $712,000,
maturing in each of the four years after August 31, 1995 are: 1996-$13,569,000,
1997-$363,000, 1998-$369,000 and 1999-$370,000.
The 5% convertible subordinated debentures due in 1996 are convertible into
the Company's Common Stock at $34.00 per share and may be redeemed by the
Company at 100% of principal, at any time. Upon conversion, bondholders are
entitled to an additional half-share of Class A Stock for each share of Common
Stock received.
The loan from the State of Illinois has an interest rate of 1%, is to be
paid over the next 14 years, and is collateralized by a mortgage on the Illinois
facility. The loan from the State of Tennessee and Maury County, Tennessee is
to be repaid over the next six years bearing interest at 8% through 1995 and 9%
through 2000.
The 11 7/8% senior subordinated debentures due May 1995 were prepaid by the
Company on August 30, 1994 at 100% of principal. The unamortized debt discount
related to the 11 7/8% debentures was not material at August 30, 1994. The 8
7/8% subordinated debentures were paid at maturity in May 1994.
The provisions of certain long-term debt arrangements of one of the
Company's subsidiaries limit, among other things, the payment of cash dividends
on the subsidiary's common stock.
In 1994, the Company acquired equipment under a capital lease. The
aggregate future minimum lease payments for the years ending August 31 are as
follows: $347,000, $256,000 and $196,000 in 1995, 1996 and 1997, respectively.
The present value of minimum lease payments is $712,000 excluding $87,000 of
interest.
11
<PAGE>
Fedders Corporation
- - --------------------------------------------------------------------------------
Long-term debt consists of the following at August 31:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
5% convertible subordinated debentures due in 1996: $13,211
principal amount less unamortized discount of $1,029 and
$1,600 at August 31, 1994 and 1993, respectively (note 9) $12,182 $11,611
Promissory note payable to the State of Illinois, interest
at 1% 4,856 5,181
Capital lease obligation 712 --
Promissory note payable to the State of Tennessee and Maury
County, Tennessee, at 8% 193 216
11 7/8% senior subordinated debentures due in 1995 -- 6,701
8 7/8% subordinated debentures due in 1994 -- 1,881
------- -------
17,943 25,590
Less current maturities 616 2,206
------- -------
$17,327 $23,384
======= =======
</TABLE>
6. Operating Leases
The Company leases certain property and equipment under operating leases which
expire over the next five years. Most of these operating leases contain one of
the following options: (a) the Company may, at the end of the initial lease
term, purchase the property at the then fair market value or (b) the Company may
renew its lease at the then fair rental value for a period of one month to four
years. Minimum payments for operating leases having initial or remaining non-
cancelable terms in excess of one year are as follows: $3,132,000, $2,030,000
$953,000, $854,000 and $866,000 in 1995, 1996, 1997, 1998 and 1999,
respectively. Minimum lease payments total $7,834,000. Total rent expense for
all operating leases amounted to $3,559,000, $3,783,000 and $3,486,000 in 1994,
1993 and 1992, respectively.
7. Income Taxes
The provision for income tax (benefit) consists of the following components:
<TABLE>
<CAPTION>
1994 1993 1992
---- ----- -----
<S> <C> <C> <C>
Current:
Federal $396 -- --
State 198 -- --
Foreign -- $(870) $(248)
---- ----- -----
594 (870) (248)
Deferred:
Foreign -- 305 214
---- ----- -----
-- 305 214
---- ----- -----
$594 $(565) $ (34)
==== ===== =====
</TABLE>
Deferred income taxes result from "temporary differences" between assets
and liabilities for financial reporting purposes and income tax purposes. These
temporary differences are determined in accordance with SFAS No. 109 and are
more inclusive in nature than "timing differences" as determined under
previously applicable accounting principles. The principal temporary differences
and carryforwards giving rise to deferred tax assets and liabilities at August
31 are as follows:
<TABLE>
<CAPTION>
1994
--------
<S> <C>
Net operating loss and tax credit
carryforwards $ 12,800
Depreciation (4,400)
Warranty 3,100
All other 125
--------
11,625
Valuation allowance (12,800)
--------
Total deferred taxes $ (1,175)
========
</TABLE>
The difference between the United States statutory income tax rate and the
Company's consolidated effective income tax rate is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ----- -------
<S> <C> <C> <C>
Expected tax (benefit)
at statutory rate $ 6,733 $(796) $(8,488)
Effect of Canadian
operations -- (123) (37)
Change in valuation
reserve (6,799) -- --
Alternative minimum
tax 396 -- --
State and local taxes 198 -- --
Losses for which no
benefits can be
provided -- 295 8,303
Other 66 59 188
------- ----- -------
Consolidated income
tax (benefit) $ 594 $(565) $ (34)
======= ===== =======
</TABLE>
12
<PAGE>
Fedders Corporation
- - --------------------------------------------------------------------------------
At August 31, 1994, the Company has U.S. net operating loss carryforwards
of approximately $29,000,000. The U.S. net operating loss carryforwards expire
in the years 2006 through 2008. The Company has investment tax credit
carryforwards of approximately $370,000 that expire in the years 1994 through
2001. The Company has alternative minimum tax credit carryforwards of
approximately $1,400,000.
8. Industry Segments
The Company operates in one industry segment and sells its room air conditioners
primarily direct to retailers and also through private label arrangements and
distributors. One customer accounted for 28% of net sales in 1994 and 1993.
Another customer accounted for 11% of net sales in 1994. Two customers each
accounted for more than 10% of net sales in 1992. International sales were
approximately $8,250,000 in 1994, $5,769,000 in 1993, and $14,743,000 in 1992,
and were made principally to Canada, the Far East and Mexico.
9. Capital Stock
Common Stock: Shares of Common Stock are reserved for the conversion of Class A
and Class B Stock as indicated herein. At August 31, 1994, 757,000 shares are
also reserved under the Company's stock option plans (note 10). In addition, at
August 31, 1994, 388,000 shares of Common Stock are reserved for issuance upon
conversion of the Company's 5% convertible subordinated debentures due in 1996
(note 5).
Class A Stock: In fiscal year 1992, 30,000,000 shares of Class A Stock were
authorized. On September 9, 1994, 10,625,029 shares of Class A were issued to
stockholders through a stock dividend of one share of Class A Stock for each two
shares of either Common or Class B Stock held. At August 31, 1994, 5,358,000
shares of Class A Stock are reserved under the Company's stock option plans. In
addition, 194,000 shares of Class A Stock are reserved for issuance upon
conversion of the Company's 5% convertible subordinated debentures due in 1996
(note 5). Class A Stock has rights substantially identical to the Common Stock,
except that the Class A Stock will not be entitled to vote except to the extent
provided under Delaware law. Class A Stock is immediately convertible into
Common Stock on a share-for-share basis upon conversion of all of the Class B
Stock, and accordingly, at August 31, 1994, 16,177,000 shares of Common Stock
are reserved for such conversion.
Class B Stock: Class B Stock is immediately convertible into Common Stock
on a share-for-share basis and accordingly, at August 31, 1994, 2,268,206 shares
of Common Stock are reserved for such conversion. Class B Stock has, in certain
circumstances, greater voting power in the election of directors but receives a
lower dividend, if declared, than Common Stock and has limited transferability.
Class B Stock also votes separately, as a class, on certain significant issues.
10. Stock Option Plans
All stock option plans, as approved by the stockholders, provide for the
granting to employees and officers of incentive stock options (as defined under
current tax laws) and non-qualified stock options. All of the plans provide for
the granting of non-qualified stock options to directors who are not employees.
Stock options are exercisable one year after the date of grant and, if not
exercised, will expire five years from the date of grant. Certain options are
only exercisable when certain financial goals are met or at the end of five
years.
For options exercised during a six-week period in early 1994, optionees
were given the opportunity to pay two-thirds of the exercise price upon exercise
and to defer the remaining balance until the earlier of July 31, 1995 or upon
the sale of such stock. Such optionees executed non-recourse interest-bearing
notes.
The stock option plan summary is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- ------
<S> <C> <C> <C>
Options outstanding
beginning of year 2,987 3,200 3,401
Granted 752 2,299 12
Canceled (109) (736) (197)
Exercised (1,028) (1,776) (16)
------- ------- ------
Options outstanding prior to
dividend-related adjustment 2,602 2,987 3,200
Dividend-related adjustment (a) 1,301 -- --
------- ------- ------
Options outstanding
at end of year 3,903 2,987 3,200
Options exercisable
at end of year 1,862 688 1,493
------- ------- ------
Exercise price $2.90(a) $4.36 $4.38
per share to 5.66 to 7.63
======= ======= ======
</TABLE>
(a) In conjunction with the stock dividend (note 9), substantially all Common
Stock options were converted to Class A Stock options and increased by 50%
with a corresponding reduction in exercise price to 67% of the original
price in order to maintain the equivalent economic position of optionees.
13
<PAGE>
Fedders Corporation
- - --------------------------------------------------------------------------------
11. Pension Plans and Other Retirement Benefits
The Company maintains defined benefit pension plans, which were curtailed in
1993, covering its union employees, which plans pay benefits to retirees based
upon the length of continuous service.
At July 31, 1994, the assumed discount rate (the estimated rate at which
the pension plans could have settled their liabilities) and the expected long-
term rate of return on plan assets were estimated to be 8% and 9%, respectively,
per year.
The majority of the trust assets are invested in cash equivalents. The
Company's funding policy is to satisfy the minimum statutory funding
requirements.
Net periodic pension cost for the Company's pension plan consists of the
following:
<TABLE>
<CAPTION>
1994 1993 1992
----- ------- -------
<S> <C> <C> <C>
Normal service cost -- $ 241 $ 384
Interest cost on
projected benefit
obligation $ 745 738 785
Actual gain on plan
assets (741) (1,511) (1,602)
Actual gain (under)
over expected gain (305) 601 712
Amortization of
unrecognized
net obligation -- (54) 87
----- ------- -------
Net periodic pension
(benefit) cost $(301) $ 15 $ 366
===== ======= =======
</TABLE>
The reconciliation of the funded status of the plans to the amount on the
Company's balance sheet is as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Actuarial present value of
accumulated and projected
vested benefit obligation $(9,900) $(9,556)
Market value of plan assets 11,354 11,186
------- -------
Excess of plan assets over
the projected benefit
obligation 1,454 1,630
Unrecognized gain (1,239) (1,820)
------- -------
Pension benefit (accrual)
on balance sheet $ 215 $ (190)
======= =======
</TABLE>
The Company has an agreement with an officer that has a term of ten years
from any point in time and provides for salary during the employment period, a
disability program, postretirement benefits and a death benefit in an amount
equal to ten times the prior year's compensation, payable by the Company over
ten years. The estimated present value of future non-salary benefits payable
under the agreement has been determined based upon certain assumptions and is
being amortized over the expected remaining years of service to the Company.
In addition to providing pension benefits, the Company provides a portion
of health care and life insurance benefits for retired employees who elect to
participate in the Company's plan. During fiscal 1994, the Company adopted SFAS
No. 106, which requires accrual accounting for all postretirement benefits other
than pension. At August 31, 1994 postretirement benefits were fully accrued. The
effect of adoption of SFAS No. 106 was not material.
12. Restructuring Charge
In August 1992, the Company undertook a restructuring program whereby its two
New Jersey manufacturing facilities were permanently closed and the compressor
operations were sold. On September 28, 1992, the Company completed the sale of
the assets and business related to the rotary compressor operations to NYCOR for
approximately $72,800,000. In consideration of the purchase price, two
outstanding promissory notes due NYCOR in the total amount of $60,000,000 plus
accrued interest of $1,226,000 were eliminated. Additionally, the Company
transferred a capital lease obligation and certain operating liabilities to
NYCOR. The Company realized a gain of approximately $7,100,000 on the sale. The
Company recorded a net restructuring charge of $3,300,000, reflecting a
$10,400,000 provision in connection with the closing of the manufacturing
facilities, offset, in part, by the gain on the sale.
14
<PAGE>
Fedders Corporation
- - --------------------------------------------------------------------------------
13. Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth Fiscal Year
------------------ ------------------ ----------------- ----------------- -------------------
1994 1993 1994 1993 1994 1993 1994 1993 1994 1993
------- -------- -------- ------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $10,527 $ 13,277 $ 36,959 $36,625 $95,812 $50,464 $88,274 $58,236 $231,572 $158,602
Gross profit 2,074 2,390 7,710 5,502 19,869 8,326 19,610 11,526 49,263 27,744
------- -------- -------- ------- ------- ------- ------- ------- -------- --------
Income (loss) before
cumulative effect of
accounting change (3,891) (2,561) 1,128 (886) 11,640 480 10,332 1,192 19,209 (1,775)
Cumulative effect
of accounting change 1,780 -- -- -- -- -- -- -- 1,780 --
------- -------- -------- ------- ------- ------- ------- ------- -------- --------
Net income (loss) $(2,111) $ (2,561) $ 1,128 $ (886) $11,640 $ 480 $10,332 $ 1,192 $ 20,989 $ (1,775)
Per share (a)(b) (0.07) $ (0.09) $ 0.04 $ (0.03) $ 0.37 $ 0.02 $ 0.32 $ 0.04 $ 0.67 $ (0.06)
======= ======== ======== ======= ======= ======= ======= ======= ======== ========
Market price (a) per share:
High 4 1/8 4 1/4 5 1/8 4 5/8 5 7/8 5 1/8 5 1/2 4 1/2 5 7/8 5 1/8
Low 3 1/8 2 1/4 3 7/8 3 3/8 4 3/8 3 5/8 4 3/8 2 7/8 3 1/8 2 1/4
------- -------- -------- ------- ------- ------- ------- ------- -------- --------
</TABLE>
(a) Restated to reflect a 50% stock dividend distributed on September 9, 1994.
(b) Quarterly earnings per share may not add to earnings per share for the year
due to rounding and changes in the number of weighted average number of
shares outstanding during the year.
- - --------------------------------------------------------------------------------
Report of Independent Auditors
To the Board of Directors and Stockholders of Fedders Corporation
We have audited the accompanying consolidated balance sheets of Fedders
Corporation as of August 31, 1994 and 1993, and the related consolidated
statements of operations, cash flows and stockholders' equity for each of the
three years in the period ended August 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Fedders
Corporation as of August 31, 1994 and 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
August 31, 1994, in conformity with generally accepted accounting principles.
As discussed in notes 1 and 7 to the consolidated financial statements, in
1994 the Company changed its method of accounting for income taxes.
/s/ Ernst & Young LLP
MetroPark, New Jersey
October 6, 1994
15
<PAGE>
EXHIBIT 21
SUBSIDIARIES
State or Other Jurisdiction
---------------------------
Name of Incorporation
- - ---- ---------------------------
Fedders North America, Inc. (1) Delaware
Fedders International, Inc. (1) Delaware
Fedders Exporting, Inc. (1) Barbados
Fedders Investment Corporation (1) Delaware
Fedders, Inc. (2) Ontario
Emerson Quiet Kool Corporation (2) Delaware
RTXX Corporation (2) Delaware
Fedders Capital N.V. (3) Netherlands Antilles
Columbia, Specialties, Inc. (3) Delaware
Fedders Asia Pte. Ltd. (4) Singapore
Fedders De Mexico S.A. de C.V. (2) Mexico
(1) Wholly owned subsidiary of Fedders Corporation
(2) Wholly owned subsidiary of Fedders North America, Inc.
(3) Wholly owned subsidiary of RTXX Corporation
(4) Wholly owned subsidiary of Fedders International
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K of
Fedders Corporation of our report dated October 6, 1994, included in the 1994
Annual Report to Shareholders of Fedders Corporation.
Our audits also included the financial statement schedules of Fedders
Corporation listed in Item 14(a). These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 2-98475, No. 33-4628, No. 33-26740, No. 33-31332 and No. 33-55054)
pertaining to the Employee Stock Option Plans of Fedders Corporation of our
report dated October 6, 1994 with respect to the consolidated financial
statements and schedules of Fedders Corporation incorporated by reference in the
Annual Report (Form 10-K) for the year ended August 31, 1994.
/s/Ernst & Young
Ernst & Young
MetroPark, New Jersey
November 4, 1994
