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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(XX) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period ended February 28, 1994 or
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-8831
FEDDERS CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 22-2572390
(State of incorporation) (I.R.S. Employer Identification No.)
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158 Highway 206, Peapack, New Jersey 07977
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (908) 234-2100
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The registrant has outstanding 18,811,649 shares of
Common Stock and 2,267,609 shares of Class B Stock (which is
immediately convertible into Common Stock on a share-for-share
basis) as of March 29, 1994.
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FEDDERS CORPORATION
INDEX
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Page
Number
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations3
Consolidated Balance Sheets 4-5
Consolidated Statements of Cash Flows6
Notes to Consolidated Financial Statements7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations8-9
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 11
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FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
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Net sales $ 36,959$ 36,625$ 47,486$ 49,902
Cost of sales 29,249 31,123 37,702 42,010
Selling, general and
administrative expense 5,409 6,195 10,607 11,538
Operating income (loss) 2,301 (693) (823) (3,646)
Interest expense (1,138) (848) (2,025) (2,048)
Income (loss) before income taxes 1,163 (1,541) (2,848) (5,694)
Federal, state and foreign income
tax (benefit) 35 (655) (85) (2,247)
Income (loss) before cumulative effect
of an accounting change 1,128 (886) (2,763) (3,447)
Cumulative effect of an
accounting change - - 1,780 -
Net income (loss) $ 1,128$ (886)$ (983)$ (3,447)
Earnings per share:
Income (loss) before cumulative effect
of an accounting change $ 0.05$ (0.04)$ (0.13)$ (0.18)
Cumulative effect of an
accounting change - - 0.08 -
Net income (loss) per share $ 0.05$ (0.04)$ (0.05) $ (0.18)
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See accompanying notes
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FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
(unaudited)
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ASSETS:
Current assets:
Cash $ 1,780$ 8,553$
Accounts receivable (less allowance
of $1,009, $1,078 and $3,354 at
February 28, 1994, August 31,
1993 and February 28, 1993,
respectively) 22,409 8,901 28,093
Inventories:
Finished goods 39,166 11,597 11,018
Work in process 1,698 842 2,709
Raw materials and supplies 8,754 6,831 10,562
Deferred income taxes - 3,882 4,217
Prepaid expenses 776 917 853
Total current assets 74,583 41,523 59,645
Property, plant and equipment at cost:
Land and improvements 1,375 1,393 1,433
Buildings 11,917 11,844 11,818
Machinery and equipment 47,157 44,799 42,960
Less accumulated depreciation 28,270 26,399 25,660
Net property, plant and
equipment 32,179 31,637 30,551
Other assets 8,009 8,125 10,026
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See accompanying notes
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FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
(unaudited)
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LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Short-term borrowing $ 24,698 - $ 12,748
Current portion of long-term debt 2,233 $ 2,206 -
Accounts payable 21,440 5,174 19,020
Accrued expenses 12,749 17,184 12,542
Total current liabilities 61,120 24,564 44,310
Long-term debt 24,368 23,384 25,444
Deferred income taxes - 6,019 5,714
Other long-term liabilities 3,049 3,089 2,859
Stockholders' equity:
Common Stock, $1 par value, 30,000,000
shares authorized, 19,452,559, 18,613,559
and 18,304,359 issued at February 28,
1994, August 31, 1993 and February 28,
1993, respectively 19,452 18,614 18,304
Class B Stock, $1 par value, 30,000,000
shares authorized, 2,267,906 issued at
February 28, 1994 and August 31, 1993,
and 2,268,206 issued at February 28,
1993, respectively 2,268 2,268 2,268
Additional paid-in capital 49,503 47,571 46,528
Retained earnings (deficit) (36,111) (35,128) (36,800)
Cumulative translation adjustment 88 (130) 540
35,200 33,
Less-treasury stock, at cost (8,966) (8,966) (8,945)
Total stockholders' equity 26,234 24,229 21,895
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See accompanying notes
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FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
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Cash flows from operations:
Net loss
Adjustments to reconcile net loss to net
cash (used in) operating activities:
Depreciation and amortization 2,763 2,593
Deferred income taxes - (74)
Changes in operating assets and liabilities:
Accounts receivable (13,508) (13,618)
Inventories (30,348)
Other current assets 4,023 (768)
Other assets (455) (1,231
Accounts payable 16,266 (9,205)
Accrued expenses (4,435) (20,081)
Long-term liabilities (6,059) 42
Other
Net cash used in operations (32,518) (25,052)
Cash flows from investing activities:
Additions to property, plant and equipment (2,425) (556)
Disposals of property, plant and equipment 12 259
Net cash used in investing activities (2,413) (297)
Cash flows from financing activities:
Increase in short-term borrowings 24,698 12,748
Proceeds from (repayments of) long-term debt 690 (355)
Proceeds from stock options exercised 2,770 6,411
Net cash provided by financing
activities 28,158 18,804
Net decrease in cash and cash equivalents (6,773) (6,545)
Cash and cash equivalents at
beginning of period 8,553 8,738
Cash and cash equivalents at end of period $ 1,780 $ 2,193
Supplemental disclosure:
Interest paid $ 1,2
Net income taxes paid (refunded) (158) (679)
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See accompanying notes
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FEDDERS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. In the first fiscal quarter of 1994, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." The adoption of SFAS No. 109 resulted in a one-time favorable
cumulative effect of an accounting change amounting to $1,780,000. It
also resulted in a decrease in the effective tax rate from 39% in fiscal
1993 period to 3% in fiscal 1994.
B. Earnings per share are computed by dividing net income by the weighted
average number of shares of Common Stock, Class B Stock and other common
stock equivalents outstanding: 20,982,000 and 19,900,000 in the second
quarter of 1994 and 1993, and 20,679,000 and 19,600,000 for the six-
month period ending February 28, 1994 and 1993, respectively.
C. Pursuant to the Company's stock option plans, options to purchase
839,000 shares of Common Stock were exercised during the first six
months of fiscal year 1994.
D. The financial information included herein is unaudited; however, such
information reflects all adjustments which, other than the cumulative
effect of an accounting change, consists solely of normal recurring
adjustments which are, in the opinion of management, necessary for a
fair statement of results for the interim periods.
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Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying consolidated
financial statements.
Results of Operations
Net sales in the second quarter ended February 28, 1994 of $37.0 million were
comparable to sales in the prior year quarter of $36.6 million. The gross
profit margin of 20.9% of net sales increased from 15.0% in the second
quarter of 1993. The increase is attributable to cost reductions.
Selling, general and administrative expense decreased 13.0%, on equivalent
sales, from $6.2 million in the fiscal 1993 quarter to $5.4 million in the
current quarter.
Interest expense increased by $290,000 as a result of higher borrowing levels
during the quarter to build inventories required for increased demand. The
backlog of orders increased by more than $70 million from the prior-year
level. The increase in orders is due, primarily, to the implementation of
just-in-time relationships with major retailers. The new leaders in room air
conditioner retailing require delivery during the peak season (April through
July) rather than before their selling season.
Net income for the fiscal 1994 quarter amounted to $1.1 million compared with
a loss of $886,000 in the fiscal 1993 quarter.
Six Months
In the seasonally slow six-month period ended February 28, 1994, sales were
off 4.8% to $47.5 million compared with $49.9 million in the prior fiscal
year.
Gross profit margin improved to 20.6% of net sales during the fiscal 1994
period, compared with 15.8% in fiscal 1993.
Selling, general and administrative expenses in the six months of fiscal 1994
were reduced by 8.1% to $10.6 million from $11.5 million in fiscal 1993.
In the six-month period, the Company reduced by 50% the seasonal pre-tax loss
on 5% lower sales.
The six months of fiscal 1994 were affected by the adoption of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." This resulted in a decrease in the effective tax rate from 39% in
fiscal 1993 period to 3% in fiscal 1994, reducing the six-month tax benefit.
The adoption of SFAS No. 109 also resulted in a one-time favorable cumulative
effect of an accounting change for prior periods amounting to $1.8 million.
Including the effects of SFAS No. 109, the net loss for the six-month period
was $1.1 million versus a loss of $3.4 million in the first half of 1993.
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Liquidity and Capital Resources
The Company's working capital requirements are seasonal, with cash peaking in
the fourth quarter and the Company utilizing its credit line primarily in the
second and third quarters during the height of the production cycle.
Accordingly, with the industry pipeline normalized entering fiscal 1994, the
Company increased production to meet product demand for delivery during the
peak selling season (April through July). This seasonally increased
inventories, short-term borrowing and accounts payable from August 31, 1993.
Investing activities during the six-month period ended February 28, 1994 were
for capital expenditures of $2.4 million.
In October 1993, the Company received a two-year renewal, with certain more
favorable terms on its revolving credit facility of $30 million. The Company
received proceeds of $2.8 million from the exercise of employee stock options
during the first six months of fiscal 1994. Management believes that the
Company's earnings and borrowing capacity are adequate to meet the needs of
its operations and long-term credit requirements, including capital
expenditures.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On January 21, 1994 the parties agreed to settle the case captioned Z Edison
Limited Partnership v. Fedders Corporation. The case was dismissed upon
payment of $80,000 to plaintiff on February 24, 1994.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FEDDERS CORPORATION
By /s/Robert L. Laurent, Jr.
Robert L. Laurent, Jr.
Executive Vice President,
Finance & Administration
Date April 12, 1994 Signing both in his capacity as
Executive Vice President on behalf
of the Registrant and as Chief
Financial Officer of the Registrant
