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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 May 31, 1995 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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<S> <C>
Delaware 22-2572390
(State of incorporation) (I.R.S. Employer Identification No.)
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<S> <C>
505 Martinsville Road, Liberty Corner, New Jersey 07938
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: 908/604-8686
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 18,988,099 shares of Common Stock,
18,677,927 shares of Class A Stock (which is immediately
convertible into Common Stock on a share-for-share basis upon
conversion of all of Class B Stock) and 2,267,906 shares of Class
B Stock (which is immediately convertible into Common Stock on a
share-for-share basis) as of June 23, 1995.
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FEDDERS CORPORATION
INDEX
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<CAPTION>
Page
Number
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4-5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
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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<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED MAY 31, ENDED MAY 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $145,869 $ 95,812 $238,351 $143,298
Cost of sales 115,380 75,943 189,870 113,645
Selling, general and
administrative expense 7,550 6,591 19,478 17,198
________________________________________
122,930 82,534 209,348 130,843
________________________________________
Operating income 22,939 13,278 29,003 12,455
Net interest expense (1,403) (1,278) (2,213) (3,303)
________________________________________
Income before
income taxes 21,536 12,000 26,790 9,152
Federal, state and foreign
income taxes 3,730 360 4,634 275
________________________________________
Income before cumulative
effect of an accounting
change 17,806 11,640 22,156 8,877
Cumulative effect of an
accounting change - - - 1,780
_________________________________________
Net income $ 17,806 $ 11,640 $ 22,156 $ 10,657
=========================================
Earnings per share:
Income before
cumulative effect of
an accounting change $ 0.44 $ 0.29 $ 0.55 $ 0.23
Cumulative effect of an
accounting change - - - 0.04
_________________________________________
Net income per share $ 0.44 $ 0.29 $ 0.55 $ 0.27
=========================================
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See accompanying notes
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FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except share data)
(unaudited)
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<CAPTION>
May 31, August 31, May 31,
1995 1994 1994
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash $ 5,028 $ 34,869 $ 4,323
Accounts receivable (less
allowance of $1,232,
$744 and $959 at
May 31, 1995, August 31,
1994 and May 31, 1994,
respectively) 64,411 12,840 48,900
Inventories:
Finished goods 21,356 9,596 26,568
Work in process 2,723 1,242 2,074
Raw materials and supplies 15,480 7,210 11,141
Net inventory 39,559 18,048 39,783
Prepaid expenses 1,370 674 948
Total current assets 110,368 66,431 93,954
Property, plant and equipment
at cost:
Land and improvements 1,364 1,363 1,356
Buildings 12,686 12,005 11,955
Machinery and equipment 51,073 47,146 47,525
65,123 60,514 60,836
Less accumulated
depreciation 34,053 33,142 28,816
Net property, plant and
equipment 31,070 27,372 32,020
Other assets 6,960 6,850 7,860
$148,398 $100,653 $133,834
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See accompanying notes
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FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except share data)
(unaudited)
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<CAPTION>
May 31, August 31, May 31,
1995 1994 1994
<S> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Short-term borrowing - - $ 22,473
Current portion of
long-term debt - $ 616 7,040
Accounts payable $ 24,854 5,315 19,575
Accrued expenses 36,431 22,127 26,023
Total current liabilities 61,285 28,058 75,111
Long-term debt 5,390 17,327 17,646
Deferred income taxes 1,175 1,175 -
Other long-term liabilities 5,015 4,776 3,136
Stockholders' equity:
Common Stock, $1 par value,
30,000,000 shares authorized,
18,988,099, 19,641,659 and
19,518,599 issued at May 31,
1995, August 31, 1994 and
May 31, 1994, respectively 18,988 19,642 19,519
Class A Stock, $1 par value,
30,000,000 shares authorized,
18,654,607 and 10,625,029 issued and
outstanding at June 14, 1995 and
September 9, 1994, respectively 18,655 10,625 -
Class B Stock, $1 par value,
30,000,000 shares authorized,
2,267,906 issued and outstanding
at May 31, 1995, August 31, 1994
and May 31, 1994 2,268 2,268 2,268
Additional paid-in capital 47,187 51,423 49,790
Retained earnings (deficit) (10,603) (24,764) (24,471)
Cumulative translation
adjustment (407) (169) (199)
Notes due on Common Stock purchases (555) (742) -
75,533 58,283 46,907
Less-treasury stock, at cost - (8,966) (8,966)
Total stockholders' equity 75,533 49,317 37,941
$148,398 $100,653 $133,834
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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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<CAPTION> NINE MONTHS ENDED
MAY 31,
1995 1994
<S> <C> <C>
Cash flows from operations:
Net income $22,156 $ 10,657
Adjustments to reconcile net income
to net cash used in
operating activities:
Depreciation and amortization 3,607 3,666
Changes in operating assets and liabilities:
Accounts receivable (51,571) (39,999)
Inventories (21,511) (20,513)
Other current assets (696) 3,851
Other assets (319) (503)
Accounts payable 19,539 14,401
Accrued expenses 18,261 8,839
Long-term liabilities 239 (5,972)
Other (238) (69)
Net cash used in operations (10,533) (25,642)
Cash flows from investing activities:
Additions to property, plant and equipment (7,022) (2,950)
Disposals of property, plant and equipment 955 150
Net cash used in investing activities (6,067) (2,800)
Cash flows from financing activities:
Increase in short-term borrowings - 22,473
Repayments of long-term debt (13,582) (1,385)
Proceeds from stock options exercised 341 3,124
Net cash (used in) provided by
financing activities (13,241) 24,212
Net decrease in cash and cash equivalents (29,841) (4,230)
Cash and cash equivalents at
beginning of period 34,869 8,553
Cash and cash equivalents at end of period $ 5,028 $ 4,323
==========================
Supplemental disclosure:
Net interest paid $ 1,017 $ 2,733
Net income taxes refunded (247) (306)
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See accompanying notes
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FEDDERS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. On May 5, 1995, the Company fully redeemed the principal amount
outstanding of $13,211,000, 100% par value, plus accrued interest, on
its 5% convertible subordinated debentures due May 1, 1996. The
Company also bought-out an equipment lease which would have expired in
February 1996 for approximately $3,000,000 on May 31, 1995.
B. Earnings per share are computed by dividing net income by the weighted
average number of shares of Class A, Common and Class B Stock and
other common stock equivalents outstanding: 40,701,000 and 39,934,000
in the third quarter of 1995 and 1994, and 40,348,000 and 39,160,000
for the nine-month period ending May 31, 1995 and 1994, respectively.
Earnings per share have been restated to reflect a 25% Class A Stock
dividend distributed on June 14, 1995.
C. Pursuant to the Company's stock option plans, options to purchase
35,225 shares of Class A Stock were exercised during the first nine
months of fiscal 1995.
D. During the third quarter, the Company retired 654,000 shares of Common
Stock held in treasury.
E. 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. The Company's
business is seasonal. Operating results for the nine-month period
ending May 31, 1995 are not necessarily indicative of the results that
may be expected for the fiscal year ending August 31, 1995.
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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 affected the Company's financial position and
operating results during the periods included in the accompanying
consolidated financial statements.
Third Quarter
Results of Operations
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Third Fiscal Quarter Nine Months
Operating Results
as Percent of Sales 1995 1994 1995 1994
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Gross Profit 20.9% 20.7% 20.3% 20.7%
Selling, General
and Administrative 5.2% 6.9% 8.2% 12.0%
Operating Income 15.7% 13.9% 12.2% 8.7%
Interest Expense 1.0% 1.3% .9% 2.3%
Pre-tax Income 14.8% 12.5% 11.2% 6.4%
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Net sales in the third quarter ended May 31, 1995 increased to $145.9
million, from $95.8 million in the third fiscal quarter a year ago. The
sales increase is attributed to the Company's ability to meet the just-in-
time requirements of major retailers and to its accurate-response
production program. Sales increased to existing customers and to new
accounts.
Selling, general and administrative expenses declined as a percentage of
sales to 5.2% from 6.9% as a result of the increase in sales.
Net interest expense declined as a percentage of sales from 1.3% in the
prior year quarter to 1.0% in the current year due to the increase in
sales.
Pre-tax income for the quarter increased to $21.5 million or 14.8% of net
sales in the quarter compared to $12.0 million or 12.5% of net sales in the
prior year.
In the third quarter, the effective tax rate increased to 17.3% from 3% in
the prior year as the Company expects to fully utilize its tax loss
carryforwards during the current fiscal year.
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Nine Months
For the first nine months of fiscal 1995, sales increased 66.0% to $238.4
million over the nine-month fiscal 1994 sales of $143.3 million. The sales
increase is due to increased volume of shipments to existing accounts and
to new customers.
Gross profit margin decreased slightly during the fiscal 1995 period
primarily as a result of customer mix.
Selling, general and administrative expenses declined as a percentage of
sales as a result of the increased sales volume.
Net interest expense decreased as a percentage of sales to 0.9% from 2.3%
in the prior-year period due to lower short-term borrowing, reduced long-
term debt and increased interest income from cash investments.
Liquidity and Capital Resources
Working capital requirements of the Company are seasonal with cash balances
peaking in the fourth quarter and the Company utilizing its credit lines in
the second and the third quarters. During the third quarter, the Company
utilized working capital lines to produce finished goods to meet demand and
then used cash from the collection of accounts receivable to eliminate the
working capital borrowings and prepay a capital lease. With the increased
sales volume and the Company's accurate response production program,
finished goods inventories decreased to $21.4 million from $26.6 million a
year ago. Accounts receivable increased to $64.4 million from $48.9
million a year ago as a result of increased sales in the third fiscal
quarter.
On May 5, 1995, the Company redeemed the principal outstanding of $13.2
million, par value, plus interest on the 5% convertible subordinated
debenture due May 1, 1996. An equipment lease which would have expired in
February 1996 was bought by the Company for $3.0 million on May 31, 1995.
On June 14, 1995, the Company distributed a 25% Class A Stock dividend to
shareholders of record of Class A, Common and Class B Stock on May 31,
1995.
At May 31, 1995, the Company had no short-term borrowing. Management
believes that the Company's earnings and borrowing capacity are adequate to
meet the demands of its operations and its long-term requirements,
including capital expenditures.
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b)Reports on Form 8-K
The Company filed a Report on Form 8-K dated May 23, 1995 and an amended
Form 8-K on June 8, 1995, reporting a change in its certifying accountant
from Ernst and Young LLP to BDO Seidman. No financial statements were
required with the filings.
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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: June 30, 1995 Signing both in his capacity as
Executive Vice President on
behalf of the Registrant and as
Chief Financial Officer of the
Registrant
