<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(XX) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period ended February 29, 1996 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.)
</TABLE>
<TABLE>
<S> <C>
505 Martinsville Road, Liberty Corner, NJ 07938
(Address of principal executive offices) (Zip Code)
</TABLE>
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 18,989,298 shares of Common Stock,
19,111,594 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 2,267,206 shares of Class B Stock (which is immediately
convertible into Common Stock on a share-for-share basis) as of March 29,
1996.
<PAGE> 2
FEDDERS CORPORATION
INDEX
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<CAPTION>
Page
Number
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4-5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 12
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<PAGE> 3
PART I FINANCIAL INFORMATION
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
FEB. 29, FEB. 28, FEB. 29, FEB 28,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales and other income $ 88,327 $ 72,357 $116,136 $ 92,482
Cost of sales 70,322 58,671 91,354 74,490
Selling, general and
administrative expense 6,872 6,325 13,651 11,928
------------------------------------------
77,194 64,996 105,005 86,418
------------------------------------------
Operating income 11,133 7,361 11,131 6,064
Minority interest in joint
venture (income)/loss 153 - 153 -
Net interest expense (1,012) (667) (456) (810)
-------------------------------------------
Income before income taxes 10,274 6,694 10,828 5,254
Federal, state and foreign
income taxes 3,904 1,127 4,115 904
-------------------------------------------
Net income $ 6,370 $ 5,567 $ 6,713 $ 4,350
===========================================
Net income per share $ 0.15 $ 0.14 $ 0.16 $ 0.11
===========================================
</TABLE>
See accompanying notes
<PAGE> 4
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
February 29, August 31, February 28,
1996 1995 1995
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash $ 13,347 $ 57,707 $ 2,383
Accounts receivable (less
allowance of $1,735, at
February 29, 1996, $872
at August 31, 1995 and
$898 at February 28, 1995) 43,324 8,847 31,571
Inventories:
Finished goods 75,400 14,592 51,801
Work in process 3,930 2,540 3,535
Raw materials and supplies 27,456 11,888 18,045
-------------------------------------
106,786 29,020 73,381
Deferred tax benefit 2,954 2,954 -
Prepaid expenses 2,150 893 888
-------------------------------------
Total current assets 168,561 99,421 108,223
Property, plant and equipment
at cost:
Land and improvements 1,360 1,369 1,351
Buildings 13,957 12,888 12,313
Machinery and equipment 60,244 53,302 48,820
-------------------------------------
75,561 67,559 62,484
Less accumulated
depreciation 40,754 37,756 33,730
-------------------------------------
Net property, plant and
equipment 34,807 29,803 28,754
Deferred tax benefit 1,277 1,277 -
Other assets 6,591 6,274 6,914
-------------------------------------
$211,236 $136,775 $143,891
=====================================
</TABLE>
See accompanying notes
<PAGE> 5
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except share data) (unaudited)
<TABLE>
<CAPTION> February 29, August 31, February 28,
1996 1995 1995
<S> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Short-term borrowing $ 34,776 - $ 17,245
Current portion of long-term debt 258 $ 590 599
Accounts payable 23,416 5,590 20,844
Accounts payable to NYCOR 974 1 4,449
Income tax payable 8,532 9,131 -
Accrued expenses 28,539 27,986 22,536
------------------------------------
Total current liabilities 96,495 43,298 65,673
Long-term debt 14,440 4,516 17,426
Deferred income taxes - - 1,175
Minority interest in joint venture 5,508 - -
Other long-term liabilities 6,551 6,419 4,928
Stockholders' equity:
Common Stock, $1 par value,
60,000,000 shares authorized,
18,989,298, 18,988,588 and
19,642,509 issued and outstanding
at February 29, 1996, August 31,
1995 and February 28, 1995,
respectively 18,989 18,989 19,643
Class A Stock, $1 par value,
30,000,000 shares authorized
19,027,640, 18,831,376 and
10,634,929 issued and outstanding
at February 29, 1996, August 31,
1995 and February 28, 1995,
respectively 19,028 18,831 10,635
Class B Stock, $1 par value,
7,500,000 shares authorized,
2,267,206 issued at February 29,
1996 and August 31, 1995 and
2,267,906 at February 28, 1995 2,267 2,267 2,268
Additional paid-in capital 46,956 46,481 52,226
Retained earnings (deficit) 1,074 (4,041) (20,414)
Cumulative translation adjustment (72) 15 (148)
Notes due on Common Stock purchases - - (555)
------------------------------------
88,242 82,542 63,655
Less-treasury stock, at cost - - (8,966)
------------------------------------
Total stockholders' equity 88,242 82,542 54,689
------------------------------------
$211,236 $136,775 $143,891
</TABLE> ====================================
See accompanying notes
<PAGE> 6
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands) (unaudited)
<TABLE>
<CAPTION> SIX MONTHS ENDED
FEB. 29, FEB. 28,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net income $ 6,713 $ 4,350
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 1,934 1,909
Effect of book/tax NOL utilization - 778
Changes in operating assets and liabilities:
Accounts receivable (33,048) (18,731)
Inventories (72,064) (55,333)
Other current assets (156) (214)
Other assets (383) (116)
Accounts payable 16,140 19,978
Accrued expenses (940) 409
Other long-term liabilities 132 152
Other (87) 21
----------------------
Net cash used in operations (81,759) (46,797)
----------------------
Cash flows from investing activities:
Additions to property, plant and equipment (2,523) (3,152)
Disposals of property, plant and equipment 30 200
Minority interest in joint venture (154) -
----------------------
Net cash used in investing activities (2,647) (2,952)
----------------------
Cash flows from financing activities:
Increase in short-term borrowings 34,776 17,245
Repayments of long-term debt (690) (205)
Proceeds from stock options exercised 672 223
Repayments of Fedders Xinle short term debt (3,396) -
Proceeds from Fedders Xinle financing 10,282 -
Dividends payable (1,598) -
----------------------
Net cash provided by financing activities 40,046 17,263
----------------------
Net decrease in cash and cash equivalents (44,360) (32,486)
Cash and cash equivalents at beginning of period 57,707 34,869
----------------------
Cash and cash equivalents at end of period $ 13,347 $ 2,383
======================
Supplemental disclosure:
Interest paid 816 $ 618
Net income taxes paid (refunded) 1,483 (250)
</TABLE>
See accompanying notes
<PAGE> 7
FEDDERS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. The accounts of the Company's joint venture, Fedders Xinle, are
reflected in the consolidated financial statements of the Company. The
equivalent of approximately $10.4 million in long-term financing was
provided by a P.R.C. bank for the joint venture. The $10.3 million
(Chinese Yuan 86 million) 15% loan matures in twelve years and is not
guaranteed by the Company. At February 29, 1996, cash on hand of $13.3
million includes $13.1 million related to Fedders Xinle.
B. The Company announced in November that a definitive agreement had been
reached to merge with NYCOR, Inc. Under the terms of the merger,
shareholders of NYCOR Common, Class A and Class B Stock will receive
Fedders stock with a value of $6.25. The agreement is subject to the
approval of the stockholders and lenders of both companies in addition to
any governmental approvals.
C. Earnings per share are computed by dividing net income by the weighted
average number of shares of Common, Class A, Class B Stock and other common
stock equivalents outstanding: 41,144,000 and 41,039,000 in the second
quarter of 1996 and 1995 and 41,091,000 and 40,341,000 for the six months
ended February 19, 1996 and February 28, 1995, respectively. Prior-period
earnings per share have been restated to reflect the Class A Stock dividend
distributed in June 1995.
D. Pursuant to the Company's stock option plans, options to purchase
106,000 shares of Class A Stock were exercised during the first six months
of fiscal 1996.
E. Purchases from NYCOR at negotiated market prices under the supply
agreement for the six months ended February 29, 1996 and February 28, 1995
were $31,600,000 and $26,400,000, respectively.
F. The financial information included herein is unaudited; however, such
information reflects all adjustments which 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 six month period ending
February 29, 1996 are not necessarily indicative of the results that may be
expected for the fiscal year ending August 31, 1996.
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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.
Second Quarter
Results of Operations
<TABLE> Operating Results as Percent of Sales
<CAPTION> Second Fiscal Quarter Six Months
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Gross Profit 20.4% 18.9% 21.3% 19.5%
Selling, General
and Administrative 7.8% 8.7% 11.8% 12.9%
Operating Income 12.6% 10.2% 9.6% 6.6%
Net interest Expense 1.1% .9% .4% .9%
Pre-tax Income 11.6% 9.3% 9.3% 5.7%
</TABLE>
Net sales in the second quarter ended February 29, 1996 amounted to $88.3
million, an increase of 22.0% from $72.4 million in the same period a year
earlier. The increase in sales resulted from shipments to new customers
and larger orders from existing customers. The gross profit margin
increased primarily due to greater fixed cost absorption from added
production to meet increased orders.
Selling, general and administrative expenses declined as a percentage of
sales to 7.8% from 8.7% as a result of the increased sales volume.
Net interest expense of $1.0 million increased from $667,000 as a result of
short-term borrowing during the quarter and increased long-term debt
related to the Company's joint venture in China.
Pre-tax income for the quarter increased to $10.3 million, or 11.6% of net
income, compared to $6.7 million, or 9.3% of net sales in the prior year.
Net income of $6.3 million reflects a fully taxable rate of 38% or a tax
provision of $3.9 million, compared to net income of $5.6 million which
reflects a tax rate of 17.2% or a tax provision of $1.1 million in the
prior year.
Six Months
For the first six months of fiscal 1996, sales were $116.1 million, an
increase of 26.0% from $92.5 million for the same period in fiscal 1995.
The sales increase for the six-month period is due to new customers and
larger orders from existing customers.
<PAGE> 9
Gross profit margin increased slightly during the fiscal 1996 period
primarily as a result of greater fixed cost absorption from added
production to meet increased orders in fiscal 1996.
Selling, general and administrative expenses declined as a percentage of
sales as a result of the increased sales volume.
Net interest expense decreased to $456,000 from $810,000 in the prior year
period. The decrease is due to increased interest income from cash
investments in the first quarter offset by increased short-term borrowing
and long-term joint venture debt in the second quarter.
In the six month period, the Company's net income increased to $6.7 million
from $4.4 million a year ago, even with the tax rate increasing to 38% of
pre-tax income from 17.2% in fiscal 1995.
Liquidity and Capital Resources
Operating Activities:
Working capital requirements of the Company are seasonal with cash balances
peaking in the fourth quarter and the greatest utilization of its lines of
credit occurring early in the calendar year. Cash on hand of $13.4 million
at February 29, 1996 include cash investments of the Fedders Xinle joint
venture of $13.1 million.
Net cash used in operations amounted to $81.7 million through February 29,
1996 versus $46.8 million in the prior year. During the six month period,
the Company utilized working capital lines to produce finished goods to
meet increased demand. As a result of this production, and inventories at
Fedders Xinle, total inventories were $106.8 million at February 29, 1996
compared with $73.3 million at February 28, 1995. Accounts receivable also
increased as a result of the higher sales volume to $43.3 from seasonal low
of $8.8 million at fiscal year end and $31.1 million at February 28, 1995.
Investing Activities:
During the six months ended February 29, 1996 investing activities
consisted primarily of purchases of machinery and equipment totaling $2.5
million. In the prior year, such purchases amounted to $3.2 million.
Financing Activities:
Net cash provided by financing activities was $40.0 million versus $17.6
million in the prior year. This increase reflects greater usage of the
Company's working capital line of credit to meet customer demand and to
proceeds from a long-term loan related to the joint venture in China. The
equivalent of approximately $10.3 million in long-term financing was
provided by a People's Republic of China bank for the joint venture. The
$10.3 million (Chinese Yuan 86 million), 15% loan matures in twelve years
and is not guaranteed by the Company. At February 29, 1996, the Company
had short-term borrowings of $34.8 million compared to $17.2 million in the
<PAGE> 10
prior year. Short-term borrowings under the working capital facility were
reduced to $16.8 million by March 31, 1996.
In fiscal 1996, the Company declared quarterly dividends of two cents on
each share of outstanding Class A and Common Stock and 1.8 cents on each
share of outstanding Class B Stock amounting to $1.6 million through
February 29, 1996. Management believes that the Company's earnings and
borrowing capacity are adequate to meet the demands of its operations and
its long-term requirements.
In November 1995, the Company announced that a definitive agreement was
reached to merge with NYCOR. Under the terms of the agreement,
shareholders of NYCOR Common, Class A and Class B Stock will receive
Fedders stock with a value of $6.25. If the Fedders average price (which
is the average closing price of a Fedders Class A share as reported on the
New York Stock Exchange for the 15 trading days ending five business days
before the Company's annual meeting) is at or above $6.25, each share of
Common, Class A and Class B Stock of NYCOR will be converted into the right
to receive Fedders Class A Stock having a market value equal to $6.25. If
the Fedders average price is below $6.25, each share of Common, Class A and
Class B Stock of NYCOR will be converted into the right to receive one
share of Fedders Convertible Preferred Stock with a conversion price of
$6.25. The agreement is subject to the approval of the stockholders and
lenders of both companies in addition to any required governmental
approvals.
<PAGE>
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b)Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report
is filed.
<PAGE>
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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 3, 1996 Signing both in his capacity as
Executive Vice President on
behalf of the Registrant and as
Chief Financial Officer of the
Registrant
<PAGE>
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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 _________________________
Robert L. Laurent, Jr.
Executive Vice President,
Finance & Administration
Date: April 3, 1996 Signing both in his capacity as
Executive Vice President on
behalf of the Registrant and as
Chief Financial Officer of the
Registrant
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000744106
<NAME> FEDDERS CORPORATION
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> AUG-31-1996 AUG-31-1996
<PERIOD-END> FEB-29-1996 FEB-29-1996
<CASH> 13,347 0
<SECURITIES> 0 0
<RECEIVABLES> 45,059 0
<ALLOWANCES> (1,735) 0
<INVENTORY> 106,786 0
<CURRENT-ASSETS> 168,561 0
<PP&E> 75,561 0
<DEPRECIATION> (40,754) 0
<TOTAL-ASSETS> 211,236 0
<CURRENT-LIABILITIES> 96,495 0
<BONDS> 14,440 0
<COMMON> 87,168 0
0 0
0 0
<OTHER-SE> 1,074 0
<TOTAL-LIABILITY-AND-EQUITY> 211,236 0
<SALES> 88,327 116,136
<TOTAL-REVENUES> 88,327 116,136
<CGS> 70,322 91,354
<TOTAL-COSTS> 77,194 105,005
<OTHER-EXPENSES> (153) (153)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,012 4,115
<INCOME-PRETAX> 10,274 10,828
<INCOME-TAX> 3,904 4,115
<INCOME-CONTINUING> 6,370 6,713
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,370 6,713
<EPS-PRIMARY> 0.15 0.16
<EPS-DILUTED> 0.15 0.16
</TABLE>
