<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 May 31, 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.)
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<S> <C>
505 Martinsville Road, Liberty Corner, New Jersey 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 18,989,798 shares of Common Stock,
19,382,355 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 2,266,706 shares of Class
B Stock (which is immediately convertible into Common Stock on a
share-for-share basis) as of June 28, 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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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,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $173,868 $145,869 $290,004 $238,351
Cost of sales 136,009 115,380 227,363 189,870
Selling, general and
administrative expense 9,035 7,550 22,686 19,478
________________________________________
145,044 122,930 250,049 209,348
________________________________________
Operating income 28,824 22,939 39,955 29,003
Net interest expense (708) (1,403) (1,164) (2,213)
Minority partner's
portion of joint
venture (income) loss 84 - 237 -
________________________________________
Income before income
taxes 28,200 21,536 39,028 26,790
Federal, state and
foreign income taxes 10,770 3,730 14,885 4,634
________________________________________
Net income $ 17,430 17,806 $ 24,143 $ 22,156
=========================================
Net income per share $ 0.42 $ 0.44 $ 0.58 $ 0.55
=========================================
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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,
1996 1995 1995
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash $ 24,064 $ 57,707 $ 5,028
Accounts receivable (less
allowance of $2,133 at
May 31, 1996, $872 at
August 31, 1995 and $1,232
at May 31, 1995 86,611 8,847 64,411
Inventories:
Finished goods 25,537 14,592 21,356
Work in process 3,475 2,540 2,723
Raw materials and supplies 21,682 11,888 15,480
Net inventory 50,694 29,020 39,559
Deferred tax benefit 2,954 2,954 -
Prepaid expenses 3,207 893 1,370
Total current assets 167,530 99,421 110,368
Property, plant and equipment
at cost:
Land and improvements 1,365 1,369 1,364
Buildings 14,078 12,888 12,686
Machinery and equipment 63,947 53,302 51,073
79,390 67,559 65,123
Less accumulated
depreciation 42,032 37,756 34,053
Net property, plant and
equipment 37,358 29,803 31,070
Deferred tax benefit 1,277 1,277 -
Other assets 6,883 6,274 6,960
$213,048 $136,775 $148,398
====================================
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See accompanying notes
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FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
May 31, August 31, May 31,
1996 1995 1995
<S> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Current portion of
long-term debt $ 590 $ 590 -
Accounts payable 24,040 5,590 $21,572
Accounts payable to NYCOR 0 1 3,282
Income tax payable 17,132 9,131 1,302
Accrued expenses 42,971 27,986 35,129
Total current liabilities 84,733 43,298 61,285
Long-term debt 10,733 4,516 5,390
Deferred income taxes - - 1,175
Other long-term liabilities 6,542 6,419 5,015
Minority interest in joint venture 5,425 - -
Stockholders' equity:
Common Stock, $1 par value,
60,000,000 shares authorized,
18,989,306, issued and
outstanding May 31, 1996 and
August 31, 1995 and 18,988,099
at May 31, 1995 18,989 18,989 18,988
Class A Stock, $1 par value,
30,000,000 shares authorized,
19,251,531, 18,831,376 and
18,654,607 issued and outstanding
at May 31, 1996, August 31, 1995
and May 31, 1995, respectively 19,252 18,831 18,655
Class B Stock, $1 par value,
7,500,000 shares authorized,
2,267,198 issued at May 31, 1996,
and August 31, 1995 and 2,267,906
at May 31, 1995 2,267 2,267 2,268
Additional paid-in capital 47,558 46,481 47,187
Retained earnings (deficit) 17,701 (4,041) (10,603)
Cumulative translation adjustment (152) 15 (407)
Notes due on Common Stock purchases - - (555)
Total stockholders' equity 105,615 82,542 75,533
__________________________________
$213,048 $136,775 $148,398
======================================
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See accompanying notes
<PAGE> 6
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
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<CAPTION> NINE MONTHS ENDED
MAY 31,
1996 1995
<S> <C> <C>
Cash flows from operations:
Net income $24,143 $ 22,156
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 3,281 3,607
Changes in operating assets and liabilities:
Accounts receivable (76,335) (51,571)
Inventories (15,972) (21,511)
Other current assets (1,213) (696)
Other assets (721) (319)
Accounts payable 15,790 19,539
Accrued expenses 22,092 18,261
Other long-term liabilities 123 239
Other (167) (238)
Net cash used in operations (28,979) (10,533)
Cash flows from investing activities:
Additions to property, plant and equipment (6,379) (7,022)
Disposals of property, plant and equipment 34 955
Minority interest in joint venture (237) -
Net cash used in investing activities (6,582) (6,067)
Cash flows from financing activities:
Repayments of long-term debt (493) (13,582)
Proceeds from stock options exercised 1,498 341
Repayments of Fedders Xinle short term debt (3,396) -
Net proceeds from Fedders Xinle financing 6,710 -
Dividends payable (2,401) -
Net cash provided by (used in)
financing activities 1,918 (13,241)
Net decrease in cash and cash equivalents (33,643) (29,841)
Cash and cash equivalents at
beginning of period 57,707 34,869
Cash and cash equivalents at end of period $ 24,064 $ 5,028
==========================
Supplemental disclosure:
Interest paid $ 1,824 $ 1,017
Net income taxes paid (refunded) 1,989 (247)
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See accompanying notes
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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 and is not guaranteed by
the Company. During the quarter, Fedders Xinle paid down $3.6 million of
its long-term debt.
B. 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: 41,704,000 and 40,701,000 in the third
quarter of 1996 and 1995 and 41,281,000 and 40,348,000 for the nine months
ended May 31, 1996 and 1995, respectively.
C. Pursuant to the Company's stock option plans, options to purchase
420,000 shares of Class A Stock were exercised during the first nine months
of fiscal 1996.
D. Purchases from NYCOR at negotiated market prices under the supply
agreement for the nine months ended May 31, 1996 and May 31, 1995 were
$47,400,000 and $41,400,000, respectively.
E. 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 nine month period ended
May 31, 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.
Third Quarter
Results of Operations
<TABLE> Operating Results as Percent of Sales
Third Fiscal Quarter Nine Months
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Gross Profit 21.8% 20.9% 21.6% 20.3%
Selling, General
and Administrative 5.2% 5.2% 7.8% 8.2%
Operating Income 16.6% 15.7% 13.8% 12.2%
Net interest expense (.4)% (1.0)% (.4)% (.9)%
Pre-tax Income 16.2% 14.8% 13.5% 11.2%
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Net sales in the third quarter ended May 31, 1996 amounted to $173.9
million, an increase of 19.0% from $145.9 million in the same period a year
earlier. The increase in sales resulted from shipments to existing and new
domestic customers and greater international sales, including sales of
Fedders Xinle, the Company's joint venture in China.
The gross profit margin increased from 20.9% in the third fiscal quarter of
1995 to 21.8% in the current fiscal quarter due primarily to greater
absorption of fixed costs as a result of increased production to support
sales.
In the third quarter, selling, general and administrative expenses of $9.0
million increased by $1.5 million from the prior year but remained constant
as a percentage of sales as a result of the increased sales volume.
Net interest expense of $708,000 decreased from $1.4 million in the same
period a year ago due to lower long-term debt.
Pre-tax income for the quarter increased to $28.2 million, or 16.2% of net
sales, compared to $21.5 million, or 14.8% of net sales in the prior year.
Net income of $17.4 million reflects a fully taxable rate of 38% or a tax
provision of $10.8 million, compared to net income of $17.8 million which
reflects a tax rate of 17% or a tax provision of $3.7 million in the prior
year.
<PAGE> 9
Nine Months
For the nine months of fiscal 1996, sales were $290.0 million, an increase
of 22.0% from $238.4 million for the same period in fiscal 1995. The sales
increase for the nine-month period is due to new customers and larger
orders from existing customers.
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 $1.2 million from $2.2 million in the
prior-year period. The decrease is due to increased interest income and
reduced debt.
In the nine month period, the Company's net income increased to $24.1
million from $22.2 million a year ago, even with the tax rate increasing to
38% of pre-tax income from 17% in fiscal 1995.
Liquidity and Capital Resources
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 $24.0 million
at May 31, 1996 include cash investments of the Fedders Xinle joint venture
of $6.5 million.
Net cash used in operations amounted to $29.0 million through May 31, 1996
versus $10.5 million in the prior year. During the nine 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 $50.7 million at May 31, 1996
compared with $40.0 million at May 31, 1995. Accounts receivable also
increased as a result of the higher sales volume to $86.6 from seasonal low
of $8.8 million at fiscal year end and $64.4 million at May 31, 1995.
Investing Activities
During the nine months ended May 31, 1996 investing activities consisted
primarily of purchases of machinery and equipment totaling $6.4 million.
In the prior year, such purchases amounted to $7.0 million.
Financing Activities
Net cash provided by financing activities was $1.9 million through May 31,
1996 versus cash used in operations of $13.2 million in the prior year.
The equivalent of approximately $10.3 million (RMB 86 million) in long-term
financing was provided by a People's Republic of China bank for the joint
venture of which $3.6 millon was paid down in April 1996. The $6.7
<PAGE> 10
million, 15% loan matures in twelve years and is not guaranteed by the
Company. At May 31, 1996, the Company had no short-term borrowings. For
the nine-month period, the Company received $1.5 million from stock option
exercises.
In each quarter of 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. Dividend payments
amounted to $2.4 million through May 31, 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.
The Company announced July 9, 1996 as the date for the NYCOR merger vote.
Stockholders of NYCOR will receive a new Fedders Convertible Preferred
Stock with a dividend rate of 2.5%. The Preferred Stock will be listed on
the New York Stock Exchange and be convertible into one share of Fedders
Class A Stock.
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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.
<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: July 9, 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> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 9-MOS 9-MOS
<FISCAL-YEAR-END> AUG-31-1996 AUG-31-1995 AUG-31-1996 AUG-31-1995
<PERIOD-END> MAY-31-1996 MAY-31-1995 MAY-31-1996 MAY-31-1995
<CASH> 0 0 24,064 5,028
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 0 88,744 65,643
<ALLOWANCES> 0 0 (2,133) (1,232)
<INVENTORY> 0 0 50,694 39,559
<CURRENT-ASSETS> 0 0 6,161 1,370
<PP&E> 0 0 79,390 65,123
<DEPRECIATION> 0 0 (42,032) (34,053)
<TOTAL-ASSETS> 0 0 213,048 148,398
<CURRENT-LIABILITIES> 0 0 84,733 61,285
<BONDS> 0 0 10,733 5,390
0 0 0 0
0 0 0 0
<COMMON> 0 0 88,066 86,543
<OTHER-SE> 0 0 17,549 (11,010)
<TOTAL-LIABILITY-AND-EQUITY> 0 0 213,048 148,398
<SALES> 173,868 145,869 290,004 238,351
<TOTAL-REVENUES> 173,868 145,869 290,004 238,351
<CGS> 136,009 115,380 227,363 189,870
<TOTAL-COSTS> 145,044 122,930 250,049 209,348
<OTHER-EXPENSES> (84) 0 (237) 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 708 1,403 1,164 2,213
<INCOME-PRETAX> 28,200 21,536 39,028 26,790
<INCOME-TAX> 10,770 3,370 14,885 4,634
<INCOME-CONTINUING> 17,430 17,806 24,143 22,156
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 17,430 17,806 24,143 22,156
<EPS-PRIMARY> 0.42 0.44 0.58 0.55
<EPS-DILUTED> 0 0 0 0
</TABLE>
