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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 29, 2000 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)
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
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 16,135,359 shares of Common Stock, 17,094,581 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 2,266,606 shares of Class B Stock (which is immediately convertible into Common Stock on a share-for-share basis) as of March 31, 2000.
FEDDERS CORPORATION
INDEX
|
Page Number |
||
|
______________________________________________________________________________ |
||
|
Item 1. |
Financial Statements |
|
|
Consolidated Statements of Operations and Comprehensive Income |
3 |
|
|
Consolidated Balance Sheets |
4-5 |
|
|
Consolidated Statements of Cash Flows |
6 |
|
|
Notes to Consolidated Financial Statements |
7-17 |
|
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
18-20 |
|
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
20 |
|
Item 6. |
Exhibits and Reports on Form 8-K |
20-21 |
|
SIGNATURE |
22 |
|
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(amounts in thousands, except per share data)
(unaudited)
|
Second Quarter |
Six Months |
|||
|
Feb. 29, 2000 |
Feb. 28, 1999 |
Feb. 29, 2000 |
Feb. 28, 1999 |
|
|
_______________________ |
______________________ |
|||
|
Net sales and other income |
$70,371 |
$58,887 |
$115,054 |
$ 84,589 |
|
Cost of sales |
48,219 |
46,001 |
79,644 |
65,111 |
|
Selling, general and administrative expense |
14,402 |
9,590 |
27,671 |
18,560 |
|
_______________________ |
______________________ |
|||
|
62,621 |
55,591 |
107,315 |
83,671 |
|
|
Operating income (loss) |
7,750 |
3,296 |
7,739 |
918 |
|
Partner's net interest in joint venture results |
(1,287) |
704 |
(1,401) |
605 |
|
Net interest expense |
(4,604) |
(2,750) |
(7,595) |
(4,777) |
|
_______________________ |
______________________ |
|||
|
Income (loss) before income taxes |
1,859 |
1,250 |
(1,257) |
(3,254) |
|
Federal, state and foreign income tax (benefit) |
575 |
435 |
(408) |
(1,134) |
|
_______________________ |
______________________ |
|||
|
Net income (loss) |
$ 1,284 |
$ 815 |
$ (849) |
$ (2,120) |
|
_______________________ |
______________________ |
|||
|
Other comprehensive income (loss): |
||||
|
Foreign currency translation, net of tax |
(238) |
105 |
(202) |
7 |
|
______________________ |
______________________ |
|||
|
Comprehensive income (loss) |
1,046 |
920 |
(1,051) |
(2,113) |
|
_______________________ |
______________________ |
|||
|
Earning (loss) per share, basic and diluted |
$ 0.04 |
$ 0.02 |
$ (0.02) |
$ (0.06) |
|
Dividends per share declared: |
||||
|
Common and Class A |
$ 0.030 |
$ 0.0250 |
$ 0.060 |
$ 0.050 |
|
Class B |
$ 0.027 |
$ 0.0225 |
$ 0.054 |
$ 0.045 |
|
==================== |
=================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(unaudited)
|
|
February 29, 2000 |
August 31, 1999 |
February 28, 1999 |
|
________________________________________ |
|||
|
ASSETS: Current assets: |
|||
|
Cash |
$ 11,180 |
$117,509 |
$ 5,439 |
|
Accounts receivable (less allowance of $2,126, $1,373, and $2,198 at February 29, 2000, August 31, 1999 and February 28, 1999, respectively) |
59,248 |
21,028 |
41,193 |
|
Inventories: Finished goods |
90,934 |
29,328 |
61,039 |
|
Work in process |
6,985 |
3,298 |
5,658 |
|
Raw materials and supplies |
31,552 |
28,988 |
32,255 |
|
________________________________________ |
|||
|
129,471 |
61,614 |
98,952 |
|
|
Deferred income taxes |
10,778 |
10,161 |
5,902 |
|
Other current assets |
2,355 |
1,496 |
3,836 |
|
________________________________________ |
|||
|
Total current assets |
213,032 |
211,808 |
155,322 |
|
Property, plant and equipment at cost: |
|||
|
Land and improvements |
4,214 |
4,042 |
2,994 |
|
Buildings |
31,320 |
31,257 |
22,463 |
|
Machinery and equipment |
103,958 |
102,380 |
82,201 |
|
Machinery and equipment under capital lease |
6,133 |
6,657 |
8,647 |
|
________________________________________ |
|||
|
145,625 |
144,336 |
116,305 |
|
|
Less accumulated depreciation |
74,428 |
73,565 |
60,011 |
|
________________________________________ |
|||
|
71,197 |
70,771 |
56,294 |
|
|
Deferred income taxes |
6,768 |
7,676 |
8,838 |
|
Goodwill |
85,935 |
73,999 |
54,308 |
|
Other assets |
17,918 |
18,088 |
16,217 |
|
________________________________________ |
|||
|
$394,850 |
$382,342 |
$290,979 |
|
|
==================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except par value) (unaudited)
|
|
February 29, 2000 |
August 31, 1999 |
February 28, 1999 |
|
________________________________________ |
|||
|
LIABILITIES & STOCKHOLDERS' EQUITY: Current liabilities: |
|||
|
Short-term notes |
$ 54,195 |
- |
$18,516 |
|
Current portion of long-term debt |
1,691 |
$ 4,598 |
2,780 |
|
Accounts payable |
22,438 |
35,432 |
25,249 |
|
Income taxes payable |
10,597 |
13,049 |
13,232 |
|
Accrued expenses |
32,655 |
46,463 |
19,647 |
|
________________________________________ |
|||
|
Total current liabilities |
121,576 |
99,542 |
79,424 |
|
Long-term debt |
159,347 |
156,765 |
107,260 |
|
Other long-term liabilities |
7,041 |
13,240 |
9,844 |
|
Partner's net interest in joint venture |
5,607 |
3,862 |
4,032 |
|
Stockholders' equity (all classes $1 par value): |
|||
|
Common Stock, 80,000 shares authorized, 16,135, 16,135 and 16,347 issued |
16,135 |
16,135 |
16,347 |
|
Class A Stock: 60,000 shares authorized, 19,543, 19,400 and 19,436 issued |
19,543 |
19,400 |
19,436 |
|
Class B Stock, 7,500 shares authorized, 2,267 issued |
2,267 |
2,267 |
2,267 |
|
Additional paid-in capital |
28,428 |
28,069 |
29,276 |
|
Retained earnings |
50,385 |
53,379 |
31,590 |
|
Cumulative other comprehensive loss |
(588) |
(288) |
(419) |
|
________________________________________ |
|||
|
116,170 |
118,962 |
98,497 |
|
|
Treasury stock, at cost, 2,746, 1,764 and 728 shares at February 29, 2000, August 31, 1999 and February 28, 1999, respectively |
(13,760) |
(8,802) |
(6,709) |
|
Deferred compensation |
(1,131) |
(1,227) |
(1,369) |
|
________________________________________ |
|||
|
Total stockholders' equity |
101,279 |
108,933 |
90,419 |
|
________________________________________ |
|||
|
$394,850 |
$382,342 |
$290,979 |
|
|
==================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(amounts in thousands) (unaudited) |
Six Months Ended |
|
|
February 29, 2000 |
February 28, 1999 |
|
|
____________________________ |
||
|
Cash flows from operations: |
||
|
Net income (loss) |
$(849) |
$(2,120) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
||
|
Depreciation and amortization |
7,782 |
4,841 |
|
Changes in operating assets and liabilities: Accounts receivable |
(35,726) |
(26,673) |
|
Income tax receivable |
753 |
- |
|
Inventories |
(63,969) |
(46,691) |
|
Other current assets |
(1,223) |
665 |
|
Other assets |
(1,580) |
(361) |
|
Accounts payable |
(15,167) |
(520) |
|
Accrued expenses |
(15,922) |
(12,704) |
|
Income tax payable |
(2,452) |
(1,174) |
|
Other long-term liabilities |
(6,199) |
(1,821) |
|
Other |
(204) |
159 |
|
____________________________ |
||
|
Net cash provided by (used in) operations |
(134,756) |
(86,399) |
|
____________________________ |
||
|
Cash flows from investing activities: |
||
|
Additions to property, plant and equipment |
(6,252) |
(4,159) |
|
Disposal of property, plant and equipment, net |
3,563 |
- |
|
Investment in Fedders Koppel, Inc. |
(4,690) |
- |
|
Investment in Sun Manufacturing, Inc. |
(986) |
- |
|
Partner's net interest in joint venture results |
1,745 |
(605) |
|
____________________________ |
||
|
Net cash provided by (used in) investing activities |
(6,620) |
(4,764) |
|
____________________________ |
||
|
Cash flows from financing activities: Proceeds from short-term borrowings |
42,449 |
18,516 |
|
Repayments of long-term debt |
(801) |
(492) |
|
Proceeds from stock options exercised |
297 |
141 |
|
Repurchase of capital stock (buy-back plan) |
(4,753) |
(9,763) |
|
Cash dividends |
(2,145) |
(2,786) |
|
____________________________ |
||
|
Net cash provided by (used in) financing activities |
35,047 |
5,616 |
|
____________________________ |
||
|
Net increase (decrease) in cash and cash equivalents |
(106,329) |
(85,547) |
|
Cash and cash equivalents at beginning of period |
117,509 |
90,986 |
|
____________________________ |
||
|
Cash and cash equivalents at end of period |
$11,180 |
$5,439 |
|
========================= |
||
|
Supplemental disclosure: |
||
|
Interest paid |
$ 5,516 |
$5,046 |
|
Net income taxes paid |
181 |
1,041 |
|
========================= |
||
See accompanying notes
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. The financial information included herein is unaudited and prepared in accordance with the instructions for Form 10-Q; however, such information reflects all adjustments, which consist solely of normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim periods. Reference should be made to the annual financial statements, including footnotes thereto, included in Fedders Corporation's (the "Company") Annual Report on Form 10-K for the fiscal year ended August 31, 1999. The Company's business is seasonal and, consequently, operating results for the three-month and six-month periods ending February 29, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2000.
B. In August 1998, the Company announced that it had been authorized to repurchase up to $30 million of outstanding stock. Under this plan, in the first six months of fiscal 2000, the Company repurchased approximately 1.0 million shares of Class A Stock for $4.7 million or $4.81 per share. Total repurchases under this plan amounted to approximately 3.6 million shares of Common and Class A Stock for $17.9 million or $4.92 per share.
C. In the second fiscal quarter of 2000 and 1999, net income per share was computed using the weighted average number of shares of Common, Class A and Class B Stock outstanding, which amounted to approximately 35,822 and 36,820 shares, respectively. In the first six months of fiscal 2000 and 1999, net loss per share was computed using the weighted average number of shares of Common, Class A and Class B Stock outstanding which amounted to approximately 35,729 and 37,271 shares, respectively.
D. During the second quarter of fiscal 2000, the Company acquired the capital stock of ABB Koppel, Inc., (now called Fedders Koppel), a leading manufacturer of room and packaged air conditioners in the Philippines, with 1999 sales of approximately $13 million, for total consideration of $11.6 million in cash and notes.
The Company also acquired the net assets of Sun Manufacturing, Inc. for $1 million of cash plus the assumption of $2.2 million of debt. Sun is a Georgia manufacturer of air conditioners that cool telecommunications equipment in cellular towers. Sun's 1999 sales were approximately $13 million.
E. Supplemental Condensed Consolidating Financial Statements
Fedders North America, Inc. ("FNA") is a wholly-owned subsidiary of the Company. FNA and the Company are the Issuer and the Guarantor, respectively, of the Senior Subordinated Notes due 2007, of which $100 million principal amount was issued in August 1997 and $50 million principal amount was issued in August 1999. The Company's guarantee is full and unconditional. The following condensed consolidating financial statements present separate information for FNA and for the Company and its subsidiaries other than FNA, and should be read in conjunction with the consolidated financial statements of the Company.
FEDDERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (amounts in thousands)
|
For the Three Months Ended February 29, 2000 |
|||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net sales |
$53,818 |
$16,553 |
$70,371 |
|
Cost of sales |
39,470 |
8,749 |
48,219 |
|
Selling, general and administrative expense (1,3) |
10,932 |
3,470 |
14,402 |
|
______________________________________ |
|||
|
Operating income (loss) |
3,416 |
4,334 |
7,750 |
|
Partner's net interest in joint venture results |
- |
(1,287) |
(1,287) |
|
Net interest income (expense) (2) |
(4,424) |
(180) |
(4,604) |
|
______________________________________ |
|||
|
Income (loss) before income taxes |
(1,008) |
2,867 |
1,859 |
|
Income taxes (benefit) |
(358) |
933 |
575 |
|
______________________________________ |
|||
|
Net income (loss) |
$(650) |
$1,934 |
$1,284 |
|
Other comprehensive income (loss): |
|||
|
Foreign currency translation, net of tax |
142 |
(380) |
(238) |
|
______________________________________ |
|||
|
Comprehensive (income) loss |
$ (508) |
$1,554 |
$1,046 |
|
================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(unaudited) (amounts in thousands)
|
For the Three Months Ended February 28, 1999 |
|||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net sales |
$54,543 |
$4,344 |
$58,887 |
|
Cost of sales |
42,912 |
3,089 |
46,001 |
|
Selling, general and administrative expense (1,3) |
7,494 |
2,096 |
9,590 |
|
______________________________________ |
|||
|
Operating income (loss) |
4,137 |
(841) |
3,296 |
|
Partner's net interest in joint venture results |
- |
704 |
704 |
|
Net interest income (expense) (2) |
(2,630) |
(120) |
(2,750) |
|
______________________________________ |
|||
|
Income (loss) before income taxes |
1,507 |
(257) |
1,250 |
|
Income taxes (benefit) |
527 |
(92) |
435 |
|
______________________________________ |
|||
|
Net income (loss) |
$ 980 |
$ (165) |
$ 815 |
|
Other comprehensive income (loss): |
|||
|
Foreign currency translation, net of tax |
100 |
5 |
105 |
|
______________________________________ |
|||
|
Comprehensive income (loss) |
$ 1,080 |
$ (160) |
$ 920 |
|
================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (amounts in thousands)
|
For the Six Months Ended February 29, 2000 |
|||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net sales |
$90,442 |
$24,612 |
$115,054 |
|
Cost of sales |
63,658 |
15,986 |
79,644 |
|
Selling, general and administrative expense (1,3) |
20,883 |
6,788 |
27,671 |
|
______________________________________ |
|||
|
Operating income (loss) |
5,901 |
1,838 |
7,739 |
|
Partner's net interest in joint venture results |
- |
(1,401) |
(1,401) |
|
Net interest income (expense) (2) |
(8,219) |
624 |
(7,595) |
|
______________________________________ |
|||
|
Income (loss) before income taxes |
(2,318) |
1,061 |
(1,257) |
|
Income taxes (benefit) |
(742) |
334 |
(408) |
|
______________________________________ |
|||
|
Net income (loss) |
$(1,576) |
$ 727 |
$ (849) |
|
Other comprehensive income (loss): |
|||
|
Foreign currency translation, net of tax |
126 |
(328) |
(202) |
|
______________________________________ |
|||
|
Comprehensive income (loss) |
$(1,450) |
$ 399 |
$(1,051) |
|
================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(unaudited) (amounts in thousands)
|
For the Six Months Ended February 28, 1999 |
|||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net sales |
$72,721 |
$11,868 |
$84,589 |
|
Cost of sales |
54,892 |
10,219 |
65,111 |
|
Selling, general and administrative expense (1,3) |
12,054 |
6,506 |
18,560 |
|
______________________________________ |
|||
|
Operating income (loss) |
5,775 |
(4,857) |
918 |
|
Partner's net interest in joint venture results |
- |
605 |
605 |
|
Net interest income (expense) (2) |
(5,220) |
443 |
(4,777) |
|
______________________________________ |
|||
|
Income (loss) before income taxes |
555 |
(3,809) |
(3,254) |
|
Income taxes (benefit) |
194 |
(1,328) |
(1,134) |
|
______________________________________ |
|||
|
Net income (loss) |
$ 361 |
$(2,481) |
$(2,120) |
|
Other comprehensive income (loss): |
|||
|
Foreign currency translation, net of tax |
(11) |
18 |
7 |
|
______________________________________ |
|||
|
Comprehensive income (loss) |
$ 350 |
$( 2,463) |
$(2,113) |
|
================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS
|
(unaudited) (amounts in thousands) |
February 29, 2000 |
|||
|
________________________________________________ |
||||
|
Fedders North America |
Other Fedders |
Eliminating Entries |
Fedders Corporation |
|
|
________________________________________________ |
||||
|
Assets Current assets: |
||||
|
Cash |
$ 233 |
$10,947 |
- |
$ 11,180 |
|
Accounts receivable, net |
43,235 |
16,013 |
- |
59,248 |
|
Inventories |
114,026 |
15,445 |
- |
129,471 |
|
Other current assets |
5,887 |
7,246 |
- |
13,133 |
|
________________________________________________ |
||||
|
Total current assets |
163,381 |
49,651 |
- |
213,032 |
|
Investment in subsidiaries |
- |
104,306 |
$(104,306) |
- |
|
Property, plant and equipment, net |
56,585 |
14,612 |
- |
71,197 |
|
Goodwill |
63,021 |
22,914 |
- |
85,935 |
|
Other long-term assets |
9,580 |
15,106 |
- |
24,686 |
|
________________________________________________ |
||||
|
$292,567 |
$206,589 |
$(104,306) |
$394,850 |
|
|
=========================================== |
||||
|
Liabilities and Stockholders' Equity Current liabilities: |
||||
|
Short-term notes |
$ 39,495 |
$ 14,700 |
- |
$ 54,195 |
|
Current portion of long-term debt |
1,685 |
6 |
- |
1,691 |
|
Accounts and income tax payable |
39,128 |
(6,093) |
- |
33,035 |
|
Accrued expenses |
29,840 |
2,815 |
- |
32,655 |
|
________________________________________________ |
||||
|
Total current liabilities |
110,148 |
11,428 |
- |
121,576 |
|
Long-term debt |
153,814 |
5,533 |
- |
159,347 |
|
Other long-term liabilities |
2,070 |
10,578 |
- |
12,648 |
|
Stockholders' equity: Common, Class A and Class B Stock |
5 |
37,945 |
$ (5) |
37,945 |
|
Paid-in capital |
21,292 |
180,355 |
(173,219) |
28,428 |
|
Retained earnings (deficit) |
5,367 |
(23,900) |
68,918 |
50,385 |
|
Treasury stock |
- |
(13,760) |
- |
(13,760) |
|
Deferred compensation |
- |
(1,131) |
- |
(1,131) |
|
Cumulative other comprehensive loss |
(129) |
(459) |
- |
(588) |
|
________________________________________________ |
||||
|
Total stockholders' equity |
26,535 |
179,050 |
(104,306) |
101,279 |
|
________________________________________________ |
||||
|
$292,567 |
$206,589 |
$(104,306) |
$394,850 |
|
|
=========================================== |
||||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS
|
(unaudited) (amounts in thousands) |
August 31, 1999 |
|||
|
________________________________________________ |
||||
|
Fedders North America |
Other Fedders |
Eliminating Entries |
Fedders Corporation |
|
|
________________________________________________ |
||||
|
Assets Current assets: |
||||
|
Cash |
$ 76,092 |
$ 41,417 |
- |
$117,509 |
|
Accounts receivable, net |
13,655 |
7,373 |
- |
21,028 |
|
Inventories |
46,991 |
14,623 |
- |
61,614 |
|
Other current assets |
5,714 |
5,943 |
- |
11,657 |
|
________________________________________________ |
||||
|
Total current assets |
142,452 |
69,356 |
- |
211,808 |
|
Investment in subsidiaries |
- |
104,306 |
$(104,306) |
- |
|
Property, plant and equipment, net |
60,226 |
10,545 |
- |
70,771 |
|
Goodwill |
67,228 |
6,771 |
- |
73,999 |
|
Other long-term assets |
9,835 |
15,929 |
- |
25,764 |
|
________________________________________________ |
||||
|
$279,741 |
$206,907 |
$(104,306) |
$382,342 |
|
|
=========================================== |
||||
|
Liabilities and Stockholders' Equity Current liabilities: |
||||
|
Current portion of long-term debt |
$ 2,188 |
$ 2,410 |
- |
$ 4,598 |
|
Accounts and income tax payable |
52,436 |
(3,955) |
- |
48,481 |
|
Accrued expenses |
40,960 |
5,503 |
- |
46,463 |
|
________________________________________________ |
||||
|
Total current liabilities |
95,584 |
3,958 |
- |
99,542 |
|
Long-term debt |
154,114 |
2,651 |
- |
156,765 |
|
Other long-term liabilities |
2,301 |
14,801 |
- |
17,102 |
|
Stockholders' equity: Common, Class A and Class B Stock |
5 |
37,802 |
$ (5) |
37,802 |
|
Paid-in capital |
21,292 |
179,996 |
(173,219) |
28,069 |
|
Retained earnings (deficit) |
6,761 |
(22,300) |
68,918 |
53,379 |
|
Treasury stock |
- |
(8,802) |
- |
(8,802) |
|
Deferred compensation |
(1,227) |
(1,227) |
||
|
Cumulative other comprehensive income (loss) |
(316) |
28 |
- |
(288) |
|
________________________________________________ |
||||
|
Total stockholders' equity |
27,742 |
185,497 |
(104,306) |
108,933 |
|
________________________________________________ |
||||
|
$279,741 |
$206,907 |
$(104,306) |
$382,342 |
|
|
=========================================== |
||||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS
|
(unaudited) (amounts in thousands) |
February 28, 1999 |
||||
|
________________________________________________ |
|||||
|
Fedders North America |
Other Fedders |
Eliminating Entries |
Fedders Corporation |
||
|
________________________________________________ |
|||||
|
Assets Current assets: |
|||||
|
Cash |
- |
$ 5,439 |
- |
$ 5,439 |
|
|
Accounts receivable, net |
$ 37,908 |
3,285 |
- |
41,193 |
|
|
Inventories |
83,172 |
15,780 |
- |
98,952 |
|
|
Other current assets |
6,761 |
2,977 |
- |
9,738 |
|
|
________________________________________________ |
|||||
|
Total current assets |
127,841 |
27,481 |
- |
155,322 |
|
|
Investment in subsidiaries |
- |
104,306 |
$(104,306) |
- |
|
|
Property, plant and equipment, net |
45,213 |
11,081 |
- |
56,294 |
|
|
Goodwill |
48,166 |
6,142 |
- |
54,308 |
|
|
Other long-term assets |
7,167 |
17,888 |
- |
25,055 |
|
|
________________________________________________ |
|||||
|
$228,387 |
$166,898 |
$(104,306) |
$290,979 |
||
|
=========================================== |
|||||
|
Liabilities and Stockholders' Equity Current liabilities: |
|||||
|
Short-term borrowing |
$18,516 |
- |
- |
$18,516 |
|
|
Current portion of long-term debt |
1,811 |
$ 969 |
- |
2,780 |
|
|
Accounts and income tax payable |
38,436 |
45 |
- |
38,481 |
|
|
Accrued expenses |
19,610 |
37 |
- |
19,647 |
|
|
________________________________________________ |
|||||
|
Total current liabilities |
78,373 |
1,051 |
- |
$79,424 |
|
|
Net due to (from) affiliate |
14,441 |
(14,441) |
- |
- |
|
|
Long-term debt |
104,609 |
2,651 |
- |
107,260 |
|
|
Other long-term liabilities |
2,453 |
11,423 |
- |
13,876 |
|
|
Stockholders' equity: Common, Class A and Class B Stock |
5 |
38,050 |
$ (5) |
38,050 |
|
|
Paid-in capital |
21,292 |
181,203 |
(173,219) |
29,276 |
|
|
Retained earnings (deficit) |
7,589 |
(44,917) |
68,918 |
31,590 |
|
|
Treasury stock |
- |
(6,709) |
- |
(6,709) |
|
|
Deferred compensation |
- |
(1,369) |
- |
(1,369) |
|
|
Cumulative other comprehensive loss |
(375) |
(44) |
- |
(419) |
|
|
________________________________________________ |
|||||
|
Total stockholders' equity |
28,511 |
166,214 |
(104,306) |
90,419 |
|
|
________________________________________________ |
|||||
|
$228,387 |
$166,898 |
$(104,306) |
$290,979 |
||
|
=========================================== |
|||||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(unaudited) (amounts in thousands)
|
For the Six Months Ended February 29, 2000 |
|||
|
______________________________________ |
|||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net cash used in operations |
$(114,660) |
$(20,096) |
$(134,756) |
|
______________________________________ |
|||
|
Net additions to property, plant, and equipment |
558 |
(3,247) |
(2,689) |
|
Investment in subsidiaries |
- |
(5,676) |
(5,676) |
|
Partner's interest in joint venture |
- |
1,745 |
1,745 |
|
______________________________________ |
|||
|
Net cash provided by (used in) investing activities |
558 |
(7,178) |
(6,620) |
|
______________________________________ |
|||
|
Net (repayments) proceeds of short-term borrowings |
38,495 |
3,954 |
42,449 |
|
Repayments of long-term debt |
(252) |
(549) |
(801) |
|
Cash dividends |
- |
(2,145) |
(2,145) |
|
Proceeds from stock options exercised |
- |
297 |
297 |
|
Repurchase of capital stock |
- |
(4,753) |
(4,753) |
|
______________________________________ |
|||
|
Net cash provided by (used in) financing activities |
38,243 |
(3,196) |
35,047 |
|
______________________________________ |
|||
|
Net increase (decrease) in cash and cash equivalents |
(75,859) |
(30,470) |
(106,329) |
|
Cash and cash equivalents at beginning of year |
76,092 |
41,417 |
117,509 |
|
______________________________________ |
|||
|
Cash and cash equivalents at end of period |
$ 233 |
$ 10,947 |
$ 11,180 |
|
================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(unaudited) (amounts in thousands)
|
For the Six Months Ended February 28, 1999 |
|||
|
______________________________________ |
|||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net cash used in operations |
$ (75,594) |
$ (10,805) |
$(86,399) |
|
______________________________________ |
|||
|
Net additions to property, plant and equipment |
(3,294) |
(1,470) |
(4,764) |
|
______________________________________ |
|||
|
Net (repayments) of short and long-term borrowings |
17,542 |
482 |
18,024 |
|
Cash dividends |
- |
(2,786) |
(2,786) |
|
Proceeds from stock options exercised |
- |
141 |
141 |
|
Repurchase of capital stock |
- |
(9,763) |
(9,763) |
|
Change in net due to (from) affiliate |
55,332 |
(55,332) |
- |
|
______________________________________ |
|||
|
Net cash provided by (used in) financing activities |
$ 72,874 |
$(67,258) |
$ 5,616 |
|
______________________________________ |
|||
|
Net increase (decrease) in cash and cash equivalents |
(6,014) |
(79,533) |
(85,547) |
|
Cash and cash equivalents at beginning of year |
6,014 |
84,972 |
90,986 |
|
______________________________________ |
|||
|
Cash and cash equivalents at end of period |
- |
$ 5,439 |
$ 5,439 |
|
================================== |
|||
See accompanying notes
Intercompany Transactions:
The historical condensed consolidating financial statements presented below include the following transactions between the Company and FNA:
to sales. Such charges to FNA amounted to approximately $3.8 million and $3.6 million for the three months ended February 29, 2000 and February 28, 1999, respectively. Such charges to FNA amounted to approximately $7.4 million and $4.6 million for the six months ended February 29, 2000 and February 28, 1999, respectively.
2) FNA's interest expense reflects actual interest charges on the 9-3/8% Senior Subordinated Notes due 2007, a promissory note, an industrial revenue bond and capital lease obligations and a revolving line of credit.
3) FNA's depreciation and amortization for the three months ended February 29, 2000 and February 28, 1999 amounted to $2.9 million and $1.2 million, respectively. Capital expenditures amounted to $1.8 million and $1.7 million in the three-month period of 2000 and 1999, respectively. FNA's depreciation and amortization for the six months ended February 29, 2000 and February 28, 1999 amounted to approximately $5.7 million and $3.8 million, respectively. Capital expenditures of FNA amounted to $3.5 million and $3.3 million in the six-month period of 2000 and 1999, respectively.
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.
|
Results of Operations Operating Results as Percent of Net Sales |
||||
|
Second Fiscal Quarter |
Six Months |
|||
|
_______________________________________________ |
||||
|
2000 |
1999 |
2000 |
1999 |
|
|
_______________________________________________ |
||||
|
Gross profit |
31.5% |
21.9% |
30.8% |
23.0% |
|
Selling, general and administrative expenses |
20.5% |
16.3% |
24.1% |
21.9% |
|
Operating income |
11.0% |
5.6% |
6.7% |
1.1% |
|
Net interest expense |
6.5% |
4.7% |
6.6% |
5.7% |
|
Pre-tax income (loss) |
2.6% |
2.1% |
(1.1%) |
(3.9%) |
|
========================================== |
||||
Second Quarter
Net sales in the second quarter ending February 29, 2000 amounted to $70.4 million, an increase of 19.5% from $58.9 million in the same period a year earlier. This increase is primarily due to added sales of counter-seasonal and non-seasonal indoor air quality products by Trion, Inc. (Trion) and its subsidiary, Envirco Corporation (Envirco), that were acquired by the Company in August 1999.
Gross profit percentage increased to 31.5% from 21.9% in the prior period primarily due to changes in customer mix as well as to higher margin Trion and Envirco sales.
In the 2000 quarter, selling, general and administrative expenses increased to 20.5% from 16.3% in the prior year quarter primarily due to the Trion and Envirco acquisitions.
Operating income was $7.8 million or 11.0% of net sales in the current year period compared to $3.3 million or 5.6% of net sales in the prior year period due to the increased sales and margins.
Net interest expense of $4.6 million increased primarily due to higher short-term borrowings in the current period compared to the prior-year period as well as the issuance in August 1999, of $50 million of 9-3/8 % Senior Subordinated Notes due 2007.
Net income increased 58% to $1.3 million, or four cents per share, compared to $0.8 million, or two cents per share, during the same period in the prior year.
Six Months
For the first six months of fiscal 2000, sales were $115.1 million, an increase of 36.0% from $84.6 million in the comparable 1999 period.
Gross profit margin percentage increased to 30.8% during the first six months of the current year, compared to 23.0% during the same period in fiscal 1999.
Selling, general and administrative expenses increased as a percentage of net sales to 24.1% from the prior year of 21.9%.
Sales and gross margins increased primarily due to added sales of counter-seasonal and non-seasonal indoor air quality products of Trion and Envirco. Higher selling, general and administrative expenses are also a result of these acquisitions.
Operating income was $7.7 million or 6.7% of net sales in the current year compared to $0.9 million or 1.1% of net sales in the prior year.
Net interest expense increased to $7.6 million or 6.6% of net sales during the fiscal 2000 period, versus $4.8 million in fiscal year 1999, primarily due to increased short-term borrowing in the current period and the issuance of $50 million of 9-3/8% Senior Subordinated Notes due 2007 in August 1999.
The Company's net loss was $0.8 million versus a loss of $2.1 million in 1999.
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 at February 29, 2000 amounted to $11.2 million and short-term borrowings were $54.2 million.
Net cash used in operations for the six months ended February 29, 2000, amounted to $134.8 million, compared to $86.4 million in the prior-year period. The Company's operations required more cash due to increased production and the result of the timing of sales volume. The principal use of cash in each period was to produce finished goods for seasonal requirements, sales of which are greatest in the third fiscal quarter. Inventories were $129.5 million at February 29, 2000 versus $99.0 million a year earlier due primarily to the Trion and Envirco acquisitions and the recent acquisitions of ABB Koppel, Inc. and Sun Manufacturing, Inc.
Net cash used in investing activities was $6.6 million versus $4.8 million in 1999. The increase was due to acquisitions of Sun Manufacturing, Inc. and ABB Koppel, Inc. which utilized cash of $1.0 and $4.7 million, respectively.
Net cash provided by financing activities during the six-month period amounted to $35.0 million, primarily due to short-term borrowings ($42.4 million) which were partially offset by stock repurchases ($4.8 million) under the previously announced stock repurchase plan of up to $30 million and for payment of dividends ($2.1 million). At February 29, 2000, the Company had $54.2 million of short-term borrowings, compared to borrowings in the prior year period of $18.5 million.
The Company declared quarterly dividends of 3.0 cents and 2.5 cents on each share of outstanding Class A and Common Stock and 2.7 cents and 2.25 cents on each share of outstanding Class B Stock in the second quarter of fiscal 2000 and 1999, respectively.
Management believes that the Company's cash, earnings and borrowing capacity are adequate to meet the demands of its operations and its long-term credit requirements.
Forward-looking statements are covered under the "Safe-Harbor" clause of the Private Securities Litigation Reform Act of 1995. Such statements are based upon current expectations and assumptions. Actual results could differ materially from those currently anticipated as a result of known and unknown risks and uncertainties including, but not limited to, weather and economic, political, market and industry conditions. Such factors are described in Fedders' SEC filings, including its most recently filed annual report on Form 10-K. The Company disclaims any obligation to update any forward-looking statements to incorporate subsequent events.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - 27 Financial Data Schedule (EDGAR filing only)
EX-27 - EXHIBIT 27 FINANCIAL DATA SCHEDULE
FEDDERS CORPORATION
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF
FEBRUARY 29, 2000 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE-MONTH PERIOD ENDED FEBRUARY 29, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
|
PERIOD-TYPE |
3-MOS |
|
FISCAL-YEAR-END |
AUG-31-2000 |
|
PERIOD START |
NOV-30-1999 |
|
PERIOD-END |
FEB-29-2000 |
|
CASH |
11,180 |
|
SECURITIES |
0 |
|
RECEIVABLES |
61,374 |
|
ALLOWANCES |
2,126 |
|
INVENTORY |
129,471 |
|
CURRENT-ASSETS |
213,032 |
|
PP&E |
145,625 |
|
DEPRECIATION |
74,428 |
|
TOTAL-ASSETS |
394,850 |
|
CURRENT-LIABILITIES |
121,576 |
|
BONDS |
159,347 |
|
PREFERRED-MANDATORY |
0 |
|
PREFERRED |
0 |
|
COMMON |
37,945 |
|
OTHER-SE |
63,334 |
|
TOTAL-LIABILITY-AND-EQUITY |
394,850 |
|
SALES |
70,371 |
|
TOTAL-REVENUES |
0 |
|
CGS |
48,219 |
|
TOTAL-COSTS |
14,402 |
|
OTHER-EXPENSES |
0 |
|
LOSS-PROVISION |
0 |
|
INTEREST-EXPENSE |
4,604 |
|
INCOME-PRETAX |
1,859 |
|
INCOME-TAX |
575 |
|
INCOME-CONTINUING |
1,284 |
|
DISCONTINUED |
0 |
|
EXTRAORDINARY |
0 |
|
CHANGES |
0 |
|
NET-INCOME |
1,284 |
|
EPS-PRIMARY |
0.04 |
|
EPS-DILUTED |
0.04 |
(b) Reports on Form 8-K
None
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/ Michael Giordano
Vice President, Finance
Chief Financial Officer
April 14, 2000
Signing both in his capacity as
Vice President, Finance /
Chief Financial Officer and on
behalf of the registrant.
|
|