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Previous: HOMESTAKE MINING CO /DE/, S-3, EX-23, 2000-07-14 |
Next: FEDDERS CORP /DE, 10-Q, EX-27, 2000-07-14 |
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, 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, 16,768,589 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 2,266,406 shares of Class B Stock (which is immediately convertible into Common Stock on a share-for-share basis) as of June 30, 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 |
7-18 |
|
|
Item 2. |
Management's Discussion and Analysis of Results of Operations and Financial Condition |
19-21 |
|
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
21 |
|
Item 6. |
Exhibits and Reports on Form 8-K |
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)
|
Three Months Ended |
Nine Months Ended |
|||
|
May 31, May 31, 2000 1999 |
May 31, May 31, 2000 1999 |
|||
|
______________________ |
_______________________ |
|||
|
Net sales |
$195,195 |
$175,632 |
$310,249 |
$260,221 |
|
Cost of sales |
150,945 |
134,973 |
230,589 |
200,084 |
|
Selling, general and administrative expense |
13,980 |
10,712 |
41,651 |
29,272 |
|
______________________ |
______________________ |
|||
|
164,925 |
145,685 |
272,240 |
229,356 |
|
|
Operating income |
30,270 |
29,947 |
38,009 |
30,865 |
|
Partners' net interest in joint venture results |
(489) |
(71) |
(1,890) |
534 |
|
Net interest expense |
(4,693) |
(2,981) |
(12,288) |
(7,758) |
|
______________________ |
______________________ |
|||
|
Income before income taxes |
25,088 |
26,895 |
23,831 |
23,641 |
|
Federal, state and foreign income taxes |
8,153 |
8,825 |
7,745 |
7,691 |
|
______________________ |
______________________ |
|||
|
Net income |
16,935 |
18,070 |
16,086 |
15,950 |
|
Other comprehensive income (loss): |
|
|||
|
Foreign currency translation, net of tax |
59 |
19 |
(144) |
27 |
|
____________________ |
______________________ |
|||
|
Comprehensive income |
$ 16,994 |
$ 18,089 |
$ 15,942 |
$ 15,977 |
|
==================== |
==================== |
|||
|
Earnings per share: Basic and Diluted |
$ 0.47 |
$ 0.50 |
$ 0.45 |
$ 0.44 |
|
==================== |
==================== |
|||
|
Dividends per share declared: |
||||
|
Common and Class A Stock |
$ 0.030 |
$ 0.025 |
$ 0.090 |
$ 0.075 |
|
Class B Stock |
$ 0.027 |
$ 0.023 |
$ 0.081 |
$ 0.068 |
|
==================== |
==================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(unaudited)
|
|
May 31, 2000 |
August 31, 1999 |
May 31, 1999 |
|
________________________________________ |
|||
|
ASSETS: Current assets: |
|||
|
Cash |
$ 54,546 |
$117,509 |
$ 51,664 |
|
Accounts receivable (less allowance of $3,153, $1,373, and $1,977 at May 31, 2000, August 31, 1999 and May 31, 1999, respectively) |
83,607 |
21,028 |
69,172 |
|
Inventories: Finished goods |
33,598 |
29,328 |
13,423 |
|
Work in process |
7,046 |
3,298 |
4,946 |
|
Raw materials and supplies |
28,764 |
28,988 |
33,857 |
|
________________________________________ |
|||
|
69,408 |
61,614 |
52,226 |
|
|
Deferred income taxes |
10,748 |
10,161 |
5,902 |
|
Other current assets |
5,850 |
1,496 |
3,026 |
|
________________________________________ |
|||
|
Total current assets |
224,159 |
211,808 |
181,990 |
|
Property, plant and equipment, at cost: |
|||
|
Land and improvements |
4,220 |
4,042 |
2,994 |
|
Buildings |
31,629 |
31,257 |
22,205 |
|
Machinery and equipment |
106,330 |
102,380 |
84,758 |
|
Machinery and equipment under capital lease |
6,139 |
6,657 |
8,446 |
|
________________________________________ |
|||
|
148,318 |
144,336 |
118,403 |
|
|
Less accumulated depreciation |
76,675 |
73,565 |
61,729 |
|
________________________________________ |
|||
|
71,643 |
70,771 |
56,674 |
|
|
Deferred income taxes |
7,698 |
7,676 |
8,838 |
|
Goodwill |
84,618 |
73,999 |
53,884 |
|
Other assets |
18,124 |
18,088 |
16,019 |
|
________________________________________ |
|||
|
$406,242 |
$382,342 |
$317,405 |
|
|
==================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except par value)
(unaudited)
|
|
May 31, 2000 |
August 31, 1999 |
May 31, 1999 |
|
________________________________________ |
|||
|
LIABILITIES & STOCKHOLDERS' EQUITY: Current liabilities: |
|||
|
Short-term notes |
$ 9,994 |
- |
- |
|
Current portion of long-term debt |
1,427 |
$ 4,598 |
$ 3,072 |
|
Accounts payable |
34,840 |
35,432 |
25,501 |
|
Income taxes payable |
17,496 |
13,049 |
20,775 |
|
Accrued expenses |
51,421 |
46,463 |
42,219 |
|
________________________________________ |
|||
|
Total current liabilities |
115,178 |
99,542 |
91,567 |
|
Long-term debt |
158,366 |
156,765 |
106,914 |
|
Other long-term liabilities |
9,198 |
13,240 |
9,672 |
|
Partners' net interest in joint venture results |
5,896 |
3,862 |
2,625 |
|
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, 19,673, 19,400 and 19,436 issued |
19,673 |
19,400 |
19,445 |
|
Class B Stock, 7,500 shares authorized, 2,267 issued |
2,267 |
2,267 |
2,267 |
|
Additional paid-in capital |
28,938 |
28,069 |
29,305 |
|
Retained earnings |
66,285 |
53,379 |
49,654 |
|
Cumulative other comprehensive loss |
(501) |
(288) |
(391) |
|
________________________________________ |
|||
|
132,797 |
118,962 |
116,627 |
|
|
Treasury stock, at cost, 2,787, 1,764 and 728 shares at May 31, 2000, August 31, 1999 and May 31, 1999, respectively |
(14,062) |
(8,802) |
(8,702) |
|
Deferred compensation |
(1,131) |
(1,227) |
(1,298) |
|
________________________________________ |
|||
|
Total stockholders' equity |
117,604 |
108,933 |
106,627 |
|
________________________________________ |
|||
|
$406,242 |
$382,342 |
$317,405 |
|
|
==================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(amounts in thousands) (unaudited) |
Nine Months Ended |
|
|
May 31, 2000 |
May 31, 1999 |
|
|
____________________________ |
||
|
Cash flows from operations: |
||
|
Net income |
$ 16,086 |
$ 15,950 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
Depreciation and amortization |
10,480 |
6,976 |
|
Changes in operating assets and liabilities: Accounts receivable |
(59,332) |
(54,652) |
|
Inventories |
(3,906) |
35 |
|
Other current assets |
(4,101) |
1,475 |
|
Other assets |
(494) |
(163) |
|
Accounts payable |
(2,914) |
(268) |
|
Accrued expenses |
(3,788) |
9,868 |
|
Taxes payable |
4,447 |
6,369 |
|
Other long-term liabilities |
801 |
(1,996) |
|
Other |
(117) |
262 |
|
____________________________ |
||
|
Net cash used in operations |
(42,838) |
(16,144) |
|
____________________________ |
||
|
Cash flows from investing activities: |
||
|
Additions to property, plant and equipment |
(7,638) |
(6,257) |
|
Disposals of property, plant and equipment, net |
1,836 |
- |
|
Investment in Fedders Koppel, Inc. |
(6,430) |
- |
|
Investment in Sun Manufacturing, Inc. |
(986) |
- |
|
Partners' net interest in joint venture results |
2,034 |
(2,012) |
|
____________________________ |
||
|
Net cash used in investing activities |
(11,184) |
(8,269) |
|
____________________________ |
||
|
Cash flows from financing activities: Proceeds from short-term borrowings |
448 |
- |
|
Repayments of long-term debt |
(2,091) |
(546) |
|
Proceeds from stock options exercised |
839 |
179 |
|
Repurchase of capital stock (buy-back plan) |
(4,957) |
(11,756) |
|
Payments of dividends |
(3,180) |
(2,786) |
|
____________________________ |
||
|
Net cash used in financing activities |
(8,941) |
(14,909) |
|
____________________________ |
||
|
Net decrease in cash and cash equivalents |
(62,963) |
(39,322) |
|
Cash and cash equivalents, at beginning of period |
117,509 |
90,986 |
|
____________________________ |
||
|
Cash and cash equivalents, at end of period |
$ 54,546 |
$ 51,664 |
|
========================= |
||
|
Supplemental disclosure: |
||
|
Interest paid |
$ 7,198 |
$ 8,120 |
|
Net income taxes paid |
2,618 |
2,441 |
|
========================= |
||
See accompanying notes
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 nine-month periods ending May 31, 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 nine months of fiscal 2000, the Company repurchased approximately 1.02 million shares of Class A Stock for $4.9 million or $4.82 per share. Total repurchases under this plan amounted to approximately 3.70 million shares of Common and Class A Stock for $18.2 million or $4.92 per share.
C. In the third 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 35,662,000 and 35,876,000 shares, respectively. In the first nine months of fiscal 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 35,707,000 and 36,268,000 shares, respectively. Stock options included in computing diluted earnings per share amounted to 214,000 and 266,000 in the third quarter of 2000 and 1999, respectively, and 124,000 and 220,000 for the nine months ended May 31, 2000 and 1999.
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. During the second quarter, the Company also acquired the net assets of Sun Manufacturing, Inc. ("Sun") 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. On December 3, 1999, the Securities and Exchange Commission issued its Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB101), which provides its view on applying Generally Accepted Accounting Principles to selected revenue recognition issues. The Company has not yet determined the impact, if any, of adopting SAB101.
F. 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, (the "Notes") of which $100 million principal amount was issued in August 1997 and $50 million FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 AND COMPREHENSIVE INCOME
(amounts in thousands)
(unaudited)
|
Three Months Ended May 31, 2000 |
|||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net sales |
$180,454 |
$ 14,741 |
$195,195 |
|
Cost of sales |
142,533 |
8,412 |
150,945 |
|
Selling, general and administrative expense (1,3) |
9,461 |
4,519 |
13,980 |
|
______________________________________ |
|||
|
Operating income |
28,460 |
1,810 |
30,270 |
|
Partners, net interest in joint venture results |
- |
(489) |
(489) |
|
Net interest expense (2) |
(4,220) |
(473) |
(4,693) |
|
______________________________________ |
|||
|
Income before income taxes |
24,240 |
848 |
25,088 |
|
Federal, state and foreign income taxes |
7,866 |
287 |
8,153 |
|
______________________________________ |
|||
|
Net income |
16,374 |
561 |
16,935 |
|
Other comprehensive income (loss): |
|||
|
Foreign currency translation, net of tax |
( 78) |
137 |
59 |
|
______________________________________ |
|||
|
Comprehensive income |
$ 16,296 |
$ 698 |
$ 16,994 |
|
================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (continued)
(amounts in thousands)
(unaudited)
|
Three Months Ended May 31, 1999 |
|||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net sales |
$164,894 |
$ 10,738 |
$175,632 |
|
Cost of sales |
126,629 |
8,344 |
134,973 |
|
Selling, general and administrative expense (1,3) |
8,614 |
2,098 |
10,712 |
|
______________________________________ |
|||
|
Operating income |
29,651 |
296 |
29,947 |
|
Partners' net interest in joint venture results |
- |
(71) |
(71) |
|
Net interest expense (2) |
(2,464) |
(517) |
(2,981) |
|
______________________________________ |
|||
|
Income (loss) before income taxes |
27,187 |
(292) |
26,859 |
|
Income taxes |
8,762 |
63 |
8,825 |
|
______________________________________ |
|||
|
Net income (loss) |
18,425 |
(355) |
18,070 |
|
Other comprehensive income: |
|||
|
Foreign currency translation, net of tax |
1 |
18 |
19 |
|
______________________________________ |
|||
|
Comprehensive income (loss) |
$ 18,426 |
$ (337) |
$ 18,089 |
|
================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (continued)
(amounts in thousands)
(unaudited)
|
Nine Months Ended May 31, 2000 |
|||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net sales |
$270,896 |
$ 39,353 |
$310,249 |
|
Cost of sales |
206,191 |
24,398 |
230,589 |
|
Selling, general and administrative expense (1,3) |
30,344 |
11,307 |
41,651 |
|
______________________________________ |
|||
|
Operating income |
34,361 |
3,648 |
38,009 |
|
Partners' net interest in joint venture results |
- |
(1,890) |
(1,890) |
|
Net interest expense (income) (2) |
(12,439) |
151 |
(12,288) |
|
______________________________________ |
|||
|
Income before income taxes |
21,922 |
1,909 |
23,831 |
|
Income taxes |
7,125 |
620 |
7,745 |
|
______________________________________ |
|||
|
Net income |
14,797 |
1,289 |
16,086 |
|
Other comprehensive income (loss): |
|||
|
Foreign currency translation, net of tax |
48 |
(192) |
(144) |
|
______________________________________ |
|||
|
Comprehensive income |
$ 14,845 |
$ 1,097 |
$ 15,942 |
|
================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (continued)
(amounts in thousands)
(unaudited)
|
For the Nine Months Ended May 31, 1999 |
|||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net sales |
$237,615 |
$ 22,606 |
$260,221 |
|
Cost of sales |
181,521 |
18,563 |
200,084 |
|
Selling, general and administrative expense (1,3) |
20,668 |
8,604 |
29,272 |
|
______________________________________ |
|||
|
Operating income (loss) |
35,426 |
(4,561) |
30,865 |
|
Partners' net interest in joint venture results |
- |
534 |
534 |
|
Net interest expense (2) |
(7,684) |
(74) |
(7,758) |
|
______________________________________ |
|||
|
Income (loss) before income taxes |
27,742 |
(4,101) |
23,641 |
|
Income taxes (benefit) |
8,956 |
(1,265) |
7,691 |
|
______________________________________ |
|||
|
Net income (loss) |
18,786 |
(2,836) |
15,950 |
|
Other comprehensive income (loss): |
|||
|
Foreign currency translation, net of tax |
(11) |
38 |
27 |
|
______________________________________ |
|||
|
Comprehensive income (loss) |
$ 18,775 |
$(2,798) |
$ 15,977 |
|
================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS
|
(amounts in thousands) (unaudited) |
May 31, 2000 |
|||
|
________________________________________________ |
||||
|
Fedders North America |
Other Fedders |
Eliminating Entries |
Fedders Corporation |
|
|
________________________________________________ |
||||
|
Assets Current assets: |
||||
|
Cash |
$ 32,641 |
$ 21,905 |
$ 54,546 |
|
|
Accounts receivable, net |
73,039 |
10,568 |
83,607 |
|
|
Inventories |
51,070 |
18,338 |
69,408 |
|
|
Other current assets |
3,017 |
13,581 |
16,598 |
|
|
________________________________________________ |
||||
|
Total current assets |
159,767 |
64,392 |
224,159 |
|
|
Investment in subsidiaries |
- |
104,306 |
$(104,306) |
- |
|
Property, plant and equipment, net |
56,262 |
15,381 |
71,643 |
|
|
Goodwill |
68,007 |
16,611 |
84,618 |
|
|
Other long-term assets |
8,497 |
17,325 |
25,822 |
|
|
________________________________________________ |
||||
|
$292,533 |
$218,015 |
$(104,306) |
$406,242 |
|
|
=========================================== |
||||
|
Liabilities and Stockholders' Equity Current liabilities: |
|
|
|
|
|
Short-term notes |
- |
$ 9,994 |
$ 9,994 |
|
|
Current portion of long-term debt |
$ 1,423 |
4 |
1,427 |
|
|
Accounts and income taxes payable |
43,338 |
8,998 |
52,336 |
|
|
Accrued expenses |
49,366 |
2,055 |
51,421 |
|
|
________________________________________________ |
||||
|
Total current liabilities |
94,127 |
21,051 |
115,178 |
|
|
Long-term debt |
153,732 |
4,634 |
158,366 |
|
|
Other long-term liabilities |
2,064 |
13,030 |
15,094 |
|
|
Stockholders' equity: Common, Class A and Class B Stock |
5 |
38,075 |
$ (5) |
38,075 |
|
Paid-in capital |
21,292 |
180,865 |
(173,219) |
28,938 |
|
Retained earnings (deficit) |
21,558 |
(24,191) |
68,918 |
66,285 |
|
Treasury stock |
- |
(14,062) |
(14,062) |
|
|
Deferred compensation |
- |
(1,131) |
(1,131) |
|
|
Cumulative other comprehensive loss |
(245) |
(256) |
(501) |
|
|
________________________________________________ |
||||
|
Total stockholders' equity |
42,610 |
179,300 |
(104,306) |
117,604 |
|
________________________________________________ |
||||
|
$292,533 |
$218,015 |
$(104,306) |
$406,242 |
|
|
=========================================== |
||||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS
|
(amounts in thousands) (unaudited) |
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 taxes 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
|
(amounts in thousands) (unaudited) |
May 31, 1999 |
|||
|
Fedders North America |
Other Fedders |
Eliminating Entries |
Fedders Corporation |
|
|
________________________________________________ |
||||
|
Assets Current assets: |
||||
|
Cash |
$32,528 |
$ 19,136 |
$ 51,664 |
|
|
Accounts receivable, net |
64,591 |
4,581 |
69,172 |
|
|
Inventories |
40,322 |
11,904 |
52,226 |
|
|
Other current assets |
6,589 |
2,339 |
8,928 |
|
|
________________________________________________ |
||||
|
Total current assets |
144,030 |
37,960 |
181,990 |
|
|
Investment in subsidiaries |
- |
104,306 |
$(104,306) |
- |
|
Property, plant and equipment, net |
46,070 |
10,604 |
56,674 |
|
|
Goodwill |
47,814 |
6,070 |
53,884 |
|
|
Other long-term assets |
7,020 |
17,837 |
24,857 |
|
|
________________________________________________ |
||||
|
$244,934 |
$176,777 |
$(104,306) |
$317,405 |
|
|
=========================================== |
||||
|
Liabilities and Stockholders' Equity Current liabilities: |
||||
|
Current portion of long-term debt |
$ 1,501 |
$ 1,571 |
$ 3,072 |
|
|
Accounts and income taxes payable |
47,624 |
(1,348) |
46,276 |
|
|
Accrued expenses |
42,547 |
(328) |
42,219 |
|
|
________________________________________________ |
||||
|
Total current liabilities |
91,672 |
(105) |
91,567 |
|
|
Long-term debt |
104,263 |
2,651 |
106,914 |
|
|
Other long-term liabilities |
2,457 |
9,840 |
12,297 |
|
|
Stockholders' equity: Common, Class A and Class B Stock |
5 |
38,059 |
$ (5) |
38,059 |
|
Paid-in capital |
21,292 |
112,315 |
(173,219) |
(39,612) |
|
Retained earnings |
25,619 |
24,033 |
68,918 |
118,570 |
|
Treasury stock |
- |
(8,702) |
(8,702) |
|
|
Deferred compensation |
- |
(1,298) |
(1,298) |
|
|
Cumulative other comprehensive loss |
(374) |
(16) |
|
(390) |
|
________________________________________________ |
||||
|
Total stockholders' equity |
46,542 |
164,391 |
(104,306) |
106,627 |
|
________________________________________________ |
||||
|
$244,934 |
$176,777 |
$(104,306) |
$317,405 |
|
|
=========================================== |
||||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
|
Nine Months Ended May 31, 2000 |
|||
|
______________________________________ |
|||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net cash used in operations |
$(38,731) |
$ (4,107) |
$(42,838) |
|
______________________________________ |
|||
|
Net additions to property, plant, and equipment |
(3,321) |
(2,481) |
(5,802) |
|
Investment in subsidiaries |
- |
(7,416) |
(7,416) |
|
Partners' interest in joint venture |
- |
2,034 |
2,034 |
|
______________________________________ |
|||
|
Net cash used in investing activities |
(3,321) |
(7,863) |
(11,184) |
|
______________________________________ |
|||
|
Net proceeds of short-term borrowings |
- |
448 |
448 |
|
Repayments of long-term debt |
(1,399) |
(692) |
(2,091) |
|
Payment of dividends |
- |
(3,180) |
(3,180) |
|
Proceeds from stock options exercised |
- |
839 |
839 |
|
Repurchase of capital stock |
- |
(4,957) |
(4,957) |
|
______________________________________ |
|||
|
Net cash used in financing activities |
(1,399) |
(7,542) |
(8,941) |
|
______________________________________ |
|||
|
Net decrease in cash and cash equivalents |
(43,451) |
(19,512) |
(62,963) |
|
Cash and cash equivalents, at beginning of period |
76,092 |
41,417 |
117,509 |
|
______________________________________ |
|||
|
Cash and cash equivalents, at end of period |
$ 32,641 |
$ 21,905 |
$ 54,546 |
|
================================== |
|||
See accompanying notes
FEDDERS CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
|
|
Nine Months Ended May 31, 1999 |
||
|
Fedders North America |
Other Fedders |
Fedders Corporation |
|
|
______________________________________ |
|||
|
Net cash used in operations |
$ (9,453) |
$ ( 6,691) |
$(16,144) |
|
______________________________________ |
|||
|
Net additions to property, plant and equipment |
(3,294) |
(4,975) |
(8,269) |
|
______________________________________ |
|||
|
Net cash used in investing activities |
(3,294) |
(4,975) |
(8,269) |
|
______________________________________ |
|||
|
Net (repayments) borrowings under debt arrangements |
(1,630) |
1,084 |
(546) |
|
Payment of dividends |
- |
(2,786) |
(2,786) |
|
Proceeds from stock options exercised |
- |
179 |
179 |
|
Repurchase of capital stock |
- |
(11,756) |
(11,756) |
|
Change in net due to (from) affiliate |
40,891 |
(40,891) |
- |
|
______________________________________ |
|||
|
Net cash provided by (used in) financing activities |
39,261 |
(54,170) |
(14,909) |
|
______________________________________ |
|||
|
Net increase (decrease) in cash and cash equivalents |
26,514 |
(65,836) |
(39,322) |
|
Cash and cash equivalents, at beginning of period |
6,014 |
84,972 |
90,986 |
|
______________________________________ |
|||
|
Cash and cash equivalents, at end of period |
$ 32,528 |
$ 19,136 |
$ 51,664 |
|
================================== |
|||
See accompanying notes
Intercompany Transactions:
The historical condensed consolidating financial statements presented above include the following transactions between the Company and FNA:
1) The Company charges corporate overhead essentially on a cost basis allocated in proportion to sales. Such charges to FNA amounted to approximately $3.5 million and $4.1 million for the three months ended May 31, 2000 and May 31, 1999, respectively, and approximately $10.9 million and $8.7 million for the nine months ended May 31, 2000 and May 31, 1999, respectively.
2) FNA's interest expense reflects actual interest charges on the Notes, a promissory note, an industrial revenue bond, capital lease obligations and a revolving line of credit.
3) FNA's depreciation and amortization for the three months ended May 31, 2000 and May 31, 1999 amounted to $2.2 million and $1.8 million, respectively. Capital expenditures amounted to $1.7 million and $2.2 million in the three-month period of 2000 and 1999, respectively. FNA's depreciation and amortization for the nine months ended May 31, 2000 and May 31, 1999 amounted to approximately $7.9 million and $5.6 million, respectively. Capital expenditures of FNA amounted to $5.2 million and $5.5 million in the nine-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.
|
Operating Results as Percent of Net Sales |
||||
|
Three Months Ended |
Nine Months Ended |
|||
|
May 31, |
May 31, |
|||
|
2000 1999 2000 1999 |
||||
|
Gross profit |
22.7% |
23.2% |
25.7% |
23.1% |
|
Selling, general and administrative expenses |
7.2% |
6.1% |
13.4% |
11.3% |
|
Operating income |
15.5% |
17.1% |
12.3% |
11.9% |
|
Net interest expense |
2.4% |
1.7% |
4.0% |
3.0% |
|
Pre-tax income |
12.9% |
15.3% |
7.7% |
9.1% |
|
========================================== |
||||
Third Quarter Results of Operations for the Three Months Ended May 31, 2000 versus the Three Months Ended May 31, 1999
Net sales in the third quarter ended May 31, 2000 amounted to $195.2 million, an increase from $175.6 million in the same period a year earlier. This increase is mainly attributable to the August 1999 acquisition of Trion, Inc. ("Trion") and its subsidiary, Envirco Corporation ("Envirco"), as well as Fedders Koppel and Sun acquired in the second quarter of fiscal 2000.
Gross profit percentage decreased to 22.7% from 23.2% in the prior period primarily due to the year-to-year variations in product mix during the quarter.
In the 2000 quarter, selling, general and administrative expenses increased, as a percentage of net sales, to 7.2% from 6.1% in the prior-year quarter primarily due to the acquisitions.
Operating income was $30.3 million or 15.5% of net sales in the current year period compared to $29.9 million or 17.1% of net sales in the prior-year period due to increased sales offset by lower margins and increased selling, general and administrative expense.
Net interest expense of $4.7 million during the current period increased in comparison to the prior-year period due to the issuance in August 1999 of $50 million of 9-3/8 % Senior Subordinated Notes due 2007 (the "Notes").
Net income decreased to $16.9 million, or 47 cents per share, compared to $18.1 million, or 50 cents per share, during the same period in the prior year. The decrease is the result of product mix during the quarter and higher interest expense associated with the Notes.
Results of Operations for the Nine Months Ended May 31, 2000 versus the Nine Months Ended May 31, 1999
For the first nine months of fiscal 2000, sales were $310.2 million, an increase of 19.2% from $260.2 million in the comparable 1999 period.
Gross profit margin percentage increased to 25.7% during the first nine months of the current year, compared to 23.1% during the same period in fiscal 1999.
Selling, general and administrative expenses increased as a percentage of net sales to 13.4% from the prior year of 11.3%.
Sales and gross profit margin percentage increased primarily due to added sales from acquired businesses of counter-seasonal and non-seasonal indoor air quality products of Trion and Envirco, and light commercial and specialized air conditioning products at Fedders Koppel and Sun. Higher selling, general and administrative expenses are also a result of these acquisitions.
Operating income was $38.0 million or 12.3% of net sales in the current year compared to $30.9 million or 11.9% of net sales in the prior year.
Net interest expense increased to $12.3 million or 4.0% of net sales during the fiscal 2000 period, versus $7.8 million or 3.0% in fiscal year 1999, primarily due to the issuance of the Notes during August 1999.
The Company's net income was $16.1 million versus $16.0 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 May 31, 2000 amounted to $54.5 million and short-term borrowings were $10.0 million.
Net cash used in operations for the nine months ended May 31, 2000, amounted to $42.8 million, compared to $16.1 million in the prior-year period. 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 $69.4 million at May 31, 2000 versus $52.2 million a year earlier. The increase is due primarily to the Trion and Envirco acquisitions and the recent acquisitions of ABB Koppel, Inc. and Sun Manufacturing, Inc., during the second fiscal quarter of August 2000.
Net cash used in investing activities was $11.2 million versus $8.3 million in 1999. The increase was due to the acquisitions of Sun Manufacturing, Inc. and ABB Koppel, Inc. which utilized cash of $1.0 and $6.4 million, respectively. Capital expenditures for the nine-month period amounted to $7.6 million.
Net cash used in financing activities during the nine-month period amounted to $8.9 million, primarily due to stock repurchases ($5.0 million), long-term debt repayments ($2.1 million) and dividends ($3.2 million), offset by proceeds received from the exercise of stock options and short- term borrowings.
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 third 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.
Subsequent Event
On June 14, 2000, the Company's board of directors approved Deloitte and Touche LLP as the Registrant's new independent accountants replacing BDO Siedman LLP. The Company filed Item 4, a report regarding this change, on Form 8-K on June 20, 2000.
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)
(b) Reports on Form 8-K, see "Subsequent Event"
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
Executive Vice President, Finance and Administration and
Chief Financial Officer
July 14, 2000
Signing both in his capacity as
Executive Vice President, Finance and Administration and
Chief Financial Officer and on
behalf of the registrant.
|
|