<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 November 30, 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 14,704,659 shares of Common Stock, 14,979,197
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 December 31, 2000.
- 1 -
<PAGE> 2
FEDDERS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page Number
--------------------------------------------------------------------------------------------
<S> <C> <C>
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 7-15
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 16-17
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURE 18
</TABLE>
- 2 -
<PAGE> 3
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)
<TABLE>
<CAPTION>
Three months ended November 30,
2000 1999
----------------------------------
<S> <C> <C>
Net sales $ 39,948 $ 44,683
Cost of sales 31,270 31,425
Selling, general and administrative
expense 16,097 13,269
----------------------------------
47,367 44,694
Operating loss (7,419) (11)
Partners' net interest in joint venture
results (130) (114)
Interest expense, net (3,573) (2,991)
----------------------------------
Loss before income taxes (11,122) (3,116)
Income tax benefit (3,610) (983)
----------------------------------
Net loss $ (7,512) $ (2,133)
----------------------------------
Other comprehensive (loss) income:
Foreign currency translation, net of tax (390) 31
----------------------------------
Comprehensive loss $ (7,902) $ (2,102)
----------------------------------
Basic and diluted loss per share $ (0.23) $ (0.06)
Dividends per share declared:
Common and Class A Stock $ 0.030 $ 0.030
Class B Stock $ 0.027 $ 0.027
==================================
</TABLE>
See accompanying notes
- 3 -
<PAGE> 4
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
November 30, August 31, November 30,
2000 2000 1999
-----------------------------------------------
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $15,201 $87,193 $ 50,163
Accounts receivable (less allowances
of $2,231, $2,138 and $1,990 at
November 30, 2000, August 31, 2000 and
November 30, 1999, respectively) 29,205 25,394 20,122
Inventories:
Finished goods 70,239 39,062 65,615
Work-in-process 7,565 4,104 6,406
Raw materials and supplies 39,160 32,005 25,190
-----------------------------------------------
116,964 75,171 97,211
Deferred income taxes 4,811 4,811 10,168
Other current assets 6,246 5,568 645
-----------------------------------------------
Total current assets 172,427 198,137 178,309
Property, plant and equipment:
Land and improvements 4,045 3,730 3,573
Buildings 34,949 33,767 26,226
Machinery and equipment 118,614 110,565 115,155
-----------------------------------------------
157,608 148,062 144,954
Less accumulated depreciation 78,160 75,794 75,219
-----------------------------------------------
79,448 72,268 69,735
Deferred income taxes 4,482 4,482 6,387
Goodwill 87,347 85,308 75,213
Other assets 18,398 18,762 20,359
-----------------------------------------------
Total assets $362,102 $378,957 $350,003
===============================================
</TABLE>
See accompanying notes
- 4 -
<PAGE> 5
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except par value) (unaudited)
<TABLE>
<CAPTION>
November 30, August 31, November 30,
2000 2000 1999
--------------------------------------------
<S> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Short-term notes $ 9,277 $ 3,753 $ 4,012
Current portion of long-term debt 2,417 2,522 1,946
Accounts payable 32,773 36,436 12,840
Income taxes payable 7,641 10,958 9,968
Accrued expenses 35,260 37,309 45,623
--------------------------------------------
Total current liabilities 87,368 90,978 74,389
Long-term debt 163,371 163,912 158,747
Other long-term liabilities 10,218 9,828 8,340
Partners' interest in joint venture 1,821 1,979 4,228
Stockholders' equity (all classes $1
par value):
Common Stock:
80,000 shares authorized, 16,135,
16,135 and 16,350 issued at November
30, 2000, August 31, 2000 and November
30, 1999, respectively 16,135 16,135 16,350
Class A Stock:
60,000 shares authorized, 19,833,
19,825 and 19,543 issued at November
30, 2000, August 31, 2000 and November
30, 1999, respectively 19,833 19,825 19,543
Class B Stock:
7,500 shares authorized, 2,267 issued
at November 30, 2000, August 31, 2000
and November 30, 1999, respectively 2,267 2,267 2,267
Additional paid-in capital 30,858 29,591 28,258
Retained earnings 61,065 69,575 50,257
Accumulated other comprehensive loss (1,705) (1,128) (243)
--------------------------------------------
128,453 136,265 116,432
Treasury stock, at cost, 6,008, 4,686 and
2,220 shares at November 30, 2000, August
31, 2000 and November 30, 1999 respectively (28,259) (23,065) (10,979)
Deferred compensation (870) (940) (1,154)
--------------------------------------------
Total stockholders' equity 99,324 112,260 104,299
--------------------------------------------
Total liabilities and stockholders' equity $362,102 $378,957 $350,003
============================================
</TABLE>
See accompanying notes
- 5 -
<PAGE> 6
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
2000 1999
---------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (7,512) $ (2,133)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 3,873 3,163
Deferred income taxes - 1,284
Stock option repricing charge 1,246 -
Partners' interest in joint venture results (158) 366
Changes in operating assets and liabilities:
Accounts receivable (2,431) 289
Income tax receivable - 617
Inventories (39,261) (35,597)
Other current assets (670) 844
Other assets 91 (176)
Accounts payable (4,284) (25,231)
Accrued expenses (3,811) (840)
Income taxes payable (3,317) (3,081)
Other long-term liabilities 390 (4,894)
Other - net (162) 117
---------------------------------
Net cash used in operating activities (56,006) (65,272)
---------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (3,833) (619)
Acquisition of business, net of cash acquired (10,886) -
---------------------------------
Net cash used in investing activities (14,719) (619)
---------------------------------
Cash flows from financing activities:
Proceeds from short-term notes 5,524 1,602
Repayment of long-term debt (596) (354)
Proceeds from stock options exercised 29 547
Repurchases of capital stock (5,194) (2,177)
Cash dividends (1,030) (1,073)
---------------------------------
Net cash used in financing activities (1,267) (1,455)
---------------------------------
Net decrease in cash and cash equivalents (71,992) (67,346)
Cash and cash equivalents at beginning of period 87,193 117,509
---------------------------------
Cash and cash equivalents at end of period $ 15,201 $ 50,163
================================
Supplemental disclosure:
Interest paid $358 $325
Net income taxes (refund) paid (745) 83
================================
</TABLE>
See accompanying notes
- 6 -
<PAGE> 7
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, 2000. The Company's business is seasonal, and consequently,
operating results for the three month period ending November 30, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending August 31, 2001.
B. In October 2000, the Company announced an increase in the stock
repurchase plan from $30.0 million to $40.0 million for the Company's Common and
Class A Stock, authorized in August 1998. Under this plan, in the first three
months of fiscal 2001, the Company repurchased approximately 666,000 shares of
Common Stock for $2.8 million or $4.13 average price per share, and 656,000
shares of Class A Stock for $2.4 million or $3.72 average price per share. Total
repurchases under this plan amounted to approximately 6.7 million shares of
Common and Class A Stock for $31.9 million or $4.70 average price per share
through November 30, 2000.
C. In the first quarter of 2001 and 2000, 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 32,865,000 and 36,029,000 shares,
respectively. Stock options were not included in the computation of diluted
earnings per share due to their anti-dilutive effect, given the net loss in both
periods.
D. In October 2000, the Company's Board of Directors approved the repricing
of a majority of unexercised stock options resulting in a $1.2 million non-cash
charge to operations.
E. On December 3, 1999, the Securities and Exchange Commission issued its
Staff Accounting Bulleting 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, of which $100 million were issued in
August 1997, and $50 million were 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 connection with the
consolidated financial statements of the Company. Certain prior year
reclassifications were made to conform with the current year presentation.
- 7 -
<PAGE> 8
FEDDERS CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
November 30, 2000
---------------------------------------------
Fedders Fedders
North America Other Fedders Corporation
---------------------------------------------
<S> <C> <C> <C>
Net sales $28,692 $11,256 $39,948
Cost of sales 22,734 8,536 31,270
Selling, general and administrative expense (1,3,4) 9,733 6,364 16,097
---------------------------------------------
Operating loss (3,775) (3,644) (7,419)
Partners' net interest in joint venture results - (130) (130)
Interest expense, net (2) (3,329) (244) (3,573)
---------------------------------------------
Loss before income taxes (7,104) (4,018) (11,122)
Income tax benefit (2,309) (1,301) (3,610)
---------------------------------------------
Net loss $ (4,795) $(2,717) $(7,512)
Other comprehensive loss:
Foreign currency translation, net of tax (57) (333) (390)
---------------------------------------------
Comprehensive loss $ (4,852) $(3,050) $(7,902)
=============================================
</TABLE>
See accompanying notes
- 8 -
<PAGE> 9
FEDDERS CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
November 30, 1999
---------------------------------------------
Fedders Fedders
North America Other Fedders Corporation
---------------------------------------------
<S> <C> <C> <C>
Net sales $36,624 $8,059 $44,683
Cost of sales 24,188 7,237 31,425
Selling, general and administrative expense (1,3) 9,951 3,318 13,269
---------------------------------------------
Operating income (loss) 2,485 (2,496) (11)
Partners' net interest in joint venture results - (114) (114)
Interest (expense) income, net (2) (3,795) 804 (2,991)
---------------------------------------------
Loss before income taxes (1,310) (1,806) (3,116)
Income tax benefit (384) (599) (983)
---------------------------------------------
Net loss $ (926) $(1,207) $(2,133)
Other comprehensive income (loss):
Foreign currency translation, net of tax 36 (5) 31
---------------------------------------------
Comprehensive loss $ (890) $(1,212) $(2,102)
=============================================
</TABLE>
See accompanying notes
- 9 -
<PAGE> 10
FEDDERS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS (unaudited) (amounts in thousands)
<TABLE>
<CAPTION>
November 30, 2000
-------------------------------------------------------
Fedders Other Elimination Fedders
North America Fedders Entries Corporation
-------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $10,051 $5,150 - $15,201
Accounts receivable, net 18,287 10,918 - 29,205
Inventories 89,615 27,349 - 116,964
Other current assets 2,410 8,647 - 11,057
-------------------------------------------------------
Total current assets 120,363 52,064 - 172,427
Investment in subsidiaries - 104,306 $(104,306) -
Property, plant and equipment, net 57,747 21,701 - 79,448
Goodwill 74,049 13,298 - 87,347
Other long-term assets 5,966 16,914 - 22,880
-------------------------------------------------------
$258,125 $208,283 $(104,306) $362,102
=======================================================
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes - $9,277 - $9,277
Current portion of long-term debt $638 1,779 - 2,417
Accounts and income tax payable 42,224 (1,810) - 40,414
Accrued expenses 24,179 11,081 - 35,260
-------------------------------------------------------
Total current liabilities 67,041 20,327 - 87,368
Long-term debt 154,086 9,285 - 163,371
Other long-term liabilities 4,333 7,706 - 12,039
Stockholders' equity:
Common, Class A and Class B
Stock 5 38,235 $ (5) 38,235
Paid-in capital 21,292 182,785 (173,219) 30,858
Retained earnings (deficit) 11,675 (19,528) 68,918 61,065
Treasury stock - (28,259) - (28,259)
Deferred compensation - (870) - (870)
Accumulated other comprehensive loss (307) (1,398) - (1,705)
-------------------------------------------------------
Total stockholders' equity 32,665 170,965 (104,306) 99,324
-------------------------------------------------------
$258,125 $208,283 $(104,306) $362,102
=======================================================
</TABLE>
See accompanying notes
- 10 -
<PAGE> 11
FEDDERS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS (unaudited) (amounts in thousands)
<TABLE>
<CAPTION>
August 31, 2000
-------------------------------------------------------
Fedders Other Elimination Fedders
North America Fedders Entries Corporation
-------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 59,716 $ 27,477 - $87,193
Accounts receivable, net 15,352 10,042 - 25,394
Inventories 56,027 19,144 - 75,171
Other current assets 2,623 7,756 - 10,379
-------------------------------------------------------
Total current assets 133,718 64,419 - 198,137
Investment in subsidiaries - 104,306 $(104,306) -
Property, plant and equipment, net 56,686 15,582 - 72,268
Goodwill 72,196 13,112 - 85,308
Other long-term assets 5,635 17,609 - 23,244
-------------------------------------------------------
$268,235 $215,028 $(104,306) $378,957
=======================================================
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $527 $5,748 - $6,275
Accounts and income tax payable 48,691 (1,297) - 47,394
Accrued expenses 25,284 12,025 - 37,309
-------------------------------------------------------
Total current liabilities 74,502 16,476 - 90,978
Long-term debt 153,676 10,236 - 163,912
Other long-term liabilities 2,513 9,294 - 11,807
Stockholders' equity:
Common, Class A and Class B
Stock 5 38,227 $(5) 38,227
Paid-in capital 21,292 181,518 (173,219) 29,591
Retained earnings (deficit) 16,470 (15,813) 68,918 69,575
Treasury stock and deferred
compensation - (24,005) - (24,005)
Accumulated other comprehensive loss (223) (905) - (1,128)
-------------------------------------------------------
Total stockholders' equity 37,544 179,022 (104,306) 112,260
-------------------------------------------------------
$268,235 $215,028 $(104,306) $378,957
=======================================================
</TABLE>
See accompanying notes
- 11 -
<PAGE> 12
FEDDERS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS (unaudited) (amounts in thousands)
<TABLE>
<CAPTION>
November 30, 1999
-------------------------------------------------------
Fedders Other Elimination Fedders
North America Fedders Entries Corporation
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and Cash equivalents $ 6,141 $44,022 - $ 50,163
Accounts receivable, net 14,283 5,839 - 20,122
Inventories 82,768 14,443 - 97,211
Other current assets 8,196 2,617 - 10,813
----------------------------------------- -------------
Total current assets 111,388 66,921 - 178,309
Investment in subsidiaries - 104,306 $(104,306) -
Property, plant and equipment, net 58,883 10,852 - 69,735
Goodwill 69,311 5,902 - 75,213
Other long-term assets 11,760 14,986 - 26,746
----------------------------------------- -------------
$251,342 $202,967 $(104,306) $350,003
========================================= =============
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes - $4,012 - $4,012
Current portion of long-term debt $1,940 6 - 1,946
Accounts and income tax payable 18,057 4,751 - 22,808
Accrued expenses 45,163 460 - 45,623
----------------------------------------- -------------
Total current liabilities 65,160 9,229 - 74,389
Long-term debt 156,096 2,651 - 158,747
Other long-term liabilities 2,069 10,499 - 12,568
Stockholders' equity:
Common, Class A and Class B
Stock 5 38,160 $(5) 38,160
Paid-in capital 21,320 180,157 (173,219) 28,258
Retained earnings (deficit) 7,027 (25,688) 68,918 50,257
Treasury stock - (10,979) - (10,979)
Deferred compensation - (1,154) - (1,154)
Accumulated other comprehensive loss (335) 92 - (243)
-------------------------------------------------------
Total stockholders' equity 28,017 180,588 (104,306) 104,299
-------------------------------------------------------
$251,342 $202,967 $(104,306) $350,003
=======================================================
</TABLE>
See accompanying notes
- 12 -
<PAGE> 13
FEDDERS CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
November 30, 2000
---------------------------------------------
Fedders Fedders
North America Other Fedders Corporation
---------------------------------------------
<S> <C> <C> <C>
Net cash used in operating activities $(46,978) $(9,028) $(56,006)
---------------------------------------------
Net additions to property, plant and equipment (2,702) (1,131) (3,833)
Acquisition of business - (10,886) (10,886)
---------------------------------------------
Net cash used in investing activities (2,702) (12,017) (14,719)
---------------------------------------------
Net proceeds of short and long-term borrowings 15 4,913 4,928
Proceeds from stock options exercised - 29 29
Cash dividends - (1,030) (1,030)
Repurchase of capital stock - (5,194) (5,194)
---------------------------------------------
Net cash provided by financing
activities 15 (1,282) (1,267)
---------------------------------------------
Net decrease in cash and cash equivalents (49,665) (22,327) (71,992)
Cash and cash equivalents at beginning of year 59,716 27,477 87,193
---------------------------------------------
Cash and cash equivalents at end of period $ 10,051 $5,150 $ 15,201
=============================================
</TABLE>
See accompanying notes
- 13 -
<PAGE> 14
FEDDERS CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
November 30, 1999
---------------------------------------------
Fedders Other Fedders
North America Fedders Corporation
---------------------------------------------
<S> <C> <C> <C>
Net cash (used in) provided by operating
activities $ (66,561) $ 1,289 $(65,272)
---------------------------------------------
Net additions to property, plant and equipment (619) - (619)
---------------------------------------------
Net (repayments) proceeds of short and long-term
borrowings (2,771) 4,019 1,248
Cash dividends - (1,073) (1,073)
Proceeds from stock options exercised - 547 547
Repurchase of capital stock - (2,177) (2,177)
---------------------------------------------
Net cash (used in) provided by financing
activities (2,771) 1,316 (1,455)
---------------------------------------------
Net (decrease) increase in cash and cash
equivalents (69,951) 2,605 (67,346)
Cash and cash equivalents at beginning of year 76,092 41,417 117,509
---------------------------------------------
Cash and cash equivalents at end of period $ 6,141 $44,022 $ 50,163
=============================================
</TABLE>
See accompanying notes
- 14 -
<PAGE> 15
Intercompany Transactions:
The historical condensed consolidating financial statements presented below
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 $3.6 million for the three months ended November 30, 2000 and
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.
3) FNA's depreciation and amortization for the three months ended November
30, 2000 and 1999 amounted to approximately $2.6 million and $2.7 million,
respectively. Capital expenditures of FNA amounted to $2.7 million and $1.7
million in each three-month period.
Other Notes:
4) Other Fedders' selling, general and administrative expense includes a
$1.2 million non-cash charge for the repricing of a majority of unexercised
stock options.
- 15 -
<PAGE> 16
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 results of
operations during the periods included in the accompanying consolidated
financial statements.
<TABLE>
<CAPTION>
Results of Operations
Operating Results as Percent of Net Sales
----------------------------------------------
First Quarter First Quarter
Fiscal 2001 Fiscal 2000
----------------------------------------------
<S> <C> <C>
Gross profit 21.7% 29.7%
Selling, general and administrative
expense 40.3% 29.7%
Operating loss 18.6% -
Interest expense, net 8.9% 6.7%
Loss before income taxes 27.8% 7.0%
==============================================
</TABLE>
FIRST QUARTER RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2000
VERSUS THE THREE MONTHS ENDED NOVEMBER 30, 1999
Net sales in the first quarter of fiscal 2001 of $39.9 million decreased
approximately 11% from sales of $44.7 million in the first quarter of 2000. The
decrease was due to reduced demand as a result of unusually cool weather this
past summer in the Midwest, Northeast, and Mid-Atlantic U.S. regions.
The gross profit margin decreased in the first quarter of 2001 to 21.7% from
29.7% from the prior period due primarily to unabsorbed overhead as a result of
reduced production to correct inventory imbalances caused by the cold summer.
Selling, general and administrative expenses were $16.1 million versus $13.3
million in the prior year. These expenses increased as a percentage of net sales
from the prior year as a result of lower sales during the period and higher
S,G&A expenses at acquired companies. S,G&A expenses in the current period
included a non-cash charge of $1.2 million for the repricing of a majority of
unexercised stock options.
Operating loss in the first quarter of 2001 was $7.4 million versus nearly break
even results in the prior period, primarily due to the lower sales and
production during the quarter.
Net interest expense increased in the first fiscal quarter to $ 3.6 million
versus $3.0 million in the prior period due primarily to financing of
acquisitions made during the prior year and the repurchases of capital stock
during the last twelve months.
The net loss for the normally unprofitable off-season first quarter of fiscal
2001 was $7.5 million, or 23 cents per share, compared to a net loss in fiscal
2000 of $2.1 million, or 6 cents per share.
- 16 -
<PAGE> 17
Liquidity and Capital Resources
Working capital requirements of the Company are seasonal, with cash balances
peaking in the fourth fiscal quarter and the greatest utilization of its lines
of credit occurring early in the calendar year. Cash on hand amounted to $15.2
million at November 30, 2000, compared to $50.2 million a year earlier. The
reduction was mainly due to cash used in acquisitions and stock repurchases.
Net cash used in operating activities for the three months ended November 30,
2000 amounted to $56.0 million, compared to $65.3 million in the prior period.
During the first fiscal quarter, the Company utilized cash to produce finished
goods. Inventories increased to $117.0 million at November 30, 2000 from $75.2
million at year-end, while increasing from $97.2 million a year earlier.
Finished goods increased to $70.2 million from $39.1 million at year-end and
$65.6 million in the prior year. The increase in inventory from year-end was to
produce finished goods for seasonal requirements. The increase from prior year
is primarily due to the acquisitions of Fedders Koppel, Sun Air Conditioning and
Eubank Manufacturing Enterprises.
Net cash used in investing activities was $14.7 million versus $0.6 million in
the prior period. The increase was mainly due to the acquisition of Eubank
Manufacturing Enterprises which required net cash of $10.9 million. Capital
expenditures for the three month period were $3.8 million.
Net cash used in financing activities during the three month period was $1.3
million, primarily due to $5.2 million of stock repurchases and $1.0 million of
cash dividends partially offset by proceeds from short-term borrowings of $5.5
million.
The Company declared quarterly dividends of 3.0 cents on each share of
outstanding Class A and Common Stock and 2.7 cents on each share of outstanding
Class B Stock in the first quarter of fiscal 2001 and 2000, respectively.
At December 31, 2000 the Company had approximately 32 million shares of Common,
Class A and Class B Stock outstanding at a weighted average closing price of
$4.39.
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.
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<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(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
Executive Vice President, Finance and Administrative and
Chief Financial Officer
January 15, 2001
Signing both in his capacity as
Executive Vice President, Finance and Administrative and
Chief Financial Officer and on
behalf of the registrant.
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