-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SB/P+MtWpFIXBBkR1SPGtINWx9IJjxfkIzYJC9aB3SMyqXc2soHz444JI12Pj29M Icul7THONNXcd3Wma+/MOw== 0000950123-97-000441.txt : 19970127 0000950123-97-000441.hdr.sgml : 19970127 ACCESSION NUMBER: 0000950123-97-000441 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19970124 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN STANDARD COMPANIES INC CENTRAL INDEX KEY: 0000836102 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 133465896 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11415 FILM NUMBER: 97510080 BUSINESS ADDRESS: STREET 1: ONE CENTENNIAL AVENUE STREET 2: P O BOX 6820 CITY: PISCATAWAY STATE: NJ ZIP: 08855-6820 BUSINESS PHONE: 9089806000 MAIL ADDRESS: STREET 1: 1114 AVENUE OF THE AMERICAS STREET 2: ONE CENTENNIAL AVENUE CITY: PISCATAWAY STATE: NJ ZIP: 08855-6820 FORMER COMPANY: FORMER CONFORMED NAME: ASI HOLDING CORP DATE OF NAME CHANGE: 19941114 10-Q/A 1 AMENDMENT NO. 1 TO FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A No. 1 (Mark One) [ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number 1-11415 AMERICAN STANDARD COMPANIES INC. (Exact name of Registrant as specified in its charter) Delaware 13-3465896 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Centennial Avenue, P.O. Box 6820, Piscataway, NJ 08855-6820 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (908) 980-6000 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. X Yes No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, $.01 par value, outstanding at October 31, 1996 78,528,888 (shares)
2 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS American Standard Companies Inc. is a Delaware corporation organized in March 1988, and has as its only investment all the outstanding common stock of American Standard Inc. Hereinafter, "the Company" will refer to American Standard Companies Inc. or to its subsidiary, American Standard Inc., as the context requires. The Company has restated its financial statements to properly record costs and expenses of its French subsidiary, Porcher S.A., of $2 million and $9 million in the three months and nine months ended September 30, 1996, respectively. The following summary statement of operations of the Company and subsidiaries for the three months and nine months ended September 30, 1996 and 1995 has not been audited, but management believes that all adjustments, consisting of normal recurring items, necessary for a fair presentation of financial data for those periods have been included. Results for the three-and nine-month periods are not necessarily indicative of results for the entire year. AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES UNAUDITED SUMMARY STATEMENT OF OPERATIONS (In millions except share data)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 ---- ---- ---- ---- SALES $ 1,485 $ 1,316 $ 4,368 $ 3,910 ------------ ------------ ------------ ------------ COST AND EXPENSES Cost of sales 1,115 975 3,282 2,893 Selling and administrative expenses 226 215 684 631 Asset impairment loss -- -- 235 -- Other expense 10 8 28 27 Interest expense 49 51 151 162 ------------ ------------ ------------ ------------ 1,400 1,249 4,380 3,713 INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 85 67 (12) 197 Income taxes 29 24 80 78 ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 56 43 (92) 119 Extraordinary loss on retirement of debt -- -- -- (30) ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ 56 $ 43 $ (92) $ 89 ============ ============ ============ ============ Income (loss) per common share: Income (loss) before extraordinary item $ .72 $ .57 $ (1.18) $ 1.61 ============ ============ ============ ============ Extraordinary loss on retirement of debt -- -- -- (.40) NET INCOME (LOSS) $ .72 $ .57 $ (1.18) $ 1.21 ============ ============ ============ ============ Average number of outstanding common shares 78,241,940 76,190,840 77,813,214 73,987,678
See accompanying notes 2 3 ITEM 1. FINANCIAL STATEMENTS (CONTINUED) AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES UNAUDITED SUMMARY BALANCE SHEET (In millions except share data)
SEPTEMBER 30, DECEMBER 31, 1996 1995 ---- ---- CURRENT ASSETS Cash and cash equivalents $ 69 $ 89 Accounts receivable 829 771 Inventories Finished products 243 191 Products in process 93 84 Raw materials 96 87 -------- -------- 432 362 Other current assets 88 73 -------- -------- TOTAL CURRENT ASSETS 1,418 1,295 FACILITIES, less accumulated depreciation; Sept. 1996-$564; Dec. 1995-$514 928 924 GOODWILL 851 1,082 OTHER ASSETS 248 219 -------- -------- TOTAL ASSETS $3,445 $3,520 ======== ======== CURRENT LIABILITIES Loans payable to banks $ 181 $ 240 Current maturities of long-term debt 65 73 Accounts payable 412 438 Accrued payrolls 166 172 Other accrued liabilities 446 384 -------- -------- TOTAL CURRENT LIABILITIES 1,270 1,307 LONG-TERM DEBT 1,738 1,770 RESERVE FOR POSTRETIREMENT BENEFITS 502 482 OTHER LIABILITIES 375 351 -------- -------- TOTAL LIABILITIES 3,885 3,910 STOCKHOLDERS' DEFICIT Preferred stock, 2,000,000 shares authorized, none issued and outstanding - - Common stock $.01 par value, 200,000,000 shares authorized;78,452,608 shares issued and outstanding in 1996; 76,733,010 in 1995 1 1 Capital surplus and other 556 509 Accumulated deficit (817) (725) Foreign currency translation effects (180) (175) -------- -------- TOTAL STOCKHOLDERS' DEFICIT (440) (390) -------- -------- $3,445 $3,520 ======== ========
See accompanying notes 3 4 ITEM 1. FINANCIAL STATEMENTS (CONTINUED) AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED SUMMARY STATEMENT OF CASH FLOWS (In millions)
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995 ---- ---- CASH PROVIDED (USED) BY: OPERATING ACTIVITIES: Income (loss) before extraordinary item $ (92) $ 119 Asset impairment loss 235 - Depreciation 91 84 Amortization of goodwill 21 25 Non-cash interest 47 48 Non-cash stock compensation 25 23 Changes in assets and liabilities: Accounts receivable (58) (130) Inventories (67) (86) Accounts payable and other accruals 16 70 Other assets and liabilities (18) 49 -------- -------- Net cash provided by operating activities 200 202 -------- -------- INVESTING ACTIVITIES: Purchases of property, plant and equipment (123) (96) Investments in affiliated companies (12) (19) Other 20 13 -------- -------- Net cash used by investing activities (115) (102) -------- -------- FINANCING ACTIVITIES: Net proceeds from issuance of common stock - 281 Minority partners' contributions to PRC venture 12 - Proceeds from issuance of long-term debt 6 469 Repayments of long-term debt (67) (1,023) Net change in revolving credit facility (31) 158 Net change in other short-term debt (18) (6) Other (6) (18) -------- -------- Net cash used by financing activities (104) (139) -------- -------- Effect of exchange rate changes on cash and cash equivalents (1) - -------- -------- Net decrease in cash and cash equivalents (20) (39) Cash and cash equivalents at beginning of period 89 93 -------- -------- Cash and cash equivalents at end of period $ 69 $ 54 ======= =========
See accompanying notes 4 5 AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 1. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121 ("FAS 121"), Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to Be Disposed Of, resulting in a non-cash charge of $235 million in the first quarter of 1996. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview." NOTE 2. TAX MATTERS As described in Note 5 of Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1995, there are pending German tax issues for the years 1984 through 1990. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." 5 6 PART 1. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Operating income increased 15% to $161 million in the third quarter of 1996 from $140 million in the third quarter of 1995 on strong growth for Air Conditioning Products and an improvement by Plumbing Products, offset partly by a decrease for Automotive Products related to weak markets. Effective January 1, 1996 the Company adopted FAS 121 related to impairment of long-lived assets. As a result, the Company recorded a non-cash charge in the first quarter of 1996 of $235 million, over 90% of which represented the write-down of goodwill, for which there is no tax benefit. Excluding this charge, operating income for the first nine months of 1996 was $454 million, an increase of 6% over the $428 million of operating income in the first nine months of 1995. SUMMARY SEGMENT AND INCOME DATA (in millions) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------ 1996 1995 1996 1995 ---- ---- ---- ---- Sales: Air Conditioning Products $ 920 $ 776 $ 2,602 $ 2,201 Plumbing Products 359 307 1,079 952 Automotive Products 206 233 687 757 ------- ------- ------- ------- Total sales $ 1,485 $ 1,316 $ 4,368 $ 3,910 ======= ======= ======= ======= Operating income before asset impairment loss: Air Conditioning Products $ 111 $ 81 $ 284 $ 209 Plumbing Products 29 23 79 96 Automotive Products 21 36 91 123 ------- ------- ------- ------- 161 140 454 428 Asset impairment loss: Air Conditioning Products -- -- (121) -- Plumbing Products -- -- (114) -- ------- ------- ------- ------- -- -- (235) -- ------- ------- ------- ------- Total operating income 161 140 219 428 Interest expense (49) (51) (151) (162) Corporate and other expenses (27) (22) (80) (69) ------- ------- ------- ------- Income (loss) before income taxes and extraordinary item $ 85 $ 67 $ (12) $ 197 ------- ------- ------- -------
6 7 RESULTS OF OPERATIONS FOR THE THIRD QUARTER AND FIRST NINE MONTHS OF 1996 COMPARED WITH THE THIRD QUARTER AND FIRST NINE MONTHS OF 1995 Consolidated sales for the third quarter of 1996 were $1,485 million, an increase of $169 million, or 13% (14% excluding the unfavorable effects of foreign exchange), from $1,316 million in the third quarter of 1995. Sales increased 19% for Air Conditioning Products and 17% for Plumbing Products, while sales for Automotive Products decreased 12% compared with the third quarter of 1995. Operating income for the third quarter of 1996 was $161 million, an increase of $21 million, or 15% (16% excluding the unfavorable effects of foreign exchange), from $140 million in the third quarter of 1995. Operating income increased 37% for Air Conditioning Products and 26% for Plumbing Products but decreased 42% for Automotive Products. Consolidated sales for the first nine months of 1996 were $4,368 million, an increase of $458 million, or 12% (13% excluding the unfavorable effects of foreign exchange), from $3,910 million in the first nine months of 1995. Sales increased 18% for Air Conditioning Products and 13% for Plumbing Products, while sales for Automotive Products declined 9%. Operating income (excluding the asset impairment charge previously mentioned) was $454 million for the first nine months of 1996, an increase of 6% (7% excluding the unfavorable effects of foreign exchange), compared with $428 million in the first nine months of 1995. Operating income for the first nine months of 1996 increased 36% for Air Conditioning Products but declined 18% for Plumbing Products and 26% for Automotive Products. Sales of Air Conditioning Products increased 19% (with little effect from foreign exchange) to $920 million for the third quarter of 1996 from $776 million for the comparable quarter of 1995. This improvement resulted from substantial volume increases and price gains for applied and unitary commercial systems; higher volumes and prices and a favorable shift to higher-efficiency, higher-capacity products for residential products in the U.S.; and sales by the new operations in the People's Republic of China ("PRC"). Sales of commercial products in the U.S. increased because of improved markets, demand for chiller replacement (due to the ban on CFC refrigerant production), higher prices and gains in market share. Residential sales in the U.S. increased because of strong demand (particularly in the replacement and renovation market), hot weather in some parts of the U.S. and improved economic conditions. International sales for the third quarter of 1996 increased principally because of sales by the new PRC operations, along with volume increases in most other businesses. Sales for Air Conditioning Products for the first nine months of 1996 increased by 18% to $2,602 million from $2,201 million in the first nine months of 1995, primarily for the reasons cited for the third quarter increase. Operating income of Air Conditioning Products increased 37% (with little effect from foreign exchange) to $111 million in the third quarter of 1996 from $81 million in the 1995 quarter, primarily reflecting expanded commercial and residential product sales in the U.S. Despite higher sales (primarily in the PRC), operating income for international operations was essentially unchanged. The new PRC operations were at break even, while results in other operations changed little from levels of the third quarter of 1995. 7 8 Operating income for the first nine months of 1996, excluding the asset impairment charge explained above, increased 36% essentially for the reasons mentioned for the third quarter increase. Sales of Plumbing Products increased 17% (18% excluding the unfavorable effects of foreign exchange) to $359 million in the third quarter of 1996 from $307 million in the third quarter of 1995 primarily as a result of sales by Porcher, the French manufacturer acquired in the fourth quarter of 1995, and higher sales in North and Latin American operations. Excluding Porcher and foreign exchange effects, 1996 third quarter sales increased 3% compared with the 1995 quarter, as a result of an 8% increase for U.S. operations, while the international group was essentially flat despite the Latin American gains. Sales in the U.S. increased as a result of higher volumes (primarily in the retail market channel) and higher prices. For the international group, volume gains in Latin American operations (primarily in Mexico) were offset by a sales decline in Europe, particularly in Germany, Italy and France which continued to experience weak economic conditions. Sales of Plumbing Products for the first nine months of 1996 increased 13% (14% excluding the unfavorable effects of foreign exchange) to $1,079 million from $952 million in the first nine months of 1995. Excluding Porcher and foreign exchange effects, sales decreased by 1% for the nine months of 1996 compared with the 1995 period as a result of the same factors affecting the third quarter results and because of a five-week strike in the Philippines that occurred in the first quarter of 1996. Operating income of Plumbing Products increased 26% (27% excluding the unfavorable effects of foreign exchange) to $29 million for the third quarter of 1996 from $23 million for the third quarter of 1995 as a result of a solid gain in U.S. operating income, partly offset by a decline in international operations. In the U.S., operating income improved because of the higher sales, benefits of lower-cost product sourcing from the Company's Mexican facilities and manufacturing and operating cost improvements. For international operations, operating income gains in Latin America were offset by declines in the weak European markets, particularly in Germany and France and, to a lesser extent, in Italy. In addition, margins in France were lower than in the prior year due to increased costs. The Company has undertaken actions to better assimilate Porcher into its European plumbing products operations and to improve operating performance. Despite a gain for U.S. operations, operating income for the first nine months of 1996, excluding the aforementioned asset impairment charge, declined by 18% (17% excluding foreign exchange effects) from the first nine months of 1995 because of a decline in international operations in the first half of 1996, including the effects of the first quarter Philippines strike. Sales of Automotive Products for the third quarter of 1996 decreased 12% (10% excluding the unfavorable effects of foreign exchange) to $206 million from $233 million in the third quarter of 1995, primarily because of a decline in European commercial vehicle production as a result of market weakness and order delays at several large customers in anticipation of new truck model introductions. Unit volume of truck and bus production in western Europe decreased from the third quarter of 1995, especially in Germany and France. Trailer, export and Brazilian markets also decreased, contributing to the sales decline. Sales of Automotive Products for the first nine months of 1996 decreased 9% (7% excluding the unfavorable effects of foreign exchange) to $687 million from $757 million in the first nine months of 1995, primarily for the reasons which caused declines in the third quarter. 8 9 Operating income for Automotive Products for the third quarter of 1996 was $21 million, a decrease of 42% (39% excluding the unfavorable effects of foreign exchange) from $36 million in the third quarter of 1995. This reflected the lower sales and start-up costs associated with new product introductions on 1997 truck models, offset partly by productivity improvements. Operating income for Automotive Products for the first nine months of 1996 decreased by 26% (24% excluding the unfavorable effects of foreign exchange) to $91 million from $123 million in the first nine months of 1995, principally for the same reasons described with respect to the third quarter. FINANCIAL REVIEW Interest expense decreased in the third quarter and first nine months of 1996 compared to the year-earlier periods, primarily as a result of reduced debt together with lower overall interest rates under the Company's 1995 bank credit agreement (the "1995 Credit Agreement"). The increase in corporate and other expenses for the third quarter and nine months of 1996 is primarily attributable to spending for corporate development and lower equity in the net results of unconsolidated joint ventures. Income tax provisions for the three months and nine months ended September 30, 1996 were $29 million and $80 million, respectively, compared with provisions of $24 million and $78 million in the corresponding periods of 1995. Effective income tax rates for the third quarter and nine months of 1996 were 34.5% and 35.6% of pretax income (excluding the asset impairment charge in the nine month period on which there is no tax benefit), compared with rates of 35.2% and 39.5% in the corresponding year-earlier periods. Both third quarter periods reflect reductions in the estimated full year tax rates. The lower effective tax rates resulted from increased levels of U.S. income (enabling the Company to recognize previously unrecognized tax benefits in both 1995 and 1996) and, in 1996, from proportionately greater pretax income earned in the U.S. (at a lower effective rate) compared to that earned in higher-rate jurisdictions in Europe and elsewhere. As a result of the redemption of debt in the first quarter of 1995 upon completion of a refinancing, the first nine months of 1995 included an extraordinary charge of $30 million attributable to the write-off of unamortized debt issuance costs, for which no tax benefit was available. CASH FLOWS Net cash provided by operating activities, after cash interest paid of $87 million, was $200 million for the first nine months of 1996, compared with $202 million of net cash provided for the similar period of 1995. Higher income before extraordinary item (excluding the non-cash asset impairment loss of $235 million) along with improved working capital utilization were offset by higher payments on liabilities, especially income taxes. Inventory turnover as of September 30, 1996, improved one full turn from September 30, 1995, and working capital as a percent of sales improved nearly one percentage point. Capital expenditures for the first nine months of 1996 were $135 million, including $12 million of investments in affiliated companies, compared with 9 10 capital expenditures of $115 million in the first nine months of 1995, including $19 million of investments in affiliated companies. Scheduled debt repayments of $50 million were made during the first nine months of 1996. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1996, the Company had outstanding borrowings of $145 million under the revolving facilities available under the 1995 Credit Agreement. There was $347 million available under such revolving facilities after reduction for borrowings and for $58 million of letters of credit usage. In addition, at September 30, 1996, the Company's foreign subsidiaries had $70 million available under overdraft facilities which can be withdrawn by the banks at any time. The Company has entered into a financial services partnership, American Standard Financial Services, with Transamerica Commercial Finance Corporation, a subsidiary of Transamerica Corporation, to provide a wide range of financial services to support sales of the Company's products while reducing cash requirements to expand its business. The partnership will offer inventory and consumer financing, commercial leasing and asset-based lending programs, which are expected to enhance the Company's cash flow. The 1995 Credit Agreement contains covenants that limit certain activities of the Company and that require the Company to meet certain financial tests. Certain debt instruments also contain financial tests and other covenants. The Company believes it is currently in compliance with all such covenants. As described in Note 5 of Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1995, there are pending German Tax issues for the years 1984 through 1990. There has been no change in the status of these issues since that report was filed. 10 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings. For a discussion of German tax issues see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" in Part I of this report which is incorporated herein by reference. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The exhibits listed on the accompanying Index to Exhibits are filed as part of this quarterly report on Form 10-Q. (b) Reports on Form 8-K. During the quarter ended September 30, 1996, the Company filed no reports on Form 8-K. 11 12 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN STANDARD COMPANIES INC. -------------------------------- By: G. Ronald Simon Vice President and Controller (Principal Accounting Officer) January 23, 1997 12 13 AMERICAN STANDARD COMPANIES INC. INDEX TO EXHIBITS (The File Number of the Registrant, American Standard Companies Inc. is 1-11415)
Exhibit No. Description ----------- ----------- (27) Financial Data Schedule
13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000,000 U.S. DOLLARS 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1 67 2 864 35 432 1,418 1,492 564 3,445 1,270 1,738 0 0 1 (441) 3,445 4,368 4,368 3,282 3,282 947 9 151 (12) 80 (92) 0 0 0 (92) (1.18) 0
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