American Standard Reports 2001 Fourth Quarter and Full-Year Financials
PISCATAWAY, N.J., Feb. 5 -- American Standard Companies Inc. today announced 2001 earnings of $4.53 per diluted share, excluding job reduction expenses, up 4 percent from a year ago. Including $53 million in expenses for the reduction of 1,700 salaried positions, diluted per share earnings were $4.04. Revenues were $7.5 billion, down 2 percent from the record-setting prior year. Free cash flow for the year was a record $309 million, up 49 percent from a year ago.
American Standard's adjusted fourth quarter earnings, excluding job reduction expenses, were 76 cents per diluted share, down 6 percent from a year ago. Including the job reduction expenses, earnings for the quarter were 27 cents per diluted share. Revenues were $1.75 billion, down 1 percent from the prior year. Free cash flow for the quarter was $138 million. Fourth quarter and full-year earnings were consistent with the company's October estimate.
``We delivered solid performance in a challenging environment,'' said Fred Poses, chairman and chief executive officer. ``We made progress on many fronts -- generally outperforming our markets, strengthening our leadership positions, benefiting from our productivity initiatives, generating strong cash flow and reducing our debt by more than 10 percent or $260 million.
``Like most companies, we felt the effects of a weak global economy,'' said Poses. ``We took necessary strong action to reduce our cost structure by eliminating 1,700 salaried positions, or 8 percent of our salaried workforce. The $53 million in job reduction expenses is about double what we projected in October, reflecting more job cuts than originally planned. The job reductions will save an estimated $55 million pre-tax a year.
``During the year, our consumer businesses continued to gain momentum, while our business-to-business equipment operations felt the biggest impact from economic conditions. Even as we reduced jobs, we maintained our production and marketing capabilities, investing in new products, keeping our 'feet on the street' and preparing for the eventual economic recovery.
``We are confident in the fundamentals of our markets and our businesses as well as the power of our growth and productivity initiatives. In the year ahead, we expect to achieve even greater success with our initiatives and stronger financial performance as the economy improves.
``Anticipating a weak first quarter and a stronger second half, we estimate 2002 earnings of $5.00-$5.20 per diluted share, including 40 cents per share for adoption of new goodwill accounting standards. For the year, we expect a sales increase of 0-2 percent, with first quarter sales declining 2-3 percent compared with first quarter a year ago. Because of soft market conditions, lower pricing and cost increases, we anticipate first quarter earnings of 74-79 cents per share, including 9 cents per share for adoption of new goodwill accounting standards.
FULL-YEAR 2001 FINANCIAL HIGHLIGHTS
Adjusted net income for the year was $331 million, up 5 percent over the prior year. Including the job reduction expenses of $53 million, net income was $295 million, down 6 percent from a year ago. Operating margin was 11.1 percent, the same as last year's record, or 10.5 percent including job reduction expenses. Segment income excluding the job reduction expenses was $830 million, down 1 percent, or $787 million including the expenses.
To provide meaningful year-over-year comparisons, the following discussion of segment results excludes the impact of job reduction expenses for the fiscal year and fourth quarter, which came from all the units as well as corporate functions.
AIR CONDITIONING SYSTEMS AND SERVICES sales were $4.7 billion, down 1 percent year-over-year. Margin increased 0.1 percentage points to 11.3 percent, with margins up significantly in the residential business. Segment income decreased 1 percent to $528 million. Residential share gains and increased sales of high efficiency units lessened the impact on segment income from lower equipment sales in the commercial business and cost escalations.
PLUMBING PRODUCTS sales were $1.8 billion, up 1 percent over the prior year (up 4 percent in local currencies). Margin was 8.9 percent, or a decrease of 0.1 percentage points. Segment income was $162 million, flat with the prior year (an increase of 5 percent in local currencies). Higher prices and cost savings from initiatives offset increased labor costs and investments in manufacturing productivity, product development and marketing programs.
VEHICLE CONTROL SYSTEMS sales for the year were $960 million, down 10 percent from last year. In local currencies, sales were down 6 percent. Sales declined because of weak markets in the U.S. and Europe, where truck and bus production declined 35 percent and 8 percent respectively. Increased content per vehicle and geographic expansion mitigated the negative impact on sales of the markets' decline. Margin rose 0.8 percentage points to 14.6 percent. Segment income fell 5 percent to $140 million (up 1 percent in local currencies). Productivity initiatives reduced the negative impact of lower sales on segment income.
FOURTH QUARTER SUMMARY
Adjusted net income for the quarter was $56 million, down 3 percent. Including the job reduction expenses, net income was $20 million. Operating margin for the quarter was 8.8 percent, down 0.7 percentage points from the fourth quarter last year. Excluding the job reduction expenses, segment income was $154 million, down 8 percent from the prior year, or $111 million, including the expenses. The segment income primarily reflected an unfavorable sales mix, which was partially offset by the positive effects of productivity initiatives.
AIR CONDITIONING SYSTEMS AND SERVICES fourth quarter sales were $1.07 billion, down 3 percent year-over-year. Margin declined from 9.1 percent to 7.6 percent, and segment income decreased 20 percent to $81 million. Strong residential sales growth, increased sales of residential high efficiency units and growth in commercial parts, services and solutions lessened the impact of lower commercial equipment sales and lower prices caused by weak market demand.
During the quarter, the company and Daikin Industries Ltd.'s air conditioning unit, a leading Japanese manufacturer with strong global positions, agreed to form a comprehensive global strategic alliance to source and sell each other's products. The company signed new global/national accounts, including Basin Electric Power, Horizon Bay, Chevron Canada Limited, Dominos and Williams Travel Center. Home Depot has agreed to use Trane commercial units in at least 80 percent of its new stores going forward, which will generate about $20 million in new air conditioning revenues. Under a 15-year performance agreement worth more than $11 million, the company will provide the Harlandale school district in San Antonio, Texas, with air conditioning solutions and service at seven different schools.
Other large air conditioning contracts signed during the quarter included ones with ABN Amro, one of the world's leading financial institutions operating in over 70 countries; Armada/Hoffler, a prominent commercial real estate developer and general contractor, for the first phase of The Town Center of Virginia Beach, a 17-block, $300 million, mixed-use development of upscale retail, office, residential, deluxe hotel and cultural facilities; Exelon, one of the nation's largest utilities, for a Chicago district cooling plant; Georgia Pacific's Dixie Products Division for its Ft. Smith, Arkansas, location; One New York Plaza, for a 5,000-ton chiller retrofit at the 50-story office and retail complex in New York's financial district; the New York Power Authority; Premier, Inc., a strategic healthcare alliance owned by more than 200 of the nation's leading hospital and healthcare systems that operate or are affiliated with 1,600 hospital facilities; the United States Army Field Artillery Center and Fort Sill in Oklahoma; and The Washington Post.
PLUMBING PRODUCTS fourth quarter sales were $440 million, up 6 percent over last year. Margin increased 1.4 percentage points to 9.1 percent, and segment income was up 25 percent to $40 million. Increased sales in U.S. retail markets and better productivity, particularly in Europe, contributed to the improved segment income.
During the quarter, Plumbing Products introduced new products around the world, including the Venice 21 bathroom suite, which won a prestigious design award in Germany, and more than 25 new products under the American Standard and Armitage Shanks brands in China. The company received two Vendor of the Year awards for its faucets from Home Depot companies -- one, for the second year in a row, from EXPO Design Center in the U.S. and one from Home Depot in Canada. In addition, the company announced the acquisition of Borma, a leading brass faucets and fittings manufacturer in Denmark, with an extensive line of luxury kitchen and bathroom fittings as well as products for commercial use sold in 25 countries.
VEHICLE CONTROL SYSTEMS fourth quarter sales were $238 million, down 3 percent from $245 million in the same period last year. Margin decreased 0.4 percentage points to 13.9 percent, and segment income fell 6 percent to $33 million. Productivity initiatives largely offset the impact of lower sales and product mix on segment income.
During the quarter, SAF, a leading European trailer axle manufacturer, named WABCO its main supplier for air disc brakes. In addition, WABCO began production of its automated transmission system for a new range of heavy-duty trucks being introduced this year in Europe by a global truck manufacturer. The fully automatic transmission system provides greater comfort and safety, as well as lower fuel consumption and lower weight.
PLEASE NOTE: American Standard Chairman and CEO Frederic Poses and Chief Financial Officer Peter D'Aloia will discuss the company's performance and provide guidance on a two-way conference call for financial analysts at 10 a.m. Eastern daylight time today. Reporters and the public are invited to listen to the call, which will be broadcast and archived on American Standard's Web site. The Web site address is http://www.americanstandard.com. For those unable to connect to the company's Web site, you may listen via telephone. The dial-in number is (913) 981-4910. Please call five to ten minutes prior to the scheduled start time. The number of telephone connections is limited. A replay of the conference call will be available from 1 p.m. Eastern time today until midnight on February 13. For the replay, please dial (719) 457-0820. The replay access code is 638196.
Comments in this news release contain certain forward-looking statements, which are based on management's good faith expectations and belief concerning future developments. Actual results may differ materially from these expectations as a result of many factors, relevant examples of which are set forth in the company's 2000 Annual Report on Form 10-K and in the ``Management's Discussion and Analysis'' section of the company's Quarterly Reports on Form 10-Q. American Standard does not undertake any obligation to update such forward-looking statements.
American Standard is a global manufacturer with market leading positions in three businesses: air conditioning systems and service, sold under the Trane® and American Standard® brands for commercial, institutional and residential buildings; plumbing products, sold under such brands as American Standard® and Ideal Standard®; and vehicle control systems, including electronic braking and air suspension systems, sold under the WABCO® name to the world's leading manufacturers of heavy-duty trucks, buses, SUVs and luxury cars. The company employs approximately 60,000 people and has manufacturing operations in 27 countries. American Standard is included in the Standard & Poor's MidCap 400 Index.
Additional information is available at http://www.americanstandard.com.
U.S. callers can listen to the latest news release and other corporate
information by dialing (888) ASD-NEWS.
American Standard Companies Inc.
Consolidated Statement of Operations
(Unaudited)
In millions Three Months Ended December 31,
except per share data 2001 2000
Adjusted Adjusted
2001 (a) 2000 (b)
Sales
Air Conditioning Systems and
Services $1,072 $1,110
Plumbing Products 440 414
Vehicle Control Systems 238 245
Total $1,750 $1,769
Segment income
Air Conditioning Systems and
Services $68 $81 $101 $101
Plumbing Products 26 40 32 32
Vehicle Control Systems 17 33 35 35
Total 111 154 168 168
Equity in net income of
unconsolidated joint ventures 4 4 4 4
115 158 172 172
Gain on sale of business -- -- 57 --
Restructuring and asset
impairment charge -- -- (70) --
115 158 159 172
Interest expense 36 36 50 50
Corporate and other expenses 42 32 26 26
Income before income taxes 37 90 83 96
Income taxes 17 34 24 38
Net income $20 $56 $59 $58
Net income per common share:
Basic $0.28 $0.78 $0.85 $0.84
Diluted $0.27 $0.76 $0.82 $0.81
Average basic outstanding
common shares 71.9 71.9 69.4 69.4
Average diluted outstanding
common shares 73.3 73.3 71.6 71.6
(a) Excludes $53 million of employee termination costs, including
$13 million for Air Conditioning Systems and Services, $14
million for Plumbing Products, $16 million for Vehicle Control
Systems and $10 million for Corporate.
(b) Excludes the gain on sale of the Calorex Water Heater business
and the restructuring and asset impairment charges
consisting of $75 million of charges for 2000 and a $5 million
reversal of prior year charges.
American Standard Companies Inc.
Consolidated Statement of Operations
(Unaudited)
In millions Twelve Months Ended December 31,
except per share data 2001 2000
Adjusted Adjusted
2001 (a) 2000 (b)
Sales
Air Conditioning Systems and
Services $4,692 $4,726
Plumbing Products 1,813 1,803
Vehicle Control Systems 960 1,069
Total $7,465 $7,598
Segment income
Air Conditioning Systems and
Services $515 $528 $531 $531
Plumbing Products 148 162 162 162
Vehicle Control Systems 124 140 147 147
Total 787 830 840 840
Equity in net income of
unconsolidated joint ventures 19 19 30 30
806 849 870 870
Gain on sale of business -- -- 57 --
Restructuring and asset
impairment charge -- -- (70) --
806 849 857 870
Interest expense 169 169 199 199
Corporate and other expenses 161 151 149 149
Income before income taxes 476 529 509 522
Income taxes 181 198 194 208
Net income $295 $331 $315 $314
Net income per common share:
Basic $4.13 $4.63 $4.49 $4.48
Diluted $4.04 $4.53 $4.36 $4.35
Average basic outstanding
common shares 71.5 71.5 70.1 70.1
Average diluted outstanding
common shares 73.1 73.1 72.2 72.2
(a) Excludes $53 million of employee termination costs, including
$13 million for Air Conditioning Systems and Services,
$14 million for Plumbing Products, $16 million for Vehicle
Control Systems and $10 million for Corporate.
(b) Excludes the gain on sale of the Calorex Water Heater business
and the restructuring and asset impairment charges consisting of
$75 million of charges for 2000 and a $5 million reversal of
prior year charges.
Data Supplement Sheet
This Data Supplement Sheet includes information on backlog and information excluding the effect of foreign exchange on operating results. With approximately half of the company's business from outside the U.S., changes in exchange rates can have significant impact on results when reported in U.S. Dollars.
Three Months Ended Twelve Months Ended
In millions December 31, December 31,
(2) % Chg (2) % Chg
% Chg (3) vs. % Chg (3) vs.
(1) vs. Adj. Adj. (1) vs. Adj. Adj.
2001 2000 2000 2000 2001 2000 2000 2000
Air Conditioning Systems
and Services
Sales 1,072 -3% 1,108 -3% 4,692 -1% 4,686 0%
Segment Income
- adjusted 81 -20% 100 -19% 528 -1% 531 -1%
Margin 7.6% -1.5 pts 9.0% -1.4 pts 11.3% 0.1pt 11.3% 0 pts
Backlog 656 -4% 675 -3%
Plumbing Products
Sales 440 6% 415 6% 1,813 1% 1,751 4%
Segment Income
- adjusted 40 25% 32 25% 162 0% 155 5%
Margin 9.1% 1.4 pts 7.7% 1.4 pts 8.9% -0.1pt 8.9% 0 pts
Vehicle Control Systems
Sales 238 -3% 246 -3% 960 -10% 1,017 -6%
Segment Income
- adjusted 33 -6% 36 -8% 140 -5% 139 1%
Margin 13.9% -0.4pts 14.6% -0.7pts 14.6% 0.8pts 13.7% 0.9pts
Backlog 382 -1% 365 5%
Total Company
Sales 1,750 -1% 1,769 -1% 7,465 -2% 7,454 0%
Segment Income
- adjusted 154 -8% 168 -8% 830 -1% 825 1%
Margin 8.8% -0.7 pts 9.5% -0.7 pts 11.1% 0 pts 11.1% 0 pts
(1) Segment Income in 2001 excludes expenses for the elimination of
salaried positions.
(2) Segment Income in 2000 excludes the sale of the Calorex Water
Heater business and the restructuring and asset impairment charges.
(3) Segment Income in 2000 Adj. excludes the sale of the Calorex Water
Heater business and the restructuring and asset impairment charges
and is shown at current exchange rates.
American Standard Companies Inc.
Consolidated Balance Sheet
(Unaudited)
In millions December 31, December 31,
2001 2000
Current assets
Cash and cash equivalents $82 $85
Accounts receivable 998 1,027
Inventories 657 606
Other current assets 159 161
Total current assets 1,896 1,879
Net facilities 1,363 1,383
Goodwill 929 935
Other assets 643 548
$4,831 $4,745
Current liabilities
Short-term debt $70 $96
Accounts payable 604 660
Accrued liabilities and taxes 1,014 1,051
Total current liabilities 1,688 1,807
Long-term debt 2,142 2,376
Other long-term liabilities
Reserve for postretirement benefits 489 408
Deferred taxes on income 85 45
Other 517 502
Total liabilities 4,921 5,138
Stockholders' deficit
Common stock, capital surplus and other 703 610
Treasury stock (505) (453)
Retained earnings (accumulated deficit) 57 (238)
Deferred loss on hedge contracts (1) --
Foreign currency translation effects (332) (312)
Minimum pension liability (12) --
Total stockholders' deficit (90) (393)
$4,831 $4,745