American Standard Reports Record Quarter, Full-Year Revenues and Diluted EPS
Fourth-Quarter Diluted EPS Increases 13 Percent; Full-Year Diluted EPS Up 9 Percent
PISCATAWAY, N.J., Jan. 26 -- American Standard Companies Inc. today announced record fourth-quarter and full-year revenues, net income and diluted earnings per share. Fourth-quarter earnings were $1.14 per diluted share, up 13 percent from $1.01 a year ago, and revenues were $2.118 billion, up 13 percent from $1.877 billion a year ago. Net income rose to $84.9 million from $73.8 million, an increase of about 15 percent.
American Standard's full-year earnings were $5.50 per diluted share, up 9 percent from $5.04 a year ago. Revenues were $8.568 billion, up 10 percent from $7.795 billion a year ago. Net income rose to $405.2 million from $371 million, up 9 percent. For the year, the company generated $651.2 million in net cash provided by operating activities, and $458.7 million in free cash flow. The company reduced debt by $280 million to $1.679 billion. American Standard previously had estimated earnings per diluted share of $1.04-$1.14 for the quarter and $5.40-$5.50 for the year.
"We finished 2003 with a strong fourth quarter and are well-positioned for further gains in 2004," said Fred Poses, chairman and chief executive officer. "We delivered sales growth and solid earnings performance, and we continued to strengthen our balance sheet. Our investments in new products and improved marketing, our productivity efforts, and our operating cost discipline continued to pay off."
During the quarter, the company resolved a German tax audit and received research and development tax credits in the U.S. The total tax resolution benefited net income by $26.7 million. In addition, job elimination expenses reduced net income by $27.3 million after taxes. Overall, the combined impact of the tax benefit and the job elimination expenses reduced earnings per diluted share by one cent.
"Our fourth-quarter sales growth came from every part of the business," said Poses. "Both Vehicle Control Systems and Bath and Kitchen delivered solid operating margin performance, excluding the impact of foreign exchange and job elimination expenses. However, continued weakness in the U.S. commercial air conditioning equipment market limited our overall margin performance. The fourth-quarter job actions, which will help us compete more effectively in our markets, will produce savings in 2004 and beyond.
"For 2004, we expect sales growth of about 4-6 percent and earnings of $6.10-$6.60 per diluted share, up 11-20 percent. We expect to generate more than $720 million in net cash provided by operating activities and more than $500 million in free cash flow, up from our record 2003 results. We'll use our cash to reduce our debt to less than $1.5 billion and increase our stock buyback," said Poses. "For the first quarter, sales should be up about 10 percent and earnings in the range of $1.02-$1.12 per diluted share, up 17-29 percent."
To facilitate understanding of fourth-quarter and full-year results, a series of tables follow this news release. They show reported results as well as results adjusted to exclude the impact of foreign exchange, job elimination expenses and tax resolution benefits.
FOURTH-QUARTER BUSINESS HIGHLIGHTS
AIR CONDITIONING SYSTEMS AND SERVICES -- During the quarter, the company won a contract to supply air conditioning and heating systems as well as bath and kitchen products for Houston Springs Development's new 2,000-home community in Perry, Ga. It will include a golf course, clubhouse and community center. MeriStar, a large hotel REIT, signed an agreement for both air conditioning and bathroom products as part of its capital improvement program. Interstate, the largest independent hotel management company, operates MeriStar's 89 hotels.
Other large commercial air conditioning contracts signed during the quarter include ones for New York construction manager Newmark Construction Services and developer Nathan Berman, who are converting large, historically significant office buildings into residential apartments; Constellation Energy Source for the Nashville (Tennessee) district energy system; Garanada Commercial Center for General Organization of Social Insurance in Riyadh, Saudi Arabia; Grand Hyatt in Jakarta, Indonesia; Hong Kong Movie City production studios; Kowloon Bay office building in Hong Kong; Plaza Indonesia Shopping Center in Jakarta; Strong Museum in Rochester (New York); and The Woodruff Arts Center, The High Museum of Art and the College of Art, all in Atlanta (Georgia). The company also added five global/national accounts.
BATH AND KITCHEN -- Bath and Kitchen's first model of the new Champion(TM) toilet with America's Best (TM) Flushing System launched successfully at Home Depot stores throughout the U.S. and Canada, supported by press, catalog and consumer marketing. The Champion(TM) continues to sell well in the wholesale channel, with additional models planned for first quarter. During the quarter, Lowe's introduced the Retrospect suite of bathroom fixtures and promoted the Sottini line. Around the world, Bath and Kitchen launched product lines, including Celia, Tonic and the Marc Newson designer suite, in several European countries. In Eastern Europe, Bath and Kitchen distributed its first region-wide catalog to support sales that grew rapidly last year. The effort to enhance distribution continued with 400 new showrooms in Europe for the luxury JADO line and the redesign of more than 1,000 Ideal Standard displays in Germany. Trade events and promotions also took place in France, Italy, Thailand, the U.K. and Vietnam.
VEHICLE CONTROL SYSTEMS -- During the quarter, PACCAR, a world leader in commercial vehicles, started production on its medium- and heavy-duty DAF trucks with WABCO's upgraded electronic braking system, as well as its electronic stability control, which DAF will offer as an option. Since October 2003, GM's Buick Rainier has been equipped with WABCO's air suspension system as standard equipment. MAN South Africa, a subsidiary of the leading international truck and bus manufacturer, named WABCO as supplier of the year in that country. In addition, WABCO earned a group ISO quality certification, based on international automotive industry standards, for about a dozen European production and sales facilities.
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 9:30 a.m. EST today. Related financial charts, reconciliation between GAAP and non-GAAP financial measures, and certain other information to be discussed on the conference call are available under the heading, "American Standard's Fourth Quarter/2003 Results" on the company's Web site, www.americanstandard.com. Reporters and the public are invited to listen to the call, which will be broadcast on the Web site and archived for one year. For those unable to connect to the company's Web site, you may listen via telephone. The dial-in number is (913) 981-5558. Please call five to ten minutes before the scheduled start time. The number of telephone connections is limited. A replay of the conference call will be available from 1:30 p.m. EST today until 11:30 p.m. EST on Feb. 2. For the replay, please dial (719) 457-0820. The replay access code is 211515.
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 2002 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 services, sold under the Trane(R) and American Standard(R) brands for commercial, institutional and residential buildings; bath and kitchen products, sold under such brands as American Standard(R) and Ideal Standard(R); and vehicle control systems, including electronic braking and air suspension systems, sold under the WABCO(R) 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 29 countries. American Standard is included in the S&P 500.
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 2003
2003 Adjusted (1)
2002
Sales
Air Conditioning Systems and
Services $1,185.4 $1,095.1
Bath & Kitchen 566.4 503.3
Vehicle Control Systems 365.9 278.5
Total $2,117.7 $1,876.9
Segment income
Air Conditioning Systems and
Services $92.8 $101.2 $102.6
Bath & Kitchen 25.8 46.6 35.7
Vehicle Control Systems 39.5 49.2 36.4
Total 158.1 197.0 174.7
Equity in net income of
unconsolidated joint ventures 7.4 7.4 6.9
165.5 204.4 181.6
Interest expense 28.1 28.1 31.2
Corporate and other expenses 52.3 52.3 39.7
Income before income taxes 85.1 124.0 110.7
Income taxes 0.2 38.5 36.9
Net income $84.9 $85.5 $73.8
Net income per common share:
Basic $1.17 $1.18 $1.02
Diluted $1.14 $1.15 $1.01
Average outstanding common shares:
Basic 72.7 72.7 72.4
Diluted 74.5 74.5 73.6
(1) Segment income excludes $38.9 million for job elimination expense,
comprised of $8.4 million for Air Conditioning Systems and Services,
$20.8 million for Bath & Kitchen, $9.7 million for Vehicle Control
Systems, and income taxes excludes the related $11.6 million tax
benefit (collectively $27.3 million net, or $0.37 per diluted
share). Income taxes also excludes a $26.7 million benefit ($0.36
per diluted share) resulting from resolution of a German tax audit
and receipt of R&D tax credits in the U.S. during the fourth quarter
of 2003. Management analyzes year-over-year changes in its
operating results with and without the effect of job elimination
expense, the related tax benefits, and tax settlements and believes
that shareholders do the same. Accordingly, management believes it
is useful to shareholders to present the analysis in this manner.
American Standard Companies Inc.
Consolidated Statement of Operations
(Unaudited)
In millions Twelve Months Ended December 31,
except per share data 2003
2003 Adjusted (1) 2002
Sales
Air Conditioning Systems and
Services $4,974.6 $4,743.9
Bath & Kitchen 2,234.8 1,994.4
Vehicle Control Systems 1,358.2 1,057.1
Total $8,567.6 $7,795.4
Segment income
Air Conditioning Systems and
Services $521.6 $530.0 $537.4
Bath & Kitchen 139.5 160.3 154.7
Vehicle Control Systems 176.6 186.3 138.7
Total 837.7 876.6 830.8
Equity in net income of
unconsolidated joint ventures 25.9 25.9 26.6
863.6 902.5 857.4
Interest expense 117.0 117.0 129.0
Corporate and other expenses 197.4 197.4 172.2
Income before income taxes 549.2 588.1 556.2
Income taxes 144.0 182.3 185.2
Net income $405.2 $405.8 $371.0
Net income per common share:
Basic $5.60 $5.61 $5.13
Diluted $5.50 $5.51 $5.04
Average outstanding common shares:
Basic 72.3 72.3 72.3
Diluted 73.7 73.7 73.6
(1) Segment income excludes $38.9 million for job elimination expense,
comprised of $8.4 million for Air Conditioning Systems and Services,
$20.8 million for Bath & Kitchen, $9.7 million for Vehicle Control
Systems, and income taxes excludes the related $11.6 million tax
benefit (collectively $27.3 million net, or $0.37 per diluted
share). Income taxes also excludes a $26.7 million benefit ($0.36
per diluted share) resulting from resolution of a German tax audit
and receipt of R&D tax credits in the U.S. during the fourth quarter
of 2003. Management analyzes year-over-year changes in its
operating results with and without the effect of job elimination
expense, the related tax benefits, and tax settlements and believes
that shareholders do the same. Accordingly, management believes it
is useful to shareholders to present the analysis in this manner.
American Standard Companies Inc.
Data Supplement Sheet
This Data Supplement Sheet includes information on backlog and information excluding the effect of foreign exchange translation on operating results and job elimination expense. Approximately half of the Company's business is outside the U.S., therefore changes in exchange rates can have a significant impact on results when reported in U.S. Dollars. In addition, management analyzes year-over-year changes in operating results with and without the effect of job elimination expense and believes shareholders do the same. Accordingly, management believes that excluding these effects is helpful in assessing the overall performance of the business.
In millions Three Months Ended December 31,
Reported Reported % Chg vs. % Chg vs. % Chg vs. 2002
2003 2002 2002 2002 (1) Excl. FX (2)
Air Conditioning
Systems and
Services
Sales 1,185.4 1,095.1 8% 8% 6%
Segment Income 92.8 102.6 -9% -1% -3%
Operating Margin 7.8% 9.4% -1.6 pts -0.9 pts -0.8 pts
Backlog -- -- -- -- --
Bath & Kitchen
Sales 566.4 503.3 13% 13% 5%
Segment Income 25.8 35.7 -28% 30% 20%
Operating Margin 4.6% 7.1% -2.5 pts 1.1 pts 1.0 pts
Vehicle Control
Systems
Sales 365.9 278.5 31% 31% 12%
Segment Income 39.5 36.4 9% 35% 18%
Operating Margin 10.8% 13.1% -2.3 pts 0.3 pts 0.7 pts
Backlog -- -- -- -- --
Total Company
Sales 2,117.7 1,876.9 13% 13% 7%
Segment Income 158.1 174.7 -10% 13% 6%
Operating Margin 7.5% 9.3% -1.8 pts 0.0 pts 0.0 pts
Twelve Months Ended December 31,
Reported Reported % Chg vs. % Chg vs. % Chg vs. 2002
2003 2003 2002 2002 (1) Excl. FX (2)
Air Conditioning
Systems and
Services
Sales 4,974.6 4,743.9 5% 5% 3%
Segment Income 521.6 537.4 -3% -1% -2%
Operating Margin 10.5% 11.3% -0.8 pts -0.6 pts -0.6 pts
Backlog 592.1 601.5 -2% -5%
Bath & Kitchen
Sales 2,234.8 1,994.4 12% 12% 4%
Segment Income 139.5 154.7 -10% 4% -5%
Operating Margin 6.2% 7.8% -1.6 pts -0.6 pts -0.7 pts
Vehicle Control
Systems
Sales 1,358.2 1,057.1 28% 28% 10%
Segment Income 176.6 138.7 27% 34% 15%
Operating Margin 13.0% 13.1% -0.1 pts 0.6 pts 0.6 pts
Backlog 612.0 467.9 31% 12%
Total Company
Sales 8,567.6 7,795.4 10% 10% 5%
Segment Income 837.7 830.8 1% 6% 0%
Operating Margin 9.8% 10.7% -0.9 pts -0.5 pts -0.5 pts
(1) Excluding the impact of job elimination expense of $8.4 million for
Air Conditioning Systems and Services, $20.8 million for Bath &
Kitchen, and $9.7 million for Vehicle Control Systems.
(2) Excluding the impact of foreign exchange translation and job
elimination expense.
American Standard Companies Inc.
Consolidated Balance Sheet
(Unaudited)
In millions December 31, December 31,
2003 2002
Current Assets:
Cash and cash equivalents $111.7 $96.6
Accounts receivable, less
allowance for doubtful
accounts 1,032.6 881.4
Dec. 2003 - $45.3; Dec.
2002 - $38.1
Inventories:
Finished products 571.8 486.1
Products in process 181.4 138.1
Raw materials 156.7 146.5
909.9 770.7
Future income tax benefits 161.0 48.7
Other current assets 285.3 217.0
Total Current Assets 2,500.5 2,014.4
Facilities, less accumulated
depreciation 1,515.4 1,430.1
Dec. 2003 - $963.5; Dec. 2002
- $773.2
Goodwill, less accumulated
amortization: 1,140.4 1,012.8
Dec. 2003 - $413.1; Dec. 2002
- $370.9
Capitalized software, less
accumulated amortization: 239.3 242.0
Dec. 2003 - $202.6; Dec. 2002
- $131.7
Debt issuance costs, net of
accumulated amortization: 21.2 26.5
Dec. 2003 - $22.4; Dec. 2002 -
$17.4
Other assets 471.8 418.0
Total Assets $5,888.6 $5,143.8
Current Liabilities:
Loans payable to banks $49.8 $36.3
Current maturities of long-
term debt 2.5 4.5
Accounts payable 674.4 601.6
Accrued payrolls 294.3 281.0
Current portion of warranties 153.1 118.0
Taxes on income 136.0 98.9
Other accrued liabilities 733.3 525.3
Total Current Liabilities 2,043.4 1,665.6
Long-Term Debt 1,626.8 1,918.4
Other Long-Term Liabilities
Reserve for post-retirement
benefits 657.4 623.3
Long term portion of
warranties 202.9 197.9
Deferred taxes on income 210.1 108.9
Other liabilities 425.7 399.9
Total Liabilities 5,166.3 4,914.0
Shareholders' Equity
Preferred stock, 2,000,000
shares authorized -- --
none issued and outstanding
Common stock $.01 par value,
200,000,000 shares 0.7 0.7
authorized; shares issued
and outstanding:
72,638,326 in 2003 ;
72,613,736 in 2002
Capital surplus 755.5 724.4
Unearned compensation (0.7) (2.3)
Treasury stock (584.3) (534.6)
Retained earnings 833.2 428.0
Foreign currency translation
effects (204.5) (309.2)
Deferred gain/(loss) on hedge
contracts, net of tax 7.1 (2.0)
Minimum pension liability
adjustment, net of tax (84.7) (75.2)
Total Shareholders' Equity 722.3 229.8
Total Liabilities & Shareholders'
Equity $5,888.6 $5,143.8
American Standard Companies Inc.
Reconciliation of Net Cash Provided (Used) By
Operating Activities to Free Cash Flow
(Unaudited)
In millions Three Months Ended December 31,
2003 2002
Cash provided by operating
activities:
Net Income $84.9 $73.8
Adjustments to reconcile net
income to net cash
provided by operating
activities 92.4 121.3
Net cash provided by operating
activities 177.3 195.1
Other deductions or additions to
reconcile to Free Cash Flow:
Purchases of property, plant,
equipment and computer software (84.0) (90.6)
Proceeds from disposals of
property 17.7 11.0
Free cash flow $111.0 $115.5
Note: This statement reconciles net cash provided (used) by operating
activities to free cash flow. Management uses free cash flow,
which is not defined by US GAAP, to measure the Company's operating
performance. Free cash flow is also one of several measures used
to determine incentive compensation for certain employees.
American Standard Companies Inc.
Reconciliation of Net Cash Provided (Used) By Operating Activities
Before Proceeds from Initial Sale of Receivables to Free Cash Flow
(Unaudited)
In millions Twelve Months Ended December 31,
2003 2002
Cash provided by operating
activities:
Net Income $405.2 $371.0
Adjustments to reconcile net
income to net cash
provided by operating
activities 246.0 171.2
Net cash provided by operating
activities before
proceeds from initial sale of
receivables 651.2 542.2
Proceeds from initial sale of
receivables -- 81.4
Net cash provided by operating
activities 651.2 623.6
Other deductions or additions to
reconcile to Free Cash Flow:
Purchases of property, plant,
equipment and computer software (215.6) (212.0)
Proceeds from disposals of
property 23.1 21.4
Free cash flow with proceeds from
initial sale of receivables 458.7 433.0
Proceeds from initial sale of
receivables -- (81.4)
Free cash flow without proceeds from
initial sale of receivables $458.7 $351.6
Note: This statement reconciles net cash provided (used) by operating
activities before receivables financing to free cash flow.
Management uses free cash flow, which is not defined by US GAAP, to
measure the Company's operating performance. Free cash flow is
also one of several measures used to determine incentive
compensation for certain employees.
American Standard Companies Inc.
Reconciliation of Net Cash Provided (Used) By
Operating Activities to Free Cash Flow
(Unaudited)
In millions Twelve Months Ended December 31,
2004 Estimate 2003
Net cash provided by operating
activities $720.0 + $651.2
Other deductions or additions to
reconcile to Free Cash Flow:
Purchases of property, plant,
equipment and computer software (230.0) + (215.6)
Proceeds from disposals of
property 10.0 + 23.1
Free cash flow $500.0 + $458.7
Note: This statement reconciles net cash provided (used) by operating
activities to free cash flow. Management uses free cash flow,
which is not defined by US GAAP, to measure the Company's
operating performance. Free cash flow is also one of several
measures used to determine incentive compensation for certain
employees.