American Standard Companies Reports Second-Quarter Results
- Delivers record second-quarter sales, up 9.7 percent for company's combined three businesses
- Reports adjusted net income per diluted share within guidance; separation costs lowered GAAP net income per diluted share
- Generates strong cash flow
- Continues to improve Bath and Kitchen results; sales process on schedule
- Sets WABCO spinoff for July 31, ahead of schedule
- Provides full-year estimate for future standalone WABCO
PISCATAWAY, N.J., July 18 -- American Standard Companies Inc. today announced second-quarter net income per diluted share of 84 cents in accordance with Generally Accepted Accounting Principles (GAAP), down from 93 cents a year ago. The decrease was driven by separation costs, including separation-related taxes that were previously not estimable. Net income per diluted share on an adjusted basis was $1.05, up 14.1 percent from second quarter a year ago. The company had provided second- quarter net income per diluted share guidance of 98 cents-$1.04 on a GAAP basis and $1.03-$1.09 on an adjusted basis. The company is in the process of selling its Bath and Kitchen business and, in accordance with GAAP, has classified it as a discontinued operation since first quarter. (Please see table below.)
Sales from continuing operations, which include Air Conditioning Systems and Services and Vehicle Control Systems, were $2.62 billion, up 10.6 percent. Sales for Bath and Kitchen were $660.5 million. In total, sales for the company's three businesses were up 9.7 percent. The company generated $225.9 million in net cash provided by operating activities and $158 million in free cash flow.
SECOND-QUARTER EARNINGS SUMMARY
2Q07 2Q06 % 2Q07
change guidance
GAAP net income per diluted
share
Continuing operations 90 cents 91 cents (1)% N/A
Discontinued operations (Bath (6)cents 2 cents (400)% N/A
and Kitchen)
Total company GAAP 84 cents 93 cents (9.7)% 98 cents -
$1.04
Adjusted net income per diluted
share
Continuing operations $1.00 88 cents 13.6 % N/A
Discontinued operations (Bath
and Kitchen) 5 cents 4 cents 25 % N/A
Total company on an
adjusted basis $1.05 92 cents 14.1 % $1.03 -
$1.09
(Please see the financial tables following the news release text for
reconciliation tables and a description of adjusted results for
continuing operations, discontinued operations and the total company.
The company provides adjusted results to facilitate understanding of
ongoing financial performance from year to year. )
"With 14 percent earnings growth on an adjusted basis, we delivered a good second quarter, particularly in light of some challenges in the residential part of our air conditioning business," said Fred Poses, chairman and CEO. "Continued strong sales of commercial equipment and services drove our results in Air Conditioning Systems and Services, more than compensating for the softer housing market, cooler weather and a warranty charge that affected our residential results. We see continued strength in the global commercial air conditioning systems and services markets. Combined with our strong position in residential markets, we expect a good overall year for this business.
"Vehicle Control Systems had a strong quarter of sales and segment income expansion," said Poses. "Sales growth in Western Europe, our largest region, outpaced truck builds, which significantly exceeded original industry forecasts. The unexpected new demand stretched the supply chain and temporarily hampered WABCO's ability to fully convert the increased volume into even higher margins. During the quarter, WABCO also won new sales around the world that continue to build its long-term sales growth pipeline.
"We continue to be very encouraged by Bath and Kitchen's improving performance, despite challenging consumer market conditions in some key areas, particularly the U.S. New products are being well received, and operational improvements are accelerating our Bath and Kitchen recovery.
"We announced our separation plans on Feb. 1, and we're very pleased with our progress so far. The Bath and Kitchen sales process is moving ahead nicely, and we're confident of a successful outcome. Last week we announced July 31 as WABCO's spinoff date, ahead of the original early fall schedule," said Poses.
FULL-YEAR PERFORMANCE ESTIMATES
"For the rest of the year, we see continued good conditions in all three businesses," said Poses. "If we were staying together as one company, we would expect full-year GAAP net income per diluted share of $3.21-$3.31 (including $85-$88 million for separation costs, net of tax, and separation-related tax costs) and net income per diluted share of $3.30-$3.40 on an adjusted basis (an increase of 24-27 percent over adjusted 2006 net income per diluted share)." The adjusted full-year estimate is based on the company as currently structured before separation costs and some duplicate costs to run two companies.
"For the company as currently structured, we expect to generate the cash flow we previously announced - about $1.015 billion in net cash provided by operating activities and about $715 million in free cash flow," said Poses.
"Because of the imminent spinoff, we are now providing a full-year estimate for WABCO," he said. "After the spinoff, we expect WABCO to have full-year 2007 net income per diluted share of approximately $2.54 on a GAAP basis and $2.85 on an adjusted basis. Both of these estimates reflect the one-for-three stock distribution ratio and WABCO's status as part of American Standard for seven months and as an independent company for five months. The adjusted estimate excludes 31 cents for WABCO's share of American Standard's overall one-time separation costs.
"We'll discuss our performance estimates and separation costs in greater detail on today's call for analysts and investors," said Poses. "As our separation plans progress, we will provide full-year performance estimates for the standalone Trane," said Poses.
SECOND-QUARTER 2007 BUSINESS HIGHLIGHTS
AIR CONDITIONING SYSTEMS AND SERVICES sales were $2.038 billion, up 9.6 percent over second quarter 2006 (up 8.5 percent excluding foreign exchange effects) because of improving pricing and volumes in commercial equipment and services. Segment income was $288.8 million, up 3.8 percent from $278.1 million in 2006, as pricing and commercial volume as well as materials productivity more than offset the continuing impact of higher commodity costs, lower volume of residential sales and residential warranty costs. Adjusted segment income was $287.2 million, excluding the impact of favorable foreign exchange effects and operational consolidation expenses, up from $277.2 million in second quarter 2006.
American Standard Companies/Trane was one of four energy services companies asked to join the Clinton Climate Initiative (CCI), a global program to reduce greenhouse gas emissions generated by urban buildings. The company will be providing "green" upgrades that deliver significant energy and operating cost reductions to buildings in 16 cities around the world. Led by former President Bill Clinton, CCI has received $5 billion in financing pledges from banks to jump-start the project. During the quarter, Air Conditioning Systems and Services signed supply agreements with 28 new homebuilders. For the third year in a row, David Weekley Homes named Trane a "Partner of Choice" with its highest "A,A" rating for quality and service. No other heating, ventilation and air conditioning (HVAC) company received such an award.
Large contracts signed during the quarter included ones for Al Nour Mall (Saudi Arabia); Alamo Community College (San Antonio, Texas); BryanLGH Medical Center (Lincoln, Neb.); Arena Plaza (Hungary); Cerritos College (Norwalk, Calif.); Chongqing Long Hu Estate villas (Chongqing, China); Dalian Wanda (Dalian, China); Dongguan Wei Jian (Dongguan, China); Dunnes stores (10 locations in Ireland); Mall of Arabia (Saudi Arabia); Minebea (three locations in Thailand); Monessen City School District (Monessen, Pa.); Ridgecrest Regional Hospital (Ridgecrest, Calif.); Sambil Barquisimeto (Barquisimeto, Venezuela); Shanghai Kerry Everbright City (Shanghai, China); UAB Women and Infants Health Center (Birmingham, Ala.).
VEHICLE CONTROL SYSTEMS second-quarter sales were $582.3 million, up 13.9 percent over the same period in the prior year (up 6.8 percent in local currencies). Segment income was $67.1 million, up from $59.5 million a year ago, as increased volume, lower warranty costs and materials savings more than offset the unfavorable impact of typical price reductions, production and logistics costs related to the unexpected demand, and escalating commodity costs. Excluding favorable translational foreign exchange effects, operational consolidation expenses and separation costs, adjusted segment income was $70.5 million, up from $60.9 million in second quarter 2006.
During the quarter, WABCO continued to build its sales pipeline with new and incremental business from commercial vehicle, bus and passenger car manufacturers. DaimlerChrysler selected WABCO as a supplier for the new platform of all its EvoBus Citybus lines, strengthening the business' position as a full system supplier for the bus market. The EvoBus business includes the brake, chassis leveling, door and climate control systems, as well as the electronic architecture. SsangYong Motor Company, a leading manufacturer of sport utility vehicles (SUVs) in Korea, chose WABCO to supply vacuum pumps for the Euro 5 diesel engine project covering its range of SUVs and Multi-Purpose Vehicles (MPVs) including the Rexton, Kyron, Actyon and Rodius models. In addition, SsangYong gave WABCO its "best supplier" award.
BATH AND KITCHEN, now classified as a discontinued operation, had sales of $660.5 million, up 6.4 percent (up 1.8 percent excluding foreign exchange effects) from the same quarter a year ago. Income from discontinued operations represented a loss of $11.5 million net of tax, down from income of $2.5 million a year ago, because of operational consolidation and separation expenses. Segment income was $21.9 million, up from $4.7 million in second quarter 2006. Improved price, volume and mix as well as prior operational consolidations and materials productivity more than offset higher commodity costs. Adjusted segment income was $22.8 million, compared with $13.6 million in second quarter 2006, excluding operational consolidation expenses and the favorable impact of foreign exchange, and including depreciation and amortization.
At K/BIS, the largest bath and kitchen show in the U.S., Bath and Kitchen displayed American Standard, Jado and Porcher lines and introduced a number of well-received products, including its Champion(R) 4 toilet with flushing capabilities unmatched in the industry. Champion 4's Accelerator flush valve pushes water into the bowl three times faster than the standard two-inch flush valve and can move 40 percent larger mass than the industry's second-best siphonic high-performance toilet. The Cadet(R) 3 toilet continues its successful market performance. In Asia, Bath and Kitchen hosted more than 400 top developers, interior designers and architects in Beijing and Bangkok for the "Celebration of the Senses" 2007 Bathroom Collection Show to share global bathroom trends. It also opened two flagship showrooms in Xian and Qingdao, China.
New commercial contracts during the quarter included ones for the Casa Riva luxury condominiums (Bangkok, Thailand); International Commercial Centre (Hong Kong, China), which will be the world's third-tallest building when completed in 2010; La Defense T1 tower office complex (Paris, France); National Gymnasium (Beijing, China), one of the city's new major sports venues; Poseidon residence, office and shopping complex (Pineto Teramo, Italy); Royal Air Force (Woodbridge, Suffolk, U.K.); and the State Administration of Environmental Protection's (SEPA) Convention Compliance Center Building (Beijing, China), a showcase for advanced "green" building design.
As part of its ongoing initiatives to rebuild Bath and Kitchen's profitability, the company announced plans to discontinue production at its ceramics plant in Excelsior, U.K., resulting in the elimination of about 140 jobs. These actions will cost about $17 million ($12 million after taxes) and, once completed, will generate annual savings of about $10 million starting in 2008. "We will start to see some of the savings this year," said Poses. "We very carefully consider any plans that affect people's jobs and believe these and any possible future actions are essential to improve Bath and Kitchen's profitability and continue to build its global competitiveness."
American Standard is an $11.2 billion 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 62,000 people and has manufacturing operations in 28 countries. American Standard is included in both the S&P 500 and the Dow Jones Sustainability North America Index, which recognizes the top 20 percent of leaders in corporate sustainability in North America. On Feb. 1, 2007, the company announced plans to separate its three businesses by spinning off its vehicle control systems business, selling its bath and kitchen business and then renaming itself Trane. On July 12, 2007, the company announced its intention to complete the tax-free spinoff of its vehicle control systems business after the close of business on July 31, 2007.
American Standard Companies Inc.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
In millions except per share data 2007 2006 2007 2006
Sales
Air Conditioning Systems and
Services $2,037.7 $1,858.5 $3,645.2 $3,321.9
Vehicle Control Systems 582.3 511.2 1,141.1 991.1
Total $2,620.0 $2,369.7 $4,786.3 $4,313.0
Segment income
Air Conditioning Systems and
Services $288.8 $278.1 $446.2 $408.9
Vehicle Control Systems 67.1 59.5 140.8 127.3
Total 355.9 337.6 587.0 536.2
Equity in net income of
unconsolidated joint ventures 7.3 12.0 14.6 21.9
Interest expense 27.3 30.9 55.5 60.9
Corporate and other expenses 65.6 52.0 122.1 99.8
Income from continuing operations
before income taxes 270.3 266.7 424.0 397.4
Income taxes 82.8 77.5 135.1 116.2
Income from continuing operations 187.5 189.2 288.9 281.2
Income (loss) from discontinued
operations, net of tax (11.5) 2.5 60.4 (5.4)
Net Income $176.0 $191.7 $349.3 $275.8
Basic earnings per share:
Income from continuing
operations $0.93 $0.94 $1.43 $1.38
Income (loss) from
discontinued operations (0.06) 0.01 0.30 (0.03)
Net Income $0.87 $0.95 $1.73 $1.35
Diluted earnings per share:
Income from continuing
operations $0.90 $0.91 $1.39 $1.35
Income (loss) from
discontinued operations (0.06) 0.02 0.29 (0.03)
Net Income $0.84 $0.93 $1.68 $1.32
Diluted earnings per share, on an
adjusted basis: (1) $1.05 $0.92 $1.63 $1.34
Average outstanding common shares:
Basic 202.8 202.4 201.7 203.7
Diluted 208.4 207.1 207.4 208.2
Note: The presentation of total segment income and diluted earnings per
share, on an adjusted basis is not in conformity with generally
accepted accounting principles (GAAP). This measure may not be
comparable to similar measures of other companies as not all
companies calculate these measures in the same manner.
(1) See reconciliation on next page
American Standard Companies Inc.
Reconciliation of Net Income to Adjusted Net Income and Adjusted Net
Income per Diluted Common Share
(Unaudited)
In millions except per share data
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Net income $176.0 $191.7 $349.3 $275.8
Adjustments:
Operational consolidation expenses,
net of tax 22.8 11.0 28.8 16.3
Tax items (11.0) (9.0) (10.4) (9.0)
Separation costs, net of tax and
separation related taxes 47.8 - 54.5 -
Gain on sale of assets, net of tax - (4.0) (56.8) (4.0)
Adjustment to include depreciation
and amortization of discontinued
operations, net of tax (1) (17.5) - (28.3) -
Adjusted net income $218.1 $189.7 $337.1 $279.1
Adjusted net income per diluted
common share $1.05 $0.92 $1.63 $1.34
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Income from Continuing Operations $187.5 $189.2 $288.9 $281.2
Adjustments:
Operational consolidation expenses,
net of tax 5.3 0.3 6.1 1.3
Tax items (10.7) (7.0) (9.7) (9.7)
Separation costs, net of tax and
separation related taxes 26.4 - 32.0 -
Adjusted net income from continuing
operations $208.5 $182.5 $317.3 $272.8
Adjusted income from continuing
operations per diluted common share $1.00 $0.88 $1.53 $1.31
2007 2006 2007 2006
Income (Loss) from Discontinued
Operations $(11.5) $2.5 $60.4 $(5.4)
Adjustments:
Operational consolidation expenses,
net of tax 17.5 10.7 22.7 15.0
Tax items (0.3) (2.0) (0.7) 0.7
Separation costs, net of tax and
separation related taxes 21.4 - 22.5 -
Gain on sale of assets, net of tax - (4.0) (56.8) (4.0)
Adjustment to include depreciation
and amortization of discontinued
operations, net of tax (1) (17.5) - (28.3) -
Adjusted net income from
discontinued operations $9.6 $7.2 $19.8 $6.3
Adjusted income from discontinued
operations per diluted common share $0.05 $0.04 $0.10 $0.03
(1) Assets are not depreciated or amortized once a business is
classified as a discontinued operation. As a result of the decision
to sell Bath and Kitchen, the GAAP results exclude Bath and Kitchen
depreciation and amortization. Adjusted results include Bath and
Kitchen depreciation and amortization. The Company provides
adjusted results to facilitate understanding of ongoing financial
performance
Note: The presentation of adjusted income from continuing operations,
adjusted income per diluted common share from continuing
operations, adjusted net income / (loss) from discontinued
operations, adjusted net income per diluted common share from
discontinued operations, adjusted net income and adjusted net
income per diluted common share is not in conformity with
generally accepted accounting principles (GAAP). These
measures may not be comparable to similar measures of other
companies as not all companies calculate these measures in the
same manner.
American Standard Companies Inc.
Reconciliation of Statement of Operations
(Unaudited)
In millions
except per share data Before
Discontinued
Reported BK Ops
2007 Adjustments 2007(1)
Sales
Air Conditioning Systems and
Services $2,037.7 $2,037.7
Bath & Kitchen - 660.5 660.5
Vehicle Control Systems 582.3 582.3
Total $2,620.0 660.5 $3,280.5
Segment income
Air Conditioning Systems and
Services $288.8 $288.8
Bath & Kitchen - 21.9 21.9
Vehicle Control Systems 67.1 67.1
Total 355.9 21.9 377.8
Equity in net income of
unconsolidated joint ventures 7.3 - 7.3
Interest expense 27.3 0.6 27.9
Corporate and other expenses 65.6 13.5 79.1
Income from continuing operations
before income taxes 270.3 7.8 278.1
Income taxes 82.8 19.3 102.1
Income from continuing operations 187.5 (11.5) 176.0
Income (loss) from discontinued
operations, net of tax (11.5) 11.5 0.0
Net Income $176.0 $176.0
(1) Includes Bath & Kitchen as if not a discontinued operation, except
for the absence of depreciation and amortization following the
decision to sell Bath & Kitchen.
American Standard Companies Inc.
Reconciliation of Statement of Operations
(Unaudited)
In millions
except per share data
Reported BK Previously
2006 Adjustments Reported 2006
Sales
Air Conditioning Systems and
Services $1,858.5 $1,858.5
Bath & Kitchen - 621.0 621.0
Vehicle Control Systems 511.2 511.2
Total $2,369.7 621.0 $2,990.7
Segment income
Air Conditioning Systems and
Services $278.1 $278.1
Bath & Kitchen - 4.7 4.7
Vehicle Control Systems 59.5 59.5
Total 337.6 4.7 342.3
Equity in net income of
unconsolidated joint ventures 12.0 - 12.0
Interest expense 30.9 0.5 31.4
Corporate and other expenses 52.0 6.5 58.5
Income from continuing operations
before income taxes 266.7 (2.3) 264.4
Income taxes 77.5 (4.8) $72.7
Income from continuing operations 189.2 2.5 191.7
Income from discontinued operations,
net of tax 2.5 (2.5) 0.0
Net Income $191.7 $191.7
Note: The presentation of the results of operations before adjustments to
reflect discontinued operations, previously reported 2006 results
of operations before adjustments to reflect discontinued operations
and total segment income is not in conformity with generally
accepted accounting principles (GAAP). These measures may not be
comparable to similar measures of other companies as not all
companies calculate these measures in the same manner.
American Standard Companies Inc.
Reconciliation of Statement of Operations
(Unaudited)
In millions Six Months Ended June 30,
except per share data Before
Discontinued
Reported BK Ops
2007 Adjustments 2007 (1)
Sales
Air Conditioning Systems and
Services $3,645.2 $3,645.2
Bath & Kitchen - 1,318.4 1,318.4
Vehicle Control Systems 1,141.1 1,141.1
Total $4,786.3 1,318.4 $6,104.7
Segment income
Air Conditioning Systems and
Services $446.2 $446.2
Bath & Kitchen - 127.8 127.8
Vehicle Control Systems 140.8 140.8
Total 587.0 127.8 714.8
Equity in net income of unconsolidated
joint ventures 14.6 0.2 14.8
Interest expense 55.5 0.9 56.4
Corporate and other expenses 122.1 22.9 145.0
Income from continuing operations
before income taxes 424.0 104.2 528.2
Income taxes 135.1 43.8 178.9
Income from continuing operations 288.9 60.4 349.3
Income (loss) from discontinued
operations, net of tax 60.4 (60.4) 0.0
Net Income $349.3 $349.3
(1) Includes Bath & Kitchen as if not a discontinued operation, except
for the absence of depreciation and amortization following the
decision to sell Bath & Kitchen.
American Standard Companies Inc.
Reconciliation of Statement of Operations
(Unaudited)
In millions Six Months Ended June 30,
except per share data
Previously
Reported BK Reported
2006 Adjustments 2006
Sales
Air Conditioning Systems and
Services $3,321.9 $3,321.9
Bath & Kitchen - 1,229.7 1,229.7
Vehicle Control Systems 991.1 991.1
Total $4,313.0 1,229.7 $5,542.7
Segment income
Air Conditioning Systems and
Services $408.9 $408.9
Bath & Kitchen - 4.2 4.2
Vehicle Control Systems 127.3 127.3
Total 536.2 4.2 540.4
Equity in net income of unconsolidated
joint ventures 21.9 - 21.9
Interest expense 60.9 1.0 61.9
Corporate and other expenses 99.8 15.3 115.1
Income from continuing operations
before income taxes 397.4 (12.1) 385.3
Income taxes 116.2 (6.7) $109.5
Income from continuing operations 281.2 (5.4) 275.8
Income from discontinued operations,
net of tax (5.4) 5.4 0.0
Net Income $275.8 $275.8
Note: The presentation of the results of operations before adjustments to
reflect discontinued operations, previously reported 2006 results of
operations before adjustments to reflect discontinued operations and
total segment income is not in conformity with generally
accepted accounting principles (GAAP). These measures may not be
comparable to similar measures of other companies as not all
companies calculate these measures in the same manner.
American Standard Companies Inc.
Data Supplement Sheet
(Unaudited)
In millions Three Months Ended June 30,
% Chg
% Chg 2006
Reported Reported vs. Adjusted
2007 2006 2006 (1)
Air Conditioning Systems and Services
Sales 2,037.7 1,858.5 9.6% 8.5%
Segment Income 288.8 278.1 3.8% 3.6%
Segment Income as a
Percentage of Sales 14.2% 15.0% -0.8pts -0.7pts
Vehicle Control Systems
Sales 582.3 511.2 13.9% 6.8%
Segment Income 67.1 59.5 12.8% 15.8%
Segment Income as a
Percentage of Sales 11.5% 11.6% -0.1pts 1.0pts
Total Company - Continuing Operations
Sales 2,620.0 2,369.7 10.6% 8.1%
Segment Income (2) 355.9 337.6 5.4% 5.8%
Segment Income as a
Percentage of Sales 13.6% 14.2% -0.6pts -0.3pts
Bath & Kitchen - Discontinued
Operations
Sales 660.5 621.0 6.4% 1.8%
Segment Income 21.9 4.7 ++ 67.6%
Segment Income as a
Percentage of Sales 3.3% 0.8% 2.5pts 1.4pts
Total Company
Sales 3,280.5 2,990.7 9.7% 6.8%
Segment Income 377.8 342.3 10.4% 8.2%
Segment Income as a
Percentage of Sales 11.5% 11.4% 0.1pts 0.1pts
Net Income Applicable to
Common Shareholders 176.0 191.7 -8.2%
Net Income Applicable to
Common Shareholders
as a Percentage of Sales 5.4% 6.4% -1.0pts
Presenting results of operations excluding the translation effects of
foreign exchange amounts, operational consolidation expenses, asset
dispositions and depreciation / amortization is not in conformity with
generally accepted accounting principles (GAAP). Notwithstanding that the
Bath & Kitchen business is a discontinued operation, management continues
to analyze Bath & Kitchen sales, segment income and segment income as a
percentage of sales to assess the performance of the Company as a whole.
In addition, total company sales, total segment income and total segment
income as a percentage of sales that include the non-GAAP Bath & Kitchen
measures are also not in conformity with generally accepted accounting
principles (GAAP). These non-GAAP measures may not be comparable to
similar measures of other companies as not all companies calculate these
measures in the same manner.
(1) Excluding the impact of foreign exchange translational effects,
operational consolidation expenses, gain on sale of assets,
separation costs and an adjustment to include depreciation and
amortization of discontinued operations. Changes in sales and segment
income excluding foreign exchange effects are calculated using
current year sales and segment income translated at prior year
exchange rates.
(2) See Consolidated Statement of Operations for a reconciliation of
total segment income to income before income taxes. In addition,
see table above for presentation of net income applicable to
common shareholders as a percentage of sales.
Segment Income Reconciliation
Vehicle
Air Conditioning Control Bath & Total
Systems & Services Systems Kitchen Company
2007
Reported 288.8 67.1 21.9 377.8
Operational Consolidation
Expenses 0.8 7.7 25.8 34.3
Adjustment to Include
Depreciation and Amortization
of Discontinued Operations - - (22.9) (22.9)
Adjustment to Exclude
Separation Costs - 0.5 - 0.5
Subtotal 289.6 75.3 24.8 389.7
Foreign Exchange Translational
Effects (2.4) (4.8) (2.0) (9.2)
Adjusted Segment Income 287.2 70.5 22.8 380.5
Vehicle
Air Conditioning Control Bath & Total
Systems & Services Systems Kitchen Company
2006
Reported 278.1 59.5 4.7 342.3
Operational Consolidation
Expenses (0.9) 1.4 15.2 15.7
Gain on Sale of Assets - - (6.3) (6.3)
Adjusted Segment Income 277.2 60.9 13.6 351.7
American Standard Companies Inc.
Data Supplement Sheet
(Unaudited)
In millions Six Months Ended June 30,
% Chg
% Chg 2006
Reported Reported vs. Adjusted
2007 2006 2006 (1)
Air Conditioning Systems and Services
Sales 3,645.2 3,321.9 9.7% 8.6%
Segment Income 446.2 408.9 9.1% 8.7%
Segment Income as a
Percentage of Sales 12.2% 12.3% -0.1pts 0pts
Backlog 976.1 909.9 7.3% 5.0%
Vehicle Control Systems
Sales 1,141.1 991.1 15.1% 7.2%
Segment Income 140.8 127.3 10.6% 7.1%
Segment Income as a
Percentage of Sales 12.3% 12.8% -0.5pts 0pts
Backlog 1,051.9 822.2 27.9% 22.0%
Total Company - Continuing Operations
Sales 4,786.3 4,313.0 11.0% 8.3%
Segment Income (2) 587.0 536.2 9.5% 8.3%
Segment Income as a
Percentage of Sales 12.3% 12.4% -0.1pts 0pts
Bath & Kitchen - Discontinued
Operations
Sales 1,318.4 1,229.7 7.2% 2.3%
Segment Income 127.8 4.2 ++ 95.3%
Segment Income as a
Percentage of Sales 9.7% 0.3% 9.4pts 1.4pts
Total Company
Sales 6,104.7 5,542.7 10.1% 7.0%
Segment Income 714.8 540.4 32.3% 11.3%
Segment Income as a
Percentage of Sales 11.7% 9.8% 1.9pts 0.4pts
Net Income Applicable to
Common Shareholders 349.3 275.8 26.7%
Net Income Applicable to
Common Shareholders
as a Percentage of Sales 5.7% 5.0% 0.7pts
Presenting results of operations excluding the translation effects of
foreign exchange amounts, operational consolidation expenses, asset
dispositions and depreciation / amortization is not in conformity with
generally accepted accounting principles (GAAP). Notwithstanding that the
Bath & Kitchen business is a discontinued operation, management continues
to analyze Bath & Kitchen sales, segment income and segment income as a
percentage of sales to assess the performance of the Company as a whole.
In addition, total company sales, total segment income and total segment
income as a percentage of sales that include the non-GAAP Bath & Kitchen
measures are also not in conformity with generally accepted accounting
principles (GAAP). These non-GAAP measures may not be comparable to
similar measures of other companies as not all companies calculate these
measures in the same manner.
(1) Excluding the impact of foreign exchange translational effects,
operational consolidation expenses, gain on sale of assets, separation
costs and an adjustment to include depreciation and amortization
of discontinued operations. Changes in sales and segment
income excluding foreign exchange effects are calculated using current
year sales and segment income translated at prior year exchange rates.
(2) See Consolidated Statement of Operations for a reconciliation of
total segment income to income before income taxes. In addition,
see table above for presentation of net income applicable to
common shareholders as a percentage of sales.
Segment Income Reconciliation
Vehicle
Air Conditioning Control Bath & Total
Systems & Services Systems Kitchen Company
2007
Reported 446.2 140.8 127.8 714.8
Operational Consolidation
Expenses 1.0 8.6 33.5 43.1
Adjustment to Include
Depreciation and Amortization
of Discontinued Operations - - (37.7) (37.7)
Adjustment to Exclude
Separation Costs - 0.5 - 0.5
Gain on Sale of Assets - - (80.8) (80.8)
Subtotal 447.2 149.9 42.8 639.9
Foreign Exchange Translational
Effects (3.2) (10.5) (5.5) (19.2)
Adjusted Segment Income 444.0 139.4 37.3 620.7
Vehicle
Air Conditioning Control Bath & Total
Systems & Services Systems Kitchen Company
2006
Reported 408.9 127.3 4.2 540.4
Operational Consolidation
Expenses (0.4) 2.9 21.2 23.7
Gain on Sale of Assets - - (6.3) (6.3)
Adjusted Segment Income 408.5 130.2 19.1 557.8
American Standard Companies Inc.
2007 Earnings Per Share Reconciliation
(Unaudited)
In millions except per share data FY 2007
Net Income Reported $662.4 - $684.3
Streamlining Expenses, net of
tax 67.2
Asset Sales, net of tax and Tax
Items (67.2)
Separation Costs, net of tax
and Separation Related Tax Costs 85.0 - 88.0
Adjustment to include
Depreciation & Amortization
from Discontinued Operations, net of tax (66.6)
Adjusted Net Income $683.8 - $702.7
Reported EPS $3.21 - $3.31
Adjusted EPS $3.30 - $3.40
Diluted Shares 206.9
2006 Earnings Per Share Reconciliation
(Unaudited)
FY 2006
Net Income Reported $541.0
Streamlining Expenses, net of
tax 43.6
Gain on Sale of Assets, net of
tax (14.3)
Tax Items (19.5)
Adjusted Net Income $550.8
Reported EPS $2.62
Adjusted EPS $2.67
Diluted Shares 206.3
Note: The presentation of adjusted net income and adjusted net
income per diluted common share is not in conformity with generally
accepted accounting principles (GAAP). These measures may not be
comparable to similar measures of other companies as not all
companies calculate these measures in the same manner.
American Standard Companies Inc.
Consolidated Balance Sheet
(Unaudited)
(dollars in millions)
June 30, December 31,
2007 2006
Current Assets:
Cash and cash equivalents $356.0 $267.8
Accounts receivable, less
allowance for doubtful
accounts: 1,542.1 1,116.8
June 2007 - $44.6;
Dec. 2006 - $44.8
Inventories 926.6 829.9
Other current assets 540.5 439.8
Assets held for sale 2,218.9 2,151.4
Total Current Assets 5,584.1 4,805.7
Facilities, less accumulated
depreciation: 1,059.0 1,058.4
June 2007 - $620.1;
Dec. 2006 - $546.2
Goodwill 666.4 649.0
Capitalized software, less
accumulated amortization: 123.3 127.9
June 2007 - $316.3;
Dec. 2006 - $290.9
Long-term asbestos receivable 336.9 336.6
Other assets 470.5 435.5
Total Assets $8,240.2 $7,413.1
Current Liabilities:
Loans payable to banks $30.8 $91.6
Current maturities of long-term
debt 27.7 23.1
Accounts payable 891.3 697.0
Taxes on income 117.4 114.3
Other accrued liabilities 1,169.3 1,105.8
Liabilities related to assets held
for sale 940.5 861.0
Total Current Liabilities 3,177.0 2,892.8
Long-Term Debt 1,606.8 1,600.7
Other Long-Term Liabilities
Reserve for post-retirement
benefits 711.2 691.7
Long-term portion of asbestos
liability 642.6 652.8
Other liabilities 735.6 651.6
Total Liabilities 6,873.2 6,489.6
Shareholders' Equity
Preferred stock, 2,000,000
shares authorized; - -
none issued and outstanding
Common stock $.01 par value,
560,000,000 shares authorized;
shares issued: 251,776,110
in 2007; 251,773,228 in 2006; and
shares outstanding: 203,908,577 in 2007;
199,891,689 in 2006 2.5 2.5
Capital surplus 940.7 897.0
Treasury stock (1,405.6) (1,523.3)
Retained earnings (1) 2,229.8 1,972.4
Foreign currency translation
effects (106.5) (138.9)
Deferred gain on hedge
contracts, net of tax 1.4 3.3
Unrealized losses on benefit
plans, net of tax (295.3) (289.5)
Total Shareholders' Equity 1,367.0 923.5
Total Liabilities & Shareholders'
Equity $8,240.2 $7,413.1
(1) Includes impact of adopting FASB Interpretation No.48, Accounting
for Uncertainty in Income Taxes, an Interpretation of FASB Statement
No.109
American Standard Companies Inc.
Reconciliation of Net Cash Provided
By Operating Activities to Free Cash Flow
(Unaudited)
In millions Three Months Ended June 30,
2007 2006
Cash provided by operating
activities: (1)
Net Income $176.0 $191.7
Adjustments to reconcile net
income to net cash provided
by operating activities 49.9 (26.9)
Net cash provided by operating
activities (2) 225.9 164.8
Other deductions or additions to
reconcile to Free Cash Flow:
Purchases of property,
plant, equipment and
computer software (67.9) (56.9)
Proceeds from disposals of
property - 15.2
Free cash flow (2) $158.0 $123.1
(1) Includes continuing and discontinued operations
(2) Excludes separation activities related to terminating accounts
receivable securitization program and separation costs as well as
an accelerated pension contribution and proceeds from the
disposition of a business.
Note: This statement reconciles net cash provided 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
By Operating Activities to Free Cash Flow
(Unaudited)
In millions Six Months Ended June 30,
2007 2006
Cash provided by operating activities: (1)
Net Income $349.3 $275.8
Adjustments to reconcile net
income to net cash provided
by operating activities (16.6) (122.6)
Net cash provided by operating
activities (2) 332.7 153.2
Other deductions or additions to
reconcile to Free Cash Flow:
Purchases of property, plant,
equipment and computer software (120.7) (106.3)
Proceeds from disposals of
property - 15.2
Free cash flow (2) $212.0 $62.1
(1) Includes continuing and discontinued operations
(2) Excludes $165.0M proceeds from the sale of the Venesta Washroom
Systems business, separation activities related to terminating
accounts receivable securitization program and separation costs
as well as an accelerated pension contribution and proceeds from
the disposition of a business. Includes $64.9M receipt of cash
from a trust related to an insurance settlement.
Note: This statement reconciles net cash provided 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 By
Operating Activities to Free Cash Flow
(Unaudited)
In millions Twelve Months Ended December 31,
2007 Estimate 2006
Net cash provided by operating
activities (1) $ Approx. 1,015.0 $706.3
Other deductions or additions
to reconcile to Free Cash Flow:
Purchases of property,
plant, equipment and
computer software Approx. (325.0) (285.1)
Proceeds from disposals of
property Approx. 25.0 20.6
Free cash flow (2) $ Approx. 715.0 $441.8
(1) Includes continuing and discontinued operations
(2) Excludes separation activities related to terminating accounts
receivable securitization program and separation costs as well as
an accelerated pension contribution and proceeds from the
disposition of a business.
Note: This statement reconciles net cash provided 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 one of several
measures used to determine incentive compensation for
certain employees.