American Standard Companies Inc. Affirms Third Quarter 1997 Results
22 October 1997
American Standard Companies Inc. Affirms Third Quarter 1997 Results
PISCATAWAY, N.J., Oct. 22 -- American Standard Companies Inc.
today announced that, consistent with the Company's expectations
disclosed in a release on September 4th, third quarter 1997 earnings (before
the $90 million write-off of purchased in-process research and development
(R&D) associated with the Company's June 30th medical business acquisitions)
were $.75 per share, an increase of 4% over earnings of $.72 per share in the
same quarter last year. Net income, excluding the write-off of purchased R&D,
for the quarter was $57 million compared to $56 million last year.
Mr. Emmanuel A. Kampouris, Chairman, President and Chief Executive Officer
remarked, "Despite the effects of persistent cool weather worldwide on Air
Conditioning, our largest business, overall results before currency effects
improved over the prior year. Very strong performance in Automotive Products
along with improved earnings in Plumbing Products and U.S. commercial Air
Conditioning more than offset the weather impact. Although we are
experiencing some weakness in the Far East markets stemming from recent
devaluations, we expect the improvements elsewhere to continue."
Total Sales for the third quarter were $1.5 billion, an increase of 2%
from the third quarter of 1996 (an increase of 7% excluding the $71 million
unfavorable effect of foreign exchange). Excluding foreign exchange effects:
-- Air Conditioning Products sales, although significantly impacted by
cooler than average temperatures in important markets increased 2% over
last year. Continued strength in the U.S. commercial business was
substantially offset by a decline in the residential business. In
overseas markets, growth in Latin America was more than offset by
weakness in the Far East, and in Europe sales were flat reflecting the
cool summer.
-- Plumbing Products sales increased 6%. Continued strength in Latin
America was augmented by an increase in U.S. sales, reflecting strong
sales through the major home improvement retailers. The effects of
continued economic weakness in Europe and a weakening in Far East
markets, as a result of several recent currency devaluations and a
decline in general economic conditions, tempered overall growth.
-- Automotive Products sales rose 24% driven by increased European
commercial vehicle production and higher product content per vehicle.
Sales of anti-lock braking systems (ABS) to the Company's U.S.
marketing joint venture more than doubled from the prior year level, as
a result of the first phase of regulations requiring ABS systems and a
rebound in heavy-duty truck production.
-- Medical Systems sales were $24 million, reflecting the acquisition of
Sorin Biomedica's European diagnostics business and its U.S. affiliate,
INCSTAR Corporation, on June 30, 1997.
Operating Income (excluding the write-off of purchased in-process R&D) was
$155 million, $2 million below the prior year (up 4% excluding the $7 million
unfavorable effect of foreign exchange). Excluding foreign exchange effects:
-- Air Conditioning Products operating income declined 11% due to the
effects of cooler than normal weather on U.S. residential products and
Europe. This shortfall was partially offset by increased income in the
U.S. commercial business.
In response to the cool weather conditions, U.S. residential air
conditioning production was reduced beginning in August and will
continue at a reduced rate through the fourth quarter. This action is
planned to align the Company's inventories to normal levels and
minimize further impact of this year's adverse weather phenomena on
1998 results.
-- Plumbing Products operating income increased 18% on improved volume
along with better margins in Latin America, the U.S. and Europe,
especially France, as a result of cost reductions.
-- Automotive Products operating income rose 74% as income from European
operations nearly doubled, reflecting higher volumes and improved
margins. Last year's results were adversely impacted by the effects of
new product introductions.
-- Medical Systems incurred a moderate operating loss as development costs
and cost of integrating operations offset the operating income of the
newly acquired diagnostic businesses.
Write-off of Purchased Research and Development of $90 million results
from the accounting for the June 30, 1997 acquisition of the medical
diagnostic businesses.
Interest Expense declined slightly from the prior year as lower interest
rates achieved through the Company's 1997 Credit Agreement and redemption of
$250 million of 11-3/8% Senior Debentures in May 1997, financed under the 1997
Credit Agreement, offset the effect of increased debt arising from share
repurchases and the acquisition of the medical diagnostic businesses.
Equity in Net Income of Unconsolidated Joint Ventures reflects the strong
growth of Automotive Products' U.S. joint venture, the benefits from the
restructuring of Air Conditioning Products' scroll compressor joint venture
and the increasing profitability of Plumbing Products' rapidly expanding
business in China. The Company has recently reached agreements, which are
expected to be completed in the fourth quarter, to acquire controlling
interest in the China plumbing business for $47 million.
Corporate and Other Expense was unchanged from the prior year level.
Income Taxes for the quarter were $31 million or 35% of pretax income
excluding the write-off of purchased R&D, compared to 34% in the quarter last
year.
Overall, foreign exchange effects unfavorably impacted sales by 5%, or
$71 million, and operating income by 5%, or $7 million. Offsetting favorable
foreign exchange effects in interest, accretion and taxes brought the net
unfavorable impact of foreign exchange to an after-tax effect of $.03 per
share.
On October 21st, the Company announced its intention to commence an
offering of $300 million of senior debt securities to finance a portion of the
planned redemption in June 1998 of its 10-1/2% Senior Subordinated Discount
Debentures. Pending the redemption the Company plans to reduce borrowings
under the revolving portion of its $1.75 billion bank credit facility.
American Standard is the global, diversified manufacturer of Trane(R) and
American Standard(R) air conditioning products, American Standard(R), Ideal
Standard(R), Standard(R) and Porcher(R) plumbing products, WABCO(R) commercial
and utility vehicle braking and control systems, LARA(TM) and Copalis(TM)
medical diagnostic systems and DiaSorin(TM) and INCSTAR(R) medical diagnostic
products.
The latest news release and corporate information can be heard on
1-888-ASD-NEWS. Additional information on American Standard is available on
the Company's World Wide Web site http://www.americanstandard.com .
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
In millions except
per share data Three Months Ended September 30,
1997 1996
Reported Adjusted (b) Reported
Sales
Air Conditioning Products $919 $920
Plumbing Products 352 359
Automotive Products 224 206
Medical Systems 24 --
1,519 1,485
Operating income (loss) before
write-off of purchased
research and development
Air Conditioning Products 98 111
Plumbing Products 31 29
Automotive Products 31 21
Medical Systems (a) (5) (4)
155 $155 157
Write-off of purchased research
and development (b) 90 -- --
Operating income 65 155 157
Equity in net income (loss) of
unconsolidated joint ventures (a) 3 3 (1)
68 158 156
Interest expense 48 48 49
Corporate and other expenses (a) 22 22 22
Income (loss) before income taxes (2) 88 85
Income taxes 31 31 29
Net income (loss) $(33) $57 $56
Net income (loss)
per common share $(.46) $.75 $.72
Average outstanding common shares (c)73.0 75.5 78.2
(a) Certain data for 1996 has been reclassified to conform with the 1997
presentation.
(b) In connection with the June 30, 1997 acquisition of the medical
diagnostics businesses, the value of purchased in-process research and
development was written off in accordance with applicable accounting
rules.
(c) Common stock equivalents are included in Adjusted 1997 results, but
are antidilutive and therefore excluded from Reported 1997 results.
AMERICAN STANDARD COMPANIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
In Millions except
per share data Nine Months Ended September 30,
1997 1996
Reported Adjusted (c) Reported Adjusted (b)
Sales
Air Conditioning
Products $2,684 $2,602
Plumbing Products 1,062 1,079
Automotive Products 699 687
Medical Systems 24 --
4,469 4,368
Operating income (loss)
before asset impairment
loss and write-off of
purchased research and
development
Air Conditioning
Products 285 284
Plumbing Products 86 79
Automotive Products 94 91
Medical Systems (a) (13) (11)
452 $452 443 $443
Asset impairment loss (b) -- -- 235 --
Write-off of purchased
research and development (c)90 -- -- --
Operating income 362 452 208 443
Equity in net income (loss)
of unconsolidated
joint ventures (a) 9 9 (4) (4)
371 461 204 439
Interest expense 144 144 151 151
Corporate and other
expenses (a) 62 62 65 65
Income (loss) before income
taxes and extraordinary
item 165 255 (12) 223
Income taxes 91 91 80 80
Income (loss) before
extraordinary item 74 164 (92) 143
Extraordinary loss on
retirement of debt,
net of tax 24 24 -- --
Net income (loss) $50 $140 $(92) $143
Per common share:
Income (loss) before
extraordinary item $.96 $2.13 $(1.18) $1.84
Extraordinary loss on
retirement of debt (.31) (.31) -- --
Net income (loss) $.65 $1.82 $(1.18) $1.84
Average outstanding common
shares (including common
stock equivalents
in 1997) 76.9 76.9 77.8 77.8
(a) Certain data for 1996 has been reclassified to conform with the 1997
presentation.
(b) Effective January 1, 1996, the Company adopted FAS 121 which resulted
in an asset impairment loss of $235 million (or $3.02 per share)
resulting predominantly from the write-down of goodwill for which no
tax benefit was available.
(c) In connection with the June 30, 1997 acquisition of the medical
diagnostics businesses, the value of purchased in-process research and
development was written off in accordance with applicable accounting
rules.
SOURCE American Standard Companies Inc.