American Standard Companies Inc. Reports 17% Increase in 1997 Earnings Per Share
3 February 1998
American Standard Companies Inc. Reports 17% Increase in 1997 Earnings Per Share
PISCATAWAY, N.J., Feb. 3 -- American Standard Companies Inc.
today announced that full year 1997 diluted per share earnings
before extraordinary item (and before a write-off of purchased research and
development) were a record $2.76, an increase of 17% over 1996 diluted per
share earnings of $2.36 (excluding a non-cash asset impairment charge).
Fourth quarter 1997 diluted per share earnings were $.62, an increase of
11% over fourth quarter 1996 diluted per share earnings of $.56. These
results are consistent with the Company's previously announced expectations.
Mr. Emmanuel A. Kampouris, Chairman, President and Chief Executive
Officer, remarked, "The Company posted solid growth in sales and earnings in
1997 despite the adverse effect of cooler than normal weather on the air
conditioning business in both the U.S. and Europe and the effects of foreign
exchange, initially in Europe and more recently as a result of dramatic events
in the Far East. Our ability to partially overcome these adversities clearly
validates our strategies built on our global diversity and leadership
positions worldwide, which provide the foundation for strong sales and
earnings growth. While we expect weakness in the Far East outside China to
continue and have adopted plans to monitor and limit the impact, we also
believe our improvements elsewhere will continue."
Total Sales for 1997 reached a record $6.0 billion, an increase of 4% from
$5.8 billion in 1996 (an 8% increase excluding the $218 million unfavorable
foreign exchange effect). Excluding foreign exchange effects:
-- Air Conditioning Products sales, although weakened by cooler than
average temperatures in important markets, increased 5% to
$3.6 billion. Strength in the U.S. commercial businesses, both
applied systems and unitary products, more than offset a decline in
the residential business. International sales also grew due to
strong growth in Latin America and modest growth in Europe and the
Middle East.
-- Plumbing Products sales increased 5% to $1.4 billion reflecting
strong markets in Latin America, increased sales through expanding
major U.S. home improvement retailers and the effect of consolidating
the operations in China since the acquisition of a majority interest
at the end of October. Sales matched the prior year level in Europe
and, despite recent economic weakness, Far East sales for the full
year (excluding China) were flat.
-- Automotive Products sales increased 14% to $952 million driven by
continued strengthening in European commercial vehicle production,
higher product content per vehicle and increased export sales. Sales
of anti-lock braking systems (ABS) to the Company's U.S. marketing
joint venture rose sharply, reflecting the first-phase implementation
of federal regulations requiring ABS systems on all new heavy trucks
together with a rebound in heavy-duty truck production.
-- Medical Systems sales were $50 million, reflecting the acquisition of
the diagnostic businesses at the end of June.
Operating Income in 1997 (excluding the write-off of purchased in-process
research and development) was $590 million, an increase of 3% from
$573 million in 1996, excluding an asset impairment charge. Operating income
increased 7% excluding the $22 million unfavorable effect of foreign exchange.
Excluding foreign exchange effects:
-- Air Conditioning Products operating income rose 3% to $364 million
despite cooler than normal weather in both the U.S. and Europe.
Increased volume and improved margin in both the applied and unitary
commercial businesses more than offset weather related declines in
both the U.S. residential and European businesses and the effect of
economic weakness in the Far East.
-- Plumbing Products operating income increased 18% to $119 million on
increased volume and improved margin in both Latin America and U.S.
operations. Margin expansion in Europe, primarily from cost
reductions in France, also contributed to the increase. The
Company's China operations, consolidated for only the final two
months of the year, offset the effects of lower volume and margin
elsewhere in the Far East.
-- Automotive Products operating income increased 14% to $127 million.
Increased volume and improved margin in European operations was
partially offset by lower margin in Brazil and start-up costs of new,
majority-owned ventures in the U.S. and China.
-- Medical Systems operating loss reflected continued costs of
development and of integrating operations of the diagnostic
businesses acquired in June.
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 by $6 million from the prior year as lower
interest rates achieved through the Company's 1997 Credit Agreement and
redemption of $250 million 11-3/8% Senior Debentures in May 1997, financed
under the Credit Agreement, offset the effect of increased debt arising from
share repurchases and acquisition of the medical diagnostic businesses.
Equity in Net Income of Unconsolidated Joint Ventures increased to
$12 million compared to 1996 income of $3 million reflecting strong growth of
Automotive Products' U.S. joint venture, benefits from the restructuring of
Air Conditioning Products' scroll compressor joint venture and increased
income from the Company's financing joint venture established in 1996.
Plumbing Products' rapidly expanding businesses in China also contributed to
the increase prior to the consolidation of such operations at the end of
October when the Company acquired controlling interest in those businesses.
Corporate and Other Expense was essentially flat.
Income Taxes were $117 million, or 35.8% of pretax income excluding the
write-off of purchased R&D, compared to 35.6% for 1996 excluding an asset
impairment charge.
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("FAS 128"), which
simplifies the standards for computing earnings per share, changes the manner
of presentation on the income statement and requires the restatement of all
prior periods presented. Accordingly, the Company has reported 1997 diluted
income per common share of $2.76 (excluding a write-off of purchased
in-process research and development related to the acquisition of the medical
diagnostics businesses), compared with restated 1996 diluted income per common
share of $2.36 (excluding an asset impairment loss).
Overall, foreign exchange effects unfavorably impacted sales by 4%, or
$218 million, and operating income by 4%, or $22 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
$.12 per share, Sales in the Far East (excluding China), approximately 6% of
total consolidated sales, were down $27 million from 1996 and pre-tax income
was $17 million, down $13 million from 1996.
Fourth quarter 1997 sales were $1.5 billion, an increase of 7% from
$1.4 billion in 1996 (a 12% increase excluding an unfavorable foreign exchange
effect). Sales were strong for most U.S. businesses (particularly commercial
air conditioning) and for Automotive Products, with sales of the new Medical
Systems segment contributing to the gain. Far East sales, excluding China,
declined.
Operating income for the fourth quarter of 1997 was $138 million, an
increase of 6% from $130 million in the 1996 quarter (a 12% increase excluding
unfavorable foreign exchange effects). Air Conditioning gained 14% and
Plumbing 6% (despite weakness in the Far East) which, together with a small
gain for Automotive, were partly offset by a loss for Medical Systems.
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 Variable on
the Company's World Wide Web site http:\\www.americanstandard.com
AMERICAN STANDARD COMPANIES INC.
SUMMARY SEGMENT DATA
(Unaudited)
In millions Three Months Ended December 31,
1997 1996
Operating Operating
Reported Margin Reported Margin
Sales
Air Conditioning Products $ 883 $ 835
Plumbing Products 377 373
Automotive Products 253 229
Medical Systems 26 --
$1,539 $1,437
Operating income (loss)
Air Conditioning Products $79 8.9% $69 8.3%
Plumbing Products 33 8.8% 31 8.3%
Automotive Products 33 13.0% 32 14.0%
Medical Systems (7) -- (2) --
$138 9.0% $130 9.0%
Year Ended December 31,
1997 1996
Operating Operating
Adjusted Margin Adjusted Margin
Sales
Air Conditioning Products $3,567 $3,437
Plumbing Products 1,439 1,452
Automotive Products 952 916
Medical Systems 50 --
$6,008 $5,805
Operating income (loss) before write-off
of purchased research and development
and asset impairment loss
Air Conditioning Products $364 10.2% $353 10.3%
Plumbing Products 119 8.3% 110 7.6%
Automotive Products 127 13.3% 123 13.4%
Medical Systems (20) -- (13) --
$590 9.8% $573 9.9%
AMERICAN STANDARD COMPANIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
in millions except
per share data Three Months Ended December 31,
1997 1996
Sales $1,539 $1,437
Operating income $138 $130
Equity in net income of
unconsolidated joint ventures 3 6
141 136
Interest expense 48 47
Corporate and other expenses 21 19
Income before income taxes 72 70
Income taxes 26 25
Net income $46 $45
Net income per common share:
Basic $.64 $.57
Diluted $.62 $.56
Average outstanding common shares-basic 71.9 78.5
Average outstanding common shares-diluted 74.0 80.7
AMERICAN STANDARD COMPANIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
In millions except
per share data Year Ended December 31,
1997 1996
Reported Adjusted(a) Reported Adjusted(b)
Sales $6,008 $6,008 $5,805 $5,805
Operating income before write-off
of purchased research and development
and asset impairment loss $ 590 $590 $573 $573
Write-off of purchased research and
development(a) 90 -- -- --
Asset impairment loss(b) -- -- 235 --
Operating income 500 590 338 573
Equity in net income of
unconsolidated joint ventures 12 12 3 3
512 602 341 576
Interest expense 192 192 198 198
Corporate and other expenses 83 83 85 85
Income before income taxes
and extraordinary item 237 327 58 293
Income taxes 117 117 104 104
Income (loss) before
extraordinary item 120 210 (46) 189
Extraordinary loss on
retirement of debt, net of tax (24) (24) -- --
Net income (loss) $96 $186 $(46) $189
Per common share(c):
Basic:
Income (loss) before
extraordinary item $1.62 $2.85 $(.60) $2.42
Extraordinary loss on
retirement of debt (.32) (.32) -- --
Net income (loss) $1.30 $2.53 $(.60) $ 2.42
Diluted;
Income (loss) before
extraordinary item $1.57 $2.76 $(.60) $2.36
Extraordinary loss on
retirement of debt (.31) (.31) -- --
Net income (loss) $1.26 $2.45 $(.60) $2.36
Average outstanding
common shares-basic 73.8 73.8 78.0 78.0
Average outstanding
common shares-diluted 76.2 76.2 78.0 79.8
(a) 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.
(b) Effective January 1, 1996, the Company adopted FAS 121 which resulted
in an asset impairment loss of $235 million resulting predominantly
from the write-down of goodwill for which no tax benefit was
available.
(c) Earnings per common share for all periods presented have been
presented in accordance with FAS 128, "Earnings per Share", adopted
effective December 31, 1997.
SOURCE American Standard Inc.