American Standard Companies Inc. Reports Q3 Per Share Earnings
20 October 1998
American Standard Companies Inc. Reports 16% Increase in 1998 Third Quarter Per Share Earnings
PISCATAWAY, N.J., Oct. 20 -- American Standard Companies Inc.
today announced that third quarter 1998 diluted per share earnings
were $.87 (before restructuring charges), an increase of 16% over diluted per
share earnings of $.75 in 1997 (before write-off of purchased research and
development costs). Including the aforementioned charges, 1998 third quarter
net income was $36 million compared to a net loss of $33 million in 1997.
Mr. Emmanuel Kampouris, Chairman, President and Chief Executive Officer,
remarked: "We are pleased to report record sales and earnings for the third
quarter. These results are due largely to strong U.S. Air Conditioning
performance, particularly the residential and commercial unitary businesses,
and the continuing solid performance in Automotive. Increased equity income,
primarily from our U.S. automotive joint venture, and lower interest expense
in the period also favorably impacted results. Although, as previously
announced, the Air Conditioning chiller business is experiencing weaker
international demand and global pricing pressures, we expect a record
performance for the full year".
Total Sales for the third quarter of 1998 were $1.7 billion, up 14% from
last year with little effect from foreign exchange. Excluding foreign
exchange effects:
* Air Conditioning Products sales increased 16% to $1,053 million. Sales
increased 19% in the U.S. and 7% in international markets. U.S.
residential sales increased 26%, reflecting strong new home construction
and increased replacement demand as a result of warmer than normal
weather. Growth in the U.S. commercial and service operations continued
to be strong. The applied systems business, however, was weakened by
curtailments of large overseas construction projects and competitive
pricing pressures worldwide. Sales growth in Europe and Latin America
more than offset declines in China and the Far East.
* Plumbing Products sales increased 11% to $387 million. Sales in the
U.S. were up 18% while international sales increased 8%. The U.S.
increase was due to strong markets and continued gains in market share.
Moderate growth in Europe and Latin America, plus the effect of
consolidating the results of operations in China, more than offset
declines elsewhere in the Far East.
* Automotive Products sales increased 16% to $265 million, driven by
continued strong European commercial vehicle production and higher
product content per vehicle. In addition, sales of anti-lock braking
systems (ABS) to the Company's U.S. joint venture continued to increase,
reflecting both the phase-in of regulations requiring ABS on all new
heavy-duty trucks and trailers, and strong commercial vehicle
production.
* Medical Systems sales declined $1 million to $23 million due to weaker
market conditions.
Total Operating Income in the third quarter of 1998 (excluding
restructuring charges) was $162 million, an increase of 4% from $155 million
in 1997 (excluding the write-off of purchased research and development costs)
with little effect from foreign exchange. Excluding foreign exchange effects:
* Air Conditioning Products operating income increased 10% to
$108 million, reflecting strong performance in the U.S. residential and
commercial unitary businesses and in Latin America. Partially
offsetting these gains were declines in the applied business,
principally in Europe, the Far East and the U.S.
* Plumbing Products operating income declined 10% to $27 million. The
unfavorable effects of economic weakness in Asia and transitional costs
to implement the European low-cost sourcing program were partially
offset by higher operating income in the U.S. and Latin America and the
consolidation of operating results in China.
* Automotive Products operating income increased 3% to $33 million.
Continued strong sales volume in Europe and to the U.S. was partially
offset by weaker results in Brazil and increased development and
maintenance costs.
* Medical Systems operating loss was $6 million compared to a $5 million
loss in the third quarter of 1997, primarily reflecting increased
development activity.
Equity in Net Income of Unconsolidated Joint Ventures increased from
$3 million to $9 million, primarily as a result of strong growth in Automotive
Products' U.S. joint venture.
Interest Expense of $43 million was $5 million lower than the prior year,
due to lower average interest rates achieved through refinancings completed
earlier this year.
Corporate and Other Expenses of $22 million was unchanged from the prior
year.
Income Taxes, on income excluding special charges, reflect an effective
rate of 40% for the first nine months of 1998 compared to 35% in 1997. The
lower 1997 rate resulted from the utilization of certain previously
unrecognized tax benefits. No similar benefits are available in 1998. The
1998 third quarter effective rate reflects the year-to-date adjustment from
the 40.5% rate used in the first half of the year.
Foreign Exchange had a negative effect on sales of $8 million, with
essentially no effect on earnings per share.
Far East sales in the quarter, including currency effects, were 7% of
consolidated sales, compared to 9% in 1997. The consolidation of Plumbing's
sales in China partially offset a 23% decline in business elsewhere in the
region. Operating income, including currency effects, was less than 1% of
consolidated operating income.
The Company previously disclosed that it expects to record restructuring
charges in 1998 of $160 to $185 million related to its European and North
American plumbing businesses. In the third quarter of 1998, the Company
recorded a restructuring charge of $35 million ($29 million net of tax)
relating to the announced closure of two European facilities. The Company
expects that the remaining charges will be recorded in the fourth quarter of
1998.
The Company also announced today that it has signed definitive agreements
to sell Porcher Distribution, the 58 branch distribution network of its French
plumbing products business, to Brossette BTI and to Buron. It is expected
that the transactions will be completed during the fourth quarter of 1998 and
enable the Company to focus on core manufacturing competencies in its French
plumbing products business. Following completion of these sales, American
Standard will continue to supply plumbing products to distributors throughout
France, including Brossette and Buron.
Comments in this earnings 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 1997 Annual Report on Form 10-K and in the
"Management's Discussion and Analysis" section of the Company's Annual Report
To Shareholders.
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(R) and Copalis(R)
medical diagnostic systems and DiaSorin(TM) medical diagnostic products.
The latest news release and corporate information can be heard on
888-ASD-NEWS. Additional information on American Standard is available on the
Company's Worldwide Web site at http://www.americanstandard.com
AMERICAN STANDARD COMPANIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
In millions except Three Months Ended September 30,
per share data 1998 1998 1997 1997
Reported Adjusted(a) Reported Adjusted(b)
Sales
Air Conditioning
Products $1,053 -- $919 --
Plumbing Products 387 -- 352 --
Automotive Products 265 -- 224 --
Medical Systems 23 -- 24 --
$1,728 -- $1,519 --
Operating income (loss)
before restructuring
Air Conditioning Products 108 -- 98 --
Plumbing Products 27 -- 31 --
Automotive Products 33 -- 31 --
Medical Systems (6) -- (5) --
162 $162 155 $155
Restructuring expenses(a) 35 -- -- --
Write-off of purchased
research & development(b) -- -- 90 --
Operating income 127 162 65 155
Equity in net income of
unconsolidated
joint ventures 9 9 3 3
136 171 68 158
Interest expense 43 43 48 48
Corporate and other expenses22 22 22 22
Income (loss) before
income taxes 71 106 (2) 88
Income taxes 35 41 31 31
Net income (loss) $36 $65 $(33) $57
Per common share:
Basic $0.50 $0.90 $(0.46) $0.78
Diluted $0.49 $0.87 $(0.46) $0.75
Average outstanding
common shares -- basic 72.1 72.1 73.0 73.0
Average outstanding
common shares -- diluted 74.2 74.2 73.0 75.5
(a) Restructuring expenses related to Plumbing Products.
(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 the applicable
accounting rules.
AMERICAN STANDARD COMPANIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
In millions except Nine Months Ended September 30,
per share data 1998 1998 1997 1997
Reported Adjusted(a) Reported Adjusted(b)
Sales
Air Conditioning
Products $3,003 -- $2,684 --
Plumbing Products 1,129 -- 1,062 --
Automotive Products 811 -- 699 --
Medical Systems 73 -- 24 --
$5,016 -- $4,469 --
Operating income (loss)
before restructuring
Air Conditioning Products 308 -- 285 --
Plumbing Products 79 -- 86 --
Automotive Products 117 -- 94 --
Medical Systems (15) -- (13) --
489 $489 452 $452
Restructuring expenses(a) 35 -- -- --
Write-off of purchased
research & development(b) -- -- 90 --
Operating income 454 489 362 452
Equity in net income of
unconsolidated
joint ventures 21 21 9 9
475 510 371 461
Interest expense 145 145 144 144
Corporate and other expenses67 67 62 62
Income before income taxes
and extraordinary item 263 298 165 255
Income taxes 113 119 91 91
Income before extraordinary
item 150 179 74 164
Extraordinary loss on
retirement of debt,
net of tax 50 50 24 24
Net income $100 $129 $50 $140
Per common share:
Basic:
Income before
extraordinary item $2.08 $2.47 $0.99 $2.20
Extraordinary loss on
retirement of debt,
net of tax 0.69 0.69 0.32 0.31
Net income $1.39 $1.78 $0.67 $1.89
Diluted:
Income before
extraordinary item $2.02 $2.40 $0.96 $2.13
Extraordinary loss on
retirement of debt,
net of tax 0.67 0.67 0.31 0.31
Net income $1.35 $1.73 $0.65 $1.82
Average outstanding
common shares -- basic 72.2 72.2 74.4 74.4
Average outstanding
common shares -- diluted74.4 74.4 76.9 76.9
(a) Restructuring expenses related to Plumbing Products.
(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 the applicable
accounting rules.