American Standard Reports Record Second Quarter EPS Up 16% to $1.48
24 July 2000
American Standard Reports Record Second Quarter EPS Up 16% to $1.48
PISCATAWAY, N.J. - American Standard Companies Inc. today announced record
second quarter results. Revenues from continuing operations rose 7% year-over-
year to $2.0 billion, operating margin grew 0.5 percentage points to 12.8% and
diluted per share earnings increased 16% to $1.48.
Excluding foreign exchange effects, second quarter revenues from
continuing operations grew 10% with all units contributing to the growth.
Segment income was $262 million, up 11% over the prior year (14% excluding
foreign exchange), reflecting the combination of strong growth and margin
expansion. Income from continuing operations increased 16%. Free cash flow
was $95 million in the quarter, an improvement of $82 million over the same
period last year.
"These results surpassed sales, margins and earnings for any previous
quarter," said Frederic Poses, chairman and chief executive officer. "For the
first time, quarterly revenue reached $2.0 billion, a significant milestone
for our company. Moreover, we achieved these results despite adverse foreign
exchange impact.
"Looking forward, we expect to maintain our current top line growth rate,
sustained by our global market leadership and geographic diversity," added
Poses. "We're also confident we will achieve our annual 15% earnings growth
target as well as our free cash flow goal of $250 million, which is double the
1999 level."
Quarter Highlights
Air Conditioning Systems and Services sales were $1.3 billion, up 9%
(10% excluding foreign exchange). In the U.S., both Applied and Unitary
Systems continued to post strong sales growth and increased share. Commercial
business grew at an accelerated pace because of a strong market, continued
expansion of the national accounts program, and sales of Integrated Comfort
Systems, which combines new high efficiency chillers, air handling units,
terminal products and controls into one system. Residential systems sales
benefited from hotter than normal weather as well as new distribution
channels. Sales growth in Latin America continued strong, while European
growth was moderate. An improving economy in Asia resulted in resumption of
large high-tech industrial projects. These projects, involving some of the
company's global accounts drove a sharp rise in commercial sales. Overall,
the global/national accounts program sales grew 19% year to date. Segment
income increased $21 million, or 14%, to $174 million, and margin improved
from 12.9% to 13.5%, reflecting volume and share increases.
Plumbing Products second quarter sales were $479 million, up 4%
(10% excluding foreign exchange). Sales growth in the Americas was strong,
despite distributors adjusting inventories because of slower consumer
spending. The business also continued to gain share. Improving economic
conditions in Europe and Asia, with the exception of China, produced a strong
sales increase. Segment income increased $4 million, or 9% (14% excluding
foreign exchange) to $50 million, mainly due to volume increases and cost
improvements from the European restructuring program. Margin improved from
10.0% to 10.4%. Rollout of the new ClearTap(TM) water filtering kitchen
faucet, with integrated filter, is reaching 150 wholesale outlets and
1,000 retail stores in the U.S. Sales are above expectations, making
ClearTap(TM) one of the company's most successful new product introductions.
Vehicle Control Systems second quarter sales were $274 million, an
increase of 4% (13% excluding foreign exchange) driven by share gains as well
as market growth in Europe and economic recovery in Latin America. Segment
income rose 6% (19% excluding foreign exchange), reflecting higher volume and
productivity improvements. Margin improved from 13.6% to 13.9%. During the
quarter, a leading European truck manufacturer selected WABCO for both
electronically controlled air suspension and electronic air processing
systems.
Standard & Poor's announced last week that it raised the company's
corporate credit rating by two levels to investment grade, from BB to BBB-.
In announcing the rating increases, Standard & Poor's said, "The upgrades
reflect the likely significant strengthening of earnings and cash flow." In
addition, S&P stated that the company's "ongoing globalization activities and
a diverse customer base temper earnings cyclicality".
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 1999 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 and 1999 Annual Report to Shareholders. American
Standard does not undertake any obligation to release publicly any revisions
to such forward-looking statements to reflect new information or future
events.
American Standard is a global manufacturer with market leading positions
in three businesses: Trane(R), the nation's leading supplier of central air
conditioning systems and service for commercial and institutional buildings
and a premier brand for residential buildings; American Standard(R) and Ideal
Standard(R), the world's largest manufacturer of plumbing products; and
WABCO(R), the leading supplier of electronic braking and control systems to
the world's manufacturers of heavy-duty trucks and buses. The company employs
approximately 58,000 people in 36 countries. American Standard is included in
the Standard & Poor's MidCap 400 Index.
NOTE: American Standard Chairman and CEO Frederic Poses and Chief
Financial Officer Peter D'Aloia will discuss the company's performance in a
conference call at 10:00 a.m. Eastern time today.
American Standard Companies Inc.
Consolidated Statement of Operations
(Unaudited)
In millions except Three Months Six Months
per share data Ended June 30, Ended June 30,
2000 1999 2000 1999
Sales
Air Conditioning
Systems and Services $1,293 $1,188 $2,359 $2,130
Plumbing Products 479 459 939 873
Vehicle Control Systems 274 264 570 556
Total $2,046 $1,911 $3,868 $3,559
Segment income
Air Conditioning
Systems and Services $174 $153 $268 $229
Plumbing Products 50 46 90 80
Vehicle Control Systems 38 36 82 76
Total 262 235 440 385
Equity in net income
of unconsolidated joint
ventures 9 9 19 17
271 244 459 402
Interest expense 49 47 98 93
Corporate and other
expenses 43 38 82 65
Income from continuing
operations before
income taxes 179 159 279 244
Income taxes 71 66 111 101
Income from continuing
operations 108 93 168 143
Loss from discontinued
operations -- 3 -- 6
Net Income $108 $90 $168 $137
Per basic common share:
Income from continuing
operations $1.54 $1.32 $2.38 $2.03
Loss from discontinued
operations -- (0.05) -- (0.08)
Net income $1.54 $1.28 $2.38 $1.95
Per diluted common share:
Income from continuing
operations $1.48 $1.28 $2.31 $1.97
Loss from discontinued
operations -- (0.05) -- (0.08)
Net income $1.48 $1.23 $2.31 $1.89
Average basic
outstanding common
shares 70.3 70.5 70.6 70.3
Average diluted
outstanding common
shares 72.8 73.1 72.8 2.4
American Standard Companies Inc.
Data Supplement Sheet
*Prior Year Shown at Current Exchange Rates
Continuing Operations (Excludes Medical)
This Data Supplement Sheet includes information on backlog and information
excluding the effect of foreign exchange on operating results. With
approximately half of the Company's business from outside the U.S., the impact
of changes in exchange rates can have significant impact on results when
reported in U.S. Dollars. Management believes that excluding exchange effects
is helpful in assessing the overall performance of the business.
$ in millions Three Months Ended June 30,
Reported % Chg vs. Adj* % Chg vs.
2000 1999 1999 Adj. 1999
Air Conditioning
Systems and Services
Sales 1,293 9% 1,176 10%
Segment Income 174 14% 153 14%
Margin 13.5% 0.6 pts 13.0% 0.5 pts
Backlog
Plumbing Products
Sales 479 4% 434 10%
Segment Income 50 9% 44 14%
Margin 10.4% 0.4 pts 10.1% 0.3 pts
Backlog
Vehicle Control Systems
Sales 274 4% 242 13%
Segment Income 38 6% 32 19%
Margin 13.9% 0.3 pts 13.2% 0.7 pts
Backlog
Total Company
Sales 2,046 7% 1,852 10%
Segment Income 262 11% 229 14%
Margin 12.8% 0.5 pts 12.4% 0.4 pts
$ in millions Six Months Ended June 30,
Reported % Chg vs. Adj* % Chg vs.
2000 1999 1999 Adj. 1999
Air Conditioning
Systems and Services
Sales 2,359 11% 2,111 12%
Segment Income 268 17% 230 17%
Margin 11.4% 0.6 pts 10.9% 0.5 pts
Backlog 730 678
Plumbing Products
Sales 939 8% 830 13%
Segment Income 90 13% 77 17%
Margin 9.6% 0.4 pts 9.3% 0.3 pts
Backlog 138 123
Vehicle Control Systems
Sales 570 3% 510 12%
Segment Income 82 8% 66 24%
Margin 14.4% 0.7 pts 12.9% 1.5 pts
Backlog 437 389
Total Company
Sales 3,868 9% 3,451 12%
Segment Income 440 14% 373 18%
Margin 11.4% 0.6 pts 10.8% 0.6 pts
American Standard Companies Inc.
Consolidated Balance Sheet
(Dollars in Millions)
June 30, December 31,
Current assets 2000 1999
Cash and cash equivalents $ 92 $ 61
Accounts receivable 1,147 986
Inventories 612 505
Other current assets 126 123
Assets held for sale (medical companies) 52 51
Total current assets 2,029 1,726
Net facilities 1,387 1,414
Goodwill 945 991
Other assets 627 555
$ 4,988 $ 4,686
Current liabilities
Short-term debt $ 102 $ 756
Accounts payable 673 578
Accrued liabilities and taxes 1,086 953
Total current liabilities 1,861 2,287
Long-term debt 2,622 1,887
Other long-term liabilities
Reserve for postretirement benefits 415 436
Deferred taxes on income 83 55
Other 454 517
Total liabilities 5,435 5,182
Stockholders' deficit
Common stock, capital surplus and other 589 596
Treasury stock (409) (363)
Accumulated deficit (385) (553)
Foreign currency translation effects (242) (176)
Total stockholders' deficit (447) (496)
$ 4,988 $4,686