UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
[ X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1993
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-470
AMERICAN STANDARD INC
(Exact name of registrant as specified in its charter)
DELAWARE 25-0900465
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1114 Avenue of the Americas,
New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code : (212) 703-5100
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. (Not applicable.)
Aggregate market value of the voting stock held by non-affiliates of the
registrant: (Not applicable ; all of the voting stock of the Registrant
is owned by its parent, ASI Holding Corporation.)
Number of shares outstanding of each of the Registrant's classes of common
stock, as of the close of business on March 10, 1994:
Common Stock, $.01 par value 1,000 shares
Documents incorporated by reference:
None
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AMERICAN STANDARD INC.
Annual Report on Form 10-K
December 31, 1993
TABLE OF CONTENTS
Page
PART I
Item 1. Business 1
Item 2. Properties 15
Item 3. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 17
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters 19
Item 6. Selected Financial Data 19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 20
Item 8. Financial Statements and Supplementary Data 39
Item 9. Changes in and Disagreements on Accounting and
Financial Disclosure 64
PART III
Item 10. Directors and Executive Officers of the Registrant 65
Item 11. Executive Compensation 72
Item 12. Security Ownership of Certain Beneficial Owners
and Management 77
Item 13. Certain Transactions and Relationships 79
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8K 81
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PART I
ITEM 1. BUSINESS
American Standard Inc. and subsidiaries (the "Company"), with 89
manufacturing facilities in 27 countries, produces air conditioning
systems, bathroom and kitchen fixtures and fittings, and braking systems
for heavy trucks and buses. In 1993 the Company had sales of $3.8
billion. The Company, which traces its roots to the nineteenth century,
is organized into three business segments: the Air Conditioning Products
Segment, the Plumbing Products Segment and the Transportation Products
Segment.
The Company's Air Conditioning Products Segment ("Air Conditioning
Products") manufactures "applied" (custom-engineered, site-assembled) and
"unitary" (self-contained, factory-assembled) air conditioning systems.
Both the applied and unitary systems are sold primarily under the TRANE*
name. In 1993 Air Conditioning Products, with revenues of $2,100 million,
accounted for 55% of the Company's sales and 47% of its operating income.
Air Conditioning Products derived approximately 15% of its total 1993
sales from operations outside the United States and over half from the
replacement, repair and service markets, which in general are less
cyclical than the new residential and commercial construction markets.
The Company's Plumbing Products Segment ("Plumbing Products")
manufactures and distributes bathroom and kitchen fixtures and fittings
primarily under the IDEAL-STANDARD*, AMERICAN-STANDARD* and STANDARD*
names. In 1993 Plumbing Products, with revenues of $1,167 million,
accounted for 30% of the Company's sales and 38% of its operating income.
Plumbing Products derived approximately 74% of its total worldwide 1993
sales from operations outside the United States.
The Company's Transportation Products Segment ("Transportation
Products") is a manufacturer of air brake and related systems principally
for the commercial vehicle industry in Europe and Brazil. Transportation
Products' most important products are pneumatic braking and related
control systems and components (including antilock braking systems)
marketed under the WABCO* name for medium-size and heavy trucks, tractors,
buses and trailers. In 1993 Transportation Products, with sales of $563
million, accounted for 15% of the Company's sales and 15% of its operating
income.
The Company, a Delaware corporation, was incorporated in 1929. All
of its common shares are owned by ASI Holding Corporation ("Holding"), a
Delaware corporation that was formed in 1988 by Kelso & Company, L.P.
("Kelso"), to acquire the Company through a cash tender offer and
subsequent merger (the "Acquisition"). The outstanding common shares of
Holding are owned 73% by Kelso ASI Partners, L.P., an affiliate of Kelso,
17% by the American-Standard Employee Stock Ownership Plan (the "ESOP")
and 10% by executive officers and other employees of the Company.
The aggregate purchase price of the Acquisition was approximately
$3.2 billion (including assumed debt), financed by approximately $350
million in equity financing provided by Kelso ASI Partners, L.P., the
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* TRANE, IDEAL-STANDARD, AMERICAN-STANDARD, STANDARD, and WABCO are
registered trademarks of the Company.
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ESOP, certain officers and members of management (the "Management
Investors"), and an unrelated institutional purchaser of the Company's
Exchangeable Preferred Stock and by approximately $2.8 billion in new and
assumed debt.
Since the Acquisition the Company has disposed of five of its
non-core businesses for aggregate proceeds of $661 million. The net cash
proceeds from these sales were used to repay bank debt.
Strategy
Demand Flow Technology
To enhance its position as a leader in each of its industries, in
1990 the Company began the implementation of Demand Flow throughout its
operations. Under Demand Flow products are produced as and when required
by the customer. To coordinate production more precisely with customer
demand the production process is streamlined, work cells are utilized, and
quality control is integrated into each major step of the manufacturing
process, instead of being limited to a final inspection of the finished
product. The benefits of Demand Flow include better customer service,
increased inventory turnover rates, quicker response to changing market
needs, improved quality control, higher productivity, and reduced
requirements for working capital and manufacturing and warehouse space.
Principally as a result of significant progress in implementing
Demand Flow, the Company achieved an aggregate $251 million reduction in
inventories for the years 1990 through 1993. Where Demand Flow has been
implemented product cycle time (the time from the beginning of the
manufacturing of a product to its completion) has been reduced from months
to days and from weeks to hours, and, on average, inventory turnover rates
have more than doubled. The Company believes that as a result of the
introduction of Demand Flow employee productivity has risen significantly,
and without reducing production capacity the Company has been able to free
more than two million square feet of manufacturing and warehouse space for
possible expansion, plant consolidation, or other uses.
Globalization
To counteract the cyclical nature of its businesses, the Company has
as one of its major strategic objectives the further expansion of its
already global presence. The Company derived 45% of its 1993 sales and
56% of its operating income from countries outside the United States. Air
Conditioning Products plans to continue to expand its operations in Europe
and is currently in the process of establishing additional joint ventures
in Australia and in the People's Republic of China ("PRC"). Plumbing
Products, which already has the widest global presence in its industry,
recently expanded its markets through joint ventures in Eastern Europe,
Spain, and Portugal and will continue this approach. Plumbing Products is
significantly expanding its operations in the PRC through a new holding
company which is establishing a number of joint ventures to manufacture,
market, and distribute bathroom and kitchen fixtures and fittings and
related products. The Company believes that this expansion will strongly
enhance its global position in the plumbing products business by
obtaining, with a low capital contribution, a significant position in the
very large and rapidly growing market in the PRC. The Company will
contribute $10 million plus its interest in an existing PRC sanitaryware
manufacturer to the holding company in exchange for an initial ownership
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interest of 21% but with provisions for effective control over day-to-day
operations. Transportation Products, headquartered in Europe, has
established an operation in Spain, is in the process of establishing joint
ventures in Eastern Europe and the PRC, and expects to expand its existing
joint ventures in Japan and the United States over the long term.
Air Conditioning Products Segment
Air Conditioning Products began with the acquisition by the Company
in February 1984 of The Trane Company, a manufacturer and distributor of
air conditioning products since 1913. Air conditioning products are sold
primarily under the TRANE name. In 1993 Air Conditioning Products, with
revenues of $2,100 million, accounted for approximately 55% of the
Company's sales and 47% of its operating income. Air Conditioning
Products derived approximately 15% of its sales in 1993 from operations
outside the United States and over half from the replacement, repair, and
service markets, which in general are less cyclical than the
new-construction market.
Air Conditioning Products manufactures three general types of air
conditioning systems. The first, called "unitary," which is sold for
residential and commercial applications, is a factory-assembled central
air conditioning system which generally encloses in one or two units all
the components to cool or heat, clean, dehumidify or humidify, and move
air. The second, called "applied," is typically custom-engineered for
commercial use and involves field installation of several different
components of the air conditioning system. Trane is a world leader in both
unitary and applied air conditioning products. The third type, called
"mini-split," is a small unitary air conditioning system, generally for
residential use, which operates without air ducts. Air Conditioning
Products manufactures and distributes mini-split units, principally in
Europe and the Far East.
Product and marketing programs have been, and are being, developed to
increase penetration in the growing replacement, repair, and servicing
businesses, in which margins are higher than on sales of original
equipment. Much of the equipment sold in the fast-growing air
conditioning markets of the 1960's and 1970's is reaching the end of its
useful life. Also, equipment sold in the 1980's is likely to be replaced
earlier than originally expected with higher-efficiency products recently
developed to meet required efficiency standards and to capitalize on the
availability of environmentally acceptable refrigerants.
Many of the products manufactured by Air Conditioning Products
utilize chlorofluorocarbons ("CFC's") and hydrochloroflourocarbons
("HCFC's") as refrigerants. Various federal and state laws and
regulations, principally the 1990 Clean Air Act Amendments, require the
eventual phase-out of the production and use of these chemicals because of
their possible deleterious effect on the earth's ozone layer if released
into the atmosphere. Phase-in of substitute refrigerants will require
replacement or modification of much of the air conditioning equipment
already installed, which management believes will present a new market
opportunity. In order to ensure that the Company's products will be
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compatible with the substitute refrigerants, Air Conditioning Products has
been working closely with the manufacturers that are developing
substitutes for those refrigerants to be phased out. Air Conditioning
Products has incurred and will continue to incur research and development
costs in this effort. These costs and the substitution of alternative
refrigerants are not expected to have a material adverse impact on Air
Conditioning Products. (See "General -- Regulations and Environmental
Matters.")
Various federal and state statutes, including the National Appliance
Energy Conservation Act of 1987, as amended, impose energy efficiency
standards for certain of the Company's unitary air conditioning products.
Although the Company has been able to meet or exceed such standards to
date, stricter standards in the future could require substantial research
and development expense and capital expenditures to maintain compliance.
The continuing implementation of Demand Flow by Air Conditioning
Products has helped provide better service to customers, better-quality
products and shorter product manufacturing cycle times, in many cases
reduced from months to days and from weeks to hours. In addition, Demand
Flow has resulted in greater productivity, lower cost for quality control,
and improvement in inventory turnover rates, which have more than doubled
since 1989 and are expected to improve further.
Air Conditioning Products has 27 manufacturing plants in 7 countries,
employing 14,900 people.
Air Conditioning Products comprises three operating groups: Unitary
Products, Commercial Systems, and International.
Unitary Products Group
Unitary Products, which accounted for approximately 42% of Air
Conditioning Products' 1993 sales, manufactures and distributes products
for residential and commercial unitary applications in the United States.
This group benefits the most from the growth of the replacement market for
residential and commercial air conditioning systems. Other major
suppliers in the unitary market are Carrier, Intercity Products, Rheem,
and Lennox.
Commercial unitary products range from 2 to 120 tons and also include
combinations of air conditioners, heat pumps, and gas furnaces, along with
variable-air-volume equipment and system controls. Typical applications
are in retail stores, small-to-medium-size office buildings, manufacturing
plants, restaurants, and commercial buildings located in office parks and
strip malls. These products are sold through the Commercial Systems Group
sales locations as well as through independent wholesale distributors and
dealer/contractors, who sell and install the equipment.
Residential central air conditioning products range from 1 to 5 tons
and include air conditioners, heat pumps, air handlers, furnaces, and
coils. These products are sold through independent wholesale distributors
and also directly to dealer/contractors, who sell and install the units
for homeowners.
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The Company also markets an AMERICAN-STANDARD brand name product to
serve distributors who typically carry other products in addition to air
conditioning products.
Commercial Systems Group
Commercial Systems, which accounted for approximately 37% of Air
Conditioning Products' 1993 sales, manufactures and distributes products
in the United States for sale in the U.S. and Canada for air conditioning
applications in larger commercial, industrial, and institutional
buildings. Other major suppliers of commercial systems are Carrier, York,
and Snyder-General.
Commercial Systems distributes its products through 81 sales
offices. Twenty-seven of these offices are Company-owned and 54 are
franchised. In 1993 the Company acquired the franchises in New York City;
Birmingham, Alabama; and Columbia, South Carolina, and early in 1994 the
Toronto, Canada, office and expects to continue to acquire major sales
offices from its franchisees.
Over the last few years Commercial Systems has added additional
aftermarket business activities, such as emergency rentals of air
conditioning equipment. Also, the group has expanded its line to include
components for converting installed centrifugal chiller products to use
more environmentally acceptable refrigerants.
During 1993 the Company achieved excellent market acceptance of new
products such as the high-efficiency centrifugal chiller, expanded air
cooled series R chiller line, and the new fan coil line. Integrated
Comfort Systems continue to grow as a percentage of total sales. Indoor
air quality is emerging as a significant new application that can be well
served by the Company's product lines.
International Group
The International Group, which accounted for approximately 21% of Air
Conditioning Products' 1993 sales, manufactures applied and unitary
products in foreign facilities operated by subsidiaries and joint ventures
and exports many of the products manufactured in the United States by the
Unitary Products and Commercial Systems Groups.
Air Conditioning Products expects to continue the expansion of its
presence outside the U.S. In France, in addition to its plants opened
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earlier in Epinal and Charmes, in late 1991 the group opened a plant in
Mirecourt to build mini-splits and air moving products known as fan coils
utilizing Demand Flow technology. The fan coil line is tailored to the
European market, and the mini-split products are being sold in Europe, the
Middle East, and the Far East. An operation was opened in 1992 in
Colchester, U.K., to provide large air handling products to the U.K. Like
the Commercial Systems Group, the International Group has an extensive
network of sales and service agencies, both Company-owned and franchised,
to provide maintenance and warranty service for its equipment installed
around the world.
The Company has increased its presence in Asia by expanding its
operations in Malaysia, purchasing an air conditioning and distribution
firm in Taiwan in 1990, and entering into a sales and manufacturing joint
venture in Thailand in 1991. In 1992 a joint venture in Egypt commenced
operations. The Company is also in negotiation to form additional air
conditioning joint ventures in Australia and the PRC. An important new
product for the Far East markets, which went into production in 1992 in
Malaysia, was a double-walled air handler designed for ease of manufacture
and compatibility with the Demand Flow manufacturing process.
Plumbing Products Segment
Plumbing Products manufactures and distributes bathroom and kitchen
fixtures and fittings primarily under the IDEAL-STANDARD,
AMERICAN-STANDARD, and STANDARD names. In 1993 Plumbing Products, with
revenues of $1,167 million, accounted for 30% of the Company's sales and
38% of its operating income. Plumbing Products derived approximately 74%
of its total 1993 sales from operations outside the United States.
Approximately 53% of Plumbing Products' sales consists of vitreous
china fixtures, 26% consists of fittings (typically brass), 7% consists of
bathtubs, and the remainder consists of related plumbing products.
Throughout the world these products are generally sold through wholesalers
and distributors and installed by plumbers and contractors. In the United
States sales through the retail channel have continued to grow and
accounted for approximately 20% of U.S. Plumbing Products' sales in 1993.
In total the residential market accounts for approximately 75% of Plumbing
Products' sales, with the commercial and industrial markets providing the
remaining 25%.
Plumbing Products currently employs approximately 16,100 people
throughout the world and, including affiliated companies, has 52
manufacturing plants in 22 countries. Plumbing Products operates through
three primary geographic groups: European Plumbing Products, the Americas
Group (comprising U.S. Plumbing Products and Americas International), and
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the Far East Group. Plumbing Products' fittings operations are organized
as the Worldwide Fittings Group, which has primary responsibility for
faucet technology, product development, and manufacturing, with
manufacturing facilities in Europe, the U.S., and Mexico. Worldwide
Fittings sales and operating results are reported in the three primary
geographic groups within which it operates.
European Plumbing Products, which sells products primarily under the
brand name IDEAL-STANDARD, manufactures and distributes bathroom and
kitchen fixtures and fittings in Europe through its wholly owned
operations in Germany, Italy, France, England and Greece; its majority-
owned subsidiaries in the Czech Republic and Bulgaria; its joint ventures
in France, Spain, and Portugal; and in Egypt through a wholly owned
subsidiary and a joint venture. U.S. Plumbing manufactures bathroom and
kitchen fixtures and fittings, selling under the brand names
AMERICAN-STANDARD and STANDARD in the United States. Americas
International manufactures bathroom and kitchen fixtures and fittings,
selling under the names AMERICAN-STANDARD, IDEAL-STANDARD, and STANDARD,
through its wholly owned operations in Mexico, Canada, and Brazil and its
majority-owned subsidiaries in Central America. The Far East Group
manufactures bathroom and kitchen fixtures and fittings, selling under the
names AMERICAN-STANDARD, IDEAL-STANDARD, and STANDARD through its wholly
owned operations in South Korea, its majority-owned operations in
Thailand, the Philippines, and the People's Republic of China, and its
manufacturing joint venture in Indonesia. Sales of the Far East Group
subsidiaries on average have been growing over the last three years at an
annual rate of more than 10%.
In 1991 the Company purchased 32% of Etablissements Porcher
("Porcher"), the leading French manufacturer and distributor of plumbing
products with manufacturing facilities for ceramic fixtures, cast iron and
acrylic bathtubs, brass fittings, and plastic components in seven
locations and with company-owned distribution outlets throughout France.
In line with its goal of increased globalization, in 1992 the Company
expanded the operations of one of its joint ventures in Egypt and
established operations in the Czech Republic and Bulgaria and joint
ventures in Spain and Portugal. The Company is also significantly
expanding its operations in the People's Republic of China as previously
described.
The market for the Company's plumbing products is divided into the
replacement and remodeling market and the new-construction market. The
replacement and remodeling market accounts for about 60% of the European
and U.S. groups' sales but only about 40% of the sales of the Far East
group, for which new construction is more important. In the United States
and Europe the replacement and remodeling market has historically been
more stable than the new-construction market and has shown moderate growth
over the past several years. The new-construction market has generally
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been declining in Europe in recent years. In the U.S. it hit its recent
low in early 1991 but had some recovery in 1992 and 1993. The
new-construction market, in which the product selection is made by
builders or contractors, is more price-competitive and volume-oriented
than the replacement and remodeling market. In the replacement and
remodeling market consumers are the purchasers, and, therefore, this
market is more responsive to quality and design than price, making it the
principal market for higher-margin luxury products. Although management
believes it must continue to offer a full line of fixtures and fittings in
order to support its distribution system, Plumbing Products' current
strategy is to focus on increasing its sales of higher-margin products in
the middle and upper segments of both the remodeling and new-construction
markets.
In an effort to capture a larger share of the replacement and
remodeling market, over the last few years Plumbing Products has
introduced a variety of new products tailored to suit customer tastes in
each country. New offerings include additional colors and ensembles,
bathroom suites from internationally known designers, and electronically
controlled products. Faucet technology is centered on lifetime ceramic
disc cartridges, anti-scald features, and low lead content to meet
emerging consumer and legislative requirements.
Plumbing Products also has continued its programs to expand its
presence in high-quality showrooms and showplaces featuring its higher-end
products in certain major countries. These programs, along with expanded
sales training activities, have enhanced the image of the Company's
products with interior designers, decorators, consumers and plumbers.
In the United States a Retail Products Division has been established
to focus on the unique needs of the growing retail home center industry,
using products sourced from several of the Company's manufacturing
locations throughout the world. This market channel accounted for about
20% of the U.S. Plumbings' sales in 1993, and this proportion is expected
to grow.
Water-saving fixtures and fittings have been a major focus of
Plumbing Products for the past six years, particularly in light of recent
water shortages experienced in a number of areas of the U.S. The Company
produces one of the most extensive lines of water-saving toilets available
in the United States. Manufacture of water-saving toilets is mandated for
residential use by federal law commencing in January 1994.
Many of the Company's bathtubs are made from a proprietary
enameled-steel composite AMERICAST*, which has gained an increasing share
of the worldwide market. Products made from the composite AMERICAST have
the durability of cast iron with only one-half the weight and are
characterized by improved resistance to breaking and chipping. AMERICAST
tubs are easier to ship, handle, and install and are less expensive to
produce than cast iron tubs. Use of this advanced material was extended
to kitchen sinks, bathroom lavatories, and other products during 1991 and
1992.
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* AMERICAST is a registered trademark of the Company.
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Plumbing Products is converting to Demand Flow technology in all
plants. In addition, new techniques are being applied at all principal
stages of production, including CAD/CAM for mold-making; computer-
controlled casting, drying and spraying; and state-of-the-art kilns as
well as faster ceramic molding techniques.
In the U.S. Plumbing Products has several important competitors,
including Kohler Company and Masco Corporation in selected product lines.
There are also important competitors in foreign markets, for the most part
operating nationally. Friederich Grohe GmbH, the major manufacturer of
fittings in Europe, is a pan-European competitor. In Europe Villeroy &
Boch and Sanitec are the major fixtures competitors, and in the Far East
Toto is the major competitor.
Transportation Products Segment
Transportation Products manufactures air brake and related systems
for the commercial vehicle industry in Europe and Brazil and markets under
the WABCO name. Transportation Products' most important products are
pneumatic braking and related control systems and components (including
antilock braking systems ("ABS")) for medium-size and heavy trucks,
tractors, buses and trailers. In 1993 Transportation Products, with
sales of $563 million, accounted for 15% of the Company's sales and 15% of
its operating income. The Company believes that Transportation Products
is the worldwide technological leader in the heavy truck and bus braking
industry. Electronic controls, first introduced in ABS in the early
1980's, are increasingly applied in other systems sold to the commercial
vehicle industry.
The Company's transportation products are sold directly to vehicle
and component manufacturers. Spare parts are sold through both original
equipment manufacturers and an independent distribution network. Although
the business is not dependent on a single or related group of customers,
sales of truck braking systems are dependent on the demand for heavy
trucks. Some of the Company's important customers are Daimler-Benz,
Volvo, Renault, Iveco, Ford, and SAAB Scania. Principal competitors are
Knorr, Robert Bosch, and Bendix.
The European market for new trucks, buses, trailers, and replacement
parts declined significantly in 1992 and 1993. Despite the decline in
the replacement market Transportation Products' share of sales to that
market increased. European legislation mandating the phase-in of ABS
beginning in 1991 has had a positive impact on sales and is expected to
continue to do so. The Brazilian market recovered somewhat in 1993 after
declining in 1992 because of political and economic uncertainties.
The WABCO ABS system, which the Company believes leads the market,
has been installed in over 550,000 heavy trucks, buses, and trailers in
Europe since 1981. Annual sales volume has significantly increased in
recent years to approximately 120,000 units in 1993. In addition,
Transportation Products has developed electronically controlled pneumatic
gearshifting systems, electronically controlled air suspension systems,
and automatic climate-control and door-control systems for the commercial
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vehicle industry. These systems have resulted in greater sales per
vehicle for Transportation Products. Significant progress was made in
1992 and 1993 in market acceptance of electronically controlled systems.
New products under development are an advanced electronic braking system
and additional electronic drive line control systems.
Demand Flow manufacturing methods have resulted in improved customer
service and product quality -- two primary goals for Transportation
Products. In addition, Transportation Products has developed and
implemented an electronic data interchange system, which links certain
customers directly to Transportation Products' information systems,
providing timely, error-free information and just-in-time delivery to the
customer.
Transportation Products and affiliated companies have 10
manufacturing facilities and 8 sales organizations with operations in 14
countries. Principal manufacturing operations are in Germany, France, the
United Kingdom, and Brazil. Transportation Products has joint ventures in
the United States with Rockwell International (Rockwell WABCO), in Japan
with Sanwa Seiki (SANWAB), in Spain with DIMETAL (WABCO DIMETAL), and in
India with TVS Group (Clayton Sundaram). There are also licensees in the
People's Republic of China and Poland.
In January 1994 the Company acquired a 70% interest in Deutsche
Perrot-Bremsen GmbH ("Perrot") through a joint venture arrangement to
conduct all engineering, manufacturing, and sales activities of Perrot's
brake business. Through this venture the Company will be able to offer
complete brake systems for trucks, buses and trailers, especially in the
important and growing air-disc brake business.
Since 1991 ABS systems for commercial vehicles have been gaining
acceptance in the United States and Japan, where Transportation Products
participates through its joint venture operations. Rockwell WABCO is now
a supplier of WABCO systems to Freightliner, Mack, Volvo-GM, Kenworth,
Peterbilt, and other vehicle manufacturers in North America. SANWAB
supplies Hino, Nissan and trailer manufacturers in Japan. Should
legislation or regulations making ABS mandatory become effective in the
United States or other countries, Transportation Products is, it believes,
in a good position to take advantage of the opportunity.
Transportation Products employed approximately 4,900 people as of
December 31, 1993.
General
Raw Materials
The Company purchases a broad range of materials and components
throughout the world in connection with its manufacturing activities.
Major items include steel, copper tubing, aluminum, ferrous and nonferrous
castings, clays, motors, and electronics. The ability of the Company's
suppliers to meet performance and quality specifications and delivery
schedules is important to its operations. The Company is working closely
with its suppliers to integrate them into the Demand Flow manufacturing
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process by developing with them just-in-time supply delivery schedules to
coordinate with the Company's customer demand and delivery schedules. The
Company expects this closer working relationship to result in better
control of inventory quantities and quality and lower related overhead and
working capital costs. The energy and materials required for its manufac-
turing operations have been readily available, and the Company does not
foresee any significant shortages.
Patents, Licenses and Trademarks
The Company's operations are not dependent to any significant extent
upon any single or related group of patents, licenses, franchises or
concessions. The Company's operations also are not dependent upon any
single trademark, although some trademarks are identified with a number of
the Company's products and services and are of importance in the sale and
marketing of such products and services. Some of the more important of
the Company's registered trademarks are:
Air Conditioning Products TRANE
AMERICAN-STANDARD
Plumbing Products AMERICAN-STANDARD
IDEAL-STANDARD
STANDARD
Transportation Products WABCO
WABCO WESTINGHOUSE
CLAYTON DEWANDRE
The Company from time to time has granted patent licenses to, and has
licensed technology from, other parties.
Research and Product Development
The Company incurred costs of approximately $43 million in 1993, $40
million in 1992, and $36 million in 1991 on research activities and
product development and improvement. Any amount spent on customer-
sponsored activities in those years was insignificant.
Regulations and Environmental Matters
The Company's operations are subject to federal, state, and local
environmental laws and regulations that impose limitations on the
discharge of pollutants into the air and water and establish standards for
the treatment, storage, and disposal of solid and hazardous wastes. A
number of the Company's plants are in the process of making changes or
modifications to comply with such laws and regulations. The Company is a
party to a number of remedial actions under various federal and state
environmental laws and regulations that impose liability on companies to
clean up, or contribute to the cost of cleaning up, sites at which
hazardous wastes or materials were disposed or released, including
approximately 30 proceedings under the Comprehensive Environmental
Response, Compensation and Liability Act and similar state statutes in
which the Company has been named a potentially responsible party or a
third party by a potentially responsible party. Additional sites may be
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identified for environmental remediation in the future, including
properties previously transferred by the Company and with respect to which
the Company may have contractual indemnification obligations.
Expenditures in 1992 and 1993 to evaluate and remediate such sites were
not material. On the basis of the Company's historical experience and
information currently available, the Company believes that these
environmental actions will not have a material adverse effect on its
financial condition, results of operations or liquidity. However, the
Company cannot estimate at this time the ultimate aggregate costs of
remedial actions, including those already identified and similar
additional ones, because of (a) uncertainties surrounding the nature and
application of environmental regulations, (b) the Company's lack of
information about additional sites at which it may be listed as a
potentially responsible party, (c) the level of clean-up that may be
required at specific sites and choices concerning the technologies to be
applied in corrective actions, (d) the number of contributors and the
financial capacity of others to contribute to the cost of remediation at
specific sites and (e) the time periods over which remediation may occur.
The Company's foreign operations are also subject to various
environmental statutes and regulations. Generally, these requirements
tend to be no more restrictive than those in effect in the United States.
The Company believes it is in substantial compliance with such existing
domestic and foreign environmental statutes and regulations.
Although there is currently no federal standard for lead discharge
into drinking water, the Federal Safe Drinking Water Act imposes a limit
on the lead content of plumbing fittings of 8% by weight. In addition,
the U.S. Environmental Protection Agency is considering proposing a
maximum federal standard of approximately 11 to 15 parts per billion of
lead leachate from faucets in drinking water.
The Company, along with 15 other major manufacturers of plumbing
fittings, was made a party to a lawsuit initiated by the State of
California in December 1992 seeking damages and other relief, alleging
that faucets sold by the parties discharged lead into drinking water in
excess of minimum standards allegedly established by Proposition 65.
Pursuant to Proposition 65, a discharge of lead into a source of drinking
water in excess of 0.5 micrograms per day is prohibited, although the
State of California has not yet established any methodology for measuring
this discharge. The Company believes that the lead limitations should not
apply to faucets because faucets are not a "source" of drinking water as
contemplated by the legislation (e.g., reservoirs, streams, etc.).
Although most of the Company's fittings contain and discharge some amount
of lead, the lead content of the Company's fittings is one of the lowest
in the industry, and all of the Company's fittings will fall below the
proposed federal discharge standard and fall below current federal weight
standards mentioned above. The Company believes its exposure in the
California suit is minimal, if any. The Company also believes that its
low-lead fittings and its continuing efforts to further reduce lead
content will afford the Company a competitive edge.
<PAGE>
<PAGE>
In September 1987 the United States became a signatory to an
international agreement known as the Montreal Protocol on Substances that
Deplete the Ozone Layer (the "Montreal Protocol"). The Montreal Protocol
requires its signatories to reduce production and consumption of CFC's.
In November 1992 the Montreal Protocol was amended in Copenhagen, Denmark,
to phase out all except critical uses of CFC's by January 1, 1996, and to
limit consumption of HCFC's beginning in 1996 and phase them out
completely by 2030. In 1988 the EPA issued regulations implementing the
Montreal Protocol in the United States. Mexico, the Federal Republic of
Germany, the United Kingdom, France and other countries have also become
signatories to the Montreal Protocol. The manner in which these countries
implement the Montreal Protocol and regulate CFC's could differ from the
approach taken in the United States.
The 1990 Clean Air Act Amendments (the "CAAA") implement the Montreal
Protocol by establishing a program for limiting the production and use of
CFC's and other ozone-depleting chemicals. Under the CAAA the production
and consumption of "Class I substances," including CFC's, are being phased
out, and most are currently scheduled to be banned completely by 1996.
The EPA has taken final action to totally phase out production of
CFC's by 1996 and phase out production of the long-lived HCFC's, such as
HCFC-22, for use in new equipment by 2010 and totally by 2020, while
adopting the current CAAA schedule for the short-lived HCFC's, such as
HCFC-123, by phasing them out for use in new equipment by 2020 and
completely out of production in 2030.
The Company derived significant revenues in 1993 and prior years from
sales of air conditioning products utilizing Class I substances,
particularly CFC-11. However, the more recent versions of these products
are designed to operate with substitute short-lived Class II substances,
such as HCFC-123, which, the Company believes, under current proposals is
not likely to be subject to a phase-out accelerated from the 2020/2030
schedule of the CAAA, or with refrigerants that do not affect ozone and
are not regulated at all. Beginning with orders accepted after January 1,
1993, Air Conditioning Products ceased selling CFC-11 with any of its
products.
The Company continues to derive substantial revenues from servicing
and repairing installed equipment that uses Class I substances. The
emissions from servicing and repairing of equipment that uses Class I
substances were regulated by the EPA beginning in mid-1993, although the
Company does not expect these regulations to have a material adverse
effect on its operations. The Company believes that these regulations
will have the effect of generating additional parts and service revenues,
as existing air conditioning equipment operating on CFC-11 is converted to
HCFC-123 or replaced, although this is likely to happen only over a number
of years and the Company is unable to estimate the magnitude or timing of
such additional revenues. In addition, the Company currently offers a
number of products that improve the operation of existing installed
equipment using alternative refrigerants.
Prior to the effectiveness of any prohibition on use of Class I or
Class II substances it will be necessary for the Company and its
competitors to address the need to substitute permitted refrigerants for
<PAGE>
<PAGE>
the Class I and Class II substances used in its products. Adoption of the
new refrigerants will require replacement or modification of much of the
air conditioning equipment already installed. The Company has been
working closely with the manufacturers of refrigerants that are developing
substitutes for the CFC's and HCFC's to be phased out in order to ensure
that its products will be compatible with the substitutes. Although the
Company believes that its commercial products will not require substantial
modification to use substitutes, residential and light commercial products
produced by the Company and its competitors may require modification for
substitute refrigerants. The costs of the substitution of alternative
refrigerants are industrywide product modification costs that are expected
to be reflected in product pricing and accordingly are not expected to
have a material adverse impact on the Company.
Various federal and state statutes, including the National Appliance
Energy Conservation Act of 1987, as amended, impose energy efficiency
standards for certain of the Company's unitary air conditioning products.
Although the Company has been able to meet or exceed such standards to
date, stricter standards in the future could require substantial research
and development expense and capital expenditures to maintain compliance.
<PAGE>
<PAGE>
<TABLE>
ITEM 2. PROPERTIES
The Company conducts its manufacturing activities through 89 plants, of
which the principal ones are as follows:
<CAPTION>
Major Products
Industry Segment Location Manufactured at Location
<S> <C> <C>
Air Conditioning Clarksville, TN Commercial unitary air conditioning
Products systems
Fort Smith, AK Commercial unitary air conditioning
systems
La Crosse, WI Applied air conditioning systems
Lexington, KY Air handling products
Macon, GA Commercial air conditioning systems
Pueblo, CO Applied air conditioning systems
Rushville, IN Air handling products
Trenton, NJ Residential gas furnaces and air
handlers
Tyler, TX Residential air conditioning
Waco, TX Water source heat pumps and air
handling products
Charmes, France Applied air conditioning systems
Epinal, France Applied air conditioning
systems
Mirecourt, France Mini-splits and air handling
products
Plumbing Products Salem, OH Enameled-steel fixtures and acrylic
bathtubs
Tiffin, OH Vitreous china
Trenton, NJ Vitreous china
Toronto, Canada Vitreous china and enameled-steel
fixtures
Hull, England Vitreous china and acrylic bathtubs
Middlewich, England Vitreous china
Dole, France Vitreous china and acrylic bathtubs
Neuss, Germany Vitreous china
Wittlich, Germany Brass plumbing fittings
Orcenico, Italy Vitreous china
Brescia, Italy Vitreous china
Mexico City, Mexico Vitreous china, water heaters
Monterrey, Mexico Brass plumbing fittings
Bangkok, Thailand Vitreous china
Transportation Campinas, Brazil Braking equipment
Products Leeds, England Braking equipment
Claye-Souilly, France Braking equipment
Hannover, Germany Braking equipment
</TABLE>
<PAGE>
<PAGE>
Except for the property located in Mirecourt, France, all of the
plants described above are owned by the Company or a subsidiary. The
properties listed above located in the United States, Canada, and the U.K.
are subject to mortgages securing the Company's obligations under the
Credit Agreement. The Company is obligated to mortgage the properties
listed above located in France (other than the property located in
Mirecourt) to secure certain obligations under the Credit Agreement and
related documents. In addition, to the extent required by the respective
indentures pursuant to which the Senior Securities were issued, the
obligations of the Company under the Senior Securities are secured by
mortgages on principal U.S. properties of the Company equally and ratably
with the Company's indebtedness under the Credit Agreement and certain
related indebtedness. See Note 8 of Notes to Consolidated Financial
Statements for a further description of the lending agreements. The
Company considers that its properties are generally in good condition, are
well maintained, and are generally suitable and adequate to carry on the
Company's business.
In 1993 Air Conditioning Products' plants, both in the United States
and abroad, operated at satisfactory levels of utilization which overall
were moderately below capacity.
In 1993 Plumbing Products' plants outside the United States operated
at levels of utilization which varied from country to country but overall
were satisfactory. Potteries (plants which produce vitreous china goods)
located in the United States also operated at levels which management
believes to be satisfactory, while other domestic facilities operated well
below capacity in 1993. In 1992 the cast iron production facility in
Louisville, Kentucky, was closed and contracts were established with
third-party suppliers for some cast iron products.
Transportation Products' plants generally operated significantly
below capacity in 1993 because of the market decline in Europe.
Employees
The Company employed approximately 36,000 people (excluding employees
of unconsolidated joint ventures) at December 31, 1993. The Company has a
total of 18 labor union contracts in North America (covering 8,000
employees), 7 of which expire in 1994 (covering 1,500 employees) and 6 of
which expire in 1995 (covering 2,000 employees). The Company also has a
total of 40 labor contracts outside North America (covering approximately
18,000 employees). The Company did not experience a material work
stoppage in 1993.
The Company believes relations with its employees are generally
satisfactory and does not anticipate problems in renegotiating labor
contracts in the future that would materially affect operating income.
Customers
The business of the Company taken as a whole is not dependent upon
any single customer or a few customers.
<PAGE>
<PAGE>
International Operations
The Company conducts significant non-U.S. operations through
subsidiaries in most of the major countries of Western Europe, Canada,
Brazil, Mexico, Central American countries, Malaysia, the People's Republic
of China, the Philippines, South Korea, Thailand, and Egypt. In addition,
the Company conducts business through affiliated companies in which the
Company owns 50% or less of the stock or the partnership.
Because the Company has manufacturing and sales operations in 32
countries, fluctuations in currency exchange rates may have a significant
impact on its financial statements. Such fluctuations have much less effect
on local operating results, however, because the Company for the most part
sells its products within the countries in which they are manufactured. The
allocation of purchase costs which resulted from the Acquisition increased
the asset exposure of foreign operations from an accounting perspective;
however, since June 29, 1988, the date of the Merger, the effects of exchange
volatility have been ameliorated by the fact that a portion of the Company's
borrowings has been denominated in foreign currencies.
ITEM 3. LEGAL PROCEEDINGS
The Company has been made a defendant in a lawsuit brought by Entech
Sales & Service, Inc., on behalf of a purported class of contractors engaged
in the service and repair of commercial air conditioning equipment. The
suit, which was filed on March 5, 1993, in the United States District Court
for the Northern District of Texas, alleges principally that the manner in
which Air Conditioning Products distributes repair service parts for its
equipment violates Federal antitrust laws and demands $680 million in damages
(which are subject to trebling under the antitrust laws) and injunctive
relief. The Company has filed an answer denying all claims and is preparing
to defend itself vigorously. The issue of whether Entech may maintain this
action as a class action is pending before the court. In management's
opinion the litigation should not have any material adverse effect on the
financial position, cash flows, or results of operations of the Company.
There are no other material legal proceedings. For a discussion of
German tax issues see "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital
Resources". For a discussion of environmental issues see "ITEM 1. BUSINESS
- -- Regulations and Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By the unanimous written consent of the sole holder of the common stock
of the Company dated as of December 2, 1993, the following individuals were
elected as directors of the Company, each to serve in office until the next
annual meeting of the stockholder of the Company or until such individual's
respective successor shall have been elected and shall qualify, or until such
individual's earlier death, resignation or removal as provided in the By-laws
of the Company:
Horst Hinrichs Frank T. Nickell
Emmanuel A. Kampouris J. Danforth Quayle
George H. Kerckhove John Rutledge
Shigeru Mizushima Joseph S. Schuchert
<PAGE>
<PAGE>
THIS
PAGE
LEFT
BLANK
INTENTIONALLY
<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's only issued and outstanding common equity, 1,000 shares of
common stock $.01 par value, is owned by Holding. There is no established
public trading market for these shares.
There were no dividends declared on the Company's common stock in 1992 and
1993.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
Year ended December 31,
1993 1992 1991 1990 1989
<S> (Dollars in Millions)
Income Statement Data: <C> <C> <C> <C> <C>
Sales $3,830 $3,792 $3,595 $3,637 $3,334
Loss from continuing
operations before extra-
ordinary loss and cumula-
tive effects of changes in
accounting methods (117) (57) (111)(a) (54) (33)
Loss from discontinued
operations - - - - (12)
Extraordinary loss on re-
tirement of debt (b) (92) - - - -
Cumulative effects of
changes in accounting
methods - - (32)(c) - (182)(d)
Net loss $ (209) $ (57) $ (143) $ (54) $ (227)
====== ====== ====== ====== ======
Balance Sheet Data
(end of period):
Total assets $2,991 $3,136 $3,285 $3,511 $3,621
Long-term debt 2,298 2,046 2,117 2,219 2,296
Exchangeable preferred
stock - 133 117 104 91
<FN>
(a) Includes $22 million loss on the sale of Tyler Refrigeration.
(b) The retirement of debt in 1993 resulted in an extraordinary charge of $92
million (including call premiums, the write-off of deferred debt issuance
costs, and loss on cancellation of foreign currency swap contracts) on
which there was no tax benefit (see Notes 5 and 8 of Notes to Consolidated
Financial Statements).
(c) Represents the cumulative effect of the accounting changes related to (i)
postretirement benefits other than pensions and (ii) warranty contract
revenues at January 1, 1991. The cumulative effect of these accounting
changes increased the net loss in the year by a total of $32 million (net
of the tax effect).
(d) Represents the cumulative effect of the change in accounting for income
taxes upon the adoption of FAS 109. In 1991 the Company elected to adopt
FAS 109 and to apply the provisions retroactively to January 1, 1989.
</TABLE>
<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
As a result of the Acquisition, results of operations include
purchase accounting adjustments and reflect a highly leveraged capital
structure.
Sales
Year Ended December 31,
1993 1992 1991
(Dollars in millions)
Air Conditioning Products(a) $2,100 $ 1,892 $ 1,836
Plumbing Products 1,167 1,170 1,018
Transportation Products 563 730 741
Sales $3,830 $ 3,792 $ 3,595
====== ======= =======
Operating Income (Loss) Before Income Taxes, Extraordinary Loss,
and Cumulative Effects of Changes in Accounting Methods
Year Ended December 31,
1993 1992 1991
(Dollars in millions)
Air Conditioning Products(a) $133 $ 104 $ 55
Plumbing Products 108 108 66
Transportation Products 41 88 121
Operating income 282 300 242
Interest expense (278) (289) (286)
Corporate items(b) (85) (63) (44)
Loss before income
taxes, extraordinary loss, and
cumulative effects of changes
in accounting methods $(81) $ (52) $ (88)
==== ===== =====
(a) For 1991 the amounts presented for Air Conditioning Products
include the following amounts for Tyler Refrigeration (which was sold
on September 30, 1991): sales of $99 million and operating loss of
$18 million (including a $22 million loss on the sale).
(b) Corporate items include administrative and general expenses,
accretion charges on postretirement benefit liabilities, minority
interest, foreign exchange transaction gains and losses, and
miscellaneous income and expense.
The following section summarizes the Company's consolidated results
of operations and then discusses the results of its three operating
segments. The Company's businesses are cyclical. Air Conditioning
Products and Plumbing Products are particularly affected by the level of
residential and commercial building activity.
<PAGE>
<PAGE>
The following table presents a summary of statistics on U.S.
non-residential construction activity and housing starts for the years 1989
through 1993.
U.S. Non-
Residential
Contract
Awards U.S. Housing
(Millions % Change Starts % Change
of square Year (Thousands of Year
feet)(a) to Year units)(b) to Year
1989 1,322 - 1% 1,376 - 8%
1990 1,155 -13% 1,193 -13%
1991 953 -17% 1,015 -15%
1992 903 - 5% 1,200 +18%
1993 (c) 930 + 3% 1,290 + 7%
(a) Source: F.W. Dodge Division, McGraw Hill, Inc.
(b) Source: U.S. Department of Commerce, Bureau of Census.
(c) Preliminary data.
The market for replacement sales and servicing of air conditioning
and plumbing products, which accounts for a substantial portion of sales
for Air Conditioning Products and Plumbing Products, is less cyclical and
sometimes countercyclical.
The following table presents a summary of statistics on unit production
of trucks, buses, and trailers in excess of six tons in Western Europe for
the years 1989 through 1993 (units in thousands).
Western Europe % Change Western Europe % Change
Truck and Bus Year Trailer Year
Production(a) to Year Production(a) to Year
1989 376 4% 125 9%
1990 343 -9% 128 2%
1991 353 3% 139 9%
1992 314 -11% 115 -17%
1993 223 -29% 88 -23%
(a) Principal sources: Verband der Deutschen Automobilindustrie (Germany);
Society of Motor Manufacturers and Traders (United Kingdom); and Chambre
Syndicate des Constructeurs Automobiles (France).
<PAGE>
<PAGE>
1993 Compared with 1992
U.S. housing starts increased by 7% in 1993 from the 1992 level, which
was up 18% over 1991 after four consecutive years of decline. U.S.
non-residential contract awards increased by 3% in 1993 after five years of
decline. The 1993 improvement in housing starts came in the second half of
the year with third- and fourth-quarter starts up 10% and 12%,
respectively, over the preceding quarter. The gain in non-residential
awards occurred over the last nine months of 1993. Western European truck
and bus production declined 29% in 1993 after an 11% decline in 1992.
However, the rate of decline in the truck market slowed in the fourth
quarter of 1993.
Consolidated sales for 1993 were $3.83 billion, an increase of 1% (6%
excluding the unfavorable effects of foreign exchange) over the $3.79
billion for 1992. A sales increase of 11% for Air Conditioning Products
was partly offset by a sales decline for Transportation Products of 23%
(16% excluding the unfavorable effects of foreign exchange). Sales for
Plumbing Products were flat (but up by 9% excluding the effects of foreign
exchange).
Operating income for 1993 was $282 million, a decrease of $18 million,
or 6% (but an increase of less than 1% excluding the effects of foreign
exchange), from $300 million in 1992. The increase in operating income of
28% for Air Conditioning Products was more than offset by a 53% decrease in
operating income for Transportation Products. Plumbing Products' operating
income was flat (but increased 15% excluding the effects of foreign
exchange). The gain for Air Conditioning Products was the result of higher
volume, increased sales of higher-margin products, the benefits of
manufacturing improvements, and the effects of restructuring and
cost-containment efforts undertaken in 1991 and 1992, offset partly by the
costs of further restructuring in 1993. For Plumbing Products the effects
of increased volume for the Far East Group were offset partly by lower
margins for the U.S. group and lower volumes and unfavorable foreign
exchange effects for the European group. Transportation Products'
operating income decreased primarily as a result of lower volumes due to
reduced demand in depressed markets in Europe, offset partly by the effects
of improvements in manufacturing efficiency.
<PAGE>
<PAGE>
Air Conditioning Products Segment
Year Ended December 31,
1993 1992 1991
(Dollars in millions)
Sales:
Domestic portion $1,786 $1,572 $1,453
Foreign portion 314 320 284
Subtotal 2,100 1,892 1,737
Tyler Refrigeration - - 99
Total $2,100 $1,892 $1,836
====== ====== ======
Operating income (loss):
Domestic portion $ 148 $ 112 $ 58
Foreign portion (15) (8) 15
Subtotal 133 104 73
Tyler Refrigeration - - (18)(a)
Total $ 133 $ 104 $ 55
====== ====== ======
Assets $1,167 $1,156 $1,174
Goodwill and purchase
accounting adjustments
included in assets 372 398 417
Capital expenditures 38 33 46(b)
Depreciation and
amortization 53 55 56(c)
(a) Includes $22 million loss on the sale of Tyler Refrigeration.
(b) Includes capital expenditures of Tyler Refrigeration of $1 million.
(c) Includes depreciation and amortization of Tyler Refrigeration of $3
million.
The domestic portion of Air Conditioning Products is composed of the
Unitary Products Group, the Commercial Systems Group (excluding Canada),
and exports from the United States by the International Group. The
foreign portion consists of the foreign-based operations of the
International Group and the Canadian operations of the Commercial Systems
Group.
<PAGE>
<PAGE>
Sales and operating income of Air Conditioning Products both increased
in 1993 despite the continuing recession in U.S. and Canadian commercial
new construction and only moderate increase in residential new
construction in the U.S. and despite the economic decline in Europe.
Sales of Air Conditioning Products, which accounted for approximately 55%
of the Company's 1993 sales, increased by 11% (with little effect from
foreign exchange) to $2,100 million in 1993 from $1,892 million in 1992.
There was a significant sales increase for each of the three operating
groups.
Operating income of Air Conditioning Products increased year to year
by 28% (with little effect from foreign exchange) to a record high of $133
million in 1993 from $104 million in 1992. The increase was attributable
to gains achieved by all three groups.
Unitary Products Group
In 1993 sales of the Unitary Products Group, which accounted for
approximately 42% of Air Conditioning Products sales, increased by 15%
over the 1992 sales level. Residential markets were up 15%, as a result
of an unusually hot summer in the northern United States and a 7% increase
in housing starts. Sales of residential products increased by 18% year
over year, principally because of higher volumes driven by the improved
market, increased furnace sales in the replacement market, and a shift in
the market to more efficient products, offset partly by the continuation
from 1992 of price degradation due to competitive pressures. Commercial
markets for unitary products were up 9% overall from the 1992 markets, as
the commercial replacement market strengthened further. New-construction
activity continued to struggle, however. Sales of commercial unitary
products increased by 10% overall, primarily as a result of higher volume
(driven by the strong replacement market for both light and large
commercial products); a shift to higher-priced, higher-tonnage products;
and a gain in market share for light commercial products due to the
success of the large Voyager products (packaged rooftop air
conditioners). As a result of these factors, together with product cost
improvements, improved labor productivity, and the benefits of
organizational restructuring which reduced the salaried workforce in 1992,
the operating income for Unitary Products in 1993 increased by 43% year
over year. This improvement was achieved even though 1993 included the
initial start-up costs of the new national distribution center in St.
Louis, Missouri, and higher advertising costs.
Unitary Products' sales increased through the success of new and
redesigned products introduced recently and improved distribution
channels. Commercial products that were introduced included the
20-to-25-ton Voyager products in 1992, which more than doubled market
share in that size range; commercial microprocessor-controlled products; a
line of convertible air handlers; and rooftop and air cooled chiller
products using more efficient scroll compressors. Residential products
introduced included the American-Standard brand outdoor units and new
lines of luxury and conventional retail residential products.
<PAGE>
<PAGE>
Commercial Systems Group
Sales of the Commercial Systems Group, which accounted for
approximately 37% of Air Conditioning Products' sales, increased 10%,
primarily on volume increases for most product lines, especially air
handling systems and water chillers (principally due to improved
replacement markets and increased market share), and increased revenue
from Company-owned sales offices (acquisitions and volume growth). These
gains were partly offset by lower volume in Canada, which continues to be
adversely affected by recession. The non-residential new-construction
market increased 3% in the United States in 1993, following decreases of
5% in 1992 and 17% in 1991. The non-residential replacement market was up
by 6% over 1992.
Operating income for Commercial Systems increased 12% in 1993 over the
recession-affected amount of 1992. The increase was primarily the result
of volume gains, improvements in manufacturing efficiency, operating
expense reductions, and the benefits of restructuring actions taken in
1992. The effects of these factors were partly offset by slightly lower
prices, increases in material, labor, and benefit costs, the costs of
additional restructuring actions in 1993, and a larger loss in the weak
Canadian market.
Product development emphasis for Commercial Systems in 1993 and 1992
was on new compressor, heat transfer and microelectronic control
technology; adaptation of products to refrigerants that comply with recent
government regulations; energy-efficient products; products for the
aftermarket and replacement market (which exceeded the new-construction
market in both 1993 and 1992); and products redesigned to improve
manufacturing productivity. This strategy benefited operations in 1993
and 1992, and the Company expects that this product development emphasis
will result in greater sales over the next several years.
International Group
Sales of Air Conditioning Products' International Group, which
accounted for approximately 21% of Air Conditioning Products' 1993 sales,
increased 7% from those of 1992 (10% excluding the unfavorable effect of
foreign exchange). Most of the gain was from higher volume in the Far
East (especially Hong Kong, Taiwan, and export sales from the U.S.)
resulting from expanded markets and increased penetration; higher export
sales from the U.S. to the Middle East (markets were significantly
stronger) and Latin America (improved penetration in a market that was up
20%); and higher volumes in Mexico. These gains were partly offset by
lower sales in Europe (lower prices and volumes in a declining market).
Markets were down in all European countries except the U.K., but the
effect was partly offset by increased revenues from service companies
acquired in 1992 and prior years. Market growth in the Far East was 6%
overall, led by the PRC market, which was up by 21%. The sales growth in
Hong Kong was driven by the very strong market in the PRC. Markets in
Thailand also grew, and the Latin American market grew by 20%.
<PAGE>
<PAGE>
Operating income for the International Group increased by
approximately 39% in 1993. The increase was primarily the result of
higher export sales from the U.S. to the Middle East and Far East, offset
partly by a larger operating loss in Europe primarily because of the weak
markets and lower margins, costs related to restructuring in response to
the lower markets, and the unfavorable effects of lower volume on factory
performance. Overall, income from the Far East and Latin America was
essentially unchanged from the prior year, as volume gains were offset by
increased costs related to expansion of distribution channels and joint
ventures and development of new and improved products to support present
and future growth.
Environmental Matters
For a discussion of environmental matters see "Business -- Regulations
and Environmental Matters."
Backlog
The worldwide backlog for Air Conditioning Products at the end of 1993
was $407 million, up 13% from 1992, excluding the effects of foreign
exchange. The backlog increased as a result of increased volume for the
Commercial Systems Group, market penetration and improved distribution
channels in the Middle East and Far East, and sales growth for commercial
Unitary Products.
Plumbing Products Segment
Year Ended December 31,
1993 1992 1991
(Dollars in millions)
Sales:
Foreign portion $ 865 $ 885 $ 783
Domestic portion 302 285 235
Total $1,167 $1,170 $1,018
====== ====== ======
Operating income (loss):
Foreign portion $ 131 $ 124 $ 93
Domestic portion (23) (16) (27)
Total $ 108 $ 108 $ 66
====== ====== ======
Assets $ 960 $1,002 $1,069
Goodwill and purchase
accounting adjustments
included in assets 376 392 447
Capital expenditures 46 48 40
Depreciation and
amortization 49 49 48
<PAGE>
<PAGE>
The foreign portion of Plumbing Products is composed of the European
Plumbing Products Group, the Americas International Group, and the Far
East Group. The domestic portion of sales and operating results is
generated primarily by the U.S. Plumbing Products Group and by export
sales from the U.S.
Sales of Plumbing Products in 1993, at $1,167 million, which
accounted for approximately 30% of the Company's 1993 sales, were at
essentially the same level as the $1,170 million of sales in 1992 (but
increased by 9% excluding the unfavorable effects of foreign exchange).
Sales increases of 42% for the Far East Group (46% excluding foreign
exchange), 9% for the Americas International Group (14% excluding foreign
exchange), and 6% for the U.S. Plumbing Products Group were offset partly
by a sales decrease of 10% for the European Plumbing Products Group (which
had a 4% increase excluding the effects of foreign exchange).
In 1993 operating income of Plumbing Products was $108 million, the
same amount as in 1992, but excluding the unfavorable effects of foreign
exchange operating income increased by 15%. The increase (on an
exchange-adjusted basis) was attributable primarily to increased
profitability for the Far East Group and for the Americas International
Group, offset partly by a decline for the U.S. group.
European Plumbing Products Group
Sales of the European group, which accounted for approximately 51% of
Plumbing Products' sales for 1993, decreased 10% in 1993 from 1992 but
increased by 4% excluding the unfavorable effects of foreign exchange.
The exchange-adjusted gain resulted from price increases, especially in
Italy, Germany, the U.K., and Greece, offset partly by lower volume in
most countries because of depressed markets. In Italy sales were up with
price increases for most product lines, offset partly by lower volume and
a less favorable product mix. The German market was stable in total, as
price gains were offset by volume and mix declines. Greece, which had
been in recession for three years, recovered somewhat in 1993. The
European group's strength has been sales in the replacement market, which
has more than made up for the effects of poor new-construction markets.
Operating income for the European group decreased 7% but increased
10% excluding the effects of foreign exchange. This increase occurred
primarily because of the price gains and cost reductions resulting from
restructuring and efficiency improvements in the U.K., France, Italy, and
Germany. Partly offsetting those favorable effects were the effects of
lower volumes and the unfavorable effect on margins caused by the decline
in value of many European currencies agains the Deutschemark. The
increased cost of fittings purchased from Germany could not be completely
recovered through sales price increases in most of the operations in other
countries.
U.S. Plumbing Products Group
Sales of the U.S. group, which accounted for approximately 26% of
total 1993 Plumbing Products sales, increased 6% in 1993. During 1993 the
U.S. building industry continued to be adversely affected by the low level
of new construction, although non-residential construction increased 3%
from 1992 and new residential construction continued to recover from the
lowest levels since the mid-1940's (up by 7% in 1993 and 18% in 1992 but
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still below pre-1990 levels). A basic shift from wholesale distribution
channels to retail channels has been developing over the last few years, a
trend the Company believes will continue and will be beneficial to the
Company because of strong product and brand-name recognition. Retail
markets now account for 20% of the total sales of the U.S. group. The
growth of sales for the U.S. group was largely the result of increased
export sales from the U.S. and to a lesser extent price increases on
certain products, a more favorable sales mix, and a small increase in the
growing retail channel business. The overall gain in the retail business
was small because significant volume gains due to an expanding customer
base were partly offset by the loss of an important customer.
The operating loss for the U.S. group in 1993 was greater than that
of the prior year. Despite higher sales, operating results were poorer
primarily because of lower margins on both domestic and export sales,
increased advertising costs and other expenses associated with expansion
of the retail distribution channel, costs related to start-up and
expansion of the low-water-volume toilet line (now mandated for new
construction), and factory performance problems caused in part by the
effects of fluctuating volumes. In addition, costs were incurred in
business system re-engineeering activities intended to improve customer
service.
Americas International and Far East Groups
Combined sales of the Americas International and Far East Groups,
which accounted for approximately 23% of total Plumbing Products sales,
increased 21% in 1993 (26% excluding the effects of foreign exchange).
The sales gain was due primarily to the consolidation of Incesa (a
previously unconsolidated group of Central American joint ventures)
effective January 1, 1993, as a result of the purchase of additional
shares of stock, and to higher volume and prices in Thailand, the PRC, the
Philippines, and Brazil, offset partly by decreases in sales in Mexico,
Canada, and Korea.
Combined operating income of the Americas International and Far East
Groups in 1993 increased 72% over the 1992 level. Gains were realized in
all operations except Mexican chinaware operations, which were adversely
affected by poor economic conditions and the uncertainty related to the
North American Free Trade Agreement. The increase was primarily from
higher prices and volumes in Brazil, Thailand, and the PRC the
consolidation of Incesa, and a smaller loss for Mexican fittings
operations.
Environmental Matters
For a discussion of environmental matters see "ITEM 1. BUSINESS --
Regulations and Environmental Matters."
Backlog
Plumbing Products' year-end 1993 backlog of $143 million was down 9%
from 1992, excluding foreign exchange effects. The decrease resulted from
a significant drop for European Plumbing Products (particularly Italy
because of economic uncertainty, tempered somewhat by increases for
England and Germany), and a drop in backlog for export sales from the
U.S., partly offset by increases in the Far East (primarily Thailand).
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Transportation Products Segment
Year Ended December 31,
1993 1992 1991
(Dollars in millions)
Sales $ 563 $730 $741
Operating income 41 88 121
Assets 652 722 828
Goodwill and purchase
accounting adjustments
included in assets 422 458 510
Capital expenditures 14 27 24
Depreciation and
amortization 35 37 34
Sales of Transportation Products, which accounted for 15% of the
Company's 1993 sales, were $563 million, down 23% from $730 million in
1992 (16% excluding the effects of foreign exchange). The sales decrease
was due primarily to a volume decline in Germany as a result of a 29%
decrease in Western European truck and bus production, led by a 34%
decline in Germany, and a 23% decrease in Western European trailer
production. Volumes were also down in all other European countries in
which Transportation Products has operations, although at the end of 1993
sales and order trends were upward. Volume in Brazil was slightly
higher. Original equipment sales volume in Europe was down 22%, and
aftermarket business was down 10%. These declines affected both
conventional and electronic products.
Operating income for Transportation Products in 1993 decreased 53%
(50% excluding foreign exchange effects) to $41 million from $88 million
in 1992, principally because of the lower sales and production volume and
the inability to pass on material and labor cost increases in a very
competitive, declining market. In response to reduced production levels,
plant employment was reduced by 15%, the costs of which further depressed
1993 operating income. Those effects were partly offset by the favorable
effects of cost improvements in manufacturing from Demand Flow implementa-
tion and reduced operating expenses.
Despite the market downturn, significant progress was made during
1993 in obtaining market acceptance of electronically controlled air
suspension systems for commercial vehicles and for antilock braking
systems on trailers.
Backlog
Transportation Products' year-end 1993 order backlog of $185 million
was 2% lower than the 1992 year-end backlog, excluding the effects of
foreign exchange, as a result of the poor market conditions.
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Financial Review
1993 Compared with 1992
The Company's financing and corporate costs were $363 million and
$352 million in 1993 and 1992, respectively. The principal causes of the
increase were effects of year-to-year changes in foreign exchange
transaction gains and losses, higher minority interest, lower equity
income, higher accretion expense on postretirement benefits, and lower
miscellaneous income. Interest expense, which accounted for most of these
costs, decreased primarily because of lower overall interest rates on new
debt issued as part of the Refinancing (described below), partly offset by
additional interest expense as a result of the exchange of the 12-3/4%
Exchangeable Preferred Stock for the 12-3/4% Junior Subordinated
Debentures.
The tax provision for 1993 was $36 million despite a pre-tax loss of
$81 million, whereas in 1992 the tax provision was $5 million on a pre-tax
loss from continuing operations of $52 million. The 1993 provision
reflected taxes payable on profitable foreign operations and was higher
than in 1992 primarily because no tax benefits were available on domestic
losses. The unusual relationship between the pre-tax losses and the tax
provision is explained by the nondeductibility for tax purposes of the
amortization of goodwill and other purchase accounting adjustments and the
share allocations made by the Company's ESOP as well as by tax rate
differences and withholding taxes on foreign earnings.
As a result of the Refinancing in 1993 there was an extraordinary
charge of $92 million related to the debt retired (including call
premiums, the write-off of deferred debt issuance costs, and loss on
cancellation of foreign currency swap contracts) on which there was no tax
benefit.
Liquidity and Capital Resources
As a result of the Acquisition the Company's capital structure became
highly leveraged. Net cash flow from operations, after cash interest
expense of $195 million, was $201 million for the year ended December 31,
1993. Utilizing this cash flow and cash on hand at December 31, 1992, the
Company devoted $98 million to capital expenditures, including $8 million
of investments in affiliated companies, and repaid $50 million of term
loans.
In July 1993 the Company completed a refinancing (the "Refinancing")
that included (a) the issuance of $200 million principal amount of 9-7/8%
Senior Subordinated Notes Due 2001; (b) the issuance of approximately $751
million principal amount of 10-1/2% Senior Subordinated Discount
Debentures Due 2005, which yielded proceeds of approximately $450 million;
(c) the amendment and restatement of the Company's 1988 Credit Agreement
(the "1988 Credit Agreement" and as so amended and restated, the "Credit
Agreement") to establish a $1 billion secured, multi-currency,
multi-borrower credit facility; and (d) the application of the proceeds of
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such issuances and such borrowings as follows: (i) the redemption on July
1, 1993, of all of the outstanding 12-7/8% Senior Subordinated Debentures
Due 2000 at a redemption price of 104.83% ($571.3 million), (ii) the
redemption on July 2, 1993, of a majority of the outstanding 14-1/4%
Subordinated Discount Debentures Due 2003 at a redemption price of 105%
($389.5 million), (iii) the refunding of bank borrowings ($405 million of
term loans and $77 million of other bank debt including revolving credit
debt), (iv) the refunding of letters of credit ($58 million), and (v)
payment of related fees and expenses.
The Credit Agreement provided to American Standard Inc. and certain
subsidiaries (the "Borrowers") a $1 billion facility as follows: (a) a
$250 million multi-currency revolving credit facility (the "Revolving
Credit Facility") available to all Borrowers, which expires in 2000; (b) a
$225 million multi-currency periodic access facility (the "Periodic Access
Facility") available to all Borrowers, which expires in 2000; and (c)
three term loan facilities (the "Term Loans") consisting of a $225 million
U.S. dollar facility available to American Standard Inc., which expires in
2000; a $200 million Deutschemark facility available to a German
subsidiary, which expires in 1997; and a $100 million U.S. dollar facility
available to all Borrowers, which expires in 1999. In August 1993 the
Company repaid $50 million, and the amount available under the Credit
Agreement by its terms was reduced to $950 million.
The Company is required to reduce to $50 million the amount of
borrowings outstanding under the Revolver for at least 30 consecutive days
in each 12-month period ending May 31. In December 1993 the Company met
this requirement for the 12 months ending May 31, 1994. Commencing August
31, 1994, the Revolver is reduced by $8.3 million annually, with a final
maturity on June 1, 2000. In addition, the Company is required to repay
the full amount of each of its outstanding revolving loans at the end of
each interest period (a maximum of six months). The Company may, however,
immediately reborrow such amounts subject to compliance with applicable
conditions of the Credit Agreement.
The Credit Agreement provides the Company with increased operating
and financial flexibility, including the ability to shift from time to
time a portion of borrowings among borrowers and currencies. As a result
of the Refinancing there was a significant reduction in annual interest
expense, which was partly offset by additional interest expense on the
12-3/4% Junior Subordinated Debentures exchanged for the 12-3/4%
Exchangeable Preferred Stock. The Company believes that the amounts
available from operating cash flows and under the Revolving Credit
Facility will be sufficient to meet its expected cash needs, including
planned capital expenditures.
As described in Note 8 of Notes to Consolidated Financial Statements,
the Credit Agreement contains various covenants that limit, among other
things, indebtedness, dividends on and redemptions of capital stock of the
Company, purchases and redemptions of other indebtedness of the Company
(including its outstanding debentures and notes), rental expense, liens,
capital expenditures, investments or acquisitions, disposal of assets, the
use of proceeds from asset sales, and certain other business activities
and require the Company to meet certain financial tests. In order to
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maintain compliance with the covenants and restrictions contained in the
1988 Credit Agreement, the Company from time to time has had to obtain
waivers and amendments. In February 1994 the Company obtained an
amendment to the Credit Agreement that among other things relaxed certain
financial tests and convenants, and facilitated the investment in an air
conditioning joint venture and the formation of a holding company to
establish joint ventures in the People's Republic of China for the
manufacture and sale of plumbing products. The Company currently believes
it will comply with the amended financial tests and covenants but may have
to obtain similar amendments or waivers in the future.
On June 30, 1993, in exchange for all of the Company's outstanding
shares of 12-3/4% Exchangeable Preferred Stock, the Company issued $141.8
million of 12-3/4% Junior Subordinated Debentures Due 2003 to the holder
of the Exchangeable Preferred Stock. Those debentures were sold by the
holder in a registered public offering in August 1993. The Company
received none of the proceeds of this offering.
The indentures related to the Company's debentures and notes contain
various covenants which, among other things, limit debt and preferred
stock of the Company and its subsidiaries, dividends on and redemption of
capital stock of the Company and its subsidiaries, redemption of certain
subordinated obligations of the Company, the use of proceeds from asset
sales, and certain other business activities.
In connection with examinations of the tax returns of the Company's
German subsidiaries for the years 1984 through 1990, the German tax
authorities have raised questions regarding the treatment of certain
significant matters. The Company has paid approximately $20 million of a
disputed German income tax. A suit is pending to obtain a refund of this
tax. The Company anticipates that the German tax authorities may propose
other adjustments resulting in additional taxes of approximately $105
million, plus penalties and interest for the tax return years under
audit. In addition, significant transactions similar to those which gave
rise to such possible adjustments occurred in years subsequent to 1990.
The Company, on the basis of the opinion of legal counsel, believes the
tax returns are substantially correct as filed and intends to vigorously
contest any adjustments which have been or may be assessed. Accordingly,
the Company had not recorded any loss contingency at December 31, 1993,
with respect to such matters. Under German tax law the authorities may
demand immediate payment of a tax assessment prior to final resolution of
the issues. The Company also believes, on the basis of opinion of legal
counsel, that it is highly likely that a suspension of payment will be
obtained if additional taxes are assessed. However, if payment is
required the Company expects that it will be able to meet such payment
from available sources of liquidity or credit support but that future cash
flows and capital expenditures, and therefore subsequent results of
operations for any particular quarterly or annual period, could be
adversely affected.
Capital Expenditures
The Company's capital expenditures for 1993 amounted to $98 million,
including investments of $8 million in affiliated companies. The amount
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of capital expenditures was $10 million less than in 1992 ($6 million less
excluding the effects of foreign exchange). Decreases in capital
spending by Plumbing Products and Transportation Products were partly
offset by an increase in spending by Air Conditioning Products. The
Company believes capital spending was sufficient for maintenance purposes,
for important product and process redesigns, for expansion projects, and
for strategic investments.
Capital expenditures by Air Conditioning Products were $38 million in
1993. This amount was 15% more than that of 1992. Capital expenditures
in 1993 included continuing projects related to Demand Flow and spending
on new products such as the Voyager III (medium-tonnage product line), the
scroll compressor, and the Series R chiller line, expansion of Voyager I
and Voyager II capacity and tooling and equipment for the American
Standard product line.
Plumbing Products' capital expenditures in 1993 were $46 million,
including investments of $8 million in affiliated companies in France
(Porcher) and the Czech Republic. Excluding the investments in affiliated
companies and the effects of foreign exchange, capital spending was 34%
higher than in 1992 as a result of spending increases in Europe and the
Far East. Major projects included capacity expansion in Thailand and
China and various projects related to Demand Flow implementation.
Capital expenditures for Transportation Products totaled $14 million
in 1993. Excluding the effects of foreign exchange, capital spending was
41% less than in 1992, a year with significant spending related to Demand
Flow cost-reduction projects in production and material flow.
1992 Compared with 1991
U.S. housing starts increased by 18% in 1992 from the 1991 level, but
non-residential contract awards decreased by 5%. Both of these economic
indicators had declined in each of the previous four years.
Consolidated sales for 1992 were $3.8 billion, an increase of 5% (4%
excluding the favorable effects of foreign exchange) over the $3.6 billion
for 1991. The 1991 amount included the sales of Tyler Refrigeration,
which was sold September 30, 1991. Excluding Tyler Refrigeration, sales
in 1992 were up 8% (7% excluding foreign exchange effects). Sales
increases of 15% for Plumbing Products and 9% for Air Conditioning
Products (excluding Tyler Refrigeration) were partly offset by a sales
decline for Transportation Products of 1% (6% excluding the favorable
effects of foreign exchange).
Operating income for 1992 was $300 million, an increase of $58
million, or 24% (19% excluding the effects of foreign exchange), from $242
million in 1991. The 1991 amount included a loss for Tyler
Refrigeration. Excluding Tyler Refrigeration, operating income in 1992
was up 15% (10% excluding foreign exchange effects.) Increases in
operating income of 42% for Air Conditioning Products (excluding Tyler
Refrigeration) and 64% for Plumbing Products were partly offset by a 27%
decrease in operating income for Transportation Products.
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Except as otherwise indicated, the following discussion, including the
financial comparisons, does not include the results of Tyler Refrigeration
or the $22 million loss on the sale of Tyler Refrigeration in 1991.
Air Conditioning Products Segment
Sales of Air Conditioning Products, which accounted for approximately
50% of the Company's 1992 sales, increased by 9% to $1,892 million in 1992
from $1,737 million in 1991. There was a significant sales increase for
each of the three operating groups -- for the Unitary Products Group in
both residential and commercial products primarily because of higher
volume and more favorable product mix (partly offset by lower prices), for
the Commercial Systems Group primarily because of higher volume and
prices, and for the International Group principally because of increased
volume in Europe and the Far East.
Operating income of Air Conditioning Products increased year to year
by 42% (with little effect from foreign exchange) to $104 million in 1992
from $73 million in 1991. The increase was attributable to the sales
gains, the benefits of manufacturing improvements and restructuring and
cost containment in the Unitary Products and Commercial Systems Groups,
and the fact that in 1991 results of the Commercial Systems Group had been
adversely affected by a 54-day work stoppage at its LaCrosse, Wisconsin,
facility. The impact of these factors was partly offset by a margin
decline for the International Group and costs related to the start-up of
new facilities, sales offices, and distribution channels.
Unitary Products Group
Sales in 1992 of the Unitary Products Group, which accounted for
approximately 41% of Air Conditioning Products sales, increased by 6% over
the 1991 sales level. Commercial markets for unitary products were up 6%
overall from the depressed 1991 markets, as a very strong commercial
replacement market more than offset the effects of low new-construction
activity. Sales of commercial unitary products increased by 7% overall,
primarily as a result of higher volume (driven by the strong replacement
market), a shift to higher-priced, higher-tonnage products, and a gain in
market share for light commercial products. Residential markets were down
3.5%, as poor replacement activity, a result of an unseasonably cool
summer, more than offset the 18% increase in new housing starts. Despite
this poorer market, sales of residential products increased by 5% year
over year, principally because of larger market share, improved furnace
markets, and a partial shift in the market to more efficient products
stimulated by Federal standards, offset partly by price degradation due to
competitive pressures. As a result of these factors, together with
benefits of manufacturing improvements, cost containment, and
organizational restructuring which reduced the salaried workforce, the
operating profit for Unitary Products in 1992 increased by 50% from the
depressed level of 1991.
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Commercial Systems Group
Sales of the Commercial Systems Group, which accounted for
approximately 38% of Air Conditioning Products' sales, increased 9%
primarily on volume increases in aftermarket replacement and parts sales,
increased revenue from Company-owned sales offices (volume growth and
acquisitions), and small price increases on most product lines. Other
factors contributing to the increase were higher sales of large applied
systems and the fact that in 1991 there was a 54-day work stoppage at the
LaCrosse, Wisconsin, plant. These gains were partly offset by lower
volume in Canada, which was adversely affected by recession.
Operating income for Commercial Systems increased 129% in 1992 over
the recession-affected and work-interrupted level of 1991. The increase
was primarily the result of the volume and price gains, improvements in
manufacturing efficiency, cost containment and restructuring, and the fact
that 1991 included the adverse impact of the LaCrosse work stoppage. The
effects of these factors were partly offset by slightly lower gross
margins, as the price increases did not completely recover increases in
material, labor and benefits costs.
International Group
Sales of Air Conditioning Products' International Group, which
accounted for approximately 21% of Air Conditioning Products' 1992 sales,
increased 15% from those of 1991 (10% excluding the favorable effect of
foreign exchange). Most of the gain was from higher volumes in Mexico
(two new sales offices resulted in expanded distribution and penetration),
the Far East (especially Hong Kong and Singapore), the Middle East
(markets were significantly stronger), and Europe (sales of new products
and increased penetration despite declining markets). Markets were down
in almost all European countries except Italy, with the largest drop in
the U.K., offset partly by increased revenues from acquired service
companies.
Operating income for the International Group decreased by
approximately 68% in 1992. The decline occurred in Europe, primarily
because of the weak markets and lower prices, costs related to the
start-up of new facilities and new distribution networks in the U.K. and
France, costs related to the introduction of new products, start-up costs
of a company in Spain acquired near the end of 1991, and foreign exchange
transaction losses from currency fluctuations in the latter half of 1992.
Income from the Far East and Latin America was essentially unchanged from
the prior year, as volume gains were offset by increased costs related to
expanded distribution channels, start-up of new joint ventures, and
development of new and improved products to support present and future
growth.
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Plumbing Products Segment
Sales of Plumbing Products, which accounted for approximately 31% of
the Company's 1992 sales, increased by 15% in 1992 (14% excluding the
effects of foreign exchange) to $1,170 million from $1,018 million in
1991. The improvement resulted from sales increases of 9% (7% excluding
the effects of foreign exchange) for the European Plumbing Products Group,
21% for the U.S. Plumbing Products Group, 4% for the Americas
International Group (7% excluding foreign exchange), and 101% for the Far
East Group (98% excluding foreign exchange).
In 1992 operating income of Plumbing Products increased 64% (56%
excluding the effects of foreign exchange) to $108 million from $66
million in 1991. The increase was attributable primarily to increased
profitability for the European group on higher prices and volumes
(especially in Italy and Germany) although improved results in the U.S.,
Americas International, and Far East groups contributed.
European Plumbing Products Group
Sales of the European group, which accounted for approximately 57% of
Plumbing Products' sales for 1992, increased 9% in 1992 over 1991, 7%
excluding the favorable effects of foreign exchange. The gain resulted
primarily from price and volume increases, especially in Italy and
Germany, offset partly by lower volume in France from declining demand and
lower prices in the U.K. caused by a very poor market. In Italy sales
were up 9%, with gains for most product lines in price, volume and market
share. The gains in Germany were the result of higher volumes and prices
for brass fittings and luxury chinaware.
Operating income for the European group increased 28% (23% excluding
the effects of foreign exchange) primarily from the price and volume gains
in Italy and Germany and higher margins on German brass operations
resulting from improved manufacturing processes and cost containment,
offset partly by lower profitability in France because of decreased volume
and in the U.K. because of the recession. A recession depressed operating
results in Greece.
U.S. Plumbing Products Group
Sales of the U.S. group, which accounted for approximately 24% of
total 1992 Plumbing Products sales, increased 21% in 1992. During 1992
the U.S. building industry continued to be severely affected by the low
level of new construction, with non-residential construction down 5% from
1991 and with new residential construction recovering from the lowest
levels since the mid-1940's (though up by 18%, it was still low in
historical terms). The U.S. market for plumbing products was up an
estimated 3% to 4%, with more than half the gain occurring in the
replacement and remodeling markets, which accounts for about 60% of the
total U.S. market. The growth of sales for the U.S. group was largely a
result of the strength of retail business (which had a significant
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increase in volume and accounted for 20% of sales of the U.S. group in
1992) and increased export sales from the U.S., together with smaller
gains resulting from price increases and higher wholesaler distribution
sales. Sales of AMERICAST products more than doubled in 1992, and smaller
volume gains were achieved for acrylic products, fixtures, and faucets.
The operating loss for the U.S. group in 1992 was less than that of
the prior year. The improvement was primarily due to price increases and
secondarily to volume and margin gains (as a result of sourcing product
from the Company's Latin American plants), offset partly by non-recurring
costs related to implementation of improved manufacturing processes and
the effects of a shift in overall sales mix from commercial and luxury to
lower-margin products.
Americas International and Far East Groups
Combined sales of the Americas International and Far East Groups,
which accounted for approximately 19% of total Plumbing Products sales,
increased 26% in 1992 (28% excluding the effects of foreign exchange).
The sales gain was due primarily to the consolidation in 1992 of a
previously unconsolidated joint venture in Thailand and to a lesser extent
to price and volume increases in Mexico and Korea and higher volumes in
Brazil, offset partly by lower sales in Canada, which were adversely
affected by severe recession.
Combined operating income of the Americas International and Far East
Groups in 1992 increased 134% over the 1991 level. Gains were realized
in all operations except Canada and the Philippines, both of which were
adversely affected by poor economies. The increase was primarily from
price and volume gains in Mexico and Korea, higher volume and margins in
Brazil, and higher volume in China.
Transportation Products Segment
Sales of Transportation Products, which accounted for 19% of the
Company's 1992 sales, were $730 million, down 1% from $741 million in 1991
(6% excluding the effects of foreign exchange). The sales decrease was
due primarily to a volume decline in Germany as a result of a significant
decrease in truck and bus production. Volumes were also down in nearly
all other European countries in which Transportation Products has
operations except the U.K. There was also a decline in prices of
electronic control products, primarily as a result of industry cost
reductions.
Operating income for Transportation Products in 1992 decreased 27%
(32% excluding foreign exchange effects) to $88 million from $121 million
in 1991, principally because of the lower sales and production volume,
lower prices, and increased spending for product engineering. Plant
employment was kept in line with reduced production levels, but the costs
associated with these reductions also depressed 1992 operating income.
Those effects were partly offset by the favorable effects of cost
reductions and increases in efficiency achieved in manufacturing
operations.
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Financial Review
1992 Compared with 1991
The Company's financing and corporate costs were $352 million and
$330 million in 1992 and 1991, respectively. The principal causes of the
increase were year-to-year effects of changes in foreign exchange
transaction gains and losses, higher minority interest, and lower
miscellaneous income. Interest expense and accretion expense on
postretirement benefits, which accounted for most of these costs, also
increased.
The tax provision for 1992 was $5 million despite a pre-tax loss of
$52 million, whereas in 1991 the tax provision was $23 million on a
pre-tax loss from continuing operations of $88 million. The 1992
provision reflected taxes payable on profitable foreign operations offset
partly by available domestic tax benefits. The 1992 provision was lower
than in 1991 primarily because of lower pre-tax earnings in foreign
operations. In 1992 the provision was also lower because of future income
tax benefits resulting from carrybacks of foreign net operating losses and
the existence of deferred tax credits which reverse in the carryforward
period applicable to other foreign net operating losses. The unusual
relationship between the pre-tax losses and the tax provision is explained
by the nondeductibility for tax purposes of the amortization of goodwill
and other purchase accounting adjustments and the share allocations made
by the Company's ESOP as well as by tax rate differences and withholding
taxes on foreign earnings.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The accompanying consolidated balance sheets at December 31, 1993 and
1992, and related consolidated statements of operations, stockholder's
equity (deficit), and cash flows for the years ended December 31, 1993,
1992 and 1991, have been prepared in conformity with generally accepted
accounting principles, and the Company believes the statements set forth a
fair presentation of financial condition and results of operations. The
Company believes that the accounting systems and related controls that it
maintains are sufficient to provide reasonable assurance that the
financial records are reliable for preparing financial statements and
maintaining accountability for assets. The concept of reasonable
assurance is based on the recognition that the cost of a system of
internal control must be related to the benefits derived and that the
balancing of those factors requires estimates and judgment. Reporting on
the financial affairs of the Company is the responsibility of its
principal officers, subject to audit by independent auditors, who are
engaged to express an opinion on the Company's financial statements. The
Board of Directors has an Audit Committee of non-employee Directors which
meets periodically with the Company's financial officers, internal
auditors, and the independent auditors and monitors the accounting affairs
of the Company.
American Standard Inc.
New York, New York
March 14, 1994
<PAGE>
<PAGE>
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
The Board of Directors
American Standard Inc.
We have audited the accompanying consolidated balance sheets of
American Standard Inc. and subsidiaries as of December 31, 1993 and 1992,
and the related consolidated statements of operations, stockholder's
equity (deficit), and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Standard Inc. and subsidiaries at December 31, 1993 and 1992, and
the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.
/s/Ernst & Young
Ernst & Young
New York, New York
March 14, 1994
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AMERICAN STANDARD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands)
Year Ended December 31,
1993 1992 1991
Sales $3,830,462 $3,791,929 $3,595,267
Costs and expenses
Cost of sales 2,902,562 2,852,230 2,752,068
Selling and administrative
expenses 692,229 678,742 614,259
Other expense 38,281 24,672 8,082
Interest expense (includes debt
issuance cost amortization of
$11,461 for 1993, $5,983 for
1992 and $5,335 for 1991) 277,860 288,851 286,316
Loss on sale of Tyler
Refrigeration - - 22,391
3,910,932 3,844,495 3,683,116
Loss before income taxes, extra-
ordinary loss and cumulative
effects of changes in accounting
methods (80,470) (52,566) (87,849)
Income taxes 36,165 4,672 23,033
Loss before extraordinary loss and
cumulative effects of changes in
accounting methods (116,635) (57,238) (110,882)
Extraordinary loss on retirement
of debt (Note 8) (91,932) - -
Cumulative effects of changes in
accounting methods (Notes 2 and 3) - - (32,291)
Net loss (208,567) (57,238) (143,173)
Preferred dividend (8,624) (15,707) (13,855)
Net loss applicable to common
shares $ (217,191) $ (72,945) $ (157,028)
========== ========== ==========
See notes to consolidated financial statements.
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AMERICAN STANDARD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
ASSETS
At December 31,
1993 1992
Current assets
Cash and certificates of deposit $ 53,237 $ 111,549
Cash in escrow 932 1,722
Accounts receivable, less allowance for doubtful
accounts-- 1993, $15,666; 1992, $12,827 507,322 468,731
Inventories 325,819 384,857
Future income tax benefits 24,562 33,192
Other current assets 29,811 31,199
Total current assets 941,683 1,031,250
Facilities, at cost net of accumulated depreciation 820,523 832,811
Other assets
Goodwill, net of accumulated amortization --
1993, $169,879; 1992 $141,858 1,025,774 1,101,716
Debt issuance costs, net of accumulated
amortization-- 1993 $9,670; 1992, $77,776 78,102 51,308
Prepaid ESOP expense 4,331 9,527
Other 120,997 109,333
$2,991,410 $3,135,945
========== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
Loans payable to banks $ 38,036 $ 99,150
Current maturities of long-term debt 105,939 13,458
Accounts payable 307,326 271,855
Accrued payrolls 99,758 105,400
Other accrued liabilities 258,322 225,335
Taxes on income 47,003 18,848
Total current liabilities 856,384 734,046
Long-term debt 2,191,737 2,032,064
Other long-term liabilities
Reserve for postretirement benefits 387,038 368,868
Deferred tax liabilities 45,625 73,307
Other 204,170 212,383
Total liabilities 3,684,954 3,420,668
Commitments and contingencies
Exchangeable preferred stock - 133,176
Stockholder's deficit
Preferred stock, Series A, 1,000 shares
issued and outstanding, par value $.01 - -
Common stock, 1,000 shares issued and outstanding,
par value $.01 - -
Capital surplus 211,333 210,409
Accumulated deficit (750,003) (541,436)
Foreign currency translation effects (149,220) (86,872)
Minimum pension liability adjustment ( 5,654) -
Total stockholder's deficit (693,544) (417,899)
$2,991,410 $3,135,945
========== ==========
See notes to consolidated financial statements.
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<TABLE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
(Dollars in thousands)
<CAPTION>
Foreign
Currency
Capital Accumulated Translation
Surplus Deficit Effects
<S> <C> <C> <C>
Balance at December 31, 1990 $233,318 $(341,025) $(48,549)
Net loss--year 1991 - (143,173) -
ASI Holding stock repurchased (17,606) - -
Capital contribution from parent 7,096 - -
Excess of value over cost of ESOP shares
allocated to employees 12,928 - -
Stock dividend on exchangeable
preferred stock (13,855) - -
Foreign currency translation - - (2,147)
Balance at December 31, 1991 221,881 (484,198) (50,696)
Net loss--year 1992 - (57,238) -
ASI Holding stock repurchased (13,937) - -
Capital contribution from parent 3,756 - -
Excess of value over cost of ESOP shares
allocated to employees 14,416 - -
Stock dividend on exchangeable
preferred stock (15,707) - -
Foreign currency translation - - (36,176)
Balance at December 31, 1992 $210,409 $(541,436) $ (86,872)
Net loss--year 1993 - (208,567) -
ASI Holding stock repurchased (12,869) - -
Capital contribution from parent 5,313 - -
Excess of value over cost of ESOP shares
allocated to employees 17,094 - -
Stock dividend on exchangeable
preferred stock (8,624) - -
Issuance of Series A Preferred Stock 10 - -
Foreign currency translation - - (62,348)
Balance at December 31, 1993 $211,333 $(750,003) $(149,220)
======== ========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Cash provided (used) by:
Operating activities:
Loss before extraordinary loss and
cumulative effects of changes in
accounting methods $(116,635) $ (57,238) $(110,882)
Loss on Tyler Refrigeration sale - - 22,391
Depreciation 106,041 111,643 107,153
Amortization of goodwill 30,807 33,064 33,036
Non-cash interest 65,031 65,527 56,859
Non-cash stock compensation 25,679 23,076 25,980
Amortization of debt issuance costs 11,461 5,983 5,335
Loss (gain) on sale of fixed assets 2,963 (660) (2,736)
Changes in assets and liabilities:
Accounts receivable (48,680) (20,081) 2,615
Inventories 47,321 44,163 60,364
Accounts payable and accrued payrolls 40,124 (8,308) 49,516
Postretirement benefits 22,687 22,074 14,273
Income taxes (4,232) (48,974) (53,708)
Other long-term liabilities 13,271 3,805 23,334
Other, net 5,003 (428) 7,211
Net cash provided by
operating activities $ 200,841 $ 173,646 $ 240,741
<FN>
(Continued on next page)
</TABLE>
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<TABLE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS-(Continued)
(Dollars in thousands)
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Net cash provided by
operating activities $ 200,841 $ 173,646 $ 240,741
Investing activities:
Purchases of property, plant and equipment (90,474) (87,409) (90,713)
Investments in affiliated companies (7,556) (20,608) (19,734)
Cash of subsidiaries consolidated 4,514 10,703 -
Proceeds from disposals of property,
plant and equipment 4,003 11,133 12,703
Investment in Tyler Holdings preferred stock - - (2,780)
Net proceeds from asset sales - - 81,470
Net cash used by investing activities (89,513) (86,181) (19,054)
Financing activities:
Proceeds from issuance of notes and debentures 650,000 388,750 -
Proceeds from Term Loans 750,000 - -
Repayment of Term Loans (454,630) (448,664) (159,629)
Redemptions of debentures (915,851) (5,000) -
Premiums on redemption of debentures (44,866) - -
Proceeds of Revolving Credit Facility 7,000 - -
Net change in short-term debt (61,600) 41,675 (3,741)
Proceeds of other long-term debt 5,557 5,409 40,023
Payments on other long-term debt (12,642) (36,395) (35,309)
ASI Holding stock repurchased in Tyler
Refrigeration sale - - (2,545)
Purchase of ASI Holding stock from ESOP (7,194) (5,950) (10,142)
Purchase of ASI Holding stock (5,000) (5,000) (4,919)
Capital contribution from parent 482 653 616
Purchase of untendered shares related to
acquisition (690) (959) (1,455)
Other financing costs (76,554) (9,591) -
Net cash used by financing activities (165,988) (75,072) (177,101)
(Decrease) increase in cash and certificates
of deposit excluding translation effects (54,660) 12,393 44,586
Effect of exchange rate changes on cash and
certificates of deposit (3,652) (6,234) (246)
Net (decrease) increase in cash and
certificates of deposit (58,312) 6,159 44,340
Cash and certificates of deposit at
beginning of period 111,549 105,390 61,050
Cash and certificates of deposit
at end of period $ 53,237 $ 111,549 $ 105,390
========= ========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
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AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
On March 17, 1988, American Standard Inc. and subsidiaries (the
"Company") agreed to be acquired by an affiliate of Kelso & Company L.P.
("Kelso"), an investment banking firm that specializes in leveraged
buyouts. On March 21, 1988, the Kelso affiliate commenced a tender offer
(the "Tender Offer") for all of the Company's common stock at $78 per
share in cash. On April 27, 1988, the Kelso affiliate completed the
Tender Offer with the purchase of approximately 95% of the Company's
shares.
Pursuant to an Agreement and Plan of Merger, a merger was consummated
(the "Merger") on June 29, 1988, whereby the Company became a wholly owned
subsidiary of ASI Holding Corporation, a Delaware corporation ("Holding")
organized by Kelso to participate in the acquisition of the Company. At
that time the remaining shares of the Company's common stock were
converted into the right to receive cash of $78 per share. The Tender
Offer, Merger, and related transactions are hereinafter referred to as the
"Acquisition." For financial statement purposes the Acquisition has been
accounted for under the purchase method.
Note 2. Accounting Policies
Consolidation
The financial statements include on a consolidated basis the results
of all majority-owned subsidiaries. All material intercompany
transactions are eliminated. Investments in affiliated companies are
included at cost plus the Company's equity in their net results.
Translation of Foreign Financial Statements
Assets and liabilities of most foreign operations are translated at
year-end rates of exchange, and the income statements are translated at
the average rates of exchange for the period. Gains or losses resulting
from translating foreign currency financial statements are accumulated in
a separate component of stockholder's equity until the entity is sold or
substantially liquidated.
Gains or losses resulting from foreign currency transactions
(transactions denominated in a currency other than the entity's local
currency) are included in net income. For operations in countries that
have high rates of inflation, net income includes gains and losses from
translating assets and liabilities at year-end rates of exchange, except
for inventories and facilities, which are translated at historical rates.
Revenue Recognition
Sales are recorded when shipment to a customer occurs.
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AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Statement of Cash Flows
Cash and certificates of deposit include all highly liquid
investments with an original maturity of three months or less.
Inventories
Inventory costs are determined by the use of the last-in, first-out
(LIFO) method on a worldwide basis, and inventories are stated at the
lower of such cost or realizable value.
Facilities
The Company capitalizes costs, including interest during
construction, of fixed asset additions, improvements, and betterments that
add to productive capacity or extend the asset life. Maintenance and
repair expenditures are charged against income. Significant foreign
investment grants are amortized into income over the period of benefit.
Goodwill
Goodwill is being amortized over 40 years.
Debt Issuance Costs
The costs related to the issuance of debt are amortized using the
interest method over the lives of the related debt.
Warranties
The Company provides for estimated warranty costs at the time of
sale. Warranty obligations beyond one year are included in other
long-term liabilities.
The Company changed its method of accounting for revenues from
extended warranty contracts at the beginning of 1991 to conform with the
FASB Technical Bulletin, "Accounting for Separately Priced Extended
Warranty and Product Maintenance Contracts." The bulletin requires the
deferral of the revenue from the sales of such contracts and amortization
thereof on a straight-line basis over the terms of the contracts. The
cumulative effect of this accounting change for all contracts in place as
of December 31, 1990, increased the net loss in 1991 by $7 million, net of
income tax benefit. The effect on the 1991 net loss, excluding the
cumulative effect upon adoption, was not material.
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AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Leases
The asset values of capitalized leases are included with facilities,
and the associated liabilities are included with long-term debt.
Postretirement Benefits
Postretirement benefits are provided for substantially all employees
of the Company, both in the United States and abroad. In the United
States the Company also provides various postretirement health care and
life insurance benefits for some of its employees. Effective January 1,
1991, such costs are calculated in accordance with Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("FAS 106").
Depreciation
Depreciation and amortization are computed on the straight-line
method based on the estimated useful life of the asset or asset group.
Research and Development Expenses
Research and development costs are expensed as incurred except for
costs incurred (after technological feasibility is established) for
computer software products expected to be sold. The Company expensed
costs of approximately $41 million in 1993, $40 million in 1992, and $36
million in 1991 for research activities and product development. Computer
software product development costs capitalized in 1993 amounted to $2
million.
Income Taxes
In 1991 the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("FAS 109"), and elected
to apply the provisions retroactively to January 1, 1989.
The Company recognizes deferred tax assets for the tax effects of
items that will be deducted for tax purposes in later years together with
the tax effects of income items included in current reporting for tax
purposes but in later years for financial statement purposes and the
effects of certain tax attributes such as net operating losses.
The Company provides for United States income taxes and foreign
withholding taxes on foreign earnings expected to be repatriated.
Deferred tax liabilities are provided on the excess of the financial
statement basis over the tax basis of certain assets, primarily for
inventories and fixed assets, including fair value adjustments resulting
from purchase accounting in connection with the Acquisition; fixed assets
due to accelerated depreciation deductions for tax purposes; and
non-permanent investments in certain foreign subsidiaries.
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AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Instruments with Off-Balance-Sheet Risk
The Company from time to time enters into foreign currency exchange
agreements in the management of foreign currency exposure. Gains and
losses from exchange rate changes are included in income unless the
contract hedges a net investment in a foreign entity or a firm commitment,
in which case gains and losses are deferred as a component of foreign
currency translation effects in stockholder's equity or included as a
component of the transaction.
Note 3. Postretirement Benefits
The Company sponsors postretirement benefit plans covering
substantially all employees, including an Employee Stock Ownership Plan
(the "ESOP") for the Company's U.S. salaried employees and certain U.S.
hourly employees. In 1988 in conjunction with the Acquisition the ESOP
purchased 5,000,000 shares (adjusted for a 100-for-1 stock split) of
common stock of Holding. The ESOP is an individual account, defined
contribution plan. The valuation of the ESOP shares is determined by
independent appraisals. The common stock acquired by the ESOP is being
allocated to the accounts of eligible employees over a period not
exceeding eight plan years, including basic allocation of 3% of covered
compensation and a matching Company contribution of up to 6% of covered
compensation invested in the Company's savings plan by employees.
Pension plan benefits are generally based on years of service and
employees' compensation during the last years of employment. In the
United States the Company also provides various postretirement health care
and life insurance benefits for some of its employees. Funding decisions
are based upon the tax and statutory considerations in each country.
Accretion expense is the implicit interest cost associated with amounts
accrued and not funded and is included in "other expense". At December
31, 1993, funded plan assets related to pensions were held primarily in
fixed income and equity funds. Postretirement health and life insurance
benefits are not prefunded.
Effective January 1, 1991, the Company changed its method of
accounting for postretirement benefits other than pensions to conform with
FAS 106. The cumulative effect of this change increased the recorded
obligation for such benefits by $40 million, thereby increasing the net
loss in 1991 by $25 million (net of the related income tax benefit). The
effect of the change on the 1991 net loss, excluding the cumulative effect
upon adoption, was not material.
The following table sets forth the Company's postretirement plans'
funded status and amounts recognized in the balance sheet at December 31,
1993 and 1992.
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<TABLE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
1993 1992
Assets in Accumulated Assets in Accumulated
Excess of Benefit Health Excess of Benefit Health
Accumulated Obligations and Life Accumulated Obligations and Life
Benefit in Excess Insurance Benefit in Excess Insurance
Obligations of Assets Benefits Obligations of Assets Benefits
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested $ 105.2 $ 511.1 $ 92.0 $ 466.8
Non-vested 4.5 30.4 4.0 28.3
Accumulated benefit obligations 109.7 541.5 96.0 495.1
Additional amounts related to
projected pay increases 12.1 46.0 10.8 48.1
Total projected benefit
obligations 121.8 587.5 $ 175.4 106.8 543.2 $ 167.5
Assets and book reserves
relating to such benefits:
Market value of funded assets 166.9 303.8 - 141.7 292.1 -
Reserve (asset) for post-
retirement benefits net of
recognized overfunding (36.8) 257.7 154.9 (38.9) 254.8 151.8
Additional minimum liability - 19.0 - - - -
130.1 580.5 154.9 102.8 546.9 151.8
Assets and book reserves in
excess of (less than)
projected benefit
obligations $ 8.3 $ (7.0) $ (20.5) $ (4.0) $ 3.7 $ (15.7)
======= ======= ======= ======= ======= ========
Consisting of:
Unrecognized prior service
benefit (cost) $ (6.6) $ 3.4 $ 10.3 $ (6.3) $ (3.9) $ -
Unrecognized net gain
(loss) from actuarial
experience 14.9 (16.0) (30.8) 2.3 7.6 (15.7)
Pension liability adjustment
to stockholder's equity - 5.6 - - - -
$ 8.3 $ (7.0) $ (20.5) $ (4.0) $ 3.7 $ (15.7)
======= ======= ======= ======= ======= ========
<FN>
At December 31, 1993, the projected benefit obligation related to health and life insurance
benefits for active employees was $53.6 million and for retirees was $121.8 million.
The weighted-average annual assumed rate of increase in the health care cost trend rate is
10% for 1994 and is assumed to decrease gradually to 5% for 1999 and remain at that level
thereafter. The health care cost trend rate assumption has a significant effect on the amounts
reported. For example, a change in the assumed rate of one percentage point for each future year
would change the accumulated postretirement benefit obligation as of December 31, 1993, by
$14.5 million and the annual postretirement cost by $1.9 million.
At December 31, 1993, the Company recognized an additional minimum liability amounting to
$19 million for certain plans, which is reflected in the reserve for postretirement benefits.
The minimum liability is the excess of the accumulated obligation over plan assets and book
reserves. In addition, the Company has offset the additional liability by recording an
intangible asset of $13.4 million, to the extent of unrecognized prior service cost, and a charge
to stockholder's equity of $5.6 million.
</TABLE>
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<TABLE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The projected benefit obligation for postretirement benefits was determined using the
assumptions in the following table:
<CAPTION>
1993 1992
Domestic Foreign Domestic Foreign
<S> <C> <C> <C> <C>
Discount rate 7.25% 4.50%-8.50% 8.50% 7.00%-10.00%
Long-term rate
of inflation 2.80% .50%-5.00% 4.50% 2.50%-6.00%
Merit and
promotional increase 1.70% 1.50% 1.70% 2.00%
Rate of return on
plan assets 8.75% 6.25%-9.50% 8.75% 7.25%-10.25%
</TABLE>
<TABLE>
Postretirement cost had the following components:
<CAPTION>
Year Ended December 31,
1993 1992 1991
Health & Health & Health &
Pension Life Ins. Pension Life Ins. Pension Life Ins.
Benefits Benefits Benefits Benefits Benefits Benefits*
<S> (Dollars in millions)
Service cost-benefits earned <C> <C> <C> <C> <C> <C>
during the period $ 20.1 $ 3.4 $ 21.7 $ 3.0 $20.7 $ 2.6
Interest cost on the projected
benefit obligation 50.6 14.1 50.4 13.7 49.2 12.6
Less assumed return on plan
assets:
Actual return on plan assets (78.8) - (35.7) - (71.3) -
Excess (shortfall) deferred 42.9 - (2.6) - 33.2 -
(35.9) - (38.3) - (38.1) -
Other, incl. amortization of
prior service (benefit) cost 2.7 .3 1.6 - .6 -
Defined benefit plan cost $ 37.5 $ 17.8 $ 35.4 $ 16.7 $32.4 $15.2
======= ======= ======== ======= ===== =====
Accretion expense reclassified
to "other expense" $ 16.4 $ 14.1 $ 16.1 $ 13.7 $15.3 $12.6
======= ======= ======== ======= ===== =====
<FN>
* Excludes the cumulative effect of adoption of FAS 106 of $39.7 million.
</TABLE>
Total postretirement costs were:
Year Ended December 31,
1993 1992 1991
(Dollars in millions)
Pension benefits $37.5 $35.4 $32.4
Health and life insurance
benefits 17.8 16.7 15.2
Defined benefit plan cost 55.3 52.1 47.6
Defined contribution plan cost (a) 22.4 20.4 20.0
Total postretirement cost,
including accretion expense $77.7 $72.5 $67.6
===== ===== =====
(a) Principally ESOP cost.
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AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Other Expense
Other income (expense) was as follows:
Year Ended December 31,
1993 1992 1991
(Dollars in millions)
Interest income $ 8.5 $ 8.7 $ 8.3
Royalties 2.6 3.8 2.5
Equity in net income (loss)
of affiliated companies (0.1) 4.9 10.2
Minority interest (14.0) (9.8) (3.1)
Accretion expense (30.5) (29.8) (27.9)
Other, net (4.8) (2.5) 1.9
$(38.3) $(24.7) $ (8.1)
====== ====== ======
The decrease in equity in net income of affiliated companies and the
increase in minority interest in 1993 and 1992 compared with 1991 were
primarily the result of consolidation of the plumbing companies in
Thailand, the People's Republic of China, and Incesa, previously
unconsolidated joint ventures.
Note 5. Income Taxes
The Company's loss before income taxes, extraordinary loss, and
cumulative effects of changes in accounting methods ("pre-tax income
(loss)") and the applicable provision (benefit) for income taxes were:
Year Ended December 31,
1993 1992 1991
(Dollars in millions)
Pre-tax income (loss):
Domestic $ (223.2) $ (170.1) $(272.6)
Foreign 142.7 117.5 184.8
Pre-tax loss $ (80.5) $ (52.6) $ (87.8)
Provision (benefit) for
income taxes:
Current:
Domestic $ 12.4 $ 5.1 $ 5.1
Foreign 43.0 63.0 71.3
55.4 68.1 76.4
Deferred:
Domestic 1.1 (35.8) (52.4)
Foreign (20.3) (27.6) (1.0)
(19.2) (63.4) (53.4)
Total provision $ 36.2 $ 4.7 $ 23.0
======== ======== =======
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AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation between the actual income tax expense provided and the
income tax benefit computed by applying the statutory federal income tax rate
of 35% in 1993 and 34% in 1992 and 1991 to the pre-tax loss is as follows:
Year Ended December 31,
1993 1992 1991
(Dollars in millions)
Tax benefit at statutory rate $(28.2) $(17.9) $(29.9)
Nondeductible goodwill charged to
operations 10.4 10.5 10.6
Nondeductible goodwill related to
operations sold - 25.1*
Nondeductible ESOP allocations 6.1 4.9 4.6
Rate differences and withholding taxes
related to foreign operations 9.0 1.4 4.7
Foreign exchange gains (7.0) (6.3) (2.1)
State tax benefits (5.5) (3.3) (3.4)
Other, net 8.7 5.5 5.6
Increase in valuation allowance 42.7 9.9 7.8
Total provision $ 36.2 $ 4.7 $ 23.0
====== ====== ======
* Includes goodwill eliminated in the sale of Tyler Refrigeration.
In addition to the valuation allowance increase of $42.7 million shown
above, a valuation allowance of $32.1 million was provided for the entire
amount of the tax benefit related to the extraordinary loss on retirement of
debt (see Note 8 of Notes to Consolidated Financial Statements).
The following table details the gross deferred liabilities and the gross
deferred tax assets and the related valuation allowances.
At December 31,
1993 1992
(dollars in millions)
Deferred tax liabilities:
Facilities (accelerated depreciation,
capitalized interest and purchase
accounting differences) $ 141.1 $ 154.1
Inventory (LIFO and purchase
accounting differences) 18.5 30.3
Employee benefits 11.0 6.6
Foreign investments 50.1 48.8
Other 26.2 26.6
246.9 266.4
Deferred tax assets:
Employee benefits (pensions and other
postretirement benefits) 110.7 97.7
Warranties 37.4 30.0
Alternative minimum tax 19.4 21.8
Foreign tax credits and net operating losses 57.5 42.3
Reserves 58.7 45.1
Other 46.0 18.5
Valuation allowances (103.9) (29.1)
225.8 226.3
Net deferred tax liabilities $ 21.1 $ 40.1
========= ========
<PAGE>
<PAGE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets related to foreign tax credits, net operating loss
carryforwards, and future tax deductions have been reduced by a valuation
allowance since realization is dependent in part on the generation of
future foreign source income as well as on income in the legal entity which
gave rise to tax losses. Other deferred tax assets have not been reduced
by valuation allowances because of carrybacks and existing deferred tax
credits which reverse in the carryforward period. The foreign tax credits
and net operating losses are available for utilization in future years. In
some tax jurisdictions the carryforward period is limited to as little as
five years; in others it is unlimited.
As a result of the Acquisition (see Note 1) and the allocation of
purchase accounting (principally goodwill) to foreign subsidiaries, the
book basis in the net assets of the foreign subsidiaries exceeds the
related U.S. tax basis in the subsidiaries' stock. Such investments are
considered permanent in duration, and accordingly no deferred taxes have
been provided on such differences, which are significant. It is
impracticable because of the complex legal structure of the Company and the
numerous tax jurisdictions in which the Company operates to determine such
deferred taxes.
Cash taxes paid were $41 million, $56 million, and $79 million in the
years 1993, 1992, and 1991, respectively.
In connection with examinations of the tax returns of the Company's
German subsidiaries for the years 1984 through 1990, the German tax
authorities have raised questions regarding the treatment of certain
significant matters. The Company has paid approximately $20 million of a
disputed German income tax. A suit is pending to obtain a refund of this
tax. The Company anticipates that the German tax authorities may propose
other adjustments resulting in additional taxes of approximately $105
million, plus penalties and interest for the tax return years under audit.
In addition, significant transactions similar to those which gave rise to
such possible adjustments occurred in years subsequent to 1990. The
Company, on the basis of the opinion of legal counsel, believes the tax
returns are substantially correct as filed and intends to vigorously
contest any adjustments which have been or may be assessed. Accordingly,
the Company had not recorded any loss contingency at December 31, 1993 with
respect to such matters. Under German tax law the authorities may demand
immediate payment of a tax assessment prior to final resolution of the
issues. The Company also believes, on the basis of opinion of legal
counsel, that it is highly likely that a suspension of payment will be
obtained if additional taxes are assessed. However, if payment is
required, the Company expects that it will be able to make such payment
from available sources of liquidity or credit support but that future cash
flows and capital expenditures and therefore subsequent results of
operations for any particular quarterly or annual period could be adversely
affected.
<PAGE>
<PAGE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Inventories
The components of inventory are as follows:
At December 31,
1993 1992
(Dollars in millions)
Finished products $169.0 $200.6
Products in process 78.0 95.8
Raw materials 78.8 88.5
Inventory at cost $325.8 $384.9
====== ======
The carrying cost of inventories reflects purchase accounting
adjustments and therefore exceeds current cost.
Note 7. Facilities
The components of facilities, at cost, are as follows:
At December 31,
1993 1992
(Dollars in millions)
Land $ 66.2 $ 65.0
Buildings 314.6 310.2
Machinery and equipment 739.9 719.4
Improvements in progress 54.4 45.6
Gross facilities 1,175.1 1,140.2
Less: accumulated depreciation 354.6 307.4
Net facilities $ 820.5 $ 832.8
======== ========
Note 8. Debt
The 1993 Refinancing
In July 1993 the Company completed a refinancing (the "Refinancing")
that included (a) the issuance of $200 million principal amount of 9-7/8%
Senior Subordinated Notes Due 2001; (b) the issuance of approximately $751
million principal amount of 10-1/2% Senior Subordinated Discount
Debentures Due 2005, which yielded proceeds of approximately $450 million;
(c) the amendment and restatement of the Company's 1988 Credit Agreement
(the "1988 Credit Agreement" and as so amended and restated, the "Credit
Agreement") to establish a $1 billion secured, multi-currency,
multi-borrower credit facility; and (d) the application of the proceeds of
such issuances and such borrowings as follows: (i) the redemption on July
1, 1993, of all of the outstanding 12-7/8% Senior Subordinated Debentures
Due 2000 (the "12-7/8% Senior Subordinated Debentures") at a redemption
price of 104.83% ($571.3 million), (ii) the redemption on July 2, 1993, of
<PAGE>
<PAGE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
a majority of the outstanding 14-1/4% Subordinated Discount Debentures Due
2003 (the "14-1/4% Subordinated Discount Debentures") at a redemption
price of 105% ($389.5 million), (iii) the refunding of bank borrowings
($405 million of term loans and $77 million of other bank debt including
revolving credit debt), (iv) the refunding of letters of credit ($58
million), and (v) payment of related fees and expenses.
The Credit Agreement provided to American Standard Inc. and certain
subsidiaries (the "Borrowers") a $1 billion facility as follows: (a) a
$250 million multi-currency revolving credit facility (the "Revolving
Credit Facility") available to all Borrowers, which expires in 2000; (b) a
$225 million multi-currency periodic access facility (the "Periodic Access
Facility") available to all Borrowers, which expires in 2000; and (c)
three term loan facilities (the "Term Loans") consisting of a $225 million
U.S. dollar facility ("Tranche A") available to American Standard Inc.,
which expires in 2000; a $200 million Deutschemark facility ("Tranche B")
available to a German subsidiary, which expires in 1997; and a $100
million U.S. dollar facility ("Tranche C") available to all Borrowers,
which expires in 1999. In August 1993 the Company repaid $50 million and
the amount available under the Credit Agreement by its terms was reduced
to $950 million.
Borrowings under the Periodic Access Facility and the Term Loans
generally bear interest at the London interbank offered rate ("LIBOR")
plus 2-1/2% except for the $225 million U.S. dollar facility, which bears
interest at LIBOR plus 3%, and the $200 million Deutschemark facility,
which bears interest at LIBOR plus 2%. The Company pays a commitment fee
of 0.5% per annum on the unused portion of the Revolving Credit Facility
and a fee of 2.5% plus issuance fees for letters of credit.
As a result of the Refinancing, results for the year ended December
31, 1993, included an extraordinary charge of $92 million related to the
debt retired (including call premiums, the write-off of deferred debt
issuance costs, and loss on cancellation of foreign currency swap
contracts) on which there was no tax benefit (see Note 5).
Short-term
The Revolving Credit Facility (the "Revolver") provides for aggregate
borrowings of up to $250 million for working capital purposes, of which up
to $200 million may be used for the issuance of letters of credit and $40
million of which is available for same-day short-term borrowings
("Swingline Loans"). At December 31, 1993, there were $7 million of
borrowings outstanding under the Revolver and $66 million of letters of
credit. Availability under the Revolver at December 31, 1993, was $177
million. Average borrowings under this facility and under the revolving
credit facility available under the previous 1988 Credit Agreement for
1993, 1992, and 1991 were $39 million, $14 million, and $44 million,
respectively. The Revolver and the Swingline Loans bear interest at the
prime rate plus 1-1/2% or LIBOR plus 2-1/2%.
The Company is required to reduce to $50 million the amount of
borrowings outstanding under the Revolver for at least 30 consecutive days
in each 12-month period ending May 31. In December 1993 the Company met
this requirement for the 12-month period ending May 31, 1994. Commencing
August 31, 1994, the Revolver is reduced by $8.3 million annually, with a
<PAGE>
<PAGE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
final maturity on June 1, 2000. In addition, the Company is required to
repay the full amount of each of its outstanding revolving loans at the
end of each interest period (a maximum of six months). The Company may,
however, immediately reborrow such amounts subject to compliance with
applicable conditions of the Credit Agreement.
Other short-term borrowings are available outside the United States
under informal credit facilities and are typically a result of
overdrafts. At December 31, 1993, the Company had $31 million of such
foreign short-term debt outstanding at an average interest rate of 11% per
annum. The Company also had an additional $50 million of unused foreign
facilities. These facilities may be withdrawn by the banks at any time.
Long-term
Long-term debt was as follows:
At December 31,
1993 1992
(Dollars in millions)
Credit Agreement $ 689.9 $ -
1988 Credit Agreement - 402.3
9 1/4% sinking fund debentures, due in
installments from 1997 to 2016 150.0 150.0
10 7/8% senior notes due 1999 150.0 150.0
11 3/8% senior debentures due 2004 250.0 250.0
9 7/8% senior subordinated notes due 2001 200.0 -
10 1/2% senior subordinated discount
debentures (net of unamortized discount
of $272.9 million in 1993) due in installments
from 2003 to 2005 477.8 -
12 7/8% senior subordinated debentures - 545.0
14 1/4% subordinated discount debentures
(net of unamortized discount of $36.3
million in 1992) due in installments
from 2002 to 2003 175.0 509.5
Other long-term debt 63.1 53.3
12 3/4% junior subordinated debentures due in
installments from 2001 to 2003 (Note 9) 141.8 -
Foreign currency swap contracts - (14.6)
2,297.6 2,045.5
Less current maturities 105.9 13.4
$ 2,191.7 $ 2,032.1
========= =========
The amounts of long-term debt maturing from 1995 through 1998 are:
1995-$126.3 million, 1996-$123.5 million, 1997 $121.2 million, 1998-$117.5
million.
Interest costs capitalized as part of the cost of constructing
facilities for the years ended December 31, 1993, 1992, and 1991, were $2.7
million, $3.1 million, and $3.6 million, respectively. Cash interest paid
for those same years on all outstanding indebtedness amounted to $198
million, $210 million, and $224 million, respectively.
<PAGE>
<PAGE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Credit Agreement loans, maturities, and effective weighted average
interest rates in effect at December 31, 1993, were as follows:
U.S. Dollar
Equivalent
(in millions)
Periodic Access Facility, due in
semi-annual installments from
February 1994 to February 2000:
British sterling loans at 7.85% $ 95.8
Deutschemark loans at 9.06% 49.4
Canadian dollar loans at 6.50% 20.2
French franc loans at 9.17% 18.5
Italian lira loans at 12.19% 8.7
Total Periodic Access loans 192.6
Term Loans:
Tranche A U.S. dollar loans, due in
semi-annual installments from August
1997 to February 2000 at 6.50% 225.0
Tranche B Deutschemark loans, due in
semi-annual installments from February
1994 to February 1997 at 7.88% 172.3
Tranche C U.S. dollar loans, due in
semi-annual installments from February
1994 to August 1999 at 6.01% 100.0
Total Term Loans 497.3
Total Credit Agreement long-term loans 689.9
Revolver loans at 7.5% 7.0
Total Credit Agreement loans $ 696.9
========
Under the 1988 Credit Agreement the various term loans and effective
weighted average interest rates in effect at December 31, 1992, were as
follows:
U.S. Dollar
Equivalent
(in millions)
Deutschemark loans at 11.4% $249.8
Canadian dollar loans at 13.05% 152.5
Total $402.3
======
The 9-7/8% Senior Subordinated Notes may be redeemed at the Company's
option, in whole or in part, on and after June 1, 1998, at redemption
prices declining from 102.82% in 1998 to 100% on June 1, 2000, and
thereafter. The 10-1/2% Senior Subordinated Discount Debentures may be
redeemed at the Company's option, in whole or in part, on and after June 1,
1998, at redemption prices declining from 104.66% in 1998 to 100% on June
1, 2002, and thereafter. The payment of the principal and interest on the
<PAGE>
<PAGE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9-7/8% Senior Subordinated Notes and on the 10-1/2% Senior Subordinated
Discount Debentures (together the "Senior Subordinated Debt") is
subordinated in right of payment to the payment when due of all Senior Debt
(as defined in the related indenture) of the Company, including all
indebtedness under the Credit Agreement and the 9-1/4% Sinking Fund
Debentures, the 10-7/8% Senior Notes, and the 11-3/8% Senior Debentures
(the said notes and debentures together the "Senior Securities").
The 9-1/4% Sinking Fund Debentures are redeemable at the Company's
option, in whole or in part, at redemption prices declining from 105.55% in
1994 to 100% in 2006 and thereafter. The 10-7/8% Senior Notes are not
redeemable by the Company. The 11-3/8% Senior Debentures are redeemable at
the option of the Company, in whole or in part, on or after May 15, 1997,
at redemption prices declining from 105.69% in 1997 to 100% on May 15,
2002, and thereafter.
The 14-1/4% Subordinated Discount Debentures are redeemable at the
Company's option, in whole or in part, at redemption prices of 105% prior to
June 30, 1994, declining to 100% on and after June 30, 1995. The payment of
the principal and interest on the 14-1/4% Subordinated Discount Debentures
issued by the Company in 1988 is subordinated in right of payment to the
payment when due of all Senior Debt (as defined in the related indenture) of
the Company, including all indebtedness under the Credit Agreement, the
Senior Securities, and the Senior Subordinated Debt. The 14-1/4%
Subordinated Discount Debentures rank senior to the 12-3/4% Junior
Subordinated Debentures (described below).
The 12-3/4% Junior Subordinated Debentures may be redeemed, at the
Company's option, in whole or in part at a redemption price of 101.8% prior
to June 30, 1994, and at 100% thereafter. The payment of principal and
interest on the 12-3/4% Junior Subordinated Debentures is subordinated in
right of payment to the payment when due of all Senior Debt (as defined in
the related indenture) of the Company, including all indebtedness under the
Credit Agreement, the Senior Securities, the Senior Subordinated Debt, and
the 14-1/4% Subordinated Discount Debentures.
Obligations under the Credit Agreement are guaranteed by ASI Holding
Corporation (the Company's parent), the Company, and significant domestic
subsidiaries of the Company (with foreign borrowings also guaranteed by
certain foreign subsidiaries) and are secured by U.S., Canadian, and U.K.
properties, plant, and equipment; by liens on receivables, inventories,
intellectual property, and other intangibles; and by a pledge of the
Company's stock and nearly all shares of subsidiary stock. In addition, the
obligations of the Company under the Senior Securities are secured, to the
extent required by the related indentures, by mortgages on the principal
U.S. properties of the Company equally and ratably with the indebtedness
under the Credit Agreement and certain related indebtedness.
The Senior Subordinated Debt, the 14-1/4% Subordinated Discount
Debentures, and the 12-3/4% Junior Subordinated Debentures are unsecured.
The Credit Agreement contains various covenants that limit, among other
things, indebtedness, dividends on and redemption of capital stock of the
Company, purchases and redemptions of other indebtedness of the Company
(including its outstanding debentures and notes), rental expense, liens,
capital expenditures, investments or acquisitions, disposal of assets, the
<PAGE>
<PAGE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
use of proceeds from asset sales, and certain other business activities and
require the Company to meet certain financial tests. In order to maintain
compliance with the covenants and restrictions contained in the 1988 Credit
Agreement, the Company from time to time has had to obtain waivers and amend-
ments. In February 1994 the Company obtained an amendment to the Credit
Agreement that among other things relaxed certain financial tests and
covenants and facilitated the investment in an air conditioning joint
venture and the formation of a holding company to establish joint ventures
in the People's Republic of China for the manufacture and sale of plumbing
products. The Company currently believes it will comply with the amended
financial tests and covenants but may have to obtain similar waivers or
amendments in the future.
The indentures related to the Company's debentures and notes contain
various covenants which, among other things, limit debt and preferred stock
of the Company and its subsidiaries, dividends on and redemption of capital
stock of the Company and its subsidiaries, redemption of certain
subordinated obligations of the Company, the use of proceeds from asset
sales, and certain other business activities.
Note 9. Exchange of Exchangeable Preferred Stock
On June 30, 1993, in exchange for all of the Company's outstanding
shares of 12-3/4% Exchangeable Preferred Stock, the Company issued $141.8
million of 12-3/4% Junior Subordinated Debentures Due 2003 to the holder of
the Exchangeable Preferred Stock. Those debentures were sold by the holder
in a registered public offering in August 1993. The Company received none
of the proceeds of this offering.
Note 10. Foreign Currency Translation
Assets and liabilities of most foreign operations are translated at
year-end rates of exchange, and the resulting gains or losses, net of income
tax effects, are accumulated in a separate component of stockholder's
equity.
Changes in exchange rates which gave rise to significant translation
effects included in stockholder's equity for the years ended December 31,
1993, 1992, and 1991, are summarized in the accompanying table.
Change in End of
Period Exchange Rate
Currency 1993 1992 1991
British sterling (2)% (19)% (3)%
Canadian dollar (4) ( 9) -
French franc (6) (6) (2)
Deutschemark (7) (6) (1)
Italian lira (14) (22) (2)
===== ===== =====
Translation loss included
in stockholder's equity, net
of tax (dollars in millions) $ (62.3) $ (36.2) $ (2.1)
====== ====== =====
<PAGE>
<PAGE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The allocation of purchase costs increased the net asset exposure of
foreign operations; however, since June 29, 1988, the date of the Merger,
the effects of exchange volatility have been ameliorated by the fact that a
portion of the Company's borrowings has been denominated in foreign
currencies.
The losses from foreign currency transactions and translation from
operations in countries with high inflation rates reflected in expense were
$21.9 million in 1993, $19.3 million in 1992, and $14.4 million in 1991.
Note 11. Fair Values of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Values of Financial Instruments" ("FAS 107"), requires disclosure
information about all financial instruments of a company except certain
excluded instruments and instruments for which it is not practicable to
estimate fair value. The fair values presented below are estimates as of
December 31, 1993, and are not necessarily indicative of amounts the Company
could realize or settle currently or indicative of the intent or ability of
the Company to dispose of or liquidate such instruments.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and certificates of deposit: The carrying amount reported in the
balance sheet for cash and certificates of deposit approximates its fair
value.
Long- and short-term debt: The fair values of the Company's Credit
Agreement loans are estimated using indicative market quotes obtained
from a major bank. The fair values of senior notes, senior debentures,
senior subordinated notes, senior subordinated discount debentures,
subordinated discount debentures, the sinking fund debentures, and the
junior subordinated debentures are based on indicative market quotes
obtained from a major securities dealer. The fair values of other loans
approximate their carrying value.
The carrying amounts and estimated fair values of selected financial
instruments at December 31, 1993 are as follows:
(dollars in millions)
Carrying Fair
Amount Value
Credit Agreement loans $ 697 $ 679
10 7/8% senior notes 150 163
11 3/8% senior debentures 250 276
9 7/8% senior subordinated notes 200 208
10 1/2% senior subordinated discount
debentures 478 505
14 1/4% subordinated discount debentures 175 184
9 1/4% sinking fund debentures 150 152
12-3/4% junior subordinated debentures 142 143
Other loans 63 63
<PAGE>
<PAGE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Related Party Transactions
The Company received non-cash capital contributions from Holding in
the form of shares of common stock awarded to employees under various
stock compensation plans totalling $5.3 million, $3.8 million, and $7.1
million in 1993, 1992 and 1991 respectively. The Company has agreed to
pay Kelso an annual fee of $2.75 million for providing management
consulting and advisory services. In June 1993 the Company issued 1,000
shares of a new, non-voting Series A Preferred Stock, par value $.01 per
share, for $10,000 to an affiliate of Kelso & Company. The Company is
committed to contribute $5 million of capital to a Kelso limited
partnership. In addition, Tyler Refrigeration was sold to an affiliate of
Kelso in 1991.
Note 13. Leases
The cumulative minimum rental commitments under the terms of all
noncancellable operating leases in effect at December 31, 1993, were $108
million. Net rental expenses for operating leases were $34 million, $32
million, and $28 million for the years ended December 31, 1993, 1992, and
1991, respectively.
Note 14. Commitments and Contingencies
The Company and certain of its subsidiaries are parties to a number
of pending legal and tax proceedings. The Company is also subject to
federal, state and local environmental laws and regulations and is
involved in environmental proceedings concerning the investigation and
remediation of numerous sites. In those instances where it is probable
that the Company will incur costs from such proceedings and the amounts
can be reasonably determined the Company has recorded a liability. The
Company believes that these legal, tax, and environmental proceedings will
not have a material adverse effect on its consolidated financial position,
cash flows, or results of operations.
The tax returns of the Company's German subsidiaries are currently
under examination by the German tax authorities (see Note 5).
Note 15. Segment Data
Sales and operating income by geographic location for the years ended
December 31, 1993, 1992, and 1991, are shown on the following page.
Identifiable assets are also shown as at years ended 1993, 1992, and
1991. See "Business" for a description of each business segment and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" for capital expenditures and depreciation and amortization.
<PAGE>
<PAGE>
<TABLE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
SEGMENT DATA
(Dollars in millions)
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Sales
Air Conditioning Products $2,100 $1,892 $1,836
Plumbing Products 1,167 1,170 1,018
Transportation Products 563 730 741
Total sales $3,830 $3,792 $3,595
Geographic distribution:
United States $2,096 $1,877 $1,890
Europe 1,315 1,588 1,491
Other 483 392 317
Eliminations (64) (65) (103)
Total sales $3,830 $3,792 $3,595
Operating Income
Air Conditioning Products $ 133 $ 104 $ 55*
Plumbing Products 108 108 66
Transportation Products 41 88 121
Total operating income $ 282 $ 300 $ 242
Geographic distribution:
United States $ 125 $ 96 $ 13*
Europe 118 180 206
Other 39 24 23
Total operating income 282 300 242
Financing and corporate items 363 352 330
Loss before income taxes, extraordinary
loss, and cumulative effect of
changes in accounting methods (81) (52) (88)
Income taxes 36 5 23
Loss before extraordinary loss and cumulative
effect of changes in accounting methods $ (117) $ (57) $ (111)
<FN>
* Includes $22 million loss on the sale of Tyler Refrigeration.
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Assets
Air Conditioning Products $1,167 $1,156 $1,174
Plumbing Products 960 1,002 1,069
Transportation Products 652 722 828
Total identifiable assets $2,779 $2,880 $3,071
Geographic distribution:
United States $1,013 $1,016 $1,015
Europe 1,196 1,370 1,577
Other 570 494 479
Total identifiable assets 2,779 2,880 3,071
Prepaid charges 82 61 52
Future income tax benefits 25 33 8
Cash and certificates of
deposit 54 113 108
Corporate assets 51 49 46
Total assets $2,991 $3,136 $3,285
</TABLE>
<PAGE>
<PAGE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERLY DATA
(Unaudited)
(Dollars in millions)
1993
First Second Third Fourth
Sales $879.4 $995.5 $976.5 $979.1
Cost of sales 650.5 754.5 727.7 769.9
Income (loss) before income taxes
and extraordinary loss (9.5) (28.2) 4.1 (46.9)
Tax provision 8.1 6.1 7.2 14.8
Loss before extraordinary loss (17.6) (34.3) (3.1) (61.7)
Extraordinary loss (Note 8) - (91.9) - -
Net loss $(17.6) $(126.2) $ (3.1) $(61.7)
====== ======= ====== ======
1992
First Second Third Fourth
Sales $901.0 $995.9 $980.9 $914.1
Cost of sales 672.0 734.1 742.2 703.9
Income (loss) before income taxes (8.1) 11.4 (16.5) (39.3)
Tax provision (benefit) 5.5 9.2 (1.5) (8.5)
Net income (loss) $(13.6) $ 2.2 $(15.0) $(30.8)
====== ======= ====== ======
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCING DISCLOSURE.
Not applicable.
<PAGE>
<PAGE>
MANAGEMENT
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information as of March 31,
1994, with respect to each person who is an executive officer or director
of the Company:
Name Age Position with Company
Emmanuel A. Kampouris 59 Chairman, President and Chief
Executive Officer, and Director
Horst Hinrichs 61 Senior Vice President,
Transportation Products, and
Director
George H. Kerckhove 56 Senior Vice President, Plumbing
Products, and Director
Fred A. Allardyce 52 Vice President and Chief
Financial Officer
Alexander A. Apostolopoulos 51 Vice President and Group
Executive, Americas, Plumbing
Products
Thomas S. Battaglia 51 Vice President and Treasurer
Roberto Canizares M. 44 Vice President, Air Conditioning
Products' Asia/America Zone
Wilfried Delker 53 Vice President and Group
Executive, Worldwide Fittings,
Plumbing Products
Adrian B. Deshotel 48 Vice President, Human Resources
Cyril Gallimore 65 Vice President, Systems and
Technology
Luigi Gandini 55 Vice President and Group
Executive, European Plumbing
Products
Daniel Hilger 53 Vice President and Group
Executive, Air Conditioning
Products in Europe, Middle East
and Africa
Joachim D. Huwendiek 63 Vice President, Automotive
Products in Germany
<PAGE>
<PAGE>
Name Age Position with Company
Frederick W. Jaqua 72 Vice President and General
Counsel and Secretary
W. Craig Kissel 42 Vice President and Group Executive,
Unitary Products
Group
William A. Klug 62 Vice President, Trane International
Philippe Lamothe 57 Vice President, Automotive
Products in France
G. Eric Nutter 58 Vice President, Automotive
Products in the United Kingdom
Raymond D. Pipes 44 Vice President and Group Executive,
Plumbing Products in the Far East
Bruce R. Schiller 49 Vice President and Group Executive,
Compressor Business
James H. Schultz 45 Vice President and Group
Executive, Commercial Systems
Group
G. Ronald Simon 52 Vice President and Controller
Wade W. Smith 43 Vice President, U.S. Plumbing
Products
Benson I. Stein 56 Vice President, General Auditor
Robert M. Wellbrock 47 Vice President, Taxes
Shigeru Mizushima 50 Director
Roger W. Parsons 52 Director
Frank T. Nickell 46 Director
J. Danforth Quayle* 47 Director
John Rutledge 45 Director
Joseph S. Schuchert* 65 Director
* The Management Development Committee functions as the
compensation committee of the Company. Since December 2, 1993,
its members have been Messrs. Quayle and Schuchert. Prior
thereto Mr. Schuchert and two other directors who retired in
December, Richard M. Cyert and Edward Donley, served as members
of the committee.
<PAGE>
<PAGE>
Directors are elected to hold office until the next annual meeting of
stockholders or until their successors are elected. Messrs. Kampouris,
Mizushima, Nickell, and Schuchert were elected in 1988; Mr. Kerckhove in
September 1990; Mr. Hinrichs in March 1991; Dr. Rutledge in March 1993;
Mr. Quayle in September 1993; and Mr. Parsons in March 1994.
Holding, Kelso ASI Partners, L.P. (the 73 percent owner of Holding)
("ASI Partners"), and executive officers and certain other management
personnel of the Company who purchased shares of Holding common stock
("Management Investors") entered into a Stockholders Agreement that, among
other things, provides for arrangements regarding the control of the
election of directors of Holding.
Until the earlier of (i) the occurrence of a public offering pursuant
to an effective registration statement under the Securities Act covering
the offer and sale of Holding common stock to the public and underwritten
by an investment banking firm of nationally recognized standing and (ii)
July 7, 1998, the Management Investors as a group are entitled to nominate
at least two directors to the Board of Directors of Holding, and ASI
Partners is entitled to nominate the remaining directors. As a result,
during such period ASI Partners will control the Board of Directors. To
effectuate their rights, the Management Investors and ASI Partners have
agreed in the Stockholders' Agreement to grant an irrevocable proxy to the
Secretary of Holding to vote their shares of common stock in accordance
with such nominations. Such grant of an irrevocable proxy terminates upon
Holding's becoming subject to the proxy rules under the Securities
Exchange Act of 1934. At present the Board of Directors of Holding
consists of nine directors.
The sole holder of the outstanding common stock of American Standard
Inc. is Holding, and Holding exclusively elects the directors of American
Standard Inc. Currently the directors of Holding are also the directors
of American Standard Inc.
Set forth below is the principal occupation of each of the executive
officers and directors named above during the past five years (except as
noted, all positions are with the Company).
Mr. Kampouris was elected Chairman in December 1993 and President and
Chief Executive Officer in February 1989. Prior thereto he was Senior
Vice President, Building Products, from 1984 to February 1989. He is also
a director of Daido Hoxan Inc. Mr. Kampouris has served as a director of
the Company since July 1988.
Mr. Hinrichs was elected Senior Vice President, Transportation
Products, in December 1990. Prior thereto he served as Vice President and
Group Executive, Automotive Products, from 1987 to 1990. Mr. Hinrichs has
served as a director of the Company since March 1991.
Mr. Kerckhove was elected Senior Vice President, Plumbing Products,
in June 1990. Prior thereto he was Vice President (from 1985 until June
1990) and Group Executive (from 1988 until June 1990) of European Plumbing
Products. Mr. Kerckhove has served as a director of the Company since
September 1990.
<PAGE>
<PAGE>
Mr. Allardyce was elected Vice President and Chief Financial Officer
in January 1992. Prior thereto he served as Vice President and Controller
from February 1983 until December 1991.
Mr. Apostolopoulos was elected Vice President and Group Executive,
Americas Plumbing Products, in December 1990. Prior thereto he served as
the executive in charge of Plumbing Products' joint ventures from
September 1989 to November 1990 and Managing Director of the Company's
Egyptian subsidiary from July 1984 to August 1989.
Mr. Battaglia was elected Vice President and Treasurer in September
1991. Prior thereto he was Assistant Treasurer.
Mr. Canizares was elected Vice President, Air Conditioning Products'
Asia/America Zone, in December 1990. Prior thereto he served as the
executive in charge of this zone and Manager of Planning and Distribution
from November 1986 to November 1990.
Mr. Delker was elected Vice President and Group Executive, Worldwide
Fittings, Plumbing Products, in April 1990. Prior thereto he served as
executive in charge of the Company's brass fittings manufacturing
operations from June 1982 until March 1990.
Mr. Deshotel was elected Vice President, Human Resources, in January
1992. Prior thereto he served as Group Vice President, Human Resources,
for U.S. Plumbing Products from September 1986 until December 1991.
Mr. Gallimore was elected Vice President, Systems and Technology, in
December 1990. Prior thereto he served as the executive in charge of
Manufacturing and Technology from 1984 to November 1990.
Mr. Gandini was elected Vice President and Group Executive, European
Plumbing Products, in July 1990. Prior thereto he served as General
Manager of Ideal Standard S.p.A., the Italian subsidiary of the Company,
from January 1978 until June 1990.
Mr. Hilger was elected Vice President and Group Executive, Air
Conditioning Products, in Europe, Middle East and Africa, in June 1988.
Mr. Huwendiek was elected Vice President, Automotive Products in
Germany, in January 1992. Prior thereto he served as Managing Director of
WABCO Germany since June 1987.
Mr. Jaqua was elected Vice President and General Counsel and
Secretary in April 1989. Prior thereto he was Associate General Counsel
and Assistant Secretary.
Mr. Kissel was elected Vice President in charge of Air Conditioning
Products' Unitary Products Group in January 1992, becoming Group Executive
in March 1994. He served as Vice President, Sales and Distribution, for
Air Conditioning Products, from December 1990 until January 1992 and
served as divisional Senior Vice President in charge of U.S. Sales from
January to November 1990. He was in charge of Western Regional Sales from
January 1989 to January 1990.
<PAGE>
<PAGE>
Mr. Klug was elected Vice President in 1985 and has been in charge of
Trane International since December 1993. He served as Group Executive,
Unitary Products Group, from April 1990 until December 1993. He was Group
Executive, North American Sales and Distribution, Air Conditioning
Products, from October 1987 to March 1990.
Mr. Lamothe was elected Vice President, Automotive Products in
France, in January 1992. He served as Group Vice President of the French
transportation business during 1991 and prior thereto was General Manager
of the French transportation subsidiary.
Mr. Nutter was elected Vice President, Automotive Products in the
United Kingdom, in January 1992. Prior thereto he served as Vice
President and General Manager of WABCO Transportation U.K. Limited, the
United Kingdom transportation subsidiary of the Company from March 1991
until December 1991 and Group Managing Director of the United Kingdom
transportation subsidiary from June 1987 until February 1991.
Mr. Pipes was elected Vice President and Group Executive for the Far
East Region of Plumbing Products in May 1992. Prior thereto he served as
Managing Director of the Company's Philippine subsidiary from May 1990
until April 1992 and was Group Vice President, Control & Finance, of U.S.
Plumbing Products from March 1985 until April 1990.
Mr. Schiller was elected Vice President and Group Executive,
Compressor Business (Air Conditioning Products) in March 1994. Prior
thereto he served as General Manager, Compressor Business Group, from May
1993 to February 1994 and Manager and then General Manager of the
Company's Tyler, Texas, facility from March 1986 to April 1993.
Mr. Schultz was elected Vice President and Group Executive,
Commercial Systems, in 1987.
Mr. Simon was elected Vice President and Controller in January 1992.
Prior thereto he served as Vice President and Controller of the Air
Conditioning Products' Commercial Systems Group from December 1984 to
December 1991.
Mr. Wade W. Smith was elected Vice President, U.S. Plumbing Products,
in May 1992. Prior thereto he served as Group Vice President in charge of
the Chinaware Business Unit of U.S. Plumbing Products from February 1992
until April 1992 and from April 1987 to February 1992 he was Vice
President and General Manager of the Building Automation Systems Division
of the Commercial Systems Group of Air Conditioning Products.
Mr. Stein was elected Vice President, General Auditor, in March 1994;
from December 1986 to February 1994 he was the Company's General Auditor.
Mr. Wellbrock was elected Vice President, Taxes, effective January 1,
1994. Prior thereto he served as Director of Taxes from 1988 through
1993.
<PAGE>
<PAGE>
Mr. Mizushima has been President and Chief Operating Officer of Daido
Hoxan Inc. since the merger in April 1993 of Hoxan Corporation with Daido
Sanso Company (a subsidiary of Air Products and Chemicals Inc.). Prior
thereto Mr. Mizushima was President of Hoxan Corporation, a position he
held since 1984. He is also a director of Daido Hoxan. Daido Hoxan Inc
is the second largest supplier of industrial gases in Japan. One of its
subsidiaries is a distributor of American-Standard plumbing products in
Japan. Mr. Mizushima has served as a director of the Company since July
1988.
Mr. Nickell has been President and a director of Kelso & Companies,
Inc., since March 1989. Kelso & Companies, Inc. is the general partner of
Kelso & Company, L.P. From 1984 to 1989 Mr. Nickell was a general partner
of Kelso & Company, L.P. He is also a director of Club Car, Inc.; King
Holding Corp; and Tyler Holdings Corporation. Mr. Nickell has served as a
director of the Company since May 1988.
Mr. Parsons is Managing Director of Rea Brothers Group PLC ("Rea
Brothers Group"), which he joined in 1988 after a long banking career.
Rea Brothers Group is a U.K. holding company of subsidiaries engaged in
the investment banking business. He also holds directorships in several
subsidiaries of Rea Brothers Group. Mr. Parsons was elected as a director
of the Company on March 2, 1994.
Mr. Quayle served as Vice President of the United States from January
1989 to January 1993. Since leaving that office Mr. Quayle has been
associated with Circle Investors, Inc. (an investment planning and
consulting firm), and FX Strategic Advisors, Inc. (an international trade
consulting firm), both of which he serves as Chairman. He is a Director
of Central Newspapers, Inc. Mr. Quayle has served as a director of the
Company since September 1993.
Dr. Rutledge has been Chairman of Rutledge & Company, Inc., a
merchant banking firm, since January 1991. He is the founder and Chairman
of Claremont Economics Institute, an economic research firm established in
1975. He is also a director of Earle M. Jorgensen & Company, Lazard
Freres Funds, Medical Specialties Group, and Utendahl Capital Partners and
is a special advisor to Kelso & Company. Dr. Rutledge has served as a
director of the Company since March 1993.
Mr. Schuchert has been Chairman, CEO, and a director of Kelso &
Companies, Inc., since March 1989. Kelso & Companies, Inc. is the general
partner of Kelso & Company, L.P. From 1984 to 1989 Mr. Schuchert was
managing general partner of Kelso & Company, L.P. He is also a director
of Earle M. Jorgensen & Company. Mr. Schuchert has served as a director
of the Company since May 1988.
<PAGE>
<PAGE>
On December 23, 1992, Kelso & Company and its chief executive
officer, Mr. Schuchert, without admitting or denying the findings
contained therein, consented to an administrative order in respect of a
Securities and Exchange Commission ("Commission") inquiry relating to the
1990 acquisition of a portfolio company by a Kelso affiliate. The order
found that Kelso's tender offer filing in connection with the acquisition
did not comply fully with the Commission's tender offer reporting
requirements, and required Kelso and Mr. Schuchert to comply with these
requirements in the future.
Compensation Committee Interlocks
and Insider Participation
Mr. Schuchert is a member of the Management Development Committee (the
Compensation Committee) of the Company's Board of Directors. He is
Chairman of Kelso & Companies, Inc. (the general partner of Kelso &
Company, L.P.) and a general partner of American Standard Partners, the
general partner of Kelso ASI Partners.
The Company pays Kelso an annual fee of $2.75 million for providing
management consulting and advisory services, including those of Messrs.
Schuchert and Nickell. The fee is reduced depending on the number of
shares Kelso controls of Holding or the Company, with final termination
when Kelso's ownership control falls below 20 percent.
The Company also entered into a transaction with Kelso Insurance Services,
Incorporated (an affiliate of Kelso) ("Kelso Insurance"), and American
Telephone and Telegraph Company ("AT&T") pursuant to which the Company as
well as other Kelso affiliated companies participates in a
telecommunications network under which AT&T provides communications
services to the group at a special lower tariff rate. In connection with
that transaction the Company has guaranteed a minimum annual usage by it
of $2 million for a period of five years commencing 1993. No fee was paid
by the Company to Kelso Insurance in connection with this transaction.
In August 1993 the Company purchased a limited partnership interest in
Kelso Investment Associates V, L.P. ("KIA V") in exchange for its
commitment to make a capital contribution of $5 million to KIA V. KIA V
was formed to seek out business opportunities and invest primarily in
equity securities, leveraged buy-outs, and joint ventures. Kelso Partners
V, L.P. serves as the general partner of KIA V. The general partners of
Kelso Partners V, L.P., include Messrs. Schuchert and Nickell. Kelso &
Co., L.P., is the manager of KIA V and, as such, acts as investment
adviser of KIA V. The management fee relating to the interest held by the
Company has been waived.
<PAGE>
<PAGE>
<TABLE>
ITEM 11. EXECUTIVE COMPENSATION
There is shown below information concerning the annual and long-term compensation for services
in all capacities to the Company for 1993, 1992 and 1991, of those persons who were (i) at
December 31, 1993, the chief executive officer and the other four most highly compensated
executive officers of the Company and (ii) a former executive officer (the persons described
in subdivisions (i) and (ii) hereinafter collectively called the "Named Officers"):
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Name and Annual Compensation Compensation All Other
Principal Other Annual LTIP Compen-
Position Year Salary Bonus (1) Compensation(2) Payouts(3) sation(4)
<S> <C> <C> <C> <C> <C> <C>
Emmanuel A. Kampouris 1993 $562,500 $600,000 $337,500 $ 896,800 $ 131,564
Chairman, President 1992 525,000 500,000 337,500 1,085,316 117,951
& Chief Executive 1991 525,000 500,000 (5) 842,000 (5)
Officer
George H. Kerckhove 1993 $334,500 $141,000 $169,500 $ 430,500 $ 33,016
Senior Vice President 1992 319,000 148,000 169,500 490,456 32,344
1991 293,369 148,000 (5) 342,000 (5)
Horst Hinrichs 1993 $292,211 $127,000 $135,000 $ 370,700 $ 30,912
Senior Vice President 1992 303,415 130,000 135,000 354,727 21,707
1991 269,444 160,000 (5) 307,000 (5)
Fred A. Allardyce 1993 $250,000 $ 96,000 $169,500 $ 266,000 $ 28,430
Vice President & Chief 1992 240,000 90,000 169,500 298,401 32,581
Financial Officer 1991 192,000 70,000 (5) 207,000 (5)
Luigi Gandini 1993 $250,916 $ 81,000 $ 0 $ 264,700 $ 27,676
Vice President 1992 243,950 88,600 0 286,625 27,957
1991 226,316 80,000 (5) 119,000 (5)
H. Thompson Smith 1993 $342,500 $154,000 $ 90,000 $ 486,500 $ 29,398
former Senior Vice 1992 330,000 144,000 90,000 579,078 24,845
President 1991 300,000 152,000 (5) 419,000 (5)
<FN>
1. Represents annual bonus earned for the year reported but paid in the subsequent year.
2. Amounts shown represent payments under the Company's 1988 Management Partners' Bonus Plan;
payments were at the rate of $1.50 per share of ASI Holding Corporation common stock owned
by Named Officers on July 7, 1993, that had been previously acquired through stock
offerings in 1988.
3. Amounts for 1993 represent a best estimate of the Long-Term Incentive Compensation Plan
("LTIP") payouts under the 1991-1993 performance period of the LTIP. Although the period
has closed, the final determination of inventory turnover, the target for this period,
cannot be made until April 1994. The payouts are expected to be made all in cash. The
1992 LTIP payouts represent achievement of the 1990-1992 performance goal, with payment
approximately 80% in cash and 20% in shares of Common Stock of Holding made partially in
1992 and partially in 1993. The shares were distributed to a grantor's trust for the
account of the Named Officers. The 1991 LTIP payouts represent achievement of the
1989-1991 performance goal, with payment (all cash) made in 1992.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
4. Included in All Other Compensation for 1993 and 1992 was the following:
<CAPTION>
Premiums for Term
Life Insurance ESOP Allocations
1993 1992 1993 1992
<S> <C> <C> <C> <C>
E.A. Kampouris $110,338 $ 97,354 $21,226 $ 20,597
G.H. Kerckhove 11,790 11,747 21,226 20,597
H. Hinrichs 9,686 1,110 21,226 20,597
F.A. Allardyce 7,204 11,984 21,226 20,597
L. Gandini 6,450 7,360 21,226 20,597
H.T. Smith 8,172 4,248 21,226 20,597
<FN>
5. Not required by the Securities and Exchange Commission transitional rules.
6. Annual bonuses and LTIP payouts may be deferred at the election of the recipient.
</TABLE>
<TABLE>
Retirement Plans
<CAPTION>
<S> <C> <C> <C> <C> <C>
Terminated Plan. As a result of the change of control of the Company in 1988, the
retirement plan of the Company covering its U.S. salaried employees was terminated as
of June 30, 1988. Thereafter, the accrued benefits of all participants through that
date, all of which vested, are provided through annuities purchased with the assets of
the terminated plan (the "Terminated Plan"). There were no further benefit accruals
under the Terminated Plan after June 30, 1988.
The annual retirement annuities that are payable to Named Officers, assuming
retirement at age 65 and no election of a joint and survivor option and after giving
effect to an offset for Social Security benefits, are as follows: Mr. Kampouris,
$90,662; Mr. Hinrichs, $72,945; Mr. Kerckhove, $109,828; Mr. Allardyce, $25,764; and
Mr. Smith, $22,426.
</TABLE>
<TABLE>
<CAPTION>
Supplemental Retirement Plan.
<S> <C> <C> <C> <C> <C>
The Company currently maintains a supplemental retirement plan (the "Supplemental
Plan") for most of its executive officers including all of the Named Officers, with
benefits, payable in the form of a single lump sum settlement, that supplement, on
the basis of a formula, their annual retirement benefits (if any) under the
Terminated Plan.
<CAPTION>
The table below shows the annualized target Supplemental Plan benefit payable to a
participant for life from normal retirement date (age 65) based on years of service
and covered compensation. If a participant dies after his Supplemental Plan benefit
vests but before he receives such benefit, his spouse is entitled to Plan benefits,
but in a reduced amount.
<S> <C> <C> <C> <C>
Highest 3-Year
Average Annual Years of Service
Compensation 10 20 30 40
$ 250,000 ................... $100,000 $125,000 $150,000 $150,000
500,000 ................... $200,000 $250,000 $300,000 $300,000
750,000 ................... $300,000 $375,000 $450,000 $450,000
1,000,000 ................... $400,000 $500,000 $600,000 $600,000
1,250,000 ................... $500,000 $625,000 $750,000 $750,000
1,500,000 ................... $600,000 $750,000 $900,000 $900,000
</TABLE>
<PAGE>
<PAGE>
The Supplemental Plan benefits are based on credited years of service and
average annual compensation for the highest three calendar years of the
final ten calendar years of employment (not exceeding 60 percent of
average annual compensation for such years of service) and are reduced by
an offset consisting of certain other retirement benefits, including
amounts payable under the Terminated Plan, annual allocations to the
executive officer's Employee Stock Ownership Plan ("ESOP") accounts, and
Social Security benefits. Benefits under the Supplemental Plan are vested
after five years of service or employment continuation through age 65.
Compensation used in determining Supplemental Plan benefits (covered
compensation) includes only salary and bonus reflected in the Summary
Compensation Table above. No covered compensation of any Named Officer
differs by more than 10% from the salary and bonus set forth in the
Summary Compensation Table.
The years of credited service under the Supplemental Plan for the Named
Officers are as follows: Mr. Kampouris, 28 years; Mr. Hinrichs, 35
years; Mr. Kerckhove, 32 years; Mr. Allardyce, 17 years; Mr. Gandini, 33
years; and Mr. H.T. Smith, 13 years.
The current annual target benefit for Mr. Kampouris is approximately 20
percent higher than that shown in the above table since a different
benefit formula under the pre-1990 version of the Supplemental Plan
applies to his period of service and earnings prior to April 27, 1991.
The method of calculating the lump sum payable to Mr. Kampouris that is
attributable to his accrued benefit through April 27, 1991, has been
adjusted to reflect the recent increase in the Federal ordinary income tax
rates.
An amendment to the Supplemental Plan in 1993 established minimum annual
lump sum payments for certain Named Officers which, after giving effect to
Plan offsets, are estimated as follows: Mr. Kampouris, $427,000; Mr.
Hinrichs, $143,000; Mr. Kerckhove, $37,000; and Mr. Gandini, $24,000.
<PAGE>
<PAGE>
<TABLE>
LONG-TERM INCENTIVE COMPENSATION PLANS-AWARDS IN 1993
<CAPTION>
Performance
Number of or Other
Shares, Units Period Until Estimated Future Payouts Under
or Other Maturation Non-Stock-Price-Based Plans
Name Rights or Payout Threshold Target Maximum
<S> <C> <C> <C> <C> <C>
Emmanuel A. Kampouris (a) 1/93-12/95 $499,350 $998,700 $1,997,400
President & Chief
Executive Officer
George H. Kerckhove (a) 1/93-12/95 $227,200 $454,400 $ 908,800
Senior Vice President
Horst Hinrichs (a) 1/93-12/95 $195,350 $390,700 $ 781,400
Senior Vice President
Fred A. Allardyce (a) 1/93-12/95 $165,000 $330,000 $ 660,000
Vice President & Chief
Financial Officer
Luigi Gandini (a) 1/93-12/95 $138,639 $277,278 $ 554,556
Vice President
H. Thompson Smith (a) 1/93-12/95 $ 85,492 $170,983 $ 341,966
former Senior Vice
President
<FN>
(a) Awards are denominated in dollars.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
The above table shows the contingent target awards made in 1993 to each Named Officer for
the 1993-1995 performance period. The targets set for the 1993-1995 performance period are
based on the achievement in 1995 of predetermined Company-wide increases in inventory
turnover rates and a fixed percentage of earnings (before interest and taxes) to sales. The
threshold reflects 50% of the target award; if the threshold level of inventory turnover and
earnings to sales is not achieved, no payouts are made. The maximum payout is twice the
target award and may be realized by achievement of inventory turnover at a substantially
increased rate or by a combination of an increase in inventory turnover and percentage of
earnings to sales above the threshold level. Contingent awards are based on a participant's
average annual base salary during his participation in the performance period, subject to
prorated adjustment to reflect the duration of his participation in the period. At the end
of a performance period a payment, in cash or in common stock of Holding or a combination of
both, is made on the basis of the achievement of the goal. Termination of employment may
result in forfeiture or proration of the award, depending on the nature of the termination.
A Plan participant may defer payment of his award. Payment of awards will not be made or
will be deferred if an event of default under the Company's loan agreements or debt
indentures has occurred or will occur as a result of such payment.
</TABLE>
<PAGE>
<PAGE>
Shares of Holding Common Stock distributable to Plan participants are
delivered to a grantor's trust for their benefit. The trust will terminate
following a public offering of Holding Common Stock, at which time shares
or cash credited to each participant's account is to be distributed.
Payment, however, may be deferred if an event of default under the
Company's loan agreements or debt indentures has occurred or will occur as
a result of such payment. Until distribution, assets of the trust are
subject to the claims of creditors of Holding or the Company. Shares held
by the trust are voted by the trustee in accordance with the Company's
directions.
Directors' Fees and Other Arrangements
In the first half of 1993 each outside director was paid a fee of $5,000
per calendar quarter and in addition received a fee of $500 for each
meeting of the Board attended; in the last half each outside director was
paid a fee of $6,750 per calendar quarter and in addition received a fee of
$1,000 for each meeting of the Board attended. Effective with the third
quarter, an outside director is also paid $1,000 for attending a Committee
meeting. (Previously an outside director was paid $500 for attending a
Committee meeting not held on the day of a Board meeting.) The only
directors currently eligible for directors' fees are directors who are
neither employees of the Company or Kelso. They are Messrs. Mizushima,
Parsons, Quayle, and Rutledge. All directors are reimbursed for reasonable
expenses incurred in connection with attendance at any meetings. No
separate directors' fees are paid for attendance at meetings of Holding
that are held on the same day the Company's Board meets.
A Supplemental Compensation Plan for Outside Directors ("Supplemental
Compensation Plan") was adopted in June 1989. A Plan Account was establish-
ed for each participating director at that time consisting of units
equivalent to $50,000 of Holding common stock with each unit having a value
of $19 per share, the independently appraised value of the shares of
Holding as of December 31, 1988. For the purpose of providing a measure of
parity among the directors, the $50,000 amount was increased to $100,000
for participating directors who became Board Members after January 1, 1993,
with such amount converted into units for the account of such directors at
the rate of $42.96 per unit ($42.96 representing the independently
appraised value of the shares of Holding as of December 31, 1992). When a
participating director ceases to be a member of the Board, he or his
beneficiary will receive a cash payment equal to the number of units in his
Plan Account multiplied by the per-share value of Holding common stock
based on the then last year-end appraisal. If a participating director is
removed for cause, his entire interest in the Plan is forfeited.
Employee-directors and Messrs. Nickell and Schuchert do not participate in
this Plan.
Mr. Donley and Dr. Cyert, directors who retired in December 1993, each
received a payment of $113,053 pursuant to the Supplemental Compensation
Plan.
<PAGE>
<PAGE>
Corporate Officers Severance Plan and Other Employment or
Severance Arrangements
The Board of Directors approved a severance plan for executive officers
(the "Officers Severance Plan"), effective April 27, 1991. The Officers
Severance Plan provides that any participant whose employment is
involuntarily terminated by the Company without "Cause" (as defined in the
Officers Severance Plan) or who leaves the Company for "Good Reason" (as
defined in the Officers Severance Plan) shall be paid an amount equal to
the sum of two (three in the case of the Chief Executive Officer) times
such participant's annual base salary at the rate in effect at the time of
termination, a proration of the then Annual Incentive Plan target award
(described previously), and one (two in the case of the Chief Executive
Officer) times such target award. In addition, group life, accident, and
disability insurance coverages, as well as group medical coverage, will be
continued for up to 24 (36 in the case of the Chief Executive Officer)
months following such officer's termination. The Named Officers (other
than Mr. Smith, who retired in December 1993) are participants in this
Plan.
An agreement was entered into with H. Thompson Smith in December 1993
concerning the terms of his termination of employment and retirement.
Under that agreement he is entitled to receive his 1993 Annual Incentive
Plan award in the amount of $154,000 and will be entitled to receive the
same amount in March 1995. In addition, Mr. Smith is retained as a
consultant through 1995 at the rate of $29,583 per month. In the event of
Mr. Smith's death, the fees remaining through the end of 1995 are payable
in a lump sum to his spouse or estate. He is also entitled to receive
payments under the Company's Long-Term Incentive Compensation Plan for the
1992-1994 and 1993-1995 performance periods in accordance with its terms,
such awards to be prorated to December 31, 1993. Mr. Smith continues under
the Company's medical and life insurance programs through 1995.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the common stock, $.01 par value, of American Standard Inc., the only
voting stock of American Standard Inc., is owned by Holding. Set forth
below is the number of shares of Common Stock, par value $.01 per share, of
Holding, the only outstanding voting stock of Holding, beneficially owned as
of March 10, 1994, by each Director and nominee, each Named Executive
Officer, all Directors and executive officers of Holding as a group, and
each 5% holder.
<PAGE>
<PAGE>
Shares Percent
Name and Address Beneficially of
Title of Class of Beneficial Owner Owned Class
Holding common stock,
par value - Kelso ASI Partners, L.P.(a) 18,000,000 73%
$.01 per share ("ASI Partners")
Joseph S. Schuchert(a) 18,000,000(d) 73% (d)
Frank T. Nickell(a) 18,000,000(d) 73% (d)
George E. Matelich(a) 18,000,000(d) 73% (d)
Thomas R. Wall IV(a) 18,000,000(d) 73% (d)
Emmanuel A. Kampouris(b) 225,000 *
George H. Kerckhove(b) 113,000 *
Horst Hinrichs(b) 90,000 *
Fred A. Allardyce(b) 113,000 *
American-Standard Employee
Stock Ownership Plan(c) 4,267,710 17%
All current directors and
executive officers of
Holding and the Company
as a group 18,824,900(e) 77% (e)
* Less than one percent.
(a) The business address for such persons is c/o Kelso & Company, 350 Park
Avenue, New York, N.Y. 10022.
(b) Mr. Kampouris is Chairman, President and Chief Executive Officer and a
director of the Company and of Holding. Messrs. Hinrichs and
Kerckhove are Named Officers and directors of the Company and of
Holding, and Mr. Allardyce is a Named Officer of the Company and of
Holding.
(c) The business address for the ESOP is c/o American Standard Inc., 1114
Avenue of the Americas, New York, N.Y. 10036. At December 31, 1993,
3,548,609 Plan shares were allocated to executive officers of Holding
and the Company and other ESOP participants. The number of shares
shown for executive officers in the table above does not reflect shares
allocated to their accounts in the ESOP. Shares in the ESOP account are
voted by the ESOP trustee as directed by the plan board (the board
administering the trust which currently consists of executive officers
of the Company). However, participants may direct the vote of their
ESOP account shares in matters involving mergers, recapitalizations, or
dispositions of substantial assets. Until termination of employment a
participant cannot dispose of shares in his ESOP account. Shares
distributed to a participant on termination are subject to the
Company's right of first refusal. The shares in the Named Officers
ESOP accounts are as follows: Mr. Kampouris, 3,995 shares; Mr.
Kerckhove, 3,953 shares; Mr. Hinrichs, 4,266 shares; Mr. Allardyce,
4,246 shares; and Mr. Gandini, 2,225 shares. The shares in the ESOP
accounts for all executive officers total 69,218 shares.
<PAGE>
<PAGE>
The number of shares shown for executive officers in the table above
also does not reflect shares of Holding Common Stock issued as part
of the payouts under the LTIP and held for them in trust under a
trust agreement dated as of January 1, 1993. Shares in the trust are
voted by the trustee as directed by the Company. Until termination
of the trust, a beneficiary of the Trust cannot dispose of shares
credited to his account. Shares in the Named Officers' accounts in
the trust are as follows: Mr. Kampouris, 4,453 shares; Mr.
Kerckhove, 2,012 shares; Mr. Hinrichs, 1,787 shares; Mr. Allardyce,
1,224 shares; and Mr. Gandini, 1,176 shares. The shares in the trust
accounts for all executive officers total 28,620 shares.
Also not included above are 19,198 shares of ASI Holding common stock
held in a similar grantor's trust for the account of certain
executive officers. These were earned by them under an employee
incentive plan prior to their becoming officers.
(d) Messrs. Schuchert and Nickell, each a director of the Company and of
Holding, and Messrs. Matelich and Wall may be deemed to share
beneficial ownership of shares owned of record by ASI Partners by
virtue of their status as general partners of American Standard
Partners, the general partner of ASI Partners. Messrs. Schuchert,
Nickell, Matelich and Wall share investment and voting power with
respect to securities owned by ASI Partners. See "Certain
Transactions and Relationships." Dr. Cyert, who was a director of
Holding and the Company until December 1993, is a limited partner in
one of the Kelso partnerships that has invested in ASI Partners.
(e) Out of such 18,824,900 shares, 18,000,000 shares represent shares of
Common Stock owned by ASI Partners in which Messrs. Schuchert and
Nickell, each a director of Holding, may be deemed to share
beneficial ownership by virtue of their status as general partners of
American Standard Partners, the general partner of ASI Partners.
ITEM 13. CERTAIN TRANSACTIONS AND RELATIONSHIPS
Messrs. Schuchert and Nickell, directors of Holding and the Company, are
Chairman and President, respectively, of Kelso & Companies, Inc. (the
general partner of Kelso & Company, L.P.), and are general partners of
American Standard Partners, the general partner of Kelso ASI Partners.
Mr. Schuchert is also a member of the Management Development Committee
(the compensation committee) of the Company's Board of Directors.
The Company pays Kelso an annual fee of $2.75 million for providing
management consulting and advisory services, including those of Messrs.
Schuchert and Nickell. The fee is reduced depending on the number of
shares Kelso controls of Holding or the Company, with final termination
when Kelso's ownership control falls below 20 percent.
The Company also has entered into a transaction with Kelso Insurance
Services, Incorporated (an affiliate of Kelso) ("Kelso Insurance"), and
American Telephone and Telegraph Company ("AT&T") pursuant to which the
Company as well as other Kelso affiliated companies participates in a
telecommunications network under which AT&T provides communications
services to the group at a special lower tariff rate. In connection with
that transaction the Company has guaranteed a minimum annual usage by it
of $2 million for a period of five years commencing 1993. No fee was paid
by the Company to Kelso Insurance in connection with this transaction.
<PAGE>
<PAGE>
In August 1993 the Company purchased a limited partnership interest in
Kelso Investment Associates V, L.P. ("KIA V"), in exchange for its
commitment to make a capital contribution of $5 million to KIA V. KIA V
was formed to seek out business opportunities and invest primarily in
equity securities, leveraged buy-outs, and joint ventures. Kelso Partners
V, L.P. serves as the general partner of KIA V. The general partners of
Kelso Partners V, L.P., include Messrs. Schuchert and Nickell. Kelso &
Co., L.P. is the manager of KIA V and, as such, acts as investment adviser
of KIA V. The management fee relating to the interest held by the Company
has been waived.
The Company will invest in a Cayman Islands corporation, A-S China
Plumbing Products Limited ("ASPPL"), to be used for the establishment of
various joint ventures in the People's Republic of China. The Company
will have a 21% voting interest in ASPPL. Shares in ASPPL will also be
sold in a private placement to certain institutions and other investors,
including certain executive officers and employees of the Company and its
subsidiaries.
Mr. Mizushima, a director of the Company and of Holding, is President and
Chief Operating Officer of Daido Hoxan Inc., a Japanese corporation which
has an approximately 11 percent limited partnership interest in ASI
Partners. Daido Hoxan Inc. is the largest distributor of the Company's
plumbing products in Japan. Its transactions as distributor with the
Company and its subsidiaries in 1992, which were on customary terms and in
the ordinary course of business, were not material to either the Company
or Daido Hoxan Inc. The Company also entered into leasing transactions
with an affiliate of Daido Hoxan whereby it has leased certain machinery
and equipment on financial terms that were comparable to those available
from other leasing companies. The leasing transactions were not material
to either the Company or Daido Hoxan Inc.
Fidelity Management Trust Company ("Fidelity") is the owner of record of
the shares of Holding held by the ESOP, a 17% owner of Holding shares.
Fidelity was paid by the Company approximately $180,000 in 1993 for
services in connection with administering the Company's ESOP and Savings
Plan.
Mr. Nickell's father is an officer and owns more than 10 percent of AC
Corporation, a contracting company which purchases air conditioning
products from the Company's Trane Division. Such purchases in 1993 were on
customary terms and in the ordinary course of business and were not
material to either the Company or AC Corporation.
Management Investors Stockholders Agreement
Under the Stockholders Agreement, pursuant to which Management Investors
purchased shares of Holding common stock, Holding is obligated to
repurchase, subject to the limitations contained in the Company's lending
arrangements and debt instruments, such shares at certain fair market
prices in case of the death, disability, retirement, or termination of
employment of a Management Investor. Shares are paid for within the
constraints of the Company's lending arrangement and debt instruments, as
supplemented by a Schedule of Priorities established by Holding's Board of
Directors. The Named Officers (other than Mr. Gandini) and most of the
executive officers are Management Investors and parties to the
Stockholders Agreement.
<PAGE>
<PAGE>
PART IV
ITEM 14. CONSOLIDATED EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
(a) 1 and 2. Financial statements and financial statement schedules
The financial statements and schedules listed in the
accompanying index to financial statements are filed as part
of this annual report on Form 10-K.
3. Exhibits
The exhibits listed on the accompanying index to exhibits are
filed as part of this annual report on Form 10-K.
Included in the exhibits are the following management
contracts or compensatory plan arrangements required to be
filed as exhibits pursuant to Item 14(c) of Form 10-K
American Standard Inc. Long-Term Incentive Compensation Plan,
as amended
Trust Agreement for American Standard Inc. Long-Term Incentive
Compensation Plan
American Standard Inc. Annual Incentive Plan
American Standard Inc. Management Partner's Bonus Plan
with amendments
American Standard Inc. Executive Supplemental Retirement
Benefit Program
American Standard Employee Stock Ownership Plan with
amendments
Estate Preservation Plan with amendments
Corporate Officers Severance Plan
American Standard Inc. Supplemental Compensation Plan
for Outside Directors
ASI Holding Corporation 1989 Stock Purchase Loan Program
Summary of Terms of Unfunded Deferred Compensation Plan
Letter of Agreement with respect to H. Thompson Smith's
retirement and consulting services
(b) Reports on Form 8-K for the quarter ended December 31, 1993.
None
<PAGE>
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICAN STANDARD INC.
By /s/ Emmanuel A. Kampouris
(Emmanuel A. Kampouris)
(Chairman, President and
Chief Executive Officer)
March 30, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ Emmanuel A. Kampouris Director, Chairman and President March 30, 1994
(Emmanuel A. Kampouris) (Chief Executive Officer)
/s/ Fred A. Allardyce Vice President and Chief March 30, 1994
(Fred A. Allardyce) Financial Officer
/s/ G. Ronald Simon Vice President & Controller March 30, 1994
(G. Ronald Simon) (Principal Accounting Officer)
/s/ Horst Hinrichs Director March 30, 1994
(Horst Hinrichs)
/s/ George H. Kerckhove Director March 30, 1994
(George H. Kerckhove)
/s/ Shigeru Mizushima Director March 30, 1994
(Shigeru Mizushima)
/s/ Frank T. Nickell Director March 30, 1994
(Frank T. Nickell)
/s/ J. Danforth Quayle Director March 30, 1994
(J. Danforth Quayle)
/s/ Roger W. Parsons Director March 30, 1994
(Roger W. Parsons)
/s/ Joseph S. Schuchert Director March 30, 1994
(Joseph S. Schuchert)
/s/ John Rutledge Director March 30, 1994
(John Rutledge)
<PAGE>
<PAGE>
AMERICAN STANDARD INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
COVERED BY
REPORT OF INDEPENDENT AUDITORS
(Item 14 (a))
1993
Form 10-K
(Pages)
1. Financial Statements
Consolidated Balance Sheet at
December 31, 1993 and 1992 42
Years ended December 31, 1993, 1992 and 1991,
Consolidated Statement of Operations 41
Consolidated Statement of Stockholder's Equity (Deficit) 43
Consolidated Statement of Cash Flows 44-45
Notes to Consolidated Financial Statements 46-62
Segment Data 63
Segment data for capital expenditures, depreciation
and amortization 23-29
Quarterly Data (Unaudited) 64
Report of Independent Auditors 40
2. Financial statement schedules, years ended December 31, 1993,
1992 and 1991:
Report of Independent Auditors 84
V Facilities 85
VI Accumulated Depreciation of Facilities 86
VIII Reserves 87
IX Short-Term Borrowings 88
X Supplementary Income Statement Information 89
All other schedules have been omitted because the information is not
applicable or is not material or because the information required is
included in the financial statements or the notes thereto.
<PAGE>
<PAGE>
Report of Independent Auditors
Stockholders and Board of Directors
American Standard Inc.
We have audited the consolidated financial statements of American Standard Inc.
as of December 31, 1993 and 1992, and for each of the three years in the period
ended December 31, 1993, and have issued our report thereon dated March 14,
1994 (included elsewhere in this Annual Report on Form-10K). Our audits also
included the consolidated schedules listed in Item 14(a)2. These schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits.
In our opinion, the consolidated schedules referred to above, when considered
in relation to the basic financial statements taken as a whole, present
fairly, in all material respects, the information required to be stated
therein.
/s/ Ernst & Young
Ernst & Young
March 14, 1994
<PAGE>
<PAGE>
<TABLE>
SCHEDULE V - FACILITIES
Years ended December 31, 1993, 1992, and 1991
(Dollars in thousands)
<CAPTION>
Additions Foreign
Balance, and Currency Balance,
Beginning Transfers Translation Assets End of
Classification of Period at Cost Disposals Effects Acquired Period
1993:
<S> <C> <C> <C> <C> <C> <C>
Land $ 65,015 $ 498 $ (291) $ (881) $ 1,811 $ 66,152
Buildings 310,202 10,935 (855) (9,446) 3,793 314,629
Machinery & equipment 719,408 85,579 (37,988) (40,287) 13,224 739,936
Improvements in Progress 45,623 8,853 (292) (1,165) 1,338 54,357
$1,140,248 $ 105,865 $ (39,426) $ (51,779) $ 20,166 $1,175,074
=============================================================================================================
1992:
Land $ 63,761 $ 1,492 $ (411) $ (643) $ 816 65,015
Buildings 322,367 9,303 (15,005) (10,070) 3,607 310,202
Machinery & equipment 727,796 91,278 (54,226) (53,959) 8,519 719,408
Improvements in progress 45,218 865 (1,555) (4,774) 5,869 45,623
$1,159,142 $ 102,938 $ (71,197) $ (69,446) $ 18,811 $1,140,248
=============================================================================================================
1991:
Land $ 63,833 $ 462 $ (348) $ (186) $ - $ 63,761
Buildings 324,436 10,730 (10,041) (2,758) - 322,367
Machinery & equipment 697,318 102,305 (62,849) (8,978) - 727,796
Improvements in progress 60,001 (11,986) (2,399) (398) - 45,218
$1,145,588 $ 101,511 $ (75,637) $ (12,320) $ - $1,159,142
=============================================================================================================
<FN>
The cost and accumulated depreciation of facilities replaced or disposed of are removed from the respective
accounts, and resulting gains or losses are reflected in income.
Depreciation: Depreciation of facilities has been provided on the basis of estimated useful lives of the
facilities, which generally are as follows:
Buildings 40 years
Machinery and equipment 4-15 years
Automotive equipment 4-5 years
Additions include capital lease obligations of approximately $15 million in 1993, $16 million in 1992, and
$11 million in 1991.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE VI - ACCUMULATED DEPRECIATION OF FACILITIES
Years ended December 31, 1993, 1992, and 1991
(Dollars in thousands)
<CAPTION>
Foreign
Balance, Provisions Currency Balance,
Beginning Charged Translation Assets End of
Classification of Period to Income Disposals Effects Acquired Period
1993:
<S> <C> <C> <C> <C> <C> <C>
Buildings $ 59,082 $ 12,688 $ (341) $ (6,099) $ - $ 65,330
Machinery & equipment 248,355 93,353 (32,118) (20,369) - 289,221
$ 307,437 $ 106,041 $ (32,459) $(26,468) $ - $ 354,551
=============================================================================================================
1992:
Buildings $ 58,599 $ 16,286 $ (10,785) $ (5,018) $ - $ 59,082
Machinery & equipment 235,254 95,357 (49,937) (32,319) - 248,355
$ 293,853 $ 111,643 $ (60,722) $(37,337) $ - $ 307,437
=============================================================================================================
1991:
Buildings $ 52,928 $ 12,229 $ (5,364) $ (1,194) $ - $ 58,599
Machinery & equipment 190,029 94,924 (47,756) (1,943) - 235,254
$ 242,957 $ 107,153 $ (53,120) $ (3,137) $ - $ 293,853
=============================================================================================================
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE VIII - RESERVES
Years ended December 31, 1993, 1992, and 1991
(Dollars in thousands)
<CAPTION>
Foreign
Currency
Balance, Additions Trans- Balance,
Beginning Charged to Other lation End of
Description of Period Income Deductions Changes Effects Period
1993:
<S> <C> <C> <C> <C> <C> <C>
Reserve deducted from
assets:
Allowance for doubtful
accounts receivable $ 12,827 $ 10,118 $ (6,584)(A) $ - $ (695) $ 15,666
=========================================================================================================
Reserve for post-
retirement benefits $368,868 $ 48,827 $ (25,815)(B) $ 11,832(E) $ (16,674) $387,038
=========================================================================================================
1992:
Reserve deducted from
assets:
Allowance for doubtful
accounts receivable $ 14,667 $ 6,489 $ (7,262)(A) - $ (1,067) $ 12,827
=========================================================================================================
Reserve for post-
retirement benefits $357,878 $ 47,374 $ (24,495)(B) $ - $(11,889) $368,868
=========================================================================================================
1991:
Reserve deducted from
assets:
Allowance for doubtful
accounts receivable $ 16,283 $ 5,314 $ (4,863)(A) $(1,639)(C) $ (428) $ 14,667
=========================================================================================================
Reserve for post-
retirement benefits $305,215 $ 76,547(D) $ (22,510)(B) $ - $ (1,374) $357,878
=========================================================================================================
<FN>
The reserve for postretirement benefits excludes the activity for currently funded U.S. pension plans.
(A) Accounts charged off.
(B) Payments made during the year.
(C) Principally the effect of assets sold or held for sale.
(D) Includes $40 million cumulative effect of change in accounting method upon adoption of FAS 106.
(E) Includes $19 million increase in minimum pension liability offset by a $7 million reduction
resulting from curtailment of certain plans.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE IX - SHORT-TERM BORROWINGS
Years ended December 31, 1993, 1992, and 1991
(Dollars in millions)
<CAPTION>
Maximum Average
Balance Weighted Amount Amount Weighted
End Average at Outstanding Average
Category of Period Interest Rate Month End During Period Interest Rate
1993:
<S> <C> <C> <C> <C> <C>
Payable to banks $ 38 10.3% $160 $118 8.97%
1992:
Payable to banks $ 99 12.5% $119 $104 11.9%
1991:
Payable to banks $ 63 12.3% $167 $104 11.2%
<FN>
The weighted average interest rates for the period were computed by dividing the actual
interest expense for the period by average short-term borrowings for the period.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years ended December 31, 1993, 1992, and 1991
(Dollars in thousands)
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Maintenance and repairs $ 71,498 $ 80,392 $ 75,573
===================================================================
Advertising costs (including
cooperative advertising,
national publications,
merchandising, and sales
contests and promotions) $ 76,263 $ 77,098 $ 71,909
====================================================================
</TABLE>
<PAGE>
<PAGE>
AMERICAN STANDARD INC.
INDEX TO EXHIBITS
(Item 14(a)3 - Exhibits Required by Item 601
of Regulation S-K and Additional Exhibits)
(The File Number of American Standard Inc., the Registrant, and
for all Exhibits incorporated by reference is 1-470, except
those Exhibits incorporated by reference in filings made by ASI
Holding Corporation ("Holding") whose File Number is 33-23070)
(3) (i) Restated Certificate of Incorporation of American Standard
Inc. (the "Company"); previously filed as Exhibit (3)(i)
in the Company's Form l0-K for the fiscal year ended
December 31, 1988, and herein incorporated by reference.
(ii) Certificate of Designation, Preferences and Relative,
Participating, Optional and other Special Rights of
Preferred Stock and Qualifications, Limitations and
Restrictions thereof of Series A Preferred Stock.
(iii) By-laws of the Company; previously filed as Exhibit
(3)(ii) in the Company's Form l0-K for the fiscal year
ended December 31, 1988, and herein incorporated by
reference.
(4) (i) Indenture, dated as of November 1, 1986, between the
Company and Manufacturers Hanover Trust Company, Trustee,
including the form of 9-1/4% Sinking Fund Debenture Due
2016 issued pursuant thereto on December 9, 1986, in the
aggregate principal amount of $150,000,000; previously
filed as Exhibit (4)(iii) in the Company's Form l0-K for
the fiscal year ended December 31, 1986, and herein
incorporated by reference.
(ii) Instrument of Resignation, Appointment and Acceptance,
dated as of April 25, 1988 among the Company,
Manufacturers Hanover Trust Company (the "Resigning
Trustee") and Wilmington Trust Company (the "Successor
Trustee"), relating to resignation of the Resigning
Trustee and appointment of the Successor Trustee under the
Indenture referred to in Exhibit (4)(i) above; previously
filed as Exhibit 4(ii) in Registration Statement No.
33-64450 of the Company under the Securities Act of 1933,
as amended, and herein incorporated by reference.
<PAGE>
<PAGE>
INDEX TO EXHIBITS - (Continued)
(iii) Form of Indenture, dated as of July 1, 1988, between the
Company and Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as Trustee,
relating to the Company's 14-1/4% Subordinated Discount
Debentures due 2003; previously filed as Exhibit 4.3 in
Amendment No. 2 to Registration Statement No. 33-22126 of the
Company under the Securities Act of 1933, as amended, and
herein incorporated by reference.
(iv) Form of Debenture evidencing the 14-1/4% Subordinated Discount
Debentures due 2003 included as Exhibit A to the Form of
Indenture referred to in (4)(iii) above.
(v) Indenture dated as of May 15, 1992, between the Company and
First Trust National Association, Trustee, relating to the
Company's 10-7/8% Senior Notes due 1999, in the aggregate
principal amount of $150,000,000; previously filed as Exhibit
(4)(i) in the Company's Form 10-Q for the quarter ended June
30, 1992, and herein incorporated by reference.
(vi) Form of 10-7/8% Senior Notes due 1999 included as Exhibit A to
the Indenture described in (4)(v) above.
(vii) Indenture dated as of May 15, 1992, between the Company and
First Trust National Association, Trustee, relating to the
Company's 11-3/8% Senior Debentures due 2004, in the aggregate
principal amount of $250,000,000; previously filed as Exhibit
(4)(iii) in the Company's Form 10-Q for the quarter ended June
30, 1992, and herein incorporated by reference.
(viii) Form of 11-3/8% Senior Debentures due 2004 included as Exhibit
A to the Indenture described in (4)(vii) above.
(ix) Form of Indenture, dated as of June 1, 1993, between the
Company and United States Trust Company of New York, as
Trustee, relating to the Company's 9-7/8% Senior Subordinated
Notes Due 2001; previously filed as Exhibit 4(xxxi) in
Amendment No. 1 to Registration Statement No. 33-61130 of the
Company under the Securities Act of 1933, as amended, and
herein incorporated by reference.
(x) Form of Note evidencing the 9-7/8% Senior Subordinated Notes
Due 2001 included as Exhibit A to the Form of Indenture
referred to in 4(ix) above.
<PAGE>
<PAGE>
INDEX TO EXHIBITS - (Continued)
(xi) Form of Indenture, dated as of June 1, 1993, between the
Company and United States Trust Company of New York, as
Trustee, relating to the Company's 10-1/2% Senior Subordinated
Discount Debentures Due 2005; previously filed as Exhibit
(4)(xxxiii) in Amendment No. 1 to Registration Statement No.
33-61130 of the Company under the Securities Act of 1933, as
amended, and herein incorporated by reference.
(xii) Form of Debenture evidencing the 10-1/2% Senior Subordinated
Discount Debentures Due 2005 included as Exhibit A to the Form
of Indenture referred to in (4)(xi) above.
(xiii) Form of Indenture, dated as of October 25, 1990, as amended
and restated as of June 15, 1993, between the Company and
Shawmut Bank, N.A., as Trustee, relating to Company's 12-3/4%
Junior Subordinated Debentures Due 2003; previously filed as
Exhibit (4)(xx) in Amendment No. 2 to Registration Statement
No. 33-64450 of the Company under the Securities Act of 1933,
as amended, and herein incorporated by reference.
(xiv) Form of Indenture evidencing the 12-3/4% Junior Subordinated
Debentures Due 2003 included as Exhibit A to the Form of
Indenture referred to in (4)(xiii) above.
(xv) Assignment and Amendment Agreement, dated as of June 1, 1993,
among the Company, Holding, certain subsidiaries of the
Company, Bankers Trust Company, as agent under the 1988 Credit
Agreement, the financial institutions named as Lenders in the
1988 Credit Agreement and certain additional Lenders and
Chemical Bank, as Administrative Agent and Arranger;
previously filed as Exhibit (4)(xiii) in Amendment No. 1 to
Registration Statement No. 33-64450 of the Company under the
Securities Act of 1933, as amended, and herein incorporated by
reference.
(xvi) Credit Agreement, dated as of June 1, 1993, among the Company,
Holding, certain subsidiaries of the Company and the lending
institutions listed therein, Chemical Bank, as Administrative
Agent and Arranger; Bankers Trust Company, The Bank of Nova
Scotia, The Chase Manhattan Bank, N.A., Deutsche Bank AG, The
Long-Term Credit Bank of Japan, Ltd., New York Branch, and
NationsBank of North Carolina, N.A., as Managing Agents, and
Banque Paribas, Citibank, N.A., and Compagnie Financiere de
CIC et de l'Union Europeenne, New York Branch, as Co-Agents;
previously filed as Exhibit (4)(xiv) in Amendment No. 1 to
Registration Statement No. 33-64450 of the Company under the
Securities Act of 1933, as amended, and herein incorporated by
reference.
(xvii) First Amendment, Consent and Waiver, dated as of February 10,
1994, to the Credit Agreement referred to in (4)(xvi) above.
<PAGE>
<PAGE>
INDEX TO EXHIBITS - (Continued)
(xviii) Stockholders Agreement, dated as of July 7, 1988, as
amended as of August 1, 1988, among Holding, Kelso ASI
Partners, L.P., and the Management Stockholders named
therein; previously filed as Exhibit 4.19 in Amendment No.
2 in the Registration Statement No. 33-23070 of Holding
under the Securities Act of 1933, as amended, and herein
incorporated by reference.
(xix) Amendment to Section 2.1 of the Stockholders Agreement
referred to in paragraph (4)(xviii) above, effective as of
January 1, 1991; previously filed as Exhibit (4)(xxvii) by
Holding in its Form 10-K for the year ended December 31,
1992, and herein incorporated by reference.
(xx) Supplement and Amendment dated as of September 4, 1991 to
the Stockholders Agreement, dated as of July 7, 1988, as
amended, referred to in paragraph (4)(xviii) above;
previously filed as Exhibit (4)(ii) by Holding in its Form
10-Q for the quarter ended September 30, 1991, and herein
incorporated by reference.
(xxi) Amended Section 6.1 of the Stockholders Agreement referred
to in paragraph (4)(xviii) above, effective as of September
2, 1993; copy of amended Section is being filed as Exhibit
(4)(xvii) by Holding in its Form l0-K for the year ended
December 31, 1993, concurrently with the filing of the
Company's Form 10-K for the same year, and herein
incorporated by reference.
(xxii) Revised Schedule of Priorities effective as of September 5,
1991, as adopted by the Board of Directors of Holding,
pursuant to the Stockholders Agreement referred to in
paragraph (4)(xviii) above; previously filed as Exhibit
(4)(iii) by Holding in its Form l0-Q for the quarter ended
September 30, 1991 and herein incorporated by reference.
(10) (i) Agreement and Plan of Merger, dated as of March 16, 1988,
among the Company, ASI Acquisition Company and Holding and
Offer Letter, dated March 16, 1988, between the Company and
Kelso & Company, L.P.; previously filed as Exhibit 2 to the
Company's Schedule 14D-9 filed March 21, 1988, in
connection with the offer for all the shares of the
Company's Common Stock by a corporation formed by Kelso &
Company, L.P., and herein incorporated by reference.
<PAGE>
<PAGE>
INDEX TO EXHIBITS - (Continued)
(ii) Amendment, dated June 3, 1988 to Agreement and Plan of
Merger referred to in (l0)(i) above; previously filed as
Exhibit 2.50 in Amendment No. 1 to the Registration
Statement No. 33-22126 of the Company under the Securities
Act of 1933, as amended, and herein incorporated by
reference.
(iii) American Standard Inc. Long-Term Incentive Compensation
Plan, as amended through February 6, 1992; previously filed
as Exhibit (10)(iv) in the Company's Form 10-K for the
fiscal year ended December 31, 1992, and herein
incorporated by reference.
(iv) Trust Agreement for American Standard Inc. Long-Term
Incentive Compensation Plan.
(v) American Standard Inc. Annual Incentive Plan; previously
filed as Exhibit (l0)(vii) in the Company's Form l0-K for
the fiscal year ended December 31, 1988, and herein
incorporated by reference.
(vi) American Standard Inc. Management Partners' Bonus Plan
effective as of July 7, 1988; previously filed as Exhibit
(l0)(i) in the Company's Form l0-Q for the quarter ended
September 30, 1988, and herein incorporated by reference;
amendments to Plan adopted on June 7, 1990, previously
filed as Exhibit (4)(ii) in the Company's Form l0-Q for the
quarter ended June 30, 1990, and herein incorporated by
reference.
(vii) American Standard Inc. Executive Supplemental Retirement
Benefit Program, as restated to include all amendments
through December 31, 1993.
(viii) Stock Purchase Agreement, dated April 27, 1988, between ASI
Acquisition Company and General Electric Capital
Corporation (without schedules); previously filed as
Exhibit 2.4 in Registration Statement No. 33-22126 of the
Company under the Securities Act of 1933, as amended, and
herein incorporated by reference.
<PAGE>
<PAGE>
INDEX TO EXHIBITS - (Continued)
(ix) Amendment, dated June 3, 1988, to Stock Purchase Agreement
referred to in (l0)(viii) above; previously filed as
Exhibit 2.6 in Amendment No. 1 in Registration Statement
No. 33-22126 of the Company under the Securities Act of
1933, as amended, and herein incorporated by reference.
(x) Form of Composite American-Standard Employee Stock
Ownership Plan incorporating amendments through December
3, 1992; previously filed as Exhibit (10)(x) in
Registration Statement No. 33-61130 of the Company under
the Securities Act of 1933, as amended, and herein
incorporated by reference.
(xi) American-Standard Employee Stock Ownership Trust
Agreement, dated as of December 1, 1991, between ASI
Holding Corporation and Fidelity Management Trust Company
(as successor to Citizens & Southern Trust Company
(Georgia), N.A.), as trustee; previously filed as Exhibit
(10)(xiv) in the Company's Form 10-K for the year ended
December 31, 1991, and herein incorporated by reference.
(xii) Consulting Agreement made July 1, 1988, with Kelso &
Company, L.P. concerning general management and financial
consulting services to the Company; previously filed as
Exhibit (l0)(xviii) in the Company's Form l0-K for the
fiscal year ended December 31, 1988, and herein
incorporated by reference.
(xiii) American Standard Inc. Supplemental Compensation Plan for
Outside Directors, as amended through September 1993.
(xiv) ASI Holding Corporation 1989 Stock Purchase Loan Program;
previously filed as Exhibit l0(i) in Holding's Form l0-Q
for the quarter ended September 30, 1989, and herein
incorporated by reference.
(xv) Corporate Officers Severance Plan adopted in December,
1990, effective April 27, 1991; previously filed as
Exhibit (l0)(xix) in the Company's Form l0-K for the
fiscal year ended December 31, 1990, and herein
incorporated by reference.
(xvi) Estate Preservation Plan adopted in December, 1990;
previously filed as Exhibit (l0)(xx) in the Company's Form
l0-K for the fiscal year ended December 31, 1990, and
herein incorporated by reference.
(xvii) Amendment adopted in March 1993 to Estate Preservation
Plan referred to in (10)(xvi) above.
<PAGE>
<PAGE>
(xviii) Summary of terms of Unfunded Deferred Compensation Plan,
adopted December 2, 1993.)
(xix) Retirement/Consulting Agreement, dated December 28, 1993,
between H. Thompson Smith and the Company.
(21) Listing of the Company's subsidiaries.
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS THEREOF
OF
SERIES A PREFERRED STOCK
AMERICAN STANDARD INC.
Pursuant to Section 151
of the General Corporation Law of the State of Delaware
The following resolution has been duly adopted by the
Board of Directors (such Board, including any committee thereof
duly authorized to act on behalf of such Board, herein referred
to as the "Board") of American Standard Inc., a Delaware
corporation (the "Corporation"), pursuant to the provisions of
Section 151 of the General Corporation Law of the State of
Delaware, which resolution remains in full force and effect as
of the date hereof:
RESOLVED that, pursuant to the authority expressly
granted to and vested in the Board by the provisions of the
Restated Certificate of Incorporation of the Corporation (the
"Restated Certificate of Incorporation") to fix by resolution or
resolutions the voting rights, if any, of each series of
Preferred Stock of the Corporation and the designations,
preferences and relative, participating, optional and other
special rights and qualifications, limitations and restrictions
thereof, the Board hereby authorizes and creates a series of
Preferred Stock on the terms and with the provisions (in
addition to those set forth in the Restated Certificate of
Incorporation of the Corporation that are applicable to all
Preferred Stock) set forth in Annex A attached hereto.
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<PAGE>
IN WITNESS WHEREOF, said American Standard Inc. has caused
this Certificate to be signed by Frederick W. Jaqua, its Vice
President, and attested by Israel A. Stein, its Assistant
Secretary, this 24th day of June, 1993.
AMERICAN STANDARD INC.
By:/s/ Frederick W. Jaqua
Vice President
ATTEST:
By:/s/ Israel A. Stein
Assistant Secretary
<PAGE>
<PAGE>
ANNEX A
Series A Preferred Stock. The second series of Preferred
Stock shall have the number of shares, designation, powers,
preferences and rights, and the qualifications, limitations or
restrictions thereof, specified below:
1. Designation. The designation of the second series of
Preferred Stock shall be "Series A Preferred Stock, $.01 par
value per share" (the "Series A Preferred Stock"). The maximum
number of shares of the Series A Preferred Stock shall be
10,000.
2. Rank. The Series A Preferred Stock shall, with respect
to dividend rights and rights on liquidation, winding up and
dissolution, rank prior to all classes of common stock,
including, without limitation, the Common Stock, par value $.01
per share. All equity securities of the Corporation to which
the Series A Preferred Stock ranks prior are collectively
referred to in this clause as the "Junior Securities". So long
as any shares of Exchangeable Preferred Stock are outstanding,
such shares with respect to either dividend rights or rights of
liquidation, winding up or dissolution shall rank prior to the
Series A Preferred Stock. The Corporation may authorize, create
or issue any class or series of stock which ranks prior to, or
on a parity with, the Series A Preferred Stock with respect to
either dividend rights or rights on liquidation, winding up or
dissolution and may increase the authorized number of shares of
Series A Preferred Stock.
3. Dividends. (a) The holders of the shares of the
Preferred Stock shall by entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally
available for the payment of dividends, cash dividends at the
rate of $.24 per share for each calendar quarter and no more.
Such dividends shall be payable on the last business day of each
of March, June, September and December (each of such dates being
a "dividend payment date"), commencing with the first such
dividend payment date following the issuance of the Series A
Preferred Stock, in preference to dividends on the Junior
Securities. Such dividend shall be paid to the holders of
record at the close of business on the date specified by the
Board of Directors of the Corporation at the time such dividend
is declared; provided, however, that such date shall not be more
than 60 days nor less than 10 days prior to the respective
dividend payment date. Dividends payable on shares of the
Series A Preferred Stock shall be fully cumulative and shall
accrue (whether or not earned or declared) from the date of
original issue of such shares.
(b) Notwithstanding anything contained herein to the
contrary, no dividends shall be declared by the Board of
Directors, paid or set apart for payment by the Corporation at
such time if the terms and provisions of any debt instruments or
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<PAGE>
agreement of the Corporation, including, but not limited to, any
credit agreement or debt indentures outstanding on the date
hereof, prohibit such declaration, payment or setting apart for
payment or provide that such declaration, payment or setting
apart for payment would constitute a breach thereof or a default
thereunder.
(c) The Corporation shall not declare, pay or set apart
for payment any dividend on any of the Junior Securities or make
any distribution in respect thereof, either directly or
indirectly, and whether in cash, obligations or shares of the
Corporation or other property (other than distributions or
dividends in Junior Securities) and shall not permit any
corporation or other entity directly or indirectly controlled by
the Corporation to do so unless prior to or concurrently with
such declaration, as the case may be, all accrued and unpaid
dividends, if any, on shares of the Series A Preferred Stock not
paid on the dates provided for in paragraph 3(a) hereof shall
have been or be paid; provided, however, that without limitation
of the foregoing, the Corporation shall not effect any such
declaration or payment, as the case may be, with respect to the
Junior Securities, unless on the immediately preceding dividend
payment date the Corporation has declared and paid or set aside
for payment one full quarterly cash dividend on the Series A
Preferred Stock.
(d) Subject to the foregoing provisions of this
paragraph 3 and to the provisions of paragraph 4 below, the Board
of Directors may declare and the Corporation may pay or set apart
for payment dividends and other distributions on any of the
Junior Securities, and may purchase or otherwise redeem any of
the Junior Securities or any warrants, rights or options
exercisable for or convertible into any of the Junior Securities,
and the holders of the shares of the Series A Preferred Stock
shall not be entitled to share therein.
4. Liquidation Preference. (a) In the event of any
voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Corporation, the holders of the shares of
Series A Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to
$11.50 for each share outstanding, plus an amount in cash equal
to all accrued but unpaid dividends (whether or not earned or
declared) thereon to the date fixed for liquidation, dissolution
or winding up before any payment shall be made or any assets
distributed to the holders of any of the Junior Securities.
Except as provided in the preceding sentence, holders of Series A
Preferred Stock shall not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the affairs of
the Corporation. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable to the
holders of
<PAGE>
<PAGE>
outstanding shares of the Series A Series A Preferred Stock, then
the holders of all such shares shall share ratably in such
distribution of assets in accordance with the amount which would
be payable of such distribution if the amounts to which the
holders of outstanding shares of Series A Preferred Stock are
entitled were paid in full.
(b) For the purpose of this paragraph 4, neither the
voluntary sale, lease, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all
or substantially all the property or assets of the Corporation
nor the consolidation or merger of the Corporation with one or
more other corporations shall be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, unless such
voluntary sale, lease, conveyance, exchange or transfer shall be
in connection with a plan of liquidation, dissolution or winding
up of the Corporation.
5. Redemption. (a) To the extent the Corporation shall have
funds legally available for such redemption, the Corporation may
redeem at its option, at any time and from time to time, the
Series A Preferred Stock, in whole or in part, at a redemption
price of $11.50 per share, plus an amount in cash equal to all
accrued and unpaid dividends (whether or not earned or declared)
thereon to the date fixed for redemption, without interest.
(b) Shares of Series A Preferred Stock which have been
issued and reacquired in any manner, including shares purchased
or redeemed or exchanged, shall (upon compliance with any
applicable provisions of the laws of the State of Delaware) have
the status of authorized and unissued shares of the class of
Preferred Stock undesignated as to series and may be redesignated
and reissued as part of any series of the Preferred Stock.
6. Procedure for Redemption. (a) In the event that fewer
than all the outstanding shares of Series A Preferred Stock are
to be redeemed, the number of shares to be redeemed shall be
determined, by the Board of Directors and the shares to be
redeemed shall be selected by lot or pro rata as may be
determined by the Board of Directors, except that in any
redemption of fewer than all the outstanding shares of Series A
Preferred Stock the Corporation may first redeem all shares held
by any holders of a number of shares not to exceed 100 as may be
specified by the Corporation.
(b) In the event the Corporation shall redeem shares of
Series A Preferred Stock, notice of such redemption shall be
given by first class mail, postage prepaid, and mailed not less
than 30 days nor more than 60 days prior to the redemption date,
to each holder of record of the shares to be redeemed at such
holder's address as the same appears on the stock register of the
Corporation; provided, however, that no failure to give such
notice nor any defect therein shall affect the validity of the
<PAGE>
<PAGE>
proceeding for the redemption of any shares of Series A Preferred
Stock to be redeemed except as to the holder to whom the
Corporation has failed to give said notice or except as to the
holder whose notice was defective. Each such notice shall state:
(a) the redemption date; (b) the number of shares of Series A
Preferred Stock to be redeemed; and, if less than all the shares
held by such holder are to be redeemed, the number of such shares
to be redeemed; (c) the redemption price; (d) the place or
places where certificates for such shares are to be surrendered
for payment of the redemption price; and (e) that dividends on
the shares to be redeemed will cease to accrue on such redemption
date.
(c) Notice having been mailed as aforesaid and
provided that on or before the redemption date specified in such
notice and all funds necessary for such redemption shall have
been set aside by the Corporation, separate and apart from its
other funds with a trust company (having capital and surplus of
not less than $25,000,000) in the Borough of Manhattan, City of
New York, in trust for the pro rata benefit of the holders of the
shares so called for redemption, so as to be and to continue to
be available therefor, then, from and after the redemption date
shares of Series A Preferred Stock so called for redemption shall
cease to accrue, and said shares shall no longer be deemed to be
outstanding for any purpose and shall not have the status of
shares of Series A Preferred Stock, and all rights of the holders
thereof as stockholders of the Corporation (except the right to
receive from the Corporation the redemption price without
interest and any required cash payments without interest upon
surrender of the certificates therefor) shall cease. Upon
surrender in accordance with said notice of the certificates for
any shares so redeemed, such shares shall be redeemed by the
Corporation at the redemption price. In case fewer than all the
shares represented by any such certificate are redeemed, a new
certificate or certificates shall be issued representing the
unredeemed shares without cost to the holder thereof. Any funds
deposited and unclaimed at the end of one year from the date
fixed for redemption shall be repaid to the Corporation upon its
request, after which repayment the holders of shares called for
redemption shall look only to the Corporation for payment.
7. Voting Rights. The holders of record of shares of
Series A Preferred Stock shall not be entitled to any voting
rights except as otherwise provided by law.
<PAGE>
FIRST AMENDMENT, CONSENT AND WAIVER
dated as of February 10, 1994, to the CREDIT
AGREEMENT dated as of June 1, 1993 (the
"Credit Agreement"), among ASI HOLDING
CORPORATION, a Delaware corporation
("Holding"); AMERICAN STANDARD INC., a
Delaware corporation ("ASI"); the
Subsidiaries of ASI listed in Schedule I
thereto (the "Subsidiary Borrowers" and,
together with ASI, the "Borrowers"); the
financial institutions listed in Schedule II
thereto and their assignees from time to time
(the "Lenders"); CHEMICAL BANK, a New York
banking corporation, as administrative agent
and arranger for the Lenders (in such
capacity, the "Administrative Agent");
BANKERS TRUST COMPANY, THE BANK OF NOVA
SCOTIA, THE CHASE MANHATTAN BANK, N.A.,
DEUTSCHE BANK AG, THE LONG-TERM CREDIT BANK
OF JAPAN, LTD., NEW YORK BRANCH, and
NATIONSBANK OF NORTH CAROLINA, N.A., as
Managing Agents (the "Managing Agents"); and
BANQUE PARIBAS, CITIBANK, N.A., and COMPAGNIE
FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE-NEW YORK BRANCH, as Co-Agents (the
"Co-Agents" and, together with the Managing
Agents and the Administrative Agent, the
"Agents").
A. The parties hereto have agreed, subject to the
terms and conditions hereof, to amend the Credit Agreement
as provided herein.
B. The Required Lenders have agreed, subject to
the terms and conditions hereof, to grant a waiver under,
and consent to the consummation of certain transactions
governed by, the Credit Agreement as provided herein.
C. Capitalized terms used and not otherwise de-
fined herein shall have the meanings assigned to such terms
in the Credit Agreement as amended by this First Amendment,
Consent and Waiver (the Credit Agreement, as amended by, and
together with, this First Amendment, Consent and Waiver, and
as hereinafter amended, modified, extended or restated from
time to time, being called the "Amended Credit Agreement").
<PAGE>
<PAGE>
Accordingly, the parties hereto hereby agree as
follows:
SECTION 1.01. Amendments to Credit Agreement.
The Credit Agreement is hereby amended as follows:
(a) Section 1.01 of the Credit Agreement is amended by
adding the following definitions:
"Heatcraft Notes" shall mean promissory notes of
Heatcraft Technologies Inc. in an aggregate principal
amount of $34,500,000 contributed to the SCI/Heatcraft
Joint Venture and distributed by such Joint Venture to
SCI.
"Hua Mei" shall mean Hua Mei Sanitary Ware Company
Ltd., a subsidiary of ASI organized in the Peoples
Republic of China.
"PRC Holding Company" shall mean a holding company
organized by ASI in the Cayman Islands as a vehicle for
various proposed joint ventures in the Peoples Republic
of China.
"SCI" shall mean Standard Compressors Inc., a
Delaware corporation and a wholly owned subsidiary of
ASI.
"SCI/Heatcraft Joint Venture" shall mean a
Delaware partnership formed by SCI and Heatcraft
Technologies Inc. and owned equally at the time of its
formation by such corporations.
(b) The definition of "Capital Expenditures" in
Section 1.01 of the Credit Agreement is amended by
inserting, immediately before the period at the end of such
definition, the following provisos:
"; provided further that notwithstanding anything
herein to the contrary, Capital Expenditures shall not
include (A) the contribution by ASI of its 67.5%
interest in Hua Mei to the PRC Holding Company, or the
reinvestment by ASI in the PRC Holding Company of any
fees or royalties received in connection with the
establishment and activities of the PRC Holding Company
or joint ventures in which the PRC Holding Company
participates or (B) the contribution by ASI and SCI of
any interest in machinery, equipment, inventory and
<PAGE>
<PAGE>
related intangible assets with an aggregate book value on
the books of ASI not in excess of $8,000,000 to the
SCI/Heatcraft Joint Venture; and provided further that
beginning January 1, 1994, any portion of Capital
Expenditures described in clauses (ii) and (iii) above
accrued as a liability shall not be included as Capital
Expenditures for purposes of calculating Free Cash Flow of
ASI under Section 6.13 until such liability is paid in
cash."
(c) The definition of "Subsidiary" in Section
1.01 of the Credit Agreement is amended by inserting,
immediately before the period at the end of the first
sentence of such definition, the following proviso:
"; provided that the PRC Holding Company shall not be
deemed a subsidiary of any Borrower."
(d) Section 2.06 of the Credit Agreement is
amended by inserting after the phrase "to the order of such
Lender" wherever it appears in such Section the phrase "(or,
if such Lender shall so request, to such Lender or
registered assigns)", and by adding the following new
paragraph (h):
"(h) Notwithstanding any other provision of this
Agreement, in the event any Lender shall request and
receive a Note payable to such Lender and its
registered assigns, the interests represented by that
Note shall at all times (including after any assignment
of all or part of such interests pursuant to Section
10.04) be represented by one or more Notes payable to
the payee named therein or its registered assigns."
(e) The second sentence of Section 2.20(c) is
amended by the insertion of the words "(or, if such
Swingline Lender shall so request, to such Swingline Lender
or registered assigns)" at the end of such sentence.
(f) Clause (B) of paragraph (v) of Section 6.02
of the Credit Agreement is amended by deleting such clause
and substituting therefor the following clause:
"(B) Subsidiaries of ASI may sell or discount
receivables in financing transactions customary in such
jurisdiction, entered into in the ordinary course of
business and consistent with the past practices of such
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<PAGE>
Subsidiaries to persons other than Affiliates; provided that
the aggregate book value of the receivables so sold during
any fiscal year of ASI (other than by Subsidiaries organized
and doing business in France, Italy and Spain) shall not
exceed $2,000,000 or the equivalent in one or more foreign
currencies; and"
(g) Sections 6.11, 6.12 and 6.13 of the Credit
Agreement are amended as of December 31, 1993, to read as
follows:
"SECTION 6.11. Consolidated EBITDA. Permit the
Consolidated EBITDA of ASI for the period beginning on
July 1, 1993, and ending on any of the dates set forth
below (taken as a single accounting period) to be less
than the amount set forth opposite such date below:
Date Amount
September 30, 1993 $120,000,000
December 31, 1993 $185,000,000
March 31, 1994 $250,000,000
June 30, 1994 $360,000,000
September 30, 1994 $470,000,000
December 31, 1994 $555,000,000
March 31, 1995 $630,000,000
June 30, 1995 $750,000,000
September 30, 1995 $925,000,000
December 31, 1995 $1,045,000,000
March 31, 1996 $1,125,000,000
June 30, 1996 $1,255,000,000
September 30, 1996 $1,440,000,000
December 31, 1996 $1,575,000,000
March 31, 1997 $1,660,000,000
<PAGE>
<PAGE>
June 30, 1997 $1,795,000,000
September 30, 1997 $1,990,000,000
December 31, 1997 $2,125,000,000
March 31, 1998 $2,210,000,000
June 30, 1998 $2,355,000,000
September 30, 1998 $2,555,000,000
December 31, 1998 $2,700,000,000
March 31, 1999 $2,790,000,000
June 30, 1999 $2,940,000,000
September 30, 1999 $3,150,000,000
December 31, 1999 $3,300,000,000
March 31, 2000 $3,390,000,000
June 30, 2000 $3,540,000,000
September 30, 2000 $3,750,000,000
December 31, 2000 $3,900,000,000
SECTION 6.12. Consolidated Senior Debt to
Consolidated Capital Funds Ratio. Permit the ratio of
(i) Consolidated Senior Debt of ASI at any time during
the fiscal quarter ended on any of the dates indicated
below to (ii) Consolidated Capital Funds of ASI at such
time to exceed the ratio indicated with respect to such
date.
Date Ratio
September 30, 1993 1.60:1.00
December 31, 1993 1.60:1.00
1994: Last Day of First 1.70:1.00
Fiscal Quarter of ASI
Last Day of Second 1.70:1.00
Fiscal Quarter of ASI
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<PAGE>
Last Day of Third 1.50:1.00
Fiscal Quarter of ASI
Last Day of Fourth 1.50:1.00
Fiscal Quarter of ASI
1995: Last Day of First 1.50:1.00
Fiscal Quarter of ASI
Last Day of Second 1.40:1.00
Fiscal Quarter of ASI
Last Day of Third 1.30:1.00
Fiscal Quarter of ASI
Last Day of Fourth 1.25:1.00
Fiscal Quarter of ASI
1996: Last Day of First 1.25:1.00
Fiscal Quarter of ASI
Last Day of Second 1.20:1.00
Fiscal Quarter of ASI
Last Day of Third 1.10:1.00
Fiscal Quarter of ASI
Last Day of Fourth 1.00:1.00
Fiscal Quarter of ASI
1997: Last Day of Each 0.80:1.00
Fiscal Quarter of ASI
1998: Last Day of Each 0.70:1.00
Fiscal Quarter of ASI
1999: Last Day of Each 0.60:1.00
Fiscal Quarter of ASI
2000: Last Day of Each 0.60:1.00
Fiscal Quarter of ASI
SECTION 6.13. Interest Coverage Ratio. Permit
the ratio of (i) Free Cash Flow of ASI to (ii)
Consolidated Cash Fixed Charges of ASI measured on each
of the measuring dates set forth below, in each case
for the period indicated with respect to such measuring
dates, to be less than the ratio indicated below for
such period:
Measuring Date Period Ratio
September 30, 1993 July 1, 1993 to
Measuring Date 1.60:1.00
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<PAGE>
December 31, 1993 July 1, 1993 to
Measuring Date 1.20:1.00
March 31, 1994 July 1, 1993 to
Measuring Date 1.20:1.00
June 30, 1994 Twelve Months Ended
on Measuring Date 1.35:1.00
September 30, 1994 Twelve Months Ended
on Measuring Date 1.35:1.00
December 31, 1994 Twelve Months Ended
on Measuring Date 1.55:1.00
March 31, 1995 Twelve Months Ended
on Measuring Date 1.55:1.00
June 30, 1995 Twelve Months Ended
on Measuring Date 1.65:1.00
September 30, 1995 Twelve Months Ended
on Measuring Date 1.75:1.00
December 31, 1995 Twelve Months Ended
on Measuring Date1.90:1.00
March 31, 1996 Twelve Months Ended
on Measuring Date 1.90:1.00
June 30, 1996 Twelve Months Ended
on Measuring Date 1.95:1.00
September 30, 1996 Twelve Months Ended
on Measuring Date 2.00:1.00
December 31, 1996 Twelve Months Ended
on Measuring Date 2.10:1.00
March 31, 1997 Twelve Months Ended
on Measuring Date 2.10:1.00
June 30, 1997 Twelve Months Ended
on Measuring Date 2.15:1.00
September 30, 1997 Twelve Months Ended
on Measuring Date 2.15:1.00
December 31, 1997 Twelve Months Ended
on Measuring Date 2.20:1.00
1998: Last Day of Twelve Months Ended
Each Fiscal on Measuring Date 2.20:1.00
Quarter of
ASI
1999: Last Day of Twelve Months Ended
Each Fiscal on Measuring Date 2.20:1.00
Quarter of
ASI
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<PAGE>
2000: Last Day of Twelve Months Ended
Each Fiscal on Measuring Date 2.20:1.00
Quarter of
ASI
(h) The second sentence of Section
10.04(b) of the Credit Agreement is amended by the insertion
of the following phrase immediately after the words
"otherwise agree" and before the comma preceding clause (A)
thereof:
"to an earlier date, which earlier
date shall not precede the date of such acceptance and
recording".
(i) Section 10.04(d) of the Credit
Agreement is amended by the insertion of the phrase ",
acting for this purpose as an agent of the Borrower,"
immediately after the words "Administrative Agent" in the
first sentence thereof, the replacement of the second
sentence thereof with the following:
"The entries in the Register shall
be conclusive and the Borrowers, the Administrative Agent
and the Lenders shall treat each person whose name is
recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary."
and the insertion of the words "and recorded in the
Register" at the end of the third sentence thereof.
(j) The second and third sentences
of Section 10.04(e) of the Credit Agreement are replaced in
their entirety so as to read as follows:
"No assignment shall be effective unless it has been
recorded in the Register as provided in this paragraph
(e). Within five Business Days after receipt of
notice, (i) the Borrowers, at their own expense, shall
execute and deliver to the Administrative Agent new
Notes payable to the order of such assignee (or, if
such assignee shall so request, to such assignee or
registered assigns) representing Loans made
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<PAGE>
pursuant to the Commitments assumed by it or Term Loans
acquired by it, as the case may be, pursuant to such
Assignment and Acceptance and (ii) the assigning
Lender, if it shall cease to be a party hereto as
provided in paragraph (a) above, shall deliver the
Notes held by it to ASI for cancellation. The new
Notes delivered to such assignee shall be dated the
date of the original Notes issued hereunder and shall
otherwise be in substantially the form of the
appropriate Exhibit or Exhibits hereto."
(k) The first sentence of each of Exhibit B-1,
Exhibit B-2, Exhibit B-3, Exhibit B-4, Exhibit B-5 and
Exhibit B-6 of the Credit Agreement is amended by deleting
the words "the order of [Name of Lender]" and substituting
therefor the following:
"[the order of] [Name of Lender] [or registered
assigns]".
SECTION 1.02. Consents and Agreements. (a) ASI
represents to the Lenders that the shares of Wabco
Westinghouse S.A., Ideal Standard S.A. and Societe Trane
(collectively, the "French Subsidiaries") owned by the Dutch
Borrower at the time the Credit Agreement was executed have
been contributed to Wabco Standard French Holdings SNC, a
newly formed French general partnership (the "French Holding
Company") of which the Dutch Borrower owns a Controlling
99.9% equity interest and the remaining equity interest is
owned by Wabco Standard Trane S.A.R.L. ASI further
represents to the Lenders that the Dutch Borrower has
created under the Security Documents in favor of the
Collateral Agent, as security for the Obligations, a valid,
first priority perfected pledge of and security interest in
its entire equity interest in the French Holding Company.
Subject to Section 1.04, the Required Lenders hereby
consent, and instruct the Collateral Agent to take all
actions and execute and deliver all documents which it shall
deem necessary or appropriate to give effect, to the release
of the shares of the French Subsidiaries from the liens
created by the Security Documents. ASI covenants and agrees
that, promptly following the release of such shares, it will
(i) cause the French Holding Company to pledge the shares of
the French Subsidiaries to secure the obligations of the
French Subsidiaries to the EEIG Borrower, (ii) cause the
EEIG Borrower to assign the rights and interests created by
such pledge to the Collateral Agent to secure the
Obligations and (iii) cause the French Holding Company and
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<PAGE>
the EEIG Borrower to execute, deliver and file all such
instruments and agreements, and to deliver all such legal
opinions, as the Collateral Agent shall request as necessary
or appropriate to ensure or provide evidence of the
validity, perfection or priority of the foregoing pledges
and assignments or otherwise in connection with such pledges
and assignments. ASI covenants and agrees that the French
Holding Company will not incur or be liable for any
Indebtedness or other material obligations (other than taxes
due as a result of the filing of consolidated tax returns),
and will not engage in any business or activities other than
those related to the management and ownership of the shares
of the French Subsidiaries.
(b) The Required Lenders hereby consent, and
instruct the Collateral Agent to take all actions and
execute and deliver all documents which it shall deem
necessary or appropriate to give effect, to the release of
the shares of Hua Mei owned by ASI from the liens created by
the Security Documents. ASI covenants and agrees that
immediately upon such release such shares shall be
contributed to the PRC Holding Company and ASI shall pledge
or cause to be pledged all shares directly or indirectly
owned by it in the PRC Holding Company (which ASI represents
will initially constitute not less than a majority of the
outstanding voting shares of the PRC Holding Company) to the
Collateral Agent for the benefit of the Lenders under the
Security Documents as security for the Obligations. ASI
shall, and shall cause its Subsidiaries to, execute, deliver
and file all such instruments and agreements and deliver all
such legal opinions as the Collateral Agent shall request as
necessary or appropriate to ensure or provide evidence of
the validity, perfection or priority of such pledge. ASI
covenants and agrees that it will not, and will not permit
any Subsidiary to, make any Investment in or guarantee or
otherwise become responsible for any Indebtedness or other
obligations of the PRC Holding Company or any joint venture
in which the PRC Holding Company has an interest other than
as expressly contemplated by the proviso added hereby to the
definition of "Capital Expenditures" or as otherwise
expressly permitted by Section 6.04, 6.05 or 6.06 of the
Credit Agreement.
(c) The Required Lenders hereby consent, and
instruct the Collateral Agent to take all actions and
execute and deliver all documents which it shall deem
necessary or appropriate to give effect, to the release of
machinery, equipment, inventories and related intangible
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<PAGE>
assets with an aggregate value on the books of ASI not in
excess of $16,000,000 from the Liens created by the Security
Documents upon the sale of a 50% interest in such machinery,
equipment, inventories and intangible assets to Heatcraft
Technologies Inc. for $8,000,000 and the contribution of the
remaining interest therein to the SCI/Heatcraft Joint
Venture. ASI covenants and agrees that it will apply the
Net Cash Proceeds of the sale of the interest in such
machinery, equipment and inventory being sold to Heatcraft
Technologies Inc., on the date received, to prepay
Borrowings in accordance with the provisions of Section
2.11(d) of the Credit Agreement (without giving effect to
clause (A) of the proviso contained in that Section). ASI
agrees to pledge or cause SCI to pledge the Heatcraft Notes
and its interest in the SCI/Heatcraft Joint Venture as
security for the Obligations in a manner and on terms
satisfactory to the Collateral Agent not later than the time
at which the release referred to above in this paragraph
becomes effective.
SECTION 1.03. Representations and Warranties.
Each of Holding and the Borrowers hereby represents and war-
rants (but, in the case of representations and warranties
relating to Credit Parties and their Subsidiaries, only as
to itself and its Subsidiaries, it being understood that
Holding and ASI make all representations and warranties as
to all parties) to each Lender, the Administrative Agent and
the other Agents, on and as of the date hereof and as of the
First Amendment Effective Date, as follows:
(a) The representations and warranties set forth
in Article III of the Amended Credit Agreement, and in
each other Credit Document, are true and correct in all
material respects with the same effect as if made on
and as of such date, except to the extent such repre-
sentations and warranties expressly relate solely to an
earlier date.
(b) Each of the Credit Parties is in compliance
in all material respects with all the terms and
conditions of the Amended Credit Agreement and the
other Credit Documents on its part to be observed or
performed and no Default or Event of Default has
occurred or is continuing.
(c) The execution, delivery and performance by
Holding and each Borrower of this First Amendment,
Consent and Waiver (a) have been duly authorized by
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<PAGE>
such person and constitute the legal, valid and binding
obligation of such person enforceable against it in
accordance with its terms, (b) do not conflict with or
violate (i) any provision of law, statute, rule or
regulation, or of the constitutive documents or by-laws
of any such person, (ii) any order of any Governmental
Authority or (iii) any provision of any indenture,
material agreement or other material instrument to
which any such person is a party or by which any of
them or any of their property may be bound and (c) does
not require any consents under, result in a breach of
or constitute (with notice or lapse of time of both) a
default under any such indenture, agreement or
instrument.
SECTION 1.04. Effectiveness. This First
Amendment, Consent and Waiver shall become effective only
upon satisfaction of the following conditions precedent on
or prior to February 28, 1994 (the first date upon which
each such condition has been satisfied being herein called
the "First Amendment Effective Date"):
(a) The Administrative Agent shall have received
duly executed counterparts of this First Amendment and
Waiver which, when taken together, bear the authorized
signatures of each of Holding, each Borrower and the
Required Lenders.
(b) The Administrative Agent shall have received
a favorable written legal opinion of Frederick W.
Jaqua, Esq., General Counsel of ASI, covering the
matters set forth in Exhibit 1.07 hereto and
satisfactory in form and substance to Cravath, Swaine &
Moore, counsel for the Administrative Agent.
(c) The Administrative Agent shall have received
such other documents, legal opinions, instruments and
certificates as it shall have reasonably requested and
such other documents, legal opinions, instruments and
certificates shall be satisfactory in form and
substance to the Administrative Agent.
Notwithstanding the foregoing, the amendments to the Credit
Agreement provided for in Section 1.01(g) will become
effective upon the satisfaction of the conditions set forth
in paragraph (a) above.
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<PAGE>
SECTION 1.05. APPLICABLE LAW. THIS FIRST AMEND-
MENT AND WAIVER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 1.06. Expenses. ASI shall pay all
reasonable out-of-pocket expenses incurred by the Admin-
istrative Agent in connection with the preparation,
negotiation, execution, delivery and enforcement of this
First Amendment, Consent and Waiver, including, but not
limited to, the reasonable fees and disbursements of
Cravath, Swaine & Moore, counsel for the Administrative
Agent. The agreement set forth in this Section 1.06 shall
survive the termination of this First Amendment, Consent and
Waiver and the Credit Agreement.
SECTION 1.07. Severability. In the event any one
or more of the provisions contained in this First Amendment,
Consent and Waiver should be held invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby. The
parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid
provisions, the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 1.08. Counterparts. This First
Amendment, Consent and Waiver may be executed in any number
of counterparts, each of which shall constitute an original
but all of which when taken together shall constitute but
one agreement.
SECTION 1.09. Credit Agreement. (a) The
amendments and waivers provided for herein shall apply and
be effective only with respect to the provisions of the
Credit Agreement specifically referred to herein. Except as
expressly waived or amended hereby, the Credit Agreement
shall continue in full force and effect in accordance with
the provisions thereof. As used in the Credit Agreement,
the terms "Agreement", "herein", "hereinafter", "hereunder",
"hereto" and words of similar import shall mean, from and
after the date hereof, the Credit Agreement as amended by
this First Amendment, Consent and Waiver.
(b) The parties hereto agree that for purposes of
Article VII of the Credit Agreement, the representations and
warranties set forth herein shall be deemed to be
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<PAGE>
representations and warranties in Article III of the Credit
Agreement and the covenants and agreements contained herein
shall be deemed to be covenants in Article VI of the Credit
Agreement.
SECTION 1.10. Amendment. Notwithstanding
anything herein to the contrary, any amendment to the
provisions of Section 10.04 of the Credit Agreement effected
pursuant to Section 1.01 of this First Amendment may be
rescinded, in whole or in part, with the written consent of
each of ASI, the Administrative Agent and the holder of any
Note which by its terms is payable to such holder or its
registered assigns.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this First Amendment, Consent and Waiver to be duly executed
by their duly authorized officers, all as of the date first
above written.
AMERICAN STANDARD INC.,
by:/s/ Fred A. Allardyce
Name: Fred A. Allarldyce
Title:Vice President &
Chief Financial Officer
ASI HOLDING CORPORATION,
by:/s/ Fred A. Allardyce
Name: Fred A. Allardyce
Title:Vice President &
Chief Financial Officer
BORROWERS:
AMERICAN STANDARD INC.,
by/s/: Fred A. Allardyce
Name: Fred A. Allardyce
Title:Vice President &
Chief Financial Officer
AMERICAN STANDARD CREDIT INC.,
by:/s/ Thomas S. Battaglia
Name: Thomas S. Battaglia
Title:Vice President &
Treasurer
WABCO STANDARD GMBH,
by:/s/ Wolfram Wenzel
Name: Wolfram Wenzel
Title:Managing Director
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<PAGE>
AMERICAN STANDARD (UK) LTD.,
by:/s/ W. Hunter Frew
Name: W. Hunter Frew
Title:Company Secretary
STANDARD EUROPE, a European
Economic Interest Grouping,
by:/s/ Philippe Ruze
Name: Philippe Ruze
Title:Gerant
WABCO STANDARD TRANE INC.,
by:/s/ Richard B. Benn
Name: Richard B. Benn
Title:Vice President &
Chief Financial Officer
WABCO STANDARD HOLDINGS BV,
by:/s/ J.M. Lips
Name: J.M. Lips
Title:Managing Director
<PAGE>
<PAGE>
ADMINISTRATIVE AGENT:
CHEMICAL BANK, individually
and as the Administrative
Agent,
by:/s/ Robert K. Gaynor
Name: Robert K. Gaynor
Title:Vice President
MANAGING AGENTS:
THE BANK OF NOVA SCOTIA,
by:/s/ J. Alan Edwards
Name: J. Alan Edwards
Title: Vice President
BANKERS TRUST COMPANY,
by:/s/ Mary Kay Coyle
Name: Mary Kay Coyle
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.,
by:/s/ Gregory M. Stover
Name: Gregory M. Stover
Title: Vice President
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<PAGE>
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLAND BRANCH,
by:/s/ Robert A. Maddux
Name: Robert A. Maddux
Title: Director
by:/s/ Jean M. Hannigan
Name: Jean M. Hannigan
Title: Assistant Vice
President
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., NEW YORK BRANCH
by:/s/ John J. Sullivan
Name: John J. Sullivan
Title: Joint General
Manager
NATIONSBANK OF NORTH CAROLINA, N.A.,
by:/s/ Christopher C. Browder
Name: Christopher C. Browder
Title: Vice President
CO-AGENTS:
BANQUE PARIBAS,
by:/s/ Jeffrey J. Youle
Name: Jeffrey J. Youle
Title: Vice President
by:/s/ Robert Faitell
Name: Robert Faitell
Title: Vice President
<PAGE>
<PAGE>
CITIBANK, N.A.,
by:/s/ Prakash Chonkar
Name: Prakash Chonkar
Title: Vice President
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE - NEW
YORK BRANCH,
by:/s/ Sean Mounier
Name: Sean Mounier
Title: Vice President
by:/s/ Marcus Edwards
Name: Marcus Edwards
Title: Vice President
LENDERS:
BANK OF AMERICA, NATIONAL
TRUST AND SAVINGS ASSOCIATION,
by:/s/ Daniel D. McCready
Name: Daniel D. McCready
Title: Vice President
THE BANK OF NEW YORK,
by:/s/ Gianni W. Sellers
Name: Gianni W. Sellers
Title: Vice President
BANQUE INDOSUEZ,
by
Name:
Title:
<PAGE>
<PAGE>
CHANCELLOR CAPITAL MANAGEMENT,
INC.,
by:/s/ Stephen M. Alfieri
Name: Stephen M. Alfieri
Title: Vice President
CREDITO ITALIANO - NEW YORK
BRANCH,
by:/s/ Harmon P. Butler
Name: Harmon P. Butler
Title: First Vice President
by:/s/ Saiyed A. Abbas
Name: Saiyed A. Abbas
Title: Assistant Vice
President
CREDIT LYONNAIS NEW YORK BRANCH,
by:/s/
Name:
Title:
CRESCENT CAPITAL CORP.,
by:/s/ Mark L. Gold
Name: Mark L. Gold
Title: Managing Director
DRESDNER BANK, AG,
by:/s/ Charles H. Hill
Name: Charles H. Hill
Title: Vice President
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<PAGE>
DRESDNER BANK, AG,
by:/s/ Richard Conroy
Name: Richard Conroy
Title: Vice President
PRIME INCOME TRUST,
by:/s/ Rafael Scolari
Name: Rafael Scolari
Title: Investment Manager
EATON VANCE PRIME RATE RESERVES,
by:/s/ Jeffrey S. Garner
Name: Jeffrey S. Garner
Title: Vice President
THE FUJI BANK, LIMITED,
by
Name:
Title:
HELLER FINANCIAL,
by:/s/ V. Robert Rotering
Name: V. Robert Rotering
Title: Assistant Vice
President
THE HOKKAIDO TAKUSHOKU BANK,
LTD. - NEW YORK BRANCH,
by:/s/ Hitoshi Sato
Name: Hitoshi Sato
Title: Vice President
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<PAGE>
KEYPORT LIFE INSURANCE COMPANY,
by:/s/ Stephen M. Alfieri
Name: Stephen M. Alfieri
Title: Vice President
LEHMAN COMMERCIAL PAPER, INC.,
by
Name:
Title:
THE MITSUBISHI TRUST AND
BANKING CORP.,
by:/s/ Masataka Ushio
Name: Masataka Ushio
Title: Senior Vice
President and
Chief Manager
MERRILL LYNCH PRIME FUND, INC.,
by:/s/ John R. Lennon
Name: John R. Lennon
Title: Authorized
Signatory
SENIOR HIGH INCOME PORTFOLIO, INC.,
by:/s/ John R. Lennon
Name: John R. Lennon
Title: Authorized
Signatory
<PAGE>
<PAGE>
ORIX USA CORPORATION,
by
Name:
Title:
PILGRIM PRIME RATE TRUST,
by:/s/ Michael D. Hately
Name: Michael D. Hately
Title: Assistant
Portfolio Manager
PROSPECT STREET SENIOR
PORTFOLIO, L.P.,
by PROSPECT STREET SENIOR
LOAN CORP.,
by:/s/ Preston I. Carnes
Name: Preston I. Carnes
Title: Vice President
PROTECTIVE LIFE INSURANCE
COMPANY, INC.,
by:/s/ Mark K. Okada
Name: Mark K. Okada
Title: Principal
THE SAKURA BANK, LTD.,
by
Name:
Title:
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<PAGE>
SOCIETE GENERALE,
by
Name:
Title:
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH,
by:/s/ Suresh Tata
Name: Suresh Tata
Title: Vice President
THE SUMITOMO TRUST & BANKING
CO., LTD. - NEW YORK
BRANCH,
by:/s/ Suraj P. Bhatia
Name: Suraj P. Bhatia
Title: Senior Vice
President
UNITED STATES NATIONAL BANK
OF OREGON,
by:/s/ Chris J. Karlin
Name: Chris J. Karlin
Title: Vice President
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST,
by:/s/ Jeffrey W. Maillet
Name: Jeffrey W. Maillet
Title: Vice President &
Portfolio Manager
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<PAGE>
BANCA COMMERCIALE ITALIANA,
by:/s/ Charles Dougherty
Name: Charles Dougherty
Title: Vice President
by:/s/ Frank Maffei
Name: Frank Maffei
Title: Assistant Vice
President
PEARL STREET LP,
by:/s/ Robert J. O'Shea
Name: Robert J. O'Shea
Title: Authorized Signer
<PAGE>
TRUST AGREEMENT FOR AMERICAN STANDARD INC.
LONG-TERM INCENTIVE COMPENSATION PLAN
This Trust Agreement dated as of January 1, 1993, by and
among ASI Holding Corporation, a Delaware corporation; its
wholly-owned subsidiary, American Standard Inc.; and Robert M.
Kennedy, as Trustee; provides, on the terms and conditions
hereinbelow set forth, for the establishment and administration
of a trust to hold shares of ASI Holding Corporation common stock
issued as payouts under the American Standard Inc. Long-Term
Incentive Compensation Plan.
1. Definitions.
For purposes of this Trust Agreement, the following
definitions shall apply:
1.1. Appraisal means the independent appraisal of Fair
Market Value used for purposes of the Stockholder Agreements.
1.2. Appraisal Date means any date as of which an Appraisal
is made.
1.3. Beneficiary means any one person or trust appointed by
a Participant in an unrevoked writing filed with the Company
directing that, in the event of such Participant's death, all of
such Participant's rights under and interests in the Trust shall
vest in such person or trust: provided that a Participant's
Beneficiary shall be deemed to be the estate or legal
representative of such Participant if such written appointment is
revoked and not replaced by another such written appointment
filed with the Committee, or if a Participant's Beneficiary does
not survive such Participant.
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<PAGE>
1.4. Board means the Board of Directors of the Company or
of Holding, as specified herein.
1.5. Call Election means the delivery by Holding or the
Company to a Participant (or, in the event of such Participant's
death, to his Beneficiary), with a copy to the Trustee, of an
irrevocable Call Election in the form attached as Exhibit A
hereto, requiring the Trustee to sell to Holding or the Company,
in accordance with Section 6.1 hereof, all Shares credited to
such Participant's Share Award Account. A Call Election may be
delivered to or with respect to a Participant at any time within
the period commencing on his Termination Date and ending on the
earlier of (x) 60 days thereafter and (y) receipt by the Company
of such Participant's (or, in the event of his death, his
Beneficiary's) Put Election.
1.6. Committee means the Management Development Committee of
the Company's Board.
1.7. Common Stock means the common stock, par value $0.01
per share, of Holding.
1.8 Company means American Standard Inc., a Delaware
corporation.
1.9. Creditor means a general creditor of the Company or
Holding and Judgment Creditor means a Creditor who has obtained a
judgment against the Company or Holding from a court of competent
jurisdiction and who has made written demand to the Company or
Holding, as appropriate, for payment on such judgment which has
gone unsatisfied for at least 180 days.
1.10. Fair Market Value means the fair market value of
shares of Common Stock, as determined by an Appraisal.
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<PAGE>
1.1l. Financing Documents means any and all debt instruments
or agreements entered into or issued by Holding, the Company or
any of their subsidiaries or to which any of them is a party or
by which any of them is bound.
1.12. Holding means ASI Holding Corporation, a Delaware
corporation of which the Company is a wholly-owned subsidiary.
1.13. Insolvent means the inability to pay debts as they
mature or being subject to proceedings as a debtor under the
United States Bankruptcy Code, and Insolvency means the state of
being insolvent.
1.14. IPO means a public offering as a result of which,
after giving effect thereto and to any action described in
Section 9 hereof, an aggregate of at least 25% of the Common
Stock has been sold and is outstanding and is traded on a
national securities exchange or in the over-the-counter market.
1.15. Payout Date means a date on which a Plan Payout is
made.
1.16. Plan means the American Standard Inc. Long-Term
Incentive Compensation Plan as in effect from time to time.
1.17. Plan Payout means a payment under the Plan.
1.18. Prime Rate means the minimum commercial lending rate
in effect from time to time as charged by Morgan Guaranty Trust
Company of New York on its New York loans.
1.19. Purchase Price means the price at which Shares are
purchased by Holding from the Trust pursuant to Section 6.2
hereof.
1.20. Put Election means the delivery to the Company (with
a copy to the Trustee) by a Participant (or by the Beneficiary of
<PAGE>
<PAGE>
a deceased Participant) of an irrevocable Put Election in the
form attached as Exhibit B hereto, requiring all Shares credited
to such Participant's Share Award Account to be purchased by
Holding or the Company from the Trustee in accordance with
Section 6.1 hereof. A Put Election may be delivered at any time
within 60 days after a Participant's Termination Date.
1.21. Share means a share of Common Stock.
1.22. Stockholder Agreements the Stockholder Agreements
dated as of July 7, 1988, as amended, among Kelso ASI Partners,
L.P., Holding, and each individual Management Stockholder (as
defined therein).
1.23. Termination Date of a Participant means the date on
which such Participant's employment with the Company terminates
for any reason, including death.
1.24. Trust means the trust fund established under this
Trust Agreement.
1.25. Trustee means R. M. Kennedy or such successor trustee
as shall be appointed by the Company pursuant to Section 19
hereof.
1.26. Valuation Date means a date on which the results of
an Appraisal are received by Holding.
2. Establishment and Duration of Trust.
The Trust is hereby established under the Plan to
fulfill certain obligations thereunder of the Company to
Participants. The Trust shall continue for such time as may be
necessary to accomplish the purpose for which it has been
created; provided that as soon as practicable after an IPO, the
Trustee shall, unless otherwise instructed in writing by the
Committee, distribute to each Participant or his Beneficiary the
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<PAGE>
number of Shares or, if and to the extent funded by the Company
or Holding pursuant to Section 8.1 hereof, the sum of cash
(including accrued interest) credited to such Participant's Share
Award Account, in which case the Trust shall terminate as soon as
practicable after the completion of all such distributions.
3. Contribution of Shares to Trust.
As of the Payout Date for any Plan Payout consisting in
whole or in part of Shares, Holding or the Company shall
contribute to the Trust, for credit to the Share Award Account of
each Participant who is granted such a Plan Payout, that number
of whole and fractional Shares, valued at their Fair Market Value
as of the last Appraisal Date before such Payout Date,
purchasable by that portion of the cash value of such Plan Payout
consisting of Shares; provided that if such Payout Date coincides
with an Appraisal Date, the number of such Shares contributed to
the Trust shall be determined on the basis of their Fair Market
Value as of such coincident Appraisal Date. When a Payout Date
occurs before the Valuation Date for the Appraisal Date
applicable to such Payout Date, as provided above, such Shares
shall be contributed to the Trust and credited to a Participant's
Share Award Account as of five business days after such Valuation
Date.
4. Share Award Accounts.
Each Participant's Share Award Account shall record:
(a) the number of Shares and fractions thereof
credited to such Share Award Account as a Plan
Payout;
(b) the Payout Date with respect to which each
such Plan Payout was made; and
(c) any amounts, including accrued interest, credited
to such Share Award Account for or with respect to
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<PAGE>
any such Shares purchased by Holding from the Trustee pursuant to
Section 6.1 hereof.
5. Voting Rights.
Shares credited to Share Award Accounts shall be voted by
the Trustee as directed in writing by the Company.
6.1. Distributions from Trust.
Subject to Section 8.1 hereof, upon the termination of a
Participant's employment, such Participant (or, in the event of
his death, his Beneficiary) shall be entitled to a distribution
from the Trust of all Shares credited to his Share Award Account;
provided, however, that in lieu of such distribution, each such
Participant (or his Beneficiary) shall have the right,
exercisable by timely delivery of a Put Election, to require
Holding or the Company to purchase from the Trust, as of such
Participant's Termination Date, and Holding or the Company shall
have the right, exercisable by its timely delivery of a Call
Election, to require the Trustee to sell to Holding or the
Company, as of such Participant's Termination Date, all such
Shares at the Purchase Price set forth in Section 6.2 hereof and
on the payment terms set forth in Sections 8.1 and 8.2 hereof.
The Trustee shall have the right to delay distribution of Share
certificates until the expiration of the periods during which
such Put and Call Elections may be made.
6.2. Determination of Purchase Price.
If the Termination Date of a Participant by or with respect
to whom a Put or Call Election is made pursuant to Section 6.1
hereof occurs on or before October 31 in any year, the Purchase
Price for the Shares credited to such Participant's Share Award
Account shall be their Fair Market Value determined as of the
last Appraisal Date before such Termination Date. If such
Participant's Termination Date occurs after October 31 in any
year, the Purchase Price for such Shares shall be their Fair
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Market Value determined as of the first Appraisal Date after such
Termination Date.
6.3. Crediting of Purchase Price.
If a timely Put or Call Election is made by or with respect
to a Participant, an unfunded amount equal to the Purchase Price
for the Shares credited to his Share Award Account shall be
retroactively entered as a credit to his Share Award Account as
of the Participant's Termination Date.
7. Issuance of Share Certificates.
If Holding or the Company makes no Call Election, and a
Participant (or, in the event of his death, his Beneficiary)
makes no Put Election during the respective periods in which each
such election may be made, Holding or the Company shall deliver
to the Trustee, as soon as administratively practicable after the
expiration of such periods, a certificate or certificates
evidencing the Shares credited to such Participant's Share Award
Account. Any certificate so issued shall bear upon its face the
following legend:
The transfer of the shares of stock represented by this
certificate is restricted by the terms of the Trust
Agreement dated as of January 1, 1993 among ASI Holding
Corporation, American Standard Inc. and R. M. Kennedy, as
Trustee, established under the American Standard Inc.
Long-Term Incentive Compensation Plan. Copies of said Trust
Agreement and of said Plan are on file with the issuer.
Such certificate shall be registered in the name of, and shall be
held in the Trust by, the Trustee, and the Trustee shall transfer
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such certificate to such Participant (or his Beneficiary) only
upon the termination of the Trust.
8.1. Interest on Payments Credited to Share Award Accounts
The unfunded Purchase Price amount entered as a credit to a
Participant's Share Award Account pursuant to Section 6.3 hereof
shall accrue interest at the Prime Rate from such Participant's
Termination Date to the date of termination of the Trust. On
such latter date, Holding or the Company shall, to the extent
permitted by Section 8.2, pay to the Trustee, for distribution
to such Participant (or to his Beneficiary), the amount,
including accrued interest, entered as a credit to such
Participant's Share Award Account.
8.2. Other Deferred Payments.
Notwithstanding Section 8.1, no payment shall be made by the
Company or Holding hereunder upon the termination of the Trust to
the extent that (x) the making of such payment is prohibited by
any Financing Documents, (y) a default has occurred under any
Financing Document and is continuing, or (z) such payment would,
or in the opinion of the Company's or Holding's Board expressed
in a duly adopted resolution might, reasonably be expected to
result in the occurrence of an event of default under any
Financing Document or create a condition which would or might
reasonably be expected, with notice or lapse of time or both, to
result in such an event of default. If the Company or Holding is
unable to pay any amount when due hereunder, in whole or in part,
by reason of this Section 8.2, then the unpaid balance of such
amount shall accrue interest at the Prime Rate from the date when
due to the date such amount is paid in full.
9. Changes in Capital Structure.
In the event of the payment of any dividend payable in, or
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the making of any distribution of, Shares to holders of record of
Shares during the period any Shares awarded under the Plan are
credited to a Participant's Share Award Account; or in the event
of any stock split, combination of Shares, recapitalization or
other similar change in the authorized capital stock of Holding
during such period; or in the event of the merger or
consolidation of Holding into or with any other corporation or
the reorganization, dissolution or liquidation of Holding during
such period; (i) there shall be credited to such Participant's
Share Award Account such new, additional or other shares of
capital stock of any class, or other property (including cash),
as such Participant would be entitled to receive as a matter of
law if such Participant were a shareholder of Holding at the time
of such event.
10. Administration.
This Trust Agreement shall be administered by the Company,
which shall have full power and authority (to the extent not
inconsistent with the terms and purposes of the Plan and this
Trust Agreement) to interpret and carry out the terms of, and to
establish, amend or rescind rules and regulations relating to,
this Trust Agreement; to direct the Trustee with respect to the
Trustee's exercise of voting rights, as specified in Section 5
hereof; to appoint a recordkeeper for this Trust Agreement and to
rescind any such appointment; and to take such other actions and
to make such other determinations relating to this Trust
Agreement as may be necessary or advisable in connection with the
Plan.
All forms required to be filed hereunder and all other
communications with respect hereto shall be addressed to Holding,
the Company or the Trustee, as the case may be, in care of the
Secretary, American Standard Inc., 1114 Avenue of the Americas,
New York, New York 10036-7776 or to such other address as the
Company may designate from time to time.
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11. Trust Subject to Creditor Claims.
Notwithstanding any other provision of this Trust Agreement
or the Plan, the Trustee shall hold the assets of the Trust for
the benefit of Creditors to the extent provided in Sections 12
and 13 hereof. Under this Trust Agreement, Participants and
Beneficiaries have only the unsecured promises of the Company and
Holding to pay benefits from the Trust. The rights hereunder of
Participants and Beneficiaries are no greater than the rights of
any other unsecured Creditor, and do not constitute any right
against or security interest in the Trust.
12. Effects of Insolvency.
Upon receipt of any written allegation of the Insolvency of
the Company or Holding, the Trustee shall suspend the making of
any distribution from the Trust and shall immediately notify the
Company or Holding, as applicable, in writing of such
allegation. Within 30 days of receipt of such an allegation, the
Trustee shall determine whether the Company or Holding, as
applicable, is Insolvent. If the Trustee determines the Company
or Holding to be Insolvent, or if the Trustee otherwise has
actual knowledge that the Company or holding is Insolvent, the
Trustee shall hold the Trust for the benefit of the Creditors
until otherwise instructed by a court of competent jurisdiction.
If the Trustee determines that the Company or Holding, as the
case may be, is not Insolvent, the Trustee shall resume making
appropriate distributions from the Trust to Participants and
Beneficiaries in accordance with this Agreement. Notwithstanding
the foregoing, if the Board, the Chief Executive Officer or the
Chief Financial Officer of the Company or Holding, as
appropriate, delivers to the Trustee a sworn statement that the
Company or Holding, as the case may be, is Insolvent, the Trustee
shall make distributions from the Trust only as directed by a
court of competent jurisdiction.
13. Judgment Creditor Claims.
In addition to the rights of Creditors set forth in Section
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12 hereof, and notwithstanding any other provision of this Trust
Agreement, the assets of the Trust shall at all times be
available to satisfy claims of Judgment Creditors. Upon receipt
by the Trustee of proof satisfactory to the Trustee that a
Creditor is a Judgment Creditor, the Trustee shall satisfy the
claim of such Judgment Creditor, to the extent possible, from the
assets of the Trust, and the Trustee shall be fully indemnified
hereunder in satisfying such claim.
14. Distributions Due to Certain Tax Consequences.
Notwithstanding any provision of this Trust Agreement other
than Sections 12 and 13 hereof, if a Participant (or Beneficiary)
is determined to be subject to United States federal income tax
on any portion of his interest in the Trust prior to the time of
distribution of such interest, that portion of such interest
shall be distributed by the Trustee to such Participant or
Beneficiary. A portion of a Participant's (or Beneficiary's)
interest in the Trust shall be determined to be subject to
federal income tax upon the earliest of (i) receipt by the
Participant or Beneficiary of a notice of deficiency from the
United States Internal Revenue Service with respect to such
interest which is not contested by such Participant or
Beneficiary; (ii) execution of a closing agreement between the
Participant (or Beneficiary) and the Internal Revenue Service
which provides that such interest is includable in the
Participant's (or Beneficiary's) gross income; and (iii) a final
determination by the United States Tax Court or any other federal
court which holds that such interest is includable in the
Participant's (or Beneficiary's) gross income.
15. Reports and Records.
The Trustee shall:
(a) keep accurate and detailed accounts of all
investments, receipts, disbursements and other
transactions in the Trust as he shall deem
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necessary and proper with respect to his administration of the
Trust, and permit inspection of such accounts, records and assets
of the Trust by any duly authorized representative of the
Company or Holding at any time during usual business hours;
(b) make such periodic reports to the Company and
Holding as they shall reasonably request;
(c) prepare and timely file such tax returns and other
reports, together with supporting data and
schedules, as may be required of the Trustee by
law, with any taxing authority or any other
government authority, whether local, state or
federal.
16. Taxes.
Holding and the Company agree that all income, deductions
and credits of the Trust belong to them as owner for income tax
purposes and shall be included on Holding's and/or the Company's
tax returns. Holding or the Company shall from time to time pay
taxes (references in this Trust Agreement to the payment of taxes
shall include interest and applicable penalties) of any and all
kinds whatsoever which at any time are lawfully levied or
assessed upon or become payable in respect of the Trust, the
income or any property forming a part thereof, or any security
transaction pertaining thereto. Any amounts distributed from the
Trust shall be reduced by the amount of any withholding taxes
required by law, and the Trustee shall have the responsibility to
withhold and pay such amounts to the appropriate governmental
authorities. The Trustee shall inform the Company or Holding in
writing of all amounts withheld and of all distributions
hereunder to a Participant or Beneficiary. The Trustee shall be
entitled to satisfy such withholding tax obligations and payments
to a Participant or Beneficiary by retaining an appropriate
number of Shares and selling such Shares to Holding.
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17.1. Expenses of the Trustee.
The Company or Holding shall reimburse the Trustee for any
expenses incurred by the Trustee including, but not limited to,
all proper charges and disbursements of the Trustee, and
reasonable fees for legal services rendered to the Trustee
(whether or not rendered in connection with a judicial or
administrative proceeding). The Trustee's entitlement to
reimbursement hereunder shall not be affected by the resignation
or removal of the Trustee or by the termination of the Trust.
17.2. Indemnification of Trustee.
The Company or Holding shall indemnify, defend and hold the
Trustee harmless from and against any claim, liability, cost or
expense (including reasonable attorneys' fees) asserted against,
imposed on or suffered or incurred by the Trustee in the good-
faith carrying out of his duties and responsibilities hereunder
and in his good-faith compliance with any written instructions
delivered to him by the Company or Holding with respect thereto.
18. Resignation and Removal of Trustee.
The Trustee may be removed by the Company at any time.
The Trustee may resign at any time upon notice in writing to the
Company.
19. Successor Trustee.
Upon the removal or resignation of the Trustee, the
Company may designate a successor Trustee to act hereunder, which
shall have the same powers and duties as those conferred upon the
Trustee. Upon such designation, and upon the written acceptance
of the successor Trustee, the former Trustee shall, if necessary,
assign, transfer and pay over to such successor Trustee the
assets then constituting the Trust. A successor Trustee shall
have all the rights and powers under this Trust Agreement as an
original Trustee.
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20. Amendment of Trust.
The Company or Holding may amend, in whole or in part, any
or all of the provisions of this Trust Agreement, provided that
no such amendment may affect the rights, protections, duties or
responsibilities of the Trustee without his consent and, provided
further, that no such amendment may permit any part of the corpus
or income of the Trust to be returned or diverted to the Company
or Holding except with respect to the purchase of Shares credited
to the Share Award Accounts of Participants as of the termination
of their employment, in accordance with Section 6.1 hereof.
21. No Right of Alienation or Employment.
Except as required in Sections 11 through 13 hereof, at no
time prior to the satisfaction of all liabilities with respect to
Participants and their Beneficiaries shall any part of the corpus
and/or income of the Trust be used for, or diverted to purposes
other than for the exclusive purpose of providing benefits to
Participants and their Beneficiary. No Participant or
Beneficiary shall have any right or interest in the assets of the
Trust which is greater than the rights of any Creditor. The
assets of the Trust shall not be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or
charge. This Trust Agreement does not give any Participant a
right to continued employment with the Company or any subsidiary
or affiliate therof.
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22. Headings.
Section headings in this Trust Agreement are for reference
only. In the event of a conflict between a heading and the
content of a Section, the content of the Section shall control.
23. Construction.
This Trust Agreement shall be construed and regulated by the
laws of the State of New York except where such laws are
superseded by federal laws.
24. Successors.
This Trust Agreement shall be binding upon, and the powers
herein granted to the Company, Holding and therustee, respective-
ly, shall be exercisable by, the respective successors and
assigns of the Company, Holding and the Trustee.
25. Separability.
If any part of this Trust Agreement shall be found to be
invalid or unenforceable, such invalidity or unenforceability
shall not affect the remaining provisions hereof. Such invalid
or unenforceable part shall be fully separable and this Trust
Agreement shall be construed and enforced as if such part had not
been inserted herein.
26. Gender and Number.
Whenever used herein, the masculine shall be interpreted to
include the feminine and neuter, the neuter to include the
masculine and feminine, the singular to include the plural and
the plural to include the singular, in each case unless the
context requires otherwise.
27. Assignment.
The benefits payable under this Trust Agreement may not be
assigned, alienated, pledged, attached or garnished.
IN WITNESS WHEREOF, each of the parties hereto has executed
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or caused to be executed this Trust Agreement as of the date and
year first written above.
AMERICAN STANDARD INC.
By:/s/ Fred A. Allardyce
Name: Fred A. Allardyce
Its: Vice President &
Chief Financial Officer
ASI HOLDING CORPORATION
By:/s/ Fred A. Allardyce
Name: Fred A. Allardyce
Its: Vice President &
Chief Financial Officer
THE TRUSTEE:
/s/Robert M. Kennedy
ROBERT M. KENNEDY
<PAGE>
AMERICAN STANDARD INC.
EXECUTIVE SUPPLEMENTAL RETIREMENT BENEFIT PROGRAM
Restated to include all amendments through
December 31, 1993
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ARTICLE I
DEFINITIONS
For all purposes of the Program the following definitions shall apply,
with words in the masculine gender including, where appropriate, the
feminine gender:
Actuarial Equivalent means, with respect to any monthly payments
referred to in Article IV, the lump-sum payment which is the present
value as of the date of commencement of such monthly payments,
determined using the following actuarial assumptions:
(a) Mortality Table - 1983 Basic Group Annuity Mortality Table for
males projected to 1988 with Scale H; and
(b) Interest - the lesser of
(1) 120% of the annual interest rate used by the Pension Benefit
Guaranty Corporation to value immediate annuities for plans
terminating as of the date as of which the applicant's
monthly pension payments would otherwise commence; and
(2) the average yield of long-term U.S. Treasury bonds issued
during the one-month period ending one month before the date
as of which the applicant's monthly pension payments would
otherwise commence, as published in the Federal Reserve
Bulletin under the heading "Composite Index: Over 10 Years
(long-term)," such average yield to be rounded to the
nearest .25%;
provided that, for purposes of calculating a lump-sum payment to
a Prior Participant or his Surviving Spouse the interest rate
applied to calculate that portion of such lump sum attributable
to such Prior Participant's Special Years of Service shall be
multiplied by sixty and four-tenths percent (60.4%).
Average Monthly Earnings of a Participating Employee means his total
Compensation for the three (3) calendar Years of Service (or such
lesser number of calendar years as may constitute his Years of
Service) in his last ten (10) calendar Years of Service (including in
such ten (10) calendar years the year in which his Service is broken),
during which his total Compensation was the highest, divided by
thirty-six (36) (or such lesser number as may constitute the number of
calendar months of his Years of Service).
Board means the Board of Directors of the Corporation.
Code means the Internal Revenue Code of 1986, as amended.
Committee means the Committee constituted under Article III, Section 2
hereof.
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Compensation means, for any calendar year, the total remuneration
(other than remuneration that is not treated as "Compensation" under
and for purposes of the Retirement Plan) for Service rendered by a
Participating Employee during such year, including any annual
incentive compensation awarded to him with respect to such year,
without regard to the year in which such incentive compensation is
received; provided that Compensation shall not include any payments
under the American Standard Inc. Management Partners' Bonus Plan or
Long-Term Incentive Compensation Plan.
Corporation means American Standard Inc. and its successors and any
predecessor corporation merged with or into, or any business acquired
by, American Standard Inc.
Employee means an employee of the Corporation or a Subsidiary Company.
ESOP Offset means two (2) times the value, as of the December 31
immediately preceding the date when a Participating Employee's Service
is broken, of the Basic Company Contributions to his account under the
American-Standard Employee Stock Ownership Plan.
Other Post-Retirement Benefits means, with respect to a Participating
Employee, his ESOP Offset, plus all amounts paid or payable to him or
his Surviving Spouse under or with respect to the Retirement Plan
(including any monthly pension payable hereunder because it exceeds
the maximum limitation on pension amounts imposed by Section 415 of
the Code), the American Standard Profit Sharing Plan and any other
non-governmental defined benefit or defined contribution employee
pension plan (except the Savings and Stock Ownership Plan of American
Standard Inc. and Participating Subsidiary Companies and the American
Standard Employee Stock Ownership Plan) to which the Corporation, any
Subsidiary Company or any previous employer of such Participating
Employee had made contributions, provided that in calculating such
amounts the following shall apply:
(a) Any Other Post-Retirement Benefit which is offset under the terms
of the Retirement Plan shall be offset under this Program;
(b) Such amounts shall include lump-sum and installment distributions
which, together with all Other Post Retirement Benefits, shall be
expressed as an Actuarially Equivalent lifetime annuity payable
monthly.
(c) Such amounts shall exclude benefits to the extent attributable to
contributions made by such Participating Employee; and
(d) Such amounts shall reflect reductions for early commencement of
benefits, if any.
Participating Employee means any Employee (including, unless the
context otherwise requires, an Employee who is a Prior Participant)
who has been and so long as he remains an officer of the Corporation
elected as such by the Board, but such term shall not include the
Chairman of the Board on January 1, 1991.
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Prior Participant means any one of Emmanuel A. Kampouris, William A.
Klug and James E. Mack, so long as he is a Participating Employee.
Primary Social Security Benefit shall have the meaning ascribed to
that term in and by the Retirement Plan. In the event that the
Participating Employee provides the Committee with the actual amount
of his Social Security Benefit plus the amounts, if any, payable to
such Employee under a foreign social insurance or pension system
(which is comparable in nature to the U.S. Social Security System)
then the total of such amounts if less than the U.S. Primary Social
Security Benefit as defined in the Retirement Plan shall be deemed the
Participating Employee's Primary Social Security Benefit for the
purposes of this Program.
Program means the Amended and Restated Executive Supplemental
Retirement Benefit Program of American Standard Inc., as set forth in
this document and as amended from time to time.
Retirement Plan means the Retirement Plan of American Standard Inc.
and Participating Subsidiary Companies, as in effect immediately
before the amendments thereto made as of June 30, 1988.
Service and Years of Service shall have the meanings ascribed to those
terms in and by the Retirement Plan.
Special Average Monthly Earnings of a Prior Participant means his
total Compensation for the three (3) calendar Years of Service during
which his Compensation was the highest in the ten (10) calendar Years
of Service ending with and including the earlier of the year in which
his Service is broken and the year 1991, divided by thirty-six (36).
Special Years of Service of a Prior Participant means his Years of
Service through the earlier of the month immediately preceding the
month in which his Service is broken and March, 1991.
Subsidiary Company means any corporation organized and existing under
the laws of a state, district or territory of the United States at
least fifty percent (50%) of whose outstanding voting stock is owned,
directly or indirectly, by the Corporation or another Subsidiary
Company.
Surviving Spouse means the person to whom a Participating Employee or
former Participating Employee was legally married on the earlier of
the date of his retirement or death.
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ARTICLE II
PURPOSE
The purpose of the Program is to further the achievement of corporate
goals of the Corporation by providing improved retirement income as a
component of executive compensation, by providing retirement income not
subject to the limits imposed on retirement plans qualified under Section
401(a) of the Code, and by assisting in recruiting and retaining senior
executives.
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ARTICLE III
AMENDMENT, CONTINUATION, ADMINISTRATION
Section 1 - Amendment and Continuation
The Board shall have the right to suspend or terminate the Program at any
time and, at any time or from time to time, to amend its terms; provided,
however, that no such action shall effect a forfeiture or a reduction in
the amount of any benefit under the Program that
(a) an Employee who had been a Participating Employee for at least
twelve (12) months prior to the month in which such action is
authorized or
(b) the Surviving Spouse of such an Employee
would otherwise have been entitled to receive if such Employee had died
on, or retired as of the first of the month coinciding with or following,
the effective date of such action or, if later, the date of its
authorization. Notwithstanding any such suspension, termination or
amendment, the Corporation and Subsidiary Companies will at all times be
free to establish other programs, similar or different, for the benefit of
any Employees.
Section 2 - Administration
The Program shall be administered by a committee of the Board (the
"Committee") which is appointed by the Board. No member of such Committee
shall be eligible to participate in the Program. The Committee shall
interpret the Program, establish administrative policies, guidelines and
rules and designate Participating Employees thereunder, and take any other
action necessary or desirable for the proper operation of the Program.
All such interpretations, policies, guidelines, rules, designations and
actions shall be final and binding upon the Corporation, all Subsidiary
Companies, all Employees and all Participating Employees.
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ARTICLE IV
ELIGIBILITY FOR AND AMOUNT OF BENEFITS
Section 1 - Upon Retirement at or After Age Sixty-Five
Any Participating Employee who, after completing at least five (5) Years
of Service, ceases to be an Employee on or after his sixty-fifth (65th)
birthday shall receive from the Corporation, no later than the thirtieth
(30th) day of the month coincident with or immediately succeeding his
sixty-fifth (65th) birthday (or the month in which he ceases to be an
Employee, if later), a single lump-sum payment which shall be the
Actuarial Equivalent of a monthly payment, commencing with such month and
continuing for his lifetime, in an amount equal to the sum of (i) the
excess of
(a) four percent (4%) of his Average Monthly Earnings, multiplied by
the number, not in excess of ten (10), of his Years of Service,
plus
(b) one percent (1%) of his Average Monthly Earnings, multiplied by
the number of his Years of Service accumulated after his first
ten (10) Years of Service (to a maximum of twenty percent (20%)
of such Average Monthly Earnings),
over the sum of
(c) such Participating Employee's Other Post-Retirement Benefits,
plus
(d) his Primary Social Security Benefit;
and (ii) the monthly pension, if any, which is not payable to him from the
Retirement Plan because of the maximum limitations on pension amounts
imposed by Section 415 of the Code.
Notwithstanding the foregoing, the Actuarial Equivalent of the monthly
payment derived under this Section 1 shall not, with respect to a Prior
Participant, be less than the amount that would have been derived
A. if clauses (a), (b) and (c) above had read as follows:
(a-1) five percent (5%) of his Special Average Monthly Earnings,
multiplied by the number, not in excess of ten (10), of
his Special Years of Service, plus
(b-1) one percent (1%) of his Special Average Monthly Earnings,
multiplied by the number of his Special Years of Service
accumulated after his first ten (10) Special Years of
Service (to a maximum of twenty percent (20%) of such
Special Average Monthly Earnings),
(c-1) such Prior Participant's Other Post-Retirement Benefits,
exclusive of his ESOP Offset, expressed as an Actuarially
Equivalent amount payable for the life of the Prior
Participant, with fifty percent (50%) continuation of such
amount to his Surviving Spouse;
B. if, in the case of a Prior Participant who ceases to be an Employee
on or before April 27, 1991, his Special Years of Service for
purposes of the above clauses (a-1) and (b-1), but not for purposes
of calculating his
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Special Average Monthly Earnings or for any other purpose, meant
his Special Years of Service plus, in the case of Mr. Kampouris,
three (3) additional Special Years of Service, and in the cases of
Messrs. Klug and Mack, two (2) additional Special Years of Service
(provided that in no case shall any such Prior Participant be
deemed, for purposes of this sentence, to have more Special Years
of Service than the Years of Service he would have had if his
employment had terminated on the first of the month coinciding with
or next following his sixty-fifth (65th) birthday); and
C. if the monthly amount calculated pursuant to this sentence were
payable for the life of such Prior Participant, with continuation
for the life of his Surviving Spouse of fifty-percent (50%), minus
one percent (1%) for each year by which the age of such Surviving
Spouse is more than five (5) years lower than that of such Prior
Participant, of the sum of the amount determined under clauses
(a-1) and (b-1) above, less fifty percent (50%) of the sum of the
amount determined under clauses (c-1) and (d) above.
Section 2 - Upon Employment Termination Before Age Sixty-Five
Any Participating Employee who ceases to be an Employee after completing
at least five (5) Years of Service, but before his sixty-fifth (65th)
birthday shall receive from the Corporation, no later than the thirtieth
(30th) day of the month designated in writing by such Participating
Employee to the Committee (which month shall not be earlier than the month
immediately following his fifty-fifth (55th) birthday), a single lump-sum
payment which shall be the Actuarial Equivalent of a monthly payment,
commencing with the month so designated by such Participating Employee and
continuing for his lifetime, in an amount equal to the product of the
amounts determined in clauses (a), (b) and (c) below, with such result
reduced by the amount in clauses (d) and (e) below and increased by the
amount in clause (f) below.
(a) The monthly payment that such Participating Employee would have
received computed under the below (i) and (ii), if he had
remained an Employee (with no change in his Average Monthly
Earnings) until, and if he had retired on, his sixty-fifth (65th)
birthday:
(i) four percent (4%) of his Average Monthly Earnings,
multiplied by the number, not in excess of ten (10), of his
Years of Service, plus
(ii) one percent (1%) of his Average Monthly Earnings,
multiplied by the number of his Years of Service
accumulated after his first ten (10) Years of Service (to a
maximum of twenty percent (20%) of such Average Monthly
Earnings);
(b) A fraction
(i) the numerator of which is the number of his Years of
Service, and
(ii) the denominator of which is the number of Years of Service
he would have accumulated if he had remained an Employee
until his sixty-fifth (65th) birthday;
(c) The percentage determined according to attained age (in years and
completed months) on date of commencement of monthly payments, in
accordance with the following table with values for non-integral
ages
to be determined by interpolation:
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Attained Age on Date of
Commencement Percentage
64 .97
63 .93
62 .88
61 .82
60 .75
59 .68
58 .61
57 .54
56 .47
55 or younger .40
(d) Such Participating Employee's Other Post-Retirement Benefits;
(e) Such Participating Employee's Primary Social Security Benefit,
multiplied by clauses (b) and (c) above, or the Participating
Employee's actual Social Security Benefit (or other comparable
benefits), if so provided by the Participating Employee;
(f) Such Participating Employee's monthly pension, if any, reduced
(if applicable) for early commencement, which is not payable to
him from the Retirement Plan because of the maximum limitations
on pension amounts imposed by Section 415 of the Code.
Notwithstanding the foregoing, the Actuarial Equivalent of the monthly
amount derived under this Section 2 shall not, with respect to a Prior
Participant, be less than the amount that would have been derived
A. if clauses (a) through (c) above had read as follows:
(a-1) The monthly payment that such Prior Participant would have
received computed under the below (i) and (ii), if he had
remained an Employee (with no change in his Special
Average Monthly Earnings) until, and if he had retired on,
his sixty-fifth (65th) birthday:
(i) five percent (5%) of his Special Average Monthly
Earnings, multiplied by the number, not in excess of
ten (10), of his Special Years of Service, plus
(ii) one percent (1%) of his Special Average Monthly
Earnings, multiplied by the number of his Special
Years of Service accumulated after his first ten
(10) Years of Service (to a maximum of 20% of such
Special Average Monthly Earnings),
(b-1) A fraction
(i) the numerator of which is the number of his Special
Years of Service, and
(ii) the denominator of which is the number of Years of
Service he would have accumulated if he had remained
an Employee until his sixty-fifth (65th) birthday,
(c-1) The percentage determined according to attained age (in
years and completed months) on date of commencement of
monthly payments, in accordance with the following table
with values for non-integral ages to be determined by
interpolation:
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<PAGE>
Attained Age on Date of
Commencement Percentage
64 .93
63 .86
62 .79
61 .72
60 .65
59 .61
58 .57
57 .53
56 .49
55 .45
(d-1) Such Prior Participant's Other Post-Retirement Benefits,
exclusive of his ESOP Offset, expressed as an Actuarial
Equivalent amount payable for the life of the Prior
Participant, with fifty percent (50%) continuation of such
amount to his Surviving Spouse,
(e-1) Such Prior Participant's Primary Social Security Benefit,
multiplied by clauses (b-1) and (c-1) above, or the Prior
Participant's actual Social Security benefit (or other
comparable benefits), if so provided by the Prior
Participant,
B. if, in the case of a Prior Participant who ceases to be an Employee
on or before April 27, 1991, his Special Years of Service for
purposes of the above clauses (a-1) and (b-1), but not for purposes
of calculating his Special Average Monthly Earnings or for any
other purpose, meant his Special Years of Service plus, in the case
of Mr. Kampouris, three (3) additional Special Years of Service,
and in the case of Messrs. Klug and Mack, two (2) additional
Special Years of Service (provided that in no case shall any Prior
Participant be deemed, for purposes of this sentence, to have more
Special Years of Service than he would have had if his employment
had terminated on the first of the month coinciding with or next
following his sixty-fifth (65th) birthday); and
C. if such monthly amount calculated pursuant to this sentence were
payable for the life of the Prior Participant, with continuation
for the life of his Surviving Spouse of fifty-percent (50%), minus
one percent (1%) for each year by which the age of such Surviving
Spouse is more than five (5) years lower than that of such Prior
Participant, of the sum of the amount determined under clauses
(a-1) and (b-1) above, less fifty percent (50%) of the sum of the
amounts determined under clauses (c-1) and (e) above.
Section 3 - Upon Death Before Retirement
If a Participating Employee is married, and has accumulated at least five
(5) Years of Service when he ceases to be an Employee due to his death,
his Surviving Spouse shall receive from the Corporation, no later than the
thirtieth (30th) day of the month immediately succeeding the month of his
death, a single lump-sum payment which shall be the Actuarial Equivalent
of a monthly payment, commencing with such succeeding month and continuing
for the lifetime of such Surviving Spouse, in an amount equal to the
product of the amounts determined in the below clauses (a), (b), (c) and
(d), with such result reduced by the amounts in the below clauses (e) and
(f).
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(a) The monthly payment that the Participating Employee would have
received computed under the below (i) and (ii), if he had
remained an Employee (with no change in his Average Monthly
Earnings) until, and if he had retired on, his sixty fifty (65th)
birthday:
(i) four percent (4%) of his Average Monthly Earnings,
multiplied by the number, not in excess of ten (10), of his
Years of Service, plus
(ii) one percent (1%) of his Average Monthly Earnings,
multiplied by the number of his Years of Service
accumulated after his first ten (10) Years of Service (to a
maximum of 20% of such Average Monthly Earnings),
(b) A fraction
(i) the numerator of which is the number of his Years of
Service, and
(ii) the denominator of which is the number of Years of Service
he would have accumulated if he had remained an Employee
until his sixty-fifth (65th) birthday,
(c) Fifty percent (50%), minus one percent (1%) for each full year by
which the age of the Surviving Spouse is more than five (5) years
lower than that of the Participating Employee,
(d) The percentage specified in clause (c) of Section 2 for the
Participating Employee's age at the time of his death,
(e) The Participating Employee's Other Post-Retirement Benefits,
(f) The Participating Employee's Primary Social Security Benefit,
multiplied by clauses (b), (c), and (d) above.
Notwithstanding the foregoing, the monthly amount derived under this
Section 3 shall not, with respect to the Surviving Spouse of a Prior
Participant, be less than the amount that would have been derived if
clauses (a) through (f) above had read as follows:
(a-1) The monthly payment that such Prior Participant would have
received computed under the below (i) and (ii), if he had
remained an Employee (with no change in his Special Average
Monthly Earnings) until, and if he had retired on, his sixty
fifty (65th) birthday:
(i) five percent (5%) of his Special Average Monthly Earnings,
multiplied by the number, not in excess of ten (10), of his
Years of Service, plus
(ii) one percent (1%) of his Special Average Monthly Earnings,
multiplied by the number of his Special Years of Service
accumulated after his first ten (10) Special Years of
Service (to a maximum of 20% of such Special Average
Monthly Earnings),
<PAGE>
<PAGE>
(b-1) A fraction
(i) the numerator of which is the number of his Special Years
of Service, and
(ii) the denominator of which is the number of Years of Service
he would have accumulated if he had remained an Employee
until his sixty-fifth (65th) birthday,
(c-1) Fifty percent (50%), minus one percent (1%) for each full
year by which the age of the Surviving Spouse is more than
five (5) years lower than that of the Prior Participant,
(d-1) The percentage specified in clause (c-1) of Section 2 for
the Prior Participant's age at the time of his death,
(e-1) The Prior Participant's Other Post-Retirement Benefits,
exclusive of his ESOP Offset,
(f-1) Such Prior Participant's Primary Social Security Benefit,
multiplied by clauses (b-1), (c-1) and (d-1) above, or the
Prior Participant's actual Social Security benefit (or
other comparable benefits), if so provided by the Prior
Participant.
Section 4 - Upon Death After Termination of Employment
If a Participating Employee described in Section 2 of this Article IV is
married when he dies after the termination of his employment but before
his receipt of the lump-sum payment to which he is entitled under said
Section, his Surviving Spouse shall receive from the Corporation, no later
than the thirtieth (30th) day of the month immediately following the month
of his death, a single lump-sum payment which shall be the Actuarial
Equivalent of the single lump-sum payment that such Participating Employee
would have received if the month that he designated for purposes of said
Section 2 had been the later of the month of his death and the month of
his fifty-fifth (55th) birthday and if he had survived through such month,
reduced by fifty percent (50%), minus one percent (1%) for each year by
which the age of the Surviving Spouse is more than five (5) years lower
than that of the Participating Employee.
<PAGE>
<PAGE>
ARTICLE V
FORFEITURES AND LIMITATIONS
Section 1 - Forfeiture of Benefits
Except with respect to the accrued benefit payable hereunder to a Prior Par-
ticipant (or his Surviving Spouse) based on such Prior Participant's
Special Years of Service and his Special Average Monthly Earnings, if the
Committee determines that any Participating Employee (or any recipient of a
benefit under the Program who had been a Participating Employee) has, while
or at any time after he ceased to be an Employee, directly or indirectly
engaged in any occupation in competition with, or has wrongfully disclosed
trade secrets of or confidential information relating to, or has
intentionally done any act materially harmful to the interests of, the
Corporation or any Subsidiary Company, the Committee may in its sole
discretion terminate or annul the payment of such benefit.
Section 2 - Inalienability of Benefits
No sale, transfer, anticipation, assignment, pledge or encumbrance of any
kind, at law or in equity, of any benefit under this Program shall be
permitted or recognized under any circumstances, and no benefit under this
Program shall be subject to attachment or other legal process.
Section 3 - Other Limitations
No benefit payable under the Program shall give rise to any offset or
shall be included in any reduction pursuant to Article III or any other
provision of the Retirement Plan or have any similar effect on any other
benefit payable under any other private benefit plan to which the
Corporation or any Subsidiary Company shall have contributed. Otherwise,
the Committee may from time to time determine whether the total benefits
payable to any individual under the Program and all other private benefit
plans to which the Corporation or any Subsidiary Company shall have
contributed shall be subject to any limitation as to amount other than as
provided elsewhere in the Program and/or in such other private plans, and,
if so, shall determine the amount of such limitation.
Section 4 - Minimum Benefit
Effective December 31, 1993, for a Prior Participant, a minimum benefit
calculated in accordance with the benefit formulas set forth in Section 1
or 2 of Article IV on the basis of his Special Average Monthly Earnings
and Special Years of Service shall be deemed fixed as of December 31, 1993
with respect to all elements of such formulas, including such Prior
Participant's Primary Social Security Benefit (which for this purpose
shall be determined as if the date of retirement occurred in the year
1993), but excluding the Actuarial Equivalent of such benefit.
<PAGE>
<PAGE>
For any Participating Employee, the portion of his benefit payable under
Section 1 or 2 of Article IV which is attributable to his Years of Service
and Average Monthly Earnings through December 31, 1993 shall not be less
than a minimum, which shall be deemed fixed as of December 31, 1993 and
shall be calculated on the basis of (x) a Primary Social Security Benefit
determined for a retirement occurring December 31, 1993, but increased by
five percent (5%) per annum for each whole calendar year between December
31, 1993 and the actual date of retirement and (y) an ESOP offset
determined as of December 31, 1993 and increased by twenty percent (20%)
per annum for each whole calendar year between December 31, 1993 and the
actual date of retirement. This provision shall not apply, however, to
calculation of the Actuarial Equivalent of the portion of a Participating
Employee's benefit under Section 1 or 2 of Article VI attributable to
Years of Service and Average Monthly Earnings through December 31, 1993.
<PAGE>
American Standard Inc.
Supplemental Compensation Plan for Outside Directors
(as amended as of January 1, 1993)
1. Definitions
(a) "Administrator" means the Secretary of the Company.
(b) "Beneficiary" means the single person or single trust
designated by a Participant in accordance with Section 9
to receive the payment provided by Section 4 in the event
of such Participant's death; provided that a Beneficiary
so designated by a Participant may be changed by such
Participant at any time upon written notice delivered the
Company in accordance with Section 9.
(c) "Board" means the Board of Directors of the Company.
(d) "Company" means American Standard Inc. or any successor
thereto by consolidation, merger or other reorganization.
(e) "ESOP" means the American-Standard Employee Stock
Ownership Plan, as in effect from time to time.
(f) "Financing Documents" means any indentures, credit
agreements or other debt instruments or agreements entered
into by Holding or any of its subsidiaries.
(g) "Holding" means ASI Holding Corporation.
(h) "Participant" means any director of the Company (other
than Messrs. Nickell and Schuchert) who is not an employee
of the Company. Participants are also referred to herein
as "Outside Directors".
(i) "Plan" means this Supplemental Compensation Plan for
Outside Directors, as set forth herein and as amended from
time to time.
(j) "Plan Account" means the account established for each
Participant pursuant to Section 2.
<PAGE>
<PAGE>
(k) "Prime Rate" means the minimum commercial lending rate in
effect from time to time as charged by Morgan Guaranty
Trust Company of New York on its New York loans.
(l) "Shares" means shares of common stock of Holding.
(m) "Unit" means the factor of $50,000 ($100,000 in the case
of any director first elected to the Board after January
1, 1993) calculated in accordance with Section 2.
2. Plan Accounts.
The Administrator shall establish a Plan Account hereunder
for each Participant as soon as he or she becomes a member of
the Board.
Whenever a Plan Account is established, the Administrator
shall credit to such Plan Account, no later than the date on
which the value, as of the December 31 immediately preceeding
the establishment of such Plan Account, of the Shares held in
the ESOP is appraised in accordance with and for purposes of
the ESOP, a number of Units and fractions thereof equal in
value to $50,000 ($100,000 in the case of any director first
elected to the Board after January 1, 1993), with the value of
each Unit for the purpose of calculating such credit being
equal to the value of each Share as so appraised as of such
December 31.
3. Forfeiture.
Upon the termination for cause of a Participant's
membership on the Board, there shall be forfeited all of the
Units and fractions thereof credited to his or her Plan
Account.
Units or fractions thereof forfeited pursuant to this
Section 3 shall not be allocated to the Plan Accounts of any
other Participants.
4. Payments.
Upon the termination of a Participant's Board membership
other than for cause, such Participant (or, if such termination
is due to his or her death, his or her Beneficiary) shall
receive from the Administrator a cash payment, net of any
required tax or other withholdings, in an amount equal to the
product of
(a) the number of Units and fractions thereof credited to
his or her Plan Account pursuant to Section 2,
<PAGE>
<PAGE>
multiplied by
(b) the value of one Share, as appraised in accordance
with and for purposes of the ESOP as of the December
31 immediately preceeding the earlier of the month in
which such Participant's Board membership terminates.
Such payment shall become due and owing thirty days after
the calculation of its amount pursuant to this Section 4 can be
made. No interest shall accrue on such payment before the date
on which it first becomes due and owing. Thereafter, such
payment shall accrue interest at the Prime Rate, compounded
annually, from the date such payment first becomes due and
owing in accordance with this Section 4 to the date such
payment is made.
5. Payment Limitations.
Notwithstanding Section 4, no payment shall be made
hereunder unless
(a) no default has occurred and is continuing under any
Financing Document, and
(b) such payment would not result in the occurrence of an
event of default under any Financing Document or
create a condition which would or (in the sole
judgment of the Administrator) might, with notice or
lapse of time or both, result in such an event of
default.
If this Section 5 requires a payment deferral, such
payment (together with any interest thereon accrued and
accruing pursuant to the last sentence of Section 4) shall
accrue interest at the Prime Rate, compounded annually, from
the date such payment became due and owing in accordance with
Section 4 to the date such payment is made, at which time (but
not before) the amount of any interest accrued pursuant to
Section 4 or this Section 5 shall also be paid.
6. Participant's Rights Unsecured.
The rights of Participants or Beneficiaries to receive
payments under the Plan shall be unsecured and unfunded claims
against the general assets of the Company.
7. Non-assignability
The right of a Participant or Beneficiary to the payment
provided in the Plan shall not be assigned, transferred,
pledged or encumbered or be subject in any manner to alienation
or anticipation.
<PAGE>
<PAGE>
8. Amendment and Termination
The Plan may at any time be amended, modified or
terminated by the Board; provided that no amendment,
modification or termination shall, without the consent of a
Participant, reduce the number of Units and fractions thereof
credited to such Participant's Plan Account pursuant to Section
2.
9. Notices.
All notices to the Company under this Plan, including a
Participant's designation of a Beneficiary, shall be in writing
and mailed or hand delivered to the Secretary of the Company at
its Corporate Headquarters.
10. Governing Law.
This Plan shall be governed by the laws of the State of
New York and shall be construed for all purposes in accordance
with the laws of said state.
<PAGE>
Amendment to Estate Preservation Plan
The section of the Plan entitled "Individual Income
Tax Effect" was amended on March 4, 1993, to read as follows:
Participants who are subject to U.S. income taxes,
plus other participants who are subject to foreign income tax
laws that would treat Company-paid premiums as taxable
income, will receive a compensation gross-up for any
additional income tax liability attributable to any payment
by the Company of premiums.
<PAGE>
Summary of Terms of
Unfunded Deferred Compensation Plan
Participants: Elected officers of the Corporation.
Deferred Items: All or part of an annual and/or long-term
incentive award.
Deferral period: Fixed - Minimum of 3 years
Earlier in event of death/disability/
termination
Deferral elections: Must be made before the determination of
the incentive payout.
Deferral payouts: Lump sum or installments
(Must be elected at time of deferral).
Interest on deferred amounts: Prime rate.
<PAGE>
December 28, 1993
Mr. H. Thompson Smith
6ll0 Covey Lane
Tyler, TX 75703
Dear Tom:
This letter agreement sets forth your arrangements and
agreements with American Standard Inc. (the "Company") and its
affiliates, including ASI Holding Corporation ("Holding"),
concerning the termination of your employment and your
retirement.
1. You have resigned as an officer and director of the
Company, Holding and any of their affiliates of which you are an
officer and/or director, and your employment with all of them
shall terminate on December 31, 1993. You hereby confirm that
all such resignations are voluntary on your part and are not for
"Good Reason" within the meaning of any plan or program in which
you are a participant including (without limitation) the
Company's Long-Term Incentive Compensation Plan (the "Long-Term
Plan") and its Severance Plan for Executive Officers.
2. On or before March 31, 1994, you will receive with
respect to the Company's Annual Incentive Plan an award for the
year 1993 which will be $154,000. You will also receive, on or
before March 31, 1995, a payment in the same amount. In the
event of your death before either such payment is made, it will
be paid to your estate.
3. With respect to the Long-Term Plan, you (or in the event
of your death, your Named Beneficiary under the Long-Term Plan)
will be entitled to receive the values of your Long-Term Award
Opportunities for the Long-Term Plan's 1991-1993 Performance
Period, its 1992-1994 Performance Period and its 1993-1995
Performance Period. Such values will be as determined and
calculated in accordance with the terms of the Long-Term Plan
and (if applicable) its trust agreement; they will be prorated
(as they pertain to the Long-Term Plan's 1992-1994 and 1993-1995
Performance Periods) to reflect your December 31, 1993
employment termination date; and such values will be paid if and
when they are distributed under the Long-Term Plan and (if
<PAGE>
<PAGE>
applicable) its trust agreement. In addition, you or your Named
Beneficiary will be entitled to a distribution of the value of
your account established under said trust agreement with respect
to the Long-Term Plan's 1990-1992 Performance Period when and to
the extent such distribution is made in accordance with the
terms of said trust agreement.
4. Your accounts in the Company's Savings Plan and the
American-Standard Employee Stock Ownership Plan (the "ESOP") are
fully vested and your rights and interests therein will be
governed by their respective terms. Contributions to such
accounts will cease as of your December 31, 1993 employment
termination date.
5. Your benefit under the Company's Retirement Plan accrued
through its June 30, 1988 termination date is fully vested in
accordance with the terms of the Retirement Plan, payable
through a monthly annuity from Aetna Life Insurance Company.
6. Your benefit under the Company's Executive Supplemental
Retirement Benefit Program (the "SERP"), accrued through your
December 31, 1993 employment termination date, is also fully
vested and will be paid to you in the form of a lump-sum
settlement calculated as specified in the SERP, no later than
December 31, 1993; provided that, in the event of your death
before receipt of such lump-sum settlement, in place thereof
your surviving spouse (if any) shall receive, in the form of a
lump-sum payment, the amount specified in Article IV, Section 4
of the SERP.
7. Through December 31, 1995 you will continue to have
active employee participation under the Company's Flexible
Benefit Program, reduced to the extent of any similar benefits
made available to you from another employer. Thereafter, you
will have retiree life insurance coverage, and you may elect
retiree medical coverage, under the terms then in effect of the
Flexible Benefit Program. In addition, you will have
Company-provided executive retiree life insurance coverage and
the life insurance coverage provided in accordance with the
terms of the Company's Estate Preservation Plan for Executive
Officers.
8. Commencing on January 1, 1994 and continuing through
December 31, 1995, you will be a consultant to the Company and
its affiliates. In that role, you will receive a consulting
fee, payable to you on a monthly basis commencing in January
1994 and continuing through December 1995, at the rate of
$29,583 per month, all such payments being subject to your
continuing compliance with your duties and obligations under
this letter agreement. In the event of your death before all
such monthly payments are made, all remaining consulting fee
payments shall be made in a single lump sum to your surviving
<PAGE>
<PAGE>
spouse or to your estate if your spouse does not survive you.
(None of such consulting fee payments will be treated as
compensation for purposes of the Company's Savings Plan, the
ESOP, the SERP or for purposes of any other benefits based on
compensation.) During such consulting period, you will be
required to perform consulting services consistent with
customary parctices, in all respects as an independent
contractor, only as and when reasonably requested by the
Company's President and subject to your reasonable time
contraints, in which case you will be reimbursed by the Company,
upon your presentation of appropriate documentation in
accordance with the Company's expense reimbursement policies,
for travel, meal and lodging expenses incurred in your
performance of consulting services as so requested.
9. You shall have the election specified in Section 2.2(c)
of your Stockholder Agreement dated as of July 7, l988, as
amended, with Kelso ASI Partners, L.P., Holding and the other
parties thereto (the "Stockholder Agreement") with respect to
the Purchase Price (as defined in the Stockholder Agreement) of
the 60,000 shares of Holding common stock issued to you pursuant
to the Stockholder Agreement, all of which shares shall be
repurchased by the Company or Holding as of your December 31,
1993 employment termination date. Payment of such Purchase
Price shall be made to you or your estate in accordance with the
terms of said Stockholder Agreement, including Section 4 thereof
and the Schedule of Payment Priorities as from time to time in
effect thereunder.
10. You shall at all times retain in confidence, and you
shall not disclose or comment upon any proprietary or
confidential information or materials of the Company and its
affiliates that are in your knowledge or possession, including
(without limitation) any information concerning the Company's
management, business operations, financial conditions, capital
and credit arrangements or any projections, forecasts or plans
with respect to any of the foregoing, all of which are strictly
confidential and proprietary to the Company.
11. Throughout the consulting period specified in 8 above,
you shall not, directly or indirectly, perform or undertake to
perform any services of any nature, as principal, employee,
agent, consultant, independent contractor or otherwise, for any
party which competes with any business activity currently being
conducted by the Company or any of its affiliates. You
acknowledge that the Company will suffer irreparable injury in
the event of your breach of this commitment and that the
Company, therefore, shall be entitled to obtain injunctive
relief, in addition to any other damages to which it may be
entitled, to restrain you from breaching or continuing any
breach of such commitment.
<PAGE>
<PAGE>
12. If the Company, in its sole discretion, determines that
any payment to you, your estate or your surviving spouse
hereunder is subject to income tax withholdings, the Company
will deduct from such payment, for remittance to the appropriate
taxing authority, such withholding amount as the Company, in its
sole discretion, determines to be appropriate.
13. The Company will reimburse you for the bills that you
receive and submit for financial planning and tax return
preparation assistance with respect to calendar years 1993 and
1994, including the preparation of your 1994 income tax returns,
in each case in accordance with the same procedures for such
reimbursement as are now in effect and applicable to you as an
executive officer of the Company.
The foregoing sets forth all the arrangements, payments and
other benefits you will receive in full satisfaction and
settlement of your rights under and interests in all of the
several agreements, plans and programs referred to above and any
and all other rights and obligations arising out of or in
connection with your employment by the Company or any of its
affiliates and the termination of such employment.
If this letter correctly and completely sets forth your
agreement with its subject matter, please indicate by signing
and returning to the undersigned the enclosed copy of this
letter for our files.
Very truly yours,
AMERICAN STANDARD INC.
ASI HOLDING CORPORATION
By:/s/ Adrian B. Deshotel
Vice President,
Human Resources
Confirmed and signed to as of
the date first above written
/s/ H. Thompson Smith
<PAGE>
PARENTS AND SUBSIDIARIES
AMERICAN STANDARD INC. (DELAWARE) - REGISTRANT
Subsid-
iaries*
U.S. SUBSIDIARIES:
The American Chinaware Company (Delaware)
American Standard International Inc. (Delaware)
Amstan Trucking Inc. (Delaware)
A-S Energy, Inc. (Texas)
It Holdings Inc. (Delaware)
Reefco Inc. (Delaware)
Standard Sanitary Manufacturing Company (Delaware)
The Trane Company (Delaware)
Trane Export, Inc. (Delaware)
WABCO Automotive Control Systems Inc. (Delaware)
WABCO Company (Pennsylvania)
World Standard Ltd. (Delaware)
(American Standard Inc., American Standard International Inc.,
WABCO Company and Standard Sanitary Manufacturing Company - Immediate
Parents)
Nether Holdings Inc. (Delaware)
FOREIGN SUBSIDIARIES:
Air Conditioning Products
(Wabco Standard French Holdings SNC - Immediate Parent)
Societe Trane (France)
(The Trane Company - Immediate Parent)
Trane S.A. (Switzerland)
(American Standard (U.K.) Limited - Immediate Parent)
Trane Limited (U.K.)
Trane (United Kingdom) Limited
Trane (Scotland) Limited
Transportation Products
(WABCO Standard GmbH, Nether Holdings Inc.,
Reefco Inc. and Ideal Standard S.p.A. - Immediate Parents)
WABCO-Standard Holdings B.V. (Netherlands)
WABCO Standard French Holdings SNC (France)
WABCO Westinghouse S.A. (France)
WABCO Westinghouse Equipements Automobiles SNC (France)
WABCO Westinghouse AG (Switzerland)
WABCO Westinghouse S.A. (Belgium)
WABCO Westinghouse B.V. (Netherlands) 1
(Ideal Standard S.p.A. and Nether Holdings Inc.
- Immediate Parents)
American Standard (U.K.) Limited (England)
Clayton Dewandre Holdings Ltd. (England)
WABCO Automotive UK Ltd. (England)
The Bridge Foundry Company Limited (England)
(Ideal Standard S.p.A.- Immediate Parent)
WABCO Westinghouse Automotive Products S.p.A. (Italy)
<PAGE>
<PAGE>
PARENTS AND SUBSIDIARIES - (Continued) Subsid-
iaries*
Transportation Products - (Continued)
(Wabco Standard Trane Inc. - Immediate Parent)
Westinghouse Air Brake Brasil S.A. (Brazil)
(Nether Holdings Inc., American Standard International Inc.,
Standard Sanitary Manufacturing Company - Immediate Parents)
WABCO Standard GmbH (Germany)
WABCO Vermogensverwaltungs GmbH (Germany) 2
Perrot Bremsen GmbH (Germany)
Building Products
(American Standard Inc. - Immediate Parent)
American Standard Sanitaryware (Thailand) Limited (Thailand)
EBS Eczacibasi Banyo Kuvetleri Sanayi Ve Ticaret A.S. (Turkey)
Egyptian American Sanitary Wares Co. S.A.E. (Egypt)
Hua Mei Sanitary Ware Company Ltd. (P.R. China)
American Standard Philippine Holdings Inc. (Philippines)
Sanitary Wares Manufacturing Corporation (Philippines)
Waterex Inc. (Japan)
(Wabco Standard French Holdings SNC - Immediate Parent)
Ideal-Standard S.A. (France)
(Westinghouse Air Brake Brasil S.A. - Immediate Parent)
Ideal Standard Wabco Industria e Comercio Ltda. (Brazil) (a)
(American Standard (U.K.) Limited - Immediate Parent)
Ideal-Standard Limited (England)
(Nether Holdings Inc. - Immediate Parent)
WABCO Standard Trane Inc. (Canada) (b)
Ideal-Standard, S.A. de C.V. (Mexico) 1
Ideal Standard S.p.A. (Italy)
Ideal Standard S.A. (Greece)
Sanistan B.V. (Netherlands)
(Nether Holdings Inc., American Standard International Inc. and
Standard Sanitary Manufacturing Company - Immediate Parents)
WABCO Standard GmbH (Germany)
Ideal-Standard GmbH (Germany)
American Standard Korea, Inc. (Korea)
Miscellaneous
Standard Europe (EEIG)(France) (c)
All of the companies listed above operate under their company names and
use one or more of the trademarks listed under "Patents and Trademarks" of
Item 1 of this annual report on Form 10-K.
* The number shown under this heading indicates other subsidiaries,
not listed by name herein, which are in the same line of business.
The name of the immediate parent of such subsidiary or subsidiaries
appears opposite the number.
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PARENTS AND SUBSIDIARIES - (Continued)
(a) This subsidiary participates in Building Products and Transportation
Products.
(b) This subsidiary participates in Building Products and Air
Conditioning Products.
(c) A European Economic Interest Grouping organized by certain French
and Italian subsidiaries of the Company.
There are omitted from the table a number of minor or inactive or
name-saving subsidiaries, all of which together would not constitute a
significant subsidiary.
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