<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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.)
One Centennial Avenue, Piscataway, NJ 08855-6820
- ------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 980-6000
--------------
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock, $.01 par value, outstanding at
October 31, 1994 1,000
----------------
(shares)
<PAGE> 2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN STANDARD INC. AND SUBSIDIARIES
UNAUDITED SUMMARY STATEMENT OF OPERATIONS
The following summary statement of operations of American Standard Inc. (the
"Company") and subsidiaries for the three months and nine months ended
September 30, 1994 and 1993 has not been audited, but management believes that
all adjustments, consisting of normal recurring items, necessary to a fair
statement for those periods have been included. Results for the three- and
nine-month periods of 1994 are not necessarily indicative of results for the
entire year.
<TABLE>
<CAPTION>
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES $ 1,188.8 $ 976.5 $ 3,308.9 $ 2,851.4
--------- --------- --------- ---------
COSTS AND EXPENSES
Cost of sales 883.5 727.7 2,487.1 2,132.7
Selling and administrative expenses 203.0 171.4 569.5 511.9
Other expense 10.5 7.2 24.9 26.8
Interest expense 65.6 66.1 194.3 213.6
--------- --------- --------- ---------
1,162.6 972.4 3,275.8 2,885.0
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS 26.2 4.1 33.1 (33.6)
Income taxes 15.1 7.2 46.7 21.4
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
EXTRAORDINARY LOSS 11.1 (3.1) (13.6) (55.0)
Extraordinary loss - - - (91.9)
--------- --------- --------- ---------
NET INCOME (LOSS) 11.1 (3.1) (13.6) (146.9)
Preferred stock dividend - - - (8.6)
--------- --------- --------- ---------
NET INCOME (LOSS) APPLICABLE
TO COMMON SHARES $ 11.1 $ (3.1) $ (13.6) $ (155.5)
========= ========= ========= =========
</TABLE>
See accompanying notes
2
<PAGE> 3
Item 1. Financial Statements (continued)
AMERICAN STANDARD INC. AND SUBSIDIARIES
UNAUDITED SUMMARY BALANCE SHEET
(Dollars in millions)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
------------ -----------
<S> <C> <C>
CURRENT ASSETS
Cash and certificates of deposit $ 62.9 $ 53.2
Cash in escrow - .9
Accounts receivable 649.6 507.3
Inventories
Finished products 237.6 169.0
Products in process 88.0 78.0
Raw materials 94.9 78.8
-------- --------
420.5 325.8
Other current assets 59.5 54.5
-------- --------
TOTAL CURRENT ASSETS 1,192.5 941.7
FACILITIES, less accumulated depreciation:
Sept. 1994 - $429.6; Dec. 1993 - $354.6 800.6 820.5
GOODWILL 1,073.8 1,025.8
OTHER ASSETS 214.2 203.4
-------- --------
$3,281.1 $2,991.4
======== ========
CURRENT LIABILITIES
Loans payable to banks $ 100.0 $ 38.0
Current maturities of long-term debt 130.1 106.0
Accounts payable 304.2 307.3
Accrued payrolls 157.5 99.8
Other accrued liabilities 358.5 258.3
Taxes on income 36.5 47.0
-------- --------
TOTAL CURRENT LIABILITIES 1,086.8 856.4
LONG-TERM DEBT 2,144.8 2,191.7
OTHER LIABILITIES 713.5 636.8
-------- --------
TOTAL LIABILITIES 3,945.1 3,684.9
STOCKHOLDER'S DEFICIT
Preferred stock, Series A, 1,000 shares
issued and outstanding, par value $.01 - -
Common stock, 1,000 shares
issued and outstanding, $.01 par value - -
Capital surplus 220.6 211.3
Accumulated deficit (763.6) (750.0)
Foreign currency translation effects (115.4) (149.2)
Minimum pension liability adjustment (5.6) (5.6)
-------- --------
TOTAL STOCKHOLDER'S DEFICIT (664.0) (693.5)
-------- --------
$3,281.1 $2,991.4
======== ========
</TABLE>
See accompanying notes
3
<PAGE> 4
Item 1. Financial Statements (continued)
AMERICAN STANDARD INC. AND SUBSIDIARIES
UNAUDITED SUMMARY STATEMENT OF CASH FLOWS
(Dollars in millions)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1994 1993
----------- -----------
<S> <C> <C>
Cash provided (used) by -
Operating activities:
Net loss before extraordinary loss $ (13.6) $ (55.0)
Depreciation and asset loss provision 95.3 81.0
Amortization of goodwill 23.4 23.2
Non-cash interest 39.5 52.0
Accrued interest 31.5 36.6
Amortization of debt issuance costs 11.0 8.4
Non-cash stock compensation 21.0 19.0
Changes in working capital invested in operations (128.4) (88.5)
Timing differences in funding 47.7 (3.3)
-------- --------
127.4 73.4
-------- --------
Investing activities:
Purchase of property, plant and equipment (50.3) (46.3)
Investment in affiliated companies (12.9) (8.1)
Proceeds from disposals of property, plant
and equipment 11.1 2.1
Other (2.1) 4.5
-------- --------
(54.2) (47.8)
-------- --------
Financing activities:
Proceeds from issuance of senior securities - 650.0
Proceeds from term loans - 750.0
Repayment of term loans (101.3) (454.6)
Repayment of senior securities - (915.9)
Premiums on redemption of senior securities - (44.9)
Net revolver borrowings 62.5 91.4
Net decrease in short-term debt (12.8) (54.6)
Proceeds from other long-term debt 9.3 3.6
Repayments of other long-term debt (16.6) (11.5)
Purchase of ASI Holding stock (4.3) (3.6)
Purchase of ASI Holding stock from ESOP (3.7) (3.3)
Capital contribution from parent .4 .4
Other financing costs - (77.0)
-------- --------
(66.5) (70.0)
-------- --------
Increase (decrease) in cash and certificates of
deposit excluding translation effects 6.7 (44.4)
Effect of exchange rate changes on cash and
certificates of deposit 3.0 (2.6)
-------- --------
Net increase (decrease) in cash and
certificates of deposit 9.7 (47.0)
Cash and certificates of deposit at beginning of period 53.2 111.5
-------- --------
Cash and certificates of deposit at end of period $ 62.9 $ 64.5
======== ========
</TABLE>
See accompanying notes
4
<PAGE> 5
AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO SUMMARY FINANCIAL STATEMENTS
(1) Included in the nine months ended September 30, 1994, are charges
of $26 million related to: employee severance ($20 million); the consolidation
of production facilities ($5 million); and the implementation of other cost
reduction actions ($1 million). Other than costs related to the consolidation
of production facilities (which costs will be liquidated over several years),
these charges will be paid by June 30, 1995. In addition the 1994 period
includes $14 million of reserves for losses on operating assets expected to be
disposed of prior to the expiration of their originally estimated useful
lives. Of the total of $40 million, $36 million was included in cost of
sales. The comparable period of 1993 included $8 million of charges for plant
shutdowns and other cost reduction actions.
(2) As described in Note 5 of Notes to Consolidated Financial
Statements for the year ended December 31, 1993, there are pending German tax
issues for the years 1984 through 1990. There has been no significant change
in the status of these issues since December 31, 1993.
(3) On October 21, 1994, the Company's existing credit agreement (the
"Existing Credit Agreement") was amended to provide for an additional term loan
of $325 million (the "October Borrowing") to the Company, the proceeds of which
will be applied to redeem on November 21, 1994, all of the $316.8 million in
aggregate principal amount of the Company's 14-1/4% Subordinated Discount
Debentures and 12-3/4% Junior Subordinated Debentures and to pay redemption
premiums of $4.4 million and debt issuance costs of $3.8 million. The Company
will incur an extraordinary loss estimated to be $8.7 million related to
redemptions of debt described above. The Company entered into an interest rate
swap agreement to fix the interest rate on the October Borrowing at 8.94% for a
period of 105 days commencing October 25, 1994.
(4) The Company has filed a registration statement with the Securities
and Exchange Commisision pursuant to which it plans to offer common stock to
the public both in the U.S. and outside the U.S. (the "Offerings"). If
completed, the Offerings are anticipated to provide gross proceeds of
approximately $300 million to the Company (assuming no exercise of the
Underwriters' over-allotment options). The net proceeds of the Offering would
be used to reduce bank borrowings.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
American Standard Inc. was acquired by American Standard Companies Inc.
(formerly named ASI Holding Corporation), a Delaware Corporation, on
April 27, 1988. As a result of this acquisition, results of operations since
that date include purchase price accounting adjustments and reflect a highly
leveraged capital structure.
SUMMARY SEGMENT DATA
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
SALES: 1994 1993 1994 1993
------ ------- ------ ------
<S> <C> <C> <C> <C>
Air Conditioning Products $ 693 $ 564 $1,861 $1,556
Plumbing Products 308 278 905 875
Transportation Products 188 134 543 420
------ ------ ------ ------
Total sales $1,189 $ 976 $3,309 $2,851
====== ====== ====== ======
OPERATING INCOME:
Air Conditioning Products $ 66 $ 58 $ 164 $ 123
Plumbing Products 29 22 88 87
Transportation Products 19 14 39 34
------ ------ ------ ------
Total operating income 114 94 291 244
Interest expense 66 66 194 213
Corporate costs 22 24 64 65
------ ------ ------ ------
Income (loss) before income taxes
and extraordinary loss $ 26 $ 4 $ 33 $ (34)
====== ====== ====== ======
</TABLE>
6
<PAGE> 7
RESULTS OF OPERATIONS: THIRD QUARTER AND FIRST NINE MONTHS OF 1994 COMPARED
WITH THIRD QUARTER AND FIRST NINE MONTHS OF 1993
Consolidated sales for the third quarter of 1994 were $1,189 million, an
increase of $213 million, or 22% (20% excluding the favorable effects of
foreign exchange), from $976 million in the third quarter of 1993. Sales
increased for all three segments with gains of 23% for Air Conditioning
Products, 11% for Plumbing Products, and 40% for Transportation Products.
Operating income for the third quarter of 1994 was $114 million, an
increase of $20 million, or 21% (18% excluding the favorable effects of foreign
exchange), from $94 million in the third quarter of 1993. Operating income
increased 14% for Air Conditioning Products, 32% for Plumbing Products, and 36%
for Transportation Products.
Consolidated sales for the first nine months of 1994 were $3,309 million,
an increase of $458 million, or 16% (with little effect from foreign exchange),
from $2,851 million for the first nine months of 1993. Sales increased for all
three segments with gains of 20% for Air Conditioning Products, 3% for Plumbing
Products, and 29% for Transportation Products.
Operating income for the first nine months of 1994 was $291 million, an
increase of $47 million, or 19% (with little effect from foreign exchange),
from $244 million in first nine months of 1993. Operating income increased 33%
for Air Conditioning Products, was flat for Plumbing Products, and increased
15% for Transportation Products. Operating income for the first nine months of
1994 reflected charges (recorded in the second quarter) of $26 million related
to: employee severance ($20 million); the consolidation of production
facilities ($5 million); and the implementation of other cost reduction actions
($1 million). Other than costs related to the consolidation of production
facilities (which costs will be liquidated over several years), these charges
will be paid by June 30, 1995. In the second quarter of 1994, the Company also
provided $14 million of reserves for losses on operating assets expected to be
disposed of prior to the expiration of their originally estimated useful lives.
The first nine months of 1993 included $8 million of charges for plant
shutdowns and other cost reduction actions. Excluding those charges from the
respective nine month periods, operating income would have increased to $331
million from $252 million, or 31%, in the 1994 period over the 1993 period.
Sales of Air Conditioning Products increased 23% (with little effect from
foreign exchange) to $693 million for the third quarter of 1994 from $564
million for the third quarter of 1993. The Unitary Products Group achieved a
gain of 25% because of higher volume (as a result of improved markets and gains
in market share) and a shift to newer, larger-capacity, higher-efficiency
products, offset in part by the effect of lower prices for certain products due
to competitive pressures. Sales of the Commercial Systems Group increased by
16% primarily because of improved markets, gains in market share, and the
acquisition of additional sales offices in the latter
7
<PAGE> 8
RESULTS OF OPERATIONS: THIRD QUARTER AND FIRST NINE MONTHS OF 1994 COMPARED
WITH THIRD QUARTER AND FIRST NINE MONTHS OF 1993
half of 1993. For the International Group sales increased 31%, principally due
to volume increases in the Far East and Latin America. For the first nine
months of 1994 sales of Air Conditioning Products increased 20% (with little
effect from foreign exchange) to $1,861 million from $1,556 million for the
first nine months of 1993, for the same reasons cited for the third quarter
gains.
Operating income of Air Conditioning Products increased 14%, to $66
million in the third quarter of 1994 from $58 million in the third quarter of
1993. This gain was primarily the result of increased operating income for the
Unitary Products Group because of higher sales and cost reductions offset
partly by an overall loss for the International Group. The Commercial Systems
Group was flat with the third quarter of 1993, as volume gains in the U.S. were
offset by lower prices and lower results in Canada. Despite higher sales, the
International Group experienced an overall decrease in operating results; a
decline for the European group was partly offset by a small gain for the Latin
American and Far East operations. The decline in European group results was
attributable to continued poor economic conditions and competitive pricing
pressures. The improvement in Latin American and Far East Operations was
principally attributable to higher sales. Operating income for Air Conditioning
Products for the first nine months of 1994 increased 33% to $164 million from
$123 million for the first nine months of 1993, principally for the reasons
cited for the third quarter and volume gains for the Commercial Systems Group
in the first half of 1994.
Sales of Plumbing Products increased 11% (8% excluding the favorable
effects of foreign exchange) to $308 million for the third quarter of 1994 from
$278 million for the third quarter of 1993. The improvement resulted from
sales increases of 7% (4% excluding the favorable effects of foreign exchange)
for the European Plumbing Products Group and 32% for the U.S. Plumbing Products
Group, offset partly by a decline of 4% for the Far East and Americas
International Groups on a combined basis. Sales of the European Plumbing
Products Group increased primarily because of volume and price gains as
economic conditions in several countries (particularly Italy, the United
Kingdom ("U.K.") and Germany) showed modest improvement over the prior year
period. Sales of the U.S. Plumbing Products Group increased as a result of
improved markets and an expanded retail customer base. Exchange-adjusted sales
decreased overall for the Far East Group primarily because of the
deconsolidation of operations in the People's Republic of China (the "PRC")
which in April 1994 were contributed to a new joint venture, American Standard
China Plumbing Products Limited ("ASPPL"); otherwise Far East sales increased
(primarily due to higher volumes in Thailand). The Americas International
Group also declined (primarily due to lower sales in Canada where poor
economic conditions continued, and in Brazil, offset partly by an increase in
Mexico). Sales for Plumbing Products increased 3% (6% excluding the
unfavorable effects of foreign exchange) to $905 million for the first nine
months of 1994 from $875 million for the first nine months of 1993, primarily
for the reasons mentioned for the third quarter.
8
<PAGE> 9
RESULTS OF OPERATIONS: THIRD QUARTER AND FIRST NINE MONTHS OF 1994 COMPARED
WITH THIRD QUARTER AND FIRST NINE MONTHS OF 1993
Operating income of Plumbing Products was $29 million in the third
quarter of 1994 compared with $22 million for the similar period of 1993, an
increase of 32% (21% excluding the favorable effects of foreign exchange).
Operating income for the European Plumbing Products Group increased because of
price and volume gains in Italy, the U.K. and Germany, and cost reductions in
most operations. Results for the U.S. Plumbing Products Group improved because
of the higher sales and cost reductions. Operating income of the Far East and
Americas International Groups on a combined basis decreased because of the
deconsolidation of operations in the PRC, a larger loss in Canada and decreased
profitability in Brazil and the Philippines, partly offset by increased
operating income in Thailand and Korea. Operating income for the Plumbing
Products Group for the first nine months of 1994 was $88 million compared with
$87 million for the first nine months of 1993, primarily for reasons
corresponding to those cited for the third quarter. This improvement was
achieved despite a loss provision in the second quarter of 1994 of $14 million
related to certain assets (principally machinery and equipment used in the
production of chinaware) that will be disposed of prior to the expiration of
their originally estimated useful lives. Overall Plumbing Products results
were also negatively affected by a provision of $5 million related to employee
severance compared with $1 million of similar charges in 1993. Excluding these
provisions from the respective periods operating income would have increased
to $107 million from $88 million, or 22%, in the nine-month 1994 period over
the 1993 period.
Sales of Transportation Products for the third quarter of 1994 were $188
million, an increase of 40% (32% excluding the favorable effects of foreign
exchange), from $134 million in the first quarter of 1993. More than half of
the gain resulted from a 34% increase in the unit volume of truck and bus
production in Western Europe and a 6% increase in aftermarket sales.
Approximately 35% of the gain (on an exchange-adjusted basis) was the sales of
Perrot ($16 million), a German brake manufacturer which was acquired in January
1994. Sales volumes were significantly higher in the U.K. (as a result of the
growing utility vehicle business in that country), in Sweden (where truck
manufacturing increased by approximately 50%), and in Brazil, France and Spain
where demand also increased. Sales of Transportation Products for the first
nine months of 1994 were $543 million, an increase of 29% (with little effect
from foreign exchange), from $420 million in the first nine months of 1993, as
similar volume increases have been achieved in all three quarters of 1994
compared to the prior year periods, as well as the sales of Perrot ($46
million).
Operating income for Transportation Products was $19 million in the
third quarter of 1994, an increase of 36% (31% excluding the effects of foreign
exchange) compared with $14 million in the third quarter of 1993. The increase
was primarily attributable to increased sales volume and the effect of cost
reductions, partly offset by a small loss experienced by the Perrot operation.
Operating income for the first nine months of 1994 was $39 million, an increase
of 15% (with little effect from foreign exchange) compared with $34 million in
the first nine months of 1993, for the same reasons cited for the third
quarter. That increase was achieved
9
<PAGE> 10
RESULTS OF OPERATIONS: THIRD QUARTER AND FIRST NINE MONTHS OF 1994 COMPARED
WITH THIRD QUARTER AND FIRST NINE MONTHS OF 1993
despite charges of $14 million recorded in the second quarter of 1994 related
to employee severance ($10 million) and the consolidation of production
facilities ($4 million). Charges of a similar nature in the 1993 nine month
period totalled $2 million. Excluding those charges from the respective
periods, operating income would have increased to $53 million from $36 million,
or 47%, in the 1994 period over the 1993 period.
Financial Review
The Company's financing and corporate costs for the third quarter of
1994 were $88 million, a decrease from $90 million in the third quarter of
1993. Corporate costs decreased $2 million primarily because of favorable
foreign exchange transaction effects. The Company's financing and corporate
costs for the first nine months of 1994 were $258 million, a decrease from $278
million in the first nine months of 1993. As a result of lower overall
interest rates on debt issued as part of the 1993 Refinancing ("the 1993
Refinancing"), interest expense decreased $19 million, despite a $9 million
increase in interest expense related to the 12-3/4% Junior Subordinated
Debentures issued in June 1993 in exchange for the Company's 12-3/4%
Exchangeable Preferred Stock.
For the three months and nine months ended September 30, 1994 the income
tax provisions were $15 million and $47 million, respectively, on income before
income taxes and extraordinary loss of $26 million and $33 million,
respectively. The tax provisions for the three and nine months ended September
30, 1993 were $7 million and $21 million, respectively, despite $4 million of
income before income taxes and extraordinary loss for the third quarter, and a
$34 million loss before income taxes and extraordinary loss for the nine month
period. These provisions reflected the annualized estimate of taxes payable on
those foreign operations that are expected to be profitable, offset partly in
the 1993 period by tax benefits from certain foreign net operating losses. The
provision for the three month and nine month periods of 1994 was adversely
affected by less favorable tax treatment with respect to certain foreign
income, primarily in Germany (see "Liquidity and Capital Resources"). The
unusual relationship between the pre-tax results and the tax provision for all
periods 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 1993 Refinancing the nine-month period of 1993
included an extraordinary charge of $92 million related to the debt retired
(including call premiums, the write-off of unamortized debt issuance costs, and
loss on cancellation of foreign currency swap contracts), on which no tax
benefit was available.
10
<PAGE> 11
RESULTS OF OPERATIONS: THIRD QUARTER AND FIRST NINE MONTHS OF 1994 COMPARED
WITH THIRD QUARTER AND FIRST NINE MONTHS OF 1993
Liquidity and Capital Resources
Net cash provided by operating activities, after cash interest paid of
$114 million, was $127 million for the nine months ended September 30, 1994,
compared with $73 million in the comparable period of 1993. The $54 million
increase resulted primarily from improved operating results ($41 million), a
non-cash asset loss provision ($14 million) and an increase in timing
differences in funding ($51 million, principally accruals for severance and
facilities consolidations, income taxes and employee compensation), offset in
part by a decrease in non-cash interest costs ($13 million) and an increase in
working capital invested in operations during the 1994 period ($40 million,
principally attributable to higher sales volumes). The other principal source
of cash was net borrowings of $63 million from the $242 million revolving
credit facility (the "Revolving Credit Facility") available under the Company's
Existing Credit Agreement. The principal uses of cash in the 1994 period were
repayments of $101 million of bank term loans and capital expenditures of $63
million, including $13 million of investments in affiliated companies.
In October 1994 the Existing Credit Agreement was amended to provide an
additional term loan of $325 million to the Company, the net proceeds of which
will be used to redeem on November 21, 1994, $316.8 million in aggregate
principal amount of the Company's 14-1/4% Subordinated Discount Debentures Due
2003 and 12-3/4% Junior Subordinated Debentures Due 2003 and to pay redemption
premiums of $4.4 million and debt issuance costs of $3.8 million.
The Company has filed a registration statement pursuant to which it
plans to offer to the public common stock, both in the U.S. and outside the
U.S. (the "Offerings"). If completed the Offerings are anticipated to provide
gross proceeds of approximately $300 million to the Company (assuming no
exercise of the underwriters' over-allotment options). The net proceeds of the
Offerings would be used to reduce bank borrowings. The Company is also seeking
to amend and restate its Existing Credit Agreement to provide for increased
borrowing capacity, less restrictive covenants and lower interest costs (the
"New Credit Facility").
As of September 30, 1994, there was $118 million available under the
Revolving Credit Facility after reduction for borrowings and for $54 million of
letters of credit outstanding thereunder. In addition, the Company's foreign
subsidiaries had $60 million available under overdraft facilities which can be
withdrawn by the banks at any time.
Through 1998 after giving effect to the October Borrowing and the
application of net proceeds therefrom, the Company's annual
11
<PAGE> 12
RESULTS OF OPERATIONS: THIRD QUARTER AND FIRST NINE MONTHS OF 1994 COMPARED
WITH THIRD QUARTER AND FIRST NINE MONTHS OF 1993
scheduled debt maturities will approximate $130 million. Those maturities do
not reflect the anticipated reduction upon completion of the Offerings and the
application of the proceeds therefrom to further reduce debt. The Company
believes that the amounts available from operating cash flows, funds available
under the Revolving Credit Facility and future debt or equity financings
(including the Offerings, and the New Credit Facility) will be sufficient to
meet its expected cash needs and planned capital expenditures for the
foreseeable future.
In February 1994 the Company obtained an amendment to the Existing
Credit Agreement that among other things relaxed certain financial tests and
covenants. The Company believes that it will comply with the amended financial
tests and covenants but may have to obtain similar amendments or waivers in the
future.
In connection with examinations of the tax returns of American
Standard'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 (using
September 30, 1994 exchange rates) 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 (principally relating to
the 1988 to 1990 period) resulting in additional taxes of up to approximately
$120 million (using September 30, 1994 exchange rates), plus interest, for the
tax return years under audit. In addition, significant transactions similar to
those which gave rise to the possible adjustments referred to above occurred in
years subsequent to 1990. If the German tax authorities should propose
adjustments for the 1988-1990 period, they might, after future tax audits,
propose tax adjustments that are comparable for years 1991 to 1993. American
Standard, on the basis of the opinion of German legal counsel, believes the tax
returns are substantially correct as filed and any such adjustments would be
inappropriate and intends to contest vigorously any adjustments which have been
or may be assessed. Accordingly, the Company had not recorded any loss
contingency at September 30, 1994 with respect to such matters.
Under German tax law, if an assessment is made for the years under
audit, the authorities may demand immediate payment of the amount assessed
prior to final resolution of the issues. (The same principles would apply as
to any assessment in connection with possible audits for subsequent years.)
American Standard believes, however, on the basis of the opinion of German
legal counsel, that it is highly likely that a suspension of payment pending
final resolution would be obtained. If immediate payment were 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 subsequent results of operations for any particular quarterly
or annual period, could be adversely affected.
As a result of recent changes in German tax legislation, the Company's
tax provisions in 1994 and thereafter will be higher in Germany. As a result
of this German tax legislation and the related additional tax provisions, the
Company believes its exposure to the issues under the audit referred to above
will be reduced for 1994 and future years.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
EX-27 Financial Data Schedule
(b) Reports on Form 8-K for the quarter ended September 30, 1994.
None
13
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN STANDARD INC.
By: G. Ronald Simon
(Vice President and Controller)
(also signing as Principal
Accounting Officer)
November 10, 1994
14
<PAGE> 15
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description Page No.
- ---------- ------------------ ------------
Ex-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000005850
<NAME> AMERICAN STANDARD INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 59,154
<SECURITIES> 3,770
<RECEIVABLES> 669,968
<ALLOWANCES> 20,338
<INVENTORY> 420,494
<CURRENT-ASSETS> 1,192,508
<PP&E> 1,230,222
<DEPRECIATION> 429,645
<TOTAL-ASSETS> 3,281,073
<CURRENT-LIABILITIES> 1,086,802
<BONDS> 2,144,840
<COMMON> 0
0
0
<OTHER-SE> (644,113)
<TOTAL-LIABILITY-AND-EQUITY> 3,281,073
<SALES> 3,308,933
<TOTAL-REVENUES> 3,308,933
<CGS> 2,487,091
<TOTAL-COSTS> 2,487,091
<OTHER-EXPENSES> 24,864
<LOSS-PROVISION> 7,161
<INTEREST-EXPENSE> 194,334
<INCOME-PRETAX> 33,106
<INCOME-TAX> 46,702
<INCOME-CONTINUING> (13,596)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,596)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
