<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 1994.
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
Form S-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------------------
AMERICAN STANDARD COMPANIES INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3465896
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
One Centennial Avenue
P.O. Box 6820
Piscataway, NJ 08855-6820
(908) 980-6000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------
Richard A. Kalaher, Esq.
Acting General Counsel & Acting Secretary
American Standard Companies Inc.
One Centennial Avenue
P.O. Box 6820
Piscataway, NJ 08855-6820
(908) 980-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
Copies to:
<TABLE>
<S> <C>
Paul H. Wilson, Jr., Esq. Michael A. Becker, Esq.
Debevoise & Plimpton Cahill Gordon & Reindel
875 Third Avenue 80 Pine Street
New York, New York 10022 New York, New York 10005
(212) 909-6000 (212) 701-3000
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- ------------------------------------------------------------------------------------------------
Common Stock ($.01 par value)..... 15,525,000 $22 $341,550,000 $117,785
- ------------------------------------------------------------------------------------------------
Common Stock Rights(3)............ 15,525,000 NA NA NA
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes up to 2,025,000 shares the Underwriters may purchase to cover
over-allotments, if any. Also includes up to 4,605,000 shares (including
shares that may be sold pursuant to the over-allotment option) that are to
be offered outside the United States but may be sold or resold from time to
time in the United States under circumstances requiring the delivery of a
prospectus.
(2) Estimated pursuant to Rule 457 under the Securities Act of 1933 solely for
purposes of calculating the registration fee.
(3) See "Description of Capital Stock -- Certain Provisions Relating to Changes
in Control -- Stockholders' Rights Agreement."
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
AMERICAN STANDARD COMPANIES INC.
CROSS REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501(B),
SHOWING LOCATION OF INFORMATION REQUIRED BY ITEMS ON FORM S-2
<TABLE>
<CAPTION>
FORM S-2 ITEM NUMBER AND CAPTIONS LOCATION OR CAPTION IN PROSPECTUS
- ------------------------------------------------- --------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................ Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges.............. Prospectus Summary; Certain Investment
Considerations; Summary Historical
Financial Data; Summary Pro Forma
Financial Data
4. Use of Proceeds............................. Use of Proceeds
5. Determination of Offering Price............. Underwriting
6. Dilution.................................... Dilution
7. Selling Security Holders.................... *
8. Plan of Distribution........................ Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered................................ Description of Capital Stock
10. Interests of Named Experts and Counsel...... *
11. Information with Respect to the Registrant
(a) Description of Business................. Prospectus Summary; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business
(b) Financial Statements.................... Consolidated Financial Statements
(c) Industry Segments....................... Prospectus Summary; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business
(d) Market Price and Dividends on
Registrant's Common Equity and Related
Stockholders' Matters.................. Dividend Policy; Description of Capital
Stock
(e) Selected Financial Data................. Pro Forma Financial Data; Selected
Historical Consolidated Financial Data
(f) Supplementary Financial Information..... Selected Historical Consolidated Financial
Data and Consolidated Financial Statements
(g) Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
(h) Disagreements with Accountants on
Accounting and Financial Disclosure.... *
12. Incorporation of Certain Information by
Reference................................. Inside Front Cover Page
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Part II
</TABLE>
- ---------------
*Not applicable or answer is in the negative.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 10, 1994
13,500,000 SHARES
AMERICAN STANDARD COMPANIES INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
-------------------
Of the 13,500,000 shares of Common Stock offered, 9,500,000 shares are
being offered hereby in the United States and 4,000,000 shares are being offered
in a concurrent international offering outside the United States. The initial
public offering price and the aggregate underwriting discount per share are
identical for both offerings (collectively, the "Offerings"). See
"Underwriting".
All of the shares of Common Stock offered are being issued and sold by the
Company. None of the Company's current stockholders, including Kelso ASI
Partners, L.P., the Company's majority stockholder, the American-Standard
Employee Stock Ownership Plan or management stockholders, will sell any Common
Stock in the Offerings.
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price per share will be between $ and $ . For factors to be considered
in determining the initial public offering price, see "Underwriting".
SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
Application will be made to list the Common Stock on the New York Stock
Exchange.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
---------------------------------------------------------------
<S> <C> <C> <C>
Per Share................ $ $ $
Total(3)................. $ $ $
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days after
the date of this Prospectus to purchase up to an additional 1,420,000 shares
at the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. Additionally, an over-allotment
option on 605,000 shares has been granted by the Company as part of the
international offering. If such options are exercised in full, the total
initial public offering price, underwriting discount and proceeds to the
Company will be $ , $ and $ , respectively. See
"Underwriting".
-------------------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
, 1995.
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
MORGAN STANLEY & CO.
INCORPORATED
SMITH BARNEY INC.
------------------------
The date of this Prospectus is , 1995.
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
American Standard Companies Inc. (formerly named ASI Holding Corporation)
(the "Company") has filed with the Securities and Exchange Commission (the
"Commission"), pursuant to Section 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), an Annual Report on Form 10-K for the year
ended December 31, 1993 (the "1993 10-K"), Quarterly Reports on Form 10-Q for
the fiscal quarters ended March 31, June 30 and September 30, 1994 (the "1994
10-Qs") and a Current Report on Form 8-K, dated November 10, 1994 (the "8-K"),
which are hereby incorporated by reference in and made a part of this Prospectus
(to the extent not superseded hereby).
Any statements contained in the 1993 10-K, the 1994 10-Qs or the 8-K shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The 1993 10-K, the 1994 10-Qs and the 8-K, without exhibits, are available
without charge upon request directed to: Office of the Secretary, American
Standard Companies Inc., One Centennial Avenue, P.O. Box 6820, Piscataway, NJ
08855-6820 ((908) 980-6000).
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-2 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares (the "Shares") of its common
stock, par value $.01 per share (the "Common Stock") offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
items of which are contained in schedules and exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete; with respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Items of information omitted from
this Prospectus but contained in the Registration Statement may be inspected and
copied without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549
and at the following regional offices of the Commission: 14th Floor, 500 West
Madison Street, Chicago, Illinois 60661; and 7 World Trade Center, New York, New
York 10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 at prescribed rates.
The Company complies with the informational requirements of the Exchange
Act and, in accordance therewith, files reports and other information with the
Commission. All such information may be inspected and copied at the public
reference facilities maintained by the Commission at the locations referred to
above.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
included elsewhere in this Prospectus. American Standard Companies Inc. is a
Delaware corporation that has as its only significant asset all the outstanding
common stock of American Standard Inc., a Delaware corporation ("American
Standard Inc."). Hereinafter, "American Standard" or "the Company" will refer to
the Company, or to the Company and American Standard Inc., including its
subsidiaries, as the context requires. Unless otherwise indicated, all
information set forth in this Prospectus (i) gives effect to a 2.5 to 1 split of
the Common Stock to be effected prior to the completion of the Offerings, (ii)
assumes an initial public offering price of $22.00 per share and (iii) assumes
no exercise of the over-allotment options to be granted to the U.S. Underwriters
and the International Underwriters (collectively, the "Underwriters").
THE COMPANY
GENERAL
American Standard is a globally-oriented manufacturer of high quality,
brand-name products in three major product groups: air conditioning systems (55%
of 1993 sales); bathroom and kitchen fixtures and fittings (30% of 1993 sales);
and braking systems for medium-sized and heavy trucks, buses, trailers and
utility vehicles (15% of 1993 sales). American Standard is a market leader in
each of these business segments in the principal geographic areas in which it
competes. The Company's brand names include TRANE(R) for air conditioning
systems, AMERICAN-STANDARD(R), IDEAL-STANDARD(R) and STANDARD(R) for plumbing
products and WABCO(R) for braking and related systems. The Company emphasizes
technologically advanced products such as air conditioning systems that utilize
energy-efficient compressors and environmentally-preferred refrigerants, water-
saving plumbing products and commercial vehicle braking and related systems
(including antilock braking systems ("ABS")) that utilize electronic controls.
American Standard had sales and operating income of $3.8 billion and $282
million, respectively, in 1993. Sales and operating income were $3.3 billion and
$291 million, respectively, in the first nine months of 1994, compared with $2.9
billion and $244 million, respectively, in the first nine months of 1993. During
the first nine months of 1994, sales from operations outside the United States
represented approximately 45% of the Company's total sales. At September 30,
1994 American Standard had 94 manufacturing facilities in 32 countries.
American Standard's business strategy is to promote growth in sales and
operating income. Key elements of this strategy are:
- INCREASE MARKET SHARES. The Company plans to increase the market
shares of its products by developing, manufacturing and selling high
quality, technologically advanced products and by providing superior
customer service.
- EXPAND SALES IN DEVELOPING MARKETS. The Company plans to build on its
historical global presence by focusing a significant portion of its
new business activities (principally through joint ventures in which
the Company has operating control) in developing market areas with the
potential for high economic growth and/or demand for the Company's
products, such as the Far East, including the People's Republic of
China ("PRC"), Latin America and Eastern Europe.
- CONTINUE APPLICATION OF DEMAND FLOW. To build on its position as a
leader in each of its industries, the Company plans to continue to
apply Demand Flow methods ("Demand Flow") to all its businesses. The
Company's use of Demand Flow is designed to streamline processes,
improve product quality, enhance customer service and reduce product
cycle times, while improving efficiency, reducing working capital
needs and lowering costs. Demand Flow, which the Company began to
apply in 1990, has resulted in significant benefits.
3
<PAGE> 6
BUSINESS SEGMENTS
American Standard operates three business segments: Air Conditioning
Products, Plumbing Products and Transportation Products.
AIR CONDITIONING PRODUCTS. American Standard is a leading U.S.
manufacturer of air conditioning systems for both domestic and export sales, and
also manufactures air conditioning systems outside the United States. Air
Conditioning Products manufactures "applied" (custom engineered, site-assembled)
and "unitary" (self-contained, factory-assembled) air conditioning systems that
are sold primarily under the TRANE(R)name. Over one-half of Air Conditioning
Products' sales in 1993 and the first nine months of 1994 was in the
replacement, repair and service markets which have been less cyclical than the
new residential and commercial construction markets. Air Conditioning Products'
sales in these periods to the commercial and residential markets represented
approximately 75% and 25%, respectively, of total Air Conditioning Products'
sales.
Air Conditioning Products' sales increased to $1,861 million in the first
nine months of 1994, compared with $1,556 million in the first nine months of
1993. This increase was due principally to increased market shares, higher
replacement, repair and service revenues and increased levels of new residential
and commercial construction activity. Management believes that Air Conditioning
Products is well positioned for growth because of its high quality, brand-name
products, significant existing market shares, the introduction of new product
features such as electronic controls and environmentally-preferred refrigerants,
and the expansion of its broad distribution network.
PLUMBING PRODUCTS. American Standard is a leading manufacturer in Europe
and a number of other countries of bathroom and kitchen fixtures and fittings
for the residential and commercial construction markets and retail sales
channels. Plumbing Products manufactures and distributes its products under the
AMERICAN-STANDARD(R), IDEAL-STANDARD(R) and STANDARD(R) names.
Plumbing Products' sales increased to $905 million in the first nine months
of 1994, compared to $875 million in the first nine months of 1993, due
principally to increased sales to the replacement and retail "do-it-yourself"
markets as well as increased levels of new residential and commercial
construction activity. Of Plumbing Products' worldwide 1993 sales, approximately
74% were derived from operations outside the United States. Management believes
that Plumbing Products is well positioned for growth due to the high quality of
its brand-name products, significant existing market shares in a number of
countries and the expansion of existing operations in developing market areas
throughout the world (principally the Far East, Latin America and Eastern
Europe).
TRANSPORTATION PRODUCTS. Transportation Products is a leading
manufacturer, primarily in Europe and Brazil, of brake and related systems for
the commercial and utility vehicle industry. Its most important products are
pneumatic braking systems and related electronic and other control systems
(including antilock braking systems) marketed under the WABCO(R) name for
medium-size and heavy trucks, tractors, buses, trailers and utility vehicles.
American Standard supplies vehicle manufacturers such as Mercedes-Benz, Volvo,
Iveco (Fiat), RVI (Renault) and Rover.
Transportation Products' sales increased to $543 million in the first nine
months of 1994, compared to $420 million in the first nine months of 1993, due
principally to increased levels of commercial vehicle production in Europe and
Brazil and the addition of sales of Deutsche Perrot-Bremsen GmbH ("Perrot"), a
German brake manufacturer acquired in January 1994. Management believes that
Transportation Products is well positioned to benefit from improved market
conditions in Europe and Brazil and increasing demand in a number of markets
(including the U.S. commercial and utility vehicle markets) for ABS and other
sophisticated electronic control systems, as well as from the technological
advances embodied in the Company's products and its close relationships with a
number of vehicle manufacturers.
See "Business -- Air Conditioning Products Segment"; "-- Plumbing Products
Segment" and "-- Transportation Products Segment".
4
<PAGE> 7
GLOBALIZATION
American Standard has historically had a significant global presence. One
of its major strategic objectives is to continue to expand that presence,
through the growth of existing operations and the establishment of new
operations in developing market areas in the Far East, Latin America and Eastern
Europe. The Company often uses joint ventures with local manufacturing and
distribution partners to facilitate risk sharing and to allow the Company to
benefit from the additional expertise of local market participants.
Air Conditioning Products plans to continue to expand its operations in the
Far East, Latin America and Europe. It has recently established a joint venture
in Australia and is establishing joint ventures in the PRC. Air Conditioning
Products also recently expanded its sales forces in the Far East and Latin
America.
Plumbing Products has entered new markets through joint ventures in the Far
East, Eastern Europe, Spain and Portugal and is continuing to expand using this
approach. Plumbing Products is significantly expanding its PRC joint venture
operation, A-S China Plumbing Products Limited ("ASPPL"), to which American
Standard is obligated to contribute $10 million and has contributed an operation
valued at $20 million for an initial ownership position of 27% with effective
control over day-to-day operations. In April 1994, ASPPL received other capital
commitments of $82.5 million, of which $27.5 million had been drawn down at
September 30, 1994. ASPPL is expanding its operations to Beijing, Tianjin,
Shanghai and Guangzhou in order to provide a full product line of fixtures,
fittings and bathtubs throughout the PRC market.
Transportation Products, headquartered in Europe, has recently acquired a
business in Spain, is in the process of establishing joint ventures in Eastern
Europe and the PRC, and plans to expand its existing joint ventures in Japan and
the United States.
See "Business -- Strategy -- Globalization".
DEMAND FLOW
To build on its position as a leader in each of its industries and to
increase sales and operating income, American Standard began in 1990 to apply
Demand Flow methods to its businesses. Under Demand Flow, products are produced
as and when required by the customer, the production process is streamlined, and
quality control is integrated into each step of the manufacturing process. The
benefits of Demand Flow include better customer service, quicker response to
changing market needs, improved quality control, higher productivity, increased
inventory turnover rates and reduced requirements for working capital and
manufacturing and warehouse space.
Demand Flow has been implemented in substantially all of American
Standard's production facilities. American Standard believes that its
implementation of Demand Flow methods has achieved significant benefits. Product
cycle time (the time from the beginning of the manufacturing of a product to its
completion) has been reduced and, on average, inventory turnover rates have more
than doubled. Principally as a result of the implementation of Demand Flow,
American Standard achieved an aggregate $251 million reduction in inventories
for the years 1990 through 1993. American Standard is also applying Demand Flow
to administrative functions and is re-engineering its organizational structure
to manage its businesses based on processes instead of functions.
See "Business -- Strategy -- Demand Flow".
5
<PAGE> 8
OWNERSHIP
The Company was formed in 1988 by Kelso & Company, L.P. ("Kelso") to effect
the acquisition (the "Acquisition") of American Standard Inc. The Company
changed its name from ASI Holding Corporation to American Standard Companies
Inc. in November 1994. Upon completion of the Offerings, the Company's Common
Stock will be owned approximately 60% by Kelso ASI Partners, L.P., an affiliate
of Kelso ("ASI Partners"), approximately 14% by the American-Standard Employee
Stock Ownership Plan (the "ESOP"), approximately 8% by certain current and
former officers and employees of American Standard and approximately 18% by
purchasers of Shares in the Offerings. These percentages do not include up to
shares of Common Stock (representing % of the outstanding Common Stock
on a fully diluted basis) issuable pursuant to the Company's Stock Incentive
Plan (the "Stock Plan"). See "Management -- Stock Incentive Plan".
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company:
U.S. Offering.......................................................... 9,500,000 shares
International Offering................................................. 4,000,000 shares
Total.................................................................. 13,500,000 shares
Common Stock to be outstanding after the Offerings(1).................... 74,551,917 shares
Proposed NYSE Symbol..................................................... ASD
</TABLE>
- ---------------
(1) Based upon shares outstanding at October 31, 1994, and exclusive of (i) up
to 2,025,000 shares subject to over-allotment options to be granted by the
Company to the Underwriters and (ii) up to shares of Common Stock
issuable upon exercise of stock options expected to be granted at the
initial public offering price in connection with the Offerings. See
"Underwriting" and "Management -- Stock Incentive Plan".
USE OF PROCEEDS
Net proceeds of the Offerings, estimated to be approximately $275 million,
will be used to reduce American Standard's bank borrowings. At September 30,
1994, after giving effect to a $325 million borrowing incurred in October 1994
(the "October Borrowing"), the Company would have had borrowings aggregating
approximately $1.0 billion outstanding under its existing credit agreement (the
"Existing Credit Agreement"). The proceeds of the October Borrowing were used to
redeem on November 21, 1994 all of the outstanding 14 1/4% Subordinated Discount
Debentures Due 2003 (the "14 1/4% Subordinated Discount Debentures") and 12 3/4%
Junior Subordinated Debentures Due 2003 (the "12 3/4% Junior Subordinated
Debentures") of American Standard Inc., which aggregated $316.8 million in
principal amount. The Company plans to retain Chemical Bank as agent and is
negotiating to amend and restate the Existing Credit Agreement to provide for
lower interest costs, increased borrowing capacity and less restrictive
covenants. The Offerings are not conditioned on the arrangement of, or
borrowings under, such amended and restated credit facility (the "New Credit
Facility"). See "Use of Proceeds" and "Pro Forma Financial Data".
CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of the Shares should consider carefully the specific
investment considerations set forth under "Certain Investment Considerations",
as well as the other information set forth in this Prospectus.
6
<PAGE> 9
SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth summary historical financial data of the
Company for each of the three years in the period ended December 31, 1993 and
the nine months ended September 30, 1993 and 1994. The summary historical
financial data were derived from the Company's Consolidated Financial
Statements. Information for the nine months ended September 30, 1993 and 1994 is
derived from unaudited interim financial statements which reflect, in the
opinion of the Company, all adjustments, which include only normal recurring
adjustments, necessary to a fair presentation of the financial data for such
periods. Results for interim periods are not necessarily indicative of results
for the full year.
For additional information, see the Consolidated Financial Statements of
the Company and the accompanying notes thereto included elsewhere in this
Prospectus. The following table should also be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- -----------------------
1991 1992 1993 1993 1994
---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED FINANCIAL DATA:
STATEMENT OF OPERATIONS DATA:
Sales......................................................... $ 3,595 $ 3,792 $ 3,830 $ 2,851 $ 3,309
Cost of sales............................................... 2,752 2,852 2,903 2,133 2,487
Selling and administrative expenses......................... 615 679 692 512 570
Other....................................................... 30(a) 24 38 27 25
Interest expense............................................ 286 289 278 213 194
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes, extraordinary loss and
cumulative effects of changes in accounting methods......... (88) (52) (81) (34) 33
Income taxes.................................................. 23 5 36 21 47
---------- ---------- ---------- ---------- ----------
Loss before extraordinary loss and cumulative effects of
changes in accounting methods............................... (111) (57) (117) (55) (14)
Extraordinary loss on retirement of debt...................... -- -- (92) (92) --
Cumulative effects of changes in accounting methods........... (32) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net loss...................................................... (143) (57) (209) (147) (14)
Preferred dividend............................................ (14) (16) (8) (8) --
---------- ---------- ---------- ---------- ----------
Net loss applicable to common shares.......................... $ (157) $ (73) $ (217) $ (155) $ (14)
=========== =========== =========== =========== ===========
OTHER DATA:
Depreciation expense.......................................... $ 107 $ 112 $ 106 $ 81 $ 81
Amortization of goodwill...................................... 33 33 31 23 23
EBIT(b)....................................................... 198 237 197 179 227
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................................... $ 228 $ 292 $ 80 $ 165 $ 101
Goodwill (net)................................................ 1,208 1,102 1,026 1,063 1,074
Total assets.................................................. 3,270 3,126 2,987 3,154 3,281
Total debt.................................................... 2,180 2,145 2,336 2,424 2,375
Exchangeable preferred stock.................................. 117 133 -- -- --
Stockholders' deficit......................................... (350) (449) (723) (646) (690)
</TABLE>
SEGMENT FINANCIAL DATA:
<TABLE>
<S> <C> <C> <C> <C> <C>
SALES:
Air Conditioning Products..................................... $ 1,836 $ 1,892 $ 2,100 $ 1,556 $ 1,861
Plumbing Products............................................. 1,018 1,170 1,167 875 905
Transportation Products....................................... 741 730 563 420 543
---------- ---------- ---------- ---------- ----------
$ 3,595 $ 3,792 $ 3,830 $ 2,851 $ 3,309
=========== ========== ========== ========== ==========
OPERATING INCOME:
Air Conditioning Products..................................... $ 55(a) $ 104 $ 133 $ 123 $ 164
Plumbing Products............................................. 66 108 108 87 88
Transportation Products....................................... 121 88 41 34 39
---------- ---------- ---------- ---------- ----------
$ 242 $ 300 $ 282 $ 244 $ 291
========== ========== ========== ========== ==========
</TABLE>
- ---------------
(a) Includes $22 million loss on the sale of Tyler Refrigeration.
(b) EBIT represents the sum of (i) income (loss) before income taxes,
extraordinary loss and cumulative effects of changes in accounting methods
and (ii) interest expense.
7
<PAGE> 10
SUMMARY OF HISTORICAL OPERATING RESULTS
As a result of the Acquisition, American Standard's results of operations
include purchase accounting adjustments and reflect a highly leveraged capital
structure. Results of operations in periods reflected in the preceding table
(including the nine months ended September 30, 1994) have also been adversely
affected by charges related to employee severance, consolidation of production
facilities, other cost reduction actions and asset dispositions. The results of
all three of the Company's business segments are cyclical, and have been
affected by recessions in a number of the Company's markets (including Europe).
Operating results improved in the first nine months of 1994, due principally to
volume increases and cost reductions in each of the Company's business segments.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
8
<PAGE> 11
SUMMARY PRO FORMA FINANCIAL DATA
The following summary unaudited pro forma financial data give effect to the
Offerings and the application of the net proceeds therefrom to reduce term
borrowings under the Existing Credit Agreement, which was increased by the
October Borrowing. The summary pro forma financial data also give effect to the
October Borrowing and the application of the net proceeds therefrom to redeem
all outstanding 14 1/4% Subordinated Discount Debentures and 12 3/4% Junior
Subordinated Debentures. In addition, as noted in the Pro Forma Financial Data
contained elsewhere in this Prospectus, certain adjustments have been made in
the pro forma statement of operations data for the year ended December 31, 1993
and for the nine months ended September 30, 1993 to give effect to a refinancing
(the "1993 Refinancing") which was completed in July 1993. The pro forma
statement of operations data have been prepared assuming that each of the
Offerings, the October Borrowing, and the application of the net proceeds had
occurred at January 1, 1993. The 1993 pro forma statement of operations data
also reflect the capital structure of the Company as it existed after the 1993
Refinancing as if it had occurred on January 1, 1993. The pro forma balance
sheet data have been prepared assuming that each of the Offerings, the October
Borrowing, and the application of the net proceeds therefrom occurred on
September 30, 1994. The pro forma data are based upon available information and
certain assumptions that management believes are reasonable. The pro forma
financial data do not purport to represent what the Company's financial position
or results of operations would actually have been had the transactions in fact
occurred on the assumed dates or at the beginning of the periods indicated or to
project the Company's financial position or results of operations for any future
date or period.
For additional information, see "Pro Forma Financial Data" and the
Consolidated Financial Statements of the Company and the accompanying notes
thereto included elsewhere in this Prospectus. The following table should also
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
<TABLE>
<CAPTION>
YEAR NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1993 1993 1994
------------ -------------- --------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales............................................ $ 3,830 $ 2,851 $ 3,309
Cost of sales.................................. 2,903 2,133 2,487
Selling and administrative expenses............ 692 512 570
Other expense.................................. 38 27 25
Interest expense............................... 220 165 168
------------ ------------- -----------
Income (loss) before income taxes and
extraordinary loss............................. (23) 14 59
Income taxes................................... 36 21 47
------------ ------------- -------------
Income (loss) before extraordinary loss.......... $ (59) $ (7) $ 12
=========== ============ ============
INCOME (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary loss.......... $ (.82) $ (.09) $ .17
Average number of outstanding common shares and
equivalents.................................... 72,813,073 72,787,348 73,411,525
BALANCE SHEET DATA (AT SEPTEMBER 30, 1994):
Working capital.................................. $ 128
Total assets..................................... 3,268
Total debt....................................... 2,108
Stockholders' deficit............................ (432)
</TABLE>
The summary pro forma financial data do not reflect any interest savings
that may be achieved from the renegotiation of the Existing Credit Agreement.
Based upon currently prevailing interest rates and assuming no increase in
borrowings, it is expected that the New Credit Facility will result in an annual
reduction in interest expense of approximately $8 million and an annual increase
in income (decrease in loss) before extraordinary loss of approximately $7
million. See "Use of Proceeds".
The pro forma statement of operations data reflect no change to the tax
provision as the impact of decreased interest expense reduces U.S. domestic
losses for which no tax benefit has been provided.
9
<PAGE> 12
CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of the Shares should consider carefully the
following investment considerations, as well as other information set forth in
this Prospectus.
SUBSTANTIAL LEVERAGE
In connection with the Acquisition in 1988, American Standard incurred
substantial indebtedness, resulting in its highly leveraged capital structure.
At September 30, 1994, the Company's total indebtedness was approximately $2.4
billion, including short-term debt and the current portion of long-term debt.
See "Capitalization." At September 30, 1994, after giving effect to the
Offerings and the October Borrowing, American Standard will have scheduled
annual principal payments ranging from approximately $105 million to $120
million for the years 1995 through 1998. American Standard intends to use cash
generated by operations to reduce its indebtedness and, subject to restrictions
imposed by the terms of the Existing Credit Agreement or, if entered into, the
New Credit Facility (the Existing Credit Agreement or the New Credit Facility,
as appropriate, the "Credit Agreement"), for capital investments and
acquisitions. Subject to restrictions in its debt instruments, the Company may
also incur additional indebtedness from time to time to finance expansion
through capital expenditures, acquisitions or joint ventures or to fund other
expenditures. American Standard is not currently planning to make any material
acquisitions.
American Standard's substantial leverage could have important consequences,
including the following: (i) the Company's ability to obtain additional
financing for working capital, capital expenditures or other purposes could be
impaired; (ii) a substantial portion of the Company's cash flow from operations
will be required to meet interest and principal repayment obligations; (iii)
American Standard may be more highly leveraged than its competitors, which may
place it at a competitive disadvantage in each of the highly competitive
businesses in which it operates; (iv) the Company's indebtedness under the
Credit Agreement bears interest at floating rates, exposing the Company to
increases in interest rates; and (v) the Company's high degree of leverage
increases its vulnerability to changes in general economic conditions, to
competitive pressures and to adverse changes in government regulation and may
limit its ability to capitalize on significant business opportunities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".
The Existing Credit Agreement contains covenants that, among other things,
restrict (a) mergers, certain sales of assets (including stock of subsidiaries)
and changes in business or the conduct of business of the Company and its
subsidiaries, (b) liens, mortgages or other encumbrances on their assets, (c)
sale/leaseback transactions, (d) operating leases, (e) dividends and
distributions on, and repurchases and redemptions of, capital stock of American
Standard Inc., and issuances and sales of stock of American Standard Inc. and
its subsidiaries, (f) voluntary prepayments, purchases, redemptions or
defeasance of other indebtedness, or required payments of principal or interest
thereon during any event of default under the Existing Credit Agreement, (g)
loans and other investments, including capital expenditures, investments in
subsidiaries and joint ventures, (h) intercompany transactions and (i)
transactions with affiliates.
To meet its debt service obligations with operating cash flow and comply
with the covenants and restrictions contained in the Credit Agreement, American
Standard will have to sustain the improved level of operating results and cash
flow it achieved in the first three quarters of 1994. Although its interest
costs and debt service obligations will be reduced as a result of the Offerings,
there can be no assurance that the Company will be able to sustain that level of
improved results, particularly because the Company's results depend
significantly on financial, business and other factors, including prevailing
economic conditions that are beyond its control. If American Standard were
unable to meet its debt service obligations, the Company could be in default
under the Credit Agreement as well as in respect of other borrowings. To avoid
potential non-compliance with the covenants and restrictions contained in the
Existing Credit Agreement, as well as in its previous credit agreement, the
Company has from time to time had to obtain waivers and amendments. No assurance
can be given that, if needed, the Company will be able to obtain similar waivers
or
10
<PAGE> 13
amendments in the future under the Existing Credit Agreement or the New Credit
Facility. American Standard will seek covenants in the New Credit Facility that
are more favorable to the Company than those contained in the Existing Credit
Agreement, but there can be no assurance that the Company will be successful.
In addition, the terms of the Existing Credit Agreement and the indentures
governing certain of American Standard Inc.'s publicly-held debt securities
permit the lenders under the Existing Credit Agreement and the holders of such
debt securities, respectively, to accelerate payments or require redemption upon
certain events which constitute a change of control of the Company or American
Standard Inc. Such change in control provisions could limit the Company's
ability to complete future equity financings. The Offerings will not constitute
a change of control under such provisions. See "Certain Indebtedness".
HISTORICAL LOSSES
Since the Acquisition in 1988, American Standard has had net losses (after
income taxes, cumulative effects of changes in accounting methods and
extraordinary loss on retirement of debt) of $227 million in 1989, $54 million
in 1990, $143 million in 1991, $57 million in 1992 and $209 million in 1993. In
addition, the Company had a net loss of $14 million for the nine months ended
September 30, 1994, compared with a net loss of $147 million for the same period
in 1993. The Company's results of operations have reflected purchase accounting
adjustments and significant interest expense resulting from its highly leveraged
capital structure. Results of operations in 1991, 1992 and 1993 were further
affected by recessions in a number of the Company's markets. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
INTERNATIONAL OPERATIONS
The Company has substantial operations and assets located outside the
United States, primarily in Western Europe as well as other countries. See Note
15 of the Notes to Consolidated Financial Statements. International operations
are subject to a number of special risks, including currency exchange rate
fluctuations, trade barriers, exchange controls, governmental expropriation,
political risks and risks of increases in taxes. In addition, various
jurisdictions outside the United States have laws limiting the right and ability
of non-U.S. subsidiaries and affiliates to pay dividends and remit earnings to
affiliated companies unless specified conditions are met.
Earnings of international subsidiaries are subject to income taxes of
non-U.S. jurisdictions that reduce cash flow available to meet required debt
service and other obligations of the Company. In 1993, despite a consolidated
net loss of $209 million, the Company paid cash income taxes, principally
outside the U.S., of $41 million.
The Company's financial performance on a U.S. dollar-denominated basis has
historically been significantly affected by changes in currency exchange rates.
Although the Company does not currently engage in significant foreign exchange
hedging activities, the Company's borrowings in foreign currencies mitigate the
effect of fluctuating currency exchange rates. Nonetheless, adverse changes in
certain exchange rates could impair the Company's ability to meet its interest
and principal obligations with respect to its U.S. dollar-denominated debt. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
TAX MATTERS
The Company has from time to time reorganized and restructured, and may in
the future reorganize and restructure, its international operations based on
certain assumptions about the various tax (including capital gains and
withholding tax) laws, U.S. and international tax treaty developments,
international currency exchange and capital repatriation laws and other relevant
laws of a variety of non-U.S. jurisdictions. While management believes that such
assumptions are correct, there can be no assurance that taxing or other
authorities will reach the same conclusion. If such assumptions are incorrect,
or if such laws were changed or modified, the Company may suffer adverse tax and
other financial consequences.
11
<PAGE> 14
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.
CYCLICALITY; SEASONALITY
American Standard's businesses are cyclical. Although the exposure of Air
Conditioning Products and Plumbing Products to cyclicality in the new
construction market is somewhat mitigated by their increasing emphasis on the
service, repair and replacement markets (approximately 60% of their 1993 sales),
which have been less cyclical, Air Conditioning Products' and Plumbing Products'
sales to the new construction market continue to constitute a substantial
portion of their sales (approximately 40% of their 1993 sales). Transportation
Products' sales are highly dependent on production levels of medium-sized and
heavy trucks and buses, particularly in Europe, which also have been cyclical.
For a more detailed discussion of U.S. non-residential construction activity and
housing starts, and Western European commercial vehicle production, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Cyclicality; Seasonality".
Total Company sales tend to be seasonally higher in the second and third
quarters of the year because a significant percentage of Air Conditioning
Products' sales is attributable to residential and commercial construction
activity, which is generally higher in the second and third quarters of the
year, and because Summer is the peak season for sales of air conditioning
products.
ENVIRONMENTAL CONSIDERATIONS
The Company's U.S. operations are subject to federal, state and local
environmental laws and regulations that impose limitations on the discharge of
pollutants into the air, water and soil 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 as well as undertaking response actions to
address soil and
12
<PAGE> 15
groundwater issues at certain of its facilities. The Company is a party to a
number of remedial actions under various federal and state environmental laws
and regulations which impose liability on companies to clean up, or contribute
to the cost of cleaning up, sites at which their 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. Expenditures in 1992,
1993 and the first nine months of 1994 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 these remedial actions
will not have a material adverse effect on its financial condition, results of
operations or liquidity.
Additional sites may be 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.
The Company cannot estimate at this time the ultimate aggregate costs of all
remedial actions, 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 required at specific sites and choices
concerning 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 international 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.
The Company has derived significant revenues in 1993 and prior years from
the sale of air conditioning products using chlorofluorocarbons ("CFCs") and
hydrochlorofluorocarbons ("HCFCs"). Use of CFCs, HCFCs and other ozone-depleting
chemicals is to be phased out over various periods of time under regulations
that will require use of substitute permitted refrigerants. Also, adoption of
new refrigerants will require replacement or modification of much of the air
conditioning equipment already installed. The Company believes that these
regulations have begun to have the effect of generating additional product sales
and parts and service revenues, as existing air conditioning equipment operating
on CFCs is converted to operate on environmentally-preferred refrigerants or
replaced. This is likely to happen only over a number of years and the Company
is unable to estimate reliably the magnitude or timing of additional conversion
or replacements. The Company has been working with the manufacturers of
refrigerants that are developing substitutes for the CFCs and HCFCs to be phased
out so 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 industry-wide 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. See "Business -- General -- Regulations
and Environmental Matters".
LABOR RELATIONS
The Company employed approximately 38,500 people (excluding employees of
unconsolidated joint venture companies) at September 30, 1994. The Company has a
total of 18 labor union contracts in North America (covering approximately 8,500
employees), one of which expires in the last quarter of 1994 (covering
approximately 200 employees), two of which expire in 1995 (covering
approximately 2,200 employees) and six of which expire in 1996 (covering
approximately 4,600 employees). There can be no assurance that the Company will
successfully negotiate the
13
<PAGE> 16
labor contracts expiring in the last quarter of 1994 or during 1995 or 1996
without work stoppages. However, the Company does not anticipate any problems in
renegotiating those contracts that would materially affect its results of
operations.
In 1994, 230 Plumbing Products' employees went on strike for 64 days at the
Landsdowne (Toronto), Canada chinaware manufacturing plant. In 1991, 1,200 Air
Conditioning Products employees went on strike for 54 days at the LaCrosse,
Wisconsin facility and, in 1989, 1,300 Air Conditioning Products workers went on
strike for 40 days at the Clarksville, Tennessee facility. Other than these
strikes, the Company has not experienced any other significant work stoppages
since 1985. The Company also has a total of 40 labor contracts outside North
America (covering approximately 18,000 employees), where the Company has not
experienced any significant work stoppage in the last five years.
Although the Company believes relations with its employees are generally
satisfactory, there can be no assurance that the Company will not experience
significant work stoppages in the future or that its relations with employees
will continue to be satisfactory.
CONTROL BY PRINCIPAL STOCKHOLDERS
Upon completion of the Offerings, ASI Partners will own approximately 60%
of the then outstanding Common Stock and will retain the power to elect a
majority of the directors of the Company and determine American Standard's
corporate policies, the persons constituting its management and the outcome of
corporate actions requiring stockholder approval. It is contemplated that an
existing stockholders agreement will be amended to entitle Kelso to nominate for
election a majority of the Company's Board of Directors for so long as ASI
Partners continues to own at least 35% of the Company's outstanding Common
Stock. See "Management -- Executive Officers and Directors," "-- Compensation
Committee Interlocks and Insider Participation," "Certain Transactions and
Relationships" and "Security Ownership of Certain Beneficial Owners".
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the consummation of the Offerings, the Company will
have outstanding approximately 74.5 million shares of Common Stock, including
shares of Common Stock beneficially owned by current stockholders (including ASI
Partners, the ESOP and officer and employee stockholders and employee benefit
plans). The 13.5 million shares of Common Stock to be sold in the Offerings will
be eligible for resale without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), in the public market
after the consummation of the Offerings by persons other than affiliates of the
Company (as defined in Rule 144 under the Securities Act). Sales of Common Stock
without registration may also be made outside the United States pursuant to
Regulation S under the Securities Act. In addition, contemporaneously with the
Offerings, American Standard will register under the Securities Act
approximately shares of Common Stock issuable upon exercise of options
under the Stock Plan or distributable pursuant to certain employee benefit
plans. The Company intends to issue to the ESOP additional Common Stock over the
next several years. Shares of Common Stock distributed to ESOP beneficiaries
(generally upon such beneficiaries' retirement or termination) will also be
generally available for resale without further registration by non-affiliates.
Sales of Common Stock by affiliates of the Company will be subject to Rule 144
under the Securities Act.
The Company and certain current stockholders (including ASI Partners and
certain executive officer stockholders), who will beneficially own approximately
outstanding shares of Common Stock immediately following the consummation
of the Offerings, have agreed with the Underwriters not to offer, sell or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of the
representatives of the Underwriters. Based on shares outstanding at ,
, following the expiration or waiver of the foregoing restrictions and any
applicable holding periods under Rule 144,
14
<PAGE> 17
shares of Common Stock owned by existing stockholders will be available for sale
into the public market pursuant to Rule 144 (including the volume and other
limitations set forth therein) or otherwise and could impair the Company's
future ability to raise capital through an offering of its equity securities.
Most of such shares were issued more than three years ago, and thus are subject
to resale without being subject to the holding periods established by Rule 144.
It is further contemplated that in connection with the Offerings ASI Partners
will be granted certain demand registration rights, and that ASI Partners and
certain executive officers and other employees of the Company who own Common
Stock will be granted certain "piggyback" registration rights. See
"Management -- Compensation Committee Interlocks and Insider Participation" and
"Certain Transactions and Relationships".
Sales of substantial amounts of the Common Stock in the public market, or
the prospect of such sales, could materially adversely affect the market price
of the Common Stock. See "Shares Eligible for Future Sale".
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for the Common
Stock. Although application will be made to list the Common Stock on the New
York Stock Exchange, no assurance can be given that an active trading market
will be created or sustained. The initial public offering price will be
determined by negotiations among the Company and representatives of the
Underwriters based on several factors and will not necessarily reflect the
market price of the Common Stock following the Offerings. See "Underwriting".
15
<PAGE> 18
THE COMPANY
American Standard is a globally-oriented manufacturer of high quality,
brand-name products in three major product groups: air conditioning systems (55%
of 1993 sales); bathroom and kitchen fixtures and fittings (30% of 1993 sales);
and braking systems for medium-sized and heavy trucks, buses, trailers and
utility vehicles (15% of 1993 sales). American Standard is a market leader in
each of these business segments in the principal geographic areas in which they
compete. The Company's brand names include TRANE(R) for air conditioning
systems, AMERICAN-STANDARD(R), IDEAL-STANDARD(R) and STANDARD(R) for plumbing
products and WABCO(R) for braking and related systems. The Company emphasizes
technologically advanced products such as air conditioning systems that utilize
energy-efficient compressors and environmentally-preferred refrigerants, water-
saving plumbing products and commercial vehicle braking and related systems
(including ABS) that utilize electronic controls. See "Business".
The Company is a Delaware corporation formed by Kelso in 1988 to effect the
Acquisition. The Company changed its name from ASI Holding Corporation to
American Standard Companies Inc. in November 1994. The Company's only
significant asset is the common stock of American Standard Inc., a Delaware
corporation which was incorporated in 1929 following the merger of American
Radiator Company and Standard Sanitary Manufacturing Company, each of which
traced its roots to the nineteenth century. Kelso is a private merchant banking
firm specializing in leveraged buyout transactions. The aggregate purchase price
for the Acquisition was approximately $3.2 billion (including assumed debt),
financed by approximately $350 million in equity financing and by approximately
$2.8 billion in new or assumed debt.
USE OF PROCEEDS
The net proceeds of the Offerings, estimated to be approximately $275
million, will be used to reduce American Standard's bank borrowings. At
September 30, 1994, after giving effect to the October Borrowing, the Company
would have had available borrowing capacity of approximately $1.2 billion and
outstanding borrowings aggregating approximately $1.0 billion under the Existing
Credit Agreement. On September 30, 1994, the weighted average interest rate per
annum on borrowings under the Existing Credit Agreement was 7.9%. The proceeds
of the October Borrowing were used to redeem on November 21, 1994 all
outstanding 14 1/4% Subordinated Discount Debentures and 12 3/4% Junior
Subordinated Debentures of American Standard Inc., aggregating $316.8 million in
principal amount. See "Pro Forma Financial Data".
The Company plans to retain Chemical Bank as agent and is negotiating to
amend and restate the Existing Credit Agreement as the New Credit Facility to
provide for lower interest costs, increased borrowing capacity and less
restrictive covenants. The New Credit Facility is expected to take the form of a
secured multi-currency, multi-borrower term and revolving credit facility
aggregating $1.0 billion. After giving effect to such amendment and restatement,
the Offerings and the application of net proceeds therefrom, the Company expects
that it would have approximately $100 million in additional borrowing capacity
available under the New Credit Facility. Based upon currently prevailing
interest rate levels, and assuming no increase in borrowings, the New Credit
Facility could result in interest savings of up to approximately $8 million per
year. The actual reduction may vary from the estimate for a variety of reasons,
including exchange rate fluctuations and changes in interest rates. The
Offerings are not conditioned on the arrangement of, or borrowings, under the
New Credit Facility.
DIVIDEND POLICY
The Company has not historically paid dividends on its Common Stock, and
does not currently intend to pay dividends. Moreover, the terms of certain debt
instruments (including the Existing Credit Agreement as well as a number of
American Standard Inc.'s publicly traded debt securities) prohibit or restrict
the payment of dividends and other extensions of funds by American Standard Inc.
to the Company. The declaration and timing of any future dividends will be
determined by the Company's Board of Directors, based on its results of
operations, financial condition, cash requirements, certain corporate law
requirements and other factors.
16
<PAGE> 19
DILUTION
The difference between the initial public offering price per share of the
Shares and the pro forma net tangible deficit per share of the Common Stock,
after giving effect to the Offerings and the October Borrowing, constitutes
immediate dilution to investors in the Offerings. At September 30, 1994, the
Company had a tangible net deficit of approximately $1.8 billion, or $29.99 per
share. Tangible net deficit per share of Common Stock represents the difference
between tangible assets and liabilities of the Company, divided by the total
number of shares of Common Stock outstanding. After giving effect to the
Offerings, the October Borrowing and the application of the net proceeds
therefrom, the tangible net deficit would be approximately $1.6 billion, or
$20.98 per share. This represents an immediate dilution of $42.98 per share to
investors in the Offerings. The following table illustrates such dilution.
<TABLE>
<S> <C> <C>
Assumed public offering price per share............................. $ 22.00
Tangible net deficit per share at September 30, 1994.............. $(29.99)
Net increase per share attributable to the Offerings and the
October Borrowing.............................................. 9.01
-------
Pro forma tangible net deficit per share at September 30, 1994,
after giving effect to the Offerings and the October Borrowing.... (20.98)
-------
Dilution per share to investors in the Offerings.................... $(42.98)
========
</TABLE>
The following table summarizes, on a pro forma basis after giving effect to
the Offerings, the number of shares of Common Stock held by, and the effective
consideration and the average price per share paid by, the existing stockholders
and the investors in the Offerings.
<TABLE>
<CAPTION>
SHARES CONSIDERATION AVERAGE PRICE
HELD PAID PER SHARE
---------- ------------ -------------
<S> <C> <C> <C>
Current stockholders............................. 61,062,078 $264,000,000(a) $ 4.32
Investors in the Offerings....................... 13,500,000 $297,000,000 $ 22.00
</TABLE>
- ---------------
(a) The effective cash consideration paid by current stockholders at September
30, 1994, is represented by the sum of (i) capital surplus and (ii) stock
dividends on exchangeable preferred stock charged to capital surplus.
17
<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of the Company and its
subsidiaries at September 30, 1994, and as adjusted to give effect to the
Offerings, the October Borrowing and the related redemption of all outstanding
14 1/4% Subordinated Discount Debentures at 102.5% of par and the 12 3/4% Junior
Subordinated Debentures at par, and the reduction of term borrowings under the
Existing Credit Agreement. The accumulated deficit, as adjusted, reflects a
$17.0 million write-off of unamortized debt issuance costs and premium costs
related to the redemptions and repayments. This table should be read in
conjunction with the Company's Consolidated Financial Statements and
accompanying notes thereto included elsewhere in this Prospectus. All amounts
are translated where applicable using September 30, 1994 currency exchange
rates. Common Stock and capital surplus actual and as adjusted amounts reflect
the 2.5 to 1 stock split to be effected prior to the completion of the
Offerings.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
----------------------
AS
ACTUAL ADJUSTED
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
SHORT-TERM DEBT:
Loans payable to banks............................................. $ 30.0 $ 30.0
Revolving credit facility.......................................... 70.0 70.0
Current maturities of long-term debt............................... 130.1 103.0
-------- --------
Total short-term debt........................................... 230.1 203.0
LONG-TERM DEBT:
14 1/4% Subordinated Discount Debentures........................... 175.0 --
12 3/4% Junior Subordinated Debentures............................. 141.8 --
Existing Credit Agreement.......................................... 617.0 667.0
9 1/4% Sinking Fund Debentures..................................... 150.0 150.0
10 7/8% Senior Notes............................................... 150.0 150.0
11 3/8% Senior Debentures.......................................... 250.0 250.0
9 7/8% Senior Subordinated Notes................................... 200.0 200.0
10 1/2% Senior Subordinated Discount Debentures.................... 515.9 515.9
Other loans........................................................ 75.2 75.2
-------- --------
2,274.9 2,008.1
Less current maturities............................................ (130.1) (103.0)
-------- --------
Total long-term debt............................................ 2,144.8 1,905.1
STOCKHOLDERS' DEFICIT:
Preferred Stock, par value $.01 per share, no shares authorized;
( shares authorized, no shares issued and outstanding, as
adjusted)....................................................... -- --
Common Stock, par value $.01 per share, 70,000,000 shares
authorized; 61,062,078 shares issued and outstanding;
( shares authorized; 74,562,078 shares issued and
outstanding, as adjusted)....................................... .6 .7
Capital surplus.................................................... 196.6 471.5
Accumulated deficit................................................ (763.6) (780.6)
Foreign currency translation effects............................... (115.4) (115.4)
Other.............................................................. (8.1) (8.1)
-------- --------
Total stockholders' deficit..................................... (689.9) (431.9)
-------- --------
Total capitalization.......................................... $1,685.0 $1,676.2
======== ========
</TABLE>
18
<PAGE> 21
PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data give effect to the
Offerings and the application of the net proceeds therefrom to reduce term
borrowings under the Existing Credit Agreement, which was increased by the
October Borrowing. The pro forma financial data also give effect to the October
Borrowing and the application of the net proceeds to redeem all outstanding
14 1/4% Subordinated Discount Debentures and 12 3/4% Junior Subordinated
Debentures. In addition, as more fully described in Note 8 of the Notes to
Consolidated Financial Statements -- "Debt" under the caption "The 1993
Refinancing", the Company completed a refinancing of its existing debt structure
in July 1993. As a result of the 1993 Refinancing, the Company's previous credit
facility was amended and restated into the Existing Credit Agreement and
offerings with respect to two new issues of debt (9 7/8% Senior Subordinated
Notes and 10 1/2% Senior Subordinated Discount Debentures) were completed. The
net proceeds of the Existing Credit Agreement and the new debt issuances were
used to replace the Company's previous credit facility (which, in general, had
higher rates of interest than the Existing Credit Agreement), and to redeem all
outstanding 12 7/8% Senior Subordinated Debentures and a substantial portion of
the 14 1/4% Subordinated Discount Debentures.
Accordingly, for the latter half of 1993 and for 1994, the Company's
results reflect a lower cost capital structure than was in place prior to the
1993 Refinancing. The pro forma statement of operations data for the year ended
December 31, 1993 and for the nine months ended September 30, 1993 have been
adjusted at January 1, 1993 to reflect (i) the capital structure of the Company
as it existed after the 1993 Refinancing; (ii) the October Borrowings and the
use of the net proceeds therefrom to redeem the remaining outstanding 14 1/4%
Subordinated Discount Debentures at 102.5% of par and all outstanding 12 3/4%
Junior Subordinated Debentures at par; and (iii) the application of the net
proceeds from the Offerings to reduce term borrowings under the Existing Credit
Agreement. The pro forma statement of operations data for the nine months ended
September 30, 1994 have been adjusted to reflect the October Borrowing, the
Offerings and the use of the proceeds therefrom to retire or repay debt as
described above as if the transactions had occurred on January 1, 1993. The pro
forma balance sheet data have been prepared assuming that each of the Offerings,
the October Borrowing, and the application of the net proceeds therefrom to
repay or retire debt had occurred on September 30, 1994. The pro forma data are
based upon available information and certain assumptions that management
believes are reasonable, including those set forth in the footnotes to the pro
forma financial data. The pro forma financial data do not purport to represent
what the Company's financial position or results of operations would actually
have been had the transactions in fact occurred on the assumed dates or at the
beginning of the periods indicated or to project the Company's financial
position or results of operations for any future date or period.
For additional information, see the Consolidated Financial Statements of
the Company and the accompanying notes thereto included elsewhere in this
Prospectus. The following table should also be read in conjunction with
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
19
<PAGE> 22
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, 1993 SEPTEMBER 30, 1993 SEPTEMBER 30, 1994
--------------------------- --------------------------- ---------------------------
ACTUAL(A) PRO FORMA(B) ACTUAL(A) PRO FORMA(B) ACTUAL(A) PRO FORMA(C)
---------- ------------ ---------- ------------ ---------- ------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales...................... $ 3,830 $ 3,830 $ 2,851 $ 2,851 $ 3,309 $ 3,309
Cost of sales............ 2,903 2,903 2,133 2,133 2,487 2,487
Selling and
administrative
expenses............... 692 692 512 512 570 570
Other expense............ 38 38 27 27 25 25
Interest expense......... 278 220 213 165 194 168
---------- ------------ ---------- ------------ ---------- ------------
Income (loss) before income
taxes and extraordinary
loss..................... (81) (23) (34) 14 33 59
Income taxes............... 36 36 21 21 47 47
---------- ------------ ---------- ------------ ---------- ------------
Income (loss) before
extraordinary loss....... $ (117) $ (59) $ (55) $ (7) $ (14) $ 12
========== =========== ========== =========== ========== ===========
INCOME (LOSS) PER COMMON
SHARE(A):
Income (loss) before
extraordinary loss....... $ (5.28) $ (.82) $ (2.68) $ (.09) $ (.57) $ .17
Average number of
outstanding common shares
and
equivalents.............. 23,725,229 72,813,073 23,714,939 72,787,348 23,964,610 73,411,525
BALANCE SHEET DATA (AT
SEPTEMBER 30, 1994):
Working capital............ $ 101 $ 128
Total assets............... 3,281 3,268
Total debt................. 2,375 2,108
Stockholders' deficit...... (690) (432)
</TABLE>
- ---------------
(a) Actual income (loss) per common share and average number of outstanding
common shares and equivalents data do not reflect the 2.5 to 1 stock split
to be effected prior to the completion of the Offerings. Pro forma income
(loss) per common share and average number of outstanding common shares and
equivalents data reflect the 2.5 to 1 stock split to be effected prior to
the completion of the Offerings as well as the issuance of the Shares in
the Offerings.
(b) Pro forma interest expense for the year ended December 31, 1993 reflects (i)
twelve months' interest expense (at 8.94%) and amortization of debt
issuance costs with respect to the October Borrowing, and the exclusion of
twelve months' interest expense (or the preferred dividend on the 12 3/4%
Exchangeable Preferred Stock which was exchanged into the 12 3/4% Junior
Subordinated Debentures on June 30, 1993) and amortization of debt issuance
costs with respect to the 14 1/4% Subordinated Discount Debentures and the
12 3/4% Junior Subordinated Debentures redeemed; (ii) five months' interest
expense and amortization of debt issuance costs with respect to the debt
issued in connection with the 1993 Refinancing and the exclusion of five
months' interest expense and amortization of debt issuance costs with
respect to the debt replaced or redeemed in the 1993 Refinancing; and (iii)
the exclusion of twelve months' interest expense on the portion of the
Existing Credit Agreement repaid with the net proceeds of the Offerings.
Pro forma interest expense for the nine months ended September 30, 1993
reflects (i) nine months' interest expense (at 8.94%) and amortization of
debt issuance costs with respect to the October Borrowing, and the
exclusion of nine months' interest expense (or the preferred dividend on
the 12 3/4% Exchangeable Preferred Stock which was exchanged into the
12 3/4% Junior Subordinated Debentures on June 30, 1993) and amortization
of debt issuance costs with respect to the 14 1/4% Subordinated Discount
Debentures and the 12 3/4% Junior Subordinated Debentures redeemed; (ii)
five months' interest expense and amortization of debt issuance costs with
respect to the debt issued in connection with the 1993 Refinancing and the
exclusion of five months' interest expense and amortization of debt
issuance costs with respect to the debt replaced or redeemed in the 1993
Refinancing; and (iii) the exclusion of nine months' interest expense on
the portion of the Existing Credit Agreement repaid with the net proceeds
of the Offerings.
20
<PAGE> 23
Pro forma interest expense on the 1993 Refinancing is based on the
effective interest rates for the 9 7/8% Senior Subordinated Notes and the
10 1/2% Senior Subordinated Discount Debentures, respectively, and at a
weighted average interest rate of 8.0% for borrowings under the Existing
Credit Agreement, based on rates in effect on borrowings under the Existing
Credit Agreement on June 2, 1993.
The pro forma statement of operations data reflect no change to the tax
provision as the impact of decreased interest expense reduces U.S. domestic
losses for which no tax benefit has been provided.
Pro forma statement of operations data exclude extraordinary charges
estimated at $17 million related to the write-off of debt issuance costs
and premiums paid with respect to debt retired or repaid in connection with
the Offerings and the October Borrowing. No tax benefit is currently
estimated to be available with respect to such extraordinary charges.
See "Capitalization" for a description of the amounts of the respective
securities issued and amounts borrowed in connection with the Offerings and
the October Borrowing and the use of proceeds thereof to retire or
refinance other existing indebtedness of the Company. See also Note 8 of
the Notes to Consolidated Financial Statements for a description of the
1993 Refinancing.
(c) Pro forma interest expense for the nine months ended September 30, 1994
reflects nine months' interest expense (at 8.94%) and amortization of debt
issuance costs with respect to the October Borrowing, and excludes nine
months' interest expense and amortization of debt issuance costs with
respect to the debt redeemed with the net proceeds of the Offerings and the
October Borrowing.
The pro forma balance sheet data at September 30, 1994 reflect the proceeds
of the October Borrowing ($325 million) and the net proceeds of the
Offerings (estimated at $275 million) and the application of the such
proceeds thereof to redeem debt, to pay premiums in respect of the redeemed
debt and to pay debt issuance costs. In addition, the pro forma
stockholders' deficit at that date reflects the extraordinary charge ($17.0
million) related to the write-off of debt issuance costs and premiums paid
with respect to debt retired or repaid in connection with the Offerings and
the October Borrowing.
21
<PAGE> 24
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data of the Company for each of the five years in the period ended December 31,
1993, and the nine months ended September 30, 1993 and 1994. The selected
historical consolidated financial data were derived from the Company's
Consolidated Financial Statements. Information for the nine months ended
September 30, 1993 and 1994 is derived from unaudited interim financial
statements which reflect, in the opinion of the Company, all adjustments, which
include only normal recurring adjustments, necessary to a fair presentation of
the financial data for such periods. Results for interim periods are not
necessarily indicative of results for the full year. For additional information,
see the Consolidated Financial Statements of the Company and the accompanying
notes thereto included elsewhere in this Prospectus. The following table should
also be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------------------- --------------------------
1989 1990 1991 1992 1993 1993 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales................ $ 3,334 $ 3,637 $ 3,595 $ 3,792 $ 3,830 $ 2,851 $ 3,309
Cost of sales...... 2,488 2,750 2,752 2,852 2,903 2,133 2,487
Selling and
administrative
expenses......... 567 630 615 679 692 512 570
Other (income)
expense.......... (3) 5 8 24 38 27 25
Loss on sale of
Tyler
Refrigeration.... -- -- 22 -- -- -- --
Interest expense... 289 294 286 289 278 213 194
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
continuing op-
erations before
income taxes,
extraordinary loss
and cumulative
effects of changes
in accounting
methods............ (7) (42) (88) (52) (81) (34) 33
Income taxes......... 26 12 23 5 36 21 47
----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss from continuing
operations before
extraordinary loss
and cumulative
effects of changes
in accounting
methods............ (33) (54) (111) (57) (117) (55) (14)
Loss from
discontinued
operations(a)...... (12) -- -- -- -- -- --
Extraordinary loss on
retirement of
debt(b)............ -- -- -- -- (92) (92) --
Cumulative effects of
changes in
accounting
methods............ (182)(c) -- (32)(d) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss............. (227) (54) (143) (57) (209) (147) (14)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Preferred
dividend(e)........ (11) (12) (14) (16) (8) (8) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss applicable
to common shares... $ (238) $ (66) $ (157) $ (73) $ (217) $ (155) $ (14)
========== ========== ========== ========== ========== ========== ==========
LOSS PER COMMON
SHARE(F):
Loss from continuing
operations before
extraordinary loss
and cumulative
effects of changes
in accounting
methods............ $ (1.92) $ (2.81) $ (5.35) $ (3.11) $ (5.28) $ (2.68) $ (.57)
Loss from
discontinued
operations......... (0.51) -- -- -- -- -- --
Extraordinary loss on
retirement of
debt............... -- -- -- -- (3.87) (3.88) --
Cumulative effects of
changes in
accounting
methods............ (7.98) -- (1.38) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss per common
share.............. $ (10.41) $ (2.81) $ (6.73) $ (3.11) $ (9.15) $ (6.56) $ (.57)
========== ========== ========== ========== ========== ========== ==========
Average number of
outstanding common
shares and
equivalents........ 22,865,500 23,439,167 23,335,278 23,454,447 23,725,229 23,714,939 23,964,610
OTHER DATA:
Depreciation
expense............ $ 109 $ 109 $ 107 $ 112 $ 106 $ 81 $ 81
Amortization of
goodwill........... 31 33 33 33 31 23 23
EBIT(g).............. 282 252 198 237 197 179 227
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital...... $ 426 $ 347 $ 228 $ 292 $ 80 $ 165 $ 101
Goodwill (net)....... 1,235 1,323 1,208 1,102 1,026 1,063 1,074
Total assets......... 3,592 3,488 3,270 3,126 2,987 3,154 3,281
Total debt........... 2,381 2,287 2,180 2,145 2,336 2,424 2,375
Exchangeable
preferred
stock(e)........... 91 104 117 133 -- -- --
Stockholders'
deficit............ (136) (200) (350) (449) (723) (646) (690)
</TABLE>
Footnotes appear on the following page.
22
<PAGE> 25
- ---------------
(a) Represents the operating losses of the discontinued Railway Braking business
sold in February 1990.
(b) The retirement of debt in connection with the 1993 Refinancing 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) The $182 million charge in 1989 represents the cumulative effect of the
change in accounting for income taxes upon the adoption of FAS 109. The
Company elected to adopt FAS 109 and to apply the provisions retroactively
to January 1, 1989.
(d) Represents the cumulative effect of the accounting changes related to
postretirement benefits other than pensions and warranty contract revenues
at January 1, 1991. The cumulative effect of these accounting changes
increased the postretirement benefit and warranty accruals at January 1,
1991 by $52 million and increased the net loss in the year by a total of
$32 million (net of the tax effect).
(e) In June 1993 the exchangeable preferred stock was exchanged for 12 3/4%
Junior Subordinated Debentures which were redeemed on November 21, 1994.
(f) Per share data and average number of outstanding common shares and
equivalents data do not reflect the 2.5 to 1 stock split to be effected
prior to the completion of the Offerings.
(g) EBIT represents the sum of (i) income (loss) from continuing operations
before income taxes, extraordinary loss and cumulative effects of changes
in accounting methods and (ii) interest expense.
23
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following sections summarize the Company's consolidated results of
operations and then discuss the results of its three operating segments for the
nine months ended September 30, 1994 compared to the first nine months of 1993,
for 1993 compared to 1992 and for 1992 compared to 1991. As a result of the
Acquisition, American Standard's results of operations include purchase
accounting adjustments and reflect a highly leveraged capital structure. Results
of operations in these periods (including the nine months ended September 30,
1994) have also been adversely affected by changes related to employee
severance, consolidation of production facilities, other cost reduction actions
and asset dispositions. The results of all three of the Company's business
segments are cyclical, and have been affected by recessions in a number of the
Company's markets (including Europe), and the results of Air Conditioning
Products are also affected by seasonal factors. See "-- Cyclicality;
Seasonality". Operating results improved in the first nine months of 1994, due
principally to volume increases and cost reductions in each of the Company's
business segments.
SALES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -----------------
1991 1992 1993 1993 1994
------- ------- ------ ------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Air Conditioning Products(a)................................ $ 1,836 $ 1,892 $2,100 $ 1,556 $1,861
Plumbing Products........................................... 1,018 1,170 1,167 875 905
Transportation Products..................................... 741 730 563 420 543
------- ------- ------ ------- ------
Sales..................................................... $ 3,595 $ 3,792 $3,830 $ 2,851 $3,309
====== ====== ====== ====== ======
</TABLE>
OPERATING INCOME
AND
INCOME (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY LOSS
AND CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING METHODS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- ----------------
1991 1992 1993 1993 1994
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Air Conditioning Products(a)................................. $ 55 $ 104 $ 133 $ 123 $ 164
Plumbing Products............................................ 66 108 108 87 88
Transportation Products...................................... 121 88 41 34 39
------ ------ ------ ------ ------
Operating income........................................... 242 300 282 244 291
Interest expense............................................. (286) (289) (278) (213) (194)
Corporate items(b)........................................... (44) (63) (85) (65) (64)
------ ------ ------ ------ ------
Income (loss) before income taxes, extraordinary loss and
cumulative effects of changes in accounting methods........ $ (88) $ (52) $ (81) $ (34) $ 33
===== ===== ===== ===== =====
</TABLE>
- ---------------
(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, equity in net income (loss)
of affiliated companies, minority interest, foreign exchange transaction
gains and losses, and miscellaneous income and expense.
24
<PAGE> 27
CONSOLIDATED RESULTS OF OPERATIONS FOR FIRST NINE MONTHS OF 1994 COMPARED WITH
FIRST NINE MONTHS OF 1993
Consolidated sales for the first nine months of 1994 of $3,309 million
increased by $458 million, or 16% (with little effect from foreign exchange),
from $2,851 million in 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 the 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 nine months ended
September 30, 1994 reflected pre-tax charges of $26 million ($20 million after
tax) 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, the
charges will be paid by June 30, 1995. In the 1994 period, the Company also
provided $14 million (with no available tax benefit) 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 periods, operating income would have
increased to $331 million from $252 million, or 31%, in the 1994 period over the
1993 period.
AIR CONDITIONING PRODUCTS SEGMENT
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1993 1994
------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C>
SALES:
U.S. portion................................... $1,316 $1,579
International portion.......................... 240 282
------ ------
Total..................................... $1,556 $1,861
====== ======
OPERATING INCOME (LOSS):
U.S. portion................................... $ 131 $ 175
International portion.......................... (8) (11)
------ ------
Total..................................... $ 123 $ 164
====== ======
</TABLE>
The U.S. portion of Air Conditioning Products is composed of the Unitary
Products Group, the Commercial Systems Group (excluding Canada), and exports
from the U.S. by the International Group. The international portion consists of
the non-U.S.-based operations of the International Group and the Canadian
operations of the Commercial Systems Group.
Sales of Air Conditioning Products increased 20% (with little effect from
foreign exchange) to $1,861 million for the first nine months of 1994 from
$1,556 million for the first nine months of 1993. The Unitary Products Group
achieved a gain of 23% 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 18% primarily because of improved markets, gains in market
share, and the acquisition of additional sales offices in the latter half of
1993. For the International Group, sales increased 17%, due principally to
volume increases in the Far East and Latin America.
25
<PAGE> 28
Operating income of Air Conditioning Products increased 33%, to $164
million in the first nine months of 1994 from $123 million in the first nine
months of 1993. This gain was primarily the result of increased operating income
for the Unitary Products Group and the Commercial Systems Group because of
higher sales and cost reductions. Despite higher sales, the International Group
experienced an overall decrease in operating results. A decline for the European
group was partly offset by a gain for the Far East and Latin America operations.
The decline in European group results was attributable to continued poor
economic conditions and competitive pricing pressures. The improvement in Far
East and Latin America groups was principally attributable to higher sales.
BACKLOG. The worldwide backlog for Air Conditioning Products as of
September 30, 1994 was $489 million, an increase of 33% from September 30, 1993,
excluding the favorable effects of foreign exchange. The increase was a result
of higher volume for the Commercial Systems Group and the commercial portion of
the Unitary Products Group, and expanded distribution channels and market
penetration in the Far East and Latin America. The current backlog is expected
to be filled during the next twelve months. Although most backlog orders are
cancellable, in whole or in part, by customers, cancellations have not been
material to date.
PLUMBING PRODUCTS SEGMENT
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1993 1994
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
SALES:
International portion............................ $656 $659
U.S. portion..................................... 219 246
---- ----
Total....................................... $875 $905
==== ====
OPERATING INCOME (LOSS):
International portion............................ $105 $107
U.S. portion..................................... (18) (19)
---- ----
Total....................................... $ 87 $ 88
==== ====
</TABLE>
The international portion of Plumbing Products is composed of the European
Plumbing Products Group, the Americas International Group, and the Far East
Group. The U.S. portion is generated primarily by the U.S. Plumbing Products
Group and by export sales from the U.S.
Sales of Plumbing Products increased 3% (6% excluding the unfavorable
effects of foreign exchange) to $905 million in the first nine months of 1994
from $875 million in the first nine months of 1993. The exchange-adjusted
improvement resulted from sales increases of 4% for the European Plumbing
Products Group, 2% for the Far East and Americas International Groups on a
combined basis, and 12% for the U.S. Plumbing Products Group. Sales of the
European Plumbing Products Group increased primarily because of volume and price
gains as economic conditions in several countries (particularly the United
Kingdom ("U.K.") and Germany) showed modest improvement over the prior year
period. Exchange-adjusted sales increased for the Far East Group (primarily on
higher volumes in Thailand and Korea) but declined for the Americas
International Group (primarily because of lower sales in Canada where poor
economic conditions continued, offset partly by a gain in Mexico). Sales
increased for the Far East Group despite the deconsolidation of operations in
the PRC which in April 1994 were contributed to ASPPL. Sales of the U.S.
Plumbing Products Group increased as a result of improved markets and an
expanded retail customer base.
Operating income of Plumbing Products was $88 million in the first nine
months of 1994 compared with $87 million for the same period of 1993 (with
little effect from foreign exchange). Operating income for the European Plumbing
Products Group increased due to price and volume gains in the U.K. and Germany,
and cost reductions in most operations. Operating income of the Far
26
<PAGE> 29
East and Americas International Groups on a combined basis decreased, as gains
in most operations (due to the higher sales, except in Canada) were more than
offset by the effect of deconsolidation of operations in the PRC. Improvements
for the U.S. Plumbing Products Group from increased sales and cost reductions at
manufacturing facilities were more than offset by a provision 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 to $1 million of similar charges in 1993. Excluding such
provisions from the respective periods operating income would have increased to
$107 million from $88 million, or 22%, in the 1994 period from the 1993 period.
BACKLOG. Plumbing Products' backlog as of September 30, 1994 was $210
million, an increase of 16% from September 30, 1993 (excluding the favorable
effects of foreign exchange), primarily from expanded sales volume. The current
backlog is expected to be filled during the next twelve months. Although most
backlog orders are cancellable, in whole or in part, by customers, cancellations
have not been material to date.
TRANSPORTATION PRODUCTS SEGMENT
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1993 1994
----- -----
<S> <C> <C>
(DOLLARS IN MILLIONS)
SALES................................................. $ 420 $ 543
OPERATING INCOME...................................... 34 39
</TABLE>
Sales of Transportation Products in 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. More than half of the gain
resulted from a 23% increase in the unit volume of truck and bus production in
Western Europe and a 5% increase in aftermarket sales. Approximately 37% of the
gain represented sales of Perrot ($46 million), a German brake manufacturer
which the Company 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).
Operating income for Transportation Products was $39 million in the first
nine months of 1994, an increase of 15% (with little effect from foreign
exchange) compared with $34 million in the first nine months 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 Perrot. Operating
income for the 1994 period reflected charges of $14 million 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.
BACKLOG. Transportation Products' backlog as of September 30, 1994, was
$293 million, an increase of 50% from September 30, 1993 (excluding the
favorable effects of foreign exchange), as a result of the significantly
improved volumes and the inclusion of backlog of Perrot. The current backlog is
expected to be filled during the next twelve months. Although most backlog
orders are cancellable, in whole or in part, by customers, cancellations have
not been material to date.
FINANCIAL REVIEW
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. Interest expense decreased
27
<PAGE> 30
$19 million as a result of lower overall interest rates on debt issued as part
of the 1993 Refinancing, despite a $9 million increase in interest expense
related to the 12 3/4% Junior Subordinated Debentures issued in June 1993 in
exchange for American Standard Inc.'s 12 3/4% Exchangeable Preferred Stock.
For the nine months ended September 30, 1994 the income tax provision was
$47 million on income before income taxes, extraordinary loss and cumulative
effects of accounting changes of $33 million. The tax provision for the nine
months ended September 30, 1993 was $21 million despite a loss before income
taxes, extraordinary loss and cumulative effects of accounting changes of $34
million. 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 first nine months 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 both 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 ESOP
as well as by tax rate differences and withholding taxes on foreign earnings.
As a result of the 1993 Refinancing, the 1993 nine-month period included an
extraordinary charge of $92 million related to the debt retired (including call
premiums, the write-off of unamortized debt issuance costs and the loss on
cancellation of foreign currency swap contracts), on which no tax benefit was
available.
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 first nine months 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, which was
principally attributable to higher sales volumes). The other principal source of
cash was net borrowings of $63 million under the Revolving Credit Facility (as
defined below). 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. See "-- Capital
Expenditures".
In connection with the Acquisition in 1988, American Standard incurred
substantial indebtedness, resulting in its highly leveraged capital structure.
At September 30, 1994, the Company's total indebtedness was approximately $2.4
billion, including short-term debt and the current portion of long-term debt. At
September 30, 1994, after giving effect to the Offerings and the October
Borrowing and the application of net proceeds therefrom, the Company's annual
scheduled debt maturities will range from approximately $105 million to $120
million for the years 1995 through 1998. The Company believes that the amounts
available from operating cash flows, funds available under the Revolving Credit
Facility and future debt or equity financings will be sufficient to meet its
expected cash needs and planned capital expenditures for the foreseeable future.
The Existing Credit Agreement currently provides for an aggregate facility
of approximately $1.2 billion as follows: (a) a $242 million multi-currency
revolving credit facility (the "Revolving Credit Facility") available to all
Borrowers (as defined); (b) a $176 million multi-currency periodic access
facility (the "Periodic Access Facility") available to all Borrowers; and (c)
four term loan facilities (each, a "Term Loan Facility"), consisting of a $222
million U.S. dollar Tranche A facility available to American Standard Inc.; a
$136 million Deutschemark Tranche B facility available to
28
<PAGE> 31
WABCO Standard GmbH; a $82 million U.S. dollar Tranche C facility available to
all Borrowers; and a $325 million U.S. dollar Tranche D Facility available to
American Standard Inc.
The Company is required to reduce to $50 million the amount of borrowings
outstanding under the Revolving Credit Facility for at least 30 consecutive days
in each 12-month period ending May 31. On August 31 of each year, the Revolving
Credit Facility is reduced by $8.3 million. 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 Existing Credit Agreement.
At September 30, 1994, the Company had outstanding borrowings of $70
million under the Revolving Credit Facility. At September 30, 1994, there was
$118 million available under the Revolving Credit Facility after reduction for
borrowings and for $54 million of outstanding letters of credit. In addition,
the Company's foreign subsidiaries had $60 million available under overdraft
facilities which can be withdrawn by the banks at any time.
The Existing 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 maintain compliance with
the covenants and restrictions contained in its previous 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 Existing 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 PRC 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.
In July 1993 the Company completed a refinancing (the "1993 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 previous credit agreement into the Existing Credit
Agreement; 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 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 at a redemption price
of 105% ($389.5 million), (iii) the extension of the term of existing 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.
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 1988-1990 period)
resulting in additional taxes of 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
29
<PAGE> 32
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.
CAPITAL EXPENDITURES
The Company's capital expenditures for the first nine months of 1994 were
$63 million, including $13 million of investments in affiliated companies,
compared with $54 million (including $8 million of investments in affiliated
companies) for the first nine months of 1993. The increase for 1994 relates
primarily to investments in affiliated companies, expansion in newer operations,
new products, and the continuing implementation of Demand Flow.
The Company's capital expenditures for 1993 amounted to $98 million,
including investments of $8 million in affiliated companies. The amount of
capital expenditures was $10 million less than in 1992 ($6 million less
excluding the effects of foreign exchange). The Company believes capital
spending in recent years has been sufficient for maintenance purposes, important
product and process redesigns, expansion projects, and strategic investments.
Capital expenditures for the full year 1994 are expected to increase
approximately 30% over the 1993 amounts. The Company expects capital
expenditures, including investments in related companies, will increase 10% to
15% in 1995.
Capital expenditures for Air Conditioning Products for the first nine
months of 1994 were $21 million, including $2 million of investments in
affiliates. Major expenditures included projects related to Demand Flow and new
products such as the Voyager III (medium-tonnage product line), changes related
to new refrigerant requirements and capacity expansion. Total capital spending
for the full year 1994 is expected to be 25% higher than in 1993. Capital
expenditures were $38 million in 1993. This amount was 15% more than that of
1992. Capital expenditures in 1993 included projects related to Demand Flow and
spending on new products such as the Voyager III, 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 line of air conditioning
products.
Plumbing Products' capital expenditures for the first nine months of 1994
were $24 million, including $3 million of investments in affiliated companies.
Expenditures for 1994 include cash investments in affiliates in the PRC and
Vietnam and expansion of capacity in other Far East operations, modernization of
the Czech Republic operations, completion of a brass fittings factory in Egypt,
and automatic glazing systems in Italy. Total capital expenditures for full year
1994 are expected to be approximately 15% higher than in 1993. 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 in 1993 was 34% higher than in 1992 as a result of spending increases
in
30
<PAGE> 33
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 in the first nine months
of 1994 were $18 million, including investments in affiliated companies of $8
million (Perrot and WABCO Espana). Major projects included construction of a
test track in Germany, continued implementation of Demand Flow, and
cost-reduction projects. Total capital spending for full year 1994 is expected
to be approximately double the 1993 level. Capital expenditures were $14 million
in 1993. Excluding the effects of foreign exchange, capital spending in 1993 was
41% less than in 1992, a year with significant spending related to Demand Flow
cost-reduction projects in production and material flow.
CONSOLIDATED RESULTS OF OPERATIONS FOR 1993 COMPARED WITH 1992
Consolidated sales for 1993 were $3.83 billion, an increase of 1% (6%
excluding the unfavorable effects of foreign exchange) over $3.79 billion in
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 unfavorable 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 unfavorable 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.
CONSOLIDATED RESULTS OF OPERATIONS FOR 1992 COMPARED WITH 1991
Consolidated sales for 1992 were $3.8 billion, an increase of 5% (4%
excluding the favorable effects of foreign exchange) over $3.6 billion in 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 favorable 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 favorable 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
favorable foreign exchange effects). Increases in operating income of 42% for
Air Conditioning Products and 64% for Plumbing Products were partly offset by a
27% decrease in operating income for Transportation Products. The gain for Air
Conditioning Products was the result of higher volume, increased sales of
higher-margin products, the benefits of manufacturing improvements,
restructuring and cost containment efforts, and the fact that 1991 also included
the effects of a work stoppage at the LaCrosse, Wisconsin, facility, partly
offset by decreased operating income for the International Group, principally in
Europe. In addition, approximately one-third of the gain in operating income for
Air Conditioning Products resulted because 1991 included an operating
31
<PAGE> 34
loss for Tyler Refrigeration of $18 million (including a $22 million loss on the
sale of this division). Plumbing Products' operating income gain resulted from
increased prices and volumes, primarily in Europe and to a lesser extent in the
United States. Transportation Products' operating income decreased primarily as
a result of lower volumes due to reduced demand in depressed markets in Europe
and Brazil and lower prices offset partly by the favorable effects of foreign
exchange and improvements in manufacturing.
RESULTS OF OPERATIONS BY SEGMENT
AIR CONDITIONING PRODUCTS SEGMENT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
(DOLLARS IN MILLIONS)
SALES:
U.S. portion........................ $ 1,453 $ 1,572 $ 1,786
International portion............... 284 320 314
------- ------- -------
Subtotal....................... 1,737 1,892 2,100
Tyler Refrigeration................. 99 -- --
------- ------- -------
Total.......................... $ 1,836 $ 1,892 $ 2,100
====== ====== ======
OPERATING INCOME (LOSS):
U.S. portion........................ $ 58 $ 112 $ 148
International portion............... 15 (8) (15)
------- ------- -------
Subtotal....................... 73 104 133
Tyler Refrigeration................. (18)(a) -- --
------- ------- -------
Total.......................... $ 55 $ 104 $ 133
====== ====== ======
</TABLE>
---------------------
(a) Includes $22 million loss on the sale of Tyler Refrigeration.
1993 COMPARED WITH 1992. 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
decreases 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-
32
<PAGE> 35
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(R) brand outdoor
units and new lines of luxury and conventional retail residential products.
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 continued to be adversely affected by
recession. The non-residential new-construction market increased 4% 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 figure for 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%.
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
33
<PAGE> 36
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.
1992 COMPARED WITH 1991. 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.
Sales and operating income of Air Conditioning Products both increased in
1992 even though U.S. and Canadian commercial and residential new construction
continued to be adversely affected by the recession in those countries and
despite the economic decline in Europe. Sales of Air Conditioning Products,
which accounted for approximately 50% of the Company's 1992 sales, increased by
9% (8% excluding the effects of foreign exchange) 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, and operating margins increased to 5.5% in 1992 from 4.2% in
1991. The increase was attributable to the sales gains of the three groups, 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 decline in operating income for the International Group
caused by lower margins 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 efficiency 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.
Unitary Products' sales in the commercial market increased through the
success of new and redesigned products introduced in 1991 and 1992 and improved
distribution channels. New and modified products in 1991 and 1992 included new
cost-reduced 20 to 25-ton Voyager products, commercial microprocessor-controlled
products, a new line of convertible air handlers, and rooftop and air-cooled
chiller products using more efficient scroll compressors.
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
34
<PAGE> 37
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 continued to be adversely affected by recession.
The non-residential new construction market dropped 5% in the United States in
1992, following a 17% decrease in 1991. The non-residential replacement market
was even with 1991.
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. Market growth in the Far
East was 9% overall, led by China, Singapore, and Korea. The sales growth in
Hong Kong was driven by the very strong market in China, even though the overall
market in Hong Kong was down. Markets in Malaysia and Indonesia also grew.
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.
PLUMBING PRODUCTS SEGMENT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
(DOLLARS IN MILLIONS)
SALES:
International portion...................... $ 783 $ 885 $ 865
U.S. portion............................... 235 285 302
------- ------- -------
Total................................. $ 1,018 $ 1,170 $ 1,167
====== ====== ======
OPERATING INCOME (LOSS):
International portion...................... $ 93 $ 124 $ 131
U.S. portion............................... (27) (16) (23)
------- ------- -------
Total................................. $ 66 $ 108 $ 108
====== ====== ======
</TABLE>
1993 COMPARED WITH 1992. 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
35
<PAGE> 38
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 against 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
4% 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 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 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-engineering 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
36
<PAGE> 39
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.
1992 COMPARED WITH 1991. 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 (98% excluding foreign
exchange). Sales of the European group increased primarily because of increases
in prices and volumes in Italy and Germany, partly offset by lower volume in
France. The sales increase for the U.S. Plumbing Products Group reflected volume
increases for products introduced in 1991 and, to a lesser extent, price
increases on certain other products as well as an increase in the growing retail
channel business. Sales increased for the Americas International group primarily
because of higher prices and volume in Mexico and higher volume in Brazil,
offset by declines in Canada, and for the Far East Group because of the
consolidation in 1992 of the Thailand operations (previously an unconsolidated
joint venture) and higher volume in China.
In 1992 operating income of Plumbing Products increased 64% (56% excluding
the effects of foreign exchange) to $108 million from $66 million in 1991 and
the operating margin increased to 9.2% from 6.5%. The increase was attributable
primarily to increased profitability for the European group on higher prices and
volumes (especially in Italy and Germany). Results for the U.S. group, whose
operations continued to be unprofitable as a result of the recession in the U.S.
markets, improved because of higher prices and volumes. Operating profit of the
Americas International and Far East Groups also improved as a result of gains in
Mexico, Brazil, Korea and China, offset partly by lower profitability in Canada
and the Philippines, both of which were affected by poor economies.
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 England caused by a very poor market. In Italy sales were up 9%,
with gains for most product lines in price, volume and market share; however,
the market was trending down at year-end as the Italian government introduced
economic measures to reduce the public deficit. The German market was stable in
total but shifted to lower-value housing and economy products as eastern Germany
became a bigger factor. The gains in Germany were the result of higher volumes
and prices for brass fittings and luxury chinaware. European markets were down
overall, particularly in the U.K. which continued in an economic slump; France,
whose economy fell off significantly in the fourth quarter of 1992; and Greece,
which has been in recession for three years. The new-construction markets in
those three countries are in recession. The European group's strength has been
sales in the replacement market, which more than made up for the effects of poor
new-construction markets.
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,
37
<PAGE> 40
offset partly by lower profitability in France because of decreased volume and
in the U.K. because of the recession. The recession continued to depress
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. 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
accounted for 20% of the total sales of the U.S. group. The growth of sales for
the U.S. group was largely a result of the strength of retail business (which
had a significant increase in volume) and increased export sales from the U.S.,
together with smaller gains resulting from price increases and higher wholesaler
distribution sales. Sales of AMERICAST(R) 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 continued to be 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
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1991 1992 1993
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
SALES............................................ $741 $730 $563
OPERATING INCOME................................. 121 88 41
</TABLE>
1993 COMPARED WITH 1992. 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 30%
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
38
<PAGE> 41
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 implementation 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.
1992 COMPARED WITH 1991. 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
(with the operating margin decreasing to 12.1% from 16.3%), 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.
CYCLICALITY; SEASONALITY
American Standard's businesses are cyclical. Although the exposure of Air
Conditioning Products and Plumbing Products to cyclicality in the new
construction market is somewhat mitigated by their increasing emphasis on the
service, repair and replacement markets (approximately 60% of their 1993 sales),
which have been less cyclical, Air Conditioning Products' and Plumbing Products'
sales to the new construction market continue to constitute a substantial
portion of their sales (approximately 40% of their 1993 sales). The following
table presents a summary of statistics on U.S. non-residential construction
activity and housing starts for the years 1989 through 1994.
<TABLE>
<CAPTION>
U.S. NON-RESIDENTIAL
CONTRACT AWARDS % CHANGE U.S. HOUSING STARTS % CHANGE
(MILLIONS OF SQUARE FEET)(A) YEAR TO YEAR (THOUSANDS OF UNITS)(B) YEAR TO YEAR
---------------------------- ------------ ----------------------- ------------
<S> <C> <C> <C> <C>
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.............. 941 +4% 1,288 +7%
1994(c)........... 1,079 +15% 1,412 +10%
</TABLE>
- ------------
(a) Source: F.W. Dodge Division, McGraw Hill, Inc.
(b) Source: U.S. Department of Commerce, Bureau of Census.
(c) Preliminary data -- 8 months annualized.
39
<PAGE> 42
Transportation Products' sales are highly dependent on production levels of
medium-sized and heavy trucks and buses, particularly in Europe, which have also
been cyclical. 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 1994 (units in thousands).
<TABLE>
<CAPTION>
WESTERN EUROPE % CHANGE WESTERN EUROPE % CHANGE
TRUCK AND BUS PRODUCTION(A) YEAR TO YEAR TRAILER PRODUCTION(A) YEAR TO YEAR
--------------------------- ------------ --------------------- ------------
<S> <C> <C> <C> <C>
1989........ 395 +4% 132 +9%
1990........ 355 -10% 134 +2%
1991........ 363 +2% 146 +9%
1992........ 323 -11% 121 -17%
1993........ 227 -30% 93 -23%
1994(b)..... 279 +23% 108 +16%
</TABLE>
- ------------
(a) Principal sources: Verband der Deutschen Automobilindustrie (Germany);
Society of Motor Manufacturers and Traders (United Kingdom); and Chambre
Syndicate des Constructeurs Automobiles (France).
(b) Preliminary data -- 8 months annualized.
Total Company sales tend to be seasonally higher in the second and third
quarters of the year because a significant percentage of Air Conditioning
Products' sales is attributable to residential and commercial construction
activity, which is generally higher in the second and third quarters of the
year, and because Summer is the peak season for sales of air conditioning
products.
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% Junior Subordinated Debentures for the 12 3/4% Exchangeable
Preferred Stock.
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 ESOP as
well as by tax rate differences and withholding taxes on foreign earnings.
As a result of the 1993 Refinancing 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.
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.
40
<PAGE> 43
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, partly offset 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 due to 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 that is 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 ESOP as well as by tax rate differences and withholding taxes on
foreign earnings.
41
<PAGE> 44
BUSINESS
GENERAL
American Standard is a globally-oriented manufacturer of high quality,
brand-name products in three major product groups: air conditioning systems (55%
of 1993 sales); bathroom and kitchen fixtures and fittings (30% of 1993 sales);
and braking systems for medium-sized and heavy trucks, buses, trailers and
utility vehicles (15% of 1993 sales). American Standard is a market leader in
each of these business segments in the principal geographic areas in which it
competes. The Company's brand names include TRANE(R) for air conditioning
systems, AMERICAN-STANDARD(R), IDEAL-STANDARD(R) and STANDARD(R) for plumbing
products and WABCO(R) for braking and related systems. The Company emphasizes
technologically advanced products such as air conditioning systems that utilize
energy-efficient compressors and environmentally-preferred refrigerants, water-
saving plumbing products and commercial vehicle braking and related systems
(including ABS) that utilize electronic controls. As of September 30, 1994,
American Standard had 94 manufacturing facilities in 32 countries.
American Standard's business strategy is to promote growth in sales and
operating income. Key elements of this strategy are:
- INCREASE MARKET SHARES. The Company plans to increase the market
shares of its products by developing, manufacturing and selling high
quality, technologically advanced products and by providing superior
customer service.
- EXPAND SALES IN DEVELOPING MARKETS. The Company plans to build on its
historical global presence by focusing a significant portion of its
new business activities (principally through joint ventures in which
the Company has operating control) in developing market areas with the
potential for high economic growth and/or demand for the Company's
products, such as the Far East, including the PRC, Latin America and
Eastern Europe.
- CONTINUE APPLICATION OF DEMAND FLOW. To build on its position as a
leader in each of its industries, the Company plans to continue to
apply Demand Flow to all its businesses. The Company's use of Demand
Flow is designed to streamline processes, improve product quality,
enhance customer service and reduce product cycle times, while
improving efficiency, reducing working capital needs and lowering
costs. Demand Flow, which the Company began to apply in 1990, has
resulted in significant benefits.
OVERVIEW OF BUSINESS SEGMENTS
American Standard operates three business segments: Air Conditioning
Products, Plumbing Products and Transportation Products.
AIR CONDITIONING PRODUCTS. American Standard is a leading U.S.
manufacturer of air conditioning systems for both domestic and export sales, and
also manufactures air conditioning systems outside the United States. Air
Conditioning Products manufactures "applied" (custom engineered, site-assembled)
and "unitary" (self-contained, factory-assembled) air conditioning systems that
are sold primarily under the TRANE(R) name. Over one-half of Air Conditioning
Products' sales in 1993 and the first nine months of 1994 was in the
replacement, repair and service markets which have been less cyclical than the
new residential and commercial construction markets. Air Conditioning Products'
sales in these periods to the commercial and residential markets represented
approximately 75% and 25%, respectively, of Air Conditioning Products' total
sales. Management believes that Air Conditioning Products is well positioned for
growth because of its high quality, brand-name products, significant existing
market shares, the introduction of new product features such as electronic
controls and environmentally-preferred refrigerants and the expansion of its
broad distribution network.
42
<PAGE> 45
PLUMBING PRODUCTS. American Standard is a leading manufacturer in Europe
and a number of other countries of bathroom and kitchen fixtures and fittings
for the residential and commercial construction markets and retail sales
channels. Plumbing Products manufactures and distributes its products under the
AMERICAN-STANDARD(R), IDEAL-STANDARD(R) and STANDARD(R) names. Management
believes that Plumbing Products is well positioned for growth due to the high
quality of its brand-name products, significant existing market shares in a
number of countries and the expansion of existing operations in developing
market areas throughout the world (principally the Far East, Latin America and
Eastern Europe).
TRANSPORTATION PRODUCTS. Transportation Products is a leading manufacturer,
primarily in Europe and Brazil, of brake and related systems for the commercial
and utility vehicle industry. Its most important products are pneumatic braking
systems and related electronic and other control systems (including antilock
braking systems) marketed under the WABCO(R) name for medium-size and heavy
trucks, tractors, buses, trailers and utility vehicles. American Standard
supplies vehicle manufacturers such as Mercedes-Benz, Volvo, Iveco (Fiat), RVI
(Renault) and Rover. Management believes that Transportation Products is well
positioned to benefit from improved market conditions in Europe and Brazil and
increasing demand in a number of markets (including the U.S. commercial and
utility vehicle markets) for ABS and other sophisticated electronic control
systems, as well as from the technological advances embodied in the Company's
products and its close relationships with a number of vehicle manufacturers.
STRATEGY
GLOBALIZATION
American Standard has historically had a significant global presence. One
of its major strategic objectives is to continue to expand that presence through
the growth of existing operations and the establishment of new operations in
developing market areas in the Far East, Latin America and Eastern Europe. The
Company often uses joint ventures with local manufacturing and distribution
partners to facilitate risk sharing and to allow the Company to benefit from the
additional expertise of local market participants.
Air Conditioning Products plans to continue to expand its operations in the
Far East, Latin America and Europe. It has recently established a joint venture
in Australia. Air Conditioning Products also recently expanded its sales forces
in the Far East and Latin America.
Plumbing Products entered new markets through joint ventures in Eastern
Europe, Spain and Portugal and is continuing to expand using this approach.
Plumbing Products is significantly expanding its PRC joint venture operation,
ASPPL to which American Standard is obligated to contribute $10 million and has
contributed an operation valued at $20 million for an initial ownership position
of 27% with effective control over day-to-day operations. In April 1994, ASPPL
received other capital commitments of $82.5 million of which $27.5 million had
been drawn down at September 30, 1994. ASPPL is expanding its operations to
Beijing, Tianjin, Shanghai and Guangzhou in order to provide a full product line
of fixtures, fittings, and bathtubs throughout the PRC market. The Company's
ownership interest in ASPPL will increase over time to up to 51% of the equity
of ASPPL through mandatory reinvestment of royalties and management fees in
additional ASPPL shares.
Transportation Products, headquartered in Europe, has recently acquired a
business in Spain, is in the process of establishing joint ventures in the PRC
and Eastern Europe, and plans to expand its existing joint ventures in Japan and
the United States.
DEMAND FLOW TECHNOLOGY
To build on its position as a leader in each of its industries and to
increase sales and operating income American Standard began in 1990 to apply
Demand Flow methods to all its businesses.
43
<PAGE> 46
Under Demand Flow, products are produced as and when required by the customer,
the production process is streamlined, and quality control is integrated into
each step of the manufacturing process. The benefits of Demand Flow include
better customer service, quicker response to changing market needs, improved
quality control, higher productivity, increased inventory turnover rates and
reduced requirements for working capital and manufacturing and warehouse space.
As part of American Standard's strategy to integrate Demand Flow into all
of its operations, over 70% of American Standard's 38,500 employees worldwide
had been trained in Demand Flow as of September 30, 1994. Demand Flow has been
implemented in substantially all of American Standard's production facilities.
In addition, American Standard is implementing Demand Flow methods in its
acquired operations such as Perrot. American Standard is also applying Demand
Flow to administrative functions and is re-engineering its organizational
structure to manage its businesses based on processes instead of functions.
American Standard believes that its implementation of Demand Flow methods
has achieved significant benefits. Product cycle time (the time from the
beginning of the manufacturing of a product to its completion) has been reduced
and, on average, inventory turnover rates have more than doubled. Principally as
a result of the implementation of Demand Flow, American Standard has achieved an
aggregate $251 million reduction in inventories for the years 1990 through 1993.
American Standard further believes that as a result of the introduction of
Demand Flow, employee productivity has risen significantly and customer service
has improved, and without reducing production capacity the Company has been able
to free more than three million square feet of manufacturing and warehouse
space, allowing for expansion, plant consolidation, or other uses.
AIR CONDITIONING PRODUCTS SEGMENT
Air Conditioning Products began with the 1984 acquisition by the Company of
The Trane Company, a manufacturer and distributor of air conditioning products
since 1913. Air conditioning products are sold primarily under the TRANE(R)
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
residential and commercial 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 the Far East and Europe.
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-preferred
refrigerants.
In May 1994 a subsidiary of the Company, Standard Compressors Inc.,
concluded the final arrangements for a partnership formed in December 1993 with
Heatcraft Technologies Inc., a subsidiary of Lennox International Inc., for the
manufacture of compressors for use in air condition-
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<PAGE> 47
ing and refrigeration equipment. Each partner has a 50% interest in the
partnership, called Alliance Compressors, which initially will manufacture
reciprocating compressors in a section of the Company's existing facility in
Tyler, Texas. Construction of a new facility in Natchitoches, Louisiana, for the
manufacture of a newly developed scroll compressor for use in residential air
conditioners is expected to begin in 1995, with startup scheduled for early
1996. In connection with this arrangement, American Standard received $22.5
million, of which $8 million was for assets transferred and $14.5 million for an
initial preferred distribution. American Standard will receive two additional
payments of $10 million each, dependent upon achieving technological and
manufacturing milestones in the development of the new scroll compressor.
Many of the products manufactured by Air Conditioning Products utilize CFCs
and HCFSs 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 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.
At September 30, 1994 Air Conditioning Products had 28 manufacturing plants
in 8 countries, employing 16,600 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 commercial and
residential 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 integrated control systems. 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 81 commercial sales
offices in 121 locations. 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 Company-owned sales offices in over 250 locations to dealers
and contractors who sell and install the equipment.
During 1994 the Unitary Products Group successfully introduced several new
products, including a new line of outdoor condensing units for the
AMERICAN-STANDARD(R) brand; a new furnace
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<PAGE> 48
line; micro-electronic controlled large rooftop units, rooftop units with
special features that appeal to national accounts; and a large rooftop line
(27.5 tons to 50 tons).
The Company also markets an AMERICAN-STANDARD(R) 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 McQuay.
Commercial Systems distributes its products through 100 sales offices.
Thirty of these offices are Company-owned and 70 are franchised. In 1993 the
Company acquired the franchises in New York City; Birmingham, Alabama; and
Columbia, South Carolina. In 1994 the Company acquired the Toronto, Canada, and
St. Louis, Missouri offices 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-preferred
refrigerants.
During 1993 and 1994 the Company successfully introduced a number 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 to be served by the Company's products and
services.
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 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. In 1992 a joint venture in Egypt commenced operations.
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. The Company has recently established a joint venture in Australia and is
establishing joint ventures in 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 process.
PLUMBING PRODUCTS SEGMENT
Plumbing Products manufactures and distributes bathroom and kitchen
fixtures and fittings primarily under the IDEAL-STANDARD(R),
AMERICAN-STANDARD(R), and STANDARD(R) names. In
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<PAGE> 49
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 operates through three primary geographic groups:
European Plumbing Products, the Americas Group (comprising U.S. Plumbing
Products and Americas International), and 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(R), manufactures and distributes bathroom and kitchen
fixtures and fittings through subsidiaries or joint ventures in Germany, Italy,
France, England, Greece, the Czech Republic, Bulgaria, Spain, Portugal, and
Egypt. In 1991 the Company purchased 32% of Etablissements Porcher ("Porcher"),
a 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.
U.S. Plumbing manufactures bathroom and kitchen fixtures and fittings,
selling under the brand names AMERICAN-STANDARD(R) and STANDARD(R) in the United
States. Americas International manufactures bathroom and kitchen fixtures and
fittings, selling under the names AMERICAN-STANDARD(R), IDEAL-STANDARD(R), and
STANDARD(R), 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(R), IDEAL-STANDARD(R), and STANDARD(R)
through its wholly owned operations in South Korea, its majority-owned
operations in Thailand and the Philippines, and its manufacturing joint venture
in Indonesia. The Company is also significantly expanding its operations in the
PRC. See "-- Globalization".
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 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, 1993 and 1994. 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 make the model selection, 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.
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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 Division has been established to focus on the
unique needs of the growing mass retail home center industry, using products
sourced from several of the Company's manufacturing locations throughout the
Americas. This market channel accounted for about 20% of U.S. Plumbings' sales
in 1993, and this proportion is expected to grow.
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 designed to suit customer tastes in particular countries. New
offerings include additional colors and ensembles, bathroom suites from
internationally known designers, and electronically controlled products. Faucet
technology is centered on anti-leak, anti-scald and other features to meet
emerging consumer and legislative requirements.
Water-saving fixtures and fittings have been a major focus of Plumbing
Products for the past several 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 fixtures available in the United
States. Manufacture of water-saving toilets was mandated for residential use by
federal law commencing in January 1994 and for commercial use in January 1997.
Many of the Company's bathtubs are made from a proprietary porcelain on
metal composite, AMERICAST(R), which has gained an increasing share of the
worldwide market. Products made from the composite AMERICAST(R) have the
durability of cast iron with only one-half the weight and are characterized by
improved resistance to breaking and chipping. AMERICAST(R) products are easier
to ship, handle, and install and are less expensive to produce than cast iron
products. Use of this advanced composite was extended to kitchen sinks, bathroom
lavatories and acrylic surfaced products during 1991 and 1992. 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.
At September 30, 1994, Plumbing Products employed approximately 16,200
people and, including affiliated companies, had 52 manufacturing plants in 22
countries.
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(R)
name. Transportation Products' most important products are pneumatic braking
systems and related electronic control and other systems and components
(including ABS) for medium-size and heavy trucks, tractors, buses, trailers and
utility vehicles. 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 a 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
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customers, sales of truck braking systems are dependent on the demand for heavy
trucks. Some of the Company's important customers are Mercedes-Benz, Volvo,
Iveco (Fiat), RVI (Renault) and Rover. 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(R) 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 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. 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, accurate
information and just-in-time delivery to the customer.
Transportation Products and affiliated companies have 14 manufacturing
facilities and 7 sales organizations with operations in 17 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), and in India
with TVS Group (Clayton Sundaram). There is also a licensee in the PRC.
In January 1994 the Company acquired Perrot, a German brake manufacturer.
Through this acquisition 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 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. In most European countries, ABS has become mandatory for
commercial vehicles. 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.
At September 30, 1994, Transportation Products employed approximately 5,600
people.
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 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
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lower related overhead and working capital costs. The energy and materials
required for its manufacturing 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 trademarks are:
<TABLE>
<CAPTION>
BUSINESS SEGMENT TRADEMARK
- -------------------------- --------------------
<S> <C>
Air Conditioning Products TRANE(R)
AMERICAN-STANDARD(R)
Plumbing Products AMERICAN-STANDARD(R)
IDEAL-STANDARD(R)
STANDARD(R)
Transportation Products WABCO(R)
WABCO WESTINGHOUSE
CLAYTON DEWANDRE
PERROT(R)
</TABLE>
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 $36 million in 1991, $40
million in 1992, $43 million in 1993 and $30 million for the nine months ended
September 30, 1994 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 U.S. operations are subject to federal, state and local
environmental laws and regulations that impose limitations on the discharge of
pollutants into the air, water and soil 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 as well as undertaking response actions to
address soil, and groundwater issues at certain of its facilities. 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.
Expenditures in 1992, 1993 and the first nine months of 1994 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.
Additional sites may be 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.
The Company cannot estimate at this time the ultimate aggregate costs of all
remedial actions because of (a) uncertainties surrounding the nature and
application of environmental regulations, (b) the Company's lack of information
about additional
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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 international 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.
On December 15, 1992 the Company, along with 15 other major manufacturers
of plumbing fittings, was sued in the Superior Court of the State of California,
County of San Francisco by the State of California. The same companies were sued
in a companion case, filed the same day, by the Natural Resources Defense
Council and a second environmental group. In each case plaintiffs sought
injunctive relief, civil penalties and compensatory damages, alleging, inter
alia, 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.). The suits also claim that warnings provided with the
fittings relating to such lead discharge are inadequate. 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 the current federal weight standards mentioned above. The Company
believes its exposure in the California suits 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. The discharge
claim in the State's case has been dismissed and has been appealed. The Natural
Resources Defense Council's case has been stayed pending the outcome of the
appeal in regard to the discharge claim in the State's case.
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 CFCs. In November 1992 the Montreal
Protocol was amended in Copenhagen, Denmark, to phase out all except critical
uses of CFCs by January 1, 1996, and to limit consumption of HCFCs 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 CFCs 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 CFCs
and other ozone-depleting chemicals. Under the CAAA the production and
consumption of "Class I substances," including CFCs, 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 CFCs by
1996 and phase out production of the long-lived HCFCs, such as HCFC-22, for use
in new equipment by 2010 and totally
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<PAGE> 54
by 2020, while adopting the current CAAA schedule for the short-lived HCFCs,
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 financial condition or
results of operations. The Company believes that these regulations will have the
effect of generating additional product sales and parts and service revenues, as
existing air conditioning equipment operating on CFCs is converted to operate on
environmentally-preferred refrigerants 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 conversion or replacements. 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 the Class I and Class II
substances used in their 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 CFCs and HCFCs 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.
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PROPERTIES
As of September 30, 1994 the Company conducted its manufacturing activities
through 94 plants in 32 countries, of which the principal ones are as follows:
<TABLE>
<CAPTION>
BUSINESS SEGMENT LOCATION MAJOR PRODUCTS MANUFACTURED AT LOCATION
- ----------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Air Conditioning Clarksville, TN Commercial unitary air conditioning
Products 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
Seoul, South Korea Brass plumbing fittings
Manila, Philippines Vitreous china
Transportation Campinas, Brazil Braking equipment
Products Leeds, England Braking equipment
Claye-Souilly, France Braking equipment
Hanover, Germany Braking equipment
Mannheim, Germany Foundation brakes
</TABLE>
Except for the properties located in Mirecourt, France and Manila,
Philippines, 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 Existing 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 Existing Credit Agreement and
related documents. In addition, to the extent required by the respective
indentures pursuant to which certain debt securities of American Standard Inc.,
were issued, the obligations of American Standard Inc. under such debt
instruments are secured by mortgages on principal U.S. properties equally and
ratably with indebtedness under the Existing Credit Agreement and certain
related indebtedness. See "Certain Indebtedness". Through joint ventures, the
Company participates in the operation (or is in the process of
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<PAGE> 56
constructing) up to seven plants in the PRC, and operates one plant in each of
Indonesia and India. 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 1994 several Air Conditioning Products' plants operated near capacity
and others operated moderately below capacity. 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 1994 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.
Transportation Products' plants generally operated moderately below
capacity in 1994 but above 1993 levels, which were significantly below capacity.
EMPLOYEES
The Company employed approximately 38,500 people (excluding employees of
unconsolidated joint venture companies) at September 30, 1994. The Company has a
total of 18 labor union contracts in North America (covering approximately 8,500
employees), one of which expires in the last quarter of 1994 (covering
approximately 200 employees), two of which expire in 1995 (covering
approximately 2,200 employees) and six of which expire in 1996 (covering
approximately 4,600 employees). There can be no assurance that the Company will
successfully negotiate the labor contracts expiring in the last quarter of 1994
or during 1995 or 1996 without work stoppages. However, the Company does not
anticipate any problems in renegotiating those contracts that would materially
affect its results of operations.
In 1994, 230 Plumbing Products employees went on strike for 64 days at the
Landsdowne (Toronto), Canada chinaware manufacturing plant. In 1991, 1,200 Air
Conditioning Products employees went on strike for 54 days at the LaCrosse,
Wisconsin facility and, in 1989, 1,300 Air Conditioning Products workers went on
strike for 40 days at the Clarksville, Tennessee facility. Other than these
strikes, the Company has not experienced any other significant work stoppages
since 1985. The Company also has a total of 40 labor contracts outside North
America (covering approximately 18,000 employees), where the Company has not
experienced any significant work stoppage in the last five years.
Although the Company believes relations with its employees are generally
satisfactory, there can be no assurance that the Company will not experience
significant work stoppages in the future or that its relations with employees
will continue to be satisfactory.
CUSTOMERS
The business of the Company taken as a whole is not dependent upon any
single customer or a few customers.
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 Philippines, South Korea, Thailand,
Taiwan, Australia 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 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
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<PAGE> 57
which resulted from the Acquisition increased the asset exposure of foreign
operations from an accounting perspective; however, since the Acquisition in
1988, 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.
LEGAL PROCEEDINGS
American Standard Inc. is the defendant in a lawsuit brought by Entech
Sales & Service, Inc., on behalf of an alleged 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 the Federal
antitrust laws. It demands $680 million in damages (which would be subject to
trebling under the antitrust laws) and injunctive relief. American Standard Inc.
has filed an answer denying all claims of violation and is defending itself
vigorously. The district court recently denied class certification with respect
to two of the three violations alleged in the suit. These alleged violations may
now only be asserted by Entech on its own behalf. With respect to the one claim
which was certified as a class action, alleging a price fixing conspiracy,
management believes that, on the basis of the facts now known to it, the claim
is without merit. In management's opinion the litigation will not have any
material adverse effect on the financial position, cash flows, or results of
operations of the Company.
For a discussion of German tax issues see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." For a discussion of environmental issues see
"-- General -- Regulations and Environmental Matters."
55
<PAGE> 58
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of September 30,
1994, with respect to each person who is an executive officer or director of the
Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
<S> <C> <C>
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............. 57 Senior Vice President, Plumbing Products, and Director
Fred A. Allardyce............... 53 Vice President and Chief Financial Officer
Alexander A. Apostolopoulos..... 52 Vice President and Group Executive, Americas, Plumbing Products
Thomas S. Battaglia............. 52 Vice President and Treasurer
Roberto Canizares M............. 44 Vice President, Air Conditioning Products' Asia Pacific Zone
Wilfried Delker................. 54 Vice President and Group Executive, Worldwide Fittings, Plumbing
Products
Adrian B. Deshotel.............. 49 Vice President, Human Resources
Cyril Gallimore................. 65 Vice President, Systems and Technology
Luigi Gandini................... 56 Vice President and Group Executive, European Plumbing Products
Daniel Hilger................... 54 Vice President and Group Executive, Air Conditioning Products in
Europe, Middle East and Africa
Joachim D. Huwendiek............ 63 Vice President, Automotive Products in Germany
Frederick W. Jaqua.............. 73 Vice President and General Counsel and Secretary
Richard A. Kalaher.............. 54 Acting General Counsel and Acting Secretary
W. Craig Kissel................. 43 Vice President and Group Executive, Unitary Products Group
William A. Klug................. 62 Vice President and Group Executive, Trane International
Jean-Claude Montauze............ 48 Vice President, Automotive Products in France
G. Eric Nutter.................. 58 Vice President, Automotive Products in the United Kingdom
Raymond D. Pipes................ 45 Vice President and Group Executive, Plumbing Products in the Far
East
Bruce R. Schiller............... 50 Vice President, Compressor Business
James H. Schultz................ 45 Vice President and Group Executive, Commercial Systems Group
G. Ronald Simon................. 53 Vice President and Controller
Wade W. Smith................... 44 Vice President, U.S. Plumbing Products
Benson I. Stein................. 57 Vice President, General Auditor
Robert M. Wellbrock............. 47 Vice President, Taxes
Steven E. Anderson*............. 52 Director
Shigeru Mizushima............... 50 Director
Frank T. Nickell................ 46 Director
Roger W. Parsons*............... 52 Director
J. Danforth Quayle*............. 47 Director
David M. Roderick............... 70 Director
John Rutledge................... 45 Director
Joseph S. Schuchert*............ 65 Director
</TABLE>
- ---------------
* The Management Development Committee functions as the compensation committee
of the Company. Since December 2, 1993, its members were Messrs. Quayle and
Schuchert and on September 1, 1994, Messrs. Anderson and Parsons also became
members of the Committee.
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<PAGE> 59
Currently, 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; Mr. Parsons in March 1994; Mr. Roderick in June 1994;
and Mr. Anderson in September 1994. Prior to the completion of the Offerings,
the Company will amend and restate its Certificate of Incorporation (as so
amended and restated, the "Restated Certificate of Incorporation"). The Restated
Certificate of Incorporation will divide the Board of Directors into three
classes, with three-year staggered terms, and initial terms expiring at the
first, second and third annual meetings of the Company's stockholders held
following the Offerings.
The Company, ASI Partners and executive officers and certain other
management personnel of the Company who purchased shares of Common Stock
("Management Investors") entered into a Stockholders Agreement in connection
with the Acquisition that, among other things, provided for arrangements
regarding the control of the election of directors of the Company. These
provisions, which will expire upon the completion of the Offerings, entitled the
Management Investors to nominate at least two directors to the Company's Board
of Directors, entitled ASI Partners to nominate the other directors, and
obligated the Management Investors and ASI Partners to vote their Common Stock
in accordance with such nominations.
In connection with the Offerings, and subject to approval by the Company's
disinterested directors and the Board of Directors, it is contemplated that the
Stockholders Agreement will be amended to allow ASI Partners to designate a
number of director nominees (based on the then-current stockholding of ASI
Partners and its affiliates) which, if elected, will result in an eleven-member
Board of Directors of American Standard Companies Inc. consisting of: (i) while
ASI Partners or investment funds controlled by Kelso own at least 50% of the
Common Stock, seven designees of ASI Partners (one of which will not be an
affiliate of Kelso or an officer of the Company), and at least four other
directors who are not designees or affiliates of Kelso (at least one of which
will not be an officer of the Company), (ii) while ASI Partners or investment
funds controlled by Kelso own less than 50% but at least 35% of the Common
Stock, six designees of ASI Partners, and at least two other directors who are
not designees or affiliates of Kelso or officers of the Company; (iii) while ASI
Partners or investment funds controlled by Kelso own less than 35% but at least
20% of the Common Stock, four designees of ASI Partners, and at least three
other directors who are not designees or affiliates of Kelso or officers of the
Company; and (iv) while ASI Partners or investment funds controlled by Kelso own
less than 20% but at least 10% of the Common Stock, one designee of ASI
Partners. It is not currently contemplated that the amended Stockholders
Agreement will obligate any of the parties thereto to vote its Common Stock in
favor of the nominated directors. See "-- Compensation Committee Interlocks and
Insider Participation" and "Certain Transactions and Relationships" for a
description of other contemplated amendments to the Stockholders Agreement and
the Company's consulting agreement with Kelso.
The sole holder of the outstanding common stock of American Standard Inc.
is the Company, and the Company exclusively elects the directors of American
Standard Inc. Currently the directors of the Company 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 American Standard Inc.).
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.
57
<PAGE> 60
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 and Group Executive of European
Plumbing Products from 1988 until June 1990. Mr. Kerckhove has served as a
director of the Company since September 1990.
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 from June 1977.
Mr. Canizares was elected Vice President, Air Conditioning Products' Asia
Pacific 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 January 1980 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. He is planning to retire in early 1995 and will be succeeded by Mr.
Kalaher.
Mr. Kalaher was elected Acting General Counsel and Acting Secretary in June
1994, having joined the Company in February 1994. Prior thereto, he was Vice
President and General Counsel of AMAX Inc. (until its merger and spinoff to
shareholders in November 1993, the third largest aluminum and coal producer in
the United States with operations also in oil and gas, gold and molybdenum) from
1991 to 1994 and Vice President and Associate General Counsel from 1985 to 1991.
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
58
<PAGE> 61
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.
Mr. Klug was elected Vice President in 1985 and has been Group Executive 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. Montauze was elected Vice President, Automotive Products in France, in
October 1994. He served as Vice President of Finance and Controller of
Automotive Products at the Brussels headquarters from September 1989 until
September 1994. Prior thereto he was Financial Manager of the French
transportation business.
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 American Standard Inc.'s Philippine subsidiary from May 1990 until
April 1992 and was Vice President, Control & Finance, of U.S. Plumbing Products
Group from March 1985 until April 1990.
Mr. Schiller was elected Vice President, 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 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.
Mr. Anderson served as National Partner in Charge -- Industries of KPMG
Peat Marwick and a member of the firm's Management Committee from November 1990
until he retired in June 1994. Prior thereto his responsibilities have included
Partner in Charge of the Boston Audit Department and Managing Partner of the
Seattle office. He became a partner of the firm in 1977, having joined the firm
in 1967. He is a member of the AICPA. Mr. Anderson was elected as a director of
the Company on September 1, 1994.
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
59
<PAGE> 62
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 The Bear Stearns Companies Inc., Club
Car, Inc., Earle M. Jorgensen Company, Harris Specialty Chemicals, Inc., King
Broadcasting Company, Tyler Refrigeration Corporation and United Refrigerated
Services, Inc. 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.
Mr. Roderick joined the Board of Earle M. Jorgensen Company (a Kelso
affiliate engaged in the fabrication and sale of steel products) and was elected
its Chairman in 1994. He joined USX Corporation (formerly United States Steel
Corporation) in 1959, becoming Chairman of the Board and Chief Executive Officer
in 1979, retiring from the latter position in 1989 and from the USX Board in
1994. He is also a director of Aetna Life & Casualty Company, Texas Instruments
Incorporated, Kelso & Companies, Inc., Presbyterian University Hospital,
Pittsburgh Baseball Club and General Medical Corporation. He is also Vice
Chairman of the U.S. Korea Business Council. Mr. Roderick was elected as a
director of the Company on June 2, 1994.
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 &
Companies, Inc. Dr. Rutledge has served as a director of the Company since March
1993.
Mr. Schuchert has been Chairman, Chief Executive Officer, and a director of
Kelso & Companies, Inc., since March 1989. Kelso & Companies, Inc. is the
general partner of Kelso. 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.
On December 23, 1992, Kelso & Companies, Inc. 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 an affiliate of Kelso & Companies, Inc. The order found
that the tender offer filing by such affiliate in connection with the
acquisition did not comply fully with the Commission's tender offer reporting
requirements, and required Kelso & Companies, Inc. 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 and
Chief Executive Officer of Kelso & Companies, Inc. (the general partner of
Kelso) and a general partner of Kelso American Standard Partners, L.P., the
general partner of Kelso ASI Partners, L.P.
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<PAGE> 63
Pursuant to a Consulting Agreement, 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 subject to
reduction depending on the number of shares Kelso controls of the Company or
American Standard Inc., with final termination when Kelso's ownership control
falls below 20 percent.
Upon completion of the Offerings, and subject to approval by the Company's
disinterested directors and the Board of Directors, it is contemplated that the
Consulting Agreement will be amended and the Company will pay Kelso a one-time
fee of $ million in consideration of (i) Kelso's agreement to provide
ongoing consulting services requested by the Company, including in connection
with the Offerings, for the originally specified term of the Consulting
Agreement without charge (other than reimbursement of expenses incurred in the
performance of such services), (ii) the release by Kelso of the Company for
compensation in connection with all services rendered or to be rendered by Kelso
to the Company (other than reimbursement of expenses incurred in the performance
of such services), (iii) the additional administrative responsibilities that
Kelso will perform as manager of ASI Partners in connection with the agreements
described in the following paragraph and (iv) the agreements described below
insofar as they apply to Kelso and its affiliates.
In order to facilitate the Offerings (which Kelso and ASI Partners deem to
be in the best interests of ASI Partners and the Company), it is contemplated
that Kelso will also agree to (i) provide, and cause ASI Partners or any
investment fund which Kelso controls and which owns Common Stock to provide,
advance notice to, and consult with, the Company a reasonable time prior to the
disposition of shares of Common Stock (other than in non-block trades on the New
York Stock Exchange and other than to an affiliate or pursuant to a public
offering), (ii) use, and cause ASI Partners or any investment fund which Kelso
controls and which owns Common Stock to use, reasonable efforts (consistent with
fiduciary duties to their respective investors) in connection with any sale by
it or them of Common Stock not to cause any undue fluctuations in the public
markets for the Common Stock, (iii) except as permitted by the amended
Stockholders Agreement, cause ASI Partners and any investment fund controlled by
Kelso, not to initiate, propose or support any solicitation for the approval of
any stockholder proposal not supported by the Board of Directors, (iv) amend the
Stockholders Agreement to provide that, except in connection with a public
offering, it will not sell or otherwise dispose of, or allow ASI Partners or any
investment fund which Kelso controls and which owns Common Stock to sell or
otherwise dispose of, more than 15% of the Common Stock then outstanding without
first offering to the Company (or its designee) the right to purchase such
shares for the same price, and (v) if objected to by a majority of the members
of the Board of Directors not affiliated with Kelso, not to acquire, and cause
ASI Partners and any investment fund which Kelso controls not to acquire,
additional shares of Common Stock or any assets of the Company.
It is further contemplated that the amended Stockholders Agreement will
allow Kelso to designate nominees for election to the Board of Directors, as
described under "Management -- Executive Officers and Directors," and will
entitle ASI Partners to demand registration rights (the first three of which
shall be at the Company's expense), as well as "piggyback" registration rights
in respect of registration statements filed by the Company covering offerings of
Common Stock. It is anticipated that the Management Investors will also be
entitled to "piggyback" registration rights pursuant to the amended Stockholders
Agreement.
American Standard Inc. 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 American Standard
Inc. 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
American Standard Inc. has guaranteed a minimum annual usage by it of $2 million
for a period of five years commencing 1993 and Kelso Insurance has guaranteed
American Standard Inc.'s minimum usage
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<PAGE> 64
to AT&T. No fee was paid by American Standard Inc. to Kelso Insurance in
connection with this transaction.
In August 1993 American Standard Inc. 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 & Company, 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 American Standard Inc. has been
waived. In connection with the Offerings, it is contemplated that Kelso will
agree to acquire, directly or through affiliates, 80% of the Company's limited
partnership interest in KIA V at a price equal to 80% of the Company's net cost
incurred to the date of such acquisition to obtain such interest, thereby
relieving the Company of 80% of the balance of its $5 million capital
contribution commitment. See "Certain Transactions and Relationships".
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 (such persons described in
subdivisions (i) and (ii) hereinafter collectively called the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
--------------------------------------------- COMPENSATION
NAME AND PRINCIPAL OTHER ANNUAL LTIP ALL OTHER
POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) PAYOUTS(4) COMPENSATION(5)
- -------------------- ---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Emmanuel A.
Kampouris......... 1993 $ 562,500 $600,000 $ 337,500 $ 966,710 $ 145,714
Chairman, President 1992 525,000 500,000 337,500 1,085,316 117,951
& Chief 1991 525,000 500,000 (6) 842,000 (6)
Executive Officer
George H.
Kerckhove......... 1993 $ 334,500 $141,000 $ 169,500 $ 464,059 $ 47,166
Senior Vice 1992 319,000 148,000 169,500 490,456 32,344
President 1991 293,369 148,000 (6) 342,000 (6)
Horst Hinrichs...... 1993 $ 292,211 $127,000 $ 135,000 $ 399,548 $ 45,062
Senior Vice 1992 303,415 130,000 135,000 354,727 21,707
President 1991 269,444 160,000 (6) 307,000 (6)
Fred A. Allardyce... 1993 $ 250,000 $ 96,000 $ 169,500 $ 286,713 $ 42,580
Vice President & 1992 240,000 90,000 169,500 298,401 32,581
Chief Financial 1991 192,000 70,000 (6) 207,000 (6)
Officer
Luigi Gandini....... 1993 $ 250,916 $ 81,000 $ 0 $ 285,314 $ 41,826
Vice President 1992 243,950 88,600 0 286,625 27,957
1991 226,316 80,000 (6) 119,000 (6)
H. Thompson
Smith............. 1993 $ 342,500 $154,000 $ 90,000 $ 524,449 $ 43,548
former Senior Vice 1992 330,000 144,000 90,000 579,078 24,845
President 1991 300,000 152,000 (6) 419,000 (6)
</TABLE>
- ---------------
(1) Includes amounts deferred by each of the Named Officers under the Savings
Plan of American Standard Inc. and Participating Subsidiary Companies (the
"Savings Plan").
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<PAGE> 65
(2) Represents annual bonus earned for the year reported but paid in the
subsequent year. Annual bonuses may be deferred at the election of the
recipient.
(3) Amounts shown for 1993 represent payments under the Company's 1988
Management Partners' Bonus Plan; payments were at the rate of $.60 per share
of Common Stock owned by Named Officers on July 7, 1993, that had been
previously acquired through stock offerings in 1988.
(4) Amounts for 1993 represent payments under the Long-Term Incentive
Compensation Plan ("LTIP") for the achievement of the 1991-1993 performance
goal with payments (95.1% cash; 4.9% in shares of the Company's Common
Stock) made partly in 1993 and partly in 1994. The 1992 LTIP payouts
represent achievement of the 1990-1992 performance goal, with payment
approximately 80% in cash and 20% in shares of the Company's Common Stock
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. LTIP payouts may be deferred at the
election of the recipient.
(5) Included in All Other Compensation for 1993 was the following:
<TABLE>
<CAPTION>
PREMIUMS FOR TERM ESOP COMPANY CONTRIBUTIONS
LIFE INSURANCE ALLOCATIONS TO SAVINGS PLAN
----------------- ----------- ---------------------
<S> <C> <C> <C>
E.A. Kampouris................... $ 110,338 $21,226 $14,150
G.H. Kerckhove................... 11,790 21,226 14,150
H. Hinrichs...................... 9,686 21,226 14,150
F.A. Allardyce................... 7,204 21,226 14,150
L. Gandini....................... 6,450 21,226 14,150
H.T. Smith....................... 8,172 21,226 14,150
</TABLE>
(6) Not required by Securities and Exchange Commission transitional rules.
RETIREMENT PLANS
TERMINATED PLAN
As a result of the change of control of American Standard Inc. in 1988, the
retirement plan of American Standard Inc. 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. Kerckhove, $109,828; Mr. Hinrichs, $72,945; Mr.
Allardyce, $25,764 and Mr. Smith, $22,426. Mr. Gandini did not participate in
the Terminated Plan.
SUPPLEMENTAL RETIREMENT PLAN
American Standard Inc. 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 annual lump
sum settlement, that supplement, on the basis of a formula, their annual
retirement benefits (if any) under the Terminated Plan.
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.
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<PAGE> 66
<TABLE>
<CAPTION>
HIGHEST 3-YEAR YEARS OF SERVICE
AVERAGE ANNUAL ------------------------------------------------
COMPENSATION 10 20 30 40
- -------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 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>
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.
As of December 31, 1993 the years of credited service under the
Supplemental Plan for the Named Officers are as follows: Mr. Kampouris, 28
years; Mr. Kerckhove, 32 years; Mr. Hinrichs, 35 years; Mr. Allardyce, 17 years;
Mr. Gandini, 33 years; and Mr. 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. Kerckhove,
$37,000; Mr. Hinrichs, $143,000; and Mr. Gandini, $24,000.
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<PAGE> 67
LONG-TERM INCENTIVE COMPENSATION PLAN
LONG-TERM INCENTIVE COMPENSATION PLANS-AWARDS IN 1993
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER
NUMBER OF PERIOD ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS UNTIL NON-STOCK-PRICE-BASED PLANS
OR OTHER MATURATION -----------------------------------
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
Chairman, President & Chief
Executive Officer
George H. Kerckhove.............. (a) 1/93-12/95 $ 227,200 $459,400 $ 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
</TABLE>
- ---------------
(a) Awards are denominated in dollars.
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, notes or in Common Stock of the
Company 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 American Standard Inc.'s loan agreements or debt
indentures has occurred or will occur as a result of such payment.
Shares of Common Stock distributable to Plan participants are delivered to
a grantor's trust for their benefit. The trust may be terminated following a
public offering or offerings in which 25% or more of the Company's Common Stock
is sold, 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 American Standard Inc.'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 the Company or American Standard
Inc. Shares held by the trust are voted by the trustee in accordance with
American Standard Inc.'s directions.
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<PAGE> 68
SUPPLEMENTAL INCENTIVE PLAN
In March 1994, the Board of Directors of American Standard Inc. adopted the
American Standard Inc. and Subsidiaries 1994-1995 Supplemental Incentive
Compensation Plan (the "Supplemental Incentive Plan") that provides for awards
to executive officers, including all the Named Officers, non-officer executive
employees and certain non-executive management employees of American Standard
Inc. and its subsidiaries. These awards will be based on American Standard
Inc.'s consolidated 1995 operating earnings before interest and taxes. The
maximum award which may be paid under the Supplemental Incentive Plan for
participants in each of the three categories is determined by reference to
awards paid under American Standard Inc.'s Long-Term Incentive Plan, American
Standard Inc.'s Annual Incentive Plan and a specified dollar amount,
respectively. The Supplemental Incentive Plan requires a participant's continued
employment (except in cases of death, disability or retirement) until December
31, 1995 in order to receive an award under the Plan. The awards, if any, are
payable 50% in Common Stock and 50% in cash for officers and non-officer
executive employees and 100% in cash in the case of non-executive management
employees.
STOCK INCENTIVE PLAN
Prior to the completion of the Offerings and subject to the approval of the
Company's majority stockholder, it is contemplated that the Company's Board of
Directors will adopt the Stock Plan. Under the Stock Plan, a compensation
committee of the Board of Directors (the "Committee") may grant awards to
officers and other key executive and management employees of the Company and its
subsidiaries. The Committee will select the grantees from approximately
employees, including officers (including Messrs. Kampouris, Kerckhove,
Hinrichs, Allardyce and Gandini). The number of grantees may vary from year to
year.
The maximum number of shares of the Company's Common Stock that may be
issued under the Stock Plan is . The shares may be unissued shares or
treasury shares. If there is a stock split, stock dividend, recapitalization, or
other relevant change affecting the Common Stock, appropriate adjustments will
be made in the number of shares that may be issued in the future and in the
number of shares and price under all outstanding grants made before the event.
If shares under a grant are not issued, those shares will again be available for
inclusion in future grants. Payment of cash in lieu of shares generally will not
be considered an issuance of shares of Common Stock, except in the case of the
exercise of a stock appreciation right ("SAR") granted in tandem with a stock
option.
GRANTS UNDER THE STOCK PLAN
The Committee has the authority to grant the following types of awards
under the Stock Plan: (1) stock options; (2) stock appreciation rights; (3)
restricted stock; (4) restricted units; and/or (5) deferred stock. Each of these
awards may be granted alone, in conjunction with, or in tandem with other awards
under the Stock Plan and/or cash awards outside the Stock Plan.
STOCK OPTIONS. The Committee may grant nonqualified options and options
qualifying as incentive stock options under the Internal Revenue Code of 1986,
as amended (the "Code"). Incentive stock options ("ISOs") and non-qualified
stock options may be granted for such number of shares as the Committee shall
determine, except that, pursuant to the above-described amendment, no
participant may be granted stock options in any 12-month period for more than
shares. The option price of either a non-qualified stock option or an
ISO will not be less than the fair market value of the underlying Common Stock
on the date of grant. To exercise an option, the grantee may pay the option
price in cash, or if permitted by the Committee, by delivering other shares of
Common Stock.
The term of each option will be fixed by the Committee but may not exceed
ten years from the date of grant. Unless otherwise determined by the Committee,
options will become exercisable in
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<PAGE> 69
three equal installments on each of the first three anniversaries of the date of
grant. The exercisability of options may be accelerated by the Committee.
STOCK APPRECIATION RIGHTS. The Committee may grant a SAR in conjunction
with an option granted under the Stock Plan or independent of any option. The
Committee will determine the time or times at which a SAR may be exercised. SARs
may be exercised in installments, and the exercisability of SARs may be
accelerated by the Committee. The Committee may grant SARs which become
exercisable only in the event of a change in control of the Company and may
provide that such are cashed out on the basis of the change in control price, as
such terms as defined in the Stock Plan. If a grantee exercises a SAR, the
grantee will generally receive a payment equal to the excess of the fair market
value of the shares with respect to which the SAR is being exercised at the time
of exercise over the price of such shares as fixed by the Committee at the time
the SAR was granted. Payment may be made in cash, in shares, or in a combination
of cash and shares as the Committee determines.
RESTRICTED STOCK GRANTS. The Committee may also award shares of Common
Stock under a restricted stock grant. The grant will set forth a restriction
period (including, without limitation, a specified period of time and a period
related to the attainment of performance goals) during which the shares of
restricted stock granted will remain subject to forfeiture. The grantee can not
dispose of the shares prior to the expiration of the restriction period. During
this period, the grantee will generally have all the rights of a stockholder,
including the right to vote the shares and receive dividends. Each certificate
will bear a legend giving notice of the restrictions in the grant.
RESTRICTED UNIT GRANTS. The Committee may grant awards of restricted units,
and each such grant will set forth the terms of a restriction period in the same
manner as those applicable to the grant of restricted stock. With respect to
restricted units, no shares of Common Stock will actually be issued to a
participant at the time a restricted unit award is made. Rather, the Company
will establish a separate account for the participant and will record in such
account the number of restricted units awarded to the participant. The
Committee, in its sole discretion, will determine whether to credit to the
account of, or to pay currently to, each recipient of a restricted unit award
amounts equal to any dividends paid by the Company with respect to the
corresponding number of shares of Common Stock ("dividend equivalents"). The
participant will be entitled to receive, upon the termination of the restricted
period, one share of Common Stock for each restricted unit with respect to which
the restrictions have lapsed ("vested unit") then credited to the recipient's
account (or, at the discretion of the Committee, cash in lieu thereof) plus cash
equal to the any dividend equivalents with respect to such vested units and any
interest thereon.
DEFERRED STOCK GRANTS. The Committee may also make deferred stock awards
under the Stock Plan. These are non-transferable awards entitling the recipient
to receive shares of the Common Stock without any payment in cash or property in
one or more installments at a future date or dates, as determined by the
Committee. Receipt of deferred stock may be conditioned on such matters as the
Committee shall determine, including continued employment or attainment of
performance goals. Any deferral restrictions under a deferred stock award may be
accelerated or waived by the Committee at any time prior to termination of
employment. The Committee may permit participants to further defer receipt of a
deferred stock award.
TERMINATION OF EMPLOYMENT. In the event of termination of employment by
reason of retirement, long term disability or death, any restrictions on
restricted units or shares of restricted or deferred stock shall lapse and any
option or SAR may thereafter be exercised in full in the case of retirement for
a period of 3 years and in the case of disability or death for a period of one
year (or such shorter period as the Committee shall determine at grant), subject
in each case to the stated term of the option. In the event of termination of
employment for any reason other than retirement, disability or death, any
options and SARs will be exercisable, to the extent exercisable at the date of
termination, for a period of 90 days and any restricted units or shares of
restricted or deferred stock then outstanding as to which the period of
restriction has not lapsed will be forfeited.
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<PAGE> 70
CHANGE OF CONTROL PROVISIONS. The Stock Plan provides that, except as
provided below, in the event of a "Change in Control" (as defined in the Stock
Plan), (i) all SARs will become immediately exercisable; (ii) the restrictions
and deferral limitations applicable to outstanding restricted unit, restricted
stock and deferred stock awards will lapse and the shares in question will fully
vest; and (iii) each option shall be cancelled in exchange for cash in an amount
equal to the excess of the highest price paid (or offered) for Common Stock
during the preceding 60-day period over the exercise price for such option.
Notwithstanding the foregoing, if the Committee determines that the grantee of
such award will receive a new award (or have his prior award honored) in a
manner which preserves its value and eliminates the risk that the value of the
award will be forfeited due to involuntary termination, no acceleration of
exercisability or vesting, lapse of restriction or deferral limitations, or cash
settlement will occur as a result of a Change in Control.
OTHER INFORMATION. The Board may terminate or suspend the Stock Plan at any
time but such termination or suspension shall not affect any stock options,
SARs, or restricted unit, restricted stock and deferred stock awards then
outstanding under the Stock Plan. Unless terminated by action of the Board, the
Stock Plan will continue in effect until , but awards granted prior to
such date shall continue in effect until they expire in accordance with their
terms. The Board may also amend the Stock Plan as it deems advisable. The Board
presently intends to submit all material amendments to the Stock Plan to the
stockholders for their approval to the extent required by Rule 16b-3 promulgated
under the Exchange Act. The Committee may amend the term of any award or option
theretofore granted, retroactively or prospectively, but no such amendment shall
adversely affect any such award or option without the holder's consent.
FEDERAL INCOME TAX ASPECTS. The following is a brief summary of the Federal
income tax consequences of awards made under the Stock Plan based upon the
Federal income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive, and does not describe state or local tax
consequences.
INCENTIVE STOCK OPTIONS. No taxable income is realized by the participant
upon the grant or exercise of an ISO. If a participant does not sell the stock
received upon the exercise of an ISO ("ISO Shares") for at least two years from
the date of grant and within one year from the date of exercise, when the shares
are sold any gain (loss) realized will be long-term capital gain (loss). In such
circumstances, no deduction will be allowed to the Company for Federal income
tax purposes.
If ISO Shares are disposed of prior to the expiration of the holding
periods described above, the participant generally will realize ordinary income
at that time equal to the excess, if any, of the fair market value of the shares
at exercise (or, if less, the amount realized on the disposition of the shares)
over the price paid for such ISO Shares. The Company will be entitled to deduct
any such recognized amount. Any further gain or loss realized by the participant
will be taxed as short-term or long-term capital gain or loss. Subject to
certain exceptions for disability or death, if an ISO is exercised more than
three months following the termination of the participant's employment, the
option will generally be taxed as a non-qualified stock option.
NON-QUALIFIED STOCK OPTIONS. No income is realized by the participant at
the time a non-qualified stock option is granted. Generally upon exercise of a
non-qualified stock option, the participant will realize ordinary income in an
amount equal to the difference between the price paid for the shares and the
fair market value of the shares on the date of exercise. The Company will be
entitled to a tax deduction in the same amount. Any appreciation (or
depreciation) after date of exercise will be either short-term or long-term
capital gain or loss, depending upon the length of time that the participant has
held the shares.
STOCK APPRECIATION RIGHTS. No income will be realized by a participant in
connection with the grant of an SAR. When the SAR is exercised, the participant
will generally be required to include as taxable ordinary income in the year of
exercise, an amount equal to the amount of cash and the fair market value of any
shares received. The Company will be entitled to a deduction at the time and in
the amount included in the participant's income by reason of the exercise. If
the participant receives
68
<PAGE> 71
common stock upon exercise of an SAR, the post-exercise appreciation or
depreciation will be treated in the same manner discussed above under
Non-Qualified Stock Options.
RESTRICTED STOCK. A participant receiving restricted stock generally will
recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
any consideration paid for the stock. The Company will be entitled to a
deduction at same time and in same amount. The holding period to determine
whether the participant has long-term or short-term capital gain or loss on a
subsequent sale generally begins when the restriction period expires, and the
participant's tax basis for such shares will generally equal the fair market
value of such shares on such date.
However, a participant may elect, under Section 83(b) of the Code, within
30 days of the grant of the stock, to recognize taxable ordinary income on the
date of grant equal to the excess of the fair market value of the shares of
restricted stock (determined without regard to the restrictions) over the
purchase price of the restricted stock. By reason of such an election, the
participant's holding period will commence on the date of grant and the
participant's tax basis will be equal to the fair market value of the shares on
that date (determined without regard to restrictions). Likewise, the Company
generally will be entitled to a deduction at that time in the amount that is
taxable as ordinary income to the participant. If shares are forfeited after
making such an election, the participant will be entitled to a deduction,
refund, or loss for tax purposes only in an amount equal to the purchase price
of the forfeited shares regardless of whether he made a Section 83(b) election.
RESTRICTED UNITS. A participant receiving a restricted unit award will not
have taxable income when the restricted units or the dividend equivalents are
credited to the participant's account. The participant will recognize ordinary
income equal to the fair market value of the Common Stock delivered (or the
amount of cash paid in lieu of such shares) plus the amount of cash and the fair
market of any property credited to the participant's account as dividend
equivalents when the shares and/or cash are delivered or paid. The capital gain
or loss holding period for the Common Stock or other property will also commence
upon delivery of such share or property. The participant will also recognize
ordinary income to the extent he receives current payments of dividend
equivalents in respect of his restricted units when the Company pays a dividend
on Common Stock. The Company will generally be entitled to a deduction for the
year and to the extent the participant has ordinary income, provided in the case
of payment in shares or other property that the Company complies with applicable
withholding requirements.
DEFERRED STOCK. The participant receiving deferred stock generally will be
subject to tax at ordinary income rates on the fair market value of the deferred
stock on the date that the stock is distributed to the participant and the
capital gain or loss holding period for such stock will also commence on that
date. The Company generally will be entitled to a deduction in the amount that
is taxable as ordinary income to the participant.
DIRECTORS' FEES AND OTHER ARRANGEMENTS
Each outside director is paid a fee of $6,750 per calendar quarter and in
addition receives a fee of $1,000 for each meeting of the Board or Committee
meeting attended. The only directors currently eligible for directors' fees are
directors who are neither employees of American Standard Inc. or Kelso. They are
Messrs. Anderson, Mizushima, Parsons, Quayle, Roderick 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 the Company that are held on the same day American Standard
Inc.'s Board of Directors meets.
A Supplemental Compensation Plan for Outside Directors ("Supplemental
Compensation Plan") was adopted in June 1989. A Plan Account was established for
each participating director at that time consisting of units equivalent to
$50,000 of Common Stock with each unit having a value of $19 per share, the
independently appraised value of the shares of Common Stock as of December 31,
1988. For the purpose of providing a measure of parity among the directors, the
$50,000
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<PAGE> 72
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 per share appraisal value of such stock as of
the December 31 immediately preceding commencement of Board membership. 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 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.
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 American Standard Inc. without "Cause" (as defined in the Officers
Severance Plan) or who leaves American Standard Inc. 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 American Standard Inc.'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 American Standard Inc.'s medical and life insurance
programs through 1995.
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CERTAIN TRANSACTIONS AND RELATIONSHIPS
Messrs. Schuchert and Nickell, directors of the Company and American
Standard Inc., are Chairman and Chief Executive Officer, and President,
respectively, of Kelso & Companies, Inc. (the general partner of Kelso), and are
general partners of Kelso American Standard Partners, L.P., the general partner
of Kelso ASI Partners, L.P. Mr. Schuchert is also a member of the Management
Development Committee (the compensation committee) of the Company's Board of
Directors.
In connection with the Acquisition, the Company and Kelso entered into a
consulting agreement (the "Consulting Agreement") pursuant to which the Company
agreed to pay Kelso an annual fee of $2.75 million in consideration for general
management and financial consulting services, with the amount of the fee
declining at stated decreased levels of stock ownership. Kelso is also entitled
to reimbursement for its reasonable and necessary out-of-pocket expenses
incurred in the performance of such services. The Consulting Agreement provides
that it will continue in effect so long as Kelso or its affiliates own at least
20% of the outstanding Common Stock. It is contemplated that the Consulting
Agreement will be amended in connection with the Offerings. See "Management --
Compensation Committee Interlocks and Insider Participation". The Company, Kelso
and ASI Partners are also parties to a stockholders agreement that is proposed
to be amended in connection with the Offerings. See "Management -- Executive
Officers and Directors".
American Standard Inc. also has entered into a transaction with 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
American Standard Inc. has guaranteed a minimum annual usage by it of $2 million
for a period of five years commencing 1993 and Kelso Insurance has guaranteed
American Standard Inc.'s minimum usage to AT&T. No fee was paid by American
Standard Inc. to Kelso Insurance in connection with this transaction.
In August 1993 American Standard Inc. 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 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 American Standard Inc. has been waived. In connection
with the Offerings, it is contemplated that Kelso will agree to acquire,
directly or through affiliates, 80% of the Company's limited partnership
interest in KIA V at a price equal to 80% of the Company's net cost incurred to
the date of such acquisition to obtain such interest, thereby relieving the
Company of 80% of the balance of its $5 million capital contribution
commitment.
In September 1991, American Standard Inc., after a determination by its
Board of Directors of the fairness of the transaction and comparability with an
arm's-length transaction with a third party, sold Tyler Refrigeration to an
affiliate of Kelso for approximately $85 million plus the purchaser's assumption
of approximately $2 million of long-term debt. Part of the consideration
received by American Standard Inc. was 89,700 (pre-split) shares of Common Stock
owned by Management Investors employed by Tyler Refrigeration, which were valued
at $28.37 per share (pre-split) (the same valuation established for ESOP
purposes at December 31, 1990). In addition, the Company purchased approximately
$3 million of preferred stock of the purchaser.
The Company has invested in a Cayman Islands corporation, ASPPL, to be used
for the establishment of various joint ventures in the PRC. The Company has
approximately a 27% voting interest in ASPPL with provisions for effective
control over day-to-day operations. In 1994, shares in ASPPL were sold to
certain institutions and other investors, including certain executive officers
and employees of the Company and its subsidiaries.
Mr. Mizushima, a director of American Standard Inc. and the Company, is
President and Chief Operating Officer of Daido Hoxan Inc., a Japanese
corporation which currently has an approxi-
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mately 13% limited partnership interest in ASI Partners. Daido Hoxan Inc. and
Kelso and its affiliates have engaged in certain transactions, including
transfers of limited partnership interests in ASI Partners and the provision by
Daido Hoxan Inc. of consulting services. Daido Hoxan Inc. is the largest
distributor of the Company's plumbing products in Japan. Its transactions as
distributor with American Standard and its subsidiaries, which were on customary
terms and in the ordinary course of business, have not been material to either
the Company or Daido Hoxan Inc. American Standard 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 the Company held by the ESOP, a 17% owner of the Company's shares.
Fidelity was paid by the Company approximately $180,000 in 1993 for services in
connection with administering the Company's ESOP and American Standard Inc.'s
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 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 Common Stock, the Company 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 the 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. It is currently anticipated that the amended
Stockholders Agreement will delete these provisions in their entirety.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is the number of shares of Common Stock (after giving
effect to a 2.5 to 1 stock split), the only outstanding voting stock of the
Company, beneficially owned as of September 30, 1994 by each Director, each
Named Officer, all Directors and executive officers of the Company as a group,
and each 5% holder.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
- -------------------------------------------------------------- ------------- --------
<S> <C> <C>
Kelso ASI Partners, L.P.(a)................................... 45,000,000 74%
Joseph S. Schuchert(a)(d)..................................... 45,000,000 74%
Frank T. Nickell(a)(d)........................................ 45,000,000 74%
George E. Matelich(a)(d)...................................... 45,000,000 74%
Thomas R. Wall IV(a)(d)....................................... 45,000,000 74%
Emmanuel A. Kampouris(b)...................................... 562,500 *
George H. Kerckhove(b)........................................ 282,500 *
Horst Hinrichs(b)............................................. 225,000 *
Fred A. Allardyce(b).......................................... 282,500 *
Luigi Gandini(b).............................................. 0 *
H. Thompson Smith(b).......................................... 0 *
Steven E. Anderson(b)......................................... 0 *
Shigeru Mizushima(b).......................................... 0 *
Roger W. Parsons(b)........................................... 0 *
J. Danforth Quayle(b)......................................... 0 *
David M. Roderick(b).......................................... 0 *
John Rutledge(b).............................................. 0 *
American-Standard Employee Stock Ownership Plan (the
"ESOP")(c).................................................. 10,426,853 17%
All current directors and executive officers of the Company
and American Standard Inc. as a group(e).................... 47,035,000 77%
</TABLE>
- ---------------
* Less than one percent.
(a) The business address for such persons is c/o Kelso & Company, Inc., 21st
Floor, 350 Park Avenue, New York, N.Y. 10022.
(b) Mr. Kampouris is Chairman, President and Chief Executive Officer and a
director of American Standard Inc. and of the Company. Messrs. Hinrichs and
Kerckhove are Named Officers and directors of American Standard Inc. and of
the Company. Messrs. Allardyce and Gandini are Named Officers of American
Standard Inc. and of the Company and Messrs. Anderson, Mizushima, Parsons,
Quayle, Roderick and Rutledge are directors of American Standard Inc. and
of the Company. Mr. Smith was a Senior Vice President of the Company and
American Standard Inc. until his retirement in December 1993.
(c) The business address for the ESOP is c/o American Standard Inc., One
Centennial Avenue, P.O. Box 6820, Piscataway, New Jersey 08855-6820. At
September 30, 1994, giving effect to the 2.5 to 1 stock split, 9,956,033
Plan shares were allocated to executive officers of the Company and
American Standard Inc. 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
American Standard Inc.). 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 American
Standard Inc.'s right of first refusal. The shares in the Named Officers
ESOP accounts are as follows: Mr. Kampouris, 10,519 shares; Mr. Kerckhove,
10,417 shares; Mr. Hinrichs, 11,199 shares;
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<PAGE> 76
Mr. Allardyce, 11,148 shares; and Mr. Gandini, 6,095 shares. The shares in
the ESOP accounts for all executive officers as a group total 187,226
shares.
The number of shares shown for executive officers in the table above also
does not reflect shares of 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 American Standard Inc. 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, 13,742
shares; Mr. Kerckhove, 6,284 shares; Mr. Hinrichs, 5,545 shares; Mr.
Allardyce, 3,835 shares; Mr. Gandini, 3,710 shares; and Mr. Smith, 7,355
shares. The shares in the trust accounts for all executive officers as a
group total 68,150 shares.
Also not included above are 49,842 shares of Common Stock held in a similar
grantor's trust for the account of certain executive officers earned under
an employee incentive plan prior to their becoming officers.
(d) Messrs. Schuchert and Nickell, each a director of American Standard Inc. and
of the Company, 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 Kelso American Standard Partners, L.P.,
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. Messrs. Schuchert, Nickell, Matelich and Wall disclaim
beneficial ownership of such securities. See "Certain Transactions and
Relationships."
(e) Out of such 47,035,000 shares, 45,000,000 shares represent shares of Common
Stock owned by ASI Partners in which Messrs. Schuchert and Nickell, each a
director of the Company, may be deemed to share beneficial ownership by
virtue of their status as general partners of Kelso American Standard
Partners, L.P., the general partner of ASI Partners. Messrs. Schuchert and
Nickell disclaim beneficial ownership of such securities.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the consummation of the Offerings, the Company will
have outstanding approximately 74.5 million shares of Common Stock, including
approximately 61 million outstanding shares of Common Stock beneficially owned
by current stockholders (including ASI Partners, the ESOP, the Management
Investors and others). The 13.5 million shares of Common Stock to be sold in the
Offerings will be eligible for resale without restriction or further
registration under the Securities Act in the public market after consummation of
the Offerings by persons other than affiliates of the Company (as defined in
Rule 144 under the Securities Act). Sales of Common Stock without registration
may also be made outside the United States pursuant to Regulation S under the
Securities Act. In addition, contemporaneously with the Offerings, American
Standard will register under the Securities Act approximately shares
of Common Stock issuable upon exercise of options under the Stock Plan or
distributable pursuant to certain employee benefit plans. Such registration is
expected to become effective as soon as practicable following the Offerings.
Shares registered and issued pursuant to such registration statement will be
tradeable except to the extent that the holders thereof are deemed to be
"affiliates" of the Company, in which case the transferability of such shares
will be subject to the volume limitations set forth in Rule 144 under the
Securities Act. The Company intends to issue to the ESOP additional Common Stock
over the next several years. Shares of Common Stock distributed to ESOP
beneficiaries (generally upon such beneficiaries' retirement or termination)
will also be generally available for resale without registration by
non-affiliates. Sales of Common Stock by affiliates of the Company will be
subject to Rule 144 under the Securities Act.
The Company and certain current stockholders (including ASI Partners and
certain executive officer stockholders), who will beneficially own approximately
outstanding shares of
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Common Stock immediately following the consummation of the Offerings, have
agreed with the Underwriters not to offer, sell or otherwise dispose of any
shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of the representatives of the
Underwriters. Based on shares outstanding as of , following the
expiration or waiver of the foregoing restrictions and any applicable holding
periods under Rule 144, shares of Common Stock owned by existing
stockholders will be available for sale in the public market pursuant to Rule
144 under the Securities Act (including the volume and other limitations set
forth therein) or otherwise and could impair the Company's future ability to
raise capital through an offering of its equity securities. Most of the
currently outstanding shares of Common Stock were issued more than three years
ago, and thus are subject to resale without being subject to the holding periods
established by Rule 144. It is further contemplated that in connection with the
Offerings ASI Partners will be granted certain demand registration rights, and
that ASI Partners and certain executive officers and other employees of the
Company who own Common Stock will be granted certain "piggyback" registration
rights. See "Management -- Compensation Committee Interlocks and Insider
Participation" and "Certain Transactions and Relationships". The Company is
unable to estimate the number of shares of Common Stock that may be sold from
time to time by the Company's current stockholders because this will depend in
part on the market price for the Common Stock, the personal circumstances of the
sellers and other factors. See "Underwriting".
In general, under Rule 144 as presently in effect, if a period of at least
two years has elapsed since the later of the date shares of Common Stock that
are "restricted securities" (as defined in Rule 144 to include securities
acquired directly from an issuer or affiliate thereof in a transaction not
involving a public offering) were acquired from the Company or the date they
were acquired from an "affiliate" (as that term is defined in Rule 144) of the
Company, as applicable, then the holder of such restricted shares (including an
affiliate) is entitled to sell a number of shares within any three-month period
that does not exceed the greater of 1% of the then outstanding shares of Common
Stock (approximately 745,000 shares immediately after the consummation of the
Offerings, assuming that the Underwriters' over-allotment options are not
exercised) or the average weekly trading volume of the Common Stock on the New
York Stock Exchange during the four calendar weeks preceding such sale. The
holder may only sell such shares through unsolicited brokers' transactions.
Sales under Rule 144 are also subject to certain requirements pertaining to the
manner of such sales, notices of such sales and the availability of current
public information concerning American Standard. Affiliates may sell shares not
constituting restricted securities in accordance with the foregoing volume
limitations and other requirements but without regard to the two-year holding
period requirement. Restricted securities properly sold in reliance on Rule 144
are thereafter freely tradeable without restriction or registration under the
Securities Act, unless thereafter held by an "affiliate" of the Company.
Under Rule 144(k), if a period of at least three years has elapsed since
the later of the date restricted shares were acquired from the Company or the
date they were acquired from an affiliate of the Company, as applicable, then a
holder of such restricted shares who is not an affiliate of the Company at the
time of the sale and who has not been an affiliate of the Company for at least
three months prior to the sale would be entitled to sell the shares immediately
without regard to the volume limitations and other conditions described above.
The Company currently has shares of Common Stock reserved for
issuance upon exercise of stock options granted under its Stock Plan, including
shares reserved for issuance upon exercise of stock options
outstanding as of , 1994.
Prior to the Offerings there has been no public market for the Common
Stock. The Company can make no predictions as to the effect, if any, that sales
of shares or the availability of shares for sale will have on market prices
prevailing from time to time. Nevertheless, sales of substantial amounts of the
Common Stock in the public market, or the prospect of such sales, could
adversely affect the market price of the Common Stock.
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DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock and the
Stockholder Rights Agreement, to be dated (the "Rights Agreement"),
between the Company and , as Rights Agent, does not purport to be
complete and is qualified in its entirety by reference to applicable Delaware
law and to the provisions of the Company's Restated Certificate of Incorporation
and By-Laws, and to the Rights Agreement. Copies of the forms of Restated
Certificate of Incorporation, By-Laws and Rights Agreement will be filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
COMMON STOCK
The Restated Certificate of Incorporation will authorize the Company to
issue up to shares of Common Stock, par value $.01 per share. As of
October 31, 1994, after giving effect to the 2.5 to 1 split of the Common Stock
to be effected prior to the completion of the Offerings, approximately 61
million shares of Common Stock were issued and outstanding. Subject to the
rights of the holders of any outstanding shares of preferred stock and any
restrictions that may be imposed by any lender to the Company, holders of Common
Stock are entitled to receive such dividends, if any, as may be declared by the
Board of Directors out of legally available funds. In the event of the
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in the assets, if any, remaining after payment of
all of the Company's debts and liabilities and the liquidation preference of any
outstanding preferred stock.
Holders of Common Stock are entitled to one vote per share on any matter
submitted to the holders of Common Stock for a vote. Because holders of Common
Stock do not have cumulative voting rights in the election of directors, the
holders of a majority of the shares of Common Stock represented at a meeting can
elect all the directors. See "Management -- Executive Officers and Directors"
and "Security Ownership of Certain Beneficial Owners". Holders of Common Stock
will not have preemptive rights to subscribe for or purchase any additional
shares of capital stock issued by the Company. All outstanding shares of the
Common Stock are, and the Shares will be when issued, duly authorized, validly
issued, fully paid and nonassessable.
Each outstanding share of Common Stock (including the Shares to be sold in
the Offerings) will have associated with it one right to purchase a share of the
Company's preferred stock at a stipulated price in certain circumstances. See
"-- Certain Provisions Relating to Changes in Control -- Stockholders' Rights
Agreement".
PREFERRED STOCK
The Restated Certificate of Incorporation will authorize the Company to
issue shares of preferred stock, par value $ per share, in one
or more series, and authorize the Board of Directors to designate the dividend
rights, preferences in liquidation and other rights, preferences, limitations
and restrictions of and upon shares of each series, including voting, redemption
and conversion rights. It is contemplated that the amended Stockholders
Agreement will provide that so long as ASI Partners, together with its
affiliates, owns at least 35% of the outstanding shares of Common Stock, the
Company will not issue (except pursuant to the Rights Agreement) any such shares
of preferred stock without ASI Partners' prior written consent. In connection
with the Rights Agreement, the Board of Directors will designate
shares of preferred stock as a new series of Junior Participating Cumulative
Preferred Stock. For a summary of the rights and preferences of this series, see
"-- Certain Provisions Relating to Changes in Control -- Stockholders' Rights
Agreement". It is not possible to state the actual effect of the authorization
and issuance of one or more other series of preferred stock upon the rights of
holders of Common Stock until the Board of Directors determines the specific
terms, rights and preferences of a series of preferred stock. See "Certain
Provisions Relating to Changes in Control -- Certain Effects of Authorized but
Unissued Stock".
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TRANSFER AGENT AND REGISTRAR
has been appointed as the transfer agent and
registrar for the Common Stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the Delaware General Corporation Law ("Section 203")
prohibits certain persons ("interested stockholders") from engaging in a
"business combination" with a Delaware corporation for three years following the
date such persons become interested stockholders. Interested stockholders
generally include (i) persons who are the beneficial owners of 15% or more of
the outstanding voting stock of the corporation and (ii) persons who are
affiliates or associates of the corporation and who hold 15% or more of the
corporation's outstanding voting stock at any time within three years before the
date on which such a person's status as an interested stockholder is determined.
Subject to certain exceptions, a "business combination" includes, among other
things (i) mergers or consolidations, (ii) the sale, lease, exchange, mortgage,
pledge, transfer or other disposition of assets having an aggregate market value
equal to 10% or more of either the aggregate market value of all assets of the
corporation determined on a consolidated basis or the aggregate market value of
all the outstanding stock of the corporation, (iii) transactions that result in
the issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder, except pursuant to a transaction that effects a pro
rata distribution to all stockholders of the corporation, (iv) any transaction
involving the corporation that has the effect of increasing the proportionate
share of the stock of any class or series, or securities convertible into the
stock of any class or series, of the corporation that is owned directly or
indirectly by the interested stockholder or (v) any receipt by the interested
stockholder of the benefit (except proportionately as a stockholder) of any
loans, advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
Section 203 does not apply to a business combination if (i) before a person
becomes an interested stockholder, the board of directors of the corporation
approves the transaction in which the interested stockholder became an
interested stockholder or approves the business combination, (ii) upon
consummation of the transaction that resulted in the interested stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (other than certain excluded shares) or (iii) following a
transaction in which the person became an interested stockholder, the business
combination is (a) approved by the board of directors of the corporation and (b)
authorized at a regular or special meeting of stockholders (and not by written
consent) by the affirmative vote of the holders of at least two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder.
CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL
The Restated Certificate of Incorporation, By-Laws and Rights Agreement
will contain several provisions that may make the acquisition of control of the
Company by means of tender offer, open market purchases, a proxy contest or
otherwise more difficult if not approved by the Board of Directors. A summary of
those provisions is set forth below. In addition, certain events relating to a
change of control of the Company or American Standard Inc. will constitute an
event of default under the Existing Credit Agreement, and/or will entitle
holders of certain of American Standard Inc.'s debt securities to require
American Standard Inc. to repurchase such securities, which may indirectly make
more difficult the acquisition of control of the Company. See "Certain
Indebtedness".
CLASSIFIED BOARD OF DIRECTORS. The Restated Certificate of Incorporation
will divide the Board of Directors into three classes. Each class will be nearly
equal in number as possible. At each annual meeting of stockholders, directors
will be elected to succeed those directors whose terms have
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expired, and each newly elected director will serve for a three-year term.
American Standard believes that a classified Board of Directors will help assure
the continuity and stability of the Board of Directors and the Company's
business strategies and policies. The classified board provision could increase
the likelihood that, in the event of a takeover of the Company, incumbent
directors will retain their positions. In addition, the classified board
provision will help insure that the Board of Directors, if confronted with an
unsolicited proposal from a third party that has acquired a block of the voting
stock of the Company, will have sufficient time to review the proposal and
appropriate alternatives and to seek the best available result for all
stockholders. With a classified board, directors may only be removed for cause,
except as provided below. It is contemplated that so long as ASI Partners,
together with its affiliates, owns at least 35% of the outstanding shares of
Common Stock, ASI Partners will have the right, exercisable at any time, to
designate a certain number of nominees for election to the Board of Directors.
See "Management -- Executive Officers and Directors." To exercise that right,
ASI Partners may request that the Company call a special meeting of stockholders
or that the stockholders act by written consent to vote on the election of
director nominees ASI Partners is entitled to designate in accordance with such
right, in which case the Company would prepare the requisite proxy statement or
information statement for the Company's stockholders. By exercising this right,
ASI Partners can effectively replace directors originally designated for
nomination by ASI Partners with or without cause. The By-Laws will provide that
vacant directorships may be filled by the Board of Directors, provided that so
long as ASI Partners, together with its affiliates, owns at least 35% of the
outstanding shares of Common Stock, ASI Partners will have the right to
designate a nominee for any vacancy created by a director originally designated
for nomination by ASI Partners.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS. The Restated
Certificate of Incorporation will prohibit stockholders from taking action by
written consent in lieu of an annual or special meeting, and thus stockholders
will only be able to take action at an annual or special meeting called in
accordance with the By-Laws, except that so long as ASI Partners, together with
its affiliates, owns at least 35% of the outstanding shares of Common Stock,
stockholder action may be taken by written consent in order to vote on director
nominees designated by ASI Partners in accordance with its right described
above. The By-Laws will provide that special meetings of stockholders may only
be called by (i) the Chief Executive Officer or (ii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors or (iii) for purposes of voting on director nominees designated by ASI
Partners in accordance with its right described above, ASI Partners, so long as
ASI Partners, together with its affiliates, own at least 35% of the outstanding
shares of Common Stock. Special meetings will not be able to be called by the
stockholders (except by ASI Partners as provided above).
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The By-Laws will establish advance notice procedures with regard to
stockholder proposals and the nomination, other than by or at the direction of
the Board of Directors or a committee thereof, of candidates for election as
directors. These procedures will provide that notice of stockholder proposals
and stockholder nominations for the election of directors at an annual meeting
must be in writing and received by the Secretary of the Company no later than 50
days prior to such annual meeting (or if less than 50 days' notice of a meeting
of stockholders is given, stockholder proposals and nominations must be
delivered to the Secretary of the Company no later than the close of business on
the seventh day following the day notice was mailed). Stockholder proposals and
nominations for the election of directors at a special meeting must be in
writing and received by the Secretary of the Company no later than the close of
business on the tenth day following the day on which notice of the meeting was
mailed or public disclosure of the date of the meeting was made, whichever
occurs first. The notice of stockholder nominations must set forth certain
information with respect to each nominee who is not an incumbent director. The
By-Laws will provide that the foregoing requirements applicable to nominations
for, and the election of, directors, will not apply to ASI Partners so long as
ASI Partners, together with its affiliates, owns at least 35% of the outstanding
shares of Common Stock.
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CERTAIN VOTING REQUIREMENTS. A 65% vote will be required to amend or repeal
certain provisions of the By-Laws and to amend or repeal certain provisions of
the Restated Certificate of Incorporation, including those: authorizing
directors to issue rights (such as the Rights referred to below); requiring a
65% vote for amendments to certain By-Laws; relating to directors and to the
nomination and election of directors; limiting the liability and authorizing the
indemnification of directors; permitting directors to take into account not only
the interest of stockholders but also certain other interests; requiring action
by stockholders to be taken at a meeting of stockholders and not by written
consent; and dealing with amendments to the Restated Certificate of
Incorporation.
ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES. The Restated Certificate
of Incorporation provides the Company's directors will not be liable to the
Company or its stockholders for monetary damages resulting from breaches of
their fiduciary duties as directors. Directors remain liable: for breaches of
their duty of loyalty to the Company or its stockholders; for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; under Section 174 of the Delaware General Corporation Law; and for
transactions from which a director derives improper personal benefit. In
addition, the Company will enter into indemnification agreements with its
directors which provide indemnification to the fullest extent permitted by the
Delaware General Corporation Law. The Restated Certificate of Incorporation also
provides that a director, in determining what he reasonably believes to be the
best interests of American Standard, shall consider the interests of the
stockholders and, in his or her discretion, may consider any of the following:
the interests of American Standard's employees, suppliers, creditors and
customers; the state of the U.S. and global economy; community and societal
interests; and the long-term as well as the short-term interests of the Company
and its stockholders, including the possibility that these interests may be best
served by the continued independence of the Company.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK. After consummation of the
Offerings, the Company will have authorized unissued and unreserved
shares of Common Stock and unissued and unreserved shares of
preferred stock. Of the unissued shares of preferred stock, shares
will be designated by the Board of Directors as Junior Cumulative Participating
Preferred Stock. See "-- Certain Provisions Relating to Changes in
Control-Stockholders' Rights Agreement". The unissued and unreserved shares of
Common Stock and of preferred stock may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital and for
facilitating corporate acquisitions. It is contemplated that the amended
Stockholders Agreement will provide that so long as ASI Partners, together with
its affiliates, owns at least 35% of the outstanding shares of Common Stock, the
Company will not issue any such shares of Common Stock or preferred stock
without ASI Partners' prior written consent, except in connection with the
Rights Agreement or pursuant to the ESOP, the Stock Plan and other employee
benefit plans. The Company intends to issue to the ESOP additional Common Stock
over the next several years. Except pursuant to the ESOP, the Stock Plan, and
other employee benefit plans, the Company does not currently have any plans to
issue additional shares of Common Stock or preferred stock. One of the effects
of issued and unreserved shares of capital stock may be to enable the Board of
Directors to render more difficult or discourage an attempt to obtain control of
the Company by means of a merger, tender offer, proxy contest or otherwise, and
thereby to protect the continuity of its management. If, for example, the Board
of Directors were to determine that a takeover proposal was not in American
Standard's best interests, such shares could be issued by the Board of Directors
without stockholder approval in one or more private transactions or other
transactions that might prevent or render more difficult or costly the
completion of the takeover transactions by diluting the voting or other rights
of the proposed acquiror or insurgent stockholder group, by creating a
substantial voting block in institutional or other hands that might undertake to
support the position of the incumbent Board of Directors, by effecting an
acquisition that might complicate or preclude the takeover, or otherwise.
STOCKHOLDERS' RIGHTS AGREEMENT. On , the Board of Directors
declared a dividend distribution of one right ("Right") for each outstanding
share of Common Stock outstanding on
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(the "Record Date"). As a result, each outstanding share of Common Stock,
including the Shares sold in the Offerings, will have associated with it one
Right. Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of the Company's Junior Participating Cumulative
Preferred Stock, par value $ per share (the "Participating Preferred
Stock"), at a price of $ per one one-hundredth of a share (the
"Purchase Price"), subject to adjustment.
Until the earlier to occur of (a) ten business days following the time (the
"Stock Acquisition Time") of a public announcement by the Company that a person
or group of affiliated or associated persons (other than (i) ASI Partners or any
of its affiliates or their immediate transferees (provided that any such
transferee holding 15% or more of the outstanding Common Stock does not acquire
any additional shares of Common Stock except from ASI Partners or any of its
affiliates), (ii) any employee benefit plan of the Company, including the ESOP
or (iii) directors, officers and employees of American Standard as a group) has
acquired beneficial ownership (as defined in the Rights Agreement) of 15% or
more of the outstanding shares of Common Stock (such 15% beneficial owner, an
"Acquiring Person"), or (b) ten business days, or such later date as may be
determined by the Board of Directors, after the date of the commencement or
announcement by a person of an intention to make a tender offer or exchange
offer for an amount of Common Stock which, together with the shares of such
stock already owned by such person, constitutes 15% or more of the outstanding
shares of Common Stock (the earlier of such dates being called the "Distribution
Date"), the Rights will be evidenced by the certificates representing the Common
Stock. The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new
issuance of the Common Stock, will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any of the Common Stock
certificates will also constitute the transfer of the Rights associated with the
shares of Common Stock represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Common Stock
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on 2005, unless earlier redeemed by the Company as described
below.
The Purchase Price payable, and the number of shares of Participating
Preferred Stock or other securities or property issuable upon exercise of the
Rights, are subject to customary anti-dilution protections.
In the event that after the Stock Acquisition Time the Company is acquired
in a merger or other business combination transaction or 50% or more of its
assets, cash flow or earning power are sold or otherwise transferred, proper
provision shall be made so that each holder of a Right shall thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, the number of shares of common stock of the acquiring company
which at the time of such transaction would have a market value (as defined in
the Rights Agreement) of two times the exercise price of the Right. In the event
that the Company were the surviving corporation of a merger and its Common Stock
were changed or exchanged, proper provision shall be made so that each holder of
a Right will thereafter have the right to receive upon exercise that number of
shares of common stock of the other party to the transaction having a market
value of two times the exercise price of the Right.
In the event that a person or group becomes an Acquiring Person (otherwise
than pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock at a price and on terms which are determined to be fair and in the
best interests of the Company and its stockholders by a majority of the members
of the Board of Directors who are not Acquiring Persons or representatives
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or nominees of or affiliated or associated with an Acquiring Person and who
either were members of the Board of Directors prior to the Stock Acquisition
Time or subsequently became a member and whose election thereto was approved by
a majority of the directors who were not Acquiring Persons or representatives or
nominees of or affiliated or associated with an Acquiring Person ("Continuing
Directors")), proper provision shall be made so that each holder of a Right
(other than Rights that are beneficially owned by the Acquiring Person, which
will thereafter be void) will thereafter have the right to receive upon exercise
that number of shares of Common Stock having a market value (as defined in the
Rights Agreement) of two times the exercise price of the Right. A person or
group will not be an Acquiring Person if the Board of Directors determines that
such person or group became an Acquiring Person inadvertently and such person or
group promptly divests itself of a sufficient number of shares of Common Stock
so that such person or group is no longer an Acquiring Person.
At any time prior to the earlier of (i) ten business days after the Stock
Acquisition Time and (ii) , 2005, the Company, by resolution of the
Board of Directors, may redeem the Rights in whole, but not in part, at a price
of $.01 per Right (the "Redemption Price"). If such resolution is adopted
following the Stock Acquisition Time, it will be effective only with the
concurrence of a majority of the Continuing Directors and only if the Continuing
Directors constitute a majority of the members of the Board of Directors then in
office. The Company may, by resolution of the Board of Directors at any time
prior to the Stock Acquisition Time, extend the time in which the Rights may be
redeemed. Immediately upon the action of the Board of Directors electing to
redeem the Rights, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.
At any time after a person becomes an Acquiring Person and prior to the
acquisition by such person of 50% or more of the outstanding Common Stock, the
Board of Directors (with the concurrence of a majority of the Continuing
Directors and only if the Continuing Directors constitute a majority of the
members of the Board of Directors) may exchange the Rights (other than Rights
beneficially owned by such Acquiring Person, which have become void), in whole
or in part, for Common Stock at an exchange ratio of one share of Common Stock
per Right (subject to adjustment).
Each share of Participating Preferred Stock purchasable upon exercise of
the rights will have a minimum preferential dividend of $ per year, but
will be entitled to receive, in the aggregate, a dividend of 100 times the
dividend declared on a share of Common Stock. In the event of liquidation,
dissolution or winding-up of the Company, the holders of the shares of
Participating Preferred Stock will be entitled to receive a minimum liquidation
payment of $ per share, but will be entitled to receive an aggregate
liquidation payment equal to 100 times the payment to be made per share of
Common Stock. Each share of Participating Preferred Stock will have 100 votes,
voting together with the shares of Common Stock. In addition, if dividends on
the Participating Preferred Stock are in arrears for four consecutive quarterly
payment periods, the holders of the Participating Preferred Stock will have the
right, voting as a class, to elect two members of the Board of Directors. In the
event of any merger, consolidation or other transaction in which shares of
Common Stock are exchanged, each share of Participating Preferred Stock will be
entitled to receive 100 times the amount and type of consideration received per
share of Common Stock. The rights of the shares of Participating Preferred Stock
as to dividends and liquidation, and in the event of mergers and consolidations,
are protected by anti-dilution provisions.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The Rights and the Rights Agreement can be amended by the Board of
Directors in any respect (including, without limitation, any extension of the
period in which the Rights may be redeemed) at any time prior to the Stock
Acquisition Time. From and after such time, without the approval of all holders
of the Common Stock or all holders of the Rights, the Board of Directors, by a
majority of the Continuing Directors, provided that the Continuing Directors
constitute a majority of the Board,
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may only supplement or amend the Rights Agreement in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained in the Rights
Agreement which may be defective or inconsistent with any other provision in the
Rights Agreement (iii) to shorten or lengthen any time period under the Rights
Agreement or (iv) to make any changes or supplements which the Company and the
Rights Agent may deem necessary or desirable which shall not adversely affect
the interests of the holders of Right Certificates (other than an Acquiring
Person or an affiliate or associate thereof).
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CERTAIN INDEBTEDNESS
EXISTING CREDIT AGREEMENT
The Company, American Standard Inc. and certain of its subsidiaries entered
into an Assignment and Amendment Agreement, dated as of June 1, 1993, relating
to the 1988 Credit Agreement, with Bankers Trust Company, as agent under the
1988 Credit Agreement, the financial institutions named as Banks in the 1988
Credit Agreement, certain of such financial institutions desiring to continue as
lenders to the Company and certain additional financial institutions named
therein (collectively, the "Lenders") and Chemical Bank, as Administrative Agent
and Arranger for the Lenders. On June 2, 1993, the 1988 Credit Agreement was
amended and restated in the form of a Credit Agreement, dated as of June 1, 1993
(the "Existing Credit Agreement"), Chemical Bank succeeded Bankers Trust Company
as agent, the outstanding loans and commitments were restructured and increased
to provide for a multi-currency, multi-borrower facility initially in an
aggregate amount of $1 billion. On October 21, 1994, the Existing Credit
Agreement was amended to provide for the making of an additional term loan of
$325 million to the Company (the "October Borrowing"), the proceeds of which
were applied to redeem on November 21, 1994 all of the $316.8 million in
aggregate principal amount of American Standard Inc.'s 14 1/4% Subordinated
Discount Debentures and 12 3/4% Junior Subordinated Debentures. The following
summaries of certain provisions of the Existing Credit Agreement do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, the Existing Credit Agreement and the definitions therein of terms
not defined in this Prospectus.
The Existing Credit Agreement currently provides for an aggregate facility
of approximately $1.2 billion as follows: (a) a $242 million multi-currency
revolving credit facility (the "Revolving Credit Facility") available to all
Borrowers (as defined); (b) a $176 million multi-currency periodic access credit
facility (the "Periodic Access Facility") available to all Borrowers; and (c)
four term loan facilities (each, a "Term Loan Facility"), consisting of a $222
million U.S. Dollar Tranche A Facility available to American Standard Inc., a
$136 million Deutschemark Tranche B Facility available to WABCO Standard GmbH,
an $82 million U.S. Dollar Tranche C Facility available to all Borrowers and a
$325 million U.S. Dollar Tranche D Facility available to American Standard Inc.
THE REVOLVING CREDIT FACILITY
The Revolving Credit Facility currently provides for aggregate borrowings
from time to time of up to $242 million for working capital purposes, of which
up to $200 million may consist of outstanding or unreimbursed letters of credit.
In addition, up to $40 million of the Revolving Credit Facility may be used for
same day short term borrowings ("Swingline Loans").
American Standard Inc. pays a commitment fee at the rate of 0.5% per annum
on the unused portion of the Lenders' commitments under the Revolving Credit
Facility, excluding any outstanding Swingline Loans. American Standard Inc. is
required to reduce to $50 million the amount of borrowings outstanding under the
Revolving Credit Facility for at least 30 consecutive days in each calendar
year. On August 31 each year, the Revolving Credit Facility is reduced by
$8,300,000. In addition, American Standard Inc. 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). American Standard Inc. may, however, reborrow
such amounts subject to compliance with applicable conditions under the Credit
Agreement.
THE PERIODIC ACCESS AND TERM FACILITIES
The Periodic Access Loans must be reduced by (a) $22,500,000 on the last
day of each February and August through and including February 28, 1997 and (b)
$10,417,000 on the last day of each February and August thereafter through the
last day of February 2000. Loans under the Periodic Access Facility ("Periodic
Access Loans") may be shifted among the borrowers during a particular 30-day
period every twelve months.
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The outstanding principal balance of the Tranche A Term Loan is payable in
semi-annual installments of $37,500,000 on the last day of February and August
of each year, commencing August 31, 1997.
The outstanding principal balance of the Tranche B Term Loan, subject to
exchange rate fluctuations, is payable in semi-annual installments, on the last
day of February and August of each year. Each installment is to be equal to
12.5% of the aggregate principal amount of the initial Tranche B Term Loan.
The outstanding principal balance of the Tranche C Term Loans is payable in
semi-annual installments of $8,350,000 on the last day of February and August of
each year. Tranche C Term Loans may be assigned from one borrower to another
during a particular 30-day period every twelve months, subject to certain
conditions.
The outstanding principal balance of the Tranche D Loan is payable on the
last day of each February and August in equal semiannual installments of
$5,000,000 in the years 1995 through 1997, $12,500,000 in year 1998, $42,500,000
in the years 1999 and 2000, with a final payment of $100,000,000 on February 28,
2001.
OTHER VOLUNTARY AND MANDATORY PREPAYMENTS
In addition to the scheduled principal payments described above, the
Existing Credit Agreement requires principal prepayments in an amount equal to
75% of Excess Cash Flow for any fiscal year (or 50%, in the case of any fiscal
year during which the ratio of Free Cash Flow (as defined) of American Standard
Inc. to Consolidated Cash Fixed Charges (as defined) is 2 to 1 or greater) and
in amounts equal to the Net Cash Proceeds of certain sales of assets and
specified percentages of the Net Cash Proceeds from certain issuances of equity
securities. In addition, partial prepayments of Revolving Credit and Periodic
Access Loans may be required in some cases if such Loans exceed the Lenders'
Revolving Credit and Periodic Access Loan Commitments as a result of currency
fluctuations.
INTEREST
Borrowings may bear interest based on a reserve adjusted London inter-bank
offered rate, or, in the case of U.S. Dollar denominated borrowings, based on
Chemical Bank's Alternate Base Rate. Swingline Loans in currencies other than
U.S. Dollars will bear interest based on the average rate for overnight deposits
for like principal amounts in the relevant currency obtainable by the Swingline
Lender. On September 30, 1994, the weighted average interest rate per annum on
borrowings under the Existing Credit Agreement was 7.9%.
SECURITY
All obligations of the borrowers under the Existing Credit Agreement are
guaranteed by the Company, American Standard Inc. and the significant Domestic
Subsidiaries of American Standard Inc. All such obligations of foreign borrowers
are also guaranteed by certain foreign subsidiaries. The Loans and guarantee
obligations are secured by mortgages and liens on the significant properties and
other assets (including inventory, receivables, contract rights and
intangibles), and pledges of the capital stock, of American Standard Inc. and
certain of its domestic and foreign subsidiaries.
COVENANTS
The Existing Credit Agreement contains covenants that, among other things,
restrict (a) mergers, certain sales of assets (including stock of subsidiaries)
and changes in business or the conduct of business of the Company, American
Standard Inc. and its subsidiaries, (b) liens, mortgages or other encumbrances
on their assets, (c) sale/leaseback transactions, (d) operating
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leases, (e) dividends and distributions on, and repurchases and redemptions of,
capital stock of American Standard Inc. and the Company, and issuances and sales
of stock of the Company, American Standard Inc. and its subsidiaries, (f)
voluntary prepayments, purchases, redemptions or defeasance of other
Indebtedness, or required payments of principal or interest thereon during any
event of default under the Existing Credit Agreement, (g) loans and other
investments, including investments in subsidiaries and joint ventures, (h)
intercompany transactions and (i) transactions with affiliates.
The ability of American Standard Inc. to comply with the covenants and
restrictions contained in the Credit Agreement may be affected by events beyond
its control, and American Standard Inc. will be required to sustain the improved
operating results achieved in 1994 to remain in compliance with such covenants
and restrictions. There can be no assurance that such improved results will be
sustained. The breach of any of these covenants or restrictions could result in
a default under the Credit Agreement which could have the same consequences as a
payment default described above under "Certain Investment
Considerations -- Substantial Leverage". In order to avoid potential
non-compliance with the covenants and restrictions contained in the Existing
Credit Agreement, as well as its predecessor credit agreement, American Standard
Inc. from time to time has had to obtain waivers and amendments. No assurance
can be given that American Standard Inc. will be able to obtain similar waivers
or amendments in the future under the Existing Credit Agreement or the New
Credit Facility. American Standard Inc. is seeking to obtain covenants in the
New Credit Facility that are more favorable to American Standard Inc. than those
contained in the Existing Credit Agreement.
CERTAIN FINANCIAL COVENANTS AND RATIOS
DEBT. American Standard Inc. and its subsidiaries may not create, incur,
assume, guarantee or permit to exist any Indebtedness, including Intercompany
Indebtedness, except among other things: (a) the obligations under the Existing
Credit Agreement; (b) enumerated Indebtedness of American Standard Inc. and its
subsidiaries outstanding on June 1, 1993; (c) the Debentures; (d) certain
Intercompany Indebtedness; (e) certain Indebtedness and Guarantees resulting
from sales of receivables; (f) up to $25,000,000 in additional letters of credit
obtained outside the Existing Credit Agreement in the ordinary course of
business; (g) up to $25,000,000 in secured Indebtedness of 95% or less owned
subsidiaries; (h) Indebtedness incurred to finance permitted Capital
Expenditures and permitted Capital Leases; (i) Indebtedness of subsidiaries
existing at the time they become subsidiaries; (j) Indebtedness of subsidiaries
which are not Credit Parties or incurred before they become Credit Parties, or
of American Standard Inc.'s Mexican and Brazilian subsidiaries, in an aggregate
principal amount at any time outstanding which, together with the Indebtedness
referred to in clause (f) above, is not in excess of $100,000,000 or, after the
occurrence of a Deleveraging Event, $150,000,000; and (k) additional unsecured
Indebtedness incurred by certain Credit Parties not exceeding $5,000,000.
CAPITAL EXPENDITURES AND CAPITAL LEASES. American Standard Inc. and its
subsidiaries may not make any Capital Expenditures or incur Capital Lease
Obligations in any year (except for certain existing projects) in excess of $150
million in 1994 and 1995, and increasing amounts thereafter. Additional amounts
of Capital Expenditures may be made depending on those made in each immediately
preceding year and available cumulative Excess Cash Flow. The sum of the
aggregate amount of Capital Lease Obligations of the Company and its
subsidiaries (except for certain existing projects) plus the aggregate amount of
other Indebtedness incurred to finance Capital Expenditures may not exceed $10
million in 1994 and any subsequent fiscal year or $50 million at any time
outstanding.
FINANCIAL TESTS, RATIOS. American Standard Inc. must satisfy certain
financial tests, as follows:
(a) American Standard Inc. may not permit Consolidated EBITDA for the
periods beginning on July 1, 1993, and ending on the last day of each quarter
(in each case taken as a single accounting
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period) to be less than specified amounts, which progressively increase. Through
December, 31, 1995, such amounts are as follows and thereafter continue to
increase:
<TABLE>
<CAPTION>
DATE AMOUNT
-------------------------------------------------------------------- --------------
<S> <C>
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
</TABLE>
(b) American Standard Inc. may not permit the ratio of (i) Consolidated
Senior Debt at any time during any fiscal quarter to (ii) Consolidated Capital
Funds of American Standard Inc. at such time to exceed specified ratios. Through
December 31, 1995, such ratios are as follows and thereafter continue to
decrease progressively:
<TABLE>
<CAPTION>
QUARTER ENDING RATIO
------------------------------------------------------------------------ -----------
<S> <C>
1994: Last Day of Third Fiscal Quarter.................................. 1.50 : 1.00
Last Day of Fourth Fiscal Quarter................................. 2.70 : 1.00
1995: Last Day of First Fiscal Quarter.................................. 2.60 : 1.00
Last Day of Second Fiscal Quarter................................. 2.40 : 1.00
Last Day of Third Fiscal Quarter.................................. 2.20 : 1.00
Last Day of Fourth Fiscal Quarter................................. 2.00 : 1.00
</TABLE>
(c) American Standard Inc. may not permit the ratio of (i) Free Cash Flow
to (ii) Consolidated Cash Fixed Charges measured on specified measuring dates,
in each case for the specified period to exceed certain ratios, which continue
to increase after 1994. Through December 31, 1995, the measuring dates, periods
and ratios are as follows:
<TABLE>
<CAPTION>
MEASURING DATE PERIOD RATIO
- -------------------- ------------------------------------------------- -----------
<S> <C> <C>
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 Date 1.90 : 1.00
</TABLE>
EVENTS OF DEFAULT
The Existing Credit Agreement contains customary Events of Default,
including payment defaults, failure of representations to be true in any
material respect, covenant defaults, defaults in respect of other Indebtedness,
bankruptcy, certain judgments, ERISA defaults, and a change of control of the
Company or American Standard Inc.
EXISTING CREDIT AGREEMENT DEFINITIONS
The following definitions apply to the Existing Credit Agreement provisions
described above. Capitalized terms used without definition in the description of
the Existing Credit Agreement are used as defined in the Existing Credit
Agreement.
"Consolidated Capital Funds" means, with respect to any person at any time,
the sum of (i) Consolidated Net Worth of such person at such time and (ii) the
outstanding principal amount of the Subordinated Indebtedness of such person at
such time; provided that, with respect to any Subordinated Indebtedness issued
with "original issue discount", the amount of such Subordinated
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Indebtedness is the accreted amount thereof, determined on the date Consolidated
Capital Funds is being determined.
"Consolidated EBITDA" means for any person, without duplication, for any
period for which such amount is being determined, the sum for such period of (i)
Consolidated Net Income (as defined to exclude after-tax gains, but not pre-tax
losses, on sales of assets out of the ordinary course of business and to exclude
premium expense and write-offs of financing costs in connection with prepayments
or redemptions of Indebtedness), (ii) provision for taxes based on income, (iii)
Consolidated Interest Expense and (iv) other non-cash items (including
depreciation expense and amortization expense) reducing Consolidated Net Income,
all as determined on a consolidated basis for such person and its Consolidated
Subsidiaries in accordance with GAAP.
"Consolidated Net Worth" means, with respect to any person, as at any date
of determination, the sum of the capital stock and additional paid-in capital
plus retained earnings (or minus accumulated deficit) of such person and its
Consolidated Subsidiaries on a consolidated after-tax basis determined in
accordance with GAAP, less the sum of the capital stock and additional paid-in
capital plus retained earnings (or minus accumulated deficit) of such person and
its Consolidated Subsidiaries as of June 30, 1993, and excluding (i) premium
expense and write-offs of financing costs deducted in connection with the
prepayment or redemption of Indebtedness subsequent to June 30, 1993, and (ii)
after-tax gains on the sales of assets out of the ordinary course of business of
such person and its Consolidated Subsidiaries subsequent to June 30, 1993.
"Credit Parties" means the Company, American Standard Inc., the Borrowers,
certain Subsidiaries enumerated in the Existing Credit Agreement, and any
additional Subsidiaries which become Subsidiary Guarantors or members of
Standard Europe, a European Economic Interest Grouping, and includes most
significant Subsidiaries of the Company in North America, Europe and Brazil.
"Deleveraging Event" means the receipt by the Company of gross cash
proceeds aggregating $500,000,000 or more from one or more issuances by the
Company of its Common Stock.
"Free Cash Flow" means, for any person, for any period, Consolidated EBITDA
for such period minus Consolidated Capital Expenditures for such period.
CERTAIN OTHER INDEBTEDNESS
The following summaries of certain American Standard Inc. debt instruments
do not purport to be complete and each is qualified in its entirety by reference
to the relevant indenture, copies of which have been filed as exhibits to the
Registration Statement.
SINKING FUND DEBENTURES
In 1986, American Standard Inc. issued $150 million aggregate principal
amount of 9 1/4% Sinking Fund Debentures Due 2016 (the "Sinking Fund
Debentures"). The Sinking Fund Debentures are secured, equally and ratably with
indebtedness under the Existing Credit Agreement and certain related
indebtedness, by mortgages on the principal U.S. properties of American Standard
Inc.
The Sinking Fund Debentures are redeemable at the option of American
Standard Inc., in whole or in part, at redemption prices declining from 105.55%
in 1994 to 100% in 2006 and thereafter. Notwithstanding the foregoing
provisions, the Sinking Fund Debentures may not be redeemed prior to December 1,
1996, as part of, or in anticipation of, any refunding operation by the
application, directly or indirectly, of moneys borrowed having an interest cost
to American Standard Inc. of less than 9 1/4% per annum.
American Standard Inc. is required to provide for the retirement, by
redemption, of $7.5 million principal amount of Sinking Fund Debentures on or
before December 1 in each of the years 1997 to 2015, inclusive, at a redemption
price equal to 100% of the principal amount thereof plus accrued interest to the
redemption date. At its option, American Standard Inc. may redeem on each
Sinking Fund payment date an additional $15 million principal amount of Sinking
Fund Debentures, at such redemption price. The right to exercise such optional
redemption is not cumulative.
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SENIOR NOTES
On May 20, 1992, American Standard Inc. issued $150 million aggregate
principal amount of the 10 7/8% Senior Notes Due 1999 (the "Senior Notes"). To
the extent required under the indenture relating thereto, the Senior Notes are
secured equally and ratably with the other Senior Securities (as defined),
indebtedness under the Existing Credit Agreement and certain related
indebtedness, by mortgages on the principal U.S. properties of American Standard
Inc.
The Senior Notes may not be redeemed at the option of American Standard
Inc. There is no mandatory sinking fund for the Senior Notes. The Senior Note
indenture has provisions requiring American Standard Inc. to offer to repurchase
Senior Notes upon the occurrence of a change of control of the Company or
American Standard Inc.
SENIOR DEBENTURES
On May 20, 1992, American Standard Inc. issued $250 million aggregate
principal amount of the 11 3/8% Senior Debentures Due 2004 (the "Senior
Debentures"). To the extent required under the indenture relating thereto, the
Senior Debentures are secured, equally and ratably with the other Senior
Securities (as defined), indebtedness under the Existing Credit Agreement and
certain related indebtedness, by mortgages on the principal U.S. properties of
American Standard Inc.
The Senior Debentures may not be redeemed prior to May 15, 1997.
Thereafter, the Senior Debentures may be redeemed at the option of American
Standard Inc., in whole or in part, at redemption prices declining from 105.69%
in 1997 to 100% in 2002 and thereafter. There is no mandatory sinking fund for
the Senior Debentures.
The Senior Debenture indenture has provisions requiring American Standard
Inc. to offer to repurchase Senior Debentures upon the occurrence of a change of
control of the Company or American Standard Inc.
9 7/8% SENIOR SUBORDINATED NOTES
On June 1, 1993, American Standard Inc. issued $200 million aggregate
principal amount of the 9 7/8% Senior Subordinated Notes Due 2001 (the "9 7/8%
Senior Subordinated Notes"). The 9 7/8% Senior Subordinated Notes are unsecured.
The payment of the principal of, premium, if any, and interest on the 9 7/8%
Senior Subordinated Notes is subordinated in right of payment, as set forth in
the Senior Subordinated Note indenture, to the payment when due of all Senior
Debt (as defined in the Senior Subordinated Note indenture).
The 9 7/8% Senior Subordinated Notes may not be redeemed prior to June 1,
1998. Thereafter, the 9 7/8% Senior Subordinated Notes may be redeemed at the
option of American Standard Inc., in whole or in part, at redemption prices
declining from 102.82% in 1998 to 100% in 2000 and thereafter. There is no
mandatory sinking fund for the 9 7/8% Senior Subordinated Notes.
The Senior Subordinated Note indenture has provisions requiring American
Standard Inc. to offer to repurchase 9 7/8% Senior Subordinated Notes upon the
occurrence of a change of control of the Company or American Standard Inc.
10 1/2% SENIOR SUBORDINATED DISCOUNT DEBENTURES
On June 1, 1993, American Standard Inc. issued $750.7 million aggregate
principal amount of the 10 1/2% Senior Subordinated Discount Debentures Due 2005
(the "10 1/2% Senior Subordinated Discount Debentures"). Interest payments on
the 10 1/2% Senior Subordinated Discount Debentures are not required prior to
December 1, 1998. Commencing December 1, 1998, interest on the 10 1/2% Senior
Subordinated Discount Debentures at 10 1/2% per annum is payable semiannually on
June 1 and December 1 of each year. The 10 1/2% Senior Subordinated Discount
Debentures are unsecured. The payment of the principal of, premium, if any, and
interest on the 10 1/2% Senior Subordinated
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<PAGE> 91
Discount Debentures is subordinated in right of payment, as set forth in the
Senior Subordinated Discount Debenture Indenture, to the payment when due of all
Senior Debt (as defined in the Senior Subordinated Discount Debenture Indenture)
of American Standard Inc.
Except as set forth below, the 10 1/2% Senior Subordinated Discount
Debentures may not be redeemed prior to June 1, 1998. Thereafter, the 10 1/2%
Senior Subordinated Discount Debentures may be redeemed at the option of
American Standard Inc., in whole or in part, at redemption prices declining from
104.66% in 1998 to 100% in 2002 and thereafter.
In the event that on or prior to June 1, 1996, American Standard Inc.
receives from the sale of its common stock or the Common Stock of the Company
aggregate net proceeds of at least $250 million, American Standard Inc. may, at
its option, use all or a portion of such proceeds to redeem up to 35% of the
original principal amount of the 10 1/2% Senior Subordinated Discount
Debentures, on not less than 30 nor more than 60 days' notice and within 75 days
of such sale, at a redemption price equal to the following percentages of
Accreted Amount (as defined in the Senior Subordinated Discount Debenture
indenture) at the date of redemption:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
-------------------------------------------- ----------------
<S> <C>
1994........................................ 110.50%
1995........................................ 109.33
1996........................................ 108.16
</TABLE>
American Standard Inc. is required to provide for the retirement, by
redemption of $187.7 million principal amount of 10 1/2% Senior Subordinated
Discount Debentures on each of June 1, 2003, and June 1, 2004, in each case at a
redemption price equal to 100% of the principal amount thereof, plus accrued
interest to the redemption date. Such redemptions are calculated to retire
approximately 50% of the principal amount of the 10 1/2% Senior Subordinated
Discount Debentures prior to maturity. In addition, the Senior Subordinated
Discount Debenture Indenture has provisions requiring American Standard Inc. to
offer to repurchase 10 1/2% Senior Subordinated Discount Debentures upon the
occurrence of a change of control of the Company or American Standard Inc.
CERTAIN COVENANTS; EVENTS OF DEFAULT
The indentures relating to the Sinking Fund Debentures, Senior Notes,
Senior Debentures, 9 7/8% Senior Subordinated Notes and 10 1/2% Senior
Subordinated Discount Debentures contain various restrictive covenants that,
among other things, impose limitations on American Standard Inc. and its
subsidiaries with respect to: (i) the incurrence of indebtedness by American
Standard Inc. and its subsidiaries; (ii) the declaration or payment of dividends
and the redemption or purchase of the capital stock or certain indebtedness of
American Standard Inc. and its subsidiaries; (iii) the issuance of preferred
stock by subsidiaries of American Standard Inc.; (iv) the ability of American
Standard Inc.'s subsidiaries to enter into agreements which restrict their
ability to declare and pay dividends and other distributions; (v) the sale or
other disposition of assets of American Standard Inc. or capital stock of its
subsidiaries; (vi) the ability of American Standard Inc. and its subsidiaries to
engage in transactions with affiliates; (vii) consolidations, mergers and sales
of all or substantially all the assets of American Standard Inc. and its
subsidiaries; (viii) the ability of American Standard Inc. and certain of its
subsidiaries to enter into certain sale and leaseback arrangements; and (ix) the
ability of American Standard Inc. and its subsidiaries to grant mortgages or
liens on their principal properties.
The indentures relating to the Senior Notes, the Senior Debentures and the
9 7/8% Senior Subordinated Notes contain provisions requiring American Standard
Inc. to offer to repurchase such securities upon the occurrence of a change of
control of the Company or American Standard Inc.
The indentures relating to the Sinking Fund Debentures, Senior Notes,
Senior Debentures, 9 7/8% Senior Subordinated Notes and 10 1/2% Senior
Subordinated Discount Debentures contain various events of default, including,
among other things, (i) default by American Standard Inc. in the payment of
principal or interest or any mandatory sinking fund payment on the relevant
security;
89
<PAGE> 92
(ii) failure by American Standard Inc. to comply with the covenants contained in
the relevant indenture; (iii) failure by American Standard Inc. to comply with
its obligations under any "Successor Corporation" section, if contained in the
relevant indenture; (iv) failure by American Standard Inc. or certain of its
subsidiaries to pay their respective indebtedness within any applicable grace
period after final maturity or acceleration of such indebtedness because of a
default, where the total amount of debt unpaid or accelerated exceeds a
specified amount ranging from $10 million to $25 million (as set forth in the
relevant indenture); (v) failure of certain subsidiaries to pay their respective
indebtedness within any applicable grace period after final maturity or
acceleration of such indebtedness because of a default, where the total amount
unpaid or accelerated exceeds $50 million; (vi) certain events of bankruptcy,
insolvency or reorganization of American Standard Inc. or certain of its
subsidiaries; and (vii) any judgment or decree for the payment of money in
excess of $25 million (to the extent not covered by insurance or a bond) being
rendered against American Standard Inc. or certain of its subsidiaries, which
judgment or decree is not discharged, waived or the execution thereof stayed
within a period of 60 days.
UNDERWRITING
Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., CS First Boston
Corporation, Morgan Stanley & Co. Incorporated, and Smith Barney Inc. are acting
as representatives, has severally agreed to purchase from the Company, the
respective number of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
U.S. UNDERWRITERS COMMON STOCK
----------------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co........................................
CS First Boston Corporation................................
Morgan Stanley & Co. Incorporated..........................
Smith Barney Inc...........................................
---------
Total............................................ 9,500,000
=========
</TABLE>
Under the terms and conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the Shares, if any are
taken.
The U.S. Underwriters propose to offer the Shares in part directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus, and in part to certain securities dealers at such price less a
concession of $ per share. The U.S. Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the Shares are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the representatives.
The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the international offering
(the "International Underwriters") providing for the concurrent offer and sale
of 4,000,000 Shares in an international offering outside the United States. The
offering price and aggregate underwriting discounts and commissions per share
for the two offerings are identical. The closing of the offering made hereby is
a condition to the closing of the international offering, and vice versa. The
representatives of the International
90
<PAGE> 93
Underwriters are Goldman Sachs International, S.G. Warburg & Co. Inc., CS First
Boston Limited and Morgan Stanley International.
An affiliate of Smith Barney Inc. and an affiliate of CS First Boston
Corporation own indirect equity interests in ASI Partners which, after giving
effect to the Offerings, will own approximately 60% of the outstanding Common
Stock of the Company. Accordingly, the provisions of Schedule E to the By-Laws
of the National Association of Securities Dealers, Inc. apply to the Offerings,
and the initial public offering price can be no higher than that recommended by
a "qualified independent underwriter" meeting certain standards. In accordance
with this requirement, Goldman, Sachs & Co. has served in such role and has
recommended a price in compliance with the requirements of Schedule E. Goldman,
Sachs & Co. in its role as qualified independent underwriter has performed due
diligence investigations and reviewed and participated in the preparation of
this Prospectus and the Registration Statement of which this Prospectus forms a
part. The representatives of the Underwriters have informed the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority except in accordance with Schedule E. In
addition, an affiliate of Smith Barney Inc., affiliates of CS First Boston
Corporation and an affiliate of S.G. Warburg & Co. Inc. are investors in
investment funds sponsored by Kelso, which funds are not investors in the
Company.
Pursuant to an agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two Offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the Shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the Shares offered hereby and other shares of Common Stock, directly
or indirectly, only in the United States of America (including the States and
the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (the "United States") and to U.S. persons, which
term shall mean, for purposes of this paragraph: (a) any individual who is a
resident of the United States or (b) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase is
located in the United States. Each of the International Underwriters has agreed
or will agree pursuant to the Agreement Between that, as a part of the
distribution of the Shares offered as a part of the international offering, and
subject to certain exceptions, it will (i) not, directly or indirectly, offer,
sell or deliver shares of Common Stock (a) in the United States or to any U.S.
persons or (b) to any person whom it believes intends to reoffer, resell or
deliver the shares in the United States or to any U.S. persons, and (ii) cause
any dealer to whom it may sell such shares at any concession to agree to observe
a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
1,420,000 additional shares of Common Stock to cover over-allotments, if any, at
the initial public offering price, less the underwriting discount, as set forth
in this Prospectus. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the total number of shares. The U.S. Underwriters may exercise
such option only to cover over-allotments in connection with the sale of the
shares. The Company has granted the International Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 605,000 additional shares of Common Stock, solely to cover
over-allotments, at the initial public offering price less the underwriting
discount, as set forth on the cover page of this Prospectus.
91
<PAGE> 94
The Company and certain existing stockholders (including ASI Partners) have
agreed not to offer, sell or otherwise dispose of any shares of Common Stock for
a period of 180 days after the date of this Prospectus without the prior written
consent of the representatives of the Underwriters, except for the shares of
Common Stock offered in connection with the concurrent U.S. and international
offerings and shares of Common Stock issued pursuant to the Stock Plan.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price will be negotiated among American
Standard and the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors to be considered in determining the initial
public offering price of the Common Stock, in addition to prevailing market
conditions, are the Company's historical performance, estimates of the business
potential and earnings prospects of the Company, an assessment of the Company's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
Application will be made to list the Common Stock on the New York Stock
Exchange. In order to meet one of the requirements for listing the Common Stock
on the New York Stock Exchange, the U.S. Underwriters have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial holders.
The representatives of the Underwriters have in the past provided and may
continue to provide investment banking services to the Company and Kelso.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Shares will be passed upon for the Company by Debevoise
& Plimpton, New York, New York. Debevoise & Plimpton also acts and may hereafter
act as counsel to Kelso and its affiliates, including ASI Partners. Certain
legal matters in connection with the Offerings will be passed upon for the
Underwriters by Cahill Gordon & Reindel (a partnership including a professional
corporation), New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1992 and 1993, and for each of the three years in the period ended December 31,
1993 appearing in this Prospectus and the Registration Statement and the
consolidated financial statements of the Company appearing in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein or included herein or incorporated herein by
reference, and have been so included or incorporated by reference in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
92
<PAGE> 95
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<S> <C>
Audited Financial Statements:
Responsibility for Financial Statements....................................... F-2
Report of Independent Auditors................................................ F-3
Consolidated Statement of Operations
for the three years ended December 31, 1993................................. F-4
Consolidated Balance Sheet
as of December 31, 1992 and 1993............................................ F-5
Consolidated Statement of Stockholders' Equity
(Deficit) for the three years ended December 31, 1993....................... F-6
Consolidated Statement of Cash Flows
for the three years ended December 31, 1993................................. F-7
Notes to Consolidated Financial Statements.................................... F-8
Segment Data.................................................................. F-25
Quarterly Data................................................................ F-27
Unaudited Interim Financial Statements:
Summary Statement of Operations for the nine months ended
September 30, 1993 and 1994................................................. F-28
Summary Balance Sheet as of September 30, 1994................................ F-29
Summary Statement of Cash Flows for the nine months ended
September 30, 1993 and 1994................................................. F-30
Notes to Summary Financial Statements......................................... F-31
</TABLE>
F-1
<PAGE> 96
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The accompanying consolidated balance sheets at December 31, 1992 and 1993,
and related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the years ended December 31, 1991, 1992 and 1993,
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 COMPANIES INC.
(formerly ASI Holding Corporation)
New York, New York
March 14, 1994
F-2
<PAGE> 97
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
American Standard Companies Inc.
We have audited the accompanying consolidated balance sheets of American
Standard Companies Inc. (formerly ASI Holding Corporation) and subsidiaries as
of December 31, 1993 and 1992, and the related consolidated statements of
operations, stockholders' 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 Companies 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.
Ernst & Young LLP
New York, New York
March 14, 1994
F-3
<PAGE> 98
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1991 1992 1993
---------- ---------- ----------
<S> <C> <C> <C>
Sales.............................................. $3,595,267 $3,791,929 $3,830,462
---------- ---------- ----------
Costs and expenses
Cost of sales.................................... 2,752,068 2,852,230 2,902,562
Selling and administrative expenses.............. 614,259 678,742 692,229
Other expenses................................... 8,082 24,672 38,281
Interest expense (includes debt issuance cost
amortization of $5,335 for 1991, $5,983 for
1992 and $11,461 for 1993).................... 286,316 288,851 277,860
Loss on sale of Tyler Refrigeration.............. 22,391 -- --
---------- ---------- ----------
3,683,116 3,844,495 3,910,932
---------- ---------- ----------
Loss before income taxes, extraordinary loss and
cumulative effects of changes in accounting
methods.......................................... (87,849) (52,566) (80,470)
Income taxes....................................... 23,033 4,672 36,165
---------- ---------- ----------
Loss before extraordinary loss and cumulative
effects of changes in accounting methods......... (110,882) (57,238) (116,635)
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........................................... (143,173) (57,238) (208,567)
Preferred dividend................................. (13,855) (15,707) (8,624)
---------- ---------- ----------
Net loss applicable to common shares............... $ (157,028) $ (72,945) $ (217,191)
========== ========== ==========
Loss per common share:
Loss from continuing operations before
extraordinary loss and cumulative effects of
changes in accounting methods.................... $ (5.35) $ (3.11) $ (5.28)
Extraordinary loss on retirement of debt........... -- -- (3.87)
Cumulative effects of changes in accounting
methods.......................................... (1.38) -- --
---------- ---------- ----------
Net loss per common share.......................... $ (6.73) $ (3.11) $ (9.15)
========== ========== ==========
Average number of outstanding common shares and
equivalents...................................... 23,335,278 23,454,447 23,725,229
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 99
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1992 1993
---------- ----------
<S> <C> <C>
Current assets
Cash and certificates of deposit................................ $ 111,549 $ 53,237
Cash in escrow.................................................. 1,722 932
Accounts receivable, less allowance for doubtful accounts --
1992, $12,827; 1993, $15,666................................. 468,731 507,322
Inventories..................................................... 384,857 325,819
Future income tax benefits...................................... 33,192 24,562
Other current assets............................................ 31,199 29,811
---------- ----------
Total current assets.................................... 1,031,250 941,683
Facilities, at cost net of accumulated depreciation............... 832,811 820,523
Other assets
Goodwill, net of accumulated amortization -- 1992, $141,858;
1993, $169,879............................................... 1,101,716 1,025,774
Debt issuance costs, net of accumulated amortization -- 1992,
$77,776; 1993, $9,670........................................ 51,308 78,102
Other........................................................... 109,333 120,997
---------- ----------
$3,126,418 $2,987,079
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<S> <C> <C>
Current liabilities
Loans payable to banks.......................................... $ 99,150 $ 38,036
Current maturities of long-term debt............................ 13,458 105,939
Accounts payable................................................ 271,855 307,326
Accrued payrolls................................................ 105,400 99,758
Other accrued liabilities....................................... 230,335 263,322
Taxes on income................................................. 18,848 47,003
---------- ----------
Total current liabilities............................... 739,046 861,384
Long-term debt.................................................... 2,032,064 2,191,737
Other long-term liabilities
Reserve for postretirement benefits............................. 368,868 387,038
Deferred tax liabilities........................................ 73,307 45,625
Other........................................................... 228,521 224,108
---------- ----------
Total liabilities....................................... 3,441,806 3,709,892
Commitments and contingencies
Exchangeable preferred stock...................................... 133,176 --
Stockholders' deficit
Common stock, $.01 par value, 28,000,000 shares authorized;
23,608,587 shares issued and outstanding in 1992, 23,858,335
in 1993...................................................... 236 239
Capital surplus................................................. 192,351 188,744
Subscriptions receivable........................................ (3,316) (2,588)
ESOP shares..................................................... (9,527) (4,331)
Accumulated deficit............................................. (541,436) (750,003)
Foreign currency translation effects............................ (86,872) (149,220)
Minimum pension liability adjustment............................ -- (5,654)
---------- ----------
Total stockholders' deficit............................. (448,564) (722,813)
---------- ----------
$3,126,418 $2,987,079
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 100
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
SUB- CURRENCY
CAPITAL SCRIPTIONS ESOP ACCUMULATED TRANSLATION
SURPLUS RECEIVABLE SHARES DEFICIT EFFECTS
-------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1990..... $216,395 $ (5,055) $(22,084) $(341,025) $ (48,549)
Net loss -- Year 1991.......... -- -- -- (143,173) --
Common stock repurchased....... (17,809) -- -- -- --
Common stock issued............ 6,010 -- -- -- --
Payments on subscriptions...... -- 1,086 -- -- --
ESOP shares allocated to
employees................... 12,928 -- 7,045 -- --
Stock dividend on exchangeable
preferred stock............. (13,855) -- -- -- --
Foreign currency translation... -- -- -- -- (2,147)
-------- ---------- -------- ----------- -----------
Balance at December 31, 1991..... 203,669 (3,969) (15,039) (484,198) (50,696)
Net loss -- Year 1992.......... -- -- -- (57,238) --
Common stock repurchased....... (13,130) -- -- -- --
Common stock issued............ 3,103 -- -- -- --
Payments on subscriptions...... -- 653 -- -- --
ESOP shares allocated to
employees................... 14,416 -- 5,512 -- --
Stock dividend on exchangeable
preferred stock............. (15,707) -- -- -- --
Foreign currency translation... -- -- -- -- (36,176)
-------- ---------- -------- ----------- -----------
Balance at December 31, 1992..... 192,351 (3,316) (9,527) (541,436) (86,872)
Net loss -- Year 1993.......... -- -- -- (208,567) --
Common stock repurchased....... (16,662) -- -- -- --
Common stock issued............ 4,585 -- -- -- --
Payments on subscriptions...... -- 728 -- -- --
ESOP shares allocated to
employees................... 17,094 -- 5,196 -- --
Stock dividend on exchangeable
preferred stock............. (8,624) -- -- -- --
Foreign currency translation... -- -- -- -- (62,348)
-------- ---------- -------- ----------- -----------
Balance at December 31, 1993..... $188,744 $ (2,588) $ (4,331) $(750,003) $ (149,220)
========= ========= ========= ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 101
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1991 1992 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash provided (used) by:
Operating activities:
Loss before extraordinary loss and cumulative effects of
changes in accounting methods.............................. $(110,882) $ (57,238) $(116,635)
Loss on Tyler Refrigeration sale............................. 22,391 -- --
Depreciation................................................. 107,153 111,643 106,041
Amortization of goodwill..................................... 33,036 33,064 30,807
Non-cash interest............................................ 56,859 65,527 65,031
Non-cash stock compensation.................................. 25,980 23,076 25,679
Amortization of debt issuance costs.......................... 5,335 5,983 11,461
Loss (gain) on sale of fixed assets.......................... (2,736) (660) 2,963
Changes in assets and liabilities:
Accounts receivable........................................ 2,615 (20,081) (48,680)
Inventories................................................ 60,364 44,163 47,321
Accounts payable and accrued payrolls...................... 49,516 (8,308) 40,124
Postretirement benefits.................................... 14,273 22,074 22,687
Income taxes............................................... (53,708) (48,974) (4,232)
Other long-term liabilities................................ 23,334 3,805 13,271
Other, net................................................. 7,211 (428) 5,003
--------- --------- ---------
Net cash provided by operating activities...................... $ 240,741 $ 173,646 $ 200,841
--------- --------- ---------
Investing activities:
Purchases of property, plant and equipment................... $ (90,713) $ (87,409) $ (90,474)
Investments in affiliated companies.......................... (19,734) (20,608) (7,556)
Cash of subsidiaries consolidated............................ -- 10,703 4,514
Proceeds from disposals of property, plant and equipment..... 12,703 11,133 4,003
Investment in Tyler Holdings preferred stock................. (2,780) -- --
Net proceeds from asset sales................................ 81,470 -- --
--------- --------- ---------
Net cash used by investing activities.......................... (19,054) (86,181) (89,513)
--------- --------- ---------
Financing activities:
Proceeds from issuance of notes and debentures............... -- 388,750 650,000
Proceeds from Term Loans..................................... -- -- 750,000
Repayment of Term Loans...................................... (159,629) (448,664) (454,630)
Redemptions of debentures.................................... -- (5,000) (915,851)
Premiums on redemption of debentures......................... -- -- (44,866)
Proceeds of Revolving Credit Facility........................ -- -- 7,000
Net change in short-term debt................................ (3,741) 41,675 (61,600)
Proceeds of other long-term debt............................. 40,023 5,409 5,557
Payments on other long-term debt............................. (35,309) (36,395) (12,642)
Common stock repurchased in Tyler Refrigeration sale......... (2,545) -- --
ESOP stock repurchases....................................... (10,142) (5,950) (7,194)
Common stock repurchases..................................... (4,919) (5,000) (5,000)
Payments on stock subscriptions receivable................... 616 653 482
Purchase of untendered shares related to acquisition......... (1,455) (959) (690)
Other financing costs........................................ -- (9,591) (76,554)
--------- --------- ---------
Net cash used by financing activities.......................... (177,101) (75,072) (165,988)
--------- --------- ---------
Increase in cash and certificates of deposit excluding
translation effects.......................................... 44,586 12,393 (54,660)
Effect of exchange rate changes on cash and certificates of
deposit...................................................... (246) (6,234) (3,652)
--------- --------- ---------
Net increase (decrease) in cash and certificates of deposit.... 44,340 6,159 (58,312)
Cash and certificates of deposit at beginning of period........ 61,050 105,390 111,549
--------- --------- ---------
Cash and certificates of deposit at end of period.............. $ 105,390 $ 111,549 $ 53,237
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 102
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
American Standard Companies Inc. (the "Company") is a Delaware corporation
that was formed in 1988 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 common stock of American Standard Inc. 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 shares of American Standard Inc.
Pursuant to an Agreement and Plan of Merger, a merger was consummated (the
"Merger") on June 29, 1988, whereby American Standard Inc. became a wholly owned
subsidiary of the Company. At that time the remaining shares of American
Standard Inc.'s common stock were converted into the right to receive cash of
$78 per share. Hereinafter "American Standard" or "the Company" will refer to
the Company or to the Company and American Standard Inc. including its
subsidiaries, as the context requires. 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.
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.
F-8
<PAGE> 103
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. In connection with its Employee
Stock Ownership Plan, the Company obtains an annual valuation of its businesses.
The results of such valuation are compared to the net book value of the
Company's operating segments including an allocated portion of goodwill and
debt. To date, such comparisons have indicated no impairment to the carrying
value of goodwill.
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.
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.
F-9
<PAGE> 104
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $36
million in 1991, $40 million in 1992, and $41 million in 1993 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.
Earnings per share
Earnings per share have been computed using the weighted average number of
common shares outstanding.
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 in 1990) of common stock of the Company. 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.
F-10
<PAGE> 105
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
F-11
<PAGE> 106
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the Company's postretirement plans' funded
status and amounts recognized in the balance sheet at December 31, 1992 and
1993.
<TABLE>
<CAPTION>
1992 1993
------------------------------------- -------------------------------------
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................. $ 92.0 $ 466.8 $ 105.2 $ 511.1
Non-vested............. 4.0 28.3 4.5 30.4
----------- ----------- ----------- -----------
Accumulated benefit
obligations............ 96.0 495.1 109.7 541.5
Additional amounts
related to projected
pay increases.......... 10.8 48.1 12.1 46.0
----------- ----------- ----------- -----------
Total projected benefit
obligations............ 106.8 543.2 $ 167.5 121.8 587.5 $ 175.4
----------- ----------- --------- ----------- ----------- ---------
Assets and book reserves
relating to such
benefits:
Market value of funded
assets.............. 141.7 292.1 -- 166.9 303.8 --
Reserve (asset) for
post-retirement
benefits net of
recognized
overfunding......... (38.9) 254.8 151.8 (36.8) 257.7 154.9
Additional minimum
liability........... -- -- -- -- 19.0 --
----------- ----------- --------- ----------- ----------- ---------
102.8 546.9 151.8 130.1 580.5 154.9
----------- ----------- --------- ----------- ----------- ---------
Assets and book reserves
in excess of (less
than) projected benefit
obligations............ $ (4.0) $ 3.7 $ (15.7) $ 8.3 $ (7.0) $ (20.5)
========== ========== ======== ========== ========== ========
Consisting of:
Unrecognized prior
service benefit
(cost).............. $ (6.3) $ (3.9) $ -- $ (6.6) $ 3.4 $ 10.3
Unrecognized net gain
(loss) from
actuarial
experience.......... 2.3 7.6 (15.7) 14.9 (16.0) (30.8)
Pension liability
adjustment to
stockholders'
equity.............. -- -- -- -- 5.6 --
----------- ----------- --------- ----------- ----------- ---------
$ (4.0) $ 3.7 $ (15.7) $ 8.3 $ (7.0) $ (20.5)
========== ========== ======== ========== ========== ========
</TABLE>
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.
F-12
<PAGE> 107
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
The projected benefit obligation for postretirement benefits was determined
using the assumptions in the following table:
<TABLE>
<CAPTION>
1992 1993
------------------------- ------------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Discount rate......................... 8.50% 7.00%-10.00% 7.25% 4.50%-8.50%
Long-term rate of inflation........... 4.50% 2.50%-6.00% 2.80% .50%-5.00%
Merit and promotional increase........ 1.70% 2.00% 1.70% 1.50%
Rate of return on plan assets......... 8.75% 7.25%-10.25% 8.75% 6.25%-9.50%
</TABLE>
Postretirement cost had the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1991 1992 1993
--------------------- --------------------- ---------------------
HEALTH & HEALTH & HEALTH &
PENSION LIFE INS. PENSION LIFE INS. PENSION LIFE INS.
BENEFITS BENEFITS BENEFITS BENEFITS BENEFITS BENEFITS
-------- --------- -------- --------- -------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Service cost-benefits earned during
the period........................ $ 20.7 $ 2.6 $ 21.7 $ 3.0 $ 20.1 $ 3.4
Interest cost on the projected
benefit
obligation........................ 49.2 12.6 50.4 13.7 50.6 14.1
Less assumed return on plan assets:
Actual return on plan assets...... (71.3) -- (35.7) -- (78.8) --
Excess (shortfall) deferred....... 33.2 -- (2.6) -- 42.9 --
-------- --------- -------- --------- -------- ---------
(38.1) -- (38.3) -- (35.9) --
Other, incl. amortization of prior
service cost...................... .6 -- 1.6 -- 2.7 .3
-------- --------- -------- --------- -------- ---------
Defined benefit plan cost........... $ 32.4 $15.2 $ 35.4 $16.7 $ 37.5 $17.8
======= ======= ======= ======= ======= =======
Accretion expense reclassified to
"other expense"................... $ 15.3 $12.6 $ 16.1 $13.7 $ 16.4 $14.1
======= ======= ======= ======= ======= =======
</TABLE>
- ---------------
* Excludes the cumulative effect of adoption of FAS 106 of $39.7 million.
F-13
<PAGE> 108
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total postretirement costs were:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1991 1992 1993
----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Pension benefits........................................... $32.4 $35.4 $37.5
Health and life insurance benefits......................... 15.2 16.7 17.8
----- ----- -----
Defined benefit plan cost.................................. 47.6 52.1 55.3
Defined contribution plan cost(a).......................... 20.0 20.4 22.4
----- ----- -----
Total postretirement cost, including accretion expense..... $67.6 $72.5 $77.7
===== ===== =====
</TABLE>
- ---------------
(a) Principally ESOP cost.
NOTE 4. OTHER EXPENSE
Other income (expense) was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1991 1992 1993
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Interest income........................................ $ 8.3 $ 8.7 $ 8.5
Royalties.............................................. 2.5 3.8 2.6
Equity in net income (loss) of affiliated companies.... 10.2 4.9 (0.1)
Minority interest...................................... (3.1) (9.8) (14.0)
Accretion expense...................................... (27.9) (29.8) (30.5)
Other, net............................................. 1.9 (2.5) (4.8)
------ ------ ------
$ (8.1) $(24.7) $(38.3)
====== ====== ======
</TABLE>
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.
F-14
<PAGE> 109
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1991 1992 1993
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Pre-tax income (loss):
Domestic.......................................... $(272.6) $(170.1) $(223.2)
Foreign........................................... 184.8 117.5 142.7
------- ------- -------
Pre-tax loss.............................. (87.8) (52.6) (80.5)
Provision (benefit) for income taxes:
Current:
Domestic....................................... 5.1 5.1 12.4
Foreign........................................ 71.3 63.0 43.0
------- ------- -------
76.4 68.1 55.4
Deferred:
Domestic....................................... (52.4) (35.8) 1.1
Foreign........................................ (1.0) (27.6) (20.3)
------- ------- -------
(53.4) (63.4) (19.2)
------- ------- -------
Total provision........................... $ 23.0 $ 4.7 $ 36.2
======== ======== ========
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1991 1992 1993
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Tax benefit at statutory rate.......................... $(29.9) $(17.9) $(28.2)
Nondeductible goodwill charged to operations........... 10.6 10.5 10.4
Nondeductible goodwill related to operations sold...... 25.1* --
Nondeductible ESOP allocations......................... 4.6 4.9 6.1
Rate differences and withholding taxes related to
foreign operations................................... 4.7 1.4 9.0
Foreign exchange gains................................. (2.1) (6.3) (7.0)
State tax benefits..................................... (3.4) (3.3) (5.5)
Other, net............................................. 5.6 5.5 8.7
Increase in valuation allowance........................ 7.8 9.9 42.7
------ ------ ------
Total provision........................................ $ 23.0 $ 4.7 $ 36.2
====== ====== ======
</TABLE>
- ---------------
* Includes goodwill eliminated in the sale of Tyler Refrigeration.
In addition to the 1993 valuation allowance increase of $42.7 million shown
above, a valuation allowance of $32.1 million was also provided for the entire
amount of the tax benefit related to the
F-15
<PAGE> 110
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1992 1993
------- ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Deferred tax liabilities:
Facilities (accelerated depreciation, capitalized interest and
purchase accounting differences)........................... $ 154.1 $141.1
Inventory (LIFO and purchase accounting differences).......... 30.3 18.5
Employee benefits............................................. 6.6 11.0
Foreign investments........................................... 48.8 50.1
Other......................................................... 26.6 26.2
------- ------
266.4 246.9
------- ------
Deferred tax assets:............................................
Employee benefits (pensions and other postretirement
benefits).................................................. 97.7 110.7
Warranties.................................................... 30.0 37.4
Alternative minimum tax....................................... 21.8 19.4
Foreign tax credits and net operating losses.................. 42.3 57.5
Reserves...................................................... 45.1 58.7
Other......................................................... 18.5 46.0
Valuation allowances.......................................... (29.1) (103.9)
------- ------
226.3 225.8
------- ------
Net deferred tax liabilities.................................. $ 40.1 $ 21.1
======== ======
</TABLE>
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 $79 million, $56 million, and $41 million in the years
1991, 1992, and 1993, 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
F-16
<PAGE> 111
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
(principally relating to the 1988 to 1990 period), plus 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. 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. The Company, 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 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, if an assessment is made for the years presently
under audit, the authorities may demand immediate payment of the amount assessed
prior to final resolution of the issues. The Company however, believes, on the
basis of 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 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.
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.
NOTE 6. INVENTORIES
The components of inventory are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1992 1993
------- -------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Finished products.............................................. $ 200.6 $ 169.0
Products in process............................................ 95.8 78.0
Raw materials.................................................. 88.5 78.8
------- -------
Inventory at cost............................................ $ 384.9 $ 325.8
====== ======
</TABLE>
The carrying cost of inventories approximates current cost as a result of
purchase accounting adjustments being offset by LIFO reserves.
F-17
<PAGE> 112
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. FACILITIES
The components of facilities, at cost, are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
1992 1993
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Land.......................................................... $ 65.0 $ 66.2
Buildings..................................................... 310.2 314.6
Machinery and equipment....................................... 719.4 739.9
Improvements in progress...................................... 45.6 54.4
--------- ---------
Gross facilities.............................................. 1,140.2 1,175.1
Less: accumulated depreciation................................ 307.4 354.6
--------- ---------
Net facilities................................................ $ 832.8 $ 820.5
======== ========
</TABLE>
NOTE 8. DEBT
The 1993 Refinancing
In July 1993 the Company completed a refinancing (the "1993 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 "Existing 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 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 Existing 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 Existing 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
F-18
<PAGE> 113
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 1993 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 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 Existing 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.
F-19
<PAGE> 114
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term
Long-term debt was as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1992 1993
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Existing 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......................................... 509.5 175.0
Other long-term debt........................................ 53.3 63.1
12 3/4% junior subordinated debentures due in installments
from 2001
to 2003 (Note 9).......................................... -- 141.8
Foreign currency swap contracts............................. (14.6) --
-------- --------
2,045.5 2,297.6
Less current maturities..................................... 13.4 105.9
-------- --------
$2,032.1 $2,191.7
======== ========
</TABLE>
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, 1991, 1992, and 1993, were $3.6 million, $3.1
million, and $2.7 million, respectively. Cash interest paid for those same years
on all outstanding indebtedness amounted to $224 million, $210 million, and $198
million, respectively.
F-20
<PAGE> 115
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Existing Credit Agreement loans, maturities, and effective weighted average
interest rates in effect at December 31, 1993, were as follows:
<TABLE>
<CAPTION>
U.S. DOLLAR
EQUIVALENT
-------------
(IN MILLIONS)
<S> <C>
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
==========
</TABLE>
Under the 1988 Credit Agreement the various term loans and effective
weighted average interest rates in effect at December 31, 1992, were as follows:
<TABLE>
<CAPTION>
U.S. DOLLAR
EQUIVALENT
-------------
(IN MILLIONS)
<S> <C>
Deutschemark loans at 11.4%............................................. $ 249.8
Canadian dollar loans at 13.05%......................................... 152.5
-------------
Total......................................................... $ 402.3
==========
</TABLE>
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 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 Existing 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").
F-21
<PAGE> 116
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 Existing 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 Existing Credit Agreement,
the Senior Securities, the Senior Subordinated Debt, and the 14 1/4%
Subordinated Discount Debentures.
Obligations under the Existing Credit Agreement are guaranteed by the
Company, American Standard Inc. and significant domestic subsidiaries of
American Standard Inc. (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 stock of American
Standard Inc. and nearly all shares of subsidiary stock. In addition, the
obligations of American Standard Inc. under the Senior Securities are secured,
to the extent required by the related indentures, by mortgages on the principal
U.S. properties of American Standard Inc. equally and ratably with the
indebtedness under the Existing 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 Existing 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 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 amendments. In February
1994 the Company obtained an amendment to the Existing 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,
F-22
<PAGE> 117
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1991,
1992, and 1993, are summarized in the accompanying table.
<TABLE>
<CAPTION>
CHANGE IN END OF
PERIOD EXCHANGE RATE
---------------------------
1991 1992 1993
----- ------ ------
<S> <C> <C> <C>
British sterling........................................ (3)% (19)% (2)%
Canadian dollar......................................... -- (9) (4)
French franc............................................ (2) (6) (6)
Deutschemark............................................ (1) (6) (7)
Italian lira............................................ (2) (22) (14)
===== ====== ======
Translation loss included in stockholder's equity, net
of tax (dollars in millions).......................... $(2.1) $(36.2) $(62.3)
===== ====== ======
</TABLE>
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
$14.4 million in 1991, $19.3 million in 1992, and $21.9 million in 1993.
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.
F-23
<PAGE> 118
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 Existing
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:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- -----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Existing 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
</TABLE>
NOTE 12. RELATED PARTY TRANSACTIONS
The Company has agreed to pay Kelso an annual fee of $2.75 million for
providing management consulting and advisory services. In June 1993 American
Standard Inc. 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 $28 million, $32 million,
and $34 million for the years ended December 31, 1991, 1992, and 1993,
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
F-24
<PAGE> 119
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1991, 1992, and 1993, are shown on the following page. Identifiable
assets are also shown as at years ended 1991, 1992, and 1993. See "Business" for
a description of each business segment.
F-25
<PAGE> 120
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
SEGMENT DATA
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1991 1992 1993
------ ------ ------
<S> <C> <C> <C>
SALES
Air Conditioning Products........................................................... $1,836 $1,892 $2,100
Plumbing Products................................................................... 1,018 1,170 1,167
Transportation Products............................................................. 741 730 563
------ ------ ------
Total sales................................................................. $3,595 $3,792 $3,830
------ ------ ------
Geographic distribution:
United States..................................................................... $1,890 $1,877 $2,096
Europe............................................................................ 1,491 1,588 1,315
Other............................................................................. 317 392 483
Eliminations...................................................................... (103) (65) (64)
------ ------ ------
Total sales................................................................. $3,595 $3,792 $3,830
------ ------ ------
OPERATING INCOME
Air Conditioning Products........................................................... $ 55* $ 104 $ 133
Plumbing Products................................................................... 66 108 108
Transportation Products............................................................. 121 88 41
------ ------ ------
Total segment operating income.............................................. $ 242 $ 300 $ 282
------ ------ ------
Geographic distribution:
United States..................................................................... $ 13* $ 96 $ 125
Europe............................................................................ 206 180 118
Other............................................................................. 23 24 39
------ ------ ------
Total operating income...................................................... 242 300 282
Financing and corporate items....................................................... 330 352 363
Loss before income taxes, extraordinary loss, and cumulative effect of changes in
accounting methods................................................................ (88) (52) (81)
Income taxes........................................................................ 23 5 36
------ ------ ------
Loss before extraordinary loss and cumulative effect of changes in accounting
methods........................................................................... $ (111) $ (57) $ (117)
====== ====== ======
</TABLE>
- ---------------
* Includes $22 million loss on the sale of Tyler Refrigeration.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1991 1992 1993
------ ------ ------
<S> <C> <C> <C>
ASSETS
Air Conditioning Products........................................................... $1,174 $1,156 $1,167
Plumbing Products................................................................... 1,069 1,002 960
Transportation Products............................................................. 828 722 652
------ ------ ------
Total identifiable assets................................................... $3,071 $2,880 $2,779
------ ------ ------
Geographic distribution:
United States..................................................................... $1,015 $1,016 $1,013
Europe............................................................................ 1,577 1,370 1,196
Other............................................................................. 479 494 570
------ ------ ------
Total identifiable assets................................................... 3,071 2,880 2,779
Prepaid charges................................................................... 37 51 78
Future income tax benefits........................................................ 8 33 25
Cash and certificates of deposit.................................................. 108 113 54
Corporate assets.................................................................. 46 49 51
------ ------ ------
Total assets................................................................ $3,270 $3,126 $2,987
====== ====== ======
CAPITAL EXPENDITURES
Air Conditioning Products......................................................... $ 46 $ 33 $ 38
Plumbing Products................................................................. 40 48 46
Transportation Products........................................................... 24 27 14
------ ------ ------
Total segment capital expenditures.......................................... $ 110 $ 108 $ 98
====== ====== ======
DEPRECIATION AND AMORTIZATION
Air Conditioning Products......................................................... $ 56 $ 55 $ 53
Plumbing Products................................................................. 48 49 49
Transportation Products........................................................... 34 37 35
------ ------ ------
Total segment depreciation and amortization................................. $ 138 $ 141 $ 137
====== ====== ======
</TABLE>
F-26
<PAGE> 121
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
QUARTERLY DATA
(UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1992
----------------------------------------
FIRST SECOND THIRD FOURTH
------ ------- ------ ------
<S> <C> <C> <C> <C>
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)
====== ======== ====== ======
Per share:
Net loss.................................. $ (.74) $ (.07) $ (.81) $(1.49)
====== ======== ====== ======
Average number of common shares (thousands)......... 23,339 23,470 23,467 23,506
</TABLE>
<TABLE>
<CAPTION>
1993
----------------------------------------
FIRST SECOND THIRD FOURTH
------ ------- ------ ------
<S> <C> <C> <C> <C>
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)
====== ======== ====== ======
Per share:
Loss before extraordinary loss...................... $ (.92) $ (1.63) $ (.13) $(2.60)
Extraordinary loss.................................. -- (3.87) -- --
------ ------- ------ ------
Net loss.................................. $ (.92) $ (5.50) $ (.13) $(2.60)
====== ======== ====== ======
Average number of common shares (thousands)......... 23,699 23,756 23,690 23,756
</TABLE>
F-27
<PAGE> 122
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
UNAUDITED SUMMARY STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1993 1994
-------- --------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Sales.......................................................... $2,851.4 $3,308.9
-------- --------
Cost and expenses
Cost of sales............................................. 2,132.7 2,487.1
Selling and administrative expenses....................... 511.9 569.5
Other expense............................................. 26.8 24.9
Interest expense.......................................... 213.6 194.3
-------- --------
2,885.0 3,275.8
Income (loss) before income taxes and extraordinary loss....... (33.6) 33.1
Income taxes................................................... 21.4 46.7
-------- --------
Loss before extraordinary loss................................. (55.0) (13.6)
Extraordinary loss............................................. (91.9) --
-------- --------
Net loss....................................................... (146.9) (13.6)
Preferred stock dividend....................................... (8.6) --
-------- --------
Net loss applicable to common shares........................... $ (155.5) $ (13.6)
======== ========
Loss per common share:
Loss before extraordinary loss............................ $ (2.68) $ (.57)
Extraordinary loss........................................ (3.88) --
-------- --------
Net loss per common share................................. $ (6.56) $ (.57)
======== ========
Average number of outstanding shares and equivalents........... 23,714,939 23,964,610
</TABLE>
See accompanying notes.
F-28
<PAGE> 123
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
UNAUDITED SUMMARY BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
-------------
<S> <C>
(DOLLARS IN
MILLIONS)
ASSETS
Current Assets
Cash and certificates of deposit........................................... $ 62.9
Accounts receivable........................................................ 649.6
Inventories
Finished products....................................................... 237.6
Products in process..................................................... 88.0
Raw materials........................................................... 94.9
-------------
420.5
Other current assets....................................................... 59.5
-------------
Total Current Assets.................................................. 1,192.5
Facilities, less accumulated depreciation of $429.6.......................... 800.6
Goodwill..................................................................... 1,073.8
Other Assets................................................................. 213.8
-------------
$ 3,280.7
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Loans payable to banks..................................................... $ 100.0
Current maturities of long-term debt....................................... 130.1
Accounts payable........................................................... 304.2
Accrued payrolls........................................................... 157.5
Other accrued liabilities.................................................. 363.5
Taxes on income............................................................ 36.5
-------------
Total Current Liabilities............................................. 1,091.8
Long-Term Debt............................................................... 2,144.8
Other Liabilities............................................................ 734.0
-------------
Total Liabilities..................................................... 3,970.6
Commitments and Contingencies
Stockholders' Deficit
Common stock $.01 par value, 28,000,000 shares authorized; 24,424,831
shares issued and outstanding in 1994................................... .2
Capital surplus............................................................ 197.0
Subscriptions receivable................................................... (2.1)
ESOP shares................................................................ (.4)
Accumulated deficit........................................................ (763.6)
Foreign currency translation effects....................................... (115.4)
Minimum pension liability adjustment....................................... (5.6)
-------------
Total Stockholders' Deficit........................................... (689.9)
-------------
$ 3,280.7
===========
</TABLE>
See accompanying notes.
F-29
<PAGE> 124
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
UNAUDITED SUMMARY STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1993 1994
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash provided (used) by:
Operating activities:
Income-related:
Net loss before extraordinary loss..................................... $ (55.0) $ (13.6)
Depreciation and asset loss provisions................................. 81.0 95.3
Amortization of goodwill............................................... 23.2 23.4
Non-cash interest...................................................... 52.0 39.5
Accrued interest....................................................... 36.6 31.5
Amortization of debt issuance costs.................................... 8.4 11.0
Non-cash stock compensation............................................ 19.0 21.0
Changes in working capital invested in operations........................ (88.5) (128.4)
Timing differences in funding............................................ (3.3) 47.7
-------- --------
Net cash flow provided by operating activities............................. 73.4 127.4
-------- --------
Investing activities:
Purchase of property, plant and equipment................................ (46.3) (50.3)
Investment in affiliated companies....................................... (8.1) (12.9)
Proceeds from disposals of property, plant and equipment................. 2.1 11.1
Other.................................................................... 4.5 (2.1)
-------- --------
Net cash used by investing activities...................................... (47.8) (54.2)
-------- --------
Financing activities:
Proceeds from issuance of senior securities.............................. 650.0 --
Proceeds from term loans................................................. 750.0 --
Repayment of term loans.................................................. (454.6) (101.3)
Repayment of senior securities........................................... (915.9) --
Premiums on redemption of senior securities.............................. (44.9) --
Net revolver borrowings.................................................. 91.4 62.5
Net decrease in short-term debt.......................................... (54.6) (12.8)
Proceeds from other long-term debt....................................... 3.6 9.3
Repayments of other long-term debt....................................... (11.5) (16.6)
Common stock repurchases................................................. (3.6) (4.3)
ESOP stock repurchases................................................... (3.3) (3.7)
Repayment of stock subscriptions receivable.............................. .4 .4
Other financing costs.................................................... (77.0) --
-------- --------
Net cash used by financing activities...................................... (70.0) (66.5)
-------- --------
Decrease in cash and certificates of deposit excluding translation
effects.................................................................. (44.4) 6.7
Effect of exchange rate changes on cash and certificates of deposit........ (2.6) 3.0
-------- --------
Net decrease in cash and certificates of deposit........................... (47.0) 9.7
Cash and certificates of deposit at beginning of period.................... 111.5 53.2
-------- --------
Cash and certificates of deposit at end of period.......................... $ 64.5 $ 62.9
======= =======
</TABLE>
See accompanying notes.
F-30
<PAGE> 125
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)
NOTES TO SUMMARY FINANCIAL STATEMENTS
(1) The accompanying summary statement of operations of American Standard
Companies Inc. (the "Company") and subsidiaries for the nine months ended
September 30, 1993 and 1994 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 first nine
months of 1994 are not necessarily indicative of results for the entire year.
(2) 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), and $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 such amounts $36 million was included in
cost of sales. Other than costs related to the consolidation of production
facilities which will be liquidated over several years, the charges will be paid
by June 30, 1995.
(3) 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.
(4) On October 21, 1994, 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
12 3/4% Junior Subordinated Debentures and 14 1/4% Subordinated Discount
Debentures and to pay redemption premiums of $4.4 million and debt issue costs
of $3.8 million. The Company will incur an extraordinary loss estimated to be
$8.7 million related to the 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.
(5) The Company has filed a registration statement pursuant to which it
plans to offer common stock to the public. If completed, the offering is
anticipated to provide gross proceeds to the Company of approximately $300
million (assuming no exercise of the Underwriters' over-allotment options). The
net proceeds of this offering would be used to reduce bank borrowings.
F-31
<PAGE> 126
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference.............................. 2
Available Information.................. 2
Prospectus Summary..................... 3
Certain Investment Considerations...... 10
The Company............................ 16
Use of Proceeds........................ 16
Dividend Policy........................ 16
Dilution............................... 17
Capitalization......................... 18
Pro Forma Financial Data............... 19
Selected Historical Consolidated
Financial Data....................... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 24
Business............................... 42
Management............................. 56
Certain Transactions and
Relationships........................ 71
Security Ownership of Certain
Beneficial Owners.................... 72
Shares Eligible for Future Sale........ 74
Description of Capital Stock........... 76
Certain Indebtedness................... 83
Underwriting........................... 90
Legal Matters.......................... 92
Experts................................ 92
Index to Consolidated Financial
Statements and Supplementary Data.... F-1
</TABLE>
13,500,000 SHARES
AMERICAN STANDARD
COMPANIES INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------
-----------
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
MORGAN STANLEY & CO.
INCORPORATED
SMITH BARNEY INC.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 127
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration fee......................................................... $
NASD fee.................................................................
NYSE listing fee.........................................................
Blue Sky fees and expenses...............................................
Transfer agent's fees....................................................
Printing and engraving expenses..........................................
Legal fees and expenses..................................................
Accounting fees and expenses.............................................
Miscellaneous............................................................
--------
Total............................................................... $
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the corporation's best interests, and, for criminal proceedings,
had no reasonable cause to believe his conduct was illegal. A Delaware
corporation may indemnify officers and directors in an action by or in the right
of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation in the performance of his duty. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director actually and reasonably incurred.
In accordance with the Delaware Law, the Certificate of Incorporation of
the Company contains a provision to limit the personal liability of the
directors for violations of their fiduciary duty. This provision eliminates each
director's liability to the Company or its respective stockholders for monetary
damages except (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware Law providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their fiduciary
duty of care, including any such actions involving gross negligence.
Subsection (f) of Article SIXTH of the Company's Certificate of
Incorporation provides for indemnification of directors and officers as follows:
(f) The Corporation shall indemnify, to the fullest extent now or
hereafter permitted by the General Corporation Law of the State of
Delaware, any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that he or she is or was or has agreed to become a director or officer
of the Corporation, or is or was serving or has agreed to serve at the
request of the
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<PAGE> 128
Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any action
alleged to be taken or omitted in such capacity, and may to the same extent
indemnify any person who was or is a party or is threatened to be made a
party to such an action, suit or proceeding by reason of the fact that he
or she is or was or has agreed to become an employee or agent of the
Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with such action, suit or proceeding or any appeal
therefrom.
Article VI of the By-Laws of the Company provides for indemnification of
directors and officers as follows:
Section 6.01. Nature of Indemnity. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he is or was or has agreed to become an employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (2) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 6.02. Successful Defense. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
6.01 hereof or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 6.03. Determination That Indemnification Is Proper. Any
indemnification of a director or officer of the Corporation under Section 6.01
hereof (unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 6.01 hereof. Any indemnification of an employee or
agent of the Corporation under Section 6.01 hereof (unless ordered by a court)
may be made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.01 hereof. Any such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not
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<PAGE> 129
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 6.04. Advance Payment of Expenses. Expenses incurred by a
director or officer in defending a civil or criminal action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized in
this Article. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate. The Board of Directors may authorize the Corporation's counsel to
represent such director, officer, employee or agent in any action, suit or
proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
Section 6.05. Procedure for Indemnification of Directors and
Officers. Any indemnification of a director or officer of the Corporation under
Sections 6.01 and 6.02, or advance of costs, charges and expenses to a director
or officer under Section 6.04 of this Article, shall be made promptly, and in
any event within 30 days, upon the written request of the director or officer.
If a determination by the Corporation that the director or officer is entitled
to indemnification pursuant to this Article is required, and the Corporation
fails to respond within sixty days to a written request for indemnity, the
Corporation shall be deemed to have approved such request. If the Corporation
denies a written request for indemnity or advancement of expenses, in whole or
in part, or if payment in full pursuant to such request is not made within 30
days, the right to indemnification or advances as granted by this Article shall
be enforceable by the director or officer in any court of competent
jurisdiction. Such person's costs and expenses incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such action shall also be indemnified by the Corporation. It shall be a
defense to any such action (other than an action brought to enforce a claim for
the advance of costs, charges and expenses under Section 6.04 of this Article
where the required undertaking, if any, has been received by the Corporation)
that the claimant has not met the standard of conduct set forth in Section 6.01
of this Article, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel, and its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 6.01 of this Article, nor the fact that
there has been an actual determination by the Corporation (including its Board
of Directors, its independent legal counsel, and its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 6.05. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action, suit or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such a "contract right" may not be modified
retroactively without the consent of such director, officer, employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 6.07. Insurance. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
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<PAGE> 130
indemnify him against such liability under the provisions of this Article,
provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 6.08. Severability. If this Article or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(The File Number of American Standard Companies Inc., the Registrant, and
for all Exhibits incorporated by reference is 33-23070, except those Exhibits
incorporated by reference in filings made by American Standard Inc. ("American
Standard Inc.") whose File Number is 1-470
A. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<S> <C>
(1) Form of U.S. Underwriting Agreement.*
(3) (i) Restated Certificate of Incorporation of American Standard Companies Inc. (the
"Company").*
(ii) By-Laws of the Company, as amended.*
(4) (i) Indenture, dated as of November 1, 1986, between American Standard Inc. 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) by American Standard Inc. in its Form 10-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 American Standard Inc., 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 described in (4)(i) above; previously
filed as Exhibit (4)(ii) in Registration Statement No. 33-64450 of American
Standard Inc. under the Securities Act of 1933, as amended, and herein
incorporated by reference.
(iii) Form of Indenture, dated as of July 1, 1988, between American Standard Inc. and
Shawmut Bank Connecticut, National Association (formerly known as The
Connecticut National Bank), as Trustee, relating to American Standard Inc.'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 American
Standard Inc. 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 American Standard Inc. and First
Trust National Association, Trustee, relating to American Standard Inc.'s
10 7/8% Senior Notes due 1999, in the aggregate principal amount of
$150,000,000; previously filed as Exhibit (4)(i) by American Standard Inc. in
its Form 10-Q for the quarter ended June 30, 1992, and herein incorporated by
reference.
</TABLE>
- ---------------
* To be filed by amendment
II-4
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<C> <C> <S>
(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 American Standard Inc. and First
Trust National Association, Trustee, relating to American Standard Inc.'s
11 3/8% Senior Debentures due 2004, in the aggregate principal amount of
$250,000,000; previously filed as Exhibit (4)(iii) by American Standard Inc. in
its 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 American Standard Inc. and
United States Trust Company of New York, as Trustee, relating to American
Standard Inc.'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
American Standard Inc. 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.
(xi) Form of Indenture, dated as of June 1, 1993, between American Standard Inc. and
United States Trust Company of New York, as Trustee, relating to American
Standard Inc.'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 American Standard Inc. 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 American Standard Inc. and Shawmut Bank, N.A., as
Trustee, relating to American Standard Inc.'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 American Standard Inc. under the
Securities Act of 1933, as amended, and herein incorporated by reference.
(xiv) Form of Debenture 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 American
Standard Inc., the Company, certain subsidiaries of American Standard Inc.,
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 American Standard Inc. under the Securities Act of
1933, as amended, and herein incorporated by reference.
(xvi) Credit Agreement, dated as of June 1, 1993, among American Standard Inc., the
Company, certain subsidiaries of American Standard Inc. 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 American Standard
Inc. under the Securities Act of 1933, as amended, and herein incorporated by
reference.
</TABLE>
- ---------------
* To be filed by amendment
II-5
<PAGE> 132
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<C> <C> <S>
(xvii) First Amendment, Consent and Waiver, dated as of February 10, 1994, to the
Credit Agreement referred to in paragraph (4)(xvi) above; previously filed as
Exhibit (4)(xvii) by American Standard Inc. in its Form 10-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.
(xviii) Second Amendment, dated as of October 21, 1994, to the Credit Agreement,
referred to in paragraph (4)(xvi) above.
(xix) Stockholders Agreement, dated as of July 7, 1988, as amended as of August 1,
1988, among the Company, Kelso ASI Partners, L.P., and the Management
Stockholders named therein; previously filed as Exhibit 4.19 in Amendment No. 2
to Registration Statement No. 33-23070 of the Company under the Securities Act
of 1933, as amended, and herein incorporated by reference.
(xx) Amendment to Section 2.1 of the Stockholders Agreement referred to in paragraph
(4)(xix) above, effective as of January 1, 1991; previously filed as Exhibit
(4)(xxvii) by the Company in its Form 10-K for the year ended December 31,
1992, and herein incorporated by reference.
(xxi) 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)(xix) above; previously filed as Exhibit (4)(ii) by the Company in its Form
10-Q for the quarter ended September 30, 1991, and herein incorporated by
reference.
(xxii) Revised Schedule of Priorities, effective as of September 5, 1991, as adopted
by the Board of Directors of the Company, pursuant to the Stockholders
Agreement dated as of July 7, 1988, as amended, referred to in paragraph
(4)(xix) above; previously filed as Exhibit (4)(iii) by the Company in its Form
10-Q for the quarter ended September 30, 1991, and herein incorporated by
reference.
(xxiii) Amended Paragraph 6.1 of the Stockholders Agreement referred to in paragraph
(4)(xix) above, effective as of September 2, 1993; previously filed as Exhibit
(4)(xxi) by the Company in its Form 10-K for the fiscal year ended December 31,
1993, and herein incorporated by reference.
(xxiv) Amended Stockholders Agreement, dated as of , 1994, among the
Company, Kelso ASI Partners, L.P., and the Management Stockholders named
therein.*
(xxv) Form of Rights Agreement, dated as of , 1995 between the Company and
as Rights Agent*.
(5) Opinion of Debevoise & Plimpton regarding the legality of the securities being
registered.*
(10) (i) Agreement and Plan of Merger, dated as of March 16, 1988, among American
Standard Inc., ASI Acquisition Company and the Company and Offer Letter, dated
March 16, 1988, between the Company and Kelso & Company, L.P.; previously filed
as Exhibit 2 to American Standard Inc.'s Schedule 14D-9 filed March 21, 1988,
in connection with the offer for all of the shares of American Standard Inc.'s
Common Stock by a corporation formed by Kelso & Company, L.P., and herein
incorporated by reference.
(ii) Amendment, dated June 3, 1988, to Agreement and Plan of Merger referred to in
paragraph (10)(i) above; previously filed as Exhibit 2.50 in Amendment No. 1 to
the Registration Statement No. 33-22126 of American Standard Inc. 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) by American
Standard Inc. in its Form 10-K for the fiscal year ended December 31, 1992, and
herein incorporated by reference.
</TABLE>
- ---------------
* To be filed by amendment
II-6
<PAGE> 133
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<C> <C> <S>
(iv) Trust Agreement for American Standard Inc. Long-Term Incentive Compensation
Plan; previously filed as Exhibit (10)(iv) by American Standard Inc. in its
Form 10-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.
(v) American Standard Inc. Annual Incentive Plan; previously filed as Exhibit
(10)(vii) by American Standard Inc. in its Form 10-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 (10)(i) by American Standard Inc. in its Form
10-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) by American Standard Inc. in its Form 10-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; previously filed
as Exhibit (10)(vii) by American Standard Inc. in its Form 10-K for the fiscal
year ended December 31, 1993, concurrently with the filings of the Company's
Form 10-K for the same year, and herein incorporated by reference.
(viii) 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 American Standard Inc. under the
Securities Act of 1933, as amended, and herein incorporated by reference.
(ix) 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) by American Standard Inc. in its
Form 10-K for the year ended December 31, 1991, and herein incorporated by
reference.
(x) Consulting Agreement, made July 1, 1988, with Kelso & Company, L.P. concerning
general management and financial consulting services to American Standard Inc.;
previously filed as Exhibit (10)(xviii) by American Standard Inc. in its Form
10-K for the fiscal year ended December 31, 1988, and herein incorporated by
reference.
(xi) American Standard Inc. Supplemental Compensation Plan for Outside Director; as
amended through September 1993; previously filed as Exhibit (10)(xv) by
American Standard Inc. in its Form 10-K for the year ended December 31, 1993,
and herein incorporated by reference.
(xii) ASI Holding Corporation 1989 Stock Purchase Loan Program; previously filed as
Exhibit 10(i) by the Company in its Form 10-Q for the quarter ended September
30, 1989, and herein incorporated by reference.
(xiii) Corporate Officers Severance Plan adopted in December, 1990, effective April
27, 1991; previously filed as Exhibit 10(xix) by American Standard Inc. in its
Form 10-K for the fiscal year ended December 31, 1990, and herein incorporated
by reference.
(xiv) Estate Preservation Plan adopted by American Standard Inc. in December, 1990;
previously filed as Exhibit (10)(xx) by American Standard Inc. in its Form 10-K
for the fiscal year ended December 31, 1990, and herein incorporated by
reference.
(xv) Amendment adopted in March 1993 to Estate Preservation Plan referred to in
paragraph (10)(xiv) above; previously filed as Exhibit (10)(xix) by American
Standard Inc. in its Form 10-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.
</TABLE>
- ---------------
* To be filed by amendment
II-7
<PAGE> 134
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<C> <C> <S>
(xvi) Summary of terms of Unfunded Deferred Compensation Plan adopted December 2,
1993; previously filed as Exhibit (10)(xviii) by American Standard Inc. in its
Form 10-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.
(xvii) Retirement/Consulting Agreement, dated December 28, 1993, between H. Thompson
Smith and American Standard Inc.; previously filed as Exhibit (10)(xix) by
American Standard Inc. in its Form 10-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.
(23) (i) Consent of Ernst & Young LLP.
(ii) Consent of Debevoise & Plimpton, included in the opinion of Debevoise &
Plimpton filed as Exhibit (5).*
(24) Powers of Attorney.
(27) Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment
B. FINANCIAL STATEMENT SCHEDULES
Financial statement schedules, years ended December 31, 1991, 1992 and 1993
Report of Ernst & Young LLP, Independent Auditors
III -- Condensed Financial Information of Registrant
V -- Facilities
VI -- Accumulated Depreciation of Facilities
VIII -- Reserves
IX -- Short-Term Borrowings
X -- Supplementary Statement Information
ITEM 17. UNDERTAKINGS.
(A) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(B) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(C) The undersigned registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or
II-8
<PAGE> 135
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-9
<PAGE> 136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Piscataway, State of New Jersey on November 10, 1994.
AMERICAN STANDARD COMPANIES INC.
By: /s/ EMMANUEL A.
KAMPOURIS
(Emmanuel A. Kampouris)
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on November 10, 1994.
<TABLE>
<C> <S>
/s/ EMMANUEL A. KAMPOURIS Chairman, President and Chief Executive Officer;
- ------------------------------------- Director (Principal Executive Officer)
(Emmanuel A. Kampouris)
/s/ FRED A. ALLARDYCE Vice President and Chief Financial Officer
- ------------------------------------- (Principal Financial Officer)
(Fred A. Allardyce)
/s/ G. RONALD SIMON Vice President and Controller (Principal Accounting
- ------------------------------------- Officer)
(G. Ronald Simon)
/s/ STEVEN E. ANDERSON* Director
- -------------------------------------
(Steven E. Anderson)
/s/ HORST HINRICHS* Director
- -------------------------------------
(Horst Hinrichs)
/s/ GEORGE H. KERCKHOVE* Director
- -------------------------------------
(George H. Kerckhove)
/s/ SHIGERU MIZUSHIMA* Director
- -------------------------------------
(Shigeru Mizushima)
/s/ FRANK T. NICKELL* Director
- -------------------------------------
(Frank T. Nickell)
/s/ ROGER W. PARSONS* Director
- -------------------------------------
(Roger W. Parsons)
/s/ J. DANFORTH QUAYLE* Director
- -------------------------------------
(J. Danforth Quayle)
/s/ DAVID M. RODERICK* Director
- -------------------------------------
(David M. Roderick)
/s/ JOHN RUTLEDGE* Director
- -------------------------------------
(John Rutledge)
/s/ JOSEPH S. SCHUCHERT* Director
- -------------------------------------
(Joseph S. Schuchert)
*By: /s/ RICHARD A. KALAHER
(Richard A. Kalaher,
as attorney-in-fact)
</TABLE>
II-10
<PAGE> 137
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
American Standard Companies Inc.
We have audited the consolidated financial statements of American Standard
Companies Inc., (formerly ASI Holding Corporation), 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
Registration Statement on Form S-2). Our audits also included the consolidated
schedules listed in Item 16(b). 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.
ERNST & YOUNG LLP
New York, New York
March 14, 1994
S-1
<PAGE> 138
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS (PARENT COMPANY SEPARATELY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
DECEMBER 31, DECEMBER 31,
1992 1993
------------ ------------
<S> <C> <C>
Interest income.................................................. $ 273 $ 188
Interest expense................................................. 273 188
Equity in net loss of subsidiary................................. (57,238) (208,567)
------------ ------------
Net loss.................................................... $(57,238) $ (208,567)
=========== ===========
</TABLE>
See notes to financial statements.
S-2
<PAGE> 139
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
BALANCE SHEET (PARENT COMPANY SEPARATELY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1992 1993
--------- ---------
<S> <C> <C>
ASSETS
Investment in subsidiary........................................... $(424,110) $(695,287)
========== ==========
LIABILITIES
Loan payable to subsidiary......................................... 3,316 2,588
Stock repurchase obligation (Note C)............................... 21,138 24,938
STOCKHOLDERS' DEFICIT
Common stock, $.01 par, 28,000,000 shares authorized; shares issued
and outstanding, 23,608,587 in 1992; 23,858,335 in 1993.......... 236 239
Capital surplus.................................................... 192,351 188,744
Subscriptions receivable........................................... (3,316) (2,588)
ESOP shares........................................................ (9,527) (4,331)
Accumulated deficit................................................ (541,436) (750,003)
Foreign currency translation effects............................... (86,872) (149,220)
Minimum pension liability adjustment............................... -- (5,654)
--------- ---------
Total stockholders' deficit.............................. (448,564) (722,813)
--------- ---------
$(424,110) $(695,287)
========== ==========
</TABLE>
See notes to financial statements.
S-3
<PAGE> 140
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS (PARENT COMPANY SEPARATELY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1992 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss....................................................... $ (57,238) $ (208,567)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Equity in net loss of subsidiary............................ 57,238 208,567
------------ ------------
Net cash flow from operating activities.......................... 0 0
------------ ------------
Cash provided (used) by investing activities:
Investment in subsidiary....................................... (3,103) (4,585)
Purchase of common stock by subsidiary......................... 10,950 12,194
------------ ------------
Net cash provided by investing activities........................ 7,847 7,609
------------ ------------
Cash provided (used) by financing activities:
Issuance of common stock....................................... 3,103 4,585
Common stock repurchased....................................... (10,950) (12,194)
Repayments on subscriptions receivable......................... 653 482
Repayment of loan from subsidiary.............................. (653) (482)
------------ ------------
Net cash used by financing activities............................ (7,847) (7,609)
------------ ------------
Net change in cash and cash equivalents.......................... $ 0 $ 0
=========== ===========
</TABLE>
See notes to the financial statements.
S-4
<PAGE> 141
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION ON REGISTRANT -- (CONTINUED)
NOTES TO FINANCIAL STATEMENTS (PARENT COMPANY SEPARATELY)
(A) The notes to the consolidated financial statements of American Standard
Companies Inc., formerly ASI Holding Corporation (the "Parent Company"),
are an integral part of these condensed financial statements.
(B) The Parent Company was organized by Kelso & Company,, L.P., a private
merchant banking firm, to participate in the acquisition of American
Standard Inc. American Standard Inc. is now a wholly owned subsidiary of
the Parent Company. The Parent Company has no other investments or
operations.
(C) The Parent Company has issued its Common Stock to numerous employees in
connection with the Acquisition and various employee benefit and incentive
plans including the ESOP. As no public market exists for the stock, the
Parent Company, to provide liquidity to employees who have terminated
employment, has made purchases of such employees' stock. Purchases are
based upon fair value appraisals obtained in connection with the ESOP. The
amount of such stock purchases is subject to annual limitations contained
in American Standard Inc.'s lending arrangements and debt instruments. As
the stock tendered for payment by terminated employees has exceeded the
amount available to be paid under the borrowing agreements described
previously, a liability for the unpaid tendered stock has been recorded on
the financial statements of the Parent Company with a concomitant reduction
in Common Stock and Capital Surplus.
S-5
<PAGE> 142
SCHEDULE V -- FACILITIES
YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS FOREIGN
BALANCE, AND CURRENCY BALANCE,
BEGINNING TRANSFERS TRANSLATION ASSETS END OF
CLASSIFICATION OF PERIOD AT COST DISPOSALS EFFECTS ACQUIRED PERIOD
- ---------------------- ---------- --------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
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
========== ========= ========== =========== ========= ==========
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
---------- --------- --------- ----------- -------- ----------
1993:
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
========== ========= ========== =========== ========= ==========
</TABLE>
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:
<TABLE>
<S> <C>
Buildings................................ 40 years
Machinery and equipment.................. 4-15 years
Automotive equipment..................... 4-5 years
</TABLE>
Additions include capital lease obligations of approximately $15 million in
1993, $16 million in 1992, and $11 million in 1991.
S-6
<PAGE> 143
SCHEDULE VI - ACCUMULATED DEPRECIATION OF FACILITIES
YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
BALANCE, PROVISIONS CURRENCY BALANCE,
BEGINNING CHARGED TRANSLATION ASSETS END OF
CLASSIFICATION OF PERIOD TO INCOME DISPOSALS EFFECTS ACQUIRED PERIOD
- ----------------------------- --------- ---------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
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
========= ========= ========= ========= ========= =========
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
========= ========= ========= ========= ========= =========
1993:
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
========= ========= ========= ========= ========= =========
</TABLE>
S-7
<PAGE> 144
SCHEDULE VIII -- RESERVES
YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
BALANCE, ADDITIONS CURRENCY BALANCE,
BEGINNING CHARGED OTHER TRANSLATION END OF
DESCRIPTION OF PERIOD TO INCOME DEDUCTIONS CHANGES EFFECTS PERIOD
- ------------------------------------ --------- --------- ---------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
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 postretirement
benefits.......................... $305,215 $76,547(D) $(22,510)(B) $ -- $ (1,374) $357,878
========== ========== =========== ========= =========== =========
1992:
Reserve deducted from assets:
Allowance for doubtful accounts
receivable.................... $ 14,667 $ 6,489 $ (7,262)(A) -- $ (1,067) $ 12,827
========== ========== =========== ========= =========== =========
Reserve for postretirement
benefits.......................... $357,878 $47,374 $(24,495)(B) $ -- $ (11,889) $368,868
========== ========== =========== ========= =========== =========
1993:
Reserve deducted from assets:
Allowance for doubtful accounts
receivable.................... $ 12,827 $10,118 $ (6,584)(A) $ -- $ (695) $ 15,666
========== ========== =========== ========= =========== =========
Reserve for postretirement
benefits.......................... $368,868 $48,827 $(25,815)(B) $11,832(E) $ (16,674) $387,038
========== ========== =========== ========= =========== =========
</TABLE>
- ---------------
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.
S-8
<PAGE> 145
SCHEDULE IX -- SHORT-TERM BORROWINGS
YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
MAXIMUM AVERAGE
BALANCE WEIGHTED AMOUNT AMOUNT WEIGHTED
END AVERAGE AT OUTSTANDING AVERAGE
CATEGORY OF PERIOD INTEREST RATE MONTH END DURING PERIOD INTEREST RATE
- ---------------------------- --------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1991:
Payable to banks.......... $63 12.3% $ 167 $ 104 11.2%
1992:
Payable to banks.......... $99 12.5% $ 119 $ 104 11.9%
1993:
Payable to banks.......... $38 10.3% $ 160 $ 118 8.97%
</TABLE>
- ---------------
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.
S-9
<PAGE> 146
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs..................................... $75,573 $80,392 $71,498
======== ======== ========
Advertising costs (including cooperative advertising,
national publications, merchandising, and sales contests
and promotions)........................................... $71,909 $77,098 $76,263
======== ======== ========
</TABLE>
S-10
<PAGE> 147
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<S> <C>
(1) Form of U.S. Underwriting Agreement.*
(3) (i) Restated Certificate of Incorporation of American Standard Companies Inc. (the
"Company").*
(ii) By-Laws of the Company, as amended.*
(4) (i) Indenture, dated as of November 1, 1986, between American Standard Inc. 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) by American Standard Inc. in its Form 10-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 American Standard Inc., 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 described in (4)(i) above; previously
filed as Exhibit (4)(ii) in Registration Statement No. 33-64450 of American
Standard Inc. under the Securities Act of 1933, as amended, and herein
incorporated by reference.
(iii) Form of Indenture, dated as of July 1, 1988, between American Standard Inc. and
Shawmut Bank Connecticut, National Association (formerly known as The
Connecticut National Bank), as Trustee, relating to American Standard Inc.'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 American
Standard Inc. 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 American Standard Inc. and First
Trust National Association, Trustee, relating to American Standard Inc.'s
10 7/8% Senior Notes due 1999, in the aggregate principal amount of
$150,000,000; previously filed as Exhibit (4)(i) by American Standard Inc. in
its Form 10-Q for the quarter ended June 30, 1992, and herein incorporated by
reference.
</TABLE>
- ---------------
* To be filed by amendment
<PAGE> 148
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<C> <C> <S>
(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 American Standard Inc. and First
Trust National Association, Trustee, relating to American Standard Inc.'s
11 3/8% Senior Debentures due 2004, in the aggregate principal amount of
$250,000,000; previously filed as Exhibit (4)(iii) by American Standard Inc. in
its 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 American Standard Inc. and
United States Trust Company of New York, as Trustee, relating to American
Standard Inc.'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
American Standard Inc. 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.
(xi) Form of Indenture, dated as of June 1, 1993, between American Standard Inc. and
United States Trust Company of New York, as Trustee, relating to American
Standard Inc.'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 American Standard Inc. 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 American Standard Inc. and Shawmut Bank, N.A., as
Trustee, relating to American Standard Inc.'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 American Standard Inc. under the
Securities Act of 1933, as amended, and herein incorporated by reference.
(xiv) Form of Debenture 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 American
Standard Inc., the Company, certain subsidiaries of American Standard Inc.,
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 American Standard Inc. under the Securities Act of
1933, as amended, and herein incorporated by reference.
(xvi) Credit Agreement, dated as of June 1, 1993, among American Standard Inc., the
Company, certain subsidiaries of American Standard Inc. 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 American Standard
Inc. under the Securities Act of 1933, as amended, and herein incorporated by
reference.
</TABLE>
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<PAGE> 149
<TABLE>
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EXHIBIT NO. DESCRIPTION
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(xvii) First Amendment, Consent and Waiver, dated as of February 10, 1994, to the
Credit Agreement referred to in paragraph (4)(xvi) above; previously filed as
Exhibit (4)(xvii) by American Standard Inc. in its Form 10-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.
(xviii) Second Amendment, dated as of October 21, 1994, to the Credit Agreement,
referred to in paragraph (4)(xvi) above.
(xix) Stockholders Agreement, dated as of July 7, 1988, as amended as of August 1,
1988, among the Company, Kelso ASI Partners, L.P., and the Management
Stockholders named therein; previously filed as Exhibit 4.19 in Amendment No. 2
to Registration Statement No. 33-23070 of the Company under the Securities Act
of 1933, as amended, and herein incorporated by reference.
(xx) Amendment to Section 2.1 of the Stockholders Agreement referred to in paragraph
(4)(xix) above, effective as of January 1, 1991; previously filed as Exhibit
(4)(xxvii) by the Company in its Form 10-K for the year ended December 31,
1992, and herein incorporated by reference.
(xxi) 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)(xix) above; previously filed as Exhibit (4)(ii) by the Company in its Form
10-Q for the quarter ended September 30, 1991, and herein incorporated by
reference.
(xxii) Revised Schedule of Priorities, effective as of September 5, 1991, as adopted
by the Board of Directors of the Company, pursuant to the Stockholders
Agreement dated as of July 7, 1988, as amended, referred to in paragraph
(4)(xix) above; previously filed as Exhibit (4)(iii) by the Company in its Form
10-Q for the quarter ended September 30, 1991, and herein incorporated by
reference.
(xxiii) Amended Paragraph 6.1 of the Stockholders Agreement referred to in paragraph
(4)(xix) above, effective as of September 2, 1993; previously filed as Exhibit
(4)(xxi) by the Company in its Form 10-K for the fiscal year ended December 31,
1993, and herein incorporated by reference.
(xxiv) Amended Stockholders Agreement, dated as of , 1994, among the
Company, Kelso ASI Partners, L.P., and the Management Stockholders named
therein.*
(xxv) Form of Rights Agreement, dated as of , 1995 between the Company and
as Rights Agent*.
(5) Opinion of Debevoise & Plimpton regarding the legality of the securities being
registered.*
(10) (i) Agreement and Plan of Merger, dated as of March 16, 1988, among American
Standard Inc., ASI Acquisition Company and the Company and Offer Letter, dated
March 16, 1988, between the Company and Kelso & Company, L.P.; previously filed
as Exhibit 2 to American Standard Inc.'s Schedule 14D-9 filed March 21, 1988,
in connection with the offer for all of the shares of American Standard Inc.'s
Common Stock by a corporation formed by Kelso & Company, L.P., and herein
incorporated by reference.
(ii) Amendment, dated June 3, 1988, to Agreement and Plan of Merger referred to in
paragraph (10)(i) above; previously filed as Exhibit 2.50 in Amendment No. 1 to
the Registration Statement No. 33-22126 of American Standard Inc. 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) by American
Standard Inc. in its Form 10-K for the fiscal year ended December 31, 1992, and
herein incorporated by reference.
</TABLE>
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<PAGE> 150
<TABLE>
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EXHIBIT NO. DESCRIPTION
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(iv) Trust Agreement for American Standard Inc. Long-Term Incentive Compensation
Plan; previously filed as Exhibit (10)(iv) by American Standard Inc. in its
Form 10-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.
(v) American Standard Inc. Annual Incentive Plan; previously filed as Exhibit
(10)(vii) by American Standard Inc. in its Form 10-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 (10)(i) by American Standard Inc. in its Form
10-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) by American Standard Inc. in its Form 10-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; previously filed
as Exhibit (10)(vii) by American Standard Inc. in its Form 10-K for the fiscal
year ended December 31, 1993, concurrently with the filings of the Company's
Form 10-K for the same year, and herein incorporated by reference.
(viii) 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 American Standard Inc. under the
Securities Act of 1933, as amended, and herein incorporated by reference.
(ix) 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) by American Standard Inc. in its
Form 10-K for the year ended December 31, 1991, and herein incorporated by
reference.
(x) Consulting Agreement, made July 1, 1988, with Kelso & Company, L.P. concerning
general management and financial consulting services to American Standard Inc.;
previously filed as Exhibit (10)(xviii) by American Standard Inc. in its Form
10-K for the fiscal year ended December 31, 1988, and herein incorporated by
reference.
(xi) American Standard Inc. Supplemental Compensation Plan for Outside Director; as
amended through September 1993; previously filed as Exhibit (10)(xv) by
American Standard Inc. in its Form 10-K for the year ended December 31, 1993,
and herein incorporated by reference.
(xii) ASI Holding Corporation 1989 Stock Purchase Loan Program; previously filed as
Exhibit 10(i) by the Company in its Form 10-Q for the quarter ended September
30, 1989, and herein incorporated by reference.
(xiii) Corporate Officers Severance Plan adopted in December, 1990, effective April
27, 1991; previously filed as Exhibit 10(xix) by American Standard Inc. in its
Form 10-K for the fiscal year ended December 31, 1990, and herein incorporated
by reference.
(xiv) Estate Preservation Plan adopted by American Standard Inc. in December, 1990;
previously filed as Exhibit (10)(xx) by American Standard Inc. in its Form 10-K
for the fiscal year ended December 31, 1990, and herein incorporated by
reference.
(xv) Amendment adopted in March 1993 to Estate Preservation Plan referred to in
paragraph (10)(xiv) above; previously filed as Exhibit (10)(xix) by American
Standard Inc. in its Form 10-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.
</TABLE>
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<PAGE> 151
<TABLE>
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(xvi) Summary of terms of Unfunded Deferred Compensation Plan adopted December 2,
1993; previously filed as Exhibit (10)(xviii) by American Standard Inc. in its
Form 10-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.
(xvii) Retirement/Consulting Agreement, dated December 28, 1993, between H. Thompson
Smith and American Standard Inc.; previously filed as Exhibit (10)(xix) by
American Standard Inc. in its Form 10-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.
(23) (i) Consent of Ernst & Young LLP.
(ii) Consent of Debevoise & Plimpton, included in the opinion of Debevoise &
Plimpton filed as Exhibit (5).*
(24) Powers of Attorney.
(27) Financial Data Schedule.
</TABLE>
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* To be filed by amendment
<PAGE> 1
CONFORMED COPY
SECOND AMENDMENT dated as of October 21,
1994, to the CREDIT AGREEMENT dated as of June 1,
1993 (as amended through the date hereof, 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 lenders thereunder (together with
the lenders who have become a party to the Credit
Agreement pursuant to this Second Amendment, the
"Lenders"); CHEMICAL BANK, a New York banking
corporation, as administrative agent 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").
ASI, Holding and the Subsidiary Borrowers have requested that
the Credit Agreement be amended as provided in Article II, and the Lenders, the
Administrative Agent, the Managing Agents and the Co-Agents have agreed to the
amendments so provided for upon the terms and subject to the conditions set
forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I. DEFINED TERMS
Capitalized terms used and not otherwise defined herein shall
have the meanings assigned to them in the Credit Agreement.
<PAGE> 2
2
ARTICLE II. AMENDMENTS TO CREDIT AGREEMENT
The Credit Agreement is amended, effective as of the Effective
Date (as defined in Article IV), set forth below:
SECTION 2.01. Amendments to Article I. Section 1.01 of the
Credit Agreement is amended as follows:
(a) The definition of "Applicable Margin" is amended (i) by
the redesignation of clauses (d) and (e) thereof as clauses (f) and (g),
respectively; (ii) by the insertion of the following new clauses (d) and (e)
immediately after clause (c):
"(d) with respect to each Tranche D Term Borrowing (or Loan)
that is a LIBOR Borrowing (or Loan), 3.25% per annum, (e) with respect
to each Tranche D Term Borrowing (or Loan) that is an ABR Borrowing
(or Loan), 2.25% per annum,";
and (iii) by the insertion of "or D Term" immediately after "Tranche A" in the
first proviso.
(b) The definition of "Commitments" is amended by the
insertion of "Tranche D Term Loan Commitment," immediately after "Tranche C
Term Loan Commitment,".
(c) The definition of "Credit Documents" is amended by the
insertion immediately before the period of "or in paragraph (i) of Article IV
of the Second Amendment dated as of October 21, 1994, to this Agreement".
(d) The definition of "Credit Facility" is amended by the
redesignation of clauses (iv) and (v) as clauses (v) and (vi), respectively,
and by the insertion immediately before such redesignated clause (v) of the
following:
"(iv) the Tranche D Term Loan Commitments and the Tranche D Term
Loans;".
(e) The definition of "Equity Prepayment Percentage" is
amended by the insertion of "and Section 2.11A" immediately after "Section
2.11(d)".
(f) The definition of "Excess Cash Flow" is amended by the
insertion of "and Section 2.11A" immediately after "Section 2.11".
<PAGE> 3
3
(g) The definition of "Excess Cash Prepayment Amount" is
amended by the insertion of "and Section 2.11A (but only to the extent of any
related reduction pursuant to Section 2.11(g) of a prepayment and commitment
reduction under Section 2.11(a))" immediately after "Section 2.11(a)".
(h) The definition of "Fees" is amended by the insertion of
"the Tranche D Commitment Fees," immediately after "the Commitment Fees,".
(i) The definition of "Information Memorandum" is amended by
the insertion of "and the Confidential Information Memorandum dated October
1994" immediately after "the Confidential Information Memorandum dated April
1993".
(j) The definition of "Loan" is amended by the insertion of
"a Tranche D Term Loan," immediately after "a Tranche C Term Loan,".
(k) The definition of "Maturity Date" is amended by the
insertion of "the Tranche D Maturity Date," immediately after "the Tranche C
Maturity Date,".
(l) The definition of "Notes" is amended by the insertion of
"the Tranche D Notes," immediately after "the Tranche C Notes,".
(m) The definition of "Term Borrowings" is amended (i) by the
deletion of "and" and the insertion in its place of a comma and (ii) by the
insertion of "and Tranche D Term Borrowings" immediately before the period at
the end thereof.
(n) The definition of "Term Loans" is amended (i) by the
deletion of "and" and the insertion in its place of a comma and (ii) by the
insertion of "and Tranche D Term Loans" immediately before the period at the
end thereof.
(o) The following new definitions are added to Section 1.01
of the Credit Agreement in their proper alphabetical positions:
"Second Amendment Effective Date" shall mean the date on which
the amendments provided for in the Second Amendment dated as of
October 21, 1994, to this Credit Agreement shall have become effective
in accordance with the terms of such Second Amendment.
"Second Amendment Execution Date" shall mean October 21, 1994.
<PAGE> 4
4
"Tranche D Lender" shall mean a Lender with a Tranche D Term
Loan Commitment and/or a Tranche D Term Loan.
"Tranche D Maturity Date" shall mean the last day of February
in the year 2001.
"Tranche D Note" shall mean a promissory note evidencing
Tranche D Term Loans, executed and delivered as provided in Section
2.06 in substantially the form of Exhibit B-7.
"Tranche D Term Borrowing" shall mean a Borrowing comprised of
Tranche D Term Loans.
"Tranche D Commitment Fee" shall have the meaning specified in
Section 2.05(e).
"Tranche D Term Loan" shall mean any loan made by a Lender
pursuant to its Tranche D Term Loan Commitment.
"Tranche D Term Loan Commitment" shall mean, with respect to
any Lender, the commitment (if any) of such Lender to make a loan
pursuant to clause (iv) of Section 2.01(a). Subject to Section 10.04,
the amount of each Lender's Tranche D Term Loan Commitment is the
amount set forth opposite such Lender's name in Schedule II under the
caption "Tranche D Term Loan Commitment", as such amount may be
permanently terminated pursuant to Section 2.10.
(p) The fifth sentence of Section 1.02 is amended (i) by the
insertion of "or in any other Credit Document" immediately after "All
references herein", and (ii) by the insertion of "(including this Agreement)"
immediately after "any agreement or instrument". Each Credit Document is
hereby amended to the extent necessary to give effect to such amendment to
Section 1.02.
SECTION 2.02. Amendments to Article II. Article II of the
Credit Agreement is amended as follows:
(a) Paragraph (a) of Section 2.01 is amended (i) by the
deletion of "and" immediately prior to clause (iii) of the first sentence
thereof; (ii) by the addition of the following new clause immediately before
the period at the end of such clause (iii):
"and (iv) to make a loan to ASI on the Second Amendment Effective
Date, in Dollars, in a principal amount not to exceed such Lender's
Tranche D Term Loan Commitment";
and (iii) by the addition of ", and, in the case of Tranche D Term Loans, on
the Second Amendment Effective Date" immediately after "Tranche B Funding Date"
in the parenthetical in the second sentence thereof.
<PAGE> 5
5
(b) Paragraph (b) of Section 2.02 is amended (i) by the
deletion of "25" in clause (i) of the proviso to the third sentence thereof and
the insertion of "30" in its place; (ii) by the deletion of "or" immediately
before clause (iv) of the third sentence thereof and the insertion in its place
of a comma; and (iii) by the insertion immediately before the period at the end
of such clause (iv) of "or (v) more than four Tranche D Term Borrowings
outstanding hereunder at any time".
(c) Section 2.03 is amended (i) by inserting "or the Second
Amendment Effective Date" immediately after "Effective Date" in the proviso to
the first sentence thereof; (ii) by inserting, immediately before the semicolon
at the end of clause (ii) of the second sentence thereof, "or (in the case of
the Second Amendment Effective Date) a Tranche D Term Borrowing"; and (iii) by
inserting "or Tranche D Term Borrowing" after "or Tranche C Term Borrowing" in
clause (vii) of such sentence.
(d) Section 2.05 is amended by the redesignation of paragraph
(e) as paragraph (f) and the addition of the following new paragraph (e):
"(e) ASI agrees to pay to the Tranche D Lenders, through the
Administrative Agent, on the earlier of the Second Amendment Effective
Date and the date on which the Tranche D Term Loan Commitments shall
be terminated as provided herein, a commitment fee (a "Tranche D
Commitment Fee") of 0.50% per annum on the average daily unused amount
of the aggregate Tranche D Term Loan Commitments during the period
from and including the Second Amendment Execution Date to and
excluding the date of such payment. All Tranche D Commitment Fees
shall be computed on the basis of the actual number of days elapsed in
a year of 360 days."
(e) Section 2.06 is amended by the insertion of the following
new paragraph (c-1) immediately after paragraph (c) thereof:
"(c-1) The Tranche D Term Loans made by each Lender to ASI
shall be evidenced by a single Tranche D Note duly executed on behalf
of ASI, dated the Second Amendment Effective Date, in substantially
the form attached hereto as Exhibit B-7 with the blanks appropriate
filled, payable to the order of such Lender. The outstanding
principal balance of the Tranche D Term Loans, as evidenced by the
Tranche D Notes, shall be payable in 13 semiannual installments,
payable on the last day of February and August of each year,
commencing on February 28, 1995. Subject to
<PAGE> 6
6
paragraph (f) below, such installments shall be in the principal
amount set forth below:
February 1995 $ 5,000,000
August 1995 5,000,000
February 1996 5,000,000
August 1996 5,000,000
February 1997 5,000,000
August 1997 5,000,000
February 1998 12,500,000
August 1998 12,500,000
February 1999 42,500,000
August 1999 42,500,000
February 2000 42,500,000
August 2000 42,500,000
February 2001 100,000,000
In any event, the final such installment shall be payable on the
Tranche D Maturity Date in an amount equal to the remaining unpaid
principal amount of the Tranche D Term Loans. All principal payments
of Tranche D Term Loans shall be accompanied by accrued interest on
the principal amount being repaid to the date of payment."
(f) Paragraph (f) of Section 2.06 is amended by the insertion
of "or 2.11A" immediately after "Section 2.11".
(g) Paragraph (a) of Section 2.10 is amended by the insertion
of the following new sentence immediately after the second sentence thereof:
"The Tranche D Term Loan Commitments shall be automatically
terminated at the Administrative Agent's close of business on the
Second Amendment Effective Date."
(h) Paragraphs (d) and (e) of Section 2.11 are amended by the
deletion of "Term Borrowings" in the first sentence of each such paragraph and
the insertion in place thereof of "Tranche A Term Borrowings, Tranche B Term
Borrowings and Tranche C Term Borrowings".
(i) Section 2.11 is amended by the insertion at the end
thereof of the following new paragraph (g):
"(g) Notwithstanding any other provision of this Section
2.11, so long as any Tranche D Term Borrowing shall remain
outstanding, the aggregate amount of each prepayment of the Tranche A
Term Borrowings, Tranche B Term Borrowings and Tranche C Term
Borrowings and reduction of the Periodic Access Revolving Credit
Commitments that would otherwise occur or be required under paragraph
(a), (d) or (e) of such Section (other than any prepayment of Tranche
A Term Borrowings pursuant to clause (E) of the proviso in such
paragraph (d)) shall be reduced (the amount of
<PAGE> 7
7
such reduction being called the "Reduction Amount") by a percentage
(expressed as a decimal) computed by dividing (i) the aggregate
outstanding principal amount of the Tranche D Term Borrowings by (ii)
the sum of the aggregate outstanding principal amount of all the Term
Borrowings and the aggregate amount of the Periodic Access Loan
Commitments."
(j) The following new Section 2.11A is inserted immediately
after Section 2.11:
"SECTION 2.11A. Prepayment of Tranche D Borrowings. On the
date of each prepayment of Tranche A Term Borrowings, Tranche B Term
Borrowings and Tranche C Term Borrowings and reduction of the Periodic
Access Loan Commitments to which paragraph (g) of Section 2.11
applies, ASI will prepay the Tranche D Term Borrowings in a principal
amount equal to the Reduction Amount referred to in such paragraph
(g). The provisions of paragraph (f) of Section 2.11 shall apply to
any such prepayment of the Tranche D Term Borrowings to the same
extent as if such prepayment had been made under Section 2.11."
SECTION 2.03. Amendments to Article III. Article III of the
Credit Agreement is amended as follows:
(a) Paragraph (a) of Section 3.04 is amended by the insertion
at the end thereof of the following new sentence:
"The proceeds of the Tranche D Term Loans made on the Second
Amendment Effective Date will be applied to redeem all the 14-1/4%
Subordinated Discount Debentures and 12-3/4% Junior Subordinated
Debentures remaining outstanding (and any remaining balance of such
proceeds will be used by ASI for general corporate purposes)."
(b) Section 3.05 is amended by the insertion immediately
after "the 1993 Redemption" of the following:
", the redemption of the 14-1/4% Subordinated Discount Debentures and
the 12-3/4% Junior Subordinated Debentures with the proceeds of the
Tranche D Term Borrowings".
(c) Paragraph (b) of Section 3.08 is amended (i) by the
insertion of "and December 31, 1993" immediately after "December 31, 1992" each
place such date appears and (ii) by the deletion of "year" and the insertion in
its place of "years" each place such word appears.
<PAGE> 8
8
(d) Paragraph (c) of Section 3.08 is amended by the insertion
of the following immediately before the period at the end of the first sentence
thereof:
"(other than the redemption of the 14-1/4% Subordinated
Discount Debentures and the 12-3/4% Junior Subordinated
Debentures with the proceeds of the Tranche D Term
Borrowings)".
SECTION 2.04. Amendments to Article VI. Article VI of the
Credit Agreement is amended as follows:
(a) Clause (b) of the proviso in Section 6.05 is amended (i)
by the insertion of "and Section 2.11A" immediately after "Section 2.11(e)" in
clause (i) thereof, and (ii) by the deletion of "Sections 2.11(a) and 2.11(e)"
in clause (ii) thereof and the insertion in its place of "Sections 2.11(a),
2.11(e) and 2.11A (but only to the extent of any related reduction pursuant to
Section 2.11(g) of a prepayment and commitment reduction under Section 2.11(a)
or (e))".
(b) Section 6.08 is amended (i) by the insertion of "or the
fourth sentence" immediately after "first sentence" in subclause (i) of clause
(b) and (ii) by insertion of "and Section 2.11(A)" at the end of the
parenthetical in subclause (ii) of clause (b) and immediately after "Section
2.11" in subclause (vi) of such clause (b).
(c) The table in Section 6.12 is amended to read as follows:
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
Last Day of Third 1.50:1.00
Fiscal Quarter of ASI0
Last Day of Fourth 2.70:1.00
Fiscal Quarter of ASI
<PAGE> 9
9
1995: Last Day of First 2.60:1.00
Fiscal Quarter of ASI
Last Day of Second 2.40:1.00
Fiscal Quarter of ASI
Last Day of Third 2.20:1.00
Fiscal Quarter of ASI
Last Day of Fourth 2.00:1.00
Fiscal Quarter of ASI
1996: Last Day of First 2.00:1.00
Fiscal Quarter of ASI
Last Day of Second 1.80:1.00
Fiscal Quarter of ASI
Last Day of Third 1.60:1.00
Fiscal Quarter of ASI
Last Day of Fourth 1.40:1.00
Fiscal Quarter of ASI
1997: Last Day of First 1.40:1.00
Fiscal Quarter of ASI
Last Day of Second 1.20:1.00
Fiscal Quarter of ASI
Last Day of Third 1.00:1.00
Fiscal Quarter of ASI
Last Day of Fourth 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
(d) Section 6.16 is amended by the insertion of "and Section
2.11A" immediately after "Section 2.11".
SECTION 2.05. Amendments to Schedules. The Schedules to the
Credit Documents are amended as follows:
(a) Schedule II to the Credit Agreement is amended to read as
set forth in Schedule II to this Second Amendment.
(b) Schedule 3.12(b) is amended to incorporate the addendum
set forth in Schedule 3.12(b) to this Second Amendment. The Lenders
acknowledge that all of the Mortgages relating to the Real Properties
identified as a "Principal Property" on Schedule 3.12(b) shall be mortgaged to
the collateral trustee under the Collateral Trust Agreement.
<PAGE> 10
10
SECTION 2.06. Amendments to Exhibits. The Exhibits to the
Credit Agreement are amended as follows:
(a) The Form of Tranche D Note attached to this Second
Amendment as Exhibit B-7 is added as a new Exhibit B-7 to the Credit Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Each of Holding, ASI and the other Borrowers hereby represents
and warrants (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 and the Administrative Agent that
this Second Amendment (a) has been duly authorized, executed and delivered by
Holding, ASI and each other Borrower or Credit Party and constitutes the legal,
valid and binding obligation of each such person enforceable against it in
accordance with its terms, except as enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforceability of creditors' rights generally and by general
principles of equity, and (b) will not conflict in any respect material to the
rights or interests of the Lenders with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute (with notice or
lapse of time or both) a default under, or result in a required prepayment of,
or (other than as contemplated by the Security Documents) result in the
creation or imposition of (or the obligation to create or impose), any Lien
upon any of the properties or assets of any Credit Party or any of its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust,
agreement or other instrument to which any Credit Party is a party or by which
it or any of its property or assets are bound or to which it may be subject
(other than as disclosed to the Lenders prior to the date hereof under any of
the foregoing relating to Indebtedness to be redeemed not more than 35 days
after the Second Amendment Effective Date). Holding, ASI and each Borrower
represents and acknowledges (a) that ASI is the only "affected Borrower"
(within the meaning of Section 10.10(b) of the Credit Agreement) in respect of
the amendments provided for herein, and (b) that the signatures hereto include
each Subsidiary that is party to any
<PAGE> 11
11
Guarantee Document or Security Document guaranteeing or securing the
Obligations of ASI.
ARTICLE IV. EFFECTIVENESS
The amendments provided for in Article II of this Second
Amendment shall become effective upon the satisfaction, on or prior to November
15, 1994, of each of the following conditions precedent (the date on which such
conditions are satisfied and this Second Amendment becomes effective being
called the "Effective Date").
(a) This Second Amendment shall have been executed and
delivered by the Required Lenders (determined without giving effect to the
amendments effected hereby) and by each of the Tranche D Lenders.
(b) Each Tranche D Lender shall have received a duly executed
Tranche D Note complying with the provisions of Section 2.06.
(c) The Administrative Agent shall have received, on behalf
of the Lenders, legal opinions from each of Debevoise & Plimpton, counsel to
the Credit Parties, Richard Kalaher, Esq., acting general counsel of ASI, and
such other counsel as shall have been requested by the Administrative Agent,
each such opinion to be dated the Second Amendment Effective Date and addressed
to the Administrative Agent and the Lenders, as to such matters as the
Administrative Agent may reasonably request, and the Borrowers hereby instruct
each such counsel to deliver such opinions.
(d) All legal matters incidental to this Second Amendment
shall be satisfactory to the Administrative Agent and to Cravath, Swaine &
Moore, counsel for the Administrative Agent.
(e) The Administrative Agent shall have received, on behalf
of the Lenders, (i) a copy of the certificate of incorporation, including all
amendments thereto, of ASI, certified as of a recent date by the Secretary of
State of the state of its organization; (ii) a certificate as to the good
standing of ASI as of a recent date from such Secretary of State; (iii) a
certificate of the Secretary or Assistant Secretary of ASI dated the Second
Amendment Effective Date and certifying (A) that attached thereto is a true and
complete copy of the by-laws of ASI as in effect on the
<PAGE> 12
12
Second Amendment Effective Date and at all times since a date prior to the date
of the resolutions described in clause (B) below, (B) that attached thereto is
a true and complete copy of resolutions duly adopted by the Board of Directors
of ASI (and, if necessary, resolutions duly adopted by the shareholders of ASI)
authorizing the execution, delivery and performance of this Second Amendment
and the Tranche D Term Borrowings and all related documents, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (C) that the certificate of incorporation of ASI has not been
amended since the date of the last amendment thereto shown on the certificate
furnished pursuant to clause (i) above, and (D) as to the incumbency and
specimen signature of each officer executing any document delivered in
connection herewith on behalf of ASI; (iv) a certificate of another officer as
to the incumbency and specimen signature of the Secretary or Assistant
Secretary executing the certificate pursuant to clause (iii) above; and (v)
such other documents as the Administrative Agent or Cravath, Swaine & Moore,
counsel for the Administrative Agent, may reasonably request.
(f) The Administrative Agent shall have received, on behalf
of the Lenders, an Officer's Certificate of ASI, dated the Second Amendment
Effective Date, confirming compliance with the conditions precedent set forth
in paragraphs (b) and (c) of Section 4.01 of the Credit Agreement insofar as
such conditions precedent relate to ASI and its Subsidiaries.
(g) The Administrative Agent shall have received all Fees and
other amounts due and payable on or prior to the Second Amendment Effective
Date, including reimbursement or payment of all out-of-pocket expenses required
to be reimbursed or paid by ASI hereunder or under any other Credit Document
(to the extent invoices and statements therefor have been received by ASI).
(h) The Security Documents and the Guarantee Documents shall
have been amended to such extent and in such manner (if any) as the
Administrative Agent or the Collateral Agent or Cravath, Swaine & Moore,
counsel for the Collateral Agent, shall have requested as necessary or
advisable to extend the benefits of the Security Documents and the Guarantee
Documents to the Tranche D Lenders (and the Lenders hereby authorize the
Administrative Agent and the Collateral Agent to execute, deliver and file or
cause
<PAGE> 13
13
to be filed all such agreements, instruments and other documents as it shall
deem necessary or advisable to effect such amendment).
(i) ASI shall have made arrangements satisfactory to the
Administrative Agent for the redemption of the 14-1/4% Subordinated Discount
Debentures and the 12-3/4% Junior Subordinated Debentures. Without limiting
the foregoing, (i) notices of the redemption of all the 14-1/4% Subordinated
Discount Debentures and 12-3/4% Junior Subordinated Debentures, such redemption
to be effective on a date (the "Redemption Date") not more than 35 days after
the Second Amendment Effective Date, shall have been duly mailed to the holders
of such Debentures pursuant to each of the Indentures under which such
Debentures were issued or arrangements therefor satisfactory to the
Administrative Agent shall have been made; (ii) arrangements satisfactory to
the Administrative Agent shall have been made for the deposit of proceeds of
the Loans to be made hereunder in an amount equal to the principal and
prepayment premium (if any) of the 14-1/4% Subordinated Discount Debentures and
the 12-3/4% Junior Subordinated Debentures on the Second Amendment Effective
Date pursuant to an escrow agreement in substantially the form of Exhibit X to
the Credit Agreement (with such modifications as ASI and the Administrative
Agent shall agree to be appropriate); and (iii) no event or circumstance shall
exist that in the judgment of the Administrative Agent or the Lenders could
prevent the effective redemption of the 14-1/4% Subordinated Discount
Debentures or the 12-3/4% Junior Subordinated Debentures on the Redemption Date
as contemplated above.
(j) ASI shall have taken all actions, if any, necessary to
designate its liabilities in respect of the Tranche D Term Borrowings as senior
indebtedness for purposes of the subordination provisions of its subordinated
indebtedness and the Tranche D Term Borrowings shall constitute senior
indebtedness for such purposes.
ARTICLE V. MISCELLANEOUS
SECTION 5.01. APPLICABLE LAW. THIS SECOND AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 5.02. Expenses. ASI shall pay all reasonable out-of-
pocket expenses incurred by the Admin-
<PAGE> 14
14
istrative Agent in connection with the preparation, negotiation, execution,
delivery and enforcement of this Second Amendment, including, but not limited
to, the reasonable fees, charges and disbursements of Cravath, Swaine & Moore,
counsel for the Administrative Agent. The agreement set forth in this Section
5.02 shall survive the termination of this Second Amendment and the Credit
Agreement.
SECTION 5.03. Severability. In the event any one or more of the
provisions contained in this Second Amendment shall 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
release 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 5.04. Counterparts. This Second Amendment 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 5.05. Credit Agreement, The amendments provided for herein
shall apply and be effective only with respect to the provisions of the Credit
Agreement specifically referred to herein. Each financial institution which is
executing this Second Amendment as a Lender and which is not already a Lender
under the Credit Agreement shall, upon the Effective Date, become a Lender
under the Credit Agreement to the same extent as if it were a signatory
thereto. Except as expressly 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 "Credit Agreement", "Agreement",
"herein", "hereinafter", "hereunder" "hereto" and words of similar import shall
mean, on and after the Second Amendment Effective Date, the Credit Agreement as
amended by this Second Amendment.
<PAGE> 15
15
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment 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. Allardyce
Title: Vice President
ASI HOLDING CORPORATION,
by
/s/ Fred A. Allardyce
---------------------------
Name: Fred A. Allardyce
Title: Vice President
BORROWERS:
AMERICAN STANDARD INC.,
by
/s/ Fred A. Allardyce
---------------------------
Name: Fred A. Allardyce
Title: Vice President
AMERICAN STANDARD CREDIT INC.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
WABCO STANDARD GMBH,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title:
<PAGE> 16
16
AMERICAN STANDARD (UK) LTD.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title:
STANDARD EUROPE, a European
Economic Interest Grouping,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title:
WABCO STANDARD TRANE INC.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title:
WABCO STANDARD TRANE B.V.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title:
ADMINISTRATIVE AGENT:
CHEMICAL BANK, individually
and as the Administrative
Agent and as Collateral
Agent,
by
/s/ Robert K. Gaynor
---------------------------
Name: Robert K. Gaynor
Title: Vice President
<PAGE> 17
17
MANAGING AGENTS:
THE BANK OF NOVA SCOTIA,
by
/s/ J. Alan Edwards
Name: J. Alan Edwards
---------------------------
Title: Authorized Signatory
BANKERS TRUST COMPANY,
by
/s/ Mary Kay Coyle
---------------------------
Name: Mary Kay Coyle
Title: Vice President
THE CHASE MANHATTAN BANK,
N.A.,
by
/s/ Richard Bonomo
---------------------------
Name: Richard Bonomo
Title: Vice President
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLAND BRANCH,
by
/s/ Christopher S. Hall
---------------------------
Name: Christopher S. Hall
Title: Vice President
by
/s/ Robert A. Maddux
---------------------------
Name: Robert A. Maddux
Title: Director
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., NEW YORK BRANCH,
by
/s/ Rene LeBlanc
Name: Rene LeBlanc
---------------------------
Title: Deputy General Manager
<PAGE> 18
18
NATIONSBANK OF NORTH CAROLINA,
N.A.,
by
/s/ Christopher C. Browder
---------------------------
Name: Christopher C. Browder
Title: Vice President
CO-AGENTS:
BANQUE PARIBAS,
by
/s/ David C. Buseck
---------------------------
Name: David C. Buseck
Title: Vice President
by
/s/ M. S. Alexander
---------------------------
Name: M. S. Alexander
Title: Managing Director
CITIBANK, N.A.,
by
/s/ Prakash Chonkar
---------------------------
Name: Prankash 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 Edward
---------------------------
Name: Marcus Edward
Title: Vice President
<PAGE> 19
19
LENDERS:
BANCA COMMERCIALE ITALIANA,
NEW YORK BRANCH,
by
/s/ Charles Dougherty
---------------------------
Name: Charles Dougherty
Title: Vice President
by
/s/ Sara Kim
---------------------------
Name: Sara Kim
Title: Assistant Vice
President
BANK OF AMERICA, NATIONAL
TRUST AND SAVINGS
ASSOCIATION,
by
/s/ L. Dustin Vincent, III
-----------------------------
Name: L. Dustin Vincent, III
Title: Vice President
THE BANK OF NEW YORK,
by
/s/ Gianni W. Sellers
---------------------------
Name: Gianni W. Sellers
Title: Vice President
BANQUE INDOSUEZ,
by
/s/ John L. Sabre
---------------------------
Name: John L. Sabre
Title: First Vice
President
/s/ Gwendy Feldman
---------------------------
Name: Gwendy Feldman
Title: First Vice
President
<PAGE> 20
20
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS, B.V.,
by CHANCELLOR SENIOR SECURED
MANAGEMENT, INC., as Portfolio
Advisor,
by
/s/ Christopher A. Bondy
---------------------------
Name: Christopher A. Bondy
Title: Vice President
CREDITO ITALIANO - NEW YORK BRANCH,
by
---------------------------
Name:
Title:
by
---------------------------
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
by
/s/ Frederick Haddad
---------------------------
Name: Frederick Haddad
Title: Senior Vice President
CREDIT SUISSE,
by
/s/ Andrea Shkane
---------------------------
Name: Andrea Shkane
Title: Associate
/s/ Jay Chall
---------------------------
Name: Jay Chall
Title: Member of Senior
Managment
<PAGE> 21
21
CRESCENT CAPITAL CORP.,
as Portfolio Manager
and as Attorney-in-Fact
for Crescent/Mach I, L.P.,
by
/s/ Mark L. Gold
---------------------------
Name: Mark L. Gold
Title: Managing Director
PRIME INCOME TRUST,
by
/s/ Rafael Scolari
---------------------------
Name: Rafael Scolari
Title: Investment Manager
DRESDNER BANK, AG,
by
---------------------------
Name:
Title:
by
---------------------------
Name:
Title:
EATON VANCE PRIME RATE
RESERVES,
by
/s/ Barbara Campbell
---------------------------
Name: Barbara Campbell
Title: Assistant Treasurer
THE FUJI BANK, LIMITED,
by
---------------------------
Name:
Title:
<PAGE> 22
22
HELLER FINANCIAL,
by
/s/ James Young
---------------------------
Name: James Young
Title: Vice President
THE HOKKAIDO TAKUSHOKU BANK,
LTD. - NEW YORK BRANCH,
by
/s/ Hitoshi Sato
--------------------------
Name: Hitoshi Sato
Title: Senior Vice President
KEYPORT LIFE INSURANCE COMPANY,
by CHANCELLOR SENIOR SECURED
MANAGEMENT, as Portfolio Advisor,
by
/s/ Chrisopher A. Bondy
---------------------------
Name: Christopher A. Bondy
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
<PAGE> 23
23
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.,
by
/s/ John R. Lennon
---------------------------
Name: John R. Lennon
Title: Authorized Signatory
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
by
/s/ Eugene O'Neill
---------------------------
Name: Eugene O'Neill
Title: Vice President
ORIX USA CORPORATION,
by
---------------------------
Name:
Title:
PEARL STREET L.P.,
by
/s/ John Urban
---------------------------
Name: John Urban
Title: Authorized Signatory
PILGRIM PRIME RATE TRUST,
by
/s/ Michael D. Hatley
---------------------------
Name: Michael D. Hatley
Title: Assistant Portfolio
Manager
<PAGE> 24
24
PROSPECT STREET SENIOR
PORTFOLIO, L.P.,
by PROSPECT STREET SENIOR
LOAN CORP., Managing
General Partner,
by
/s/ Dana E. Erikson
---------------------------
Name: Dana E. Erikson
Title: Vice President
PROTECTIVE LIFE INSURANCE
COMPANY, INC.,
by
/s/ Mark K. Okada
---------------------------
Name: Mark K. Okada
Title: Principal
THE SAKURA BANK, LTD.,
by
/s/ Hiroshi Shimazaki
---------------------------
Name: Hiroshi Shimazaki
Title: Senior Vice President
and Manager
SENIOR HIGH INCOME PORTFOLIO, INC.,
by
/s/ John R. Lennon
---------------------------
Name: John R. Lennon
Title: Authorized Signatory
SOCIETE GENERALE,
by
---------------------------
Name:
Title:
<PAGE> 25
25
STICHTING RESTRUCTURED
OBLIGATIONS BACKED BY SENIOR
ASSETS 2 (ROSA 2),
by CHANCELLOR SENIOR SECURED
MANAGEMENT, INC., as Portfolio
Advisor,
by
/s/ Christopher A. Bondy
---------------------------
Name: Christopher A. Bondy
Title: Vice President
MERRILL LYNCH PRIME RATE
PORTFOLIO,
by MERRILL LYNCH ASSET
MANAGEMENT, L.P., as
Investment Advisor,
by
/s/ John R. Lennon
---------------------------
Name: John R. Lennon
Title: Authorized Signatory
SENIOR HIGH INCOME PORTFOLIO
II, INC.,
by
/s/ John R. Lennon
---------------------------
Name: John R. Lennon
Title: Authorized Signatory
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH,
by
---------------------------
Name:
Title:
<PAGE> 26
26
THE SUMITOMO TRUST & BANKING CO.,
LTD. - NEW YORK BRANCH,
by
/s/ Suraj P. Bhatia
---------------------------
Name: Suraj P. Bhatia
Title: Senior Vice President
Manager, Corporate
Finance II Department
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 and
Portfolio Manager
THE TRAVELERS INSURANCE
COMPANY,
by
/s/ Allen R. Cantrell
---------------------------
Name: Allen R. Cantrell
Title: Investment Officer
FALCON 94, LIMITED,
by
/s/ John C. R. Collis
---------------------------
Name: John C. R. Collis
Title: Director
<PAGE> 27
27
THE LONG-TERM CREDIT BANK OF
JAPAN (DEUTSCHLAND) AG,
by
/s/ D. Schroeter
---------------------------
Name: D. Schroeter
Title: Member of the
Board of Managing
Directors
by
/s/ Dr. P. Rudolph
---------------------------
Name: Dr. P. Rudolph
Title: Vice President
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY,
by
/s/ A. Kipp Koester
---------------------------
Name: A. Kipp Koester
Title: Vice President
STRATA FUNDING LTD.,
by CHANCELLOR SENIOR SECURED
MANAGEMENT, INC., as Financial
Manager,
by
/s/ Christopher A. Bondy
---------------------------
Name: Christopher A. Bondy
Title: Vice President
<PAGE> 28
28
The undersigned Credit Parties
hereby agree to Section 2.01(p) above insofar
as it affects the respective
Credit Documents to which they
are party.
A.L. RAND INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
AMERICAN RADIATOR & STANDARD
SANITARY CORPORATION,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
AMERICAN STANDARD CREDIT INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
AMERICAN STANDARD
INTERNATIONAL INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
<PAGE> 29
29
AMERICAN STANDARD TRANE, LTD.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
AMSTAN CORPORATION,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
AMSTAN INTERNATIONAL LTD.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
AMSTAN TRUCKING INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
A-S ENERGY, INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
CAG INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
<PAGE> 30
30
CARDWELL WESTINGHOUSE COMPANY,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
COMPROMISE HOLDINGS, CORP.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
CURTIS ALCORN CORP.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
DFM CORPORATION,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
DOMINO DOPANT INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
FLUID POWER INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
<PAGE> 31
31
FWJ INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
IDEAL-STANDARD INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
IT HOLDINGS INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
IAS INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
IVES REP, INC.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frderick W. Jaqua
Title: Vice President
LOCUS COERULEUS, CORP.,
by
/s/ Frederick W. Jaqua
---------------------------
Name: Frederick W. Jaqua
Title: Vice President
<PAGE> 32
32
M.C. CAPSULE INC.,
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
MCDERMOTT SIZING CORP.,
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
MONGRUE & SONS, INC.
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
MWM CORPORATION,
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
NETHER HOLDINGS INC.,
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
REEFCO INC.,
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
<PAGE> 33
33
PAMMEL CREEK CORP.,
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
S.S. FROSCA & CO.,
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
SAU CORP.,
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
STANDARD COMPRESSORS INC.,
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
STANDARD SANITARY
MANUFACTURING COMPANY,
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
THE HERMANN SAFE COMPANY,
by
/s/ Israel A. Stein
---------------------------
Name: Israel A. Stein
Title: Vice President
<PAGE> 34
34
THE TRANE COMPANY (DEL.),
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
THE TRANE COMPANY (NEVADA),
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
TRANE EXPORT, INC.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
TRANE HELLAS, INC.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
TOENSING CHART SUPPLY, INC.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
TWITTY & CO.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
<PAGE> 35
35
U.S. RAILWAY INC.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
UNIVERSAL RAILWAY DEVICES
COMPANY,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
WABCO AUTOMOTIVE CONTROL
SYSTEMS INC.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: Vice President
WABCO COMPANY,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
WABCO STANDARD EXPORT LTD.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: Vice President
<PAGE> 36
36
WABCO WESTINGHOUSE CIS
HOLDINGS INC.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
WESTINGHOUSE AIR BRAKE
INTERNATIONAL CORPORATION,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
WORLD STANDARD LTD.,
by
/s/ Richard A. Kalaher
---------------------------
Name: Richard A. Kalaher
Title: President
ASI HOLDING CORPORATION,
by
/s/ Fred A. Allardyce
---------------------------
Name: Fred A. Allardyce
Title: Vice President
<PAGE> 37
EXHIBIT B-7
FORM OF TRANCHE D NOTE
New York, New York
October 21, 1994
FOR VALUE RECEIVED, the undersigned, AMERICAN STANDARD INC., a
Delaware corporation (the "Borrower"), hereby promises to pay to [the order of]
[NAME OF LENDER] [or registered assigns] (the "Lender"), at the office of
Chemical Bank (the "Administrative Agent"), at 270 Park Avenue, New York, New
York 10017 or such other place as the Administrative Agent shall have
specified, on the Tranche D Maturity Date (as defined in the Credit Agreement
referred to below), the aggregate unpaid principal amount of all Tranche D Term
Loans made by the Lender to the Borrower pursuant to the Credit Agreement, in
Dollars, in same day funds, and to pay interest from the date hereof on such
principal amount from time to time outstanding, in like funds, at said office,
at a rate or rates per annum and payable on such dates as determined pursuant
to the Credit Agreement. This Note is one of the Tranche D Notes referred to
in the Credit Agreement dated as of June 1, 1993, as amended (as so amended and
as amended, modified, extended or restated from time to time after the date
hereof, the "Credit Agreement"), among ASI Holding Corporation, American
Standard Inc., certain subsidiaries of American Standard Inc., the Lenders,
Managers and Co-Agents named therein, and Chemical Bank, as Administrative
Agent and Arranger. This Note is entitled to the benefits under the Credit
Agreement and is secured as provided therein. Capitalized terms used in this
Note and not defined herein are used as defined in the Credit Agreement.
The Borrower promises to pay interest, on demand, on any
overdue principal and, to the extent permitted by law, overdue interest from
their due dates at a rate or rates determined as set forth in the Credit
Agreement.
The Borrower hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The nonexercise by the holder of
any of its rights hereunder in any particular instance shall not constitute a
waiver thereof in that or any subsequent instance.
All borrowings evidenced by this Note and all payments and
prepayments of the principal hereof and
<PAGE> 38
2
interest hereon and the respective dates thereof shall be endorsed by the
holder hereof on the schedule attached hereto and made a part hereof, or on a
continuation thereof which shall be attached hereto and made a part hereof, or
otherwise recorded by such holder in its internal records; provided, however,
that any failure of the holder hereof to make such a notation or any error in
such notation shall not in any manner affect the obligation of the Borrower to
make payments of principal and interest in accordance with the terms of this
Note and the Credit Agreement.
The Credit Agreement, among other things, contains provisions
for the acceleration of the maturity hereof upon the happening of certain
events, for optional and mandatory prepayment of the principal hereof prior to
the maturity hereof and for the amendment or waiver of certain provisions of
the Credit Agreement, all upon the terms and conditions therein specified.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK OF THE UNITED STATES OF AMERICA.
AMERICAN STANDARD INC.,
by
------------------------
Title:
<PAGE> 39
SCHEDULE II
TO THE
CREDIT AGREEMENT
Lenders and Commitments
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B TRANCHE C TRANCHE D
TERM LOAN TERM LOAN TERM LOAN TERM LOAN
LENDER COMMITMENT COMMITMENT COMMITMENT COMMITMENT
<S> <C> <C> <C> <C>
1. Chemical Bank $0.00 $1,129,321.15 $8,217,915.54 $20,000,000.00
2. The Bank of Nova Scotia 0.00 10,811,588.25 3,130,008.44 0.00
3. Bankers Trust Company 0.00 10,811,588.25 3,130,008.44 0.00
4. Banque Paribas 0.00 0.00 0.00 20,000,000.00
5. The Chase Manhattan Bank, N.A. 0.00 10,811,588.25 0.00 12,500,000.00
6. Citibank, N.A. 0.00 7,290,763.85 0.00 20,000,000.00
7. Deutsche Bank AG 0.00 0.00 0.00 0.00
8. The Long-Term Credit Bank of
Japan, Ltd., New York Branch 0.00 6,498,578.36 3,130,008.44 12,500,000.00
9. NationsBank of North Carolina,
N.A. 0.00 10,811,588.25 0.00 20,000,000.00
10. Compagnie Financiere de CIC
et de L'Union Europeene-
New York Branch 0.00 9,009,655.85 2,608,343.38 20,000,000.00
11. Merrill Lynch Prime Fund, Inc. 24,694,259.73 0.00 0.00 35,000,000.00
12. Merrill Lynch Prime Rate
Portfolio 14,877,703.89 0.00 0.00 0.00
13. Senior High Income Portfolio,
Inc. 9,877,703.89 0.00 0.00 0.00
14. Senior High Income Portfolio,
Inc. II 9,877,703.89 0.00 0.00 0.00
15. Bank of America, National Trust
and Savings Association 0.00 0.00 0.00 0.00
16. Prime Income Trust 0.00 0.00 0.00 10,000,000.00
17. Heller Financial 19,755,407.78 0.00 0.00 15,000,000.00
</TABLE>
<TABLE>
<CAPTION>
PERIODIC REVOLVING
ACCESS LOAN CREDIT
LENDER COMMITMENT COMMITMENT
<S> <C> <C>
1. Chemical Bank $316,492.02 $9,125,986.78
2. The Bank of Nova Scotia 12,789,771.58 18,793,986.78
3. Bankers Trust Company 8,472,097.88 9,125,986.78
4. Banque Paribas 7,789,771.58 13,793,986.78
5. The Chase Manhattan Bank, N.A. 12,789,771.58 18,793,986.78
6. Citibank, N.A. 12,789,771.58 18,793,986.78
7. Deutsche Bank AG 8,740,294.18 12,843,464.18
8. The Long-Term Credit Bank of
Japan, Ltd., New York Branch 12,789,771.58 18,793,986.78
9. NationsBank of North Carolina,
N.A. 12,789,771.58 18,793,986.78
10. Compagnie Financiere de CIC
et de L'Union Europeene-
New York Branch 10,658,142.61 15,661,655.33
11. Merrill Lynch Prime Fund, Inc. 0.00 0.00
12. Merrill Lynch Prime Rate
Portfolio 0.00 0.00
13. Senior High Income Portfolio,
Inc. 0.00 0.00
14. Senior High Income Portfolio,
Inc. II 0.00 0.00
15. Bank of America, National Trust
and Savings Association 10,628,119.98 15,617,538.31
16. Prime Income Trust 0.00 0.00
17. Heller Financial 0.00 0.00
</TABLE>
<PAGE> 40
2
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B TRANCHE C TRANCHE D
TERM LOAN TERM LOAN TERM LOAN TERM LOAN
LENDER COMMITMENT COMMITMENT COMMITMENT COMMITMENT
<S> <C> <C> <C> <C>
18. The Sakura Bank, Ltd. 0.00 15,403,606.75 4,108,957.77 5,000,000.00
19. Credit Lyonnais New York Branch 0.00 0.00 0.00 0.00
20. Pilgrim Prime Rate Trust 0.00 0.00 0.00 25,000,000.00
21. Societe Generale 0.00 0.00 0.00 0.00
22. The Sumitomo Bank, Limited, New
York Branch 0.00 0.00 0.00 0.00
23. Van Kampen Merritt Prime Rate
Income Trust 32,102,537.64 0.00 0.00 35,000,000.00
24. Eaton Vance Prime Rate Reserves 14,816,555.84 0.00 0.00 10,000,000.00
25. Prospect Street Senior Loan
Management Co., Inc. 0.00 0.00 10,683,290.21 0.00
26. Protective Life Insurance
Company 0.00 0.00 0.00 15,000,000.00
27. United States National Bank
of Oregon 0.00 0.00 12,326,873.31 0.00
28. Credito Italiano-New York Branch 0.00 0.00 0.00 0.00
29. The Hokkaido Takushoku Bank,
Ltd.-New York Branch 0.00 0.00 8,217,915.54 0.00
30. The Sumitomo Trust & Banking
Co., Ltd.-New York Branch 0.00 0.00 8,217,915.54 10,000,000.00
31. ORIX USA Corporation 4,938,851.95 0.00 0.00 0.00
32. Banca Commerciale Italiana 0.00 0.00 0.00 0.00
33. Crescent Capital Corp. 12,347,129.86 0.00 0.00 0.00
34. Falcon 94, Limited 10,000,000.00 0.00 0.00 0.00
35. ROSA 38,523,045.17 0.00 0.00 0.00
36. ROSA II 10,865,474.28 0.00 0.00 0.00
</TABLE>
<TABLE>
<CAPTION>
PERIODIC REVOLVING
ACCESS LOAN CREDIT
LENDER COMMITMENT COMMITMENT
<S> <C> <C>
18. The Sakura Bank, Ltd. 0.00 0.00
19. Credit Lyonnais New York Branch 8,856,765.37 13,014,616.87
20. Pilgrim Prime Rate Trust 0.00 0.00
21. Societe Generale 8,856,765.32 13,014,616.87
22. The Sumitomo Bank, Limited, New
York Branch 11,513,796.53 4,834,000.00
23. Van Kampen Merritt Prime Rate
Income Trust 0.00 0.00
24. Eaton Vance Prime Rate Reserves 0.00 0.00
25. Prospect Street Senior Loan
Management Co., Inc. 0.00 0.00
26. Protective Life Insurance
Company 0.00 0.00
27. United States National Bank
of Oregon 0.00 0.00
28. Credito Italiano-New York Branch 3,542,706.91 5,205,845.78
29. The Hokkaido Takushoku Bank,
Ltd.-New York Branch 0.00 0.00
30. The Sumitomo Trust & Banking
Co., Ltd.-New York Branch 0.00 0.00
31. ORIX USA Corporation 0.00 0.00
32. Banca Commerciale Italiana 3,542,706.91 5,205,845.78
33. Crescent Capital Corp. 0.00 0.00
34. Falcon 94, Limited 0.00 0.00
35. ROSA 0.00 0.00
36. ROSA II 0.00 0.00
</TABLE>
<PAGE> 41
3
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B TRANCHE C TRANCHE D
TERM LOAN TERM LOAN TERM LOAN TERM LOAN
LENDER COMMITMENT COMMITMENT COMMITMENT COMMITMENT
<S> <C> <C> <C> <C>
37. Senior Strategic Income Fund,
Inc. 4,938,851.95 0.00 0.00 0.00
38. Strata Funding Limited 9,694,259.73 0.00 0.00 0.00
39. The Travelers Insurance Company 4,938,851.95 0.00 12,147,901.90 20,000,000.00
40. Dresdner Bank AG 0.00 3,520,824.41 0.00 0.00
41. The Fuji Bank Limited 0.00 6,161,442.70 0.00 0.00
42. Lehman Commercial Paper Inc. 0.00 26,655,298.06 0.00 0.00
43. Keyport Life Insurance Company 0.00 0.00 6,260,016.90 0.00
44. The Bank of New York 0.00 0.00 0.00 0.00
45. Banque Indosuez 0.00 0.00 0.00 0.00
46. Mitsubishi Trust and Banking 0.00 0.00 0.00 0.00
47. Morgan Guaranty Trust Co. 0.00 0.00 0.00 0.00
48. Pearl Street, L.P. 0.00 0.00 0.00 0.00
49. The Long-Term Credit Bank of
Japan (Deutschland) AG 0.00 4,313,009.89 0.00 0.00
50. Credit Suisse 0.00 0.00 0.00 10,000,000.00
51. Northwestern Mutual Life
Insurance 0.00 0.00 0.00 10,000,000.00
--------------- --------------- --------------- ---------------
Total $222,248,337.55 $123,228,854.02 $82,179,155.41 $325,000,000.00
</TABLE>
<TABLE>
<CAPTION>
PERIODIC REVOLVING
ACCESS LOAN CREDIT
LENDER COMMITMENT COMMITMENT
<S> <C> <C>
37. Senior Strategic Income Fund,
Inc. 0.00 0.00
38. Strata Funding Limited 0.00 0.00
39. The Travelers Insurance Company 0.00 0.00
40. Dresdner Bank AG 0.00 0.00
41. The Fuji Bank Limited 0.00 0.00
42. Lehman Commercial Paper Inc. 0.00 0.00
43. Keyport Life Insurance Company 0.00 0.00
44. The Bank of New York 4,317,673.70 9,668,000.00
45. Banque Indosuez 3,837,932.17 4,834,000.00
46. Mitsubishi Trust and Banking 8,635,347.40 4,834,000.00
47. Morgan Guaranty Trust Co. 4,049,477.40 5,950,522.60
48. Pearl Street, L.P. 5,000,000.00 5,000,000.00
49. The Long-Term Credit Bank of
Japan (Deutschland) AG 0.00 0.00
50. Credit Suisse 0.00 0.00
51. Northwestern Mutual Life
Insurance 0.00 0.00
--------------- ---------------
Total $172,706,947.91 $241,699,999.96
</TABLE>
<PAGE> 42
Addendum
to
Schedule 3.12(b)
The "Principal Properties" of ASI and Restricted Subsidiaries which
are subject to mortgages in favor of the collateral trustee under the
Collateral Trust Agreement are the facilities of ASI located as set forth
below:
1. South Zero Street, Fort Smith AR
2. 101 Williams, Pueblo CO
3. 7610 Industrial Way, Macon GA
4. 1500 Mercer Road, Lexington KY
5. 1541 South 7th Street, Louisville KY
6. Highway 23 South, Paintsville KY
7. 2231 East State Street, Trenton NJ
8. 240 Princeton Avenue, Trenton NJ
9. 4500 Morris Field Drive, Charlotte NC
10. 605 South Ellsworth Avenue, Salem OH
11. 324 Fourth Avenue, Tiffin OH
12. Clarksville, TN
13. 6200 Troup Highway, Tyler TX
14. La Crosse WI
<PAGE> 1
EXHIBIT 23(i)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 14, 1994 in the Registration Statement (Form
S-2, No. 33- ) and related Prospectus of American Standard Companies Inc. for
the registration of 15,525,000 shares of its common stock.
We also consent to the use of our report dated March 14, 1994 with respect to
the financial schedules of American Standard Companies Inc. for the years ended
December 31, 1992 and 1993 in the Registration Statement.
ERNST & YOUNG LLP
New York, New York
November 9, 1994
<PAGE> 1
POWER OF ATTORNEY
The undersigned, a Director of American Standard Companies Inc.
(formerly named ASI Holding Corporation), a Delaware corporation (the
"Corporation"), does hereby constitute and appoint Frederick W. Jaqua, Richard
A. Kalaher and Israel Stein, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution, to execute and
deliver in his name and on his behalf:
(a) one or more Registration Statements of the Corporation on an
appropriate form proposed to be filed with the Securities and Exchange
Commission (the "SEC") for the purpose of registering under the Securities
Act of 1933, as amended (the "Securities Act"), up to 17,000,000 shares of
the Corporation's Common Stock, par value $.01 per share (and associated
Common Stock Rights) (the "Shares"), such Shares to be issued from time to
time on terms to be established in each case by or pursuant to a
resolution of the Board of Directors of the Corporation or any duly
authorized committee thereof; and
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement or
Statements;
and any and all other documents and instruments in connection with the issuance
of the Shares which such attorneys-in-fact and agents, or any one of them, deem
necessary or advisable to enable the Corporation to comply with (a) the
Securities Act and the other federal securities laws of the United States of
America (including, without limitation, the Securities Exchange Act of 1934)
and the rules, regulations and requirements of the SEC in respect of any
thereof, (b) the securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America, (c) the rules and regulations of
the New York Stock Exchange or any other national or foreign securities
exchange or authorized interdealer quotation system, (d) the requirements of
the National Association of Securities Dealers, Inc. and (e) the securities
laws of any foreign jurisdiction, including, without limitation, Canada; and
the undersigned does hereby ratify and confirm as his own acts and deeds all
that such attorneys-in-fact and agents, and each of them, shall do or cause to
be done by virtue hereof.
<PAGE> 2
Each one of such attorneys-in-fact and agents shall have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this
power of attorney this 28th day of October, 1994.
/s/ STEVEN E. ANDERSON
--------------------------
Name: Steven E. Anderson
Title: Director
2
<PAGE> 3
POWER OF ATTORNEY
The undersigned, a Director of American Standard Companies Inc.
(formerly named ASI Holding Corporation), a Delaware corporation (the
"Corporation"), does hereby constitute and appoint Frederick W. Jaqua, Richard
A. Kalaher and Israel Stein, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution, to execute and
deliver in his name and on his behalf:
(a) one or more Registration Statements of the Corporation on an
appropriate form proposed to be filed with the Securities and Exchange
Commission (the "SEC") for the purpose of registering under the Securities
Act of 1933, as amended (the "Securities Act"), up to 17,000,000 shares of
the Corporation's Common Stock, par value $.01 per share (and associated
Common Stock Rights) (the "Shares"), such Shares to be issued from time to
time on terms to be established in each case by or pursuant to a
resolution of the Board of Directors of the Corporation or any duly
authorized committee thereof; and
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement or
Statements;
and any and all other documents and instruments in connection with the issuance
of the Shares which such attorneys-in-fact and agents, or any one of them, deem
necessary or advisable to enable the Corporation to comply with (a) the
Securities Act and the other federal securities laws of the United States of
America (including, without limitation, the Securities Exchange Act of 1934)
and the rules, regulations and requirements of the SEC in respect of any
thereof, (b) the securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America, (c) the rules and regulations of
the New York Stock Exchange or any other national or foreign securities
exchange or authorized interdealer quotation system, (d) the requirements of
the National Association of Securities Dealers, Inc. and (e) the securities
laws of any foreign jurisdiction, including, without limitation, Canada; and
the undersigned does hereby ratify and confirm as his own acts and deeds all
that such attorneys-in-fact and agents, and each of them, shall do or cause to
be done by virtue hereof.
<PAGE> 4
Each one of such attorneys-in-fact and agents shall have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this
power of attorney this 2nd day of November, 1994.
/s/ HORST HINRICHS
--------------------------
Name: Horst Hinrichs
Title: Director
2
<PAGE> 5
POWER OF ATTORNEY
The undersigned, a Director of American Standard Companies Inc.
(formerly named ASI Holding Corporation), a Delaware corporation (the
"Corporation"), does hereby constitute and appoint Frederick W. Jaqua, Richard
A. Kalaher and Israel Stein, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution, to execute and
deliver in his name and on his behalf:
(a) one or more Registration Statements of the Corporation on an
appropriate form proposed to be filed with the Securities and Exchange
Commission (the "SEC") for the purpose of registering under the Securities
Act of 1933, as amended (the "Securities Act"), up to 17,000,000 shares of
the Corporation's Common Stock, par value $.01 per share (and associated
Common Stock Rights) (the "Shares"), such Shares to be issued from time to
time on terms to be established in each case by or pursuant to a
resolution of the Board of Directors of the Corporation or any duly
authorized committee thereof; and
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement or
Statements;
and any and all other documents and instruments in connection with the issuance
of the Shares which such attorneys-in-fact and agents, or any one of them, deem
necessary or advisable to enable the Corporation to comply with (a) the
Securities Act and the other federal securities laws of the United States of
America (including, without limitation, the Securities Exchange Act of 1934)
and the rules, regulations and requirements of the SEC in respect of any
thereof, (b) the securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America, (c) the rules and regulations of
the New York Stock Exchange or any other national or foreign securities
exchange or authorized interdealer quotation system, (d) the requirements of
the National Association of Securities Dealers, Inc. and (e) the securities
laws of any foreign jurisdiction, including, without limitation, Canada; and
the undersigned does hereby ratify and confirm as his own acts and deeds all
that such attorneys-in-fact and agents, and each of them, shall do or cause to
be done by virtue hereof.
<PAGE> 6
Each one of such attorneys-in-fact and agents shall have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this
power of attorney this 5th day of November, 1994.
/s/ GEORGE H. KERCKHOVE
---------------------------
Name: George H. Kerckhove
Title: Director
2
<PAGE> 7
POWER OF ATTORNEY
The undersigned, a Director of American Standard Companies Inc.
(formerly named ASI Holding Corporation), a Delaware corporation (the
"Corporation"), does hereby constitute and appoint Frederick W. Jaqua, Richard
A. Kalaher and Israel Stein, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution, to execute and
deliver in his name and on his behalf:
(a) one or more Registration Statements of the Corporation on an
appropriate form proposed to be filed with the Securities and Exchange
Commission (the "SEC") for the purpose of registering under the Securities
Act of 1933, as amended (the "Securities Act"), up to 17,000,000 shares of
the Corporation's Common Stock, par value $.01 per share (and associated
Common Stock Rights) (the "Shares"), such Shares to be issued from time to
time on terms to be established in each case by or pursuant to a
resolution of the Board of Directors of the Corporation or any duly
authorized committee thereof; and
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement or
Statements;
and any and all other documents and instruments in connection with the issuance
of the Shares which such attorneys-in-fact and agents, or any one of them, deem
necessary or advisable to enable the Corporation to comply with (a) the
Securities Act and the other federal securities laws of the United States of
America (including, without limitation, the Securities Exchange Act of 1934)
and the rules, regulations and requirements of the SEC in respect of any
thereof, (b) the securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America, (c) the rules and regulations of
the New York Stock Exchange or any other national or foreign securities
exchange or authorized interdealer quotation system, (d) the requirements of
the National Association of Securities Dealers, Inc. and (e) the securities
laws of any foreign jurisdiction, including, without limitation, Canada; and
the undersigned does hereby ratify and confirm as his own acts and deeds all
that such attorneys-in-fact and agents, and each of them, shall do or cause to
be done by virtue hereof.
<PAGE> 8
Each one of such attorneys-in-fact and agents shall have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this
power of attorney this 9th day of November, 1994.
/s/ SHIGERU MIZUSHIMA
--------------------------
Name: Shigeru Mizushima
Title: Director
2
<PAGE> 9
POWER OF ATTORNEY
The undersigned, a Director of American Standard Companies Inc.
(formerly named ASI Holding Corporation), a Delaware corporation (the
"Corporation"), does hereby constitute and appoint Frederick W. Jaqua, Richard
A. Kalaher and Israel Stein, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution, to execute and
deliver in his name and on his behalf:
(a) one or more Registration Statements of the Corporation on an
appropriate form proposed to be filed with the Securities and Exchange
Commission (the "SEC") for the purpose of registering under the Securities
Act of 1933, as amended (the "Securities Act"), up to 17,000,000 shares of
the Corporation's Common Stock, par value $.01 per share (and associated
Common Stock Rights) (the "Shares"), such Shares to be issued from time to
time on terms to be established in each case by or pursuant to a
resolution of the Board of Directors of the Corporation or any duly
authorized committee thereof; and
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement or
Statements;
and any and all other documents and instruments in connection with the issuance
of the Shares which such attorneys-in-fact and agents, or any one of them, deem
necessary or advisable to enable the Corporation to comply with (a) the
Securities Act and the other federal securities laws of the United States of
America (including, without limitation, the Securities Exchange Act of 1934)
and the rules, regulations and requirements of the SEC in respect of any
thereof, (b) the securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America, (c) the rules and regulations of
the New York Stock Exchange or any other national or foreign securities
exchange or authorized interdealer quotation system, (d) the requirements of
the National Association of Securities Dealers, Inc. and (e) the securities
laws of any foreign jurisdiction, including, without limitation, Canada; and
the undersigned does hereby ratify and confirm as his own acts and deeds all
that such attorneys-in-fact and agents, and each of them, shall do or cause to
be done by virtue hereof.
<PAGE> 10
Each one of such attorneys-in-fact and agents shall have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this
power of attorney this 2nd day of November, 1994.
/s/ FRANK T. NICKELL
--------------------------
Name: Frank T. Nickell
Title: Director
2
<PAGE> 11
POWER OF ATTORNEY
The undersigned, a Director of American Standard Companies Inc.
(formerly named ASI Holding Corporation), a Delaware corporation (the
"Corporation"), does hereby constitute and appoint Frederick W. Jaqua, Richard
A. Kalaher and Israel Stein, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution, to execute and
deliver in his name and on his behalf:
(a) one or more Registration Statements of the Corporation on an
appropriate form proposed to be filed with the Securities and Exchange
Commission (the "SEC") for the purpose of registering under the Securities
Act of 1933, as amended (the "Securities Act"), up to 17,000,000 shares of
the Corporation's Common Stock, par value $.01 per share (and associated
Common Stock Rights) (the "Shares"), such Shares to be issued from time to
time on terms to be established in each case by or pursuant to a
resolution of the Board of Directors of the Corporation or any duly
authorized committee thereof; and
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement or
Statements;
and any and all other documents and instruments in connection with the issuance
of the Shares which such attorneys-in-fact and agents, or any one of them, deem
necessary or advisable to enable the Corporation to comply with (a) the
Securities Act and the other federal securities laws of the United States of
America (including, without limitation, the Securities Exchange Act of 1934)
and the rules, regulations and requirements of the SEC in respect of any
thereof, (b) the securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America, (c) the rules and regulations of
the New York Stock Exchange or any other national or foreign securities
exchange or authorized interdealer quotation system, (d) the requirements of
the National Association of Securities Dealers, Inc. and (e) the securities
laws of any foreign jurisdiction, including, without limitation, Canada; and
the undersigned does hereby ratify and confirm as his own acts and deeds all
that such attorneys-in-fact and agents, and each of them, shall do or cause to
be done by virtue hereof.
<PAGE> 12
Each one of such attorneys-in-fact and agents shall have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this
power of attorney this 3rd day of November, 1994.
/s/ ROGER W. PARSONS
--------------------------
Name: Roger W. Parsons
Title: Director
2
<PAGE> 13
POWER OF ATTORNEY
The undersigned, a Director of American Standard Companies Inc.
(formerly named ASI Holding Corporation), a Delaware corporation (the
"Corporation"), does hereby constitute and appoint Frederick W. Jaqua, Richard
A. Kalaher and Israel Stein, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution, to execute and
deliver in his name and on his behalf:
(a) one or more Registration Statements of the Corporation on an
appropriate form proposed to be filed with the Securities and Exchange
Commission (the "SEC") for the purpose of registering under the Securities
Act of 1933, as amended (the "Securities Act"), up to 17,000,000 shares of
the Corporation's Common Stock, par value $.01 per share (and associated
Common Stock Rights) (the "Shares"), such Shares to be issued from time to
time on terms to be established in each case by or pursuant to a
resolution of the Board of Directors of the Corporation or any duly
authorized committee thereof; and
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement or
Statements;
and any and all other documents and instruments in connection with the issuance
of the Shares which such attorneys-in-fact and agents, or any one of them, deem
necessary or advisable to enable the Corporation to comply with (a) the
Securities Act and the other federal securities laws of the United States of
America (including, without limitation, the Securities Exchange Act of 1934)
and the rules, regulations and requirements of the SEC in respect of any
thereof, (b) the securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America, (c) the rules and regulations of
the New York Stock Exchange or any other national or foreign securities
exchange or authorized interdealer quotation system, (d) the requirements of
the National Association of Securities Dealers, Inc. and (e) the securities
laws of any foreign jurisdiction, including, without limitation, Canada; and
the undersigned does hereby ratify and confirm as his own acts and deeds all
that such attorneys-in-fact and agents, and each of them, shall do or cause to
be done by virtue hereof.
<PAGE> 14
Each one of such attorneys-in-fact and agents shall have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this
power of attorney this 1st day of November, 1994.
/s/ D. M. RODERICK
--------------------------
Name: D. M. Roderick
Title: Director
2
<PAGE> 15
POWER OF ATTORNEY
The undersigned, a Director of American Standard Companies Inc.
(formerly named ASI Holding Corporation), a Delaware corporation (the
"Corporation"), does hereby constitute and appoint Frederick W. Jaqua, Richard
A. Kalaher and Israel Stein, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution, to execute and
deliver in his name and on his behalf:
(a) one or more Registration Statements of the Corporation on an
appropriate form proposed to be filed with the Securities and Exchange
Commission (the "SEC") for the purpose of registering under the Securities
Act of 1933, as amended (the "Securities Act"), up to 17,000,000 shares of
the Corporation's Common Stock, par value $.01 per share (and associated
Common Stock Rights) (the "Shares"), such Shares to be issued from time to
time on terms to be established in each case by or pursuant to a
resolution of the Board of Directors of the Corporation or any duly
authorized committee thereof; and
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement or
Statements;
and any and all other documents and instruments in connection with the issuance
of the Shares which such attorneys-in-fact and agents, or any one of them, deem
necessary or advisable to enable the Corporation to comply with (a) the
Securities Act and the other federal securities laws of the United States of
America (including, without limitation, the Securities Exchange Act of 1934)
and the rules, regulations and requirements of the SEC in respect of any
thereof, (b) the securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America, (c) the rules and regulations of
the New York Stock Exchange or any other national or foreign securities
exchange or authorized interdealer quotation system, (d) the requirements of
the National Association of Securities Dealers, Inc. and (e) the securities
laws of any foreign jurisdiction, including, without limitation, Canada; and
the undersigned does hereby ratify and confirm as his own acts and deeds all
that such attorneys-in-fact and agents, and each of them, shall do or cause to
be done by virtue hereof.
<PAGE> 16
Each one of such attorneys-in-fact and agents shall have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this
power of attorney this 9th day of November, 1994.
/s/ JOHN RUTLEDGE
--------------------------
Name: John Rutledge
Title: Director
2
<PAGE> 17
POWER OF ATTORNEY
The undersigned, a Director of American Standard Companies Inc.
(formerly named ASI Holding Corporation), a Delaware corporation (the
"Corporation"), does hereby constitute and appoint Frederick W. Jaqua, Richard
A. Kalaher and Israel Stein, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution, to execute and
deliver in his name and on his behalf:
(a) one or more Registration Statements of the Corporation on an
appropriate form proposed to be filed with the Securities and Exchange
Commission (the "SEC") for the purpose of registering under the Securities
Act of 1933, as amended (the "Securities Act"), up to 17,000,000 shares of
the Corporation's Common Stock, par value $.01 per share (and associated
Common Stock Rights) (the "Shares"), such Shares to be issued from time to
time on terms to be established in each case by or pursuant to a
resolution of the Board of Directors of the Corporation or any duly
authorized committee thereof; and
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement or
Statements;
and any and all other documents and instruments in connection with the issuance
of the Shares which such attorneys-in-fact and agents, or any one of them, deem
necessary or advisable to enable the Corporation to comply with (a) the
Securities Act and the other federal securities laws of the United States of
America (including, without limitation, the Securities Exchange Act of 1934)
and the rules, regulations and requirements of the SEC in respect of any
thereof, (b) the securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America, (c) the rules and regulations of
the New York Stock Exchange or any other national or foreign securities
exchange or authorized interdealer quotation system, (d) the requirements of
the National Association of Securities Dealers, Inc. and (e) the securities
laws of any foreign jurisdiction, including, without limitation, Canada; and
the undersigned does hereby ratify and confirm as his own acts and deeds all
that such attorneys-in-fact and agents, and each of them, shall do or cause to
be done by virtue hereof.
<PAGE> 18
Each one of such attorneys-in-fact and agents shall have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this
power of attorney this 3rd day of November, 1994.
/s/ JOSEPH SCHUCHERT
--------------------------
Name: Joseph Schuchert
Title: Director
2
<PAGE> 19
POWER OF ATTORNEY
The undersigned, a Director of American Standard Companies Inc.
(formerly named ASI Holding Corporation), a Delaware corporation (the
"Corporation"), does hereby constitute and appoint Frederick W. Jaqua, Richard
A. Kalaher and Israel Stein, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution, to execute and
deliver in his name and on his behalf:
(a) one or more Registration Statements of the Corporation on an
appropriate form proposed to be filed with the Securities and Exchange
Commission (the "SEC") for the purpose of registering under the Securities
Act of 1933, as amended (the "Securities Act"), up to 17,000,000 shares of
the Corporation's Common Stock, par value $.01 per share (and associated
Common Stock Rights) (the "Shares"), such Shares to be issued from time to
time on terms to be established in each case by or pursuant to a
resolution of the Board of Directors of the Corporation or any duly
authorized committee thereof; and
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement or
Statements;
and any and all other documents and instruments in connection with the issuance
of the Shares which such attorneys-in-fact and agents, or any one of them, deem
necessary or advisable to enable the Corporation to comply with (a) the
Securities Act and the other federal securities laws of the United States of
America (including, without limitation, the Securities Exchange Act of 1934)
and the rules, regulations and requirements of the SEC in respect of any
thereof, (b) the securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America, (c) the rules and regulations of
the New York Stock Exchange or any other national or foreign securities
exchange or authorized interdealer quotation system, (d) the requirements of
the National Association of Securities Dealers, Inc. and (e) the securities
laws of any foreign jurisdiction, including, without limitation, Canada; and
the undersigned does hereby ratify and confirm as his own acts and deeds all
that such attorneys-in-fact and agents, and each of them, shall do or cause to
be done by virtue hereof.
<PAGE> 20
Each one of such attorneys-in-fact and agents shall have, and may exercise, all
of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this
power of attorney this 9th day of November, 1994.
/s/ J. DANFORTH QUAYLE
--------------------------
Name: J. Danforth Quayle
Title: Director
2
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<NAME> AMERICAN STANDARD COMPANIES, INC.
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