SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 1-11415
AMERICAN STANDARD COMPANIES INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3465896
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Centennial Avenue, P.O. Box 6820, Piscataway, NJ 08855-6820
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (732) 980-6000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock, $.01 par value, outstanding at
October 31, 1997 71,928,748
(shares)
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
American Standard Companies Inc. is a Delaware corporation organized in
March 1988, and has as its only investment all the outstanding common stock of
American Standard Inc. Hereinafter, "the Company" will refer to American
Standard Companies Inc. or to its subsidiary, American Standard Inc., as the
context requires. The following summary statement of operations of the Company
and subsidiaries for the three months and nine months ended September 30, 1997
and 1996 has not been audited, but management believes that all adjustments,
consisting of normal recurring items, necessary for a fair presentation of
financial data for those periods have been included. Results for the three- and
nine-month periods of 1997 are not necessarily indicative of results for the
entire year.
<TABLE>
<CAPTION>
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
UNAUDITED SUMMARY STATEMENT OF OPERATIONS
(In millions except share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
SALES $1,519 $1,485 $4,469 $4,368
----- ----- ------ ------
COST AND EXPENSES
Cost of sales 1,138 1,115 3,319 3,282
Selling and administrative expenses 236 226 730 684
Asset impairment loss - - - 235
Write-off of purchased research and
development 90 - 90 -
Other expense 9 10 21 28
Interest expense 48 49 144 151
-- -- --- ---
1,521 1,400 4,304 4,380
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (2) 85 165 (12)
Income taxes 31 29 91 80
-- -- -- --
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (33) 56 74 (92)
Extraordinary loss on retirement of debt,
net of tax - - 24 -
-- -- -- --
NET INCOME (LOSS) $ (33) $ 56 $ 50 $ (92)
====== ==== ====== =======
Income (loss) per common share:
Income (loss) before extraordinary item $ (.46) $ .72 $ .96 $(1.18)
Extraordinary loss on retirement of debt - - (.31) -
------ ----- ---- ----- -
NET INCOME (LOSS) $ (.46) $ .72 $ .65 $ (1.18)
====== ===== ==== =====
Average number of outstanding common shares
and common share equivalents (Note 3) 72,985,131 78,241,940 76,903,567 77,813,214
<FN>
See accompanying notes
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
UNAUDITED SUMMARY BALANCE SHEET
(Dollars in millions
except share data)
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 39 $ 60
Accounts receivable 895 800
Inventories
Finished products 291 236
Products in process 97 78
Raw materials 104 95
---- --
492 409
Other current assets 132 117
---- ---
TOTAL CURRENT ASSETS 1,558 1,386
FACILITIES, less accumulated depreciation;
Sept. 1997 - $622; Dec. 1996 - $577 1,044 1,006
GOODWILL 832 875
OTHER ASSETS 278 253
---- ---
TOTAL ASSETS $ 3,712 $3,520
========= ======
CURRENT LIABILITIES
Loans payable to banks $ 743 $ 109
Current maturities of long-term debt 18 73
Accounts payable 437 469
Accrued payrolls 190 152
Other accrued liabilities 513 434
--- ---
TOTAL CURRENT LIABILITIES 1,901 1,237
LONG-TERM DEBT 1,584 1,742
RESERVE FOR POSTRETIREMENT BENEFITS 437 473
OTHER LIABILITIES 448 448
--- ---
TOTAL LIABILITIES 4,370 3,900
STOCKHOLDERS' DEFICIT
Preferred stock, 2,000,000 shares authorized,
none issued and outstanding - -
Common stock $.01 par value, 200,000,000 shares
authorized; 71,971,183 shares issued and
outstanding in 1997; 78,572,638 in 1996 1 1
Capital surplus and other 274 563
Accumulated deficit (721) (771)
Foreign currency translation effects (212) (173)
----- ----
TOTAL STOCKHOLDERS' DEFICIT (658) (380)
----- ----
$ 3,712 $3,520
======== ======
<FN>
See accompanying notes
</FN>
</TABLE>
<PAGE>
Item1. Financial Statements (continued)
<TABLE>
<CAPTION>
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED SUMMARY STATEMENT OF CASH FLOWS
(Dollars in millions)
Nine Months Ended
September 30,
1997 1996
---- ----
<S> <C> <C>
CASH PROVIDED (USED) BY:
OPERATING ACTIVITIES:
Income (loss) before extraordinary item $ 74 $ (92)
Write-off of purchased in-process research and
development 90 -
Asset impairment loss - 235
Depreciation 94 91
Amortization of goodwill 21 21
Non-cash interest 44 47
Non-cash stock compensation 10 25
Changes in assets and liabilities:
Accounts receivable (92) (58)
Inventories (84) (67)
Accounts payable and other accruals 54 16
Other assets and liabilities 15 (18)
--- ----
Net cash provided by operating activities 226 200
---- ---
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (157) (123)
Investments in affiliated companies (1) (12)
Acquisition of medical diagnostic businesses ( 212) -
Other 5 20
-- --
Net cash used by investing activities (365) (115)
----- -----
FINANCING ACTIVITIES:
Minority partners' contributions to PRC venture - 12
Repurchases of common stock (294) -
Proceeds from issuance of long-term debt 399 6
Repayments of long-term debt, including
redemption premiums (626) (67)
Net change in revolving credit facility 640 (31)
Net change in other short-term debt 11 (18)
Other (8) (6)
--- ---
Net cash provided (used) by financing activities 122 (104)
--- ---
Effect of exchange rate changes on cash and
cash equivalents (4) (1)
--- ---
Net decrease in cash and cash equivalents (21) (20)
Cash and cash equivalents at beginning of period 60 89
--- ---
Cash and cash equivalents at end of period $ 39 $ 69
======= =======
<FN>
See accompanying notes
</FN>
</TABLE>
<PAGE>
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note 1. Public Offering of Common Stock and Repurchases of Common Stock
In the first quarter of 1997 the Company completed a secondary public
offering of 12,429,548 shares of the Company's common stock owned by Kelso
ASI Partners, L.P. ("ASI Partners"), the Company's largest stockholder at
December 31, 1996, and the repurchase by the Company from ASI Partners of
4,628,755 shares of common stock of the Company. In addition, the Company
issued to ASI Partners 5-year warrants to purchase 3,000,000 shares of the
Company's common stock at $55 per share. ASI Partners no longer owns any
common stock of the Company and is no longer entitled to designate any of the
Company's directors. On October 6, 1997, the Company completed an additional
repurchase of 2,320,900 shares of its common stock for $100 million under a
program commenced in May 1997. See Management's Discussion and Analysis of
Financial Position and Results of Operations - Liquidity and Capital
Resources.
Note 2. Acquisition of Medical Diagnostics Businesses
On June 30, 1997, the Company acquired for $212 million, including fees
and expenses, the European medical diagnostic business of Sorin Biomedica
S.p.A. ("Sorin"), an affiliate of the Fiat Group, and all the outstanding
shares of INCSTAR Corporation ("Incstar"), a biotechnology company based in
Stillwater, Minnesota. This transaction has been accounted for as a purchase
and the financial statements as of September 30, 1997 reflect the allocation
of the purchase price. Purchase price allocated to the value of purchased
in-process research and development totaling $90 million has been charged to
operations in the third quarter of 1997. Approximately $50 million of
goodwill resulted after allocation of the purchase price to the fair value of
assets acquired and liabilities assumed. See Management's Discussion and
Analysis of Financial Position and Results of Operations -- Liquidity and
Capital Resources.
Note 3. Earnings Per Share
Effective December 31, 1997, the Company is required to adopt Statement
of Financial Accounting Standards No. 128, Earnings per Share,") which will
simplify the calculation and presentation of earnings per share data and
require the restatement of earnings per share data for all prior periods
presented, the effect of which will not be material. Earlier application is
not permitted. The average number of outstanding common shares for the three
months ended September 30, 1997 excludes average common stock equivalents of
2,535,678 shares, as their inclusion would have been antidilutive to the loss
per share.
Note 4. Tax Matters
As described in Note 6 of Notes to Consolidated Financial Statements in
the Company's Annual Report on Form 10-K for the year ended December 31,
1996, there are pending German tax issues for the years 1984 through 1990.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources."
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company's sales in the third quarter of 1997 increased 2% to $1,519
million and operating income was $2 million below the prior year at $155
million, excluding the $90 million write-off of purchased in-process research
and development related to the June 30, 1997 acquisition of the medical
diagnostics businesses. Operating income for the first nine months of 1997 was
$452 million (excluding the write-off of purchased in-process research and
development), an increase of 2% over the $443 million of operating income in the
first nine months of 1996 (excluding an asset impairment charge). Operating
losses for Medical Systems and equity in net income (loss) of unconsolidated
joint ventures for 1996 have been reclassified to conform with the 1997
presentation.
<TABLE>
<CAPTION>
SUMMARY SEGMENT AND INCOME DATA
(Dollars in millions)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Sales:
Air Conditioning Products $ 919 $ 920 $2,684 $2,602
Plumbing Products 352 359 1,062 1,079
Automotive Products 224 206 699 687
Medical Systems 24 - 24 -
------ ------ ------ ------
Total sales $1,519 $1,485 $4,469 $4,368
====== ====== ====== ======
Operating income (loss) before asset
impairment loss and write-off of
purchased research and development:
Air Conditioning Products $ 98 $ 111 $ 285 $ 284
Plumbing Products 31 29 86 79
Automotive Products 31 21 94 91
Medical Systems (5) (4) (13) (11)
------ ------ ----- ------
155 157 452 443
Asset impairment loss and write-off
of purchased research and development:
Air Conditioning Products impairment loss - - - (121)
Plumbing Products impairment loss - - - (114)
Medical Systems write-off of purchased
research and development (90) - (90) -
------ ------ ----- ------
(90) - (90) (235)
------ ------ ----- ------
Total operating income 65 157 362 208
Equity in net income (loss) of
unconsolidated joint ventures 3 (1) 9 (4)
Interest expense (48) (49) (144) (151)
Corporate and other expenses (22) (22) (62) (65)
------ ------ ----- ------
Income (loss) before income taxes
and extraordinary item $ (2) $ 85 $ 165 $ (12)
========= ======== ======= ========
</TABLE>
<PAGE>
Results of Operations for the Third Quarter and First Nine Months of 1997
Compared with the Third Quarter and First Nine Months of 1996
Consolidated sales for the third quarter of 1997 were $1,519 million,
an increase of $34 million, or 2% (7% excluding the unfavorable effects of
foreign exchange), from $1,485 million in the third quarter of 1996. Sales
increased 9% for Automotive Products, while sales were flat for Air Conditioning
Products and decreased 2% for Plumbing Products compared with the third quarter
of 1996. Medical Systems contributed sales of $24 million. Operating income for
the third quarter of 1997 was $155 million (excluding the $90 million write-off
of purchased in-process research and development), a decrease of $2 million, or
1% (but an increase of 4% excluding the unfavorable effects of foreign
exchange), from $157 million in the third quarter of 1996. Operating income
increased 46% for Automotive Products and 7% for Plumbing Products but decreased
11% for Air Conditioning Products, while Medical Systems incurred a small
operating loss.
Consolidated sales for the first nine months of 1997 were $4,469
million, an increase of $101 million, or 2% (6% excluding the unfavorable
effects of foreign exchange), from $4,368 million in the first nine months of
1996. The increase reflected gains of 3% for Air Conditioning Products, 2% for
Automotive Products and Medical Systems' third quarter sales. Partly offsetting
these gains was a decline of 2% for Plumbing Products. Operating income was $452
million for the first nine months of 1997 (excluding the write-off of research
and development), an increase of 2% (6% excluding the unfavorable effects of
foreign exchange), compared with $443 million in the first nine months of 1996
(excluding the asset impairment charge previously mentioned). Operating income
increased 9% for Plumbing Products, 3% for Automotive Products and less than 1%
for Air Conditioning Products, while Medical Systems incurred a slightly larger
loss.
The following discussion of sales and operating income excludes the
effects of the write-off of purchased in-process research and development in
1997 and the asset impairment loss in 1996, as applicable.
Sales of Air Conditioning Products were $919 million for the third
quarter of 1997, essentially the same as the $920 million for the third quarter
of 1996, but up by 2% excluding the unfavorable effects of foreign exchange,
despite being adversely affected by cooler than normal temperatures in important
markets. This increase reflected continued strength in the U.S. commercial
business and higher volume in international operations. Sales in the U.S.
increased because of higher volumes of applied and unitary commercial products
resulting from improved markets and gains in market share (for commercial
unitary products), but was partly offset by lower volume for residential
products due to the cooler weather. International sales for the third quarter of
1997 increased principally because of higher volumes in Latin America and the
Middle East. Sales for Air Conditioning Products for the first nine months of
1997 increased by 3% to $2,684 million from $2,602 million in the first nine
months of 1996, primarily for the reasons cited for the third quarter increase
and volume increases in Europe in the first half of the year.
Operating income of Air Conditioning Products decreased 11% (with
little effect from foreign exchange) to $98 million in the third quarter of 1997
from $111 million in the 1996 third quarter. This primarily reflected the
effects of cooler than normal weather on U.S. residential products and European
operations, partly offset by increased income in the U.S commercial business and
in the Middle East. Operating income for the first nine months of 1997 increased
slightly, as gains in the U.S. commercial business and the Middle East exceeded
the declines experienced for residential products, Europe and the Far East.
<PAGE>
Sales of Plumbing Products decreased 2% to $352 million in the third
quarter of 1997 from $359 million in the third quarter of 1996. Excluding the
unfavorable effects of foreign exchange, sales increased 6% reflecting an
increase of 7% in international sales and 6% in the U.S. The international sales
increase resulted primarily from higher volume in Latin America. Europe
contributed a small increase but continued to experience weak economic
conditions, particularly in Germany and France. Sales growth in the Far East was
tempered as a result of several currency devaluations and general economic
conditions. Sales in the U.S. increased as a result of higher volumes to major
home improvement retailers. Sales of Plumbing Products for the first nine months
of 1997 decreased 2% to $1,062 million from $1,079 million in the first nine
months of 1996. Excluding unfavorable foreign exchange effects, sales increased
by 4% due to the same factors affecting the third quarter results and reflecting
the adverse effect of a five-week strike in the Philippines during the first
quarter of 1996.
Operating income of Plumbing Products increased 7% (18% excluding the
unfavorable effects of foreign exchange) to $31 million for the third quarter of
1997 from $29 million for the third quarter of 1996. In the U.S., operating
income improved because of higher sales, benefits of lower-cost products from
the Company's Mexican facilities and manufacturing cost improvements. For
international operations, operating income increased primarily because of
reduced costs in Europe, especially France, and improved margins due to higher
volume in Latin America. Operating income for the first nine months of 1997
increased by 9% (16% excluding foreign exchange effects) over the 1996 period,
primarily for the reasons mentioned for the third quarter and because of the
first quarter 1996 Philippines strike.
Sales of Automotive Products for the third quarter of 1997 increased 9%
(24% excluding the unfavorable effects of foreign exchange) to $224 million from
$206 million in the third quarter of 1996, primarily because of higher volumes
in Europe and higher product content per vehicle. Unit volume of truck and bus
production in Western Europe increased 23% overall from the third quarter of
1996, with a particularly strong gain in Germany. Sales of ABS systems to the
Company's U.S. joint venture more than doubled, reflecting the new regulations
in effect for such systems on new heavy-duty trucks and a rebound in U.S. truck
production. Sales of Automotive Products for the first nine months of 1997
increased 2% (11% excluding the unfavorable effects of foreign exchange) to $699
million from $687 million in the first nine months of 1996, primarily due to the
strong performance in the third quarter.
Operating income for Automotive Products for the third quarter of 1997
was $31 million, an increase of 46% (74% excluding the unfavorable effects of
foreign exchange) from $21 million in the third quarter of 1996, as
exchange-adjusted income from European operations nearly doubled. This increase
resulted from the higher sales and improved margins due to productivity
improvements. This also reflected the adverse effects in the third quarter of
1996 of new product introductions. Operating income for Automotive Products for
the first nine months of 1997 was $94 million, an increase of 3% (15% excluding
the unfavorable effects of foreign exchange) from $91 million in the first nine
months of 1996. This principally was because of the improvements for the third
quarter.
Medical Systems sales reflected the acquisition of Sorin and Incstar on
June 30, 1997. Medical Systems incurred an operating loss as development costs
and the cost of integrating operations more than offset the operating income of
the newly-acquired diagnostics businesses.
<PAGE>
Financial Review
Interest expense decreased $1 million in the third quarter of 1997
compared to the year-earlier quarter as lower overall interest rates on debt
outstanding under the 1997 Credit Agreement more than offset the effect of
increased debt arising from share repurchases and the acquisition of the medical
diagnostics businesses. The Company repurchased $308 million of shares of its
common stock during the first nine months of 1997 (see "Liquidity and Capital
Resources"). In addition, on May 15, 1997, the Company redeemed the $250 million
aggregate principal amount of its 11-3/8% Senior Debentures (at a redemption
price of 105.69% of the principal amount plus interest accrued to the redemption
date) with lower-rate borrowings under the 1997 Credit Agreement. Corporate and
other expenses were essentially unchanged. The higher equity in earnings of
unconsolidated joint ventures reflects the growth of Automotive Products' U.S.
joint venture, the benefits from restructuring Air Conditioning Products' scroll
compressor venture, the Company's financial services partnership and increased
profitability of Plumbing Products' expanding joint ventures in China.
The income tax provision for the third quarter of 1997 was $31 million,
or 35.3% of pretax income (excluding the write-off of purchased research and
development) compared with a provision of $29 million, or 34.5% of pretax income
in the third quarter of 1996. The effective tax rates reflect improvements in
U.S. income in both nine-month periods, which enabled the Company to recognize
previously unrecognized tax benefits.
As a result of the redemption of the 11-3/8% Senior Debentures and the
retirement of debt upon completion of the 1997 Credit Agreement, the first nine
months of 1997 included an extraordinary charge of $24 million, net of income
taxes, attributable to call premiums on the debentures and the write-off of
unamortized debt issuance costs.
Liquidity and Capital Resources
Net cash provided by operating activities, after cash interest paid of
$89 million, was $226 million for the first nine months of 1997, compared with
net cash provided of $200 million for the similar period of 1996. The $26
million increase resulted primarily from higher earnings (excluding the
write-off of purchased research and development from 1997 and the asset
impairment loss from 1996). The Company acquired the Medical diagnostics
businesses for $212 million and made capital expenditures of $158 million for
the first nine months of 1997, including $1 million of investments in affiliated
companies, compared with capital expenditures of $135 million in the first nine
months of 1996, including $12 million of investments in affiliated companies.
In January 1997 the Company entered into the 1997 Credit Agreement.
This agreement, which expires in 2002, provides the Company with senior secured
credit facilities aggregating $1.75 billion as follows: (a) a $750 million U.S.
dollar revolving credit facility and a $625 million multi-currency revolving
credit facility (the "Revolving Facilities") and (b) a $375 million
multi-currency periodic access credit facility. Up to $500 million of the
Revolving Facilities may be used for the issuance of letters of credit.
Borrowings under the Revolving Facilities by their terms are short-term. The
1997 Credit Agreement and certain other American Standard Inc. debt instruments
contain restrictive covenants and other requirements with which the Company
believes it is currently in compliance. The 1997 Credit Agreement provides lower
interest costs, significantly increased borrowing capacity, less restrictive
covenants and no scheduled principal payments until maturity in 2002.
<PAGE>
At September 30, 1997, the Company had outstanding borrowings of $694
million under the Revolving Facilities. There was $621 million available under
the Revolving Facilities after reduction for borrowings and for $60 million of
letters of credit usage. In addition, at September 30, 1997, the Company's
foreign subsidiaries had $71 million available under overdraft facilities which
can be withdrawn by the banks at any time.
In the first quarter of 1997 the Company completed (i) a secondary
public offering of 12,429,548 shares of the Company's common stock owned by ASI
Partners, including 1,621,245 shares sold pursuant to the underwriters'
over-allotment option (the "Secondary Offering"), and (ii) the share repurchase
by the Company from ASI Partners, then the Company's largest stockholder, of
4,628,755 shares of the Company's common stock for $208 million (the "Share
Repurchase"). In conjunction with the Secondary Offering and the Share
Repurchase, ASI Partners distributed to certain of its partners 3,780,353 shares
(the "Share Distribution") of the Company's common stock that it owned. In
addition, the Company issued to ASI Partners 5-year warrants to purchase
3,000,000 shares of the Company's common stock at $55 per share, $10 per share
over the public offering price in the Secondary Offering. After the Secondary
Offering, the Share Distribution and the Share Repurchase, ASI Partners owned no
common stock of the Company and is no longer entitled to designate any of the
Company's directors. All of the shares sold in the Secondary Offering were
previously issued and outstanding and the Company received no proceeds
therefrom.
On October 6, 1997, the Company completed an additional repurchase of
2,320,900 shares of its common stock for $100 million under a program commenced
in May 1997.
In January 1997 the Company announced formation of its Medical Systems
Group to pursue initiatives in the medical diagnostics field. For the last
several years the Company has supported the development of two medical
diagnostics products groups focusing on test instruments using laser technology
and reagents. On June 30, 1997, the Company acquired the European medical
diagnostic business of Sorin Biomedica S.p.A., an affiliate of the Fiat Group
and all the outstanding shares of INCSTAR Corporation, a biotechnology company
based in Stillwater, Minnesota. In 1996 Sorin and Incstar had sales of
approximately $80 million and $40 million, respectively. The aggregate cost of
the acquisition was approximately $212 million, including fees and expenses, and
was funded with borrowings under the 1997 Credit Agreement. This transaction has
been accounted for as a purchase and the financial statements as of September
30, 1997 reflect allocation of the purchase price. Purchase price allocated to
the value of in-process research and development projects totaling $90 million
has been charged to operations in the third quarter of 1997. Approximately $50
million of goodwill resulted after allocation of the purchase price to the fair
value of assets acquired and liabilities assumed.
On August 1, 1997, American Standard Companies Inc. and its
wholly-owned subsidiary, American Standard Inc., jointly filed a shelf
registration statement with the Securities and Exchange Commission covering $1
billion of debt securities to be offered by American Standard Inc. and
unconditionally guaranteed by American Standard Companies Inc. Proceeds from the
sale of the securities, to be issued from time to time at market interest rates,
will be used for general corporate purposes including refinancing of outstanding
debt, stock repurchases, acquisitions, additions to working capital or capital
expenditures. In late October the Company announced its intent to offer $300
million of senior notes under its shelf registration and plans to proceed when
suitable market conditions exist.
<PAGE>
As described in Note 6 of Notes to Consolidated Financial Statements in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
there are pending German Tax issues for the years 1984 through 1990. There has
been no change in the status of these issues since that report was filed.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
For a discussion of German tax issues see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" in Part I of this
report which is incorporated herein by reference.
Item 5. Other Information
For a discussion of the $1 billion debt shelf registration
statement jointly filed by American Standard Companies Inc. and its
wholly-owned subsidiary, American Standard Inc., on August 1, 1997,
see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" in Part I
of this Report which is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The exhibits listed on the accompanying Index to
Exhibits are filed as part of this quarterly report on Form 10-Q.
(b) Reports on Form 8-K. During the quarter ended September 30, 1997,
the Company filed a Current Report on Form 8-K describing the
acquisition on June 30, 1997, of the European medical diagnostic
business of Sorin Biomedica S.p.A., an affiliate of the Fiat Group
and all the outstanding shares of INCSTAR Corporation, a
biotechnology company based in Stillwater, Minnesota.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN STANDARD COMPANIES INC.
By:/s/ G. Ronald Simon
Vice President and Controller
(Principal Accounting Officer)
November 14, 1997
<PAGE>
AMERICAN STANDARD INC.
INDEX TO EXHIBITS
(The File Number of the Registrant, American Standard Companies Inc. is 1-11415)
Exhibit No. Description
(12) Computation of Ratios of Earnings to Fixed Charges
(27) Financial Data Schedule
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
AMERICAN STANDARD INC.
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
Nine Months
Ended
For the Years ended December 31, September 30,
-------------------------------- -------------
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
---- ---- ---- ---- ---- ---- ----
Income (loss) from continuing
operations before taxes $(52.6) $(80.5) $(15.2) $226.9 $57.6 $(12.3) $164.4
Minus (plus) equity in net income of
associated companies net of dividends
received 1.9 (1.8) (1.1) (11.0) (11.8) (9.0) (0.3)
Amortization of capitalized interest 0.8 0.9 1.0 1.1 1.3 0.9 1.1
Interest expense 288.9 277.9 259.4 213.3 198.2 150.9 144.0
Rental expense factor 12.5 13.2 17.6 23.0 27.3 15.4 18.0
---- ---- ---- ---- ---- ---- ----
Earnings available for fixed charges $247.7 $213.3 $263.9 $475.3 $296.2 $163.9 $327.8
====== ====== ====== ====== ====== ====== ======
Interest expenxe 288.9 277.9 259.4 213.3 198.2 150.9 144.0
Capitalized interest 3.1 2.7 2.9 4.0 3.9 2.9 2.9
Rental expense factor 12.5 13.2 17.6 23.0 27.3 15.4 18.0
---- ---- ---- ---- ---- ---- ----
Fixed charges $304.5 $293.8 $279.9 $240.3 $229.4 $169.2 $164.9
====== ====== ====== ====== ====== ====== ======
Ratio of earnings to fixed charges (a) - (b) - (b) - (b) 2.0 1.3 - (b) 2.0
====== ====== ====== ====== ====== ====== ======
<FN>
a) For the purpose of computing the ratio of earnings to fixed charges, fixed
charges consist of interest on debt (including capitalized interest),
amortization of debt discount and expense, and a portion of rentals
determined to be representative of interest. Earnings consist of
consolidated net income before income taxes, plus fixed charges other than
capitalized interest but including the amortization thereof, adjusted by
the excess or deficiency of dividends over income of entities accounted for
by the equity method.
b) Earnings were insufficient to cover fixed charges for the years ended
December 31, 1992, 1993, 1994 and the nine months ended September 30, 1996,
by $56.8 million, $80.5 million, $16.0 million and $5.3 million,
respectively.
</FN>
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 39
<SECURITIES> 0
<RECEIVABLES> 927
<ALLOWANCES> 32
<INVENTORY> 492
<CURRENT-ASSETS> 1,558
<PP&E> 1,666
<DEPRECIATION> 622
<TOTAL-ASSETS> 3,712
<CURRENT-LIABILITIES> 1,901
<BONDS> 1,584
0
0
<COMMON> 1
<OTHER-SE> (659)
<TOTAL-LIABILITY-AND-EQUITY> 3,712
<SALES> 4,469
<TOTAL-REVENUES> 4,469
<CGS> 3,305
<TOTAL-COSTS> 3,305
<OTHER-EXPENSES> 855
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 144
<INCOME-PRETAX> 165
<INCOME-TAX> 91
<INCOME-CONTINUING> 74
<DISCONTINUED> 0
<EXTRAORDINARY> 24
<CHANGES> 0
<NET-INCOME> 50
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0
</TABLE>
