<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A No. 1
(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, 1996
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 (908) 980-6000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
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.
<TABLE>
<S> <C>
Common stock, $.01 par value, outstanding at
October 31, 1996 78,528,888
(shares)
</TABLE>
<PAGE> 2
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 Company has restated its financial statements to properly record
costs and expenses of its French subsidiary, Porcher S.A., of $2 million and $9
million in the three months and nine months ended September 30, 1996,
respectively. The following summary statement of operations of the Company and
subsidiaries for the three months and nine months ended September 30, 1996 and
1995 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 are not necessarily indicative of results for the entire
year.
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
UNAUDITED SUMMARY STATEMENT OF OPERATIONS
(In millions except
share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 1,485 $ 1,316 $ 4,368 $ 3,910
------------ ------------ ------------ ------------
COST AND EXPENSES
Cost of sales 1,115 975 3,282 2,893
Selling and administrative expenses 226 215 684 631
Asset impairment loss -- -- 235 --
Other expense 10 8 28 27
Interest expense 49 51 151 162
------------ ------------ ------------ ------------
1,400 1,249 4,380 3,713
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 85 67 (12) 197
Income taxes 29 24 80 78
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 56 43 (92) 119
Extraordinary loss on retirement of debt -- -- -- (30)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 56 $ 43 $ (92) $ 89
============ ============ ============ ============
Income (loss) per common share:
Income (loss) before extraordinary item $ .72 $ .57 $ (1.18) $ 1.61
============ ============ ============ ============
Extraordinary loss on retirement of debt -- -- -- (.40)
NET INCOME (LOSS) $ .72 $ .57 $ (1.18) $ 1.21
============ ============ ============ ============
Average number of outstanding common shares 78,241,940 76,190,840 77,813,214 73,987,678
</TABLE>
See accompanying notes
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
UNAUDITED SUMMARY BALANCE SHEET
(In millions
except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 69 $ 89
Accounts receivable 829 771
Inventories
Finished products 243 191
Products in process 93 84
Raw materials 96 87
-------- --------
432 362
Other current assets 88 73
-------- --------
TOTAL CURRENT ASSETS 1,418 1,295
FACILITIES, less accumulated depreciation;
Sept. 1996-$564; Dec. 1995-$514 928 924
GOODWILL 851 1,082
OTHER ASSETS 248 219
-------- --------
TOTAL ASSETS $3,445 $3,520
======== ========
CURRENT LIABILITIES
Loans payable to banks $ 181 $ 240
Current maturities of long-term debt 65 73
Accounts payable 412 438
Accrued payrolls 166 172
Other accrued liabilities 446 384
-------- --------
TOTAL CURRENT LIABILITIES 1,270 1,307
LONG-TERM DEBT 1,738 1,770
RESERVE FOR POSTRETIREMENT BENEFITS 502 482
OTHER LIABILITIES 375 351
-------- --------
TOTAL LIABILITIES 3,885 3,910
STOCKHOLDERS' DEFICIT
Preferred stock, 2,000,000 shares authorized, none issued
and outstanding - -
Common stock $.01 par value, 200,000,000 shares
authorized;78,452,608 shares issued and
outstanding in 1996; 76,733,010 in 1995 1 1
Capital surplus and other 556 509
Accumulated deficit (817) (725)
Foreign currency translation effects (180) (175)
-------- --------
TOTAL STOCKHOLDERS' DEFICIT (440) (390)
-------- --------
$3,445 $3,520
======== ========
</TABLE>
See accompanying notes
3
<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED SUMMARY STATEMENT OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
---- ----
<S> <C> <C>
CASH PROVIDED (USED) BY:
OPERATING ACTIVITIES:
Income (loss) before extraordinary item $ (92) $ 119
Asset impairment loss 235 -
Depreciation 91 84
Amortization of goodwill 21 25
Non-cash interest 47 48
Non-cash stock compensation 25 23
Changes in assets and liabilities:
Accounts receivable (58) (130)
Inventories (67) (86)
Accounts payable and other accruals 16 70
Other assets and liabilities (18) 49
-------- --------
Net cash provided by operating activities 200 202
-------- --------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (123) (96)
Investments in affiliated companies (12) (19)
Other 20 13
-------- --------
Net cash used by investing activities (115) (102)
-------- --------
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock - 281
Minority partners' contributions to PRC venture 12 -
Proceeds from issuance of long-term debt 6 469
Repayments of long-term debt (67) (1,023)
Net change in revolving credit facility (31) 158
Net change in other short-term debt (18) (6)
Other (6) (18)
-------- --------
Net cash used by financing activities (104) (139)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents (1) -
-------- --------
Net decrease in cash and cash equivalents (20) (39)
Cash and cash equivalents at beginning of period 89 93
-------- --------
Cash and cash equivalents at end of period $ 69 $ 54
======= =========
</TABLE>
See accompanying notes
4
<PAGE> 5
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 ("FAS 121"), Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of, resulting in a
non-cash charge of $235 million in the first quarter of 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview."
NOTE 2. TAX MATTERS
As described in Note 5 of Notes to Consolidated Financial Statements in
the Company's Annual Report on Form 10-K for the year ended December 31, 1995,
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."
5
<PAGE> 6
PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Operating income increased 15% to $161 million in the third quarter of
1996 from $140 million in the third quarter of 1995 on strong growth for Air
Conditioning Products and an improvement by Plumbing Products, offset partly by
a decrease for Automotive Products related to weak markets. Effective January 1,
1996 the Company adopted FAS 121 related to impairment of long-lived assets. As
a result, the Company recorded a non-cash charge in the first quarter of 1996 of
$235 million, over 90% of which represented the write-down of goodwill, for
which there is no tax benefit. Excluding this charge, operating income for the
first nine months of 1996 was $454 million, an increase of 6% over the $428
million of operating income in the first nine months of 1995.
SUMMARY SEGMENT AND INCOME DATA
(in millions)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales:
Air Conditioning Products $ 920 $ 776 $ 2,602 $ 2,201
Plumbing Products 359 307 1,079 952
Automotive Products 206 233 687 757
------- ------- ------- -------
Total sales $ 1,485 $ 1,316 $ 4,368 $ 3,910
======= ======= ======= =======
Operating income before asset
impairment loss:
Air Conditioning Products $ 111 $ 81 $ 284 $ 209
Plumbing Products 29 23 79 96
Automotive Products 21 36 91 123
------- ------- ------- -------
161 140 454 428
Asset impairment loss:
Air Conditioning Products -- -- (121) --
Plumbing Products -- -- (114) --
------- ------- ------- -------
-- -- (235) --
------- ------- ------- -------
Total operating income 161 140 219 428
Interest expense (49) (51) (151) (162)
Corporate and other expenses (27) (22) (80) (69)
------- ------- ------- -------
Income (loss) before income
taxes and extraordinary item $ 85 $ 67 $ (12) $ 197
------- ------- ------- -------
</TABLE>
6
<PAGE> 7
RESULTS OF OPERATIONS FOR THE THIRD QUARTER AND FIRST NINE MONTHS OF 1996
COMPARED WITH THE THIRD QUARTER AND FIRST NINE MONTHS OF 1995
Consolidated sales for the third quarter of 1996 were $1,485 million,
an increase of $169 million, or 13% (14% excluding the unfavorable effects of
foreign exchange), from $1,316 million in the third quarter of 1995. Sales
increased 19% for Air Conditioning Products and 17% for Plumbing Products, while
sales for Automotive Products decreased 12% compared with the third quarter of
1995. Operating income for the third quarter of 1996 was $161 million, an
increase of $21 million, or 15% (16% excluding the unfavorable effects of
foreign exchange), from $140 million in the third quarter of 1995. Operating
income increased 37% for Air Conditioning Products and 26% for Plumbing Products
but decreased 42% for Automotive Products.
Consolidated sales for the first nine months of 1996 were $4,368
million, an increase of $458 million, or 12% (13% excluding the unfavorable
effects of foreign exchange), from $3,910 million in the first nine months of
1995. Sales increased 18% for Air Conditioning Products and 13% for Plumbing
Products, while sales for Automotive Products declined 9%. Operating income
(excluding the asset impairment charge previously mentioned) was $454 million
for the first nine months of 1996, an increase of 6% (7% excluding the
unfavorable effects of foreign exchange), compared with $428 million in the
first nine months of 1995. Operating income for the first nine months of 1996
increased 36% for Air Conditioning Products but declined 18% for Plumbing
Products and 26% for Automotive Products.
Sales of Air Conditioning Products increased 19% (with little effect
from foreign exchange) to $920 million for the third quarter of 1996 from $776
million for the comparable quarter of 1995. This improvement resulted from
substantial volume increases and price gains for applied and unitary commercial
systems; higher volumes and prices and a favorable shift to higher-efficiency,
higher-capacity products for residential products in the U.S.; and sales by the
new operations in the People's Republic of China ("PRC"). Sales of commercial
products in the U.S. increased because of improved markets, demand for chiller
replacement (due to the ban on CFC refrigerant production), higher prices and
gains in market share. Residential sales in the U.S. increased because of strong
demand (particularly in the replacement and renovation market), hot weather in
some parts of the U.S. and improved economic conditions. International sales for
the third quarter of 1996 increased principally because of sales by the new PRC
operations, along with volume increases in most other businesses. Sales for Air
Conditioning Products for the first nine months of 1996 increased by 18% to
$2,602 million from $2,201 million in the first nine months of 1995, primarily
for the reasons cited for the third quarter increase.
Operating income of Air Conditioning Products increased 37% (with
little effect from foreign exchange) to $111 million in the third quarter of
1996 from $81 million in the 1995 quarter, primarily reflecting expanded
commercial and residential product sales in the U.S. Despite higher sales
(primarily in the PRC), operating income for international operations was
essentially unchanged. The new PRC operations were at break even, while results
in other operations changed little from levels of the third quarter of 1995.
7
<PAGE> 8
Operating income for the first nine months of 1996, excluding the asset
impairment charge explained above, increased 36% essentially for the reasons
mentioned for the third quarter increase.
Sales of Plumbing Products increased 17% (18% excluding the unfavorable
effects of foreign exchange) to $359 million in the third quarter of 1996 from
$307 million in the third quarter of 1995 primarily as a result of sales by
Porcher, the French manufacturer acquired in the fourth quarter of 1995, and
higher sales in North and Latin American operations. Excluding Porcher and
foreign exchange effects, 1996 third quarter sales increased 3% compared with
the 1995 quarter, as a result of an 8% increase for U.S. operations, while the
international group was essentially flat despite the Latin American gains. Sales
in the U.S. increased as a result of higher volumes (primarily in the retail
market channel) and higher prices. For the international group, volume gains in
Latin American operations (primarily in Mexico) were offset by a sales decline
in Europe, particularly in Germany, Italy and France which continued to
experience weak economic conditions. Sales of Plumbing Products for the first
nine months of 1996 increased 13% (14% excluding the unfavorable effects of
foreign exchange) to $1,079 million from $952 million in the first nine months
of 1995. Excluding Porcher and foreign exchange effects, sales decreased by 1%
for the nine months of 1996 compared with the 1995 period as a result of the
same factors affecting the third quarter results and because of a five-week
strike in the Philippines that occurred in the first quarter of 1996.
Operating income of Plumbing Products increased 26% (27% excluding the
unfavorable effects of foreign exchange) to $29 million for the third quarter of
1996 from $23 million for the third quarter of 1995 as a result of a solid gain
in U.S. operating income, partly offset by a decline in international
operations. In the U.S., operating income improved because of the higher sales,
benefits of lower-cost product sourcing from the Company's Mexican facilities
and manufacturing and operating cost improvements. For international operations,
operating income gains in Latin America were offset by declines in the weak
European markets, particularly in Germany and France and, to a lesser extent, in
Italy. In addition, margins in France were lower than in the prior year due to
increased costs. The Company has undertaken actions to better assimilate Porcher
into its European plumbing products operations and to improve operating
performance. Despite a gain for U.S. operations, operating income for the first
nine months of 1996, excluding the aforementioned asset impairment charge,
declined by 18% (17% excluding foreign exchange effects) from the first nine
months of 1995 because of a decline in international operations in the first
half of 1996, including the effects of the first quarter Philippines strike.
Sales of Automotive Products for the third quarter of 1996 decreased
12% (10% excluding the unfavorable effects of foreign exchange) to $206 million
from $233 million in the third quarter of 1995, primarily because of a decline
in European commercial vehicle production as a result of market weakness and
order delays at several large customers in anticipation of new truck model
introductions. Unit volume of truck and bus production in western Europe
decreased from the third quarter of 1995, especially in Germany and France.
Trailer, export and Brazilian markets also decreased, contributing to the sales
decline. Sales of Automotive Products for the first nine months of 1996
decreased 9% (7% excluding the unfavorable effects of foreign exchange) to $687
million from $757 million in the first nine months of 1995, primarily for the
reasons which caused declines in the third quarter.
8
<PAGE> 9
Operating income for Automotive Products for the third quarter of 1996
was $21 million, a decrease of 42% (39% excluding the unfavorable effects of
foreign exchange) from $36 million in the third quarter of 1995. This reflected
the lower sales and start-up costs associated with new product introductions on
1997 truck models, offset partly by productivity improvements. Operating income
for Automotive Products for the first nine months of 1996 decreased by 26% (24%
excluding the unfavorable effects of foreign exchange) to $91 million from $123
million in the first nine months of 1995, principally for the same reasons
described with respect to the third quarter.
FINANCIAL REVIEW
Interest expense decreased in the third quarter and first nine months
of 1996 compared to the year-earlier periods, primarily as a result of reduced
debt together with lower overall interest rates under the Company's 1995 bank
credit agreement (the "1995 Credit Agreement"). The increase in corporate and
other expenses for the third quarter and nine months of 1996 is primarily
attributable to spending for corporate development and lower equity in the net
results of unconsolidated joint ventures.
Income tax provisions for the three months and nine months ended
September 30, 1996 were $29 million and $80 million, respectively, compared with
provisions of $24 million and $78 million in the corresponding periods of 1995.
Effective income tax rates for the third quarter and nine months of 1996 were
34.5% and 35.6% of pretax income (excluding the asset impairment charge in the
nine month period on which there is no tax benefit), compared with rates of
35.2% and 39.5% in the corresponding year-earlier periods. Both third quarter
periods reflect reductions in the estimated full year tax rates. The lower
effective tax rates resulted from increased levels of U.S. income (enabling the
Company to recognize previously unrecognized tax benefits in both 1995 and 1996)
and, in 1996, from proportionately greater pretax income earned in the U.S. (at
a lower effective rate) compared to that earned in higher-rate jurisdictions in
Europe and elsewhere.
As a result of the redemption of debt in the first quarter of 1995 upon
completion of a refinancing, the first nine months of 1995 included an
extraordinary charge of $30 million attributable to the write-off of unamortized
debt issuance costs, for which no tax benefit was available.
CASH FLOWS
Net cash provided by operating activities, after cash interest paid of
$87 million, was $200 million for the first nine months of 1996, compared with
$202 million of net cash provided for the similar period of 1995. Higher income
before extraordinary item (excluding the non-cash asset impairment loss of $235
million) along with improved working capital utilization were offset by higher
payments on liabilities, especially income taxes. Inventory turnover as of
September 30, 1996, improved one full turn from September 30, 1995, and working
capital as a percent of sales improved nearly one percentage point. Capital
expenditures for the first nine months of 1996 were $135 million, including $12
million of investments in affiliated companies, compared with
9
<PAGE> 10
capital expenditures of $115 million in the first nine months of 1995, including
$19 million of investments in affiliated companies. Scheduled debt repayments of
$50 million were made during the first nine months of 1996.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had outstanding borrowings of $145
million under the revolving facilities available under the 1995 Credit
Agreement. There was $347 million available under such revolving facilities
after reduction for borrowings and for $58 million of letters of credit usage.
In addition, at September 30, 1996, the Company's foreign subsidiaries had $70
million available under overdraft facilities which can be withdrawn by the banks
at any time.
The Company has entered into a financial services partnership, American
Standard Financial Services, with Transamerica Commercial Finance Corporation, a
subsidiary of Transamerica Corporation, to provide a wide range of financial
services to support sales of the Company's products while reducing cash
requirements to expand its business. The partnership will offer inventory and
consumer financing, commercial leasing and asset-based lending programs, which
are expected to enhance the Company's cash flow.
The 1995 Credit Agreement contains covenants that limit certain
activities of the Company and that require the Company to meet certain financial
tests. Certain debt instruments also contain financial tests and other
covenants. The Company believes it is currently in compliance with all such
covenants.
As described in Note 5 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, 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.
10
<PAGE> 11
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 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, 1996,
the Company filed no reports on Form 8-K.
11
<PAGE> 12
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: G. Ronald Simon
Vice President and Controller
(Principal Accounting Officer)
January 23, 1997
12
<PAGE> 13
AMERICAN STANDARD COMPANIES INC.
INDEX TO EXHIBITS
(The File Number of the Registrant, American Standard Companies Inc. is 1-11415)
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C> <C>
(27) Financial Data Schedule
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 67
<SECURITIES> 2
<RECEIVABLES> 864
<ALLOWANCES> 35
<INVENTORY> 432
<CURRENT-ASSETS> 1,418
<PP&E> 1,492
<DEPRECIATION> 564
<TOTAL-ASSETS> 3,445
<CURRENT-LIABILITIES> 1,270
<BONDS> 1,738
0
0
<COMMON> 1
<OTHER-SE> (441)
<TOTAL-LIABILITY-AND-EQUITY> 3,445
<SALES> 4,368
<TOTAL-REVENUES> 4,368
<CGS> 3,282
<TOTAL-COSTS> 3,282
<OTHER-EXPENSES> 947
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 151
<INCOME-PRETAX> (12)
<INCOME-TAX> 80
<INCOME-CONTINUING> (92)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (92)
<EPS-PRIMARY> (1.18)
<EPS-DILUTED> 0
</TABLE>
