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 June 30, 1998
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
July 31, 1998 72,300,489 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 six months ended June 30, 1998 and 1997
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 six-month
periods of 1998 are not necessarily indicative of results for the entire year.
<TABLE>
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
UNAUDITED SUMMARY STATEMENT OF OPERATIONS
(In millions except share data)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
----- ----- ----- ----
<S> <C> <C> <C> <C>
SALES $1,795 $1,589 $3,288 $2,950
------- ------- ------ ------
COST AND EXPENSES
Cost of sales 1,315 1,163 2,439 2,181
Selling and administrative expenses 289 258 547 494
Other expense 9 7 8 12
Interest expense 51 47 102 96
----- ----- ----- -----
1,664 1,475 3,096 2,783
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 131 114 192 167
Income taxes 53 40 78 60
----- ----- ----- -----
INCOME BEFORE EXTRAORDINARY ITEM 78 74 114 107
Extraordinary loss on retirement
of debt, net of tax 50 15 50 23
----- ----- ----- -----
NET INCOME $ 28 $ 59 $ 64 $ 84
===== ===== ===== =====
PER COMMON SHARE
Basic: Income before extraordinary item $ 1.08 $ .99 $ 1.58 $ 1.43
Extraordinary loss (.69) .20 (.69) (.32)
----- ----- ----- -----
Net Income $ .39 $ .79 $ .89 $1.11
===== ===== ===== =====
Diluted: Income before extraordinary item $ 1.04 $ .96 $ 1.53 $ 1.38
Extraordinary loss (.67) (.20) (.67) (.30)
----- ----- ----- -----
Net Income $ .37 $ .76 $ .86 $ 1.08
===== ====== ===== =====
Average common shares outstanding
Basic 72,472,970 74,033,708 72,285,567 75,158,665
Diluted 74,971,695 76,564,766 74,628,831 77,634,740
<FN>
See accompanying notes
</FN>
</TABLE>
<PAGE>
<TABLE>
Item 1. Financial Statements (continued)
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
UNAUDITED SUMMARY BALANCE SHEET
(Dollars in millions except share data)
June 30, December 31,
<CAPTION>
1998 1997
---------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 73 $ 29
Accounts receivable 991 831
Inventories
Finished products 287 255
Products in process 95 87
Raw materials 112 89
---- ----
494 431
Other current assets 121 103
---- ----
TOTAL CURRENT ASSETS 1,679 1,394
FACILITIES, less accumulated depreciation;
June 1998 - $630; Dec. 1997 - $578 1,170 1,139
GOODWILL 843 844
OTHER ASSETS 345 292
---- ----
TOTAL ASSETS $4,037 $3,669
===== =====
CURRENT LIABILITIES
Loans payable to banks $ 681 $ 718
Current maturities of long-term debt 170 30
Accounts payable 524 466
Accrued payrolls 208 180
Other accrued liabilities 561 447
---- ----
TOTAL CURRENT LIABILITIES 2,144 1,841
LONG-TERM DEBT 1,521 1,551
RESERVE FOR POSTRETIREMENT BENEFITS 456 438
OTHER LIABILITIES 443 449
---- ----
TOTAL LIABILITIES 4,564 4,279
STOCKHOLDERS' DEFICIT
Preferred stock, 2,000,000 shares
authorized, none issued and outstanding - -
Common stock, $.01 par value, 200,000,000 shares
authorized; 72,418,170 shares issued and
outstanding in 1998; 71,962,713 in 1997 1 1
Capital surplus and other 591 587
Treasury stock (303) (310)
Accumulated deficit (611) (675)
Foreign currency translation effects (205) (213)
----- -----
TOTAL STOCKHOLDERS' DEFICIT (527) (610)
----- -----
$4,037 $3,669
===== =====
<FN>
See accompanying notes
</FN>
</TABLE>
<PAGE>
<TABLE>
Item 1. Financial Statements (continued)
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED SUMMARY STATEMENT OF CASH FLOWS
(Dollars in millions)
Six Months Ended
<CAPTION>
June 30,
1998 1997
---- ----
<S> <C> <C>
CASH PROVIDED (USED) BY:
OPERATING ACTIVITIES:
Income before extraordinary item $ 114 $ 107
Depreciation 66 63
Amortization of goodwill and other intangibles 25 18
Non-cash interest 28 29
Non-cash stock compensation 4 12
Changes in assets and liabilities:
Accounts receivable (151) (129)
Inventories (62) (97)
Accounts payable and other accruals 148 83
Other assets and liabilities (5) (18)
---- ----
Net cash provided by operating activities 167 68
---- ----
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (97) (94)
Investments in affiliated companies (10) (1)
Acquisition of medical diagnostic businesses - (210)
Other (5) (2)
---- ----
Net cash used by investing activities (112) (307)
---- ----
FINANCING ACTIVITIES:
Repurchases of common stock (3) (232)
Proceeds from issuance of long-term debt 1,011 380
Repayments of long-term debt, including
redemption premiums (966) (615)
Net change in revolving credit facility (32) 705
Net change in other short-term debt 6 11
Financing costs and other (27) (18)
---- ----
Net cash provided (used) by financing activities (11) 231
---- ----
Effect of exchange rate changes on cash and
cash equivalents - (1)
---- ----
Net increase (decrease) in cash and cash equivalents 44 (9)
Cash and cash equivalents at beginning of period 29 60
---- ----
Cash and cash equivalents at end of period $ 73 $ 51
==== ====
<FN>
See accompanying notes
</FN>
</TABLE>
<PAGE>
AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note 1. Public Offering of Debt
In the first quarter and early April of 1998, the Company completed public
offerings of $1 billion principal amount of senior debt securities,
including: (i) $125 million of 7-1/8% Senior Notes due 2003; (ii) $250
million of 7-3/8% Senior Notes due 2005; (iii) $350 million of 7-3/8% Senior
Notes due 2008; and (iv) $275 million of 7-5/8% Senior Notes due 2010. The
Company used the net proceeds of these offerings (approximately $963 million,
net of underwriting discounts and interest rate hedge costs) to redeem, on
June 1, 1998 (the "Redemption"), its 10-1/2% Senior Subordinated Discount
Debentures due 2005 and 9-7/8% Senior Subordinated Notes due 2001. The total
amount required to complete the Redemption, including redemption premiums,
was $954 million, net of the effect of the settlement of certain swap
transactions related to the Senior Subordinated Discount Debentures. Pending
the Redemption, the net proceeds of the offerings were applied to the extent
possible to reduce borrowings under the revolving portion of the Company's
$1.75 billion bank credit agreement (the "1997 Credit Agreement") and the
excess was invested in short-term securities. The Redemption was funded using
approximately $200 million of such short-term securities and $750 million of
borrowings under the revolving portion of the 1997 Credit Agreement. As a
result of the Redemption, the second quarter of 1998 included an
extraordinary charge of approximately $50 million, net of taxes, related to
the Redemption, including call premiums and the write-off of unamortized debt
issuance costs.
Note 2. Comprehensive Income
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income. Total
comprehensive income, consisting of net income and foreign currency
translation effects, for the three months and six months ended June 30, 1998
and 1997 was $23 million, $72 million, $93 million and $49 million,
respectively.
Note 3. 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, 1997,
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."
Note 4. Earnings Per Share
The average number of outstanding common shares used in computing diluted
earnings per share for the three months ended June 30, 1998 and 1997 included
2,498,725 and 2,531,058 average incremental shares, respectively, for the
assumed exercise of stock options, and for the six months ended June 30, 1998
and 1997 included 2,343,264 and 2,476,075 average incremental shares,
respectively.
<PAGE>
Note 5. Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted in years beginning after June 15, 1999. The Company's
use of derivatives is minimal, and therefore management believes that the
adoption of the new Statement will not have a significant effect on earnings
or the financial position of the Company.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Sales for the second quarter of 1998 were $1.8 billion, an increase of
13% (16% excluding the unfavorable effects of foreign exchange) from $1.6
billion in the second quarter of 1997. Operating income was $202 million, an
increase of 13% (17% excluding the unfavorable effects of foreign exchange) from
$178 million in the second quarter of 1997. Operating income for the first half
of 1998 was $327 million, an increase of 10% over the $297 million of operating
income in the first half of 1997.
<TABLE>
SUMMARY SEGMENT AND INCOME DATA
(Dollars in millions)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales:
Air Conditioning Products $1,112 $ 983 $1,950 $1,765
Plumbing Products 384 367 742 710
Automotive Products 274 239 546 475
Medical Systems 25 - 50 -
------ ------ ------ ------
Total sales $1,795 $1,589 $3,288 $2,950
====== ====== ====== ======
Operating income (loss):
Air Conditioning Products $ 132 $ 118 $ 200 $ 187
Plumbing Products 33 33 52 55
Automotive Products 42 31 84 63
Medical Systems (5) (4) (9) (8)
------ ------ ------ ------
202 178 327 297
Equity in net income of
unconsolidated joint ventures 6 3 12 6
------ ------ ------ ------
208 181 339 303
Interest expense (51) (47) (102) (96)
Corporate and other expenses (26) (20) (45) (40)
------ ------ ------ ------
Income before income taxes
and extraordinary item $ 131 $ 114 $ 192 $ 167
======= ======== ======= =======
</TABLE>
<PAGE>
Results of Operations for the Second Quarter and First Six Months of 1998
Compared with the Second Quarter and First Six Months of 1997
The Company achieved record sales in the second quarter of 1998 of
$1,795 million, an increase of $206 million, or 13% (16% excluding the
unfavorable effects of foreign exchange), from $1,589 million in the second
quarter of 1997. Sales increased 13% for Air Conditioning Products, 5% for
Plumbing Products and 15% for Automotive Products, and included $25 million for
the new Medical Systems segment.
Operating income for the second quarter of 1998 was also a record at
$202 million, an increase of $24 million, or 13% (17%% excluding the unfavorable
effects of foreign exchange), from $178 million in the second quarter of 1997.
Operating income increased 12% for Air Conditioning Products, 35% for Automotive
Products and was flat for Plumbing Products. The operating loss for Medical
Systems was $5 million in the second quarter of 1998 compared with a $4 million
loss in the 1997 quarter.
Sales for the first half of 1998 were $3,288 million, an increase of
$338 million, or 11% (15% excluding the unfavorable effects of foreign
exchange), from $2,950 million in the first half of 1997. Sales increased 10%
for Air Conditioning Products, 5% for Plumbing Products and 15% for Automotive
Products, and included $50 million of sales for the new Medical Systems segment.
Operating income was $327 million for the first half of 1998, an increase of 10%
(15% excluding the unfavorable effects of foreign exchange), compared with $297
million in the first half of 1997. Operating income increased 7% for Air
Conditioning Products and 33% for Automotive Products but declined 5% for
Plumbing Products. The operating loss for Medical Systems was $9 million for the
first half of 1998 compared with a loss of $8 million for the first half of
1997.
Sales of Air Conditioning Products increased 13% (15% excluding the
unfavorable effects of foreign exchange) to $1,112 million for the second
quarter of 1998, from $983 million for the second quarter of 1997. These gains
reflected a 17% increase in the U.S., resulting from continued strength in
commercial businesses and expanding sales and service operations, and a 9%
increase in international operations (excluding unfavorable foreign exchange
effects), due to strong growth in Latin America and modest growth elsewhere.
Sales of applied and unitary commercial products in the U.S. increased because
of improved markets. U.S. residential product sales surged 24% due to the effect
of hot weather on the replacement market as well as strong new construction.
International sales for the second quarter of 1998 increased principally because
of higher volumes in Latin America, the Far East and Middle East. Sales for Air
Conditioning Products for the first half of 1998 increased by 10% (12% excluding
foreign exchange effects) to $1,950 million from $1,765 million in the first
half of 1997, primarily for the reasons cited for the second quarter increase,
offset somewhat by the adverse effects of a four-week strike at the Lexington,
Kentucky, air handling facility in the first quarter of 1998.
Operating income of Air Conditioning Products increased 12% (14%
excluding the unfavorable effects of foreign exchange) to $132 million in the
second quarter of 1998 from $118 million in the 1997 quarter, primarily
reflecting higher residential and commercial product volumes in the U.S. Those
gains were partly offset by lower operating income for international operations,
reflecting lower margins in Europe and the Far East. Operating income for the
first half of 1998 increased 7% (8% excluding unfavorable foreign exchange
effects) to $200 million from $187 million in the first half of 1997,
essentially for the reasons mentioned for the second quarter increase, offset
partly by the effects of the strike at Lexington in the first quarter.
<PAGE>
Sales of Plumbing Products increased 5% (10% excluding the unfavorable
effects of foreign exchange) to $384 million in the second quarter of 1998, from
$367 million in the second quarter of 1997. Sales increased 13% in the U.S. and
8% in international operations excluding the unfavorable effects of foreign
exchange. Sales in the U.S. increased as a result of higher volume, primarily
through expanding major retailers, and gains in market share. The international
sales increase resulted primarily from increased volume in Latin America where
markets were strong, and from the effect of including results from operations in
China on a consolidated basis since the fourth quarter of 1997 following the
acquisition of a majority interest. The gain in international sales was achieved
despite lower sales in the Far East (excluding China) as a result of the adverse
economic conditions in that area. Sales of Plumbing Products for the first half
of 1998 increased 5% (11% excluding the unfavorable effects of foreign exchange)
to $742 million from $710 million in the first half of 1997. This increase was
due principally to the same factors affecting second quarter results.
Operating income of Plumbing Products was $33 million in the second
quarter of 1998, the same level as the second quarter of 1997, but increased 6%
excluding the unfavorable effects of foreign exchange. In the U.S., operating
income improved because of higher sales and benefits of lower-cost products
manufactured at the Company's Mexican facilities. For international operations,
operating income increased primarily because of higher volume in Latin America
and the effect of consolidating the China plumbing operations, which more than
offset the effects of economic weakness in the rest of Asia and interim costs
associated with implementing the low-cost sourcing program in Europe. Operating
income for the first half of 1998 was $52 million compared with $55 million in
the first half of 1997, but increased by 6% excluding unfavorable foreign
exchange effects. The exchange-adjusted increase resulted primarily for the
reasons mentioned for the second quarter.
Sales of Automotive Products for the second quarter of 1998 increased
15% (19% excluding the unfavorable effects of foreign exchange) to $274 million
from $239 million in the second quarter of 1997. This increase resulted
primarily from higher volume, as unit volume of truck and bus production in
Western Europe increased 12% over the second quarter of 1997. In addition, sales
increased because of higher product content per vehicle on new model
introductions launched in 1997 and increased shipments of anti-lock braking
systems (ABS) to the Company's U.S. marketing joint venture. The increased sales
in the U.S. reflected the phase-in of regulations requiring ABS on all new
heavy-duty trucks and trailers, together with an increased level of heavy truck
production. Sales of Automotive Products for the first half of 1998 increased
15% (21% excluding the unfavorable effects of foreign exchange) to $546 million
from $475 million in the first half of 1997, primarily for the reasons cited for
the second quarter.
Operating income for Automotive Products for the second quarter of 1998
was $42 million, an increase of 35% (45% excluding the unfavorable effects of
foreign exchange) from $31 million in the second quarter of 1997. This reflected
the higher sales and improved margins due to productivity improvements.
Operating income for Automotive Products for the first half of 1998 was $84
million, an increase of 33% (42% excluding the unfavorable effects of foreign
exchange) from $63 million in the first half of 1997 principally for the same
reasons cited for the second quarter of 1998.
Medical Systems sales were $25 million in the second quarter of 1998,
reflecting the acquisition of the diagnostic business in June 1997. The
operating loss was $5 million in the second quarter of 1998 compared with a $4
million loss in the 1997 quarter, reflecting development costs, including
efforts to obtain U.S. and European regulatory approvals of new diagnostic
products and tests.
<PAGE>
Equity in net income of unconsolidated joint ventures increased to $6
million in the second quarter of 1998 from $3 million in the second quarter of
1997, reflecting the strong growth of Automotive Products' U.S. joint venture
and increased earnings from the Company's financing joint venture established in
1996.
Financial Review
Interest expense increased $4 million in the second quarter of 1998
compared to the year-earlier quarter principally due to debt incurred to finance
1997 share repurchases and the acquisition of the medical diagnostic business.
The $6 million increase in corporate and other expenses is primarily
attributable to reduced exchange gains in hyperinflationary countries, increased
discount fees associated with U.S. customer inventory financing through the
Company's financial services joint venture and an EPA settlement related to a
discontinued operation.
The income tax provision for the second quarter of 1998 was $53
million, or 40.5% of pretax income compared with a provision of $40 million, or
35.5% of pretax income in the second quarter of 1997. The lower effective tax
rate in 1997 resulted from the utilization of certain previously unrecognized
tax benefits. No similar benefits are available in 1998.
On June 1, 1998, the Company redeemed its 10-1/2% Senior Subordinated
Discount Debentures and its 9-7/8% Senior Subordinated Notes with the proceeds
of offerings of $1 billion principal amount of Senior Notes as described below.
As a result of this redemption, the second quarter of 1998 included an
extraordinary charge of $50 million, net of income taxes, attributable to call
premiums and the write-off of unamortized debt issuance costs. The second
quarter of 1997 also included an extraordinary charge of $15 million, net of
income taxes, related to the redemption of the Company's 11-3/8% Senior
Debentures.
Liquidity and Capital Resources
Net cash provided by operating activities, after cash interest paid of
$53 million, was $167 million for the first six months of 1998, compared with
net cash provided of $68 million for the similar period of 1997. The $99 million
increase resulted primarily from improved net working capital. The Company made
capital expenditures of $107 million for the first half of 1998, including $10
million of investments in affiliated companies, compared with capital
expenditures of $95 million in the first half of 1997, including $1 million of
investments in affiliated companies (excluding the acquisition of the medical
diagnostic business).
In the first quarter and early April of 1998, the Company completed
public offerings of $1 billion principal amount of senior debt securities,
including: (i) $125 million of 7-1/8% Senior Notes due 2003; (ii) $250 million
of 7-3/8% Senior Notes due 2005; (iii) $350 million of 7-3/8% Senior Notes due
2008; and (iv) $275 million of 7-5/8% Senior Notes due 2010. The Company used
the net proceeds of these offerings (approximately $963 million, net of
underwriting discounts and interest rate hedge costs) to effect the Redemption,
on June 1, 1998, of its 10-1/2% Senior Subordinated Discount Debentures due 2005
and 9-7/8% Senior Subordinated Notes due 2001. The total amount required to
complete the Redemption, including redemption premiums, was $954 million, net of
the effect of the settlement of certain swap transactions related to the Senior
Subordinated Discount Debentures. Pending the Redemption, the net proceeds of
the offerings were applied to the extent possible to reduce borrowings under the
revolving portion of the Company's $1.75 billion 1997 Credit Agreement and the
<PAGE>
excess was invested in short-term securities. The Redemption was funded using
approximately $200 million of such short-term securities and $750 million of
borrowings under the revolving portion of the 1997 Credit Agreement. In
accordance with the terms of the 10-1/2% Senior Subordinated Discount
Debentures, on June 1, 1998, interest on the debentures would have become
payable in cash. As a result of the Redemption, the Company expects to reduce
its total annual cash interest payments by approximately $24 million compared to
the amount that would otherwise have been payable and to reduce its annual net
interest expense by approximately $20 million before taxes.
In January 1997 the Company entered into the 1997 Credit Agreement.
This agreement, which requires no repayment of principal prior to its expiration
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"), which by their nature are short-term, and (b) a $375
million multi-currency periodic access credit facility. Up to $500 million of
the Revolving Facilities may be used to issue letters of credit. 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.
At June 30, 1998, the Company had borrowings of $555 million
outstanding under the Revolving Facilities. There was $760 million available
under the Revolving Facilities after reduction for borrowings and for $60
million of letters of credit usage. The Company's foreign subsidiaries had $73
million available at June 30, 1998, under overdraft facilities that can be
withdrawn by the banks at any time. In addition, the Company's operations in
China have $34 million available under bank credit facilities after reduction
for borrowings of $8 million and letters of credit usage of $15 million.
The Company had previously disclosed that the restructuring of its
European plumbing operations would entail a special charge of approximately
$75-$100 million related to employee severance and consolidation of production
facilities. The Company expects to record this charge in the third quarter of
1998. Also, the Company plans to take a non-cash asset impairment charge of
approximately $40 million related to goodwill associated with the European
plumbing operations in accordance with SFAS No. 121 and a special charge of
approximately $45 million associated with restructuring its plumbing products
operations in the Americas.
The Company recently announced that it may repurchase additional shares
of its common stock. The Company's Board of Directors has approved the
repurchase of up to $100 million of its common stock per year for up to three
years. Full implementation of this repurchase program, however, is subject to
obtaining the removal of certain restrictive covenants in the Company's debt
instruments limiting the amount of stock repurchases. The Company expects to
obtain the removal or modification of these restrictive covenants to permit full
implementation of the repurchase plan.
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, 1997,
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.
<PAGE>
Comments in this Quarterly Report on Form 10-Q contain certain
forward-looking statements which are based on management's good faith
expectations and belief concerning future developments. Actual results may
differ materially from these expectations as a result of many factors, relevant
examples of which are set forth in the Company's 1997 Annual Report on Form 10-K
and in the "Management's Discussion and Analysis" section of the Company's 1997
Annual Report to Shareholders.
<PAGE>
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 2. Changes in Securities and Use of Proceeds.
On March 11, 1996, the Company issued 13,334 shares of its common stock
to Frankwich Service Agency ("Frankwich"), an independent sales office engaged
in sales of the Company's air conditioning products, in a private placement
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and in conformity with the provisions of Rule 506 of
Regulation D thereunder as payment of the purchase price of $375,000 to acquire
substantially all of the assets of Frankwich.
On April 30, 1996, the Company issued 231, 256 shares of its common
stock to the shareholders of Diagnostics and Devices Inc. ("DDI") in a private
placement pursuant to Section 4(2) of the Securities Act and in conformity with
the provisions of Rule 506 of Regulation D thereunder as payment of the purchase
price of $6.4 million for all the issued and outstanding shares of DDI not
already owned by the Company.
On November 1, 1997 and April 15, 1998, respectively, the Company
issued 24,186 shares and 4,650 shares of its common stock to the shareholders of
Elsbree Corporation ("Elsbree"), an independent sales office engaged in sales of
the Company's air conditioning products, in a private placement pursuant to
Section 4(2) of the Securities Act and in conformity with the provisions of Rule
506 of Regulation D thereunder as payment of the purchase price of $975,000 to
acquire substantially all of the assets and certain liabilities of Elsbree.
On March 3, 1998 and April 23, 1998, respectively, the Company issued
143,358 shares and 29,541 shares of its common stock to the shareholders of
Industrial Sheet Metal & Mechanical Corporation ("ISM&M") in a private placement
pursuant to Section 4(2) of the Securities Act and in conformity with the
provisions of Rule 506 of Regulation D thereunder as payment of the purchase
price of approximately $7.7 million to acquire substantially all of the assets
and certain liabilities of ISM&M.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's 1998 Annual Meeting of Stockholders ("Annual Meeting")
was held on May 7, 1997. At the Annual Meeting, the Company's stockholders (a)
elected three Class III Directors with terms expiring at the Company's Annual
Meeting of Stockholders in 2001, (b) approved the 1997-1999 Supplemental
Incentive Compensation Plan, (c) approved the amendment and restatement of the
Company's Restated Certificate of Incorporation to remove certain obsolete
provisions and make a clarifying change conforming to the Company's Amended
By-laws and (d) ratified the selection of Ernst & Young LLP as independent
certified public accountants of the Company and its consolidated subsidiaries
for 1998.
<PAGE>
Following the Annual Meeting, three Class I Directors, having terms
expiring in 1999, and three Class II Directors, having terms expiring in 2000,
continued in office.
<TABLE>
The following sets forth the results of voting at the Annual Meeting:
<CAPTION>
Broker
Non
Matters For Against Abstentions Votes
<S> <C> <C> <C> <C> <C>
Election of Directors*
- For a term expiring at the Annual
Meeting of Stockholders in 2001
Steven E. Anderson 57,645,096 226,623 * -0-
Emmanuel A. Kampouris 57,622,871 248,847 * -0-
Roger W. Parsons 57,647,545 224,174 * -0-
Approval of the 1997-1999 Supplemental Incentive
Compensation Plan 55,761,802 1,699,821 464,215 -0-
-----------------
Approval of amendment and restatement of Restated
Certificate of Incorporation 57,338,988 367,099 216,227 -0-
----------------------------
Selection of Independent Accountants 57,756,560 56,112 110,973 -0-
- ------------------------------------
- ---------------------------
<FN>
* With respect to the election of directors, the form of proxy permitted
shareholders to check boxes indicating votes either "For" or "Withheld", or to
vote "For all except" and to name exceptions; votes relating to directors
designated above as "Against" include votes cast as "Withheld" and for named
exceptions.
</FN>
</TABLE>
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 June 30, 1998, the
Company filed no reports on Form 8-K.
<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: G. Ronald Simon
Vice President and Controller
(Principal Accounting Officer)
August 13, 1998
<PAGE>
AMERICAN STANDARD COMPANIES INC.
INDEX TO EXHIBITS
(The File Number of the Registrant, American Standard Companies Inc. is 1-11415)
Exhibit No. Description
(27) Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 73
<SECURITIES> 0
<RECEIVABLES> 1,024
<ALLOWANCES> 33
<INVENTORY> 494
<CURRENT-ASSETS> 1,679
<PP&E> 1,800
<DEPRECIATION> 630
<TOTAL-ASSETS> 4,037
<CURRENT-LIABILITIES> 2,144
<BONDS> 1,521
0
0
<COMMON> 1
<OTHER-SE> (528)
<TOTAL-LIABILITY-AND-EQUITY> 4,037
<SALES> 3,288
<TOTAL-REVENUES> 3,288
<CGS> 2,439
<TOTAL-COSTS> 2,439
<OTHER-EXPENSES> 8
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 102
<INCOME-PRETAX> 192
<INCOME-TAX> 78
<INCOME-CONTINUING> 114
<DISCONTINUED> 0
<EXTRAORDINARY> 50
<CHANGES> 0
<NET-INCOME> 64
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.86
</TABLE>
