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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] Transition Report 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, New Jersey 08855-6820
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (732) 980-6000
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class Name of each exchange on which registered
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Common Stock, $.01 par value New York Stock Exchange, Inc.
(and associated Common Stock Rights)
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Securities registered pursuant to Section 12 (g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock (Common Stock) held by
non-affiliates of the Registrant as of the close of business on March 10, 2000
was approximately $2.5 billion based on the closing sale price of the common
stock on the New York Stock Exchange consolidated tape on that date.
Number of shares outstanding of each of the Registrant's classes of Common
Stock, as of the close of business on March 10, 2000:
Common Stock, $.01 par value 70,775,276 Shares
Documents incorporated by reference:
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Part of the Form 10-K into
Document (Portions only) which document is incorporated.
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Annual Report to Stockholders for the year Parts I, II and IV
ended December 31, 1999
Definitive Proxy Statement dated
March 27, 2000 for use in connection with
the Annual Meeting of Stockholders to be
held on May 4, 2000 Part III
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business. 3
Item 2. Properties. 16
Item 3. Legal Proceedings. 17
Item 4. Submission of Matters to a Vote of 18
Security Holders.
Executive Officers of the Registrant. 19
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters. 22
Item 6. Selected Financial Data. 23
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 24
Item 7A. Quantitative and Qualitative Disclosures
about Market Risk
Item 8. Financial Statements and Supplementary
Data. 24
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure. 24
PART III
Item 10. Directors and Executive Officers of the
Registrant. 25
Item 11. Executive Compensation. 25
Item 12. Security Ownership of Certain Beneficial
Owners and Management. 25
Item 13. Certain Relationships and Related
Transactions. 25
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K. 26
Signatures 32
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PART I
ITEM 1. BUSINESS
American Standard Companies Inc. (the "Company") is a Delaware corporation
that has as its only significant assets all the outstanding common stock of
American Standard Inc., a Delaware corporation ("American Standard Inc.") and
all the outstanding common stock of American Standard International Inc., a
Delaware corporation ("ASII"). Hereinafter, "American Standard" or "the Company"
will refer to the Company, or to the Company and American Standard Inc. or ASII,
including their subsidiaries, as the context requires.
American Standard is a global, diversified manufacturer of high quality,
brand-name products in three major product groups: air conditioning systems and
services (60% of 1999 sales); bathroom and kitchen fixtures and fittings (25% of
1999 sales); and vehicle control systems for medium-sized and heavy trucks,
buses, trailers and utility vehicles (15% of 1999 sales). American Standard is
among the three largest providers of products it manufactures in each of its
three major business segments in the principal geographic areas where it
competes. The Company's brand names include TRANE(R) and AMERICAN STANDARD(R)
for air conditioning systems, AMERICAN STANDARD(R), IDEAL STANDARD(R) ,
STANDARD(R), PORCHER(R), ARMITAGE SHANKS(R) and DOLOMITE(R), for plumbing
products, WABCO(R) for vehicle control systems.
One of the ways the Company makes it products more competitive is by
emphasizing technological advancements such as:
- air conditioning systems that utilize energy-efficient compressors
and refrigerants meeting current environmental standards;
- water-saving plumbing products;
- commercial vehicle antilock braking systems ("ABS") and electronic
controls systems.
As of December 31, 1999 American Standard had 102 manufacturing facilities
in 29 countries.
OVERVIEW OF BUSINESS SEGMENTS
American Standard has three business segments: Air Conditioning Systems
and Services, Plumbing Products and Vehicle Control Systems.
AIR CONDITIONING SYSTEMS AND SERVICES. 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 Systems and Services ("Trane") are sold primarily under the
TRANE(R) and AMERICAN STANDARD(R) names. Sales to the commercial and residential
markets accounted for approximately 75% and 25%, respectively, of Trane's total
sales in 1999. Approximately 65% of Trane's sales in 1999 were in the
replacement, renovation and repair markets, which have been less cyclical than
the new residential and commercial construction markets. Trane derived 76% of
its 1999 sales in the U.S. and 24% outside. Management believes that Trane 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; the expansion of its broad distribution network;
conversion to products utilizing environmentally-preferable refrigerants; and
expansion of operations in developing market areas throughout the world,
principally the Asia-Pacific area (although expansion in the Asia-Pacific region
outside China slowed due to the unfavorable economic conditions existing in the
region since 1997) and Latin America.
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PLUMBING PRODUCTS. American Standard is a leading manufacturer in Europe,
the U.S. 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), STANDARD(R) and PORCHER(R)
names, and also under the ARMITAGE SHANKS(R) and DOLOMITE(R) names since the
February 1999 acquisition of the Bathrooms Division of Blue Circle Industries
PLC, described below. Of Plumbing Products' 1999 sales, 69% was derived from
operations outside the United States and 31% from within. Management believes
that Plumbing Products is well positioned for growth due to the high quality
associated with its brand-name products, significant existing market shares in a
number of countries, supplying its markets with lower-cost products manufactured
in Mexico, Eastern Europe and the Far East, and the expansion of existing
operations in developing market areas throughout the world, principally the Far
East, Latin America and Eastern Europe, although Far East growth has slowed
because of weak economic conditions existing in the region.
VEHICLE CONTROL SYSTEMS. Vehicle Control Systems ("WABCO") is a leading
manufacturer of braking and control systems for the worldwide commercial vehicle
industry. Its biggest selling products are pneumatic braking control systems and
related electronic and other control systems, including antilock and electronic
braking systems ("ABS" and "EBS", respectively), marketed under the WABCO(R)
name for medium-size and heavy trucks, tractors, buses, trailers and utility
vehicles. WABCO supplies vehicle manufacturers such as DaimlerChrysler (Mercedes
and Freightliner), Volvo, Iveco (Fiat), Scania, RVI (Renault), PACCAR, Hino,
Nissan and Rover. Management believes that WABCO is well positioned to benefit
from its strong market positions in Europe and Brazil and from increasing demand
for ABS, EBS and other sophisticated electronic control systems in a number of
markets (including the commercial vehicle market in the United States, where the
mandated two-year phase-in of ABS began in March 1997), as well as from the
technological advances embodied in the Company's products and its close
relationships with a number of vehicle manufacturers.
DISCONTINUED OPERATIONS
In the fourth quarter of 1999, the Board of Directors of the Company
approved a plan for the sale of the Medical Systems segment. The Company expects
to complete the sale in the second quarter of 2000. The 1999 loss from
discontinued operations of $126 million consists of a loss from operations of
$14 million, net of tax benefit of $9 million, and an estimated loss on
disposition of $112 million, net of tax benefit of $8 million. The loss on
disposition includes a provision for estimated operating losses in 2000
projected through the expected date of sale. The estimated loss on sale is based
upon certain assumptions about the timing of the sale and expected proceeds.
Therefore, actual amounts may differ. Operating results, net assets and cash
flows of the discontinued Medical Systems segment have been reported separately
from continuing operations in the Consolidated Financial Statements which appear
in the Company's Annual Report to Stockholders and are incorporated herein by
reference in Item 8 of Part II of this report.
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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 has frequently structured 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 Systems and Services continues to expand its operations
in the Far East, the Middle East, Latin America, Brazil and Europe. It also
continues to expand its sales forces in these regions. Since the end of 1995 the
Company has been developing and expanding its air conditioning business in the
People's Republic of China ("China"), to become an integrated manufacturer,
marketer and distributor of a broad range of air conditioning systems and
related products for residential and commercial applications. The Company and a
minority investor established ASI China Holdings Limited ("ASI China"), in which
the Company has an ownership interest of 67.5%, and formed A-S Air Conditioning
Products Limited ("ASAP"), owned 53.7% by ASI China, to establish or acquire
majority ownership in up to five manufacturing joint ventures as well as sales
and service businesses in China. As of December 31, 1999, ASAP had acquired
majority ownership in three manufacturing joint ventures. The Company's
ownership interest in ASAP is expected to increase over time through
reinvestment of royalties and management fees and through additional stock
purchases.
Plumbing Products has entered new markets through joint ventures in
Eastern Europe and the Far East, and is continuing to expand using this
approach. In 1997, 1998 and 1999 the Company expanded its production capacity in
Bulgaria and in Mexico. Plumbing Products continues to expand its operations in
China through its affiliate, A-S China Plumbing Products Limited ("ASPPL"), in
which American Standard increased its ownership position to approximately 55%
through the purchase of additional shares from other investors in 1997. ASPPL
has entered into 6 joint ventures with local business concerns which, together
with one wholly-owned operation, have received business licenses from Chinese
government authorities. These include three chinaware manufacturing facilities,
two fittings plants and two steel tub factories. The Company's ownership
interest in ASPPL is expected to increase over time through reinvestment of
royalties and management fees and through additional stock purchases.
Vehicle Control Systems, headquartered in Europe, has a manufacturing
subsidiary in Brazil, a joint venture in China and is in the process of
constructing a manufacturing facility in Poland. In the United States the
Meritor WABCO joint venture is growing rapidly as federal regulations mandating
ABS were fully phased in as of March 1999. The Company is also expanding the
volume of business done through its other existing joint venture in the United
States with Cummins Engine Co. (WABCO Compressor Manufacturing Co., a
manufacturing joint venture formed in 1997 to produce air compressors designed
by WABCO), and through another joint venture in Japan. In March 1999, WABCO
acquired the heavy vehicle business of Mando Machinery Corporation in South
Korea, to be operated under a wholly-owned subsidiary, WABCO Korea Inc.
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DEMAND FLOW(R) TECHNOLOGY*
To build on its position as a leader in each of its industries and to
increase sales and segment income, American Standard began in 1990 to apply
Demand Flow to all its businesses. Applying Demand Flow principles, products are
produced as and when required by customers, 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, American Standard has trained most of its approximately
58,000 employees worldwide in Demand Flow and has implemented Demand Flow in
substantially all of its production facilities. American Standard has also
applied Demand Flow to administrative functions and has re-engineered 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 tripled since 1990 to 9 turns.
Principally as a result of the implementation of Demand Flow, American Standard
has reduced inventories (from amounts that would otherwise have been carried) by
approximately 65% from December 31, 1989 through December 31, 1999. American
Standard further believes that as a result of the introduction of Demand Flow
employee productivity has risen significantly, 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.
SIX SIGMA
Six Sigma is a structured analytical methodology applied to achieve
significant improvement in the quality of work processes and to measure process
performance. The analysis is focused to better understand and ultimately satisfy
customer requirements through optimized process design. Time-tested statistical
and qualitative tools are used to diagnose performance deficiencies, identify
and measure improvement opportunities, implement improved work methods and
institutionalize related performance gains.
Management has begun to implement Six Sigma methodologies across the
Company's operations, extending into both manufacturing and administrative
processes. The primary objectives of the program will be to compliment and
leverage the efficiencies driven by Demand Flow and significantly reduce
defects. Technical experts (called Six Sigma Black Belts and Green Belts) will
be developed and deployed through robust training and project deployment
programs. Expected benefits include enhanced customer satisfaction, improved
process cycle times and increased productivity.
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* Demand Flow is a registered trademark of J-I-T Institute of Technology,
Inc.
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AIR CONDITIONING SYSTEMS AND SERVICES SEGMENT
Air Conditioning Systems and Services began with the 1984 acquisition by
the Company of the Trane Company, a manufacturer and distributor of Air
Conditioning Systems and Services since 1913. Air Conditioning Systems and
Services are sold primarily under the TRANE(R) and AMERICAN STANDARD(R) names.
In 1999 Trane, with revenues of $4,337 million, accounted for 60% of the
Company's sales and 60% of its segment income. Trane derived 24% of its 1999
sales from outside the United States. Approximately 65% of Trane's sales in 1999
were in the replacement, renovation and repair markets, which in general are
less cyclical than the new residential and commercial construction markets.
Trane manufactures three general types of air conditioning systems. The
first, called "unitary," is sold for residential and commercial applications,
and is a factory-assembled central air conditioning system which generally
encloses in one or two units all the components to cool or heat, clean, humidify
or dehumidify, and move air. The second, called "applied," is typically
custom-engineered for commercial use and involves on-site installation of
several different components of the air conditioning system. Trane is one of the
three largest global manufacturers of both unitary and applied Air Conditioning
Systems and Services. The third type, called "mini-split," is a small unitary
air conditioning system which operates without air ducts. Within the mini-split
category there are two primary products; room air conditioners, primarily for
residential applications, and packaged air conditioners, intended primarily for
light commercial applications. Trane manufactures and distributes mini-split
units in the Far East, Europe, the Middle East and Latin America.
Trane competes in all of its markets on the basis of service to customers,
product quality and reliability, technological leadership and price/value.
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 generally higher than for sales of original
equipment. Much of the equipment sold in the fast-growing air conditioning
markets of the 1960's and 1970's has been 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 new
refrigerants which meet current and future environmental standards.
Many of the air conditioning systems manufactured by Trane utilize HCFCs
and in the past utilized CFCs 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 refrigerants 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 has created a new market opportunity. In order to ensure
that Company products will be compatible with the substitute refrigerants, Trane
has been working closely with the manufacturers that are developing substitute
refrigerants. Trane has also been active in supporting industry-wide efforts to
transition to these new fluids in an orderly and sensible fashion while
balancing key environmental issues such as ozone depletion on one hand and
global warming (greenhouse gas effects) on the other. 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 Systems and Services.
Although the Company has been able to meet or exceed such standards to date,
stricter standards in the future will require additional research and
development expense and capital expenditures to both maintain compliance and
continue to offer customers choices.
In December 1993 the Company formed a partnership, Alliance Compressors,
with Heatcraft Technologies Inc., a subsidiary of Lennox International Inc., for
the manufacture of compressors for use
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in air conditioning and refrigeration equipment. On December 31, 1996, the
partnership was restructured to admit a new partner, Copesub, Inc., a subsidiary
of Emerson Electric Co. Following the restructuring, the Company and Heatcraft
Technologies Inc. each own a 24.5% partnership interest and Copesub, Inc. owns
the balance. Alliance develops, manufactures, markets and sells, primarily to
Trane and Lennox, scroll compressors utilized mainly in residential central air
conditioning applications. Alliance operates principally from a facility in
Natchitoches, Louisiana.
At December 31, 1999, Air Conditioning Systems and Services had 31
manufacturing plants in 9 countries, employing approximately 26,100 people.
Air Conditioning Systems and Services is composed of two operating
groups: Worldwide Unitary Systems Group and Worldwide Applied Systems Group.
WORLDWIDE APPLIED SYSTEMS GROUP
The Worldwide Applied Systems Group ("Applied Systems"), which accounted
for 53% of Air Conditioning Systems and Services' 1999 sales, manufactures and
distributes applied Air Conditioning Systems and Services throughout the world,
including the exporting of many products manufactured in the U.S. These products
are for air conditioning applications in larger commercial, industrial and
institutional buildings. Approximately 68% of Applied Systems sales are in the
U.S. and 32% in international markets. Other major suppliers of commercial
systems are Carrier, York and McQuay.
In the U.S., Applied Systems distributes its products through 87 sales
offices, 46 of which are Company-owned and 41 of which are franchised. Applied
Systems is continuing the process of acquiring certain commercial sales and
service offices, having acquired five offices in 1999, six offices in 1998,
seven in 1997 and three in 1996. Outside the U.S., Applied Systems also has an
extensive network of sales and service agencies, both Company owned and
franchised, to sell products and provide maintenance and service.
Over the last few years Applied Systems has expanded its aftermarket
business activities to include services such as emergency rentals of air
conditioning equipment. The group has also expanded its line to include
components to convert installed centrifugal chiller products to use refrigerants
meeting current environmental standards.
During 1997, 1998 and 1999 Applied Systems continued to introduce new
products, broadening its line of high-efficiency centrifugal chillers,
introducing new water cooled series R chillers, expanding the air cooled series
R chiller line and introducing a new absorption chiller, a new water source heat
pump and a new line of low pressure air handlers. Sales of systems that
automatically control a building's performance, including energy consumption and
air quality, continue to grow as a percentage of total sales with new product
introductions such as Tracer Summit and wireless thermostats. Indoor air quality
is emerging as a significant application to be served by the Company's products
and services. Systems capabilities, coupled with equipment, service and parts
have allowed Trane to be active in the performance contracting business as a
comfort systems solution provider.
WORLDWIDE UNITARY SYSTEMS GROUP
The Worldwide Unitary Systems Group ("Unitary Systems"), which accounted
for 47% of Air Conditioning Systems and Services' 1999 sales, manufactures and
distributes products for commercial and residential unitary applications
throughout the world. Unitary Systems exports many products manufactured in the
United States and also distributes mini-splits manufactured in facilities
operated by subsidiaries and joint ventures outside the U.S. Approximately 83%
of Unitary Systems' sales originated in the U.S. and 17% in international
markets. This group benefits significantly from the growth of the replacement
market for residential and commercial unitary air conditioning systems,
particularly in the U.S. Other major suppliers in the unitary market are
Carrier, York, Rheem, Lennox and Goodman Industries.
Commercial unitary products range from 2 to 120 tons and include
combinations of air conditioners, heat pumps, and gas furnaces, along with
variable-air-volume equipment and integrated
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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. In the U.S. these products are sold
through commercial sales offices, independent wholesale distributors and
company-owned dealer sales offices in over 375 locations. Residential central
Air Conditioning Systems and Services range from 1 to 5 tons and include air
conditioners, heat pumps, air handlers, furnaces, and coils. In the U.S. 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. Outside the U.S., Unitary Systems also has an extensive
network of sales and service agencies, both Company-owned and franchised, to
provide maintenance and warranty service for its equipment.
During the past few years, the Unitary Systems Group successfully
introduced several new products including: a line of multi-stage cooling and
heat pump units offering the industry's highest efficiencies; a unique line of
outdoor condensing units for the AMERICAN STANDARD(R) brand; an ultra-high
efficiency gas furnace with variable speed airflow and gas combustion
components; an ultra-high efficiency packaged air conditioner; modulating gas
and variable frequency drive 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 commercial unitary business also concentrated on indoor air
quality enhancements and new capabilities for existing products.
Unitary Systems also markets light commercial and residential products
under an AMERICAN STANDARD(R) brand name to serve distributors who typically
carry other products in addition to Air Conditioning Systems and Services.
INTERNATIONAL EXPANSION
Trane continues the expansion of its presence outside the U.S. in both
applied and unitary systems. In the Asia-Pacific region Trane established three
manufacturing joint ventures in China in 1995 (see "Globalization") and has had
operations in Malaysia since the mid-1980's. Since the early 1990's it has
operated an air conditioning manufacturing and distribution firm in Taiwan, and
a sales and manufacturing joint venture in Thailand. A Brazilian manufacturing
plant and distribution operations were acquired in 1994. In Europe, the group
operates plants in Epinal and Charmes, France, and in Colchester, U.K. A joint
venture in Egypt commenced operations in 1992 to serve markets in the Middle
East. Trane is also continuing to expand its international distribution network.
e-BUSINESS
In 1999 Trane launched a segment-wide e-business initiative aimed at
providing contractors, engineers, national accounts and other key customers
access to Trane product and systems data necessary for them to select, purchase
and service Trane products. Initially this "extranet" initiative, called the
"Trane ComfortSite", will allow contractors in North America to access all
pertinent information on residential and light commercial products and service
parts so that they will be able to select, check availability, price, purchase
and track delivery of these goods on-line, 24 hours a day, 7 days a week.
SERVICE PARTS INITIATIVES
Trane recognizes the value of providing a convenient and reliable source
of repair parts to service all products and systems it manufactures. In support
of current and future Trane customers, a significant investment is being made to
expand the numbers of locations and provide easy access to parts needed to
maintain and repair all products that Trane manufactures and sells on a
world-wide basis.
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PLUMBING PRODUCTS SEGMENT
Plumbing Products manufactures and distributes bathroom and kitchen
fixtures and fittings primarily under the IDEAL STANDARD(R), AMERICAN
STANDARD(R), STANDARD(R) and PORCHER(R) names, and also under the ARMITAGE
SHANKS(R) and DOLOMITE(R) names since the February 1999 acquisition of the
Bathrooms Division of Blue Circle Industries PLC, described below. In 1999
Plumbing Products, with revenues of $1,755 million, accounted for 25% of the
Company's sales and 22% of its segment income. Plumbing Products derived 69% of
its total 1999 sales from operations outside the United States.
Plumbing Products' sales were 55%% from chinaware fixtures, 24%% from
fittings (typically brass) and 11% from bathtubs, with the remainder consisting
of related plumbing products. Throughout the world these products are generally
sold through wholesalers and distributors and installed by plumbers and
contractors. In the U.S., a significant and growing number of products are sold
through home improvement centers. In total the residential market accounts for
approximately 75% of Plumbing Products' sales, with the commercial and
industrial markets providing the remainder.
Plumbing Products operates through three primary geographic groups:
Americas, Europe, and the Far East. Plumbing Products' fittings operations are
organized as the Worldwide Fittings Group, with manufacturing facilities in
Germany, the U.K., Bulgaria, the U.S., Mexico, Thailand, South Korea and China.
Worldwide Fittings' sales and operating results are reported in the three
primary geographic groups within which it operates.
The Company sells products in Europe primarily under the brand names IDEAL
STANDARD(R), ARMITAGE SHANKS(R), DOLOMITE(R) and PORCHER(R), manufactures and
distributes bathroom and kitchen fixtures and fittings through subsidiaries or
joint ventures in Germany, Italy, France, the United Kingdom, Greece, the Czech
Republic, Bulgaria and Egypt and distributes products in other European
countries. In November 1995 the Company acquired Porcher S.A. ("Porcher"), a
French manufacturer and distributor of plumbing products in which the Company
previously had a minority ownership interest. The unprofitable distribution
portion of Porcher was sold to a major French plumbing distributor in October
1998. This sale was part of a major restructuring program involving the closure
of five plants in Europe and the shift of manufacturing capacity to lower-cost
facilities in Bulgaria.
On February 2, 1999, the Company acquired for approximately $427 million
the Bathrooms Division of Blue Circle Industries PLC, a manufacturer of ceramic
sanitaryware, brassware and integrated plumbing systems. The acquired business,
which operates principally under the names ARMITAGE SHANKS(R) and CERAMICA
DOLOMITE(R) ("Armitage/Dolomite"), had 1999 sales of $279 million (for 11 months
from the acquisition date). Armitage Dolomite has 3 major manufacturing
facilities and 5 smaller facilities located in England and Italy, and employs
approximately 2,300 people. The primary markets for its products are in England,
Italy, Ireland and Germany. Management believes that Armitage Dolomite products
complement the Company's current product lines and strengthen its competitive
position in Europe. The acquisition has been accounted for as a purchase. After
allocating the purchase price to the value of the assets acquired and
liabilities assumed, goodwill of $300 million was recorded.
In the Far East the Company 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 and Indonesia,
and its majority-owned operations in Thailand, the Philippines and Vietnam. The
group also has operations in China, in which American Standard increased its
ownership position to approximately 55% through the purchase of additional
shares from other investors in the fourth quarter of 1997. See -"Globalization".
Plumbing Products' Americas Group manufactures bathroom and kitchen
fixtures and fittings selling under the brand names AMERICAN STANDARD(R) and
STANDARD(R) in the U.S. and under the
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brand names AMERICAN STANDARD(R), IDEAL STANDARD(R), and STANDARD(R) through its
wholly owned operations in Mexico, Canada and Brazil and its joint ventures in
Central America and the Dominican Republic.
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 Company's
European and U.S. sales but only about 40% of the sales in the Far East, where
new construction is more important. In the U.S. 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. With the
exception of the U.K., the new construction market in Europe has been weak since
1994. In the U.S. the new construction market hit its recent low in 1992 but has
evidenced strong recovery through 1999. The new construction market, in which
builders or contractors make product selection, is more price-competitive and
volume-oriented than the replacement and remodeling market. In the replacement
and remodeling market, consumers make model selections and, therefore, this
market is more responsive to quality and design than price, making it the
principal market for higher-margin luxury products. Through expansion of
manufacturing in low-cost locations, Plumbing Products has become more
competitive, enabling it to increase sales of products in the lower and middle
segments of both the remodeling and new construction markets.
Plumbing Products is also continuing 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 U.S., Plumbing Products is focusing on the unique needs of the
growing retail home center industry, using products obtained from several of the
Company's lower-cost manufacturing locations throughout the world. This market
channel has become a significant part of U.S. sales and is expected to continue
to grow.
In an effort to capture a larger share of the replacement and remodeling
market, 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 water shortages
experienced in a number of areas of the U.S. The Company produces an extensive
line of water-saving fixtures throughout its operations. Manufacture of
water-saving toilets was mandated for residential use by federal law commencing
in January 1994 and for commercial use in January 1996.
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 with AMERICAST(R) have the durability of cast
iron with only one-half the weight and are characterized by greater 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 the early 1990's.
As of December 31, 1999, Plumbing Products employed approximately 25,900
people and, including affiliated companies, had 56 manufacturing plants in 22
countries.
In the U.S., Plumbing Products has several important competitors,
including Kohler and, in selected product lines, Masco. There are also important
competitors in foreign markets, for the most part operating nationally.
Friederich Grohe, the major manufacturer of fittings in Europe, is a
pan-European competitor. In Europe, Sanitec and Roca are the major fixtures
competitors and, in the Far East, Toto is
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<PAGE> 12
the major competitor. Plumbing Products competes in most of its markets on the
basis of service to customers, product quality and design, reliability and
price.
VEHICLE CONTROL SYSTEMS SEGMENT
Operating under the WABCO(R) name, Vehicle Control Systems designs,
manufactures and sells brake and control systems primarily for the worldwide
commercial vehicle industry. WABCO's largest selling products are pneumatic
braking control systems and related electronic controls (ABS and EBS) and
conventional components for tractors, buses, trailers and utility vehicles. In
1999 WABCO, with sales of $1,098 million, accounted for 15% of the Company's
sales and 18% of its total segment income. The Company believes that WABCO is
the worldwide technology leader for braking, suspension and transmission control
of commercial vehicles. Electronic controls, first introduced in ABS in the
early 1980's, are increasingly applied in other control systems sold to the
commercial vehicle industry.
WABCO's 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 customers, sales of truck braking systems are
dependent on the demand for heavy trucks. Some of the Company's largest
customers are DaimlerChrysler (Mercedes and Freightliner), Volvo, Iveco (Fiat),
Scania, RVI (Renault), Paccar, Hino, Nissan and Rover. Principal competitors are
Knorr, Robert Bosch, and Honeywell. WABCO competes primarily on the basis of
customer service, quality and reliability of products, technological leadership
and price.
The European market for new trucks, buses, trailers, and replacement parts
declined slightly in 1999 after improvements in 1998 and 1997 from a lower level
in 1996. The Brazilian market declined in 1999 and 1998 after having recovered
strongly in 1997 from a significant decline in 1996. The North American market
increased significantly from 1998.
Since 1981, the WABCO(R) ABS system, which the Company believes leads the
market, has been installed in approximately 3.6 million heavy trucks, buses, and
trailers worldwide. WABCO has developed an advanced electronic braking system,
electronically controlled pneumatic gear and hydraulic shifting 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 WABCO. During 1997 a major European
truck manufacturer introduced its new heavy-duty truck line which incorporated a
significant number of WABCO products, including EBS. In 1998 WABCO entered the
passenger car market with an advanced, electronically controlled air suspension
system now featured by the two leading German luxury car manufacturers. New
products under development include further advancements in electronic braking,
stability and safety controls, as well as driveline control and suspension
control systems.
At December 31, 1999, WABCO and affiliated companies employed
approximately 6,300 people and had 15 manufacturing facilities and 11 sales
organizations operating in 20 countries. Principal manufacturing operations are
in Germany, France, the United Kingdom, the Netherlands and Brazil. WABCO has
joint ventures in the United States (Meritor WABCO and WABCO Compressor
Manufacturing Co.), in Japan with Sanwa Seiki (WABCO Japan), in India with TVS
Group (Sundaram Clayton Ltd.) and in China.
BUSINESS SEGMENT DATA
Information concerning revenues and segment profit attributable to each of
the Company's business segments and geographic areas is set forth in the
Company's 1999 Annual Report to Stockholders on page 16, "Five-Year Financial
Summary", under the caption "Segment Data", on pages 18 through 29 under the
caption entitled "Management's Discussion and Analysis", and on page 57 in Note
15 of Notes to Consolidated Financial Statements which are incorporated herein
by reference.
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<PAGE> 13
Information concerning identifiable assets of each of the Company's business
segments is set forth on page 57 of the Company's 1999 Annual Report to
Stockholders in Note 15 of notes to Consolidated Financial Statements, which is
incorporated herein by reference.
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 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 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 Systems and TRANE(R)
Services AMERICAN STANDARD(R)
Plumbing Products AMERICAN STANDARD(R)
IDEAL STANDARD(R)
STANDARD(R)
PORCHER(R)
ARMITAGE SHANKS(R)
DOLOMITE(R)
Vehicle Control Systems WABCO(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 made expenditures of $156 million in 1999, $143 million in
1998 and $149 million in 1997 for research and product development and for
product engineering in its four business segments. The expenditures for research
and product development alone were $103 million in 1999, $97 million in 1998 and
$99 million in 1997 and were incurred primarily by Vehicle Control Systems and
Air Conditioning Systems and Services. Vehicle Control Systems, which expended
the largest amount, has conducted research and development in recent years on
advanced electronic braking systems, heavy-duty disc brake systems, and
additional electronic control systems for commercial vehicles. Air Conditioning
Systems and Services' research and development expenditures were primarily
related to
13
<PAGE> 14
alternative refrigerants with less impact on the environment, compressors, heat
transfer surfaces, air flow technology, acoustics and micro-electronic controls.
Any amount spent on customer sponsored research and development activities in
these periods 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. The Company
believes that it is in substantial compliance with such laws and regulations. A
number of the Company's plants are undertaking responsive actions to address
soil and groundwater issues. In addition, 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 24 proceedings under the Comprehensive Environmental
Response, Compensation and Liability Act (Superfund) 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 1997, 1998 and 1999 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 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.
The Company derived significant revenues in past years from sales of Air
Conditioning Systems and Services using chlorofluorocarbons ("CFCs"), and in
1999 and prior years from sales of products using hydrochloroflurocarbons
("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, utilization of new refrigerants will
require replacement or modification of much existing air conditioning equipment.
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 utilizing CFCs is converted to operate on environmentally
preferred refrigerants or replaced, although such conversion or replacement is
expected to occur only over a period of years, and the Company is unable to
estimate the magnitude or timing of such additional conversion or replacements.
The Company has been working closely with refrigerant manufacturers that are
developing refrigerant substitutes for CFCs and HCFCs, so that the Company's
products will be compatible with those substitutes. Although the Company
believes that its commercial products currently in production will not require
substantial modification to use substitutes, residential and light commercial
products produced by the Company and its competitors may require modification
for refrigerant substitutes. The costs of introducing alternative refrigerants
are expected to be reflected in product pricing and accordingly are not expected
to have a material adverse impact on the Company.
Certain 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 Systems and Services.
Although the Company has been able to meet or exceed such
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<PAGE> 15
standards to date, stricter standards in the future could require additional
research and development expense and capital expenditures to maintain
compliance.
EMPLOYEES
The Company employed approximately 58,000 people as of December 31, 1999
(excluding employees of unconsolidated joint venture companies). The Company has
a total of 14 labor union contracts in North America (covering approximately
9,200 employees), two of which expire in 2000 (covering approximately 650
employees), two of which expire in 2001 (covering approximately 2,600 employees)
and eight of which expire in 2002 (covering 6,000 employees). There can be no
assurance that the Company will successfully negotiate the remaining labor
contracts expiring during 2000 without a work stoppage. However, the Company
does not anticipate any problems in renegotiating these contracts that would
materially affect its results of operations.
In January 1999, 1,900 Air Conditioning Systems and Services employees
went on strike for 22 days at the Clarksville, Tennessee, manufacturing plant.
In February 1998 1,100 Air Conditioning Systems and Services employees went on
strike for 30 days at the Lexington, Kentucky, manufacturing plant. In 1997, 150
employees went on strike for 77 days at the Rushville, Indiana, air conditioning
plant. Other than these strikes, the Company has not experienced any significant
work stoppages in North America in the last five years.
The Company also has a total of 40 labor contracts outside North America
(covering approximately 18,000 employees). In early 1996 there was a 5-week work
stoppage at the two chinaware manufacturing plants of the Philippines plumbing
products subsidiary, involving 700 employees, where the Company combined the two
facilities. Other than the Philippines work stoppage, the Company has not
experienced any significant work stoppage in the last five years outside North
America.
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, the Czech Republic, Bulgaria,
Canada, Brazil, Mexico, Central American countries, China, Malaysia, the
Philippines, Indonesia, South Korea, Thailand, Taiwan, Vietnam and Egypt. In
addition, the Company conducts business in these and other countries through
affiliated companies and partnerships in which the Company owns 50% or less of
the equity interest in the venture.
Because the Company has manufacturing operations in 29 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 asset exposure of
foreign operations to the effects of exchange volatility has been partly offset
by the denomination in foreign currencies of a portion of the Company's
borrowings.
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<PAGE> 16
ITEM 2. PROPERTIES
As of December 31, 1999, the Company conducts its manufacturing activities
through 102 plants in 29 countries of which the principal facilities are:
<TABLE>
<CAPTION>
Business Segment Location.Location Major Products Manufactured at Location
---------------- ----------------- ---------------------------------------
<S> <C> <C>
Air Conditioning Clarksville, TN Commercial unitary air conditioning
Systems and Services Fort Smith, AK Commercial unitary air conditioning
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 handlers
Charmes, France Applied air conditioning systems
Epinal, France Unitary air conditioning systems and mini-splits
Ligang, China Applied air conditioning systems
Taicang, China Unitary air conditioning systems and mini-splits
Taipei, Taiwan Unitary air conditioning systems
Sao Paulo, Brazil Unitary air conditioning systems
Plumbing Products Salem, OH Enameled-steel fixtures and acrylic bathtubs
Tiffin, OH Vitreous china
Trenton, NJ Vitreous china
Toronto, Canada Enameled-steel fixtures
Sevlievo, Bulgaria Vitreous china and brass plumbing fittings
Teplice, Czech Republic Vitreous china
Hull, England Vitreous china and acrylic bathtubs
Middlewich, England Vitreous china
Rugeley, England Vitreous china and acrylic bathtubs
Wolverhampton, England Brass plumbing fittings
Dole, France Vitreous china
Revin, France Vitreous china and bathtubs
Wittlich, Germany Brass plumbing fittings
West Java, Indonesia Vitreous china
Orcenico, Italy Vitreous china
Brescia, Italy Vitreous china
Trichiana, Italy Vitreous china
Aguascalientes, Mexico Vitreous china
Mexico City, Mexico Vitreous china
Monterrey, Mexico Brass plumbing fittings
Manila, Philippines Vitreous china
Seoul, South Korea Brass plumbing fittings
Bangkok, Thailand Vitreous china
Tianjin, China Vitreous china
Beijing, China Enameled steel fixtures
Shanghai, China Vitreous china and brass plumbing fittings
Guangdong Province, China Vitreous china, plumbing fittings and bathtubs
enameled steel fixtures
Braking and Control Campinas, Brazil Vehicle Control Systems
Systems Leeds, England Vehicle Control Systems
Claye-Souilly, France Vehicle Control Systems
Hanover, Germany Vehicle Control Systems
Mannheim, Germany Foundation brakes
</TABLE>
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<PAGE> 17
Except for the property located in Manila, Philippines which is leased,
all of the plants described above are owned by the Company or a subsidiary. 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 1999 several Air Conditioning Systems and Services' plants operated at
or near capacity and others operated moderately below capacity.
In 1999 Plumbing Products' plants worldwide operated at levels of
utilization which varied from country to country, but overall were satisfactory.
Vehicle Control Systems' plants generally operated at good utilization
levels in 1999.
ITEM 3. LEGAL PROCEEDINGS
In October 1999, in Haynes Trane Service Agency, Inc. and Frederick M.
Haynes v. American Standard, Inc., d/b/a The Trane Company, in the United States
District Court for the District of Colorado, verdicts were returned against the
Company for a total of $18 million in respect of claims of wrongful termination
of a distributorship agreement. The Company is currently seeking relief from the
verdicts at the trial court level and, if necessary, will appeal to the United
States Court of Appeals for the Tenth Circuit. The Company believes material
errors were made at the trial level and that the captioned matter was wrongly
decided.
As a result of audits of the Company's German subsidiaries by The State
Finance Administration for the State of North Rhine-Westphalia, Germany for the
periods 1984 through 1990 and 1991 through 1994, the Company has previously
received two assessments for the 1984-1990 audit period which the Company has
been contesting. The Company believes, based on the opinion of our external
German legal counsel, that its German tax returns are substantially correct as
filed and that any adjustments would be inappropriate. Unless the Company is
otherwise able to reach a satisfactory resolution of these matters with the
German Tax Authority, the Company intends to contest vigorously the pending
assessments and any other amounts that may be assessed.
The first assessment was issued in 1992 and was for approximately $16
million of combined corporation and trade taxes and claimed a disallowance of a
deduction of interest expense related to an intercompany finance instrument.
Later in 1992 the amount of the assessment was deposited with the German tax
authorities as security for the disputed tax and a suit to recover that amount
was promptly commenced and is currently pending before the Tax Court for the
State of North Rhine-Westphalia in Cologne, Germany. As a result of making the
deposit, no interest will accrue on the amount under dispute. The second
assessment, received in March 1996, was for approximately $56 million of
combined corporation and trade taxes. Were the Company not to prevail in its
dispute of this assessment, the Company could be required to pay interest on the
assessed amount of approximately $18 million as of December 31, 1999. Interest
on assessed and unpaid taxes accrues, on a non-compounding basis, at the rate of
six percent per annum commencing fifteen months after the end of the tax year
for which the tax is assessed. The second assessment claimed primarily that
earnings of a Dutch subsidiary should have been recognized as income taxable in
Germany. In early 1997, the German tax authority agreed to accept a partial
deposit of $16 million in respect of the second assessment and the Company
commenced an administrative appeal of the assessment with the German tax
authority. The amounts paid in 1992 and 1997 were recorded as assets on the
Company's consolidated balance sheets because the Company, expecting to prevail
in litigation of these matters, would recover such amounts and, therefore,
appropriately accounted for them as receivables. This position is based upon the
opinion of the Company's external German legal counsel, referred to above, that
the Company's German tax returns are substantially correct as filed and that
adjustments would be inappropriate.
In 1998, in connection with the development of the Company's plan to
restructure its plumbing operations in Germany, the Company entered into
discussions with certain German regulatory authorities
17
<PAGE> 18
which could have resulted in an offer to settle the primary issue under dispute
with respect to the second assessment, including all corporation and trade taxes
and accrued interest. On January 22, 1999 the Company's administrative appeal of
the second assessment and any offer of settlement was rejected.
In February 1999, the Company filed notice of appeal with the German Tax
Court and moved to join its appeal of the first assessment with the appeal of
the second assessment. In addition, the Company requested an order from the
German tax authority staying its obligation to pay the amount of the second
assessment during the pendency of the appeal. The German Tax Authority is
obligated by law to grant an order staying payment of disputed tax until final
resolution of the matter if the assessment is subject to serious doubt. On March
15, 1999, the staying order was granted. The Company has agreed to leave the
amount already deposited with the German tax authority pending final resolution
of the dispute. In the ordinary course, it is anticipated that litigation of the
Company's appeal before the State Tax Court will require five to seven years and
that any appeal thereafter to the federal Supreme German Tax Court would require
an additional two or three years. Although the Company's 1998 proposal of
settlement was rejected, the Company has continued to pursue settlement on
appropriate terms.
The Company recorded a loss contingency in 1998 in the amount of the
deposits related to the first and second assessments, related trade taxes and
accrued interest thereon, which amount represents the amount for which the
Company would have been willing in 1998 to settle the issue related to the
second assessment. Based on the opinion of the Company's external German legal
counsel referred to above, the Company intends to vigorously contest and to
litigate these disputed German tax matters, and no additional contingency with
respect to such matters has been recorded.
With respect to the 1991-1994 audit period, the Company engaged in
significant transactions similar to those that gave rise to the assessments in
the prior audit period and, with respect to a matter related to the intercompany
instrument at issue in connection with the first assessment, the German tax
auditors have proposed an adjustment of approximately $40 million. In addition,
because the German tax authorities assessed additional taxes for the 1984-1990
audit period they might, after completing their audit of the later period,
propose further adjustments for the 1991-1994 audit period related to the
subject matter of the second assessment that might be as much as fifty percent
higher than the amount of the assessments in the first audit period. Although
the Company is unable to predict when the audit of its German tax returns for
the 1991-1994 period will be complete or the amount of any additional taxes that
may be assessed, the Company believes the audit may be completed prior to the
end of 2000.
If all matters currently under review by the German tax authorities were
made the subject of assessments and either no orders staying the payment of such
amounts following assessment or during the pendency of our appeal were granted
or the Company was finally determined to owe the full amount of all such taxes,
the Company could be required to pay all assessed amounts plus accrued interest
thereon. The total amount of any payments made with respect to the tax matters
described above, and the timing thereof, could have a material adverse effect on
the Company's liquidity, cash flow and/or results of operation and,
consequently, impair the Company's competitive position. In addition, the
Company might need to raise additional capital and no assurance can be given as
to the availability of debt or equity financing if such need were to arise. See
Note 8 of Notes to Consolidated Financial Statements incorporated by reference
herein (see Item 14(a) of Part IV hereof).
For a discussion of environmental issues see "Item 1. Business -
General - Regulations and Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's stockholders during the
fourth quarter of 1999.
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<PAGE> 19
EXECUTIVE OFFICERS OF THE REGISTRANT
In reliance on General Instruction G to Form 10-K, information on
executive officers of the Registrant is included in this Part I. The following
table sets forth certain information as of March 1, 2000 with respect to each
person who is an executive officer of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
--------------- ---- -----------------------------------------------
<S> <C> <C>
Frederic M. Poses 57 Chairman and Chief Executive Officer, and Director
G. Peter D'Aloia 55 Senior Vice President and Chief Financial Officer
W. Craig Kissel 49 Senior Vice President, Vehicle Control Systems
J. Paul McGrath 59 Senior Vice President, General Counsel and Secretary
Alexander A. Apostolopoulos 57 Vice President, Plumbing Products, Product and Business Development
Thomas S. Battaglia 57 Vice President and Treasurer
Gary A. Brogoch 49 Vice President and Group Executive, Plumbing Products, Asia Pacific
Michael C.R. Broughton 59 Vice President, Vehicle Control Systems, Leeds Operations
Roberto Canizares M. 50 Vice President, Air Conditioning Systems and Services, Worldwide Applied
Systems, Distribution
Wilfried Delker 59 Vice President and Group Executive, Plumbing Products, Worldwide Fittings
George H. Kerckhove 62 Vice President and Director
Alberto Loreti 58 Vice President and Group Executive, Plumbing Products, Europe
Jean-Claude Montauze 53 Vice President, Vehicle Control Systems, Claye-Souilly Operations
G. Eric Nutter 64 Vice President and Group Executive, Americas Plumbing Products Group
David R. Pannier 49 Vice President and Group Executive, Air Conditioning Systems and Services,
North American Unitary Products
Raymond D. Pipes 50 Vice President, Investor Relations
James H. Schultz 51 Vice President and Group Executive, Air Conditioning Systems and
Services, Worldwide Applied Systems
G. Ronald Simon 58 Vice President and Controller
Wolfgang Voss 53 Vice President, Vehicle Control Systems, Order Fulfillment
Robert M. Wellbrock 53 Vice President, Taxes
</TABLE>
Each officer of the Company is elected by the Board of Directors to hold
office until the first Board meeting after the Annual Meeting of Stockholders
next succeeding his election.
None of the Company's officers has any family relationship with any
director or other officer. "Family relationship" for this purpose means any
relationship by blood, marriage or adoption, not more remote than first cousin.
Set forth below is the principal occupation of each of the executive
officers named above during the past five years (except as noted, all positions
are with the Company and American Standard Inc.).
Mr. Poses was elected Chief Executive Officer effective January 1, 2000.
Prior to that, beginning in 1998, he was President and Chief Operating Officer
of AlliedSignal, Inc., having spent his entire 30-year business career with that
corporation. He was also a Director and Vice Chairman of AlliedSignal from 1997
until October 22, 1999 following his election to the Board of American Standard
Companies Inc.
Mr. D'Aloia was elected Senior Vice President and Chief Financial Officer
effective February 1, 2000. Prior to that he was employed by Honeywell
International, Inc., most recently serving as Vice President Business
Development. He spent 27 years with Honeywell's predecessor company,
AlliedSignal, Inc. in diverse management positions, including Vice President -
Taxes, Vice President and Treasurer, Vice President and Controller, and Vice
President and Chief Financial Officer for the Engineered Materials Sector.
Mr. Kissel was elected Senior Vice President, Vehicle Control Systems
in January 1998. Prior thereto he was Vice President of Air Conditioning
Systems and Services' Unitary Products Group since January 1992, becoming
Group Executive in March 1994.
Mr. McGrath joined the Company as Senior Vice President, General Counsel
and Secretary, effective January 17, 2000. From 1996 until that date, he served
as Senior Vice President, General
19
<PAGE> 20
Counsel and Secretary of FMC Corporation and prior to that, was Vice President
and General Counsel of AlliedSignal's Engineered Materials business.
Mr. Apostolopoulos was elected a Vice President in December 1990. In
December 1998 he became Vice President, Product and Business Development for
Plumbing Products. From December 1990 to September 1998 he served as Vice
President and Group Executive, Plumbing Products, Americas International.
Mr. Battaglia was elected Vice President and Treasurer in September
1991.
Mr. Brogoch was elected Vice President in December 1994, and has served as
Group Executive of the Asia Pacific Plumbing Group since the consolidation of
the Far East and China Plumbing Groups in February 1997. Prior thereto he was
Group executive of the China Plumbing Group from December 1994 until February
1997.
Mr. Broughton was elected a Vice President in January 1997. In February
1999 he became Vice President, Vehicle Control Systems, Leeds, Operations. He
served as Vice President in charge of the United Kingdom operations of Vehicle
Control Systems from January 1997 until February 1999. Prior thereto he served
as Managing Director (Business Leader) of that Group from May 1995 to December
1996, and as Process Owner, Order Fulfillment from 1993 to May 1995.
Mr. Canizares was elected Vice President in December 1990. In June 1998 he
became VP, Distribution, for the Worldwide Applied System Group, after having
responsibility for the Air Conditioning Systems and Services Sector's
International Applied Business from January 1998 until June. Prior thereto, from
December 1990, he was in charge of the Trane Asia Pacific Region.
Mr. Delker was elected Vice President and Group Executive, Plumbing
Products, Worldwide Fittings, in April 1990.
Mr. Kerckhove was elected Vice President in January 1998. Prior thereto
he was Senior Vice President, Plumbing Products, since June 1990. Mr.
Kerckhove has served as a director of the Company since September 1990.
Mr. Loreti was elected Vice President and Group Executive, Plumbing
Products, Europe, in March 1999. From November 1996 until March 1999 he was
Business Leader of the Company's Sanifrance operations in France and of the
Italian plumbing company. Prior thereto he was Managing Director and General
Manager of the Italian plumbing company since 1990.
Mr. Montauze was elected a Vice President in October 1994. In February
1999 he became Vice President, Vehicle Control Systems, Claye-Souilly
Operations. He served as Vice President in charge of the French operations of
Vehicle Control Systems from October 1994 until February 1999.
Mr. Nutter was elected Vice President and Group Executive, U.S.
Plumbing Products, in May 1995 and has been Vice President and Group
Executive, Plumbing Products, Americas, since January 1998. Prior thereto he
served as Vice President, Vehicle Control Systems, United Kingdom from
January 1992.
Mr. Pannier was elected Vice President and Group Executive, North American
Unitary Products Group in January 1998. He served as Coach of Unitary Products
Group Marketing and Sales from July 1995 until December 1997, and prior thereto
as Vice President, Residential Marketing from November 1991 until July 1995.
Mr. Pipes was elected as Vice President in May 1992, and has been Vice
President, Investor Relations since January 1998. Prior thereto he was
responsible for Corporate Development programs since February 1997 and served as
Group Executive for the Far East Region of Plumbing Products from May 1992 until
February 1997.
20
<PAGE> 21
Mr. Schultz was elected a Vice President in 1987 and has been Vice
President and Group Executive, Worldwide Applied Systems, Air Conditioning
Systems and Services since January 1998. Prior thereto he served as Group
Executive, North American Commercial Group of Air Conditioning Systems and
Services, since 1987.
Mr. Simon was elected Vice President and Controller in January 1992.
Mr. Voss was elected a Vice President in July 1995. In February 1999 he
became Vice President, Vehicle Control Systems, Order Fulfillment. He served as
Vice President and Group Executive, European Plumbing Products from July 1995
until February 1999. Prior thereto, he served as Process Owner, Order
Fulfillment of the WABCO Automotive company in Germany from January 1994 to June
1995.
Mr. Wellbrock was elected Vice President, Taxes, effective January 1,
1994.
21
<PAGE> 22
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of the Company is listed on The New York Stock Exchange
(the "Exchange"). The common stock was first traded on the Exchange on February
3, 1995 concurrent with the underwritten initial public offering of shares of
the Company's common stock at an initial price to the public of $20.00 per share
(the "Offering"). Prior to the Offering there was no established public trading
market for the Company's shares.
In January 1995 the Company adopted a Restated Certificate of
Incorporation, Amended Bylaws and a Stockholder Rights Agreement. The Restated
Certificate of Incorporation authorizes the Company to issue up to 200,000,000
shares of common stock, par value $.01 per share, and 2,000,000 shares of
preferred stock, par value $.01 per share, of which the Board of Directors
designated 900,000 shares as a new series of Junior Participating Cumulative
Preferred Stock. Each outstanding share of common stock has associated with it
one right to purchase a specified amount of Junior Participating Cumulative
Preferred Stock at a stipulated price in certain circumstances relating to
changes in ownership of the common stock of the Company.
The number of holders of record of the common stock of the Company as of
March 10, 2000, was 951.
No dividends have been declared on the Company's common stock since the
Offering. The Company has no separate operations and its ability to pay
dividends or repurchase its common stock is dependent entirely upon the extent
to which it receives dividends or other funds from its wholly-owned
subsidiaries, American Standard Inc. and American Standard International Inc.
The terms of the Company's 1997 Credit Agreement restrict the payment of
dividends and other extensions of funds by American Standard Inc. and American
Standard International Inc. to the Company.
Set forth below are the high and low sales prices for shares of the
Company's common stock for each quarterly period in 1998 and 1999.
<TABLE>
<CAPTION>
1998: High Low
----- ---- ---
<S> <C> <C>
First quarter $48-1/4 $37-3/8
Second quarter $49-1/4 $39-7/8
Third quarter $48-7/16 $24-5/16
Fourth quarter $37-7/8 $21-5/8
1999:
First quarter $35-3/4 $31-3/8
Second quarter $49-7/16 $34-5/8
Third quarter $49-1/4 $38-3/8
Fourth quarter $46 $33-3/8
</TABLE>
22
<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
- ----------------------------
Sales $ 7,190 $ 6,556 $ 5,958 $ 5,805 $ 5,221
============ ============ ============ ============ ============
Segment income $ 751 $ 658 $ 632 $ 605 $ 551
Equity in net income of
unconsolidated joint
ventures 37 27 12 3 7
Restructuring and asset
impairment charges (a) (15) (197) -- (235) --
Interest expense (188) (188) (192) (198) (213)
Corporate expenses (134) (110) (105) (104) (111)
------------ ------------ ------------ ------------ ------------
Income from continuing
operations before income taxes
and extraordinary item 451 190 347 71 234
Income taxes (187) (141) (124) (105) (85)
------------ ------------ ------------ ------------ ------------
Income (loss) from continuing
operations before extraordinary
item (b) $ 264 $ 49 $ 223 $ (34) $ 149
============ ============ ============ ============ ============
Per Common Share:
Income (loss) from continuing
operations before extraordinary
item:
Basic $ 3.74 $ .68 $ 3.03 $ (.44) $ 2.00
============ ============ ============ ============ ============
Diluted $ 3.63 $ .66 $ 2.93 $ (.44) $ 1.97
============ ============ ============ ============ ============
Average number of outstanding Common shares:
Basic 70,524,145 71,729,541 73,801,220 77,986,511 74,671,830
Diluted 72,666,406 73,672,018 76,167,486 77,986,511 75,823,854
BALANCE SHEET DATA (at end of
- ------------------
period):
Total assets $ 4,686 $ 4,107 $ 3,718 $ 3,520 $ 3,520
Total debt 2,643 2,428 2,300 1,923 2,083
Stockholders' deficit (497) (701) (610) (380) (390)
</TABLE>
(a) In 1999 the Company recorded restructuring and asset impairment charges of
$15 million ($9 million, net of tax benefits, or $.13 per diluted share).
These consist of restructuring charges of $30 million principally for
Vehicle Control Systems and a $13 million impairment charge relating to a
minority equity interest in a non-core business, partly offset by a
reduction of charges taken in 1998 to restructure North American Plumbing
Products Operations. In 1998 the Company recorded restructuring and asset
impairment charges of $197 million ($183 million, net of tax, or $2.49 per
diluted share.) Effective January 1, 1996, the Company adopted Statement
of Financial Accounting Standards No. 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, or $2.95 per diluted
share.
(b) Retirements of debt in connection with debt refinancing in 1998 and 1997
and the initial public offering in 1995 resulted in extraordinary charges
of $50 million (net of taxes of $7 million) in 1998, $24 million (net of
taxes of $6 million) in 1997, and $30 million in 1995 on which there was
no tax benefit. These charges included call premiums and the write-off of
deferred debt issuance costs (see
23
<PAGE> 24
Note 11 of Notes to Consolidated Financial Statements included in the
Company's 1999 Annual Report to Stockholders and incorporated herein by
reference).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis of the financial condition and results
of operations of the Company is set forth on pages 18 through 29 of the
Company's Annual report to Stockholders and is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk are set forth in
the Company's Annual Report to Stockholders on pages 28 and 29 under the caption
"Market Risk" and on page 55 in Note 13 to the financial statements and are
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference from the Company's Annual Report to
Stockholders are the financial statements and related information listed in the
Index to Financial Statements and Financial Statement Schedules on page 27
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
24
<PAGE> 25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Except for information regarding the Company's executive officers, the
information called for by this Item is incorporated in this report by reference
to the Company's definitive Proxy Statement dated March 27, 2000: under the
headings: "Stock Ownership" and "1. Election of Directors", except for
information not deemed to be "soliciting material" or "filed" with the SEC,
information subject to Regulations 14A or 14C under the Exchange Act or
information subject to the liabilities of Section 18 of the Exchange Act.
For information concerning the executive officers of the Company, see
"Executive Officers of the Registrant" under Part I of this report.
None of the Company's directors or officers has any family relationship
with any other director or officer. ("Family relationship" for this purpose
means any relationship by blood, marriage or adoption, not more remote than
first cousin.)
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation and related matters is set
forth in the Company's definitive Proxy Statement dated March 27, 2000 as
follows: under the section entitled "Directors' Fees and Other Arrangements" on
page 7 thereof, under the heading entitled "Executive Compensation" on pages 10
through 14 thereof, under the heading entitled "Compensation Committee
Interlocks and Insider Participation" on page 18 and under the heading entitled
"Certain Relationships and Related Party Transactions" on page 18 thereof, and
is incorporated herein by reference except for the sections entitled "Management
Development and Nominating Committee Report on Compensation of Executive
Officers of the Company" and "Performance Graph" appearing on pages 15 through
18 except for information not deemed to be "soliciting material" or "filed" with
the SEC, information subject to Regulations 14A or 14C under the Exchange Act or
information subject to the liabilities of Section 18 of the Exchange Act.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning shares of common stock of the Company beneficially
owned by management and others is set forth under the heading entitled "Stock
Ownership" on pages 4 and 5 in the Company's definitive Proxy Statement dated
March 27, 2000 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated in this report by
reference to the Company's definitive Proxy Statement dated March 27, 2000 under
the section entitled "Certain Relationships and Related Party Transactions",
except for information not deemed to be "soliciting material" or "filed" with
the SEC, information subject to Regulations 14A or 14C under the Exchange Act or
information subject to the liabilities of Section 18 of the Exchange Act.
25
<PAGE> 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial statements and financial statement schedules
The financial statements and financial statement schedules listed in
the Index to Financial Statements and Financial Statement Schedules on
page 27 hereof incorporated herein by reference.
3. Exhibits
The exhibits to this Report are listed on the accompanying index to
exhibits and are incorporated herein by reference or are filed as part
of this Annual Report on Form 10-K.
(b) Reports on Form 8-K
During the quarter ended December 31, 1999, the company filed a
Current Report on Form 8-K which included the text of a press release
announcing the election on October 7, 1999, of Frederic M. Poses as
Chairman and Chief Executive Officer of the Company effective January
1, 2000, and as a Director of the Company effective immediately. Also
included were the texts of separate press releases announcing the
Company's decision to sell its Medical Systems Group and the election
of Jared L. Cohon as a Director.
26
<PAGE> 27
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
COVERED BY
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
<TABLE>
<CAPTION>
------------
1999
ANNUAL
REPORT
TO
STOCKHOLDERS
(PAGES)
------------
<S> <C>
1. Financial Statements (incorporated by reference from
the Company's 1999 Annual Report to Stockholders)
Consolidated Balance Sheet at
December 31, 1999, and 1998 34
Years ended December 31, 1999, 1998, and 1997:
Consolidated Statement of Operations 32
Consolidated Statement of Cash Flows 33
Consolidated Statement of Stockholders' Deficit 36
Notes to Financial Statements 37-65
Segment Data 16,57
Quarterly Data (Unaudited) 66,67
Report of Independent Auditors 31
</TABLE>
<TABLE>
<CAPTION>
------------
FORM 10-K
(PAGES)
------------
<S> <C>
2. Report of Independent Auditors 34
Financial statement schedules, years ended
December 31, 1999, 1998, and 1997
I Condensed Financial Information of Registrant 35-38
II Valuation and Qualifying Accounts 39
</TABLE>
All other schedules have been omitted because the information is not
applicable or is not material or because the information required is included
in the financial statements or the notes thereto.
27
<PAGE> 28
AMERICAN STANDARD COMPANIES INC.
INDEX TO EXHIBITS
(Item 14(a)3 - Exhibits Required by Item 601
of Regulation S-K and Additional Exhibits)
(The Commission File Number of American Standard Companies Inc. (formerly ASI
Holding Corporation), the Registrant (sometimes hereinafter referred to as
"Holding"), and for all Exhibits incorporated by reference, is 1-11415, except
those Exhibits incorporated by reference in filings made by American Standard
Inc. (the "Company") the Commission File Number of which is 33-64450. Prior to
filing its Registration Statement on Form S-2 on November 10, 1994, Holding's
Commission File Number was 33-23070.)
(3) (i) Restated Certificate of Incorporation of Holding; previously filed as
Exhibit 3(i) in Holding's Form 10-Q for the quarter ended September 30, 1998 and
herein incorporated by reference.
(ii) Amended and Restated By-laws of Holding, filed herewith.
(4) (i) Form of Common Stock Certificate; previously filed as Exhibit 4(i)
in Amendment No. 3 to Registration Statement No. 33-56409 of
Holding, filed January 5, 1995, and herein incorporated by
reference.
(ii) Indenture, dated as of November 1, 1986, between the Company 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) to the Company's Form 10-K for
the fiscal year ended December 31, 1986, and herein incorporated by
reference.
(iii) Instrument of Resignation, Appointment and Acceptance, dated as of
April 25, 1988 among the Company, 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 referred to in Exhibit (4) (ii) above; previously filed as
Exhibit (4) (ii) to Registration Statement No. 33-64450 of the
Company, filed June 16, 1993, and herein incorporated by reference.
(iv) First Supplemental Indenture, dated as of February 1, 2000 among the
Company, Holding and Wilmington Trust Company, as Trustee, filed
herewith.
(v) Form of Senior Debt Indenture dated as of January 15, 1998 among the
Company, Holding and The Bank of New York; filed as Exhibit (4) (i)
to Amendment No. 1 to Registration Statement No. 333-32627 filed
September 19, 1997, and herein incorporated by reference.
(vi) Indenture dated as of January 15, 1998 among the Company, Holding
and The Bank of New York, Trustee; previously filed as Exhibit 4.1
in Holding's Form 10- Q for the quarter ended September 30, 1998,
and herein incorporated by reference.
(vii) First Supplemental Indenture dated as of January 15, 1998 between
the Company, Holding and The Bank of New York, relating to the
Company's 7.375% Senior Notes due 2008, guaranteed by Holding;
previously filed as Exhibit (4)(xi) in Holding's Form 10-K for the
fiscal year ended December 31, 1997, and herein incorporated by
reference.
28
<PAGE> 29
(viii)Second Supplemental Indenture dated as of February 13, 1998 between
the Company, Holding and The Bank of New York relating to the
Company's 7-1/8% Senior Notes due 2003 and 7-5/8% Senior Notes due
2010, guaranteed by Holding; previously filed as Exhibit (4)(xii) in
Holding's Form 10-K for the fiscal year ended December 31, 1997, and
herein incorporated by reference.
(ix) Third Supplemental Indenture dated as of April 13, 1998 to the
Indenture dated as of January 15, 1998 among the Company, Holding
and The Bank of New York relating to the 7-3/8% Senior Notes due
2005; previously filed as Exhibit 4.2 in Holding's Form 10-Q for the
quarter ended September 30, 1998 and herein incorporated by
reference.
(x) Fourth Supplemental Indenture dated as of May 28, 1999 to the
Indenture dated as of January 15, 1998 among the Company, Holding
and The Bank of New York relating to the 8.25% Senior Notes due;
filed herewith.
(xi) Fifth Supplemental Indenture dated as of May 28, 1999 to the
Indenture dated as of May 28, 1999 among the Company, Holding and
The Bank of New York relating to the 8.25% Senior Notes due 2009;
filed herewith.
(xii) Sixth Supplemental Indenture dated as of May 28, 1999 to the
Indenture dated as of May 28, 1999 among the Company, Holding and
The Bank of New York relating to the 7.125% Senior Notes due 2006,
filed herewith.
(xiii)Amended and Restated Credit Agreement, dated as of January 31,
1997, among Holding, the Company, certain subsidiaries of the
Company and the financial institutions listed therein, The Chase
Manhattan Bank, as Administrative Agent; Citibank, N. A., as
Documentation Agent; The Bank of Nova Scotia and NationsBank, N. A.,
as Co-Syndication Agents; Bankers Trust Company, Deutsche Bank AG,
The Industrial Bank of Japan Trust Company, The Sanwa Bank Limited,
New York Branch and The Sumitomo Bank, Ltd., as Senior Managing
Agents; and The Bank of New York, Banque Paribas, CIBC Inc., CIBC
Wood Gundy plc, Compagnie Financiere de CIC et de L'Union
Europeenne, Credit Lyonnais, New York Branch, Fleet National Bank,
The Long Tem Credit Bank of Japan, Limited and The Toronto-Dominion
Bank, as Managing Agents; previously filed as Exhibit (4) (xviii) to
Amendment No. 2 to Registration Statement No. 333-18015, filed
February 5, 1997, and herein incorporated by reference.
(xiv) First Amendment dated as of May 22, 1997 to the Amended and Restated
Credit Agreement dated as of January 31, 1997 among Holding, the
Company, certain subsidiaries of the Company, the financial
institutions party thereto and The Chase Manhattan Bank, as
administrative agent; previously filed as Exhibit 4 (a) to Holding's
Report on Form 8-K dated October 24, 1997, and herein incorporated
by reference.
(xv) Second Amendment dated as of August 20, 1997 to the Amended and
Restated Credit Agreement dated as of January 31, 1997 among
Holding, the Company, certain subsidiaries of the Company, the
financial institutions party thereto and The Chase Manhattan Bank,
as administrative agent; previously filed as Exhibit 4 (b) to
Holding's Report on Form 8-K dated October 24, 1997, and herein
incorporated by reference.
(xvi) Third Amendment dated as of August 7, 1998 to the Amended and
Restated Credit Agreement dated as of January 31, 1997 among
Holding, the Company, certain subsidiaries of the Company, the
financial institutions party thereto and The Chase Manhattan Bank,
as Administrative Agent; previously filed as Exhibit 4.3 in
Holding's Form 10-Q for the quarter ended September 30, 1998, and
herein incorporated by reference.
(xvii)Fourth Amendment dated as of December 22, 1998 to the Amended and
Restated Credit Agreement dated as of January 31, 1997 among
Holding, the Company, certain
29
<PAGE> 30
subsidiaries of the Company, the financial institutions party
thereto and The Chase Manhattan Bank, as Administrative Agent;
previously filed as Exhibit 4 in Holding's Form 8-K dated December
22, 1998, filed February 12, 1999, and herein incorporated by
reference.
(xviii) Fifth Amendment dated as of November 30, 1999 to the Amended and
Restated Credit Agreement dated as of January 31, 1997 among
Holding, the Company, certain subsidiaries of the Company, the
financial institutions party thereto and The Chase Manhattan Bank,
as Administrative Agent; filed herewith.
(xix) Rights Agreement, dated as of January 5, 1995, between Holding and
Citibank N.A. as Rights Agent; previously filed as Exhibit (4)
(xxv) to Holding's Form 10-K for the fiscal year ended December
31, 1994, and herein incorporated by reference.
(10)* (i) Employment Agreement of Frederic M. Poses, previously filed as
Exhibit (10) to Holding's Form 10-Q for the third quarter ended
September 30, 1999, and herein incorporated by reference.
(ii) The American Standard Companies Inc. Employee Stock Purchase Plan;
previously filed as Exhibit (10)(i) in Holding's Form 10-K for the
fiscal year ended December 31, 1997, and herein incorporated by
reference.
(iii) American Standard Inc. Long-Term Incentive Compensation Plan, as
amended and restated on December 5, 1996; incorporated herein by
reference to Exhibit (10) (i) of Company's Form 10-K for the
fiscal year ended December 31, 1996.
(iv) Trust Agreement for American Standard Inc. Long-Term Incentive
Compensation Plan and American Standard Companies Inc.
Supplemental Incentive Compensation Plan, as amended and restated
on December 5, 1996; incorporated herein by reference to Exhibit
(10) (ii) of Company's Form 10-K for the fiscal year ended
December 31, 1996.
(v) American Standard Inc. Annual Incentive Plan, as amended and
restated on December 5, 1996; incorporated herein by reference to
Exhibit (10) (iii) of Company's Form 10-K for the fiscal year
ended December 31, 1996.
(vi) American Standard Inc. Executive Supplemental Retirement Benefit
Program, as restated to include all amendments through July 6,
1995; incorporated herein by reference to Exhibit (10) (iv) of
Company's Form 10-K for the fiscal year ended December 31, 1995.
(vii) American Standard Inc. Supplemental Compensation Plan for Outside
Directors, as amended through December 4, 1997; incorporated
herein by reference to Exhibit (10) (v) to the Company's Form 10-K
for the fiscal year ended December 31, 1997.
(viii) Trust Agreement for the American Standard Inc. Supplemental
Compensation Plan for Outside Directors, dated March 7, 1996;
incorporated herein by reference to Exhibit (10) (vi) to the
Company's Form 10-K for the fiscal year ended December 31, 1997.
(ix) American Standard Companies Inc. Corporate Officer Severance Plan,
as amended and restated as of December 2, 1999; filed herewith.
(x) Summary of terms of Unfunded Deferred Compensation Plan adopted
December 2, 1993; previously filed as Exhibit (10) (xviii) to the
Company's Form 10-K for the fiscal year ended December 31, 1993
and herein incorporated by reference.
*Items in this section 10 constitute management contracts or compensatory plans
or arrangements with the exception of (10) (xvi), (xvii) and (xviii).
30
<PAGE> 31
(xi) American Standard Companies Inc. Stock Incentive Plan, as amended
and restated on December 2, 1999, filed herewith.
(xii) Addendum to Stock Incentive Plan referred to in Exhibit (10) (xi)
above to comply with local regulations in the United Kingdom with
respect to options granted in that country, filed herewith.
(xiii) Addendum to Stock Incentive Plan referred to in Exhibit (10) (xi)
above to comply with local regulations in France with respect to
options granted in that country, filed herewith.
(xiv) American Standard Companies Inc. and Subsidiaries 1997-1999
Supplemental Incentive Plan as described in the American Standard
Companies Inc. Notice of Annual Meeting of Stockholders and Proxy
Statement, May 7, 1998, on pages 11 and 18 and herein incorporated
by reference. The plan was amended on March 4, 1999 to extend the
performance period through the year 2000 and modify the target
conditions for the achievement of awards under the Plan and is now
called the American Standard Companies Inc. and Subsidiaries
1997-2000 Supplemental Incentive Plan.
(xv) Form of Indemnification Agreement; previously filed as Exhibit
(10) (xxi) in Amendment No. 3 to Registration Statement No.
33-56409, filed January 5, 1995, and herein incorporated by
reference.
(xvi) Stock Disposition Agreement, dated as of December 16, 1996, among
Holding, Kelso & Company, L.P. and Kelso ASI Partners, L.P.;
previously filed as Exhibit (10) (i) to Registration Statement No.
333-18015, filed December 17, 1996, and herein incorporated by
reference.
(xvii) Form of Warrant Agreement between Holding and Citibank, N. A. as
Warrant Agent, included as Annex A to the Stock Disposition
Agreement described in (10) (xvi) above; previously filed as
Exhibit (10) (ii) to Registration Statement No. 333-18015, filed
December 17, 1996, and herein incorporated by reference.
(xviii) Share Purchase Agreement dated February 2,1999 among Blue Circle
Industries PLC; Blue Circle Bathrooms Limited; Blue Circle Home
Products BV; Blue Circle Home Products Beteiligungs-GmbH and Ideal
Standard Limited; Ideal Standard S.r.l.; WABCO Standard GmbH and
U.S. Plumbing Products Inc.; Ideal Standard IBV Limited; WABCO
Standard Export Inc.; previously filed as Exhibit 2 in Holding's
Form 8-K, dated December 22, 1998, filed February 12, 1999, and
herein incorporated by reference.
(xix) Amendment of Employment Agreement of Frederic M. Poses referred
to in Exhibit (10)(i) above, filed herewith.
(12) Ratio of Earnings to Fixed Charges.
(13) 1999 Annual Report to Stockholders. Only those portions
specifically incorporated by reference are filed; no other
portions of the 1999 Annual Report to Stockholders are to be
deemed filed.
(21) Listing of Holding's subsidiaries.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedule.
31
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN STANDARD COMPANIES INC.
By: /s/ Frederic M. Poses
--------------------------
(Frederic M. Poses)
Chairman and Chief Executive Officer
March 29, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated:
/s/ FREDERIC M. POSES
----------------------
(Frederic M. Poses) Chairman, President and Chief
Executive
Officer; Director
(Principal Executive Officer)
/s/ G. PETER D'ALOIA
--------------------
(G. Peter D'Aloia) Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
/s/ G. RONALD SIMON
---------------------
(G. Ronald Simon) Vice President and Controller
(Principal Accounting Officer)
/s/ STEVEN E. ANDERSON
------------------------
(Steven E. Anderson) Director
/s/ JARED L. COHON
-------------------
(Jared L. Cohon) Director
/s/ JAMES F. HARDYMON
----------------------
(James F. Hardymon) Director
/s/ GEORGE H. KERCKHOVE
------------------------
(George H. Kerckhove) Director
/s/ ROGER W. PARSONS
----------------------
(Roger W. Parsons) Director
/s/ J. DANFORTH QUAYLE
------------------------
(J. Danforth Quayle) Director
/s/ DAVID M. RODERICK
------------------------
(David M. Roderick) Director
32
<PAGE> 33
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report (other than the historical
financial data and other statements of historical fact), including, without
limitation, statements as to management's expectations and belief, are
forward-looking statements. Forward-looking statements are made based upon
management's good faith expectations and belief concerning future developments
and their potential effect upon the Company. There can be no assurance that
future developments will be in accordance with such expectations or that the
effect of future developments on the Company will be those anticipated by
management. Many important factors could cause actual results to differ
materially from management's expectations, including the level of construction
activity in the Company's Air Conditioning Systems and Services' and Plumbing
Products' markets; the timing of completion and success in the start-up of new
production facilities; changes in U.S. or international economic conditions,
such as inflation or interest rate fluctuations or recessions in the Company's
markets; pricing changes to the Company's supplies or products or those of its
competitors, and other competitive pressures on pricing and sales; labor
relations; integration of acquired businesses; risks generally relating to the
Company's international operations, including governmental, regulatory or
political changes; changes in environmental, health or other regulations that
may affect one or more of the Company's products or potential products and the
inability to obtain regulatory approvals for one or more of the Company's
potential products; changes in laws or different interpretations of laws
including the risk that German judicial authorities will disagree with the
opinions of the Company's German legal counsel; the planned redemption of debt;
the impact of the Far East economic situation; and transactions or other events
affecting the need for, timing and extent of the Company's capital expenditures.
33
<PAGE> 34
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of American Standard
Companies Inc. as of December 31, 1999 and 1998, and for each of the three years
in the period ended December 31, 1999, and have issued our report thereon dated
February 11, 2000. Our audits also included the financial statement schedules
listed in Item 14(a). 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 financial statement 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 set forth therein.
/S/ ERNST & YOUNG LLP
New York, New York
February 11, 2000
34
<PAGE> 35
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS (PARENT COMPANY SEPARATELY)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Interest income $ -- $ -- $ 1.4
Interest expense -- -- (1.4)
Equity in net income (loss) of subsidiary 138.3 (16.3) 96.2
-------- -------- --------
Net income (loss) $ 138.3 $ (16.3) $ 96.2
======== ======== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE> 36
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF
REGISTRANT - (CONTINUED)
BALANCE SHEET (PARENT COMPANY SEPARATELY)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------
ASSETS 1999 1998
------- -------
<S> <C> <C>
Investment in subsidiaries $(145.2) $(344.8)
LIABILITIES
Loan payable to subsidiary 351.3 356.2
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value, 200,000,000
shares authorized: issued and
outstanding, 70,742,538 shares in 1999;
69,924,615 shares in 1998 .7 .7
Capital surplus 595.1 594.0
Treasury stock (363.3) (379.6)
Accumulated deficit (553.3) (691.6)
Foreign currency translation effects (175.7) (224.5)
------- -------
Total stockholders' deficit (496.5) (701.0)
------- -------
$(145.2) $(344.8)
======= =======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE> 37
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS (PARENT COMPANY SEPARATELY)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 138.3 $ (16.3) $ 96.2
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities
Equity in net loss (income) of subsidiary (138.3) 16.3 (96.2)
------- ------- -------
Net cash flow from operating activities -- -- --
------- ------- -------
Cash provided (used) by investing
activities:
Investment in subsidiary (8.1) (4.9) (1.2)
Purchase of common stock by subsidiary -- -- 16.9
------- ------- -------
Net cash provided (used) by investing
activities (8.1) (4.9) 15.7
------- ------- -------
Cash provided (used) by financing activities:
Purchases of treasury stock (4.2) (83.7) (310.7)
Issuance of common stock 17.2 14.8 20.0
Loan from subsidiary (4.9) 73.8 291.9
Other -- -- (16.9)
------- ------- -------
Net cash provided (used) by financing
activities 8.1 4.9 (15.7)
------- ------- -------
Net change in cash and cash equivalents $ 0 $ 0 $ 0
======= ======= =======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE> 38
SCHEDULE I -- 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. (the "Parent Company"), are an integral part of these
condensed financial statements.
(B) The Parent Company was organized in 1988 to acquire American Standard Inc.
(the "Acquisition"). American Standard Inc.'s common stock is owned solely
by the Parent Company. On December 31, 1999, the Parent Company became the
sole owner of all the common stock of American Standard International Inc.
as a result of a reorganization of subsidiary ownership within the
Company.
(C) In the first quarter of 1997, the Parent Company completed a secondary
offering of 12,429,548 shares of its common stock owned by Kelso ASI
Partners, L.P., ("ASI Partners") and the Parent Company's largest
shareholder as of December 31, 1996. In conjunction with the secondary
offering, the Parent Company purchased 4,628,755 shares of its common
stock from ASI Partners for $208 million, plus fees and expenses. In
addition, in October 1997 the company completed its open-market share
repurchase program commenced in May 1997 pursuant to which 2,320,900
shares of its common stock were purchased for $100 million. Both of these
purchases were funded with borrowings by American Standard Inc. under
American Standard Inc.'s 1997 Credit Agreement which were loaned to the
Parent Company under a non-interest-bearing intercompany demand note.
(D) In 1998, the Parent Company's Board of Directors approved the purchase of
up to $300 million of the Parent Company's common stock, not to exceed
$100 million per year, during the three-year period ending July 2001.
During 1999 the Parent Company purchased .1 million shares of its common
stock for $4 million and during 1998 purchased 2.7 million shares for
$83.7 million, 2.5 million of which shares were purchased for $75 million
pursuant to this plan. These purchases were funded with borrowings by
American Standard Inc.'s 1997 Credit Agreement which were loaned to the
Parent Company under a non-interest-bearing intercompany demand note.
38
<PAGE> 39
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Description Foreign
Balance Additions Currency Balance
Beginning Charged to Other Translation End of
of Period Income Deductions Changes Effects Period
--------- ------ ---------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
1999:
Reserve deducted from assets:
Allowance for doubtful
accounts receivable $ 33,264 $23,520 $(10,468)(A) $ 1,412 $( 1,825) $ 45,903
======== ======= ======== ======== ======== ========
Reserve for post-retirement
benefits $468,197 $71,562 $(56,107)(B) $ (4,866)(C) $(42,680) $436,106
======== ======= ======== ======== ======== ========
1998:
Reserve deducted from assets:
Allowance for doubtful
accounts receivable $ 28,885 $15,236 $ (8,289)(A) $ (1,660) $ (908) $ 33,264
======== ======= ======== ======== ======== ========
Reserve for post-retirement
benefits $428,385 $60,219 $(44,514)(B) $ 2,716(D) $ 21,391 $468,197
======== ======= ======== ======== ======== ========
1997:
Reserve deducted from assets:
Allowance for doubtful
accounts receivable $ 28,294 $14,212 $ (9,581)(A) $ (841) $ (3,199) $ 28,885
======== ======= ======== ======== ======== ========
Reserve for post-retirement
benefits $473,229 $57,751 $(44,808)(B) $(15,641)(C) $(42,146) $428,385
======== ======= ======== ======== ======== ========
</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) Includes reclassifications to current liabilities, offset by effect of
acquisition of new businesses.
(D) Primarily includes reclassification from current liabilities.
39
<PAGE> 1
Exhibit 3 (ii)
AMERICAN STANDARD COMPANIES INC.
AMENDED BY-LAWS
As adopted on January 4, 1995,
as Amended on December 5, 1996,
as Amended on March 24, 1997 (effective May 1, 1997),
as Amended on March 5, 1998,
as Amended on March 26, 1999 (effective May 6, 1999),
as Amended December 2, 1999
ARTICLE I
STOCKHOLDERS
Section 1.1. Annual Meetings. The annual meeting of the
stockholders of the Corporation for the election of Directors and for the
transaction of such other business as properly may come before such meeting
shall be held at such place, either within or without the State of Delaware, and
at 10:00 a.m. (local time) on the first Thursday in May (or, if such day is a
legal holiday, then on the next succeeding business day), or at such other date
and hour, as may be fixed from time to time by resolution of the Board of
Directors and set forth in the notice or waiver of notice of the meeting.
[Sections 211(a), (b).](1)
Section 1.2. Special Meetings. Special meetings of the
stockholders may be called at any time by the (i) Chief Executive Officer or
(ii) by the Board of Directors pursuant to a resolution adopted by a majority of
the total number of authorized Directors. Special meetings of the stockholders
shall be held at such places, within or without the State of Delaware, as shall
be specified in the respective notices or waivers of notice thereof. [Section
211(d).]
Section 1.3. Notice of Meetings; Waiver. The Secretary, Acting
Secretary or any Assistant Secretary shall cause written notice of the place,
date and hour of each meeting of the stockholders, and, in the case of a special
meeting, the purpose or purposes for which such meeting is called, to be given
personally or by mail, not less than ten nor more than sixty days prior to the
meeting, to each stockholder of record entitled to vote at such meeting. If such
notice is mailed, it shall be deemed to have been given to a stockholder when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the record of stockholders of the
Corporation, or, if he shall have filed with the Secretary or Acting or
Assistant Secretary of the Corporation a written
- --------
(1). Citations are to the General Corporation Law of the State of Delaware as
in effect on December 20, 1994 (the "GCL"), and are inserted for
reference only, and do not constitute a part of the Amended By-Laws.
<PAGE> 2
request that notices to him be mailed to some other address, then directed to
him at such other address. Such further notice shall be given as may be required
by law.
No notice of any meeting of stockholders need be given to any
stockholder who submits a signed waiver of notice, whether before or after the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in a written
waiver of notice. The attendance of any stockholder at a meeting of stockholders
shall constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened. [Sections 222, 229.]
Section 1.4. Quorum. Except as otherwise required by law or by the
Restated Certificate of Incorporation, the presence in person or by proxy of the
holders of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting. [Section 216.]
Section 1.5. Voting. If, pursuant to Section 5.5 of these Amended
By-Laws, a record date has been fixed, every holder of record of shares entitled
to vote at a meeting of stockholders shall be entitled to one vote for each
share outstanding in his name on the books of the Corporation at the close of
business on such record date, provided, however, that the certificate of
designation pertaining to any series of the Corporation's preferred stock may
provide for a greater number of votes per share of such series. If no record
date has been fixed, then every holder of record of shares entitled to vote at a
meeting of stockholders shall be entitled to one vote (subject to the same
proviso as set forth in the immediately preceding sentence) for each share of
stock standing in his name on the books of the Corporation at the close of
business on the day next preceding the day on which notice of the meeting is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. Except as otherwise required by
law, by the Restated Certificate of Incorporation or by these Amended By-Laws,
the vote of a majority of the shares represented in person or by proxy at any
meeting at which a quorum is present shall be sufficient for the transaction of
any business at such meeting. [Sections 212(a), 216.]
Section 1.6. Voting by Ballot. No vote of the stockholders need be
taken by written ballot unless otherwise required by law. Any vote which need
not be taken by ballot may be conducted in any manner approved by the meeting.
Section 1.7. Adjournment. If a quorum is not present at any
meeting of the stockholders, the stockholders present in person or by proxy
shall have the power to adjourn any such meeting from time to time until a
quorum is present. Notice of
2
<PAGE> 3
any adjourned meeting of the stockholders of the Corporation need not be given
if the place, date and hour thereof are announced at the meeting at which the
adjournment is taken, provided, however, that if the adjournment is for more
than thirty days, or if after the adjournment a new record date for the
adjourned meeting is fixed pursuant to Section 5.5 of these Amended By-Laws, a
notice of the adjourned meeting, conforming to the requirements of Section 1.3
hereof, shall be given to each stockholder of record entitled to vote at such
meeting. At any adjourned meeting at which a quorum is present, any business may
be transacted that might have been transacted on the original date of the
meeting. [Section 222(c).]
Section 1.8. Proxies. Any stockholder entitled to vote at any
meeting of the stockholders or to express consent to or dissent from corporate
action without a meeting may authorize another person or persons to vote at any
such meeting and express such consent or dissent for him by proxy. A stockholder
may authorize a valid proxy by executing a written instrument signed by such
stockholder, or by causing his or her signature to be affixed to such writing by
any reasonable means including, but not limited to, by facsimile signature, or
by transmitting or authorizing the transmission of a telegram, cablegram or
other means of electronic transmission to the person designated as the holder of
the proxy, a proxy solicitation firm or a like authorized agent. No such proxy
shall be voted or acted upon after the expiration of three years from the date
of such proxy, unless such proxy provides for a longer period. Every proxy shall
be revocable at the pleasure of the stockholder executing it, except in those
cases where applicable law provides that a proxy shall be irrevocable. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by filing another duly executed proxy bearing a later date with the
Secretary. Proxies by telegram, cablegram or other electronic transmission must
either set forth or be submitted with information from which it can be
determined that the telegram, cablegram or other electronic transmission was
authorized by the stockholder. Any copy, facsimile telecommunication or other
reliable reproduction of a writing or transmission created pursuant to this
section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission. [Sections 212(b), (c), (d), (e).]
Section 1.9. Organization; Procedure. At every meeting of
stockholders the presiding officer shall be the Chief Executive Officer or, in
the event of his absence or disability,
3
<PAGE> 4
any Vice President or a presiding officer chosen by a majority of the
stockholders present in person or by proxy. The Secretary or Acting Secretary,
or in the event of his absence or disability, the Assistant Secretary, if any,
or if there be no Assistant Secretary, in the absence of the Secretary or Acting
Secretary, an appointee of the presiding officer, shall act as Secretary of the
meeting. The order of business and all other matters of procedure at every
meeting of stockholders may be determined by such presiding officer.
Section 1.10. Stockholder Proposals and Nominations of Directors.
Nominations for election to the Board of Directors of the Corporation at a
meeting of the stockholders may be made by the Board of Directors, or on behalf
of the Board of Directors by a Nominating Committee appointed by the Board of
Directors, or (subject to compliance with the remainder of this section) by any
stockholder of the Corporation entitled to vote for the election of Directors at
such meeting. Any nominations, other than those made by or on behalf of the
Board of Directors or any such Nominating Committee, and any proposal by any
stockholder to transact any corporate business at an annual or special
stockholders meeting, shall be made by written notice, mailed by certified mail,
to the Secretary of the Corporation and (i) in the case of an annual meeting,
received no later than 50 days prior to the date of the annual meeting;
provided, however, that if less than 50 days' advance notice of a meeting of
stockholders is given to the stockholders, such advance notice of proposed
business or nomination by such stockholder shall have been made or delivered to
the Secretary or Acting Secretary of the Corporation not later than the close of
business on the seventh day following the day on which the written notice of a
meeting was mailed, and (ii) in the case of a special meeting of stockholders,
received not later than the close of business on the tenth day following the day
on which written notice of the date of the meeting was mailed or public
disclosure of the date of the meeting was made, whichever occurs first.
Notwithstanding the foregoing, the inclusion of stockholder proposals in proxy
materials prepared by the Corporation shall be governed by Rule 14a-8 under the
Securities Exchange Act of 1934, as amended. The form of written notice of
Director nominations by a stockholder or stockholders shall set forth as to each
proposed nominee who is not an incumbent Director (i) the name, age, business
address and, if known, residence address of each nominee proposed in such
notice, (ii) the principal occupation or employment of each such nominee, (iii)
the number of shares of stock of the Corporation which are beneficially owned by
each such nominee and the nominating stockholder, and (iv) any other information
concerning the nominee that must be disclosed regarding nominees in proxy
solicitations pursuant to Section 14(a) of the Securities Exchange Act of 1934,
as amended, and the rules under such section.
4
<PAGE> 5
The Chairman of the Board, or in his absence the Chief Executive
Officer, any Vice President or the Secretary or Acting Secretary, may, if the
facts warrant, determine and declare to the meeting of stockholders that a
nomination or a proposal made by a stockholder was not made in accordance with
the foregoing procedure and that the defective nomination or proposal shall be
disregarded.
Section 1.11. Inspectors of Elections. Preceding any meeting of
the stockholders, the Board of Directors shall appoint one or more persons to
act as Inspectors of Elections, and may designate one or more alternate
inspectors. In the event no inspector or alternate is able to act, the person
presiding at the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of the duties of an
inspector, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspector shall:
(a) ascertain the number of shares outstanding and the voting power of
each;
(b) determine the shares represented at a meeting and the validity of
proxies and ballots;
(c) count all votes and ballots;
(d) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors; and
(e) certify his or her determination of the number of shares
represented at the meeting, and his or her count of all votes and ballots.
The inspector may appoint or retain other persons or entities to assist in the
performance of the duties of inspector.
When determining the shares represented and the validity of
proxies and ballots, the inspector shall be limited to an examination of the
proxies, any envelopes submitted with those proxies, any information provided in
accordance with Section 1.8 of these Amended By-Laws, ballots and the regular
books and records of the Corporation. The inspector may consider other reliable
information for the limited purpose of reconciling proxies and ballots submitted
by or on behalf of banks, brokers or their nominees or a similar person which
represent more votes than the holder of a proxy is authorized by the record
owner to cast or more votes than the stockholder holds of record. If the
5
<PAGE> 6
inspector considers other reliable information as outlined in this section, the
inspector, at the time of his or her certification pursuant to (e) of this
section shall specify the precise information considered, the person or persons
from whom the information was obtained, when this information was obtained, the
means by which the information was obtained, and the basis for the inspector's
belief that such information is accurate and reliable. [Sections 231(a), (b),
(d).]
Section 1.12. Opening and Closing of Polls. The date and time for
the opening and the closing of the polls for each matter to be voted upon at a
meeting of stockholders shall be announced at the meeting. The inspector of the
election shall be prohibited from accepting any ballots, proxies or votes nor
any revocations thereof or changes thereto after the closing of the polls,
unless the Court of Chancery upon application by a stockholder shall determine
otherwise. [Section 231(c).]
Section 1.13. Consent of Stockholders in Lieu of Meeting. Any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at a duly called annual or special meeting of the stockholders
of the Corporation, and the ability of stockholders to consent in writing to the
taking of any action is hereby specifically denied.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. General Powers. Except as may otherwise be provided
by law, by the Restated Certificate of Incorporation or by these Amended
By-Laws, the business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors which may exercise all such powers
of the Corporation. [Section 141(a).]
Section 2.2. Number and Term of Office. The number of Directors
constituting the entire Board of Directors shall be as fixed from time to time
exclusively by resolution of the Board of Directors, but in no event shall the
number of Directors be less than three (3) or greater than twenty-one (21). Each
Director (whenever elected) shall hold office until his successor has been duly
elected and qualified, or until his earlier death, resignation or removal. If
the number of Directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain or attain a number of Directors
in each class as nearly equal as reasonably possible, but no decrease in the
number of Directors may shorten the term of any incumbent Director.
Section 2.3. Election of Directors. The members of the Board of
Directors elected by the holders of the Common Stock
6
<PAGE> 7
of the Corporation were divided at the annual meeting of stockholders held in
1995 into three classes, designated Classes I, II and III, which shall be as
nearly equal in number as possible. At the annual meeting of stockholders in
1995, Directors of Class I were elected to hold office for a term expiring at
the annual meeting of stockholders held in 1996, Directors of Class II were
elected to hold office for a term expiring at the annual meeting of stockholders
held in 1997 and Directors of Class III were elected to hold office for a term
expiring at the annual meeting of stockholders held in 1998. At each succeeding
annual meeting of stockholders following such initial classification and
election, the respective successors of Directors whose terms are expiring shall
be elected for terms expiring at the annual meeting of stockholders held in the
third succeeding year. If the annual meeting of stockholders for the election of
Directors is not held on the date designated therefor, the Directors shall cause
the meeting to be held as soon thereafter as convenient. At each meeting of the
stockholders for the election of Directors, provided a quorum is present, the
Directors shall be elected by a plurality of the votes validly cast in such
election. Notwithstanding the foregoing, the election, term, removal and filling
of vacancies with respect to Directors elected separately by the holders of one
or more series of Preferred Stock of the Corporation shall not be governed by
this Article II, but rather shall be as provided for in the resolutions adopted
by the Board of Directors creating and establishing such series of Preferred
Stock. [Sections 141(d), 211(b), (c), 216.]
Section 2.4. Annual and Regular Meetings. The annual meeting of
the Board of Directors for the purpose of electing officers and for the
transaction of such other business as may come before the meeting shall be held
as soon as possible following adjournment of the annual meeting of the
stockholders at the place of such annual meeting of the stockholders. Notice of
such annual meeting of the Board of Directors need not be given. The Board of
Directors from time to time may by resolution provide for the holding of regular
meetings and fix the place (which may be within or without the State of
Delaware) and the date and hour of such meetings. Notice of regular meetings
need not be given, provided, however, that if the Board of Directors shall fix
or change the time or place of any regular meeting, notice of such action shall
be mailed promptly, or sent by facsimile transmission or telegram, to each
Director who shall not have been present at the meeting at which such action was
taken, addressed to him at his usual place of business, or shall be delivered to
him personally. Notice of such action need not be given to any Director who
attends the first regular meeting
after such action is taken without protesting the lack of notice to him, prior
to or at the commencement of such meeting, or to any Director who submits a
signed waiver of notice, whether
7
<PAGE> 8
before or after such meeting. [Section 141(g).]
Section 2.5. Special Meetings; Notice. Special meetings of the
Board of Directors shall be held whenever called by the Chief Executive Officer
or, in the event of his absence or disability, by any Vice President or by the
Secretary or Acting Secretary, at such place (within or without the State of
Delaware), date and hour as may be specified in the respective notices or
waivers of notice of such meetings. Special meetings of the Board of Directors
may be called on 24 hours' notice, if notice is given to each Director
personally or by telephone, telegram, facsimile or other electronic means of
transmission, or on five days' notice, if notice is mailed to each Director,
addressed to him at his usual place of business. Notice of any special meeting
need not be given to any Director who attends such meeting without protesting
the lack of notice to him, prior to or at the commencement of such meeting, or
to any Director who submits a signed waiver of notice, whether before or after
such meeting, and any business may be transacted thereat. [Sections 141(g),
229.]
Section 2.6. Quorum; Voting. At all meetings of the Board of
Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the Restated Certificate of Incorporation or these
Amended By-Laws, the vote of a majority of the Directors present at any meeting
at which a quorum is present shall be the act of the Board of Directors.
[Section 141(b).]
Section 2.7. Adjournment. A majority of the Directors present,
whether or not a quorum is present, may adjourn any meeting of the Board of
Directors to another time or place. No notice need be given of any adjourned
meeting unless the time and place of the adjourned meeting are not announced at
the time of adjournment, in which case notice conforming to the requirements of
Section 2.5 shall be given to each Director.
Section 2.8. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors. [Section 141(f).]
Section 2.9. Organization. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board or, in his absence or if
such office is vacant, by the Chief
Executive Officer, or in their absence by a chairman chosen at the meeting. The
Secretary or Acting Secretary shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act as secretary
of the
8
<PAGE> 9
meeting.
Section 2.10. Regulations; Manner of Acting. To the extent
consistent with applicable law, the Restated Certificate of Incorporation and
these Amended By-Laws, the Board of Directors may adopt such rules and
regulations for the conduct of meetings of the Board of Directors and for the
management of the property, affairs and business of the Corporation as the Board
of Directors may deem appropriate. The Directors shall act only as a Board, and
the individual Directors shall have no power as such.
Section 2.11. Action by Telephonic Communications. Members of the
Board of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this provision shall constitute presence
in person at such meeting. [Section 141(i).]
Section 2.12. Resignations. Any Director may resign at any time by
delivering a written notice of resignation, signed by such Director, to the
Chief Executive Officer or the Secretary or Acting Secretary. Unless otherwise
specified therein, such resignation shall take effect upon delivery. [Section
141(b).]
Section 2.13. Removal of Directors. A Director may be removed for
or without cause, upon the affirmative vote of the holders of a majority of the
outstanding shares of stock of the Corporation then entitled to vote at an
election of Directors, cast at a special meeting of stockholders called for the
purpose or at an annual meeting. Any vacancy in the Board of Directors caused by
any such removal may be filled at any such meeting by the stockholders entitled
to vote for the election of the Director so removed. Notwithstanding the
foregoing, the election, term, removal and filling of vacancies with respect to
Directors elected separately by the holders of one or more series of Preferred
Stock of the Corporation shall not be governed by this Article II, but rather
shall be as provided for, either in the Restated Certificate of Incorporation or
in the Preferred Stock Certificate of Designation creating and establishing such
series of Preferred Stock. [Section 141(k).]
Section 2.14. Vacancies and Newly Created Directorships. If any
vacancies shall occur in the Board of Directors, by reason of death,
resignation, removal (and the stockholders shall not have filled such vacancy as
provided in
Section 2.13 above) or otherwise, or if the authorized number of Directors shall
be increased, the Directors then in office shall continue to act, and such
vacancies or newly created directorships, as the case may be, may be filled by a
majority of Directors then in office, although less than a quorum. A
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Director elected by the Directors pursuant to this Section 2.14 to fill a
vacancy or a newly created directorship shall hold office until his successor
has been elected and qualified or until his earlier death, resignation or
removal. [Section 223.]
Section 2.15. Compensation. The amount, if any, which each
Director shall be entitled to receive as compensation for his services as such
shall be fixed from time to time by resolution of the Board of Directors.
[Section 141(h).]
Section 2.16. Reliance on Accounts and Reports, etc. A Director,
or a member of any Committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the Corporation and upon information, opinions, reports or statements
presented to the Corporation by any of the Corporation's officers or employees,
or Committees designated by the Board of Directors, or by any other person as to
the matters the member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Corporation. [Section 141(e).]
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.1. How Constituted. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate one or more
Committees, including an Executive Committee, each such Committee to consist of
such number of Directors as from time to time may be fixed by the Board of
Directors. The Board of Directors may designate one or more Directors as
alternate members of any such Committee, who may replace any absent or
disqualified member or members at any meeting of such Committee. Thereafter,
members (and alternate members, if any) of each such Committee may be designated
at the annual meeting of the Board of Directors. Any such Committee may be
abolished or re-designated from time to time by the Board of Directors. Each
member (and each alternate member) of any such Committee (whether designated at
an annual meeting of the Board of Directors or to fill a vacancy or otherwise)
shall hold office until his successor shall have been designated or until he
shall cease to be a Director, or until his earlier death, resignation or
removal. [Section 141(c).]
Section 3.2. Powers. During the intervals between the meetings of
the Board of Directors, the Executive Committee, except as otherwise provided in
this section, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the property, affairs and business of
the
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Corporation, including the power to declare dividends and to authorize the
issuance of stock. Each such other Committee, except as otherwise provided in
this section, shall have and may exercise such powers of the Board of Directors
as may be provided by resolution or resolutions of the Board of Directors.
Neither the Executive Committee nor any such other Committee shall have the
power or authority:
(a) to amend the Restated Certificate of Incorporation (except
that a Committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the
Board of Directors as provided in Section 151(a) of the Delaware General
Corporation Law, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any
other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series),
(b) to adopt an agreement of merger or consolidation,
(c) to recommend to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets,
(d) to recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or
(e) to amend the Amended By-Laws of the Corporation.
The Executive Committee shall have, and any such other Committee may be granted
by the Board of Directors, power to authorize the seal of the Corporation to be
affixed to any or all papers which may require it. [Section 141(c).]
Section 3.3. Proceedings. Each such Committee may fix its own
rules of procedure and may meet at such place (within or without the State of
Delaware), at such time and upon such notice, if any, as it shall determine from
time to time. Each such Committee shall keep minutes of its proceedings and
shall report such proceedings to the Board of Directors at the meeting of the
Board of Directors next following any such proceedings.
Section 3.4. Quorum and Manner of Acting. Except as may be
otherwise provided in the resolution creating such Committee, at all meetings of
any Committee the presence of members (or alternate members) constituting a
majority of the total authorized membership of such Committee shall constitute a
quorum for the transaction of business. The act of the majority
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of the members present at any meeting at which a quorum is present shall be the
act of such Committee. Any action required or permitted to be taken at any
meeting of any such Committee may be taken without a meeting, if all members of
such Committee shall consent to such action in writing and such writing or
writings are filed with the minutes of the proceedings of the Committee. The
members of any such Committee shall act only as a Committee, and the individual
members of such Committee shall have no power as such. [Section 141(c), (f).]
Section 3.5. Action by Telephonic Communications. Members of any
Committee designated by the Board of Directors may participate in a meeting of
such Committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting. [Section 141(i).]
Section 3.6. Absent or Disqualified Members. In the absence or
disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. [Section 141(c).]
Section 3.7. Resignations. Any member (and any alternate member)
of any Committee may resign at any time by delivering a written notice of
resignation, signed by such member, to the Chairman or the Chief Executive
Officer. Unless otherwise specified therein, such resignation shall take effect
upon delivery.
Section 3.8. Removal. Any member (and any alternate member) of any
Committee may be removed at any time, either for or without cause, by resolution
adopted by a majority of the whole Board of Directors.
Section 3.9. Vacancies. If any vacancy shall occur in any
Committee, by reason of disqualification, death, resignation, removal or
otherwise, the remaining members (and any alternate members) shall continue to
act, and any such vacancy may be filled by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.1. Number. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a Chief Executive Officer, one or
more Vice Presidents, a Secretary, a
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Controller, a General Auditor and a Treasurer, and it may, if it so determines,
elect a Chairman of the Board of Directors from among its members. The Board of
Directors also may elect a Vice Chairman and one or more Acting or Assistant
Secretaries, Assistant Controllers and Assistant Treasurers in such numbers as
the Board of Directors may determine. Any number of offices may be held by the
same person, except that neither the Chairman of the Board of Directors nor the
Chief Executive Officer shall also hold the office of Secretary. No officer,
other than the Chairman or Vice Chairman, need be a Director of the Corporation.
[Section 142(a), (b).]
Section 4.2. Election. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual meeting,
officers may be elected at any regular or special meeting of the Board of
Directors. Each officer shall hold office until his successor has been elected
and qualified, or until his earlier death, resignation or removal. [Section
142(b).]
Section 4.3. Salaries. The salaries of all officers and agents of
the Corporation shall be fixed by the Board of Directors.
Section 4.4. Removal and Resignation; Vacancies. Any officer may
be removed for or without cause at any time by the Board of Directors. Any
officer may resign at any time by delivering a written notice of resignation,
signed by such officer, to the Board of Directors or the Chief Executive Officer
or the Secretary or Acting Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery. Any vacancy occurring in any office
of the Corporation, by death, resignation, removal or otherwise, shall be filled
by the Board of Directors. [Section 142(b), (e).]
Section 4.5. Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and perform
such duties as may be specified in these Amended By-Laws, except that in any
event each officer shall exercise such powers and perform such duties as may be
required by law. [Section 142(a).]
Section 4.6. The Chief Executive Officer. The Chief Executive
Officer shall preside at all meetings of the stockholders and Directors at which
he is present in the absence of the Chairman or Vice Chairman, shall be the
chief executive officer and the chief operating officer of the Corporation,
shall have general control and supervision of the policies and
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operations of the Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect. He shall manage and administer
the Corporation's business and affairs and shall also perform all duties and
exercise all powers usually pertaining to the office of a chief executive
officer and a chief operating officer of a corporation. He shall have the
authority to sign, in the name and on behalf of the Corporation, checks, orders,
contracts, leases, notes, drafts and other documents and instruments in
connection with the business of the Corporation, and together with the Secretary
or an Acting or Assistant Secretary, conveyances of real estate and other
documents and instruments to which the seal of the Corporation is affixed. He
shall have the authority to cause the employment or appointment of such
employees and agents of the Corporation as the conduct of the business of the
Corporation may require, to fix their compensation, and to remove or suspend any
employee or agent elected or appointed by the Chief Executive Officer or the
Board of Directors. The Chief Executive Officer shall perform such other duties
and have such other powers as the Board of Directors or the Chairman may from
time to time prescribe.
Section 4.7. Vice Presidents. Each Vice President shall perform
such duties and exercise such powers as may be assigned to him from time to time
by the Chief Executive Officer. In the absence of the Chief Executive Officer,
the duties of the Chief Executive Officer shall be performed and his powers may
be exercised by such Vice President as shall be designated by the Chief
Executive Officer, or failing such designation, such duties shall be performed
and such powers may be exercised by each Vice President in the order of their
earliest election to that office, subject in any case to review and superseding
action by the Chief Executive Officer.
Section 4.8. The Secretary. The Secretary shall have the following
powers and duties:
(a) He shall keep or cause to be kept a record of all the
proceedings of the meetings of the stockholders and of the Board of
Directors in books provided for that purpose.
(b) He shall cause all notices to be duly given in accordance
with the provisions of these Amended By-Laws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a
resolution of the Board of Directors, he shall furnish a copy of such
resolution to the members of such Committee.
(d) He shall be the custodian of the records and of the seal of
the Corporation and cause such seal (or a facsimile thereof) to be
affixed to all certificates representing shares of the Corporation prior
to the issuance thereof and to all instruments the execution of which on
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behalf of the Corporation under its seal shall have been duly authorized
in accordance with these Amended By-Laws, and when so affixed he may
attest the same.
(e) He shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required by
law, the Restated Certificate of Incorporation or these Amended By-Laws.
(f) He shall have charge of the stock books and ledgers of the
Corporation and shall cause the stock and transfer books to be kept in
such manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names (arranged
alphabetically or chronologically) and the addresses of the holders of
record of such shares, the number of shares held by each holder and the
date as of which each became such holder of record.
(g) He shall sign (unless the Treasurer, an Assistant Treasurer
or Acting or Assistant Secretary shall have signed) certificates
representing shares of the Corporation the issuance of which shall have
been authorized by the Board of Directors.
(h) He shall perform, in general, all duties incident to the
office of Secretary and such other duties as may be specified in these
Amended By-Laws or as may be assigned to him from time to time by the
Board of Directors, or the Chief Executive Officer.
Section 4.9. The Treasurer. The Treasurer shall have the following
powers and duties:
(a) He shall have charge and supervision over and be
responsible for the moneys, securities, receipts and disbursements of the
Corporation, and shall keep or cause to be kept full and accurate records
of all receipts of the Corporation.
(b) He shall cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or
other depositaries as shall be selected in accordance with Section 8.5 of
these Amended By-Laws.
(c) He shall cause the moneys of the Corporation to be
disbursed by checks or drafts (signed as provided in Section 8.6 of these
Amended By-Laws) upon the authorized
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depositaries of the Corporation and cause to be taken and preserved
proper vouchers for all moneys disbursed.
(d) He shall render to the Board of Directors or the Chief
Executive Officer, whenever requested, a statement of the financial
condition of the Corporation and of all his transactions as Treasurer,
and render a full financial report at the annual meeting of the
stockholders, if called upon to do so.
(e) He shall be empowered from time to time to require from all
officers or agents of the Corporation reports or statements giving such
information as he may desire with respect to any and all financial
transactions of the Corporation.
(f) He may sign (unless an Assistant Treasurer or the Secretary
or an Acting or Assistant Secretary shall have signed) certificates
representing stock of the Corporation the issuance of which shall have
been authorized by the Board of Directors.
(g) He shall perform, in general, all duties incident to the
office of treasurer and such other duties as may be specified in these
Amended By-Laws or as may be assigned to him from time to time by the
Board of Directors, or the Chief Executive Officer.
Section 4.10. Additional Officers. The Board of Directors may
appoint such other officers and agents as it may deem appropriate, and such
other officers and agents and the officers specified in Section 4.1 hereof not
covered in Sections 4.6 through 4.9 hereof shall hold their offices for such
terms and shall exercise such powers and perform such duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be authorized or prescribed by the Board of Directors. The
Board of Directors from time to time may delegate to any officer or agent the
power to appoint subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties. Any such officer or
agent may remove any such subordinate officer or
agent appointed by him, for or without cause. [Section 142(a), (b).]
Section 4.11. Security. The Board of Directors may require any
officer, agent or employee of the Corporation to provide security for the
faithful performance of his duties, in such amount and of such character as may
be determined from time to time by the Board of Directors. [Section 142(c).]
ARTICLE V
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CAPITAL STOCK
Section 5.1. Certificates of Stock, Uncertificated Shares. The
shares of the Corporation shall be represented by certificates, provided that
the Board of Directors may provide by resolution or resolutions that some or all
of any or all classes or series of the stock of the Corporation, or rights
associated therewith shall be uncertificated shares. Any such resolution shall
not apply to shares represented by a certificate until each certificate is
surrendered to the Corporation. Notwithstanding the adoption of such a
resolution by the Board of Directors, every holder of stock in the Corporation
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
Corporation, by the Chairman, Chief Executive Officer or a Vice President, and
by the Treasurer or an Assistant Treasurer, or the Secretary or an Acting or
Assistant Secretary, representing the number of shares registered in certificate
form. Such certificate shall be in such form as the Board of Directors may
determine, to the extent consistent with applicable law, the Restated
Certificate of Incorporation and these Amended By-Laws. [Section 158.]
Section 5.2. Signatures; Facsimile. All of such signatures on the
certificate may be a facsimile, engraved or printed, to the extent permitted by
law. In case any officer, transfer agent or registrar who has signed, or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue. [Section 158.]
Section 5.3. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation.
The Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of any such new certificate. [Section 167.]
Section 5.4. Transfer of Stock. Upon surrender to the Corporation
or the transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by appropriate evidence of succession, assignment or
authority to transfer, the Corporation shall issue a new certificate to the
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person entitled thereto, cancel the old certificate and record the transaction
upon its books. Within a reasonable time after the transfer of uncertificated
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General
Corporation Law of the State of Delaware. Subject to the provisions of the
Restated Certificate of Incorporation and these Amended By-Laws, the Board of
Directors may prescribe such additional rules and regulations as it may deem
appropriate relating to the issue, transfer and registration of shares of the
Corporation. [Section 151(f).]
Section 5.5. Record Date. In order to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which record date shall not precede the date on which the
resolution fixing the record date is adopted by the Board of Directors, and
which shall not be more than sixty nor less than ten days before the date of
such meeting. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
In order that the Corporation may determine the stockholders
entitled pursuant to these Amended By-Laws to consent to corporate action in
writing without a meeting, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall not be
more than ten days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. If no record date has been fixed by
the Board of
Directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record
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date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on which
the Board of Directors adopts the resolution taking such prior action.
In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights of the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. [Section 213.]
Section 5.6. Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer or uncertificated
shares are requested to be transferred, both the transferor and transferee
request the Corporation to do so. [Section 159.]
Section 5.7. Transfer Agent and Registrar. The Board of Directors
may appoint one or more transfer agents and one or
more registrars, and may require all certificates representing shares to bear
the signature of any such transfer agents or registrars.
ARTICLE VI
INDEMNIFICATION(2)
Section 6.1. Nature of Indemnity. The Corporation shall indemnify
any person who was or is a party or is threatened
- ---------
(2). Section 145.
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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 6.2. 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
6.1 hereof or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually
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and reasonably incurred by him in connection therewith.
Section 6.3. Determination That Indemnification is Proper. Any
indemnification of a Director or officer of the Corporation under Section 6.1
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 6.1 hereof. Any indemnification of an employee or
agent of the Corporation under Section 6.1 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 6.1 hereof. Any such
determination shall be made (1) by a majority vote of the Directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(2) if there are no such Directors, or if such Directors so direct, by
independent legal counsel in a written opinion, or (3) by the stockholders.
Section 6.4. Advance Payment of Expenses. Expenses (including
attorneys' fees) incurred by a Director or officer in defending any civil,
criminal, administrative or investigative 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 (including attorneys' fees) 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 6.5. Procedure for Indemnification of Directors and
Officers. Any indemnification of a Director or officer of the Corporation under
Sections 6.1 and 6.2, or advance of costs, charges and expenses to a Director or
officer under Section 6.4 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
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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 6.4 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 6.1
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 6.1 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 6.6. 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 General Corporation Law of the State of Delaware are in
effect. Any repeal or modification of these indemnification provisions 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 6.7. 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
22
<PAGE> 23
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 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 6.8. Severability. If this Article VI 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.
ARTICLE VII
OFFICES
Section 7.1. Registered Office. The registered office of the
Corporation in the State of Delaware shall be located at Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle.
Section 7.2. Other Offices. The Corporation may maintain offices
or places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. Dividends. Subject to any applicable provisions of
law and the Restated Certificate of Incorporation, dividends upon the shares of
the Corporation may be declared by the Board of Directors at any regular or
special meeting of the Board of Directors and any such dividend may be paid in
cash, property, shares of the Corporation's capital stock or rights to acquire
the same.
23
<PAGE> 24
A member of the Board of Directors, or a member of any Committee
designated by the Board of Directors shall be fully protected in relying in good
faith upon the records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or Committees of the Board of Directors, or by any other person as to
matters the Director reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Corporation, as to the value and amount of the assets,
liabilities and/or net profits of the Corporation, or any other facts pertinent
to the existence and amount of surplus or other funds from which dividends might
properly be declared and paid. [Sections 172, 173.]
Section 8.2. Reserves. There may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may similarly modify or abolish any such
reserve.
Section 8.3. Execution of Instruments. The Chief Executive
Officer, any Vice President, the Secretary or Acting Secretary or the Treasurer
may enter into any contract or execute and deliver any instrument in the name
and on behalf of the Corporation. The Board of Directors or the Chief Executive
Officer may authorize any other officer or agent to enter into any contract or
execute and deliver any instrument in the name
and on behalf of the Corporation. Any such authorization may be general or
limited to specific contracts or instruments.
Section 8.4. Corporate Indebtedness. No loan shall be contracted
on behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the Board of Directors or the Chief Executive
Officer or any Vice President. Such authorization may be general or confined to
specific instances. Loans so authorized may be effected at any time for the
Corporation from any bank, trust company or other institution, or from any firm,
corporation or individual. All bonds, debentures, notes and other obligations or
evidences of indebtedness of the Corporation issued for such loans shall be
made, executed and delivered as the Board of Directors or the Chief Executive
Officer or any Vice President shall authorize. When so authorized by the Board
of Directors or the Chief Executive Officer or any Vice President, any part of
or all the properties, including contract rights, assets, business or good will
of the Corporation, whether then owned or thereafter
24
<PAGE> 25
acquired, may be mortgaged, pledged, hypothecated or conveyed or assigned in
trust as security for the payment of such bonds, debentures, notes and other
obligations or evidences of indebtedness of the Corporation, and of the interest
thereon, by instruments executed and delivered in the name of the Corporation.
Section 8.5. Deposits. Any funds of the Corporation may be
deposited from time to time in such banks, trust companies or other depositaries
as may be determined by the Board of Directors or the Chief Executive Officer,
or by such officers or agents as may be authorized by the Board of Directors or
the Chief Executive Officer or any Vice President to make such determination.
Section 8.6. Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such agent or
agents of the Corporation, and in such manner, as the Board of Directors or the
Chief Executive Officer or any Vice President from time to time may determine.
Section 8.7. Sale, Transfer, etc. of Securities. To the extent
authorized by the Board of Directors or by the Chief Executive Officer, any Vice
President, the Secretary or Acting Secretary or the Treasurer or any other
officers designated by the Board of Directors or the Chief Executive Officer may
sell, transfer, endorse, and assign any shares of stock, bonds or other
securities owned by or held in the name of the Corporation, and may make,
execute and deliver in the name of the Corporation, under its corporate seal,
any instruments that may be appropriate to effect any such sale, transfer,
endorsement or assignment.
Section 8.8. Voting as Stockholder. Unless otherwise determined by
resolution of the Board of Directors, the Chief Executive Officer or any Vice
President or the Secretary or Acting Secretary shall have full power and
authority on behalf of the Corporation to attend any meeting of stockholders of
any corporation in which the Corporation may hold stock, and to act, vote (or
execute proxies to vote) and exercise in person or by proxy all other rights,
powers and privileges incident to the ownership of such stock. Such officers
acting on behalf of the Corporation shall have full power and authority to
execute any instrument expressing consent to or dissent from any action of any
such corporation without a meeting. The Board of Directors may by resolution
from time to time confer such power and authority upon any other person or
persons.
Section 8.9. Fiscal Year. The fiscal year of the Corporation shall
commence on the first day of January of each year and shall terminate in each
case on December 31.
Section 8.10. Seal. The seal of the Corporation shall
25
<PAGE> 26
be circular in form and shall contain the name of the Corporation, the year of
its incorporation and the words "Corporate Seal" and "Delaware". The form of
such seal shall be subject to alteration by the Board of Directors. The seal may
be used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
Section 8.11. Books and Records; Inspection. Except to the extent
otherwise required by law, the books and records of the Corporation shall be
kept at such place or places within or without the State of Delaware as may be
determined from time to time by the Board of Directors.
ARTICLE IX
AMENDMENT OF AMENDED BY-LAWS
Section 9.1. Amendment. These Amended By-Laws may be amended,
altered or repealed
(a) by resolution adopted by a majority of the Board of Directors
at any special or regular meeting of the Board if, in the case of such
special meeting only, notice of such amendment, alteration or repeal is
contained in the notice or waiver of notice of such meeting; or
(b) at any regular or special meeting of the stockholders upon the
affirmative vote of a majority of the combined voting power of the then
outstanding stock of the Corporation entitled to vote generally in the
election of
Directors, provided, however, that any amendment, alteration or repeal of
Article I, sections 1.2, 1.10 or 1.13, Article VI or this Section 9.1 as
it pertains to Directors and officers, shall require the affirmative vote
of not less than 65% of the combined voting power of the then outstanding
stock of the Corporation entitled to vote generally in the election of
Directors. In the case of such special meeting only, notice of such
amendment, alteration or repeal must be contained in the notice or waiver
of notice of such meeting. [Section 109(a).]
ARTICLE X
CONSTRUCTION
Section 10.1. Construction. In the event of any conflict between
the provisions of these Amended By-Laws as in effect from time to time and the
provisions of the Restated Certificate of Incorporation of the Corporation as in
effect from time to time, the provisions of such Restated Certificate of
26
<PAGE> 27
Incorporation shall be controlling.
27
<PAGE> 28
AMERICAN STANDARD COMPANIES INC.
AMENDED BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
STOCKHOLDERS 1
Section 1.1. Annual Meetings....................................................................... 1
Section 1.2. Special Meetings...................................................................... 1
Section 1.3. Notice of Meetings; Waiver............................................................ 1
Section 1.4. Quorum................................................................................ 2
Section 1.5. Voting................................................................................ 2
Section 1.6. Voting by Ballot...................................................................... 2
Section 1.7. Adjournment........................................................................... 2
Section 1.8. Proxies............................................................................... 3
Section 1.9. Organization; Procedure............................................................... 3
Section 1.10. Stockholder Proposals and Nominations
of Directors ...................................................................... 4
Section 1.11. Inspectors of Elections .............................................................. 5
Section 1.12. Opening and Closing of Polls ......................................................... 6
Section 1.13. Consent of Stockholders in
Lieu of Meeting ................................................................... 6
ARTICLE II
BOARD OF DIRECTORS.................................................... 6
Section 2.1. General Powers ....................................................................... 6
Section 2.2. Number and Term of Office............................................................. 6
Section 2.3. Election of Directors................................................................. 7
Section 2.4. Annual and Regular Meetings........................................................... 7
Section 2.5. Special Meetings; Notice.............................................................. 8
Section 2.6. Quorum; Voting........................................................................ 8
Section 2.7. Adjournment........................................................................... 8
Section 2.8. Action Without a Meeting.............................................................. 8
Section 2.9. Organization.......................................................................... 8
Section 2.10. Regulations; Manner of Acting......................................................... 9
Section 2.11. Action by Telephonic Communications................................................... 9
Section 2.12. Resignations.......................................................................... 9
Section 2.13. Removal of Directors.................................................................. 9
</TABLE>
i
<PAGE> 29
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 2.14. Vacancies and Newly Created Directorships............................................. 9
Section 2.15. Compensation..........................................................................10
Section 2.16. Reliance on Accounts and Reports, etc.................................................10
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES........................................ 10
Section 3.1. How Constituted...................................................................... 10
Section 3.2. Powers............................................................................... 11
Section 3.3. Proceedings.......................................................................... 11
Section 3.4. Quorum and Manner of Acting.......................................................... 12
Section 3.5. Action by Telephonic Communications.................................................. 12
Section 3.6. Absent or Disqualified Members....................................................... 12
Section 3.7. Resignations......................................................................... 12
Section 3.8. Removal.............................................................................. 12
Section 3.9. Vacancies............................................................................ 12
ARTICLE IV
OFFICERS........................................................ 13
Section 4.1. Number............................................................................... 13
Section 4.2. Election............................................................................. 13
Section 4.3. Salaries............................................................................. 13
Section 4.4. Removal and Resignation; Vacancies................................................... 13
Section 4.5. Authority and Duties of Officers..................................................... 13
Section 4.6. The Chief Executive Officer.......................................................... 14
Section 4.7. Vice Presidents...................................................................... 14
Section 4.8. The Secretary........................................................................ 14
Section 4.9. The Treasurer........................................................................ 15
Section 4.10. Additional Officers.................................................................. 16
Section 4.11. Security............................................................................. 17
ARTICLE V
CAPITAL STOCK...................................................... 17
Section 5.1. Certificates of Stock, Uncertificated
Shares .......................................................................... 17
Section 5.2. Signatures; Facsimile................................................................ 17
Section 5.3. Lost, Stolen or Destroyed Certificates............................................... 17
Section 5.4. Transfer of Stock.................................................................... 18
Section 5.5. Record Date ......................................................................... 18
</TABLE>
ii
<PAGE> 30
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 5.6. Registered Stockholders.............................................................. 19
Section 5.7. Transfer Agent and Registrar......................................................... 19
ARTICLE VI
INDEMNIFICATION..................................................... 20
Section 6.1. Nature of Indemnity.................................................................. 20
Section 6.2. Successful Defense................................................................... 21
Section 6.3. Determination That Indemnification
is Proper ........................................................................ 21
Section 6.4. Advance Payment of Expenses.......................................................... 21
Section 6.5. Procedure for Indemnification of
Directors and Officers ........................................................... 22
Section 6.6. Survival; Preservation of Other Rights............................................... 22
Section 6.7. Insurance............................................................................ 23
Section 6.8. Severability......................................................................... 23
ARTICLE VII
OFFICES......................................................... 23
Section 7.1. Registered Office.................................................................... 23
Section 7.2. Other Offices........................................................................ 24
ARTICLE VIII
GENERAL PROVISIONS................................................... 24
Section 8.1. Dividends............................................................................ 24
Section 8.2. Reserves............................................................................. 24
Section 8.3. Execution of Instruments............................................................. 24
Section 8.4. Corporate Indebtedness............................................................... 25
Section 8.5. Deposits............................................................................. 25
Section 8.6. Checks............................................................................... 25
Section 8.7. Sale, Transfer, etc. of Securities................................................... 25
Section 8.8. Voting as Stockholder................................................................ 26
Section 8.9. Fiscal Year.......................................................................... 26
Section 8.10. Seal................................................................................. 26
Section 8.11. Books and Records; Inspection........................................................ 26
ARTICLE IX
AMENDMENT OF AMENDED BY-LAWS.............................................. 26
Section 9.1. Amendment............................................................................ 26
</TABLE>
iii
<PAGE> 31
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE X
CONSTRUCTION...................................................... 27
Section 10.1. Construction......................................................................... 27
</TABLE>
iv
<PAGE> 1
Exhibit 4 (iii)
- --------------------------------------------------------------------------------
AMERICAN STANDARD INC.
AMERICAN STANDARD COMPANIES INC.
and
WILMINGTON TRUST COMPANY
(successor to Manufacturers Hanover Trust Company)
as Trustee
First Supplemental Indenture
Dated as of February 1, 2000
$150,000,000
9 1/4% Sinking Fund Debentures Due 2016
- -------------------------------------------------------------------------------
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of February 1, 2000, among
American Standard Companies Inc., a Delaware corporation (the "Guarantor"),
American Standard Inc., a Delaware corporation (the "Company"), and Wilmington
Trust Company, a Delaware banking corporation, as Trustee (the "Trustee").
RECITALS
WHEREAS, the Company and the Trustee are parties to that certain
Indenture, dated as of November 1, 1986 (the "Indenture"), pursuant to which the
Company has issued its 9 1/4% Sinking Fund Debentures due 2016 (the
"Securities"; capitalized terms used and not otherwise defined herein are used
with the meaning given such terms in the Indenture); and
WHEREAS, the Guarantor is the owner of all of the outstanding
capital stock of the Company having the power to vote and wishes to guarantee
the due and punctual payment of the principal of, premium, if any, interest on
and sinking fund payments with respect to, the Securities and to substitute, for
the obligation of the Company, its own obligation to file with the Trustee all
information and reports required to be filed pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934; and
WHEREAS, the Indenture provides that it may be supplemented without
the consent of the Holders of the Securities for such purposes, among others, as
are set forth in Paragraph (9) of Section 9.01 of the Indenture, and
WHEREAS, the Guarantor, the Company and the Trustee have done all
things necessary under the Indenture to enter into this First Supplemental
Indenture, to make the guarantee herein the valid obligation of the Guarantor
and to make this First Supplemental Indenture a valid agreement among the
Guarantor, the Company and the Trustee in accordance with its terms.
NOW, therefore, the parties hereto agree as follows:
ARTICLE I
Guarantee
Section 1.01. The Guarantor hereby fully and unconditionally
guarantees to each Holder of a Security heretofore or hereafter authenticated
and delivered under the Indenture and to the Trustee on behalf of each such
Holder the due and punctual payment of the principal of, premium, if any, and
interest on such Securities (including, in the case of default, interest on
principal and, to the extent permitted by applicable law, on overdue interest
and including any additional interest required to be paid according to the terms
of such Securities), and the due and punctual payment of each sinking fund
payment provided for with respect to such Securities (the "Guarantor Debt"),
when and as the same shall become due and payable, whether at Stated Maturity or
by declaration of acceleration, call for redemption or otherwise, according to
the terms of such Security and of the Indenture. In case of the default by the
Company or any successor punctually to pay any such principal, premium,
interest, or sinking fund payment, the Guarantor hereby agrees to cause any such
payment to be made duly and punctually when and as the same shall be due, as if
such payment were made by the Company.
The Guarantor hereby agrees that its Guarantor Debt hereunder shall
be as if it were principal debtor and not merely surety and shall be absolute
and unconditional, irrespective of the validity, regularity or enforceability of
any Security or this Indenture, the absence of any action to enforce the same,
any waiver or consent by the Holder of any Security with respect to any
provisions thereof or hereof, the recovery of any judgment against the Company
or any action to enforce the same, or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
The Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in
<PAGE> 3
the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that its guarantee hereunder will not be discharged except by
complete performance of its obligations contained in any such Security and in
this Guarantee.
If the Trustee or the Holder of any Security is required by any
court or otherwise to return to the Company or the Guarantor, or any custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar official
acting in relation to the Company or the Guarantor, any amount paid to the
Trustee or such Holder in respect of a Security, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. The
Guarantor further agrees, to the fullest extent that it may lawfully do so,
that, as between the Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, the maturity of the obligations guaranteed hereby
may be accelerated as provided in Article V of the Indenture for the purposes of
this Guarantee, notwithstanding any stay, injunction or other prohibition except
as may arise under any applicable bankruptcy law preventing such acceleration in
respect of the obligations guaranteed hereby.
The Guarantor shall be subrogated to all rights of the Holders of
the Securities against the Company in respect of any amounts paid by the
Guarantor on account of such Securities or this Indenture; provided, however,
that the Guarantor shall not be entitled to enforce or to receive any payments
arising out of, or based upon, such right of subrogation until the principal of,
premium, if any, and interest, if any, on all Securities shall have been
indefeasibly paid in full.
ARTICLE II
Endorsement and Change of Form of Securities
Section 2.01. Securities authenticated and delivered after the
execution of this First Supplemental Indenture may (unless the text of the
Security is modified as provided in Section 2.02) be stamped on the face or
reverse with a notation as follows:
"American Standard Companies Inc., a Delaware corporation and owner
of all of the issued and outstanding shares of capital stock of the
issuer of this Security having voting power, has fully and
unconditionally guaranteed the payment of the principal of, premium,
if any, interest on and any sinking fund payment due with respect
to, this Security (the "Guarantee"), the terms of which Guarantee
are fully set forth in that certain First Supplemental Indenture
dated as of February 1, 2000, a copy of which is available from the
Trustee. For further information, write to either the Trustee or to
American Standard Companies Inc., One Centennial Avenue, Piscataway,
New Jersey 08854-6820, Attention:
Treasurer."
Section 2.02. In exchange for outstanding Securities, the Company
may issue new Securities that reflect the guarantee contained in this First
Supplemental Indenture.
ARTICLE III
Periodic Reports
Section 3.01. For so long as the Securities remain outstanding, the
Guarantor shall file with the Trustee within 15 days after the Guarantor is
required to file the same with the Securities and Exchange Commission copies of
the annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as said Commission may by rules
and regulations prescribe) which the Guarantor is required to file with said
Commission pursuant to Section 13 or Section 15 (d) of the Securities Exchange
Act of 1934; or, if the Guarantor is not required to file information, documents
or
<PAGE> 4
reports pursuant to either of such sections, then it shall file with the Trustee
and said Commission, in accordance with rules and regulations prescribed by said
Commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Securities Exchange
Act of 1934 in respect of a security listed and registered on a national
securities exchange as may be prescribed in such rules and regulations.
Section 3.02. The Guarantor shall file with the Trustee and the
Securities and Exchange Commission, in accordance with rules and regulations
prescribed from time to time by said Commission, such additional information,
documents and reports with respect to compliance by the Guarantor with the
conditions and covenants provided for in the Indenture and this First
Supplemental Indenture, as may be required by such rules and regulations.
Section 3.03. The Guarantor shall transmit to the Holders of the
Securities, as the names and addresses of such Holders appear on the registry
books of the Company, within 30 days after the filing thereof with the Trustee
such summaries of any information, documents and reports required to be filed by
the Guarantor pursuant to the provisions of Section 3.01 or 3.02 of this First
Supplemental Indenture as may be required by rules and regulations prescribed
from time to time by the Securities and Exchange Commission.
ARTICLE IV
Events of Default
Section 4.01. In addition to the Events of Default specified in the
Indenture, the following events shall be Events of Default with respect to the
Securities:
(a) a default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Guarantor (including a
default with respect to Securities (as defined in the Indenture) of
any series other than that series) or under any mortgage, indenture
or instrument under which there may be issued or by which there may
be secured or evidenced any indebtedness for money borrowed by the
Guarantor (including this Indenture), whether such indebtedness now
exists or shall hereafter be created, which default shall have
resulted in a principal amount of such indebtedness in excess of
$10,000,000 becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable,
without such acceleration having been rescinded or annulled within a
period of 10 days after there shall have been given, by registered
or certified mail, to the Guarantor by the Trustee or to the
Guarantor and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written notice
specifying such default and requiring the Guarantor to cause such
acceleration to be rescinded or annulled and stating that such
notice is a "Notice of Default" hereunder; provided, however, that,
subject to the provisions of Sections 601 and 602 of the Indenture,
the Trustee shall not be deemed to have knowledge of such default
unless either (A) a Responsible Officer of the Trustee shall have
actual knowledge of such default of (B) the Trustee shall have
received written notice thereof from the Guarantor, from any Holder,
from the holder of any such indebtedness or from the trustee under
any such mortgage, indenture or other instrument;
(b) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Guarantor in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Guarantor a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the
Guarantor under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Guarantor or of any substantial part
of its
<PAGE> 5
property, or ordering the winding up or liquidation of its affairs,
and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(c) the commencement by the Guarantor of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in
respect of the Guarantor in an involuntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law,
or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of
the Guarantor or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by
the Guarantor in furtherance of any such action.
ARTICLE V
Miscellaneous
Section 5.01. Except as hereby expressly modified, the Indenture and
the Securities issued thereunder and all the terms thereof, shall remain in full
force and effect.
Section 5.02. This First Supplemental Indenture shall be executed in
one or more counterparts, each of which shall be deemed to be an original for
all purposes; but such counterparts shall together be deemed to constitute but
one and the same instrument.
Section 5.03. Any notice to or demand on the Guarantor shall be made
in a writing delivered or mailed by first class mail, postage prepaid, to the
Guarantor at the following address:
American Standard Companies Inc.
One Centennial Avenue
Piscataway, New Jersey 08854-6820
The Guarantor by notice to the Trustee may furnish an alternative address.
Section 5.04. The Trustee makes no representations as to the
validity or sufficiency of this First Supplemental Indenture, except as to the
due and valid execution hereof by the Trustee, and shall incur no liability or
responsibility whatsoever in respect of the validity hereof. The Trustee's
execution of this First Supplemental Indenture should not be construed to be an
approval or disapproval of the advisability of the amendments to the Indenture
provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be
<PAGE> 6
duly executed, and their respective corporate seals hereunder to be affixed and
attested, all as of the day and year first above written.
SIGNATURES
[Corporate Seal] AMERICAN STANDARD COMPANIES INC.
By
----------------------------
Vice President and Treasurer
Attest:
By
- ---------------------------------- ----------------------------
Assistant Secretary Assistant Treasurer
AMERICAN STANDARD INC.
[Corporate Seal]
By
----------------------------
Vice President and Treasurer
Attest:
- -----------------------------------
Assistant Secretary
WILMINGTON TRUST COMPANY
[Corporate Seal]
as Trustee
By
----------------------------
Vice President
Attest:
- -----------------------------------
[Assistant Secretary] [Trust Officer]
<PAGE> 1
EXHIBIT (4) (x)
================================================================================
AMERICAN STANDARD INC., as Issuer
AMERICAN STANDARD COMPANIES INC., as Guarantor
and
THE BANK OF NEW YORK, as Trustee
---------------
Fourth Supplemental Indenture
Dated as of May 28, 1999
---------------
UP TO $200,000,000
8.25% Senior Notes due 2009
================================================================================
<PAGE> 2
FOURTH SUPPLEMENTAL INDENTURE, dated as of May 28, 1999 (the
"Fourth Supplemental Indenture"), to the Indenture, dated as of January 15, 1998
(as amended, modified or supplemented from time to time in accordance therewith,
the "Indenture"), among AMERICAN STANDARD INC., a Delaware corporation
(hereinafter called the "Issuer"), having its principal office at One Centennial
Avenue, P.O. Box 6820, Piscataway, New Jersey 08835-6820, and AMERICAN STANDARD
COMPANIES INC., a Delaware corporation (hereinafter called the "Guarantor"),
having its principal office at One Centennial Avenue, P.O. Box 6820, Piscataway,
New Jersey 08835-6820, and THE BANK OF NEW YORK, a New York banking corporation,
as Trustee hereunder (hereafter called the "Trustee"), having its principal
office at 101 Barclay Street, Floor 21 West, New York, New York 10286.
RECITALS
WHEREAS, the Issuer, the Guarantor and the Trustee have each duly
authorized the execution and delivery of the Indenture to provide for the
issuance from time to time of one or more series of its senior debt securities
(the "Securities") to be issued in one or more series as in the Indenture
provided;
WHEREAS, the Issuer and the Guarantor desire and have requested
the Trustee to join them in the execution and delivery of this Fourth
Supplemental Indenture in order to establish and provide for the issuance by the
Issuer and the Guarantor of a series of Securities designated as its 8.25%
Senior Notes due 2009 (the "Dollar Notes") in the aggregate principal amount not
to exceed $200,000,000, substantially in the form attached hereto as Exhibit A,
on the terms set forth herein;
WHEREAS, Section 9.01 of the Indenture provides that a
supplemental indenture may be entered into by the Issuer and the Guarantor and
the Trustee for such purpose provided certain conditions are met;
WHEREAS, the conditions set forth in the Indenture for the
execution and delivery of this Fourth Supplemental Indenture have been complied
with; and
<PAGE> 3
-2-
WHEREAS, all things necessary to make this First Supplemental
Indenture a valid agreement of the Issuer, the Guarantor and the Trustee, in
accordance with its terms, and a valid amendment of, and supplement to, the
Indenture have been done;
NOW, THEREFORE:
In consideration of the premises and the purchase and acceptance
of the Dollar Notes by the Holders thereof the Company mutually covenants and
agrees with the Trustee, for the equal and proportionate benefit of all Holders
of the Dollar Notes, that the Indenture is supplemented and amended, to the
extent and for the purposes expressed herein, as follows:
Section 1. SCOPE OF THIS FOURTH
SUPPLEMENTAL INDENTURE
(a) The changes, modifications and supplements to the Indenture
effected by this Fourth Supplemental Indenture in Section 2 hereof shall only be
applicable with respect to, and govern the terms of, the Dollar Notes issued by
the Issuer and the Guarantor, which shall not exceed an original aggregate
principal amount to $200,000,000, and shall not apply to any other Securities
which may be issued under the Indenture unless a supplemental indenture with
respect to such other Securities specifically incorporates such changes,
modifications.
(b) Pursuant to this Fourth Supplemental Indenture, there is
hereby created and designated a series of Securities under the Indenture
entitled "Dollar Notes due 2009." The Dollar Notes shall be in the form of
Exhibit A hereto. The Guarantee to be endorsed on the Dollar Notes shall be in
substantially the form set forth in exhibit B.
(1) the title of the Securities of such series shall be "Dollar
8.25% Senior Notes due 2009" and the Dollar Notes are endorsed to the
benefit of Article XII of the Indenture;
(2) the Dollar Notes shall be delivered from time to time in an
aggregate principal amount not to exceed
<PAGE> 4
-3-
$200,000,000; provided that the aggregate principal amount of Dollar
Notes initially authenticated on the Closing Dates shall not exceed
$100,000,000;
(3) the Notes will be issued at a price of 98.864%;
(4) the principal of each Dollar Note shall be payable on June
1, 2009;
(5) the Dollar Notes shall bear interest at the rate of 8.25%
per annum;
(6) interest shall accrue on the Dollar Notes from May 28,
1999, or the most recent date to which interest has been paid or duly
provided for; the Interest Payment Dates for such Notes shall be June 1
and December 1 in each year, commencing December 1, 1999, and the Regular
Record Dates with respect to the Interest Payment Dates for such Notes
shall be May 15 and November 15 in each year, respectively (whether or
not a Business Day);
(7) the Corporate Trust Office of The Bank of New York, in New
York, New York (and so long as the Notes are listed on the Luxembourg
Stock Exchange and the rules of and the rules of such Exchange so
require, in the city of Luxembourg and in any other city where such
agency is required to be maintained under the rules of any stock exchange
on which the Notes are listed) shall be the place at which (i) the
principal of, premium, if any, and interest, if any, on the Dollar Notes
shall be payable, (ii) registration of transfer of such Notes may be
effected, (iii) exchanges of such Notes may be effected and (iv) notices
and demands to or upon the Issuer in respect of such Notes and the
Indenture may be served; and The Bank of New York shall be the Security
Registrar for the Dollar Notes;
(8) the Dollar Notes shall not be redeemable by the Issuer
prior to Maturity;
(9) not applicable;
<PAGE> 5
-4-
(10) not applicable;
(11) not applicable;
(12) not applicable;
(13) not applicable;
(14) not applicable;
(15) see Section 2 of this Fourth Supplemental Indenture;
(16) not applicable;
(17) the Dollar Notes are to be issued as Registered Securities;
each Dollar Note is to be initially registered in the name of Cede & Co.,
as nominee for The Depository Trust Company (the "Depositary"). The
Dollar Notes shall not be transferable or exchangeable, nor shall any
purported transfer be registered, except as follows:
(i) a Dollar Note may be transferred in whole, and appropriate
registration of transfer effected, if such transfer is by
such nominee to the Depositary, or by the Depositary to
another nominee thereof, or by any nominee of the
Depositary to any other nominee thereof, or by the
Depositary or any nominee thereof to any successor
securities depositary or any nominee thereof; and
(ii) a Dollar Note may be exchanged for certificated notes
registered in the respective names of the beneficial
holders thereof, and thereafter shall be transferable
without restriction, if:
(A) The Depositary, or any successor securities
depositary, shall have notified the Issuer and the Trustee
that it is unwilling or unable to continue to act as
securities depositary with respect to such Dollar Note or
the Issuer becomes aware that the Depositary has ceased to
be a
<PAGE> 6
-5-
clearing agency registered under the Securities Exchange
Act of 1934, as amended, and, in any such case, the Trustee
shall not have been notified by the Issuer within ninety
(90) days of the identity of a successor securities
depositary with respect to such Dollar Note;
(B) (1) an Event of Default shall have occurred and
be continuing under Section 5.02 of the Indenture and upon
the request of the holders of a majority of the Dollar
Notes; or
(C) at any time if the issuer in its sole discretion
determines that the Global notes (in whole but not in part)
should be exchanged for definitive registered notes.
(18) not applicable;
(19) not applicable;
(20) the Dollar Notes will be issued in book entry form;
(21) the Dollar Notes are subject to the defeasance and covenant
defeasance provisions of the Indenture;
(22) not applicable;
(23) not applicable; and
(24) not applicable.
Section 2. ADDITIONAL PROVISIONS
(a) ADDITIONAL DEFINITIONS Each of the following definitions,
which constitute part of this Fourth Supplemental Indenture, shall be inserted
in proper alphabetical order in Article I of the Indenture. Any definition set
forth in the Indenture which is also set forth below shall have the meaning set
forth below for purposes of terms of the Indenture and this
<PAGE> 7
-6-
Fourth Supplemental Indenture. Capitalized terms used in this Fourth
Supplemental Indenture but not defined herein shall have the meaning ascribed to
such terms in the Indenture.
"Attributable Liens" means in connection with a sale and
lease-back transaction, the lesser of (a) the fair market value of the assets
subject to such transaction and (b) the present value (discounted at a rate per
annum equal to the average interest borne by all outstanding securities issued
under the Indenture (which may include securities in addition to the Dollar
Notes) determined on a weighted average basis and compounded semiannually) of
the obligations of the lessee for rental payments during the term of the related
lease.
"Capital Lease" means any Indebtedness represented by a lease
obligation of a person incurred with respect to real property or equipment
acquired or leased by such person and used in its business that is required to
be recorded as a capital lease in accordance with GAAP.
"Closing Date" means May 28, 1999.
"Exempted Debt" means the sum of the following as of the date of
determination: (i) Indebtedness of the Issuer and Guarantor incurred after the
Closing Date and secured by Liens not otherwise permitted by the first sentence
under Limitation on Liens below (Section 10.11), and (ii) Attributable Liens of
the Issuer and Guarantor and their Subsidiaries in respect of sale and
lease-back transactions entered into after the Closing Date, other than sale and
lease-back transactions permitted by the limitation on sale and lease-back
transactions set forth under Section 10.12. For purposes of determining whether
or not a sale and lease-back transaction is "permitted" by Section 10.12,
Limitation on Sale and Lease-Back Transactions, the last paragraph under Section
10.11, Limitation on Liens (creating an exception for Exempted Debt), will be
disregarded.
"Lien" means any lien, security interest, charge or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest).
<PAGE> 8
-7-
"Permitted Liens" means (i) Liens securing Indebtedness under the
Facility and any initial or subsequent renewal, extension, refinancing,
replacement or refunding thereof; (ii) Liens on accounts receivable, merchandise
inventory, equipment, and patents, trademarks, trade names and other
intangibles, securing Indebtedness; (iii) Liens on any asset of the Issuer and
Guarantor, any Subsidiary, or any joint venture to which the Issuer or the
Guarantor or any of their Subsidiaries is a party, created solely to secure
obligations incurred to finance the refurbishment, improvement or construction
of such asset, which obligations are incurred no later than 24 months after
completion of such refurbishment, improvement or construction, and all renewals,
extensions, refinancings, replacements or refundings of such obligations;
(iv)(a) Liens given to secure the payment of the purchase price incurred in
connection with the acquisition (including acquisition through merger or
consolidation) of property (including shares of stock), including Capital Lease
transactions in connection with any such acquisition, and (b) Liens existing on
property at the time of acquisition thereof or at the time of acquisition by the
Issuer or Guarantor or a Subsidiary or any person then owning such property
whether or not such existing Liens were given to secure the payment of the
purchase price of the property to which they attach; provided that, with respect
to clause (a), the Liens shall be given within 24 months after such acquisition
and shall attach solely to the property acquired or purchased and any
improvements then or thereafter placed thereon; (v) Liens in favor of customs
and revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (vi) Liens upon specific
items of inventory or other goods and proceeds of any person securing such
person's obligations in respect of bankers' acceptances issued or created for
the account of such person to facilitate the purchase, shipment or storage of
such inventory or other goods; (vii) Liens securing reimbursement obligations
with respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (viii)
Liens on key-man life insurance policies granted to secure Indebtedness of the
Issuer or Guarantor against the cash surrender value thereof; (ix) Liens
encumbering customary initial deposits and margin deposits and
<PAGE> 9
-8-
other Liens in the ordinary course of business, in each case securing
Indebtedness of the Company under interest swap obligations and currency
agreements and forward contract, option, futures contracts, futures options or
similar agreements or arrangements designed to protect the Issuer or the
Guarantor or any of their Subsidiaries from fluctuations in interest rates,
currencies or the price of commodities; (x) Liens arising out of conditional
sale, title retention, consignment or similar arrangements for the sale of goods
entered into by the Issuer or Guarantor or any of their Subsidiaries in the
ordinary course of business and (xi) Liens in favor of the Issuer or Guarantor
or any Subsidiary.
(b) ADDITIONAL SECTIONS Each of the following provisions, which
constitutes part of this Fourth Supplemental Indenture, is numbered to conform
with the format of the Indenture:
Section 10.11 Limitation on Liens
The Issuer and the Guarantor will not, and will not permit any of
their Subsidiaries to, create, incur, or permit to exist, any Lien on any of
their respective properties or assets, whether now owned or hereafter acquired,
or upon any income or profits therefrom, in order to secure any Indebtedness of
either of the Issuer or the Guarantor, without effectively providing that the
Dollar Notes shall be equally and ratably secured until such time as such
Indebtedness is no longer secured by such Lien, except: (i) Liens existing as of
the Closing Date; (ii) Liens granted after the Closing Date on any assets or
properties of the Issuer or the Guarantor or any of their Subsidiaries securing
Indebtedness of the Issuer or the Guarantor created in favor of the Holders of
the Dollar Notes; (iii) Liens securing Indebtedness of the Issuer or the
Guarantor which is incurred to extend, renew or refinance Indebtedness which is
secured by Liens permitted to be incurred under the Indenture; provided that
such Liens do not extend to or cover any property or assets of the Issuer or the
Guarantor or any of their Subsidiaries other than the property or assets
securing the Indebtedness being refinanced and that the principal amount of such
Indebtedness does not exceed the principal amount of the Indebtedness being
refinanced; (iv) Permitted
<PAGE> 10
-9-
Liens; and (v) Liens created in substitution of or as replacements for any Liens
permitted by the preceding clauses (i) through (iv), provided that, based on a
good faith determination of an officer each of the Issuer and the Guarantor, the
property or asset encumbered under any such substitute or replacement Lien is
substantially similar in nature to the property or asset encumbered by the
otherwise permitted Lien which is being replaced.
Notwithstanding the foregoing, the Issuer and the Guarantor and
any Subsidiary may, without securing the Dollar Notes, create, incur or permit
to exist Liens which would otherwise be subject to the restrictions set forth in
the preceding paragraph, if after giving effect thereto and at the time of
determination, Exempted Debt does not exceed the greater of (i) 10% of
Consolidated Net Assets or (ii) $250,000,000.
Section 10.12 Limitation on Sale and Lease-Back Transactions
The Issuer and Guarantor will not, and will not permit any of
their Subsidiaries to, enter into any sale and lease-back transaction for the
sale and leasing back of any property or asset, whether now owned or hereafter
acquired, of the Issuer or Guarantor or any of their Subsidiaries (except such
transactions (i) entered into prior to the Closing Date or (ii) for the sale and
leasing back of any property or asset by a Subsidiary of the Issuer or Guarantor
to the Issuer or Guarantor or (iii) involving leases for less than three years
or (iv) in which the lease for the property or asset is entered into within 120
days after the later of the date of acquisition, completion of construction or
commencement or full operations of such property or asset) unless (a) the Issuer
or Guarantor or such Subsidiary would be entitled under the Limitation on Liens
covenant above to create, incur or permit to exist a Lien on the assets to be
leased in an amount at least equal to the Attributable Liens in respect of such
transaction without equally and ratably securing the Dollar Notes, or (b) the
proceeds of the sale of the assets to be leased are at least equal to their fair
market value and the proceeds are applied to the purchase or acquisition (or in
the case of real property, the construction) of assets or to the repayment of
Indebtedness of
<PAGE> 11
-10-
the Issuer or Guarantor or a Subsidiary of the Issuer or Guarantor which by its
terms matures not earlier than one year after the date of such repayment.
<PAGE> 12
-11-
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Supplemental Indenture to be duly executed as of the day and year first above
written.
AMERICAN STANDARD INC.
By:
----------------------------------
Name:
Title:
AMERICAN STANDARD COMPANIES INC.,
as Guarantor
By:
----------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Trustee
By:
----------------------------------
Name:
Title:
<PAGE> 13
EXHIBIT A
[Face of Security]
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC"), 55 WATER STREET, NEW YORK, NEW YORK TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL THIS SECURITY IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
DTC TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER NOMINEE OF
DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH
SUCCESSOR.
A-1
<PAGE> 14
AMERICAN STANDARD INC.
8.25% Senior Notes Due 2009
No. 01 $100,000,000
CUSIP No. 029712AA4
ISIN US029712AA48
AMERICAN STANDARD INC., a Delaware corporation (herein referred to as the
"Issuer," which term includes any successor Person under the Indenture referred
to on the reverse hereof), for value received, hereby promises to pay to CEDE &
CO. or registered assigns the principal sum of ONE HUNDRED MILLION DOLLARS on
June 1, 2009 (the "Stated Maturity Date") and to pay interest thereon from May
28, 1999 or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, semi-annually on June 1 and December 1 in each
year (each, an "Interest Payment Date"), commencing December 1, 1999, at the
rate of 8.25% per annum, until the principal hereof is paid or duly provided
for. The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the Holder
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be May 15 or November 15 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date at the office or
agency of the Issuer maintained for such purpose; provided, however, that such
interest may be paid, at the Issuer's option, by mailing a check to such Holder
at its registered address or by transfer of funds to an account maintained by
such Holder within the United States. Any such interest not so punctually paid
or duly provided for shall forthwith cease to be payable to the Holder on such
Regular Record Date, and may be paid to the Holder in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to Holders of Securities of this
series not less than 10 days prior to
A-2
<PAGE> 15
such Special Record Date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in the Indenture. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The principal of this Security payable on the Stated Maturity Date or the
principal of, premium, and interest on this Security will be paid against
presentation of this Security at the office or agency of the Issuer maintained
for that purpose in New York, in such coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts.
Interest payable on this Security on any Interest Payment Date and on the Stated
Maturity Date will include interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has been paid or
duly provided for (or from and including May 28, 1999, if no interest has been
paid on this Security) to but excluding such Interest Payment Date or the Stated
Maturity Date, as the case may be. If any Interest Payment Date or the Stated
Maturity Date falls on a day that is not a Business Day, as defined below,
principal, premium, and/or interest payable with respect to such Interest
Payment Date or Stated Maturity Date, as the case may be, will be paid on the
next succeeding Business Day with the same force and effect as if it were paid
on the date such payment was due, and no interest shall accrue on the amount so
payable for the period from and after such Interest Payment Date or Stated
Maturity Date, as the case may be. "Business Day" means any day, other than a
Saturday or Sunday, on which banks in New York are not required or authorized by
law or executive order to close.
All payments of principal, premium, and interest in respect of this Security
will be made by the Issuer in immediately available funds.
Reference is hereby made to the further provisions of this Security set forth on
the reverse hereof, which further provi-
A-3
<PAGE> 16
sions shall for all purposes have the same effect as if set forth at this place.
Unless the Certificate of Authentication hereon has been executed by the Trustee
by manual signature of one of its authorized signatories, this Security shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
A-4
<PAGE> 17
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed
under its facsimile corporate seal.
Dated: AMERICAN STANDARD INC.
-------------------
By:
--------------------------------
Title:
Attest:
- -----------------------------------
Assistant Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
Dated:
-----------------------
THE BANK OF NEW YORK
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
A-5
<PAGE> 18
[Reverse of Security]
AMERICAN STANDARD INC.
This Security is one of a duly authorized issue of securities of the Issuer
(herein called the "Securities"), issued and to be issued in one or more series
under an Indenture, dated as of May 28, 1999 (herein called the "Indenture")
among the Issuer, the Guarantor and The Bank of New York, as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture with respect to the series of which this Security is a part), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Trustee and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the duly authorized series of Securities
designated on the face hereof (collectively, the "Securities"), and the
aggregate principal amount of the Securities to be issued under such series is
limited to $200,000,000 (except for Securities authenticated and delivered upon
transfer of, or in exchange for, or in lieu of other Securities). All terms used
in this Security which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.
If an Event of Default, as defined in the Indenture, shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the Guarantor and the rights of the Holders of the Securities under
the Indenture at any time by the Issuer, the Guarantor and the Trustee with the
consent of the Holders of not less than a majority of the aggregate principal
amount of all Securities issued under the Indenture at the time Outstanding and
affected thereby. The Indenture also contains provisions permitting the Holders
of not less than a majority of the aggregate principal amount of the
A-6
<PAGE> 19
Outstanding Securities, on behalf of the Holders of all such Securities, to
waive compliance by the Issuer and the Guarantor with certain provisions of the
Indenture. Furthermore, provisions in the Indenture permit the Holders of not
less than a majority of the aggregate principal amount, in certain instances, of
the Outstanding Securities of any series to waive, on behalf of all of the
Holders of Securities of such series, certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and other Securities issued upon the registration of
transfer hereof or in exchange hereafter or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Issuer, which is absolute
and unconditional, to pay the principal of (and premium) and interest on this
Security at the times, places and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein and
herein set forth, the transfer of this Security is registrable in the Security
Register of the Issuer upon surrender of this Security for registration of
transfer at the office or agency of the Issuer in any place where the principal
of (and premium) and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Security Registrar duly executed by, the Holder hereof or by his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein and
herein set forth, this Security is exchangeable for a like aggregate principal
amount of Securities of different authorized denominations but otherwise having
the same terms and conditions, as requested by the Holder hereof surrendering
the same.
A-7
<PAGE> 20
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
No service charge shall be made for any such registration of transfer or
exchange, but the Issuer and the Guarantor may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to due presentment of this Security for registration of transfer, the
Issuer, the Guarantor, the Trustee and any agent of the Issuer or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
No recourse shall be had for the payment of the principal of or premium, or the
interest on this Security, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture or any indenture
supplemental thereto, against any past, present or future stockholder, employee,
officer, director, incorporator, limited or general partner, as such, of the
Issuer or of any successor, either directly or through the Issuer or any
successor, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
The Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely in such State without regard to conflicts of law
principles thereof.
A-8
<PAGE> 21
ASSIGNMENT FORM
To assign this Securities, fill in the form below:
I or we assign and transfer this Security to
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
(Print or type assignee's name, address and zip code)
----------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Security on the books of the Company. The agent may substitute
another to act for him.
- -------------------------------------------------------------------------------
Date: Your Signature:
-------------------- --------------------
Signature Guarantee:
----------------------------------
(Signature must be guaranteed)
- ---------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
A-9
<PAGE> 22
EXHIBIT B
FORM OF NOTATION ON SECURITY
RELATING TO AMERICAN STANDARD COMPANIES INC.
The Guarantor has unconditionally guaranteed, to the extent set
forth in the Indenture and subject to the provisions in the Indenture, the due
and punctual payment and performance of the obligations of the Issuer in
connection with the Indenture and each Series of Securities issued thereunder.
In case of the failure of the Issuer punctually to perform or make any such
payment, the Guarantor hereby agrees to cause such payment and performance to be
made punctually.
The obligations of the Guarantor to the Holders and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth in Article
Twelve of the Indenture and reference is hereby made to the Indenture for the
precise terms of the Guarantee. Capitalized terms used and not defined herein
have the meanings ascribed thereto in the Indenture.
AMERICAN STANDARD COMPANIES INC.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
Attest:
By:
-------------------------------
Name:
--------------------------
[Assistant] Secretary
(Seal)
B-1
<PAGE> 1
EXHIBIT (4) (xi)
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AMERICAN STANDARD INC., as Issuer
AMERICAN STANDARD COMPANIES INC., as Guarantor
and
THE BANK OF NEW YORK, as Trustee
---------------
Fifth Supplemental Indenture
Dated as of May 28, 1999
---------------
Pound Sterling 60,000,000
8.25% Senior Notes due 2009
================================================================================
<PAGE> 2
FIFTH SUPPLEMENTAL INDENTURE, dated as of May 28, 1999 (the "Fifth
Supplemental Indenture"), to the Indenture, dated as of May 28, 1999 (as
amended, modified or supplemented from time to time in accordance therewith, the
"Indenture"), among AMERICAN STANDARD INC., a Delaware corporation (hereinafter
called the "Issuer"), having its principal office at One Centennial Avenue, P.O.
Box 6820, Piscataway, New Jersey 08835-6820, and AMERICAN STANDARD COMPANIES
INC., a Delaware corporation (hereinafter called the "Guarantor"), having its
principal office at One Centennial Avenue, P.O. Box 6820, Piscataway, New Jersey
08835-6820, and THE BANK OF NEW YORK, a New York banking corporation, as Trustee
hereunder (hereafter called the "Trustee"), having its principal office at 101
Barclay Street, Floor 21 West, New York, New York 10286.
RECITALS
WHEREAS, the Issuer, the Guarantor and the Trustee have each duly
authorized the execution and delivery of the Indenture to provide for the
issuance from time to time of one or more series of its senior debt securities
(the "Securities") to be issued in one or more series as in the Indenture
provided;
WHEREAS, the Issuer and the Guarantor desire and have requested
the Trustee to join them in the execution and delivery of this Fifth
Supplemental Indenture in order to establish and provide for the issuance by the
Issuer and the Guarantor of a series of Securities designated as its 8.25%
Senior Notes due 2009 (the "Sterling Notes") in the aggregate principal amount
not to exceed Pound Sterling 60,000,000, substantially in the form attached
hereto as Exhibit A, on the terms set forth herein;
WHEREAS, Section 9.01 of the Indenture provides that a
supplemental indenture may be entered into by the Issuer and the Guarantor and
the Trustee for such purpose provided certain conditions are met;
WHEREAS, the conditions set forth in the Indenture for the
execution and delivery of this Fifth Supplemental Indenture have been complied
with; and
WHEREAS, all things necessary to make this Fifth Supplemental
Indenture a valid agreement of the Issuer, the Guarantor and the Trustee, in
accordance with its terms, and a
<PAGE> 3
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valid amendment of, and supplement to, the Indenture have been done;
NOW, THEREFORE:
In consideration of the premises and the purchase and acceptance
of the Sterling Notes by the Holders thereof the Issuer mutually covenants and
agrees with the Trustee, for the equal and proportionate benefit of all Holders
of the Sterling Notes, that the Indenture is supplemented and amended, to the
extent and for the purposes expressed herein, as follows:
Section 1. SCOPE OF THIS FIFTH
SUPPLEMENTAL INDENTURE
(a) The changes, modifications and supplements to the Indenture
effected by this Fifth Supplemental Indenture in Section 2 hereof shall only be
applicable with respect to, and govern the terms of, the Sterling Notes issued
by the Issuer and the Guarantor, which shall be limited in original aggregate
principal amount to Pound Sterling 60,000,000 and shall not apply to any other
Securities which may be issued under the Indenture unless a supplemental
indenture with respect to such other Securities specifically incorporates such
changes, modifications and supplements.
(b) Pursuant to this Fifth Supplemental Indenture, there is hereby
created and designated a series of Securities under the Indenture entitled
"8.25% Senior Notes due 2009." The Sterling Notes shall be in the form of
Exhibit A hereto. The Guarantee to be endorsed on the Sterling Notes shall be in
substantially the form set forth in Exhibit B.
(1) the title of the Securities of such series shall be "Sterling
8.25% Senior Notes due 2009" and the Sterling Notes are endorsed to the
benefit of Article XII of the Indenture;
(2) the Sterling Notes shall be initially authenticated and
delivered from time to time in aggregate principal amount not to exceed
Pound Sterling 60,000,000;
<PAGE> 4
-3-
(3) the Notes will be issued at a price of 98.335%;
(4) the principal of each Sterling Note shall be payable on June
1, 2009;
(5) the Sterling Notes shall bear interest at the rate of 8.25%
per annum;
(6) interest shall accrue on the Sterling Notes from May 28, 1999,
or the most recent date to which interest has been paid or duly provided
for; the Interest Payment Dates for such Notes shall be June 1 and
December 1 in each year, commencing December 1, 1998, and the Regular
Record Dates with respect to the Interest Payment Dates for such Notes
shall be May 15 and November 15 in each year, respectively (whether or
not a Business Day);
(7) the Corporate Trust Office of The Bank of New York, in New
York, New York (and so long as the Notes are listed on the Luxembourg
Stock Exchange and the rules of and the rules of such Exchange so
require, in the city of Luxembourg and in any other city where such
agency is required to be maintained under the rules of any stock exchange
on which the Notes are listed) shall be the place at which (i) the
principal of, premium, if any, and interest, if any, on the Sterling
Notes shall be payable, (ii) registration of transfer of such Notes may
be effected, (iii) exchanges of such Notes may be effected and (iv)
notices and demands to or upon the Issuer in respect of such Notes and
the Indenture may be served; and The Bank of New York shall be the
Security Registrar for the Sterling Notes;
(8) the Sterling Notes shall not be redeemable by the Issuer prior
to Maturity;
(9) not applicable;
(10) the Securities will be issuable in denominations of Pound
Sterling 1,000 and any integral multiple thereof;
<PAGE> 5
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(11) the currency in which the Securities are denominated and
payable is pounds sterling; provided, however, that if the United Kingdom
adopts the Euro, it will replace pounds sterling as the legal tender in
the United Kingdom and result in the effective redenomination of the
Sterling Notes into Euro and the regulations of the European Commission
relating to the Euro shall apply to the Sterling Notes. The circumstances
and consequences described hereunder entitle neither the Issuer, the
Guarantor nor any holder of Sterling Notes to early redemption,
rescission, notice or repudiation of the terms and conditions of the
Sterling Notes or the Indenture or this Fifth Supplemental Indenture or
to raise other defenses or to request any compensation claim, nor will
they affect any of the other obligations of the Issuer or the Guarantor
under the Sterling Notes and the Indenture and this Fifth Supplemental
Indenture;
(12) not applicable;
(13) not applicable;
(14) not applicable;
(15) see Section 2 of this Fifth Supplemental Indenture;
(16) not applicable;
(17) the Sterling Notes are to be issued as Registered
Securities; each Sterling Note is to be initially registered in the
nominee name of the Trustee, as common depositary for EuroClear and Cedel
Bank (the "Common Depositary"). The Sterling Notes shall not be
transferable or exchangeable, nor shall any purported transfer be
registered, except as follows:
(i) a Sterling Note may be transferred in whole, and
appropriate registration of transfer effected, if such
transfer is by EuroClear and Cedel Bank to the Common
Depositary, or by the Common Depositary to EuroClear or
Cedel Bank, or by an-
<PAGE> 6
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other nominee of EuroClear or Cedel Bank to any other
nominee thereof, or by EuroClear or Cedel Bank or any
nominee thereof to any successor of EuroClear or Cedel Bank
or any nominee thereof; and
(ii) a Sterling Note may be exchanged for certificated notes
registered in the respective names of the beneficial
holders thereof, and thereafter shall be transferable
without restriction, if:
(A) EuroClear or Cedel Bank, or any successor of
EuroClear or Cedel Bank, shall have notified the Issuer and
the Trustee that it is unwilling or unable to continue to
act as account holder with respect to such Sterling Note
and, in such case, the Trustee shall not have been notified
by the Issuer within ninety (90) days of the identity of a
successor of EuroClear or Cedel Bank with respect to such
Sterling Note;
(B) Euroclear and Cedel notify the Issuer that they
are unwilling or unable to act as clearing agency and a
successor is not appointed by the issuer within 90 days; or
(C) (1) an Event of Default shall have occurred and
be continuing pursuant to Section 5.02 of the Indenture
upon the request of a majority of the holders of the
Sterling Notes; or
(D) at any time if the issuer in its sole discretion
determines that the Global Notes (in whole but not in part)
should be exchanged for definitive registered notes. (18)
not applicable;
(19) not applicable;
<PAGE> 7
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(20) the Sterling Notes will be issued in book entry form;
(21) the Sterling Notes are subject to the defeasance and
covenant defeasance provisions of the Indenture;
(22) not applicable;
(23) not applicable; and
(24) not applicable.
Section 2. ADDITIONAL PROVISIONS
(a) ADDITIONAL DEFINITIONS Each of the following definitions,
which constitute part of this Fifth Supplemental Indenture, shall be inserted in
proper alphabetical order in Article I of the Indenture. Any definition set
forth in the Indenture which is also set forth below shall have the meaning set
forth below for purposes of terms of the Indenture and this Fifth Supplemental
Indenture. Capitalized terms used in this Fifth Supplemental Indenture but not
defined herein shall have the meaning ascribed to such terms in the Indenture.
"Attributable Liens" means in connection with a sale and
lease-back transaction, the lesser of (a) the fair market value of the assets
subject to such transaction and (b) the present value (discounted at a rate per
annum equal to the average interest borne by all outstanding securities issued
under the Indenture (which may include securities in addition to the Sterling
Notes) determined on a weighted average basis and compounded semiannually) of
the obligations of the lessee for rental payments during the term of the related
lease.
"Capital Lease" means any Indebtedness represented by a lease
obligation of a person incurred with respect to real property or equipment
acquired or leased by such person and used in its business that is required to
be recorded as a capital lease in accordance with GAAP.
"Closing Date" means May 28, 1999.
<PAGE> 8
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"Exempted Debt" means the sum of the following as of the date of
determination: (i) Indebtedness of the Issuer and Guarantor incurred after the
Closing Date and secured by Liens not otherwise permitted by the first sentence
under Limitation on Liens below (Section 10.11), and (ii) Attributable Liens of
the Issuer and Guarantor and their Subsidiaries in respect of sale and
lease-back transactions entered into after the Closing Date, other than sale and
lease-back transactions permitted by the limitation on sale and lease-back
transactions set forth under Section 10.12. For purposes of determining whether
or not a sale and lease-back transaction is "permitted" by Section 10.12,
Limitation on Sale and Lease-Back Transactions, the last paragraph under Section
10.11, Limitation on Liens (creating an exception for Exempted Debt), will be
disregarded.
"Lien" means any lien, security interest, charge or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest).
"Permitted Liens" means (i) Liens securing Indebtedness under the
Facility and any initial or subsequent renewal, extension, refinancing,
replacement or refunding thereof; (ii) Liens on accounts receivable, merchandise
inventory, equipment, and patents, trademarks, trade names and other
intangibles, securing Indebtedness; (iii) Liens on any asset of the Issuer and
Guarantor, any Subsidiary, or any joint venture to which the Issuer or the
Guarantor or any of their Subsidiaries is a party, created solely to secure
obligations incurred to finance the refurbishment, improvement or construction
of such asset, which obligations are incurred no later than 24 months after
completion of such refurbishment, improvement or construction, and all renewals,
extensions, refinancings, replacements or refundings of such obligations;
(iv)(a) Liens given to secure the payment of the purchase price incurred in
connection with the acquisition (including acquisition through merger or
consolidation) of property (including shares of stock), including Capital Lease
transactions in connection with any such acquisition, and (b) Liens existing on
property at the time of acquisition thereof or at the time of acquisition by the
Issuer or Guarantor or a Subsidiary or any person then owning such property
whether or not such existing Liens were given
<PAGE> 9
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to secure the payment of the purchase price of the property to which they
attach; provided that, with respect to clause (a), the Liens shall be given
within 24 months after such acquisition and shall attach solely to the property
acquired or purchased and any improvements then or thereafter placed thereon;
(v) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods;
(vi) Liens upon specific items of inventory or other goods and proceeds of any
person securing such person's obligations in respect of bankers' acceptances
issued or created for the account of such person to facilitate the purchase,
shipment or storage of such inventory or other goods; (vii) Liens securing
reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the products
and proceeds thereof; (viii) Liens on key-man life insurance policies granted to
secure Indebtedness of the Issuer or Guarantor against the cash surrender value
thereof; (ix) Liens encumbering customary initial deposits and margin deposits
and other Liens in the ordinary course of business, in each case securing
Indebtedness of the Company under interest swap obligations and currency
agreements and forward contract, option, futures contracts, futures options or
similar agreements or arrangements designed to protect the Issuer or the
Guarantor or any of their Subsidiaries from fluctuations in interest rates,
currencies or the price of commodities; (x) Liens arising out of conditional
sale, title retention, consignment or similar arrangements for the sale of goods
entered into by the Issuer or Guarantor or any of their Subsidiaries in the
ordinary course of business and (xi) Liens in favor of the Issuer or Guarantor
or any Subsidiary.
(b) ADDITIONAL SECTIONS Each of the following provisions, which
constitutes part of this Fifth Supplemental Indenture, is numbered to conform
with the format of the Indenture:
Section 10.11 Limitation on Liens
The Issuer and the Guarantor will not, and will not permit any of
their Subsidiaries to, create, incur, or permit to exist, any Lien on any of
their respective properties or as-
<PAGE> 10
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sets, whether now owned or hereafter acquired, or upon any income or profits
therefrom, in order to secure any Indebtedness of either of the Issuer or the
Guarantor, without effectively providing that the Sterling Notes shall be
equally and ratably secured until such time as such Indebtedness is no longer
secured by such Lien, except: (i) Liens existing as of the Closing Date; (ii)
Liens granted after the Closing Date on any assets or properties of the Issuer
or the Guarantor or any of their Subsidiaries securing Indebtedness of the
Issuer or the Guarantor created in favor of the Holders of the Sterling Notes;
(iii) Liens securing Indebtedness of the Issuer or the Guarantor which is
incurred to extend, renew or refinance Indebtedness which is secured by Liens
permitted to be incurred under the Indenture; provided that such Liens do not
extend to or cover any property or assets of the Issuer or the Guarantor or any
of their Subsidiaries other than the property or assets securing the
Indebtedness being refinanced and that the principal amount of such Indebtedness
does not exceed the principal amount of the Indebtedness being refinanced; (iv)
Permitted Liens; and (v) Liens created in substitution of or as replacements for
any Liens permitted by the preceding clauses (i) through (iv), provided that,
based on a good faith determination of an officer each of the Issuer and the
Guarantor, the property or asset encumbered under any such substitute or
replacement Lien is substantially similar in nature to the property or asset
encumbered by the otherwise permitted Lien which is being replaced.
Notwithstanding the foregoing, the Issuer and the Guarantor and
any Subsidiary may, without securing the Sterling Notes, create, incur or permit
to exist Liens which would otherwise be subject to the restrictions set forth in
the preceding paragraph, if after giving effect thereto and at the time of
determination, Exempted Debt does not exceed the greater of (i) 10% of
Consolidated Net Assets or (ii) $250,000,000.
Section 10.12 Limitation on Sale and Lease-Back
Transactions
The Issuer and Guarantor will not, and will not permit any of
their Subsidiaries to, enter into any sale and lease-back transaction for the
sale and leasing back of any
<PAGE> 11
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property or asset, whether now owned or hereafter acquired, of the Issuer or
Guarantor or any of their Subsidiaries (except such transactions (i) entered
into prior to the Closing Date or (ii) for the sale and leasing back of any
property or asset by a Subsidiary of the Issuer or Guarantor to the Issuer or
Guarantor or (iii) involving leases for less than three years or (iv) in which
the lease for the property or asset is entered into within 120 days after the
later of the date of acquisition, completion of construction or commencement or
full operations of such property or asset) unless (a) the Issuer or Guarantor or
such Subsidiary would be entitled under the Limitation on Liens covenant above
to create, incur or permit to exist a Lien on the assets to be leased in an
amount at least equal to the Attributable Liens in respect of such transaction
without equally and ratably securing the Sterling Notes, or (b) the proceeds of
the sale of the assets to be leased are at least equal to their fair market
value and the proceeds are applied to the purchase or acquisition (or in the
case of real property, the construction) of assets or to the repayment of
Indebtedness of the Issuer or Guarantor or a Subsidiary of the Issuer or
Guarantor which by its terms matures not earlier than one year after the date of
such repayment.
<PAGE> 12
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IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Supplemental Indenture to be duly executed as of the day and year first above
written.
AMERICAN STANDARD INC.
By:
-------------------------------------
Name:
Title:
AMERICAN STANDARD COMPANIES INC.,
as Guarantor
By:
-------------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Trustee
By:
-------------------------------------
Name:
Title:
<PAGE> 13
EXHIBIT A
FORM OF SENIOR SECURITY
[Face of Security]
If the Holder of this Security (as indicated below) is the trustee of the
indenture as common depositary ("Common Depositary") for EuroClear or Cedel Bank
or a nominee of EuroClear or Cedel Bank, this Security is a Global Security and
the following legend applies:
THIS SECURITY IS HELD BY THE COMMON DEPOSITARY (AS
DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THIS GLOBAL
SECURITY MAY BE TRANSFERRED IN WHOLE BUT NOT IN PART PURSUANT TO
SECTION 1(b)(17)(i) OF THE FIFTH SUPPLEMENTAL INDENTURE, (II) THIS
GLOBAL SECURITY MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT
TO SECTION 1(b)(17)(ii) OF THE FIFTH SUPPLEMENTAL INDENTURE, (III)
THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 3.09 OF THE INDENTURE AND (IV) THIS
GLOBAL SECURITY MAY BE TRANSFERRED TO A SUCCESOR COMMON DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER.
A-1
<PAGE> 14
AMERICAN STANDARD INC.
8.25% Senior Notes Due 2009
No. 01 Pound Sterling 60,000,000
ISIN No. XS0097937477
AMERICAN STANDARD INC., a Delaware corporation (herein referred to as the
"Issuer," which term includes any successor Person under the Indenture referred
to on the reverse hereof), for value received, hereby promises to pay to THE
BANK OF NEW YORK DEPOSITORY (NOMINEES) LIMITED or registered assigns the
principal sum of SIXTY MILLION POUNDS STERLING on June 1, 2009 (the "Stated
Maturity Date") and to pay interest thereon from May 28, 1999 or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semi-annually on June 1 and December 1 in each year (each, an "Interest
Payment Date"), commencing December 1, 1999, at the rate of 8.25% per annum,
until the principal hereof is paid or duly provided for. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Holder in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be May 15 or
November 15 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date at the office or agency of the Issuer maintained for
such purpose; provided, however, that such interest may be paid, at the Issuer's
option, by mailing a check to such Holder at its registered address or by
transfer of funds to an account maintained by such Holder. Any such interest not
so punctually paid or duly provided for shall forthwith cease to be payable to
the Holder on such Regular Record Date, and may be paid to the Holder in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities of this series not less than 10 days prior to such Special Record
Date, or may be paid at any time
A-2
<PAGE> 15
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in the Indenture. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The principal of this Security payable on the Stated Maturity Date or the
principal of, premium, and interest on this Security will be paid against
presentation of this Security at the office or agency of the Issuer maintained
for that purpose in New York, in the coin or currency of the United Kingdom.
Interest payable on this Security on any Interest Payment Date and on the Stated
Maturity Date will include interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has been paid or
duly provided for (or from and including May 28, 1999, if no interest has been
paid on this Security) to but excluding such Interest Payment Date or the Stated
Maturity Date, as the case may be. If any Interest Payment Date or the Stated
Maturity Date falls on a day that is not a Business Day, as defined below,
principal, premium, and/or interest payable with respect to such Interest
Payment Date or Stated Maturity Date, as the case may be, will be paid on the
next succeeding Business Day with the same force and effect as if it were paid
on the date such payment was due, and no interest shall accrue on the amount so
payable for the period from and after such Interest Payment Date or Stated
Maturity Date, as the case may be. "Business Day" means any day, other than a
Saturday or Sunday, on which banks in New York are not required or authorized by
law or executive order to close.
All payments of principal, premium, and interest in respect of this Security
will be made by the Issuer in immediately available funds.
Reference is hereby made to the further provisions of this Security set forth on
the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
A-3
<PAGE> 16
Unless the Certificate of Authentication hereon has been executed by the Trustee
by manual signature of one of its authorized signatories, this Security shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
A-4
<PAGE> 17
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed
under its facsimile corporate seal.
Dated: AMERICAN STANDARD INC.
--------------
By:
-----------------------
Title:
Attest:
- ------------------------------
Assistant Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
Dated:
--------------------
THE BANK OF NEW YORK
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
-----------------------
Authorized Signatory
A-5
<PAGE> 18
[Reverse of Security]
AMERICAN STANDARD INC.
This Security is one of a duly authorized issue of securities of the Issuer
(herein called the "Securities"), issued and to be issued in one or more series
under an Indenture, dated as of May 28, 1999 (herein called the "Indenture")
among the Issuer, the Guarantor and The Bank of New York, as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture with respect to the series of which this Security is a part), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Trustee and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the duly authorized series of Securities
designated on the face hereof (collectively, the "Securities"), and the
aggregate principal amount of the Securities to be issued under such series is
limited to Pound Sterling 60,000,000 (except for Securities authenticated and
delivered upon transfer of, or in exchange for, or in lieu of other Securities).
All terms used in this Security which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
If an Event of Default, as defined in the Indenture, shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the Guarantor and the rights of the Holders of the Securities under
the Indenture at any time by the Issuer, the Guarantor and the Trustee with the
consent of the Holders of not less than a majority of the aggregate principal
amount of all Securities issued under the Indenture at the time Outstanding and
affected thereby. The Indenture also contains provisions permitting the Holders
of not less than a majority of the aggregate principal amount of the
A-6
<PAGE> 19
Outstanding Securities, on behalf of the Holders of all such Securities, to
waive compliance by the Issuer and the Guarantor with certain provisions of the
Indenture. Furthermore, provisions in the Indenture permit the Holders of not
less than a majority of the aggregate principal amount, in certain instances, of
the Outstanding Securities of any series to waive, on behalf of all of the
Holders of Securities of such series, certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and other Securities issued upon the registration of
transfer hereof or in exchange hereafter or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Issuer, which is absolute
and unconditional, to pay the principal of (and premium) and interest on this
Security at the times, places and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein and
herein set forth, the transfer of this Security is registrable in the Security
Register of the Issuer upon surrender of this Security for registration of
transfer at the office or agency of the Issuer in any place where the principal
of (and premium) and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Security Registrar duly executed by, the Holder hereof or by his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein and
herein set forth, this Security is exchangeable for a like aggregate principal
amount of Securities of different authorized denominations but otherwise having
the same terms and conditions, as requested by the Holder hereof surrendering
the same.
A-7
<PAGE> 20
The Securities of this series are issuable only in registered form without
coupons in denominations of Pound Sterling 1,000 and any integral multiple
thereof.
No service charge shall be made for any such registration of transfer or
exchange, but the Issuer and the Guarantor may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to due presentment of this Security for registration of transfer, the
Issuer, the Guarantor, the Trustee and any agent of the Issuer or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
No recourse shall be had for the payment of the principal of or premium, or the
interest on this Security, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture or any indenture
supplemental thereto, against any past, present or future stockholder, employee,
officer, director, incorporator, limited or general partner, as such, of the
Issuer or of any successor, either directly or through the Issuer or any
successor, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
The Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely in such State without regard to conflicts of law
principles thereof.
A-8
<PAGE> 21
ASSIGNMENT FORM
To assign this Securities, fill in the form below:
I or we assign and transfer this Security to
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
(Print or type assignee's name, address and zip code)
----------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Security on the books of the Company. The agent may substitute
another to act for him.
--------------------------------------------------
Date: Your Signature:
-------------------- --------------------
Signature Guarantee:
----------------------------------
(Signature must be guaranteed)
- -----------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
A-9
<PAGE> 22
EXHIBIT B
FORM OF NOTATION ON SECURITY
RELATING TO AMERICAN STANDARD COMPANIES INC.
The Guarantor has unconditionally guaranteed, to the extent set
forth in the Indenture and subject to the provisions in the Indenture, the due
and punctual payment and performance of the obligations of the Issuer in
connection with the Indenture and each Series of Securities issued thereunder.
In case of the failure of the Issuer punctually to perform or make any such
payment, the Guarantor hereby agrees to cause such payment and performance to be
made punctually.
The obligations of the Guarantor to the Holders and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth in Article
Twelve of the Indenture and reference is hereby made to the Indenture for the
precise terms of the Guarantee. Capitalized terms used and not defined herein
have the meanings ascribed thereto in the Indenture.
AMERICAN STANDARD COMPANIES INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
By:
--------------------------------
Name:
---------------------------
Assistant Secretary
(Seal)
B-1
<PAGE> 1
EXHIBIT (9994) (xii)
================================================================================
AMERICAN STANDARD INC., as Issuer
AMERICAN STANDARD COMPANIES INC., as Guarantor
and
THE BANK OF NEW YORK, as Trustee
---------------
Sixth Supplemental Indenture
Dated as of May 28, 1999
---------------
UP TO Euro350,000,000
7.125% Senior Notes due 2006
================================================================================
<PAGE> 2
SIXTH SUPPLEMENTAL INDENTURE, dated as of May 28, 1999 (the "Sixth
Supplemental Indenture"), to the Indenture, dated as of May 28, 1999 (as
amended, modified or supplemented from time to time in accordance therewith, the
"Indenture"), among AMERICAN STANDARD INC., a Delaware corporation (hereinafter
called the "Issuer"), having its principal office at One Centennial Avenue, P.O.
Box 6820, Piscataway, New Jersey 08835-6820, and AMERICAN STANDARD COMPANIES
INC., a Delaware corporation (hereinafter called the "Guarantor"), having its
principal office at One Centennial Avenue, P.O. Box 6820, Piscataway, New Jersey
08835-6820, and THE BANK OF NEW YORK, a New York banking corporation, as Trustee
hereunder (hereafter called the "Trustee"), having its principal office at 101
Barclay Street, Floor 21 West, New York, New York 10286.
RECITALS
WHEREAS, the Issuer, the Guarantor and the Trustee have each duly
authorized the execution and delivery of the Indenture to provide for the
issuance from time to time of one or more series of its senior debt securities
(the "Securities") to be issued in one or more series as in the Indenture
provided;
WHEREAS, the Issuer and the Guarantor desire and have requested
the Trustee to join them in the execution and delivery of this Sixth
Supplemental Indenture in order to establish and provide for the issuance by the
Issuer and the Guarantor of a series of Securities designated as its 7.125%
Senior Notes due 2006 (the "Euro Notes") in the aggregate principal amount not
to exceed Euro350,000,000, substantially in the form attached hereto as Exhibit
A, on the terms set forth herein;
WHEREAS, Section 9.01 of the Indenture provides that a
supplemental indenture may be entered into by the Issuer and the Guarantor and
the Trustee for such purpose provided certain conditions are met;
WHEREAS, the conditions set forth in the Indenture for the
execution and delivery of this Sixth Supplemental Indenture have been complied
with; and
WHEREAS, all things necessary to make this Sixth Supplemental
Indenture a valid agreement of the Issuer, the Guarantor and the Trustee, in
accordance with its terms, and a
<PAGE> 3
-2-
valid amendment of, and supplement to, the Indenture have been done;
NOW, THEREFORE:
In consideration of the premises and the purchase and acceptance
of the Euro Notes by the Holders thereof the Issuer mutually covenants and
agrees with the Trustee, for the equal and proportionate benefit of all Holders
of the Euro Notes, that the Indenture is supplemented and amended, to the extent
and for the purposes expressed herein, as follows:
Section 1. SCOPE OF THIS SIXTH
SUPPLEMENTAL INDENTURE
(a) The changes, modifications and supplements to the Indenture
effected by this Sixth Supplemental Indenture in Section 2 hereof shall only be
applicable with respect to, and govern the terms of, the Euro Notes issued by
the Issuer and the Guarantor, which shall be limited in original aggregate
principal amount not to exceed Euro350,000 and shall not apply to any other
Securities which may be issued under the Indenture unless a supplemental
indenture with respect to such other Securities specifically incorporates such
changes, modifications and supplements.
(b) Pursuant to this Sixth Supplemental Indenture, there is hereby
created and designated a series of Securities under the Indenture entitled "Euro
7.125% Senior Notes due 2006." The Euro Notes shall be in the form of Exhibit A
hereto. The Guarantee to be endorsed on the Euro Notes shall be in substantially
the form set forth in Exhibit B.
(1) the title of the Securities of such series shall be "[ ]%
Senior Notes due 2009" and the Euro Notes are endorsed to the benefit of
Article XII of the Indenture;
(2) the Euro Notes shall be initially authenticated and
delivered from time to time in an aggregate principal amount not to
exceed Euro350,000,000; provided that hte aggregate principal amount of
the Euro Ntoes on the Closing Date shall not exceed Euro250,,000,000;
<PAGE> 4
-3-
(3) the Notes will be issued at a price of 99.70%;
(4) the principal of each Euro Note shall be payable on June 1,
2006;
(5) the Euro Notes shall bear interest at the rate of 7.125%
per annum;
(6) interest shall accrue on the Euro Notes from May 28, 1999,
or the most recent date to which interest has been paid or duly provided
for; the Interest Payment Dates for such Notes shall be June 1 and
December 1 in each year, commencing December 1, 1998, and the Regular
Record Dates with respect to the Interest Payment Dates for such Notes
shall be May 15 and November 15 in each year, respectively (whether or
not a Business Day);
(7) the Corporate Trust Office of The Bank of New York, in New
York, New York (and so long as the Notes are listed on the Luxembourg
Stock Exchange and the rules of and the rules of such Exchange so
require, in the city of Luxembourg and in any other city where such
agency is required to be maintained under the rules of any stock exchange
on which the Notes are listed) shall be the place at which (i) the
principal of, premium, if any, and interest, if any, on the Euro Notes
shall be payable, (ii) registration of transfer of such Notes may be
effected, (iii) exchanges of such Notes may be effected and (iv) notices
and demands to or upon the Issuer in respect of such Notes and the
Indenture may be served; and The Bank of New York shall be the Security
Registrar for the Euro Notes;
(8) the Euro Notes shall not be redeemable by the Issuer prior
to Maturity;
(9) not applicable;
(10) the Securities will be issuable in denominations of Euro
1,000 and any integral multiple thereof;
(11) the currency in which the Securities are denominated and
payable is Euros;
<PAGE> 5
-4-
(12) not applicable;
(13) not applicable;
(14) not applicable;
(15) see Section 2 of this Sixth Supplemental Indenture;
(16) not applicable;
(17) the Euro Notes are to be issued as Registered Securities;
each Euro Note is to be initially registered in the nominee name of the
Trustee, as common depositary for EuroClear and Cedel Bank (the "Common
Depositary"). The Euro Notes shall not be transferable or exchangeable,
nor shall any purported transfer be registered, except as follows:
(i) a Euro Note may be transferred in whole, and appropriate
registration of transfer effected, if such transfer is by
EuroClear and Cedel Bank to the Common Depositary, or by
the Common Depositary to EuroClear or Cedel Bank, or by
another nominee of EuroClear or Cedel Bank to any other
nominee thereof, or by EuroClear or Cedel Bank or any
nominee thereof to any successor of EuroClear or Cedel Bank
or any nominee thereof; and
(ii) a Euro Note may be exchanged for certificated notes
registered in the respective names of the beneficial
holders thereof, and thereafter shall be transferable
without restriction, if:
(A) EuroClear or Cedel Bank, or any successor of
EuroClear or Cedel Bank, shall have notified the Issuer and
the Trustee that it is unwilling or unable to continue to
act as account holder with respect to such Euro Note and,
in such case, the Trustee shall not have been notified by
the Issuer within ninety (90) days
<PAGE> 6
-5-
of the identity of a successor of EuroClear or Cedel Bank
with respect to such Euro Note;
(B) Euroclear and Cedel notify the Issuer that they
are unwilling or unable to act as clearing agency and a
successor is not appointed by the issuer within 90 days; or
(C) (1) an Event of Default shall have occurred and
be continuing pursuant to Section 5.02 of the Indenture
upon the request of a majority of the holders of the Euro
Notes; or
(D) at any time if the issuer in its sole discretion
determines that the Global Notes (in whole but not in part)
should be exchanged for definitive registered notes.
(18) not applicable;
(19) not applicable;
(20) the Euro Notes will be issued in book entry form;
(21) the Euro Notes are subject to the defeasance and covenant
defeasance provisions of the Indenture;
(22) not applicable;
(23) not applicable; and
(24) not applicable.
Section 2. ADDITIONAL PROVISIONS
(a) ADDITIONAL DEFINITIONS Each of the following definitions,
which constitute part of this Sixth Supplemental Indenture, shall be inserted in
proper alphabetical order in Article I of the Indenture. Any definition set
forth in the Indenture which is also set forth below shall have the meaning set
forth below for purposes of terms of the Indenture and this Sixth Supplemental
Indenture. Capitalized terms used in this
<PAGE> 7
-6-
Sixth Supplemental Indenture but not defined herein shall have the meaning
ascribed to such terms in the Indenture.
"Attributable Liens" means in connection with a sale and
lease-back transaction, the lesser of (a) the fair market value of the assets
subject to such transaction and (b) the present value (discounted at a rate per
annum equal to the average interest borne by all outstanding securities issued
under the Indenture (which may include securities in addition to the Euro Notes)
determined on a weighted average basis and compounded semiannually) of the
obligations of the lessee for rental payments during the term of the related
lease.
"Capital Lease" means any Indebtedness represented by a lease
obligation of a person incurred with respect to real property or equipment
acquired or leased by such person and used in its business that is required to
be recorded as a capital lease in accordance with GAAP.
"Closing Date" means May 28, 1999.
"Exempted Debt" means the sum of the following as of the date of
determination: (i) Indebtedness of the Issuer and Guarantor incurred after the
Closing Date and secured by Liens not otherwise permitted by the first sentence
under Limitation on Liens below (Section 10.11), and (ii) Attributable Liens of
the Issuer and Guarantor and their Subsidiaries in respect of sale and
lease-back transactions entered into after the Closing Date, other than sale and
lease-back transactions permitted by the limitation on sale and lease-back
transactions set forth under Section 10.12. For purposes of determining whether
or not a sale and lease-back transaction is "permitted" by Section 10.12,
Limitation on Sale and Lease-Back Transactions, the last paragraph under Section
10.11, Limitation on Liens (creating an exception for Exempted Debt), will be
disregarded.
"Lien" means any lien, security interest, charge or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest).
<PAGE> 8
-7-
"Permitted Liens" means (i) Liens securing Indebtedness under the
Facility and any initial or subsequent renewal, extension, refinancing,
replacement or refunding thereof; (ii) Liens on accounts receivable, merchandise
inventory, equipment, and patents, trademarks, trade names and other
intangibles, securing Indebtedness; (iii) Liens on any asset of the Issuer and
Guarantor, any Subsidiary, or any joint venture to which the Issuer or the
Guarantor or any of their Subsidiaries is a party, created solely to secure
obligations incurred to finance the refurbishment, improvement or construction
of such asset, which obligations are incurred no later than 24 months after
completion of such refurbishment, improvement or construction, and all renewals,
extensions, refinancings, replacements or refundings of such obligations;
(iv)(a) Liens given to secure the payment of the purchase price incurred in
connection with the acquisition (including acquisition through merger or
consolidation) of property (including shares of stock), including Capital Lease
transactions in connection with any such acquisition, and (b) Liens existing on
property at the time of acquisition thereof or at the time of acquisition by the
Issuer or Guarantor or a Subsidiary or any person then owning such property
whether or not such existing Liens were given to secure the payment of the
purchase price of the property to which they attach; provided that, with respect
to clause (a), the Liens shall be given within 24 months after such acquisition
and shall attach solely to the property acquired or purchased and any
improvements then or thereafter placed thereon; (v) Liens in favor of customs
and revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (vi) Liens upon specific
items of inventory or other goods and proceeds of any person securing such
person's obligations in respect of bankers' acceptances issued or created for
the account of such person to facilitate the purchase, shipment or storage of
such inventory or other goods; (vii) Liens securing reimbursement obligations
with respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (viii)
Liens on key-man life insurance policies granted to secure Indebtedness of the
Issuer or Guarantor against the cash surrender value thereof; (ix) Liens
encumbering customary initial deposits and margin deposits and
<PAGE> 9
-8-
other Liens in the ordinary course of business, in each case securing
Indebtedness of the Company under interest swap obligations and currency
agreements and forward contract, option, futures contracts, futures options or
similar agreements or arrangements designed to protect the Issuer or the
Guarantor or any of their Subsidiaries from fluctuations in interest rates,
currencies or the price of commodities; (x) Liens arising out of conditional
sale, title retention, consignment or similar arrangements for the sale of goods
entered into by the Issuer or Guarantor or any of their Subsidiaries in the
ordinary course of business and (xi) Liens in favor of the Issuer or Guarantor
or any Subsidiary.
(b) ADDITIONAL SECTIONS Each of the following provisions, which
constitutes part of this Sixth Supplemental Indenture, is numbered to conform
with the format of the Indenture:
Section 10.11 Limitation on Liens
The Issuer and the Guarantor will not, and will not permit any of
their Subsidiaries to, create, incur, or permit to exist, any Lien on any of
their respective properties or assets, whether now owned or hereafter acquired,
or upon any income or profits therefrom, in order to secure any Indebtedness of
either of the Issuer or the Guarantor, without effectively providing that the
Euro Notes shall be equally and ratably secured until such time as such
Indebtedness is no longer secured by such Lien, except: (i) Liens existing as of
the Closing Date; (ii) Liens granted after the Closing Date on any assets or
properties of the Issuer or the Guarantor or any of their Subsidiaries securing
Indebtedness of the Issuer or the Guarantor created in favor of the Holders of
the Euro Notes; (iii) Liens securing Indebtedness of the Issuer or the Guarantor
which is incurred to extend, renew or refinance Indebtedness which is secured by
Liens permitted to be incurred under the Indenture; provided that such Liens do
not extend to or cover any property or assets of the Issuer or the Guarantor or
any of their Subsidiaries other than the property or assets securing the
Indebtedness being refinanced and that the principal amount of such Indebtedness
does not exceed the principal amount of the Indebtedness being refinanced; (iv)
Permitted
<PAGE> 10
-9-
Liens; and (v) Liens created in substitution of or as replacements for any Liens
permitted by the preceding clauses (i) through (iv), provided that, based on a
good faith determination of an officer each of the Issuer and the Guarantor, the
property or asset encumbered under any such substitute or replacement Lien is
substantially similar in nature to the property or asset encumbered by the
otherwise permitted Lien which is being replaced.
Notwithstanding the foregoing, the Issuer and the Guarantor and
any Subsidiary may, without securing the Euro Notes, create, incur or permit to
exist Liens which would otherwise be subject to the restrictions set forth in
the preceding paragraph, if after giving effect thereto and at the time of
determination, Exempted Debt does not exceed the greater of (i) 10% of
Consolidated Net Assets or (ii) $250,000,000.
Section 10.12 Limitation on Sale and Lease-Back Transactions
The Issuer and Guarantor will not, and will not permit any of
their Subsidiaries to, enter into any sale and lease-back transaction for the
sale and leasing back of any property or asset, whether now owned or hereafter
acquired, of the Issuer or Guarantor or any of their Subsidiaries (except such
transactions (i) entered into prior to the Closing Date or (ii) for the sale and
leasing back of any property or asset by a Subsidiary of the Issuer or Guarantor
to the Issuer or Guarantor or (iii) involving leases for less than three years
or (iv) in which the lease for the property or asset is entered into within 120
days after the later of the date of acquisition, completion of construction or
commencement or full operations of such property or asset) unless (a) the Issuer
or Guarantor or such Subsidiary would be entitled under the Limitation on Liens
covenant above to create, incur or permit to exist a Lien on the assets to be
leased in an amount at least equal to the Attributable Liens in respect of such
transaction without equally and ratably securing the Euro Notes, or (b) the
proceeds of the sale of the assets to be leased are at least equal to their fair
market value and the proceeds are applied to the purchase or acquisition (or in
the case of real property, the construction) of assets or to the repayment of
Indebtedness of
<PAGE> 11
-10-
the Issuer or Guarantor or a Subsidiary of the Issuer or Guarantor which by its
terms matures not earlier than one year after the date of such repayment.
<PAGE> 12
-11-
IN WITNESS WHEREOF, the parties hereto have caused this Sixth
Supplemental Indenture to be duly executed as of the day and year first above
written.
AMERICAN STANDARD INC.
By:
--------------------------------------
Name:
Title:
AMERICAN STANDARD COMPANIES INC.,
as Guarantor
By:
--------------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Trustee
By:
--------------------------------------
Name:
Title:
<PAGE> 13
EXHIBIT A
[Face of Security]
THIS SECURITY IS HELD BY THE COMMON DEPOSITARY (AS
DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THIS GLOBAL
SECURITY MAY BE TRANSFERRED IN WHOLE BUT NOT IN PART PURSUANT TO
SECTION 1(b)(17)(i) OF THE SIXTH SUPPLEMENTAL INDENTURE, (II) THIS
GLOBAL SECURITY MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT
TO SECTION 1(b)(17)(ii) OF THE SIXTH SUPPLEMENTAL INDENTURE, (III)
THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 3.09 OF THE INDENTURE AND (IV) THIS
GLOBAL SECURITY MAY BE TRANSFERRED TO A SUCCESOR COMMON DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER.
A-1
<PAGE> 14
AMERICAN STANDARD INC.
7.125% Senior Notes Due 2006
No. 01 Euro250,000,000
ISIN No. XS0097937121
AMERICAN STANDARD INC., a Delaware corporation (herein referred to as the
"Issuer," which term includes any successor Person under the Indenture referred
to on the reverse hereof), for value received, hereby promises to pay to THE
BANK OF NEW YORK DEPOSITORY (NOMINEES) LIMITED or registered assigns the
principal sum of TWO HUNDRED FIFTY MILLION EUROS on June 1, 2006 (the "Stated
Maturity Date") and to pay interest thereon from May 28, 1999 or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semi-annually on June 1 and December 1 in each year (each, an "Interest
Payment Date"), commencing December 1, 1999, at the rate of 7.125% per annum,
until the principal hereof is paid or duly provided for. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Holder in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be May 15 or
November 15 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date at the office or agency of the Issuer maintained for
such purpose; provided, however, that such interest may be paid, at the Issuer's
option, by mailing a check to such Holder at its registered address or by
transfer of funds to an account maintained by such Holder. Any such interest not
so punctually paid or duly provided for shall forthwith cease to be payable to
the Holder on such Regular Record Date, and may be paid to the Holder in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof
A-2
<PAGE> 15
shall be given to Holders of Securities of this series not less than 10 days
prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in the Indenture.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The principal of this Security payable on the Stated Maturity Date or the
principal of, premium, and interest on this Security will be paid against
presentation of this Security at the office or agency of the Issuer maintained
for that purpose in New York, in the coin or currency of the European Community.
Interest payable on this Security on any Interest Payment Date and on the Stated
Maturity Date will include interest accrued from and including the next
preceding Interest Payment Date in respect of which interest has been paid or
duly provided for (or from and including May 28, 1999, if no interest has been
paid on this Security) to but excluding such Interest Payment Date or the Stated
Maturity Date, as the case may be. If any Interest Payment Date or the Stated
Maturity Date falls on a day that is not a Business Day, as defined below,
principal, premium, and/or interest payable with respect to such Interest
Payment Date or Stated Maturity Date, as the case may be, will be paid on the
next succeeding Business Day with the same force and effect as if it were paid
on the date such payment was due, and no interest shall accrue on the amount so
payable for the period from and after such Interest Payment Date or Stated
Maturity Date, as the case may be. "Business Day" means any day, other than a
Saturday or Sunday, on which banks in New York are not required or authorized by
law or executive order to close.
All payments of principal, premium, and interest in respect of this Security
will be made by the Issuer in immediately available funds.
Reference is hereby made to the further provisions of this Security set forth on
the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
A-3
<PAGE> 16
Unless the Certificate of Authentication hereon has been executed by the Trustee
by manual signature of one of its authorized signatories, this Security shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
A-4
<PAGE> 17
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed
under its facsimile corporate seal.
Dated: AMERICAN STANDARD INC.
--------------
By:
----------------------------
Title:
Attest:
- -----------------------------
Assistant Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
Dated:
-----------------------
THE BANK OF NEW YORK
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
--------------------------
Authorized Signatory
A-5
<PAGE> 18
[Reverse of Security]
AMERICAN STANDARD INC.
This Security is one of a duly authorized issue of securities of the Issuer
(herein called the "Securities"), issued and to be issued in one or more series
under an Indenture, dated as of May 28, 1999 (herein called the "Indenture")
among the Issuer, the Guarantor and The Bank of New York, as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture with respect to the series of which this Security is a part), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Trustee and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the duly authorized series of Securities
designated on the face hereof (collectively, the "Securities"), and the
aggregate principal amount of the Securities to be issued under such series is
limited to Euro350,000,000 (except for Securities authenticated and delivered
upon transfer of, or in exchange for, or in lieu of other Securities). All terms
used in this Security which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.
If an Event of Default, as defined in the Indenture, shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the Guarantor and the rights of the Holders of the Securities under
the Indenture at any time by the Issuer, the Guarantor and the Trustee with the
consent of the Holders of not less than a majority of the aggregate principal
amount of all Securities issued under the Indenture at the time Outstanding and
affected thereby. The Indenture also contains provisions permitting the Holders
of not less than a majority of the aggregate principal amount of the
A-6
<PAGE> 19
Outstanding Securities, on behalf of the Holders of all such Securities, to
waive compliance by the Issuer and the Guarantor with certain provisions of the
Indenture. Furthermore, provisions in the Indenture permit the Holders of not
less than a majority of the aggregate principal amount, in certain instances, of
the Outstanding Securities of any series to waive, on behalf of all of the
Holders of Securities of such series, certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and other Securities issued upon the registration of
transfer hereof or in exchange hereafter or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Issuer, which is absolute
and unconditional, to pay the principal of (and premium) and interest on this
Security at the times, places and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein and
herein set forth, the transfer of this Security is registrable in the Security
Register of the Issuer upon surrender of this Security for registration of
transfer at the office or agency of the Issuer in any place where the principal
of (and premium) and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Security Registrar duly executed by, the Holder hereof or by his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein and
herein set forth, this Security is exchangeable for a like aggregate principal
amount of Securities of different authorized denominations but otherwise having
the same terms and conditions, as requested by the Holder hereof surrendering
the same.
A-7
<PAGE> 20
The Securities of this series are issuable only in registered form without
coupons in denominations of Euro1,000 and any integral multiple thereof.
No service charge shall be made for any such registration of transfer or
exchange, but the Issuer and the Guarantor may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to due presentment of this Security for registration of transfer, the
Issuer, the Guarantor, the Trustee and any agent of the Issuer or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
No recourse shall be had for the payment of the principal of or premium, or the
interest on this Security, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture or any indenture
supplemental thereto, against any past, present or future stockholder, employee,
officer, director, incorporator, limited or general partner, as such, of the
Issuer or of any successor, either directly or through the Issuer or any
successor, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
The Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely in such State without regard to conflicts of law
principles thereof.
A-8
<PAGE> 21
ASSIGNMENT FORM
To assign this Securities, fill in the form below:
I or we assign and transfer this Security to
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
(Print or type assignee's name, address and zip code)
----------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Security on the books of the Company. The agent may substitute
another to act for him.
- -------------------------------------------------------------------------------
Date: Your Signature:
-------------------- --------------------
Signature Guarantee:
----------------------------------
(Signature must be guaranteed)
- -------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
A-9
<PAGE> 22
EXHIBIT B
FORM OF NOTATION ON SECURITY
RELATING TO AMERICAN STANDARD COMPANIES INC.
The Guarantor has unconditionally guaranteed, to the extent set
forth in the Indenture and subject to the provisions in the Indenture, the due
and punctual payment and performance of the obligations of the Issuer in
connection with the Indenture and each Series of Securities issued thereunder.
In case of the failure of the Issuer punctually to perform or make any such
payment, the Guarantor hereby agrees to cause such payment and performance to be
made punctually.
The obligations of the Guarantor to the Holders and to the Trustee
pursuant to the Guarantee and the Indenture are expressly set forth in Article
Twelve of the Indenture and reference is hereby made to the Indenture for the
precise terms of the Guarantee. Capitalized terms used and not defined herein
have the meanings ascribed thereto in the Indenture.
AMERICAN STANDARD COMPANIES INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
By:
--------------------------------
Name:
---------------------------
[Assistant] Secretary
(Seal)
B-1
<PAGE> 1
Exhibit (4) (xviii)
EXECUTION COPY
FIFTH AMENDMENT (this "Fifth Amendment") dated as of
November 30, 1999 to the Amended and Restated Credit Agreement dated
as of January 31, 1997 (as amended, the "Credit Agreement";
capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Credit Agreement, as amended
hereby), among American Standard Companies Inc. ("Holding");
American Standard Inc. ("ASI"); the Subsidiaries of ASI listed in
Schedule I thereto (the "Subsidiary Borrowers" and, together with
ASI, the "Borrowers"); the financial institutions party thereto (the
"Lenders"); The Chase Manhattan Bank, as administrative agent for
the Lenders (in such capacity, the "Administrative Agent");
Citibank, N.A., as Documentation Agent (the "Documentation Agent");
and The Bank of Nova Scotia and Nationsbank, N.A., as Co-Syndication
Agents (the "Co-Syndication Agents" and, together with the
Documentation Agent and the Administrative Agent, the "Agents").
ASI, Holding and the Subsidiary Borrowers have requested that the
Required Lenders (i) consent to the sale by ASI of its Medical Systems Business,
(ii) agree to amend the definitions of "Reorganization" and "Restricted Group"
in the Fourth Amendment and (iii) amend Section 6.06 of the Credit Agreement.
The undersigned Lenders and the Agents are willing to grant such consent and
agree to such amendments on the terms and subject to the conditions set forth
herein. Accordingly, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
(a) For purposes of this Fifth Amendment, the following terms shall
have the meanings set forth below:
"Fourth Amendment" shall mean the Fourth Amendment dated as of
December 22, 1998, to the Credit Agreement.
"Medical Systems Business Sale" shall mean the sale to one or more
third parties in one or more transactions approved by ASI's Board of
Directors of, whether by means of the sale of capital stock or assets, or
both, of (a) ASI's Medical Systems Segment (as described in Holding's
Annual Report on Form 10-K for the year ended December 31, 1998) and (b)
Meretek Diagnotics, Inc.
ARTICLE II. AMENDMENTS TO CREDIT AGREEMENT
SECTION 2.01. Amendment of Section 1.01 of the Credit Agreement.
Section 1.01 of the Credit Agreement is hereby amended by adding the following
definitions in their appropriate alphabetical order:
""Attributable Debt" shall mean, on any date, the aggregate rental
or similar payments, however denominated, made or to be made under any
Synthetic Lease during the fiscal year in progress on such date multiplied
by eight."
<PAGE> 2
2
"Synthetic Lease" shall mean any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet
financing product where the transaction is considered indebtedness for
borrowed money for Federal income tax purposes but is classified as an
operating lease in accordance with GAAP for financial reporting purposes."
SECTION 2.02. Amendment to Section 6.06 of the Credit Agreement.
Section 6.06 of the Credit Agreement is hereby amended by replacing Section 6.06
in its entirety with the following:
"SECTION 6.06. Synthetic Leases. Permit the aggregate
Attributable Debt in respect of all Synthetic Leases for which ASI and
its Subsidiaries are liable (whether directly, under any Guarantee or
other suretyship arrangement or otherwise) at any time to exceed
$100,000,000."
ARTICLE III. CONSENT TO MEDICAL SYSTEMS BUSINESS SALE
Pursuant to Section 6.02(a)(ii)(1) of the Credit Agreement, the
undersigned Lenders hereby consent to the Medical Systems Business Sale,
provided that such sale is conducted in compliance with clauses (2) through (5)
of Section 6.02(a)(ii) of the Credit Agreement.
ARTICLE IV. AMENDMENTS TO FOURTH AMENDMENT RELATING TO REORGANIZATION
SECTION 4.01. Amendment of Certain Definitions. The
definitions of "Reorganization", "Restricted Group" and "Spin-Off" in the
Fourth Amendment are hereby amended to read as follows:
""Reorganization" shall mean a series of transactions, all of which
shall be completed no later than January 15, 2000, pursuant to which (a)
ASI will effect the following transactions in the following order: (i)
each of WABCO Company, Webbco Inc. and WABCO Inc. will merge with and into
Webbco Inc., which upon effectiveness of the merger will be renamed WABCO
Co., (ii) ASI will transfer all of its trademarks, tradenames, service
marks and other similar intellectual property and related rights to ASII,
and ASI and ASII will enter into territorial licenses which permit ASI and
its subsidiaries to use all of the foregoing intellectual property in the
United States, (iii) WABCO Co., Standard Sanitary Manufacturing Company,
It Holdings Inc., Trane Hellas, Inc. and The Trane Company will merge with
and into ASII, (iv) ASI will transfer the subsidiaries listed on Schedule
I hereto to ASII, (v) WABCO Standard Trane Holdings, Inc. will merge with
and into ASII and (vi) ASI will distribute the capital stock of ASII to
Holding, all with the result that the corporate structure of Holding and
its subsidiaries will be as set forth in Schedule II hereto and (b) all
Liens on any capital stock existing under the Security Documents and all
Guarantees under the Guarantee Documents will remain in full force and
effect notwithstanding the transfer of the capital stock of any Guarantor,
grantor or pledged entity.
"Restricted Group" shall mean each of ASII, Trane Export Inc. and
The Trane Company.
"Spin-Off" shall mean the consummation of the transaction
described in clause (a)(vi) of the definition of Reorganization."
<PAGE> 3
3
SECTION 4.02. Amendment of Certain Conditions. Section 5.02
of the Fourth Amendment is hereby amended by the deletion of paragraphs (d)
and (e) thereof and by the amendment of paragraph (i) thereof to read as
follows:
"(i) Each Credit Party involved in the Reorganization shall have
executed and delivered an instrument satisfactory to the Administrative
Agent acknowledging the continued effectiveness at all times after the
completion of the Spin-Off of all existing pledges and guarantees under
the Security Documents and the Guarantee Documents as pledges securing or
guarantees of the Obligations (including any future advances under the
Credit Documents), and ASII shall have undertaken the obligations of a
pledgor under the Security Documents with respect to all equity interests
of Subsidiaries owned by it following the Reorganization; and"
SECTION 4.03. Amendment of Section 6.18 of Credit Agreement.
Section 6.18 of the Credit Agreement is hereby amended to read as follows:
"SECTION 6.18. Restricted Group. Holding covenants and agrees that
it shall cause each member of the Restricted Group (a) to engage only in
those activities in which such member was engaged (or in which
Subsidiaries merged into such member pursuant to the Reorganization were
engaged) immediately prior to the Spin-Off; provided, that such member may
also serve as a holding company for Foreign Subsidiaries engaged in
businesses not inconsistent with Section 6.17, (b) except in the case of
ASII, to continue at all times to be at least a direct Designated
Subsidiary of ASII with the remaining capital stock owned by another
Designated Subsidiary and (c) not to incur, create, assume or permit to
exist any Indebtedness other than (i) Indebtedness outstanding on the date
of the Fourth Amendment (including the Obligations) and (ii) Indebtedness
owed to Holding, ASI or a Domestic Subsidiary of ASI that is evidenced by
one or more promissory notes that are pledged as security for the
Obligations under a Pledge Agreement in form and substance satisfactory to
the Administrative Agent."
ARTICLE IV. 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 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 permitted by the
Credit Agreement as amended hereby or as contemplated by the Security Documents)
result in the creation or imposition of (or the obligation to create or impose)
any Lien
<PAGE> 4
4
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 may be subject.
ARTICLE V. EFFECTIVENESS
The consent provided for in Article II hereof and the amendments
provided for in Article III hereof shall become effective on the date (the
"Effective Date") on which the following conditions precedent shall have been
satisfied:
(a) the signature lines at the foot of this Amendment shall have
been executed by the Required Lenders;
(b) the Administrative Agent shall have received, on behalf of the
Lenders, an Officer's Certificate of ASI, dated the 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; and
(c) all legal matters incidental to this Fifth Amendment shall be
satisfactory to the Administrative Agent and to Cravath, Swaine & Moore,
counsel for the Administrative Agent.
ARTICLE VI. MISCELLANEOUS
SECTION 6.01. Further Assurances Relating to the
Reorganization. (a) Holding agrees that promptly upon the consummation of the
Spin-Off and pursuant to Section 5.11 of the Credit Agreement, it will grant to
the Administrative Agent for the benefit of the Lenders a perfected security
interest in the capital stock of ASII pursuant to a Supplemental Securities
Pledge Agreement, together with undated stock powers.
(b) Each of Holding, ASII and ASI confirms that, pursuant to Section
5.11 of the Credit Agreement, it will, and that it will cause any Subsidiary to,
pledge to the Administrative Agent all shares of capital stock of any Subsidiary
that it did not own prior to the commencement of the Reorganization and that it
owns upon completion of the Spin-Off.
(c) Each of Holding, ASI and ASII agrees that, from time to time at
the request of the Administrative Agent or the Required Lenders, it will
promptly deliver a detailed, written report on the status of the Reorganization
and take such actions as the Administrative Agent or the Required Lenders may
request to perfect or maintain the Liens or maintain the Guarantees contemplated
by the Credit Agreement, as amended by the Fourth Amendment and this Fifth
Amendment.
SECTION 6.02. APPLICABLE LAW. THIS FIFTH AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
<PAGE> 5
5
SECTION 6.03. Expenses. ASI shall pay all reasonable out-of-pocket
expenses incurred by the Administrative Agent in connection with the
preparation, negotiation, execution, delivery and enforcement of this Fifth
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 6.03 shall survive the termination of
the Credit Agreement.
SECTION 6.04. Counterparts. This Fifth 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.
[Intentionally Left Blank]
<PAGE> 6
6
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be duly executed by their duly authorized officers, all as of the
date first above written.
AMERICAN STANDARD COMPANIES INC.,
by ____________________________________
Name:
Title:
AMERICAN STANDARD INC.,
by ____________________________________
Name:
Title:
AMERICAN STANDARD CREDIT INC.,
by ____________________________________
Name:
Title:
WABCO STANDARD GMBH,
by ____________________________________
Name:
Title:
AMERICAN STANDARD (UK) CO.,
by ____________________________________
Name:
Title:
<PAGE> 7
7
STANDARD EUROPE, a European Economic
Interest Grouping,
by ____________________________________
Name:
Title:
WABCO STANDARD TRANE INC.,
by ____________________________________
Name:
Title:
WABCO STANDARD TRANE B.V.,
by ____________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent,
by ____________________________________
Name:
Title:
CITIBANK, N.A., individually and as
Documentation Agent,
by ____________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA, individually and
as Co-Syndication Agent,
by ____________________________________
Name:
Title:
<PAGE> 8
8
BANK OF AMERICA, N.A., individually and
as Co-Syndication Agent,
by ____________________________________
Name:
Title:
BANKERS TRUST COMPANY,
by ____________________________________
Name:
Title:
NATIONSBANK, N.A., individually and as
Co-Syndication Agent,
by ____________________________________
Name:
Title:
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN
ISLANDS BRANCH,
by ____________________________________
Name:
Title:
by ____________________________________
Name:
Title:
THE BANK OF NEW YORK,
by ____________________________________
Name:
Title:
<PAGE> 9
9
PARIBAS,
by ____________________________________
Name:
Title:
by ____________________________________
Name:
Title:
CIBC INC.,
by ____________________________________
Name:
Title:
CIBC WOOD GUNDY plc,
by ____________________________________
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE,
by ____________________________________
Name:
Title:
by ____________________________________
Name:
Title:
<PAGE> 10
10
CREDIT LYONNAIS NEW YORK BRANCH,
by ____________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY,
by ____________________________________
Name:
Title:
THE LONG TERM CREDIT BANK OF JAPAN, LIMITED,
by ____________________________________
Name:
Title:
THE SANWA BANK LIMITED, NEW YORK BRANCH,
by ____________________________________
Name:
Title:
THE SUMITOMO BANK, LTD.,
by ____________________________________
Name:
Title:
THE TORONTO-DOMINION BANK,
by ____________________________________
Name:
Title:
<PAGE> 11
11
ABN AMRO BANK N.V., NEW YORK BRANCH,
by ____________________________________
Name:
Title:
by ____________________________________
Name:
Title:
ALLIED IRISH BANK plc, CAYMAN ISLANDS
BRANCH,
by ____________________________________
Name:
Title:
by ____________________________________
Name:
Title:
ARAB BANKING CORPORATION,
by ____________________________________
Name:
Title:
BANCA COMMERCIALE ITALIANA, NEW YORK BRANCH,
by ____________________________________
Name:
Title:
by ____________________________________
Name:
Title:
<PAGE> 12
12
BANK OF MONTREAL,
by ____________________________________
Name:
Title:
BANK OF SCOTLAND,
by ____________________________________
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH,
by ____________________________________
Name:
Title:
CREDIT AGRICOLE INDOSUEZ,
by ____________________________________
Name:
Title:
UNICREDITO ITALIANO, SpA,
by ____________________________________
Name:
Title:
by ____________________________________
Name:
Title:
FLEET NATIONAL BANK,
by ____________________________________
Name:
Title:
<PAGE> 13
13
LLOYDS BANK, PLC,
by ____________________________________
Name:
Title:
by ____________________________________
Name:
Title:
MERITA BANK Plc.,
by ____________________________________
Name:
Title:
by ____________________________________
Name:
Title:
NATIONAL CITY BANK,
by ____________________________________
Name:
Title:
THE ROYAL BANK OF SCOTLAND plc,
by ____________________________________
Name:
Title:
THE SAKURA BANK, LIMITED,
by ____________________________________
Name:
Title:
<PAGE> 14
14
SOCIETE GENERALE, NEW YORK BRANCH,
by ____________________________________
Name:
Title:
COMERICA BANK,
by ____________________________________
Name:
Title:
ERSTE BANK,
by ____________________________________
Name:
Title:
FIRST UNION NATIONAL BANK,
by ____________________________________
Name:
Title:
STANDARD CHARTERED BANK,
by ____________________________________
Name:
Title:
by ____________________________________
Name:
Title:
<PAGE> 15
15
THE SUMITOMO TRUST AND BANKING CO., LTD.,
NEW YORK BRANCH,
by ____________________________________
Name:
Title:
THE TOKAI BANK, LIMITED, NEW YORK BRANCH,
by ____________________________________
Name:
Title:
UNITED STATES NATIONAL BANK OF OREGON,
by ____________________________________
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.,
by ____________________________________
Name:
Title:
BAYERISCHE HYPO -- und VEREINSBANK AG,
New York Branch,
by ____________________________________
Name:
Title:
<PAGE> 16
16
THE DAI-ICHI KANGYO BANK, LIMITED,
by ____________________________________
Name:
Title:
FUJI BANK LIMITED,
by ____________________________________
Name:
Title:
TOYO TRUST & BANKING CO., LTD.,
by ____________________________________
Name:
Title:
NATEXIS BANQUE BFCE,
by ____________________________________
Name:
Title:
MARINE MIDLAND BANK, N.A.
by ____________________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE,
by ____________________________________
Name:
Title:
DRESDNER BANK AG,
by ____________________________________
Name:
Title:
<PAGE> 17
17
FIRSTTRUST BANK,
by ____________________________________
Name:
Title:
GENERAL ELECTRIC CAPIAL CORPORATION,
by ____________________________________
Name:
Title:
HSBC BANK USA,
by ____________________________________
Name:
Title:
<PAGE> 18
WEBSTER BANK,
by ____________________________________
Name:
Title:
Accepted and Acknowledged as of the
date first above written:
AMERICAN STANDARD INTERNATIONAL, INC.,
by ____________________________________
Name:
Title:
STANDARD SANITARY
MANUFACTURING COMPANY,
by ____________________________________
Name:
Title:
THE TRANE COMPANY,
by ____________________________________
Name:
Title:
TRANE EXPORT INC.,
by ____________________________________
Name:
Title:
TRANE WABCO COMPANY,
by ____________________________________
Name:
Title:
<PAGE> 19
WABCO STANDARD TRANE
HOLDINGS INC.,
by ____________________________________
Name:
Title:
<PAGE> 1
Exhibit 10 (ix)
AMERICAN STANDARD COMPANIES INC.
CORPORATE OFFICER SEVERANCE PLAN
(As Amended and Restated as of December 2, 1999)
Section I. Purpose.
The purpose of the Plan is to provide elected officers of the Company
with severance benefits should their employment with the Company terminate under
the circumstances described below. The Plan supersedes any and all previous
severance pay practices or policies of the Company, whether written or
unwritten.
Section II. Definitions.
A. Agreement and Release - means an agreement prepared by the
Company under which a Participant, in return for the benefits provided under the
Plan, agrees to release the Company and its affiliates from any and all claims
which such Participant may have against the Company at the time the agreement is
executed, and further agrees to certain other undertakings, including
cooperation with the Company in any matter which may give rise to legal claims
against the Company, a one year non-competition obligation, keeping confidential
proprietary information of the company as well as the terms of the Agreement and
Release, settlement of any disputes concerning the Agreement and Release through
binding arbitration, and such other undertakings as the Company may require from
time to time.
B. Board - means the Board of Directors of the Company.
C. Cause - means a Participant's (i) willful and continued failure
substantially to perform his or her duties with the Company or any Subsidiary
(other than any such failure resulting from incapacity due to reasonably
documented physical or mental illness), after a demand for substantial
performance is delivered to such Participant by the Chairman of the Board or
officer of equivalent authority which specifically identifies the manner in
which it is believed that such Participant has not substantially performed his
or her duties, or (ii) the willful engaging by such Participant in illegal
misconduct materially and demonstrably injurious to the Company or any
Subsidiary or to the trustworthiness or effectiveness of the Participant in the
-1-
<PAGE> 2
performance of his or her duties. For purposes hereof, no act, or failure to
act, on such Participant's part shall be considered "willful" unless done, or
omitted to be done, by him or her not in good faith and without reasonable
belief that his or her action or omission was in the best interest of the
Company or a Subsidiary. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by such Participant in good faith and in the best interest of the
Company or such Subsidiary.
D. Change of Control - means the occurrence of any of the following
events:
(i) any person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 15% or more
of the combined voting power of the Company's then-outstanding
securities (a "15% Beneficial Owner"); provided, however, that
(a) the term "15% Beneficial Owner" shall not include (1) Kelso
ASI Partners, L.P. and Kelso American Standard Partners, L.P.
("Kelso") and their affiliates or their immediate transferees
provided that any such transferee holding 15% or more of the
combined voting power of the Company's outstanding securities
following any such transfer does not following or concurrently
with such transfer acquire any additional shares of such
securities except from Kelso or any of their affiliates or (2)
any Beneficial Owner who has crossed such 15% threshold solely as
a result of an acquisition of securities directly from the
Company, or solely as a result of an acquisition by the Company
of Company securities, until such time thereafter as such person
acquires additional voting securities other than directly from
the Company and, after giving effect to such acquisition, such
person would constitute a 15% Beneficial Owner; and (b) with
respect to any person eligible to file a Schedule 13G pursuant to
Rule 13d-1(b)(1) under the Act with respect to Company securities
(an "Institutional Investor"), there shall be excluded from the
number of securities deemed to be beneficially owned by such
person a number of securities representing not more than 10% of
the combined voting power of the Company's then-outstanding
securities;
(ii) during any period of two consecutive years beginning after
December 1, 1996, individuals who at the beginning of such period
constitute the Board together with those individuals who first
become directors during such period
-2-
<PAGE> 3
(other than by reason of an agreement with the Company or the
Board in settlement of a proxy contest for the election of
directors) and whose election or nomination for election to the
Board was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved (the "Continuing
Directors"), cease for any reason to constitute a majority of
the Board;
(iii) the shareholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the Company,
or a reverse stock split of any class of voting securities of the
Company, or the consummation of any such transaction if
shareholder approval is not obtained, other than such transaction
which would result in at least 75% of the total voting power
represented by the voting securities of the Company or the
surviving entity outstanding immediately after such transaction
being beneficially owned by persons who together owned at least
75% of the combined voting power of the voting securities of the
Company outstanding immediately prior to such transaction, with
the relative voting power of each such continuing holder compared
to the voting power of each other continuing holder not
substantially altered as a result of the transaction; provided
that, for purposes of this paragraph (iii), (a) such continuity
of ownership (and preservation of relative voting power) shall be
deemed to be satisfied if the failure to meet such 75% threshold
(or to preserve such relative voting power) is due solely to the
acquisition of voting securities by an employee benefit plan of
the Company or of such surviving entity or of any subsidiary of
the Company or such surviving entity and (b) voting securities
beneficially owned by such persons who receive them other than as
holders of voting securities of the Company outstanding
immediately prior to such transaction shall not be taken into
account for purposes of determining whether such 75% threshold
(or such relative voting power) is satisfied;
(iv) the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the
sale or disposition of all or substantially all the assets of the
Company unless following the completion of such liquidation or
dissolution, or such sale or disposition, the 75% threshold
-3-
<PAGE> 4
(and relative voting power) requirements set forth in
sub-paragraph (iii) above are satisfied; or
(v) any other event which the Plan Administrator determines
shall constitute a Change of Control for purposes of this Plan;
provided, however, that a Change of Control shall not be deemed to have
occurred if one of the following exceptions applies:
(1) Unless a majority of the Continuing Directors and of the
Plan Administrator determines that the exception set forth
in this paragraph (1) shall not apply, none of the
foregoing conditions would have been satisfied but for one
or more of the following persons acquiring or otherwise
becoming the Beneficial Owner of securities of the
Company: (A) any person who has entered into a binding
agreement with the Company, which agreement has been
approved by two-thirds of the Continuing Directors,
limiting the acquisition of additional voting securities
by such person, the solicitation of proxies by such person
or proposals by such person concerning a business
combination with the Company (a "Standstill Agreement");
(B) any employee benefit plan, or trustee or other
fiduciary thereof, maintained by the Company or any
Subsidiary; (C) any Subsidiary; or (D) the Company.
(2) Unless a majority of the Continuing Directors and of the
Plan Administrator determines that the exception set forth
in this paragraph (2) shall not apply, none of the
foregoing conditions would have been satisfied but for the
acquisition by or of the Company of or by another entity
(whether by the merger or consolidation, the acquisition
of stock or assets, or otherwise) in exchange, in whole or
in part, for securities of the Company, provided that,
immediately following such acquisition, the Continuing
Directors constitute a majority of the Board, or a
majority of the board of directors of any other surviving
entity, and, in either case, no agreement, arrangement or
understanding exists at that time which would cause such
Continuing Directors to cease thereafter to constitute a
majority of the Board or of such other board of directors.
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<PAGE> 5
Notwithstanding the foregoing, unless otherwise determined by a
majority of the Continuing Directors, no Change of Control shall be
deemed to have occurred with respect to a particular Participant if the
Change of Control results from actions or events in which such
Participant is involved in a capacity other than solely as an officer,
employee or director of the Company.
For purposes of the foregoing definition of Change of Control,
the term "Beneficial Owner," with respect to any securities, shall mean
any person who, directly or indirectly, has or shares the right to vote
or dispose of such securities or otherwise has "beneficial ownership" of
such securities (within the meaning of Rule 13d-3 and Rule 13d-5 (as
such Rules are in effect on December 1, 1996) under the Act), including
pursuant to any agreement, arrangement or understanding (whether or not
in writing); provided, however, that (i) a person shall not be deemed
the Beneficial Owner of any security as a result of any agreement,
arrangement or understanding to vote such security (A) arising solely
from a revocable proxy or consent solicited pursuant to, and in
accordance with, the applicable provisions of the Act and the rules and
regulations thereunder or (B) made in connection with, or otherwise to
participate in, a proxy or consent solicitation made, or to be made,
pursuant to, and in accordance with, the applicable provisions of the
Act and the rules and regulations thereunder, in either case described
in clause (A) or clause (B) above whether or not such agreement,
arrangement or understanding is also then reportable by such person on
Schedule 13D under the Act (or any comparable or successor report), and
(ii) a person engaged in business as an underwriter of securities shall
not be deemed to be the Beneficial Owner of any securities acquired
through such person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition.
E. Company - means American Standard Companies Inc., a Delaware
corporation, and any successor thereto.
F. Disability - means a Participant's inability, due to reasonably
documented physical or mental illness, for more than six months to perform his
or her duties with the Company or a Subsidiary on a full time basis if, within
30 days after written notice of termination has been given to such Participant,
he or she shall not have returned to the full time performance of his or her
duties.
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<PAGE> 6
G. Effective Date - means April 27, 1991.
H. Good Reason - means any of the following:
(i) an adverse change in a Participant's status or position(s)
as an executive of the Company or of a Subsidiary, any adverse change in
a Participant's status or position as an executive of the Company or of
a Subsidiary as a result of a material diminution in his or her duties
or responsibilities or a relocation of a Participant's principal place
of employment to a location which is at least 50 miles further from such
Participant's principal residence than his or her current location or
the assignment to him or her of any duties or responsibilities which are
inconsistent with such status or position(s), or any removal of such
Participant from or any failure to reappoint or reelect him or her to
such position(s) (except in connection with the termination of his or
her employment for Cause, Disability or retirement or as a result of his
or her death or by him or her other than for Good Reason);
(ii) a reduction by the Company or such Subsidiary in such
Participant's base salary;
(iii) the taking of any action by the Company or a Subsidiary
(including the elimination of a plan without providing substitutes
therefor or the reduction of his or her awards thereunder) that would
substantially diminish the aggregate projected value of such
Participant's awards under the Company's or such Subsidiary's bonus and
benefit plans in which he or she was participating at the time of the
taking of such action;
(iv) the taking of any action by the Company or such Subsidiary
that would substantially diminish the aggregate value of the benefits
provided such Participant under the Company's or such subsidiary's
medical, health, accident, disability, life insurance, thrift and
retirement plans in which he or she was participating at the time of the
taking of such action; or
(v) any purported termination by the Company or such
Subsidiary of such Participant's employment that is not effected for
Cause, provided that this shall not include termination of employment at
age sixty-five pursuant to the Company's mandatory retirement policy for
Corporate Officers.
Notwithstanding the foregoing, a termination for Good Reason
shall not have
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<PAGE> 7
occurred (a) if the Participant consented in writing to the event giving
rise to the "Good Reason", or (b) with regard to the occurrence of the
events described in paragraphs 4(ii), (iii) and (iv) above prior to a
Change of Control, if such reductions or actions are proportionate to
the reductions or actions applicable to other employees in similar
positions pursuant to a cost savings plan.
I. Participant - means each elected officer of the Company.
J. Plan - means the American Standard Companies Inc. Corporate
Officer Severance Plan.
K. Plan Administrator - means the Management Development and
Nominating Committee of the Board (the "MDC") or any committee or individual
designated by the MDC to perform some or all of its administrative functions
hereunder.
L. Subsidiary - means any corporation or partnership in which the
Company owns, directly or indirectly, 50% or more of the total combined voting
power of all classes of stock of such corporation or of the capital interest or
profits interest of such partnership.
Section III. Eligibility.
A Participant shall be eligible to receive the benefits provided under
the Plan in the event that:
(i) such Participant voluntarily terminates his or her employment for
Good Reason or suffers an involuntary termination by the Company
other than a termination for Cause, provided that in either case
such termination shall not include a termination upon attainment
of age sixty-five pursuant to the Company's mandatory retirement
policy for Corporate Officers; and
(ii) such Participant executes an Agreement and Release in a form
acceptable to the Company at the time of the Participant's
termination of employment.
No other individual shall be eligible for benefits under the Plan and the
payment of benefits hereunder shall not be affected by the payment of retirement
or other benefits under any other Company plan.
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<PAGE> 8
Section IV. Severance Payments.
A Participant who satisfies the eligibility requirements of Section III
hereof shall receive severance payments equal to the sum of the following:
A. an amount equal to two times (or in the case of the Chief
Executive Officer of the Company three times) the Participant's annual base
salary in effect on the date the termination occurs; plus
B. the amount of the Participant's annual incentive plan target
award in effect for the calendar year in which the termination occurs determined
without regard to whether the applicable targets are obtained, multiplied by a
fraction, the numerator of which is the number of days in the year of
termination that the Participant was an employee of the Company, and the
denominator of which is 365; plus
C. the amount (or in the case of the Chief Executive Officer, two
times the amount) of the Participant's annual incentive plan target award in
effect for the year in which the termination occurs determined without regard to
whether the applicable targets are obtained.
Section V. Certain Additional Payments by the Company.
(A) Anything in this Plan to the contrary notwithstanding, in the
event it shall be determined that any payment, award, benefit or distribution
(or any acceleration of any payment, award, benefit or distribution) by the
Company (or any of its affiliated entities) or any entity which effectuates a
Change of Control (or any of its affiliated entities) to or for the benefit of a
Participant (whether pursuant to the terms of this Plan or otherwise, but
determined without regard to any additional payments required under this Section
V) (the "Payments") would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest
or penalties are incurred by a Participant with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Company shall pay to
such Participant (or to the Internal Revenue Service on behalf of Participant)
an additional payment (a "Gross-Up
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<PAGE> 9
Payment") in an amount such that after payment by such Participant of all taxes
(including any Excise Tax) imposed upon the Gross-Up Payment, such Participant
retains (or has had paid to the Internal Revenue Service on his behalf) an
amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed
upon the Payments and (y) the product of any deductions disallowed because of
the inclusion of the Gross-Up Payment in such Participant's adjusted gross
income and the highest applicable marginal rate of federal income taxation for
the calendar year in which the Gross-Up Payment is to be made. For purposes of
determining the amount of the Gross-Up Payment, a Participant shall be deemed
(i) to pay federal income taxes at the highest marginal rates of federal income
taxation for the calendar year in which the Gross-Up Payment is to be made, (ii)
to pay applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-Up Payment is to be made, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes and (iii) to have otherwise allowable
deductions for federal income tax purposes at least equal to the Gross-Up
Payment.
(B) Subject to the provisions of Section V(a), all determinations
required to be made under this Section V, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment, and the assumptions to
be utilized in arriving at such determinations, shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the Change of Control (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Participant within fifteen
(15) business days of the receipt of notice from the Company or Participant that
there has been a Payment, or such earlier time as is requested by the Company
(collectively, the "Determination"). In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, the Participant may appoint another nationally recognized
public accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company
and the Company shall enter into any agreement reasonably requested by the
Accounting Firm in connection with the performance of the services hereunder.
The Gross-Up Payment under this Section V with respect to any Payments shall be
made no later than thirty (30) days following such Payment. If the Accounting
Firm determines that no Excise Tax is payable by the Participant, it shall
furnish the Participant with a written opinion to such effect, and to the effect
that failure to report the Excise Tax, if any, on the Participant's applicable
federal income tax
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<PAGE> 10
return will not result in the imposition of a negligence or similar penalty. The
Determination by the Accounting Firm shall be binding upon the Company and
Participant. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the Determination, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment") or Gross-Up Payments are made by the Company which should not
have been made ("Overpayment"), consistent with the calculations required to be
made hereunder. In the event that the Participant thereafter is required to make
payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of the Participant. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse the Participant for his Excise Tax,
the Accounting Firm shall determine the amount of the Overpayment that has been
made and any such Overpayment (together with interest at the rate provided in
Section 1274(b)(2) of the Code) shall be promptly paid by the Participant (to
the extent he has received a refund if the applicable Excise Tax has been paid
to the Internal Revenue Service) to or for the benefit of the Company.
Section VI. Payment of Benefits.
Unless the Plan Administrator determines otherwise, all severance
payments hereunder shall be paid in a single lump sum at, or as soon as
practicable after, the Participant's termination of employment.
Section VII. Continuation of Welfare Plan Coverage.
In the event of a Participant's voluntary termination for Good Reason or
his or her involuntary termination by the Company other than a termination for
Cause, such Participant will be entitled, upon payment of any premiums or
co-payments theretofore required for such coverage, to continue all life,
accident, health and disability coverage, on the same basis as in effect on the
date he or she terminated employment, for a period of 24 months from the date of
termination (36 months in the case of the Chief Executive Officer), provided
that, to the extent permitted by law, such coverage may be terminated at the
discretion of the Plan Administrator in the event the Participant obtains at
least equal alternate coverage.
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<PAGE> 11
Section VIII. Financial Planning Assistance.
The Company will reimburse a Participant for all bills which the Plan
Administrator determines are reasonably related to financial planning assistance
and tax preparation, provided that such bills are incurred and evidence of
payment by the Participant is submitted to the Plan Administrator within one
year after the date of termination.
Section IX. Reservation of Right to Amend and Terminate.
The Company reserves the right, whether in an individual case or more
generally, by a majority of the Continuing Directors to amend, reduce or
eliminate the Plan, in whole or in part, at any time and from time to time
without notice, provided that no amendment to this Plan shall be made for two
years following the occurrence of a Change of Control if such amendment would
reduce the benefits hereunder and no such amendment shall be effective if a
Change of Control occurs within six months following such amendment.
Section X. Relationship to Other Benefits.
No payment under the Plan shall be taken into account in determining any
payments, benefits, coverage levels or participation rates under any incentive
compensation plan, any pension, retirement, profit sharing, group insurance, or
other benefit plan of the Company; provided that, a Participant shall not be
entitled to receive the severance payment set forth in Section IV.B. of this
Plan if such Participant becomes entitled to receive a comparable payment
pursuant to Article IV of the Company's Annual Incentive Plan by reason of a
Change of Control.
Section XI. Administration.
Subject to Section V of the Plan, the Plan Administrator shall have full
power and authority to interpret and carry out the terms of the Plan, and to
exercise discretion where necessary or appropriate in the interpretation and
administration of the Plan, and prior to a
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<PAGE> 12
Change of Control all decisions by the Plan Administrator shall be final and
binding on all affected parties.
Section XII. Expenses.
All expenses of administering the Plan shall be borne by the Company.
Section XIII. Withholding.
The Company may withhold from any amounts payable hereunder such
Federal, state or local taxes as may be required to be withheld pursuant to any
applicable law or regulation.
Section XIV. Governing Law.
This Plan and all rights and obligations hereunder shall be construed in
accordance with and governed by the laws of the State of Delaware, without
reference to the principles of conflict of laws.
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<PAGE> 1
Exhibit 10 (xi)
AMERICAN STANDARD COMPANIES INC.
STOCK INCENTIVE PLAN
(AS AMENDED THROUGH DECEMBER 2, 1999)
SECTION 1.
PURPOSE
The purpose of the Plan is to foster and promote the long-term
financial success of the Company and materially increase shareholder value by
(a) motivating superior performance by means of performance-related incentives,
(b) encouraging and providing for the acquisition of an ownership interest in
the Company by Employees, and (c) enabling the Company to attract and retain the
services of an outstanding management team upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
SECTION 2.
DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms
shall have the respective meanings et forth below:
(a) "Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Adjustment Event" shall mean any stock dividend, stock
split or share combination of, or extraordinary cash dividend on, the
Common Stock or recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination, exchange of shares, warrants or rights
offering to purchase Common Stock at a price substantially below Fair
Market Value, or other similar event affecting the Common Stock of the
Company.
(c) "Board" means the Board of Directors of the Company.
<PAGE> 2
(d) "Cause" means a Participant's (i) willful and continued
failure substantially to perform his duties with the Company or any
Subsidiary (other than any such failure resulting from incapacity due to
reasonably documented physical or mental illness), after a demand for
substantial performance is delivered to such Participant by the Chairman
of the Board or any executive officer which specifically identifies the
manner in which it is believed that such Participant has not
substantially performed his duties, or (ii) the willful engaging by such
Participant in illegal misconduct materially and demonstrably injurious
to the Company or any Subsidiary or to the trustworthiness or
effectiveness of such Participant in the performance of his duties. For
purposes hereof, no act, or failure to act, on such Participant's part
shall be considered "willful" unless done, or omitted to be done, by him
not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company or a Subsidiary. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to
be done, by such Participant in good faith and in the best interest of
the Company or such Subsidiary.
(e) "Change of Control" shall mean the occurrence of any of the
following events:
(i) any person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing
15% or more of the combined voting power of the Company's
then-outstanding securities (a "15% Beneficial Owner"); provided,
however, that (a) the term "15% Beneficial Owner" shall not
include any Beneficial Owner who has crossed such 15% threshold
solely as a result of an acquisition of securities directly from
the Company, or solely as a result of an acquisition by the
Company of Company securities, until such time thereafter as such
person acquires additional voting securities other than directly
from the Company and, after giving effect to such acquisition,
such person would constitute a 15% Beneficial Owner; and (b) with
respect to any person eligible to file a Schedule 13G pursuant to
Rule 13d-1(b)(1) under the Act with respect to Company securities
(an "Institutional Investor"), there shall be excluded from the
number of securities deemed to be beneficially owned by such
person a number of securities representing not more than 10% of
the combined
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<PAGE> 3
voting power of the Company's then-outstanding securities;
(ii) during any period of two consecutive years beginning
after December 1, 1996, individuals who at the beginning of such
period constitute the Board together with those individuals who
first become directors during such period (other than by reason
of an agreement with the Company or the Board in settlement of a
proxy contest for the election of directors) and whose election
or nomination for election to the Board was approved by a vote of
at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved
(the "Continuing Directors"), cease for any reason to constitute
a majority of the Board;
(iii) the shareholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the Company,
or a reverse stock split of any class of voting securities of the
Company, or the consummation of any such transaction if
shareholder approval is not obtained, other than such transaction
which would result in at least 75% of the total voting power
represented by the voting securities of the Company or the
surviving entity outstanding immediately after such transaction
being beneficially owned by persons who together owned at least
75% of the combined voting power of the voting securities of the
Company outstanding immediately prior to such transaction, with
the relative voting power of each such continuing holder compared
to the voting power of each other continuing holder not
substantially altered as a result of the transaction; provided
that, for purposes of this paragraph (iii), (a) such continuity
of ownership (and preservation of relative voting power) shall be
deemed to be satisfied if the failure to meet such 75% threshold
(or to preserve such relative voting power) is due solely to the
acquisition of voting securities by an employee benefit plan of
the Company or of such surviving entity or of any subsidiary of
the Company or such surviving entity and (b) voting securities
beneficially owned by such persons who receive them other than as
holders of voting securities of the Company outstanding
immediately prior to such transaction shall not be taken into
account for purposes of determining whether such 75% threshold
(or such relative voting power) is
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<PAGE> 4
satisfied;
(iv) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company or an
agreement for the sale or disposition of all or substantially all
the assets of the Company unless following the completion of such
liquidation or dissolution, or such sale or disposition, the 75%
threshold (and relative voting power) requirements set forth in
sub-paragraph (iii) above are satisfied; or
(v) any other event which the Committee determines shall
constitute a Change of Control for purposes of this Plan;
provided, however, that a Change of Control shall not be deemed to have
occurred if one of the following exceptions applies:
(1) Unless a majority of the Continuing Directors and of the
Committee determine that the exception set forth in this
paragraph (1) shall not apply, none of the foregoing
conditions would have been satisfied but for one or more
of the following persons acquiring or otherwise becoming
the Beneficial Owner of securities of the Company: (A)
any person who has entered into a binding agreement with
the Company, which agreement has been approved by
two-thirds of the Continuing Directors, limiting the
acquisition of additional voting securities by such
person, the solicitation of proxies by such person or
proposals by such person concerning a business
combination with the Company (a "Standstill Agreement");
(B) any employee benefit plan, or trustee or other
fiduciary thereof, maintained by the Company or any
Subsidiary; (C) any Subsidiary; or (D) the Company.
(2) Unless a majority of the Continuing Directors and of the
Committee determine that the exception set forth in this
paragraph (2) shall not apply, none of the foregoing
conditions would have been satisfied but for the
acquisition by or of the Company of or by another entity
(whether by the merger or consolidation, the acquisition
of stock or assets, or otherwise) in exchange, in whole or
in part, for securities of the Company, provided that,
immediately following such acquisition, the Continuing
Directors
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<PAGE> 5
constitute a majority of the Board, or a majority of the
board of directors of any other surviving entity, and, in
either case, no agreement, arrangement or understanding
exists at that time which would cause such Continuing
Directors to cease thereafter to constitute a majority of
the Board or of such other board of directors.
Notwithstanding the foregoing, unless otherwise determined by a
majority of the Continuing Directors, no Change of Control shall be
deemed to have occurred with respect to a particular Participant if the
Change of Control results from actions or events in which such
Participant is involved in a capacity other than solely as an officer,
employee or director of the Company.
For purposes of the foregoing definition of Change of Control,
the term "Beneficial Owner," with respect to any securities, shall mean
any person who, directly or indirectly, has or shares the right to vote
or dispose of such securities or otherwise has "beneficial ownership" of
such securities (within the meaning of Rule 13d-3 and Rule 13d-5 (as
such Rules are in effect on December 1, 1996) under the Act), including
pursuant to any agreement, arrangement or understanding (whether or not
in writing); provided, however, that (i) a person shall not be deemed
the Beneficial Owner of any security as a result of any agreement,
arrangement or understanding to vote such security (A) arising solely
from a revocable proxy or consent solicited pursuant to, and in
accordance with, the applicable provisions of the Act and the rules and
regulations thereunder or (B) made in connection with, or otherwise to
participate in, a proxy or consent solicitation made, or to be made,
pursuant to, and in accordance with, the applicable provisions of the
Act and the rules and regulations thereunder, in either case described
in clause (A) or clause (B) above whether or not such agreement,
arrangement or understanding is also then reportable by such person on
Schedule 13D under the Act (or any comparable or successor report), and
(ii) a person engaged in business as an underwriter of securities shall
not be deemed to be the Beneficial Owner of any securities acquired
through such person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition.
f) "Change of Control Settlement Value" shall mean, with
respect to a share of Common Stock, the excess of the Change of Control
Stock Value over the option
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<PAGE> 6
price of the Option covering such share of Common Stock, provided that,
with respect to any Option which is an Incentive Stock Option
immediately prior to the election to receive the Change of Control
Settlement Value, the Change of Control Settlement Value shall not
exceed the maximum amount permitted for such Option to continue to
qualify as an Incentive Stock Option.
(g) "Change of Control Stock Value" shall mean the value of a
share of Common Stock determined as follows:
(i) if the Change of Control results from an event
described in clause (iii) of the Change of Control definition,
the highest per share price paid for shares of Common Stock of
the Company in the transaction resulting in the Change of
Control;
(ii) if the Change of Control results from an event
described in clauses (i), (ii) or (v) of the Change of Control
definition and no event described in clauses (iii) or (iv) of the
Change of Control definition has occurred in connection with such
Change of Control, the highest sale price of a share of Common
Stock of the Company on any trading day during the 60 consecutive
trading days immediately preceding and following the date of such
Change of Control as reported on the New York Stock Exchange
Composite Tape, or other national securities exchange on which
the Common Stock is traded, and published in The Wall Street
Journal; or
(iii) if the Change of Control results from an event
described in clause (iv) of the Change of Control definition, the
price per share at which shares of Common Stock are redeemed or
exchanged by their holders in the transaction described in such
clause (iv) or, if there has been no such redemption or exchange,
the higher of the amounts determined in accordance with clause
(i) or clause (ii) of this Change of Control Stock Value
definition.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means the Management Development and Nominating
Committee of the Board (or such other committee of the Board that the
Board shall designate), which shall consist of two or more members, each
of whom shall be a non-employee director within the meaning of Rule
16b-3, as promulgated under the Act and
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<PAGE> 7
serving at the pleasure of the Board. Notwithstanding the foregoing,
with respect to Incentive Awards granted to non-employee directors, the
Committee shall mean the entire Board.
(j) "Common Stock" means the common stock of the Company, par
value $0.01 per share.
(k) "Company" means American Standard Companies Inc., a
Delaware corporation, and any successor thereto.
(l) "Disability" means a Participant's inability, due to
reasonably documented physical or mental illness, for more than six
months to perform his duties with the Company or a Subsidiary on a full
time basis if, within 30 days after written notice of termination has
been given to such Participant, he shall not have returned to the full
time performance of his duties.
(m) "Dividend Equivalents" means an amount equal to the cash
dividends paid by the Company upon one share of Common Stock for each
Restricted Unit awarded to a Participant in accordance with Section 7 of
the Plan.
(n) "Employee" means any officer or other key employee of the
Company or any of its Subsidiaries, including any employee of a
minority-owned joint venture.
(o) "Fair Market Value" means, on any date, the average of the
highest and lowest sales price reported for such day on a national
exchange or the average of the highest and lowest bid and asked prices
on such date as reported on a nationally recognized system of price
quotation. In the event that there are no Common Stock transactions
reported on such exchange or system on such date, Fair Market Value
shall mean the closing price on the immediately preceding date on which
Common Stock transactions were so reported.
(p) "Incentive Award" means the award of an Option, a Stock
Appreciation Right, a Restricted Unit, or Restricted Stock under the
Plan and shall also include an award of Common Stock or Restricted Units
made in conjunction with other incentive programs established by the
Company.
(q) "Option" means the right to purchase Common Stock at a
stated price for a specified period of time. For purposes of the Plan,
an Option may be either (i) an
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<PAGE> 8
"Incentive Stock Option" with the meaning of Section 422 of the Code or
(ii) an Option which is not an Incentive Stock Option (a "Non-Qualified
Stock Option").
(r) "Participant" means any Employee or any non-employee
director of the Company designated by the Committee to receive an
Incentive Award under the Plan.
(s) "Plan" means the American Standard Companies Inc. Stock
Incentive Plan, as set forth herein and as the same may be amended from
time to time.
(t) "Public Offering" means the Company's offering of Common
Stock to the general public through a registration statement filed with
the Securities and Exchange Commission that covers (together with prior
effective registrations) not less than 15% of the shares of Common Stock
outstanding at the closing of such offering on a fully diluted basis.
(u) "Restricted Period" means the period during which
Restricted Units or shares of Restricted Stock are subject to forfeiture
or restrictions on transfer (if applicable) pursuant to Section 7 of the
Plan.
(v) "Restricted Stock" means Common Stock awarded to a
Participant pursuant to the Plan which is subject to forfeiture and
restrictions on transferability in accordance with Section 7 of the
Plan.
(w) "Restricted Unit" means a Participant's right to receive
pursuant to the Plan one share of Common Stock at the end of a specified
period of time, which right is subject to forfeiture in accordance with
Section 7 of the Plan.
(x) "Retirement" means termination of a Participant's
employment on or after the date the Participant attains age 55 with 10
years of service.
(y) "Stock Appreciation Right" means the right to receive a
payment from the Company, in cash or Common Stock, in an amount
determined under Section 6.12 of the Plan.
(z) "Subsidiary" means any corporation or partnership in which
the Company owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock of such corporation or of
the capital interest or profits interest of such partnership.
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2.2. Gender and Number. Except when otherwise indicated by the
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
SECTION 3.
ELIGIBILITY AND PARTICIPATION
Participants in the Plan shall be those Employees and
non-employee directors selected by the Committee to participate in the Plan.
SECTION 4.
ADMINISTRATION
4.1. Power to Grant and Establish Terms of Awards. The Committee
shall have the authority, subject to the terms of the Plan, to determine the
Participants to whom Incentive Awards shall be granted and the terms and
conditions of any and all Incentive Awards, including but not limited to the
number of shares of Common Stock to be covered by each Incentive Award, the time
or times at which Incentive Awards shall be granted, and the terms and
provisions of the instruments by which Options shall be evidenced; to designate
Options as Incentive Stock Options or Non-Qualified Stock Options; and to
determine the period of time during which restrictions on Restricted Stock or
Restricted Units shall remain in effect. The proper officers of the Company may
suggest to the Committee the Participants who should receive Incentive Awards.
The terms and conditions of each Incentive Award shall be determined by the
Committee at the time of grant, and such terms and conditions shall not be
subsequently changed in a manner which would be adverse to the Participant
without the consent of the Participant to whom such Incentive Award has been
granted. The Committee may establish different terms and conditions for
different Participants receiving Incentive Awards and for the same Participant
for each Incentive Award such Participant may receive, whether or not granted at
different times. The grant of any Incentive Award to any Participant shall
neither entitle such Participant to, nor disqualify him from, the grant of any
other Incentive
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Awards. Notwithstanding anything else contained in the Plan to the contrary, the
Committee may delegate, subject to such terms and conditions as it shall
determine, to any officer of the Company or to a committee of officers of the
Company the authority to grant Incentive Awards (and to make any and all
determinations related thereto) to Participants who are not subject to the
reporting requirements of Section 16(a) of the Act.
4.2. Substitute Options. The Committee shall have the right,
subject to the consent of Participants to whom Options have been granted, to
grant in substitution for outstanding Options, replacement Options which may
contain terms more favorable to the Participant than the Options they replace,
including, without limitation, a lower exercise price (subject to Section 6.2),
and to cancel replaced Options.
4.3. Administration. The Committee shall be responsible for the
administration of the Plan. Any Incentive Award granted by the Committee may be
subject to such conditions, not inconsistent with the terms of the Plan, as the
Committee shall determine. The Committee, by majority action thereof, is
authorized to prescribe, amend and rescind rules and regulations relating to the
Plan, to provide for conditions deemed necessary or advisable to protect the
interests of the Company to interpret the Plan and to make all other
determinations necessary or advisable for the administration and interpretation
of the Plan to carry out its provisions and purposes. Determinations,
interpretations or other actions made or taken by the Committee pursuant to the
provisions of the Plan shall be final, binding and conclusive for all purposes
and upon all persons. The Committee may consult with legal counsel, who may be
counsel to the Company, and shall not incur any liability for any action taken
in good faith in reliance upon the advice of counsel.
SECTION 5.
STOCK SUBJECT TO PLAN
5.1. Number. Subject to the provisions of Section 5.3, the
number of shares of Common Stock subject to Incentive Awards under the Plan may
not exceed 12,604,475, provided that, no more than 7,604,475 of such shares may
be granted as Incentive Stock
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Options under the Plan. The shares to be delivered under the Plan may consist,
in whole or in part, of Common Stock held in treasury or authorized but unissued
Common Stock, not reserved for any other purpose.
5.2. Canceled, Terminated, or Forfeited Awards. Any shares of
Common Stock subject to an Incentive Award which for any reason expires, or is
canceled, terminated or otherwise settled without the issuance of any Common
Stock shall again be available under the Plan.
5.3. Adjustment in Capitalization. The aggregate number of
shares of Common Stock available for Incentive Awards under Section 5.1 or
subject to outstanding Incentive Awards and the respective prices and/or vesting
criteria applicable to outstanding Incentive Awards shall be proportionately
adjusted to reflect, as deemed equitable and appropriate by the Committee, an
Adjustment Event. To the extent deemed equitable and appropriate by the
Committee, subject to any required action by stockholders, in any merger,
consolidation, reorganization, liquidation, dissolution, or other similar
transaction, any Incentive Award granted under the Plan shall pertain to the
securities and other property to which a holder of the number of shares of
Common Stock covered by the Incentive Award would have been entitled to receive
in connection with such event.
Any shares of stock (whether Common Stock, shares of stock into
which shares of Common Stock are converted or for which shares of Common Stock
are exchanged or shares of stock distributed with respect to Common Stock) or
cash or other property received with respect to any award of Restricted Stock or
Restricted Units granted under the Plan as a result of any Adjustment Event, any
distribution of property or any merger, consolidation, reorganization,
liquidation, dissolution or other similar transaction shall, except as provided
in Section 7.4 or as otherwise provided by the Committee at or after the date an
award of Restricted Stock or Restricted Units is made by the Committee, be
subject to the same terms and conditions, including restrictions on transfer, as
are applicable to such shares of Restricted Stock or Restricted Units and any
stock certificate(s) representing or evidencing any shares of stock so received
shall be legended in substantially the same manner as provided in Section 7.5
hereof.
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SECTION 6.
STOCK OPTIONS
6.1. Grant of Options. Options may be granted to Participants at
such time or times as shall be determined by the Committee. Options granted to
non-employee directors shall be in such amounts and intervals as determined by
the Board from time to time. Options granted under the Plan may be of two types:
(i) Incentive Stock Options and (ii) Non-Qualified Stock Options, except that no
Incentive Stock Option may be granted to a non-employee director or to any
Employee of a Subsidiary which is not a corporation. The date of grant of an
Option under the Plan will be the date on which the Option is awarded by the
Committee or, if so determined by the Committee, the date on which occurs any
event the occurrence of which is an express condition precedent to the grant of
the Option. The Committee shall determine the number of Options, if any, to be
granted to the Participant, provided that, in no event shall the number of
shares of Common Stock subject to any Options or related Stock Appreciation
Rights granted to any Participant during any 12 month period exceed 1,000,000
shares as such number may be adjusted pursuant to Section 5.3. Each Option shall
be evidenced by an Option agreement that shall specify the type of Option
granted, the exercise price, the duration of the Option, the number of shares of
Common Stock to which the Option pertains, and such other terms and conditions
not inconsistent with the Plan as the Committee shall determine.
6.2. Option Price. Non-Qualified Stock Options and Incentive
Stock Options granted pursuant to the Plan shall have an exercise price which is
not less than the Fair Market Value on the date the Option is granted.
6.3. Exercise of Options. Options awarded to a Participant under
the Plan shall be exercisable at such times and shall be subject to such
restrictions and conditions including the performance of a minimum period of
service or the satisfaction of performance goals, as the Committee may impose
either at or after the time of grant of such Options, subject to the Committee's
right to accelerate the exercisability of such Option in its discretion.
Notwithstanding the foregoing, unless otherwise determined by the Committee,
Options shall
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become exercisable in three equal installments on each of the first three
anniversaries of the date of grant. Except as may be provided in any provision
approved by the Committee pursuant to this Section 6.3, after becoming
exercisable each installment shall remain exercisable until expiration,
termination or cancellation of the Option. An Option may be exercised from time
to time, in whole or in part, up to the total number of shares of Common Stock
with respect to which it is then exercisable. Notwithstanding the foregoing, no
Option shall be exercisable for more than 10 years after the date on which it is
granted.
6.4. Payment. The Committee shall establish procedures governing
the exercise of Options, which shall require that written notice of exercise be
given and that the Option price be paid in full at the time of exercise (i) in
cash or cash equivalents, (ii) in the discretion of the Committee, in shares of
Common Stock which have been owned by the Participant for at least six months'
(or such greater or lesser period as the Committee shall determine) having a
Fair Market Value on the date of exercise equal to such Option price or in a
combination of cash and Common Stock or (iii) in accordance with such procedures
or in such other form as the Committee shall from time to time determine. As
soon as practicable after receipt of a written exercise notice and payment of
the exercise price in accordance with this Section 6.4, the Company shall
deliver to the Participant a certificate or certificates representing the
acquired shares of Common Stock.
6.5. Incentive Stock Options. Notwithstanding anything in the
Plan to the contrary, no term of the Plan relating to Incentive Stock Options
shall be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422 of the Code, or, without the consent of any Participant affected
thereby, to cause any Incentive Stock Option previously granted to fail to
qualify for the Federal income tax treatment afforded under Section 421 of the
Code.
6.6. Settlement. At the time a Participant exercises an Option
in lieu of accepting payment of the exercise price of the Option and delivering
the number of shares of Common Stock for which the Option is being exercised,
the Committee may direct that the Company either (i) pay the Participant a cash
amount, or (ii) issue a lesser number of shares
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of Common Stock having a Fair Market Value on the date of exercise, equal to the
amount, if any, by which the aggregate Fair Market Value of the shares of Common
Stock as to which the Option is being exercised exceeds the aggregate exercise
price for such shares, based on such terms and conditions as the Committee shall
establish.
6.7. Termination of Employment Due to Retirement. Unless
otherwise determined by the Committee at the time of grant, in the event a
Participant's employment with the Company or a Subsidiary terminates by reason
of Retirement, any Options granted to such Participant which are exercisable at
the date of such Participant's termination of employment may be exercised at any
time prior to three (3) years following the Participant's termination of
employment or the expiration of the term of the Options, whichever period is
shorter.
6.8. Termination of Employment Due to Death or Disability.
Unless otherwise determined by the Committee at the time of grant, in the event
a Participant's employment with the Company or a Subsidiary terminates by reason
of death or Disability, any Options granted to such Participant which are
exercisable at the date of such Participant's termination of employment may be
exercised by the Participant or the Participant's designated beneficiary, and if
none is named, in accordance with Section 10.2, at any time prior to one (1)
year following the Participant's termination of employment or the expiration
date of the term of the Options, whichever period is shorter.
6.9. Termination of Employment for Cause. Unless otherwise
determined by the Committee at the time of grant, in the event a Participant's
employment with the Company or a Subsidiary is terminated for Cause, all Options
granted to such Participant which are then outstanding (whether or not
exercisable prior to the date of such termination) shall be forfeited.
6.10. Termination of Employment for Any Other Reason. Unless
otherwise determined by the Committee at or after the time of grant, in the
event a Participant's employment with the Company or a Subsidiary terminates for
any reason other than one described in Section 6.7, 6.8 or 6.9, any Options
granted to such Participant which are
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exercisable at the date of such Participant's termination of employment shall be
exercisable at any time prior to 90 days following such Participant's
termination of employment or the expiration of the term of such Options,
whichever period is shorter.
6.11. Committee Discretion. Notwithstanding anything else
contained in this Section 6 to the contrary, the Committee may permit all or any
portion of any Options to be exercised following a Participant's termination of
employment for any reason on such terms and subject to such conditions as the
Committee shall determine for a period up to and including, but not beyond, the
expiration of the term of such Options.
6.12. Stock Appreciation Rights. The Committee may, in its
discretion, include in any Option, either at the time the Option is granted or
thereafter at any time prior to the exercise, termination or expiration of the
Option, a right of the Participant to elect, in lieu of purchasing any shares of
Common Stock in respect of which such Option is exercisable at any time, to
relinquish his Option with respect to any and all of such shares of Common Stock
and to receive from the Company a payment, in cash or Common Stock, equal to the
amount by which (i) the product of (x) the Fair Market Value of a share of
Common Stock on the date of such election multiplied by (y) the number of shares
of Common Stock as to which the Participant shall have made such election
exceeds (ii) the total exercise price for that number of shares of Common Stock
under the terms of such Option. If the Participant shall exercise Stock
Appreciation Rights appertaining to any Option, such Option shall thereafter
remain exercisable, according to its term, only with respect to the number of
shares of Common Stock as to which it would otherwise be exercisable less the
number of shares of Common Stock with respect to which such Stock Appreciation
Rights have been exercised. Each Stock Appreciation Right shall be subject to
the same terms and conditions as the related Option and shall be exercisable
only to the extent the related Option is exercisable.
SECTION 7.
RESTRICTED STOCK AND RESTRICTED UNITS
7.1. Grant of Restricted Stock and Restricted Units. Any award
made
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hereunder of Restricted Stock or Restricted Units shall be subject to the terms
and conditions of the Plan and to any other terms and conditions not
inconsistent with the Plan (including, but not limited to, requiring the
Participant to pay the Company an amount equal to the par value per share for
each share of Restricted Stock awarded) as shall be prescribed by the Committee
in its sole discretion. As determined by the Committee, with respect to an award
of Restricted Stock, the Company shall either (i) transfer or issue to each
Participant to whom an award of Restricted Stock has been made the number of
shares of Restricted Stock specified by the Committee or (ii) hold such shares
of Restricted Stock for the benefit of the Participant for the Restricted
Period. In the case of an award of Restricted Units, no shares of Common Stock
shall be issued at the time an award is made, and the Company shall not be
required to set aside a fund for the payment of such award.
7.2. Restrictions on Transferability. Shares of Restricted Stock
may not be sold, assigned, transferred, pledged, hypothecated or otherwise
encumbered by the Participant during the Restricted Period, except as
hereinafter provided. Notwithstanding the foregoing, the Committee may permit
(on such terms and conditions as it shall establish) shares of Restricted Stock
to be transferred during the Restricted Period by the Participant to a member of
the Participant's immediate family or to a trust or similar vehicle for the
benefit of such immediate family members, provided that any shares of Restricted
Stock so transferred shall remain subject to the provisions of this Section 7.
7.3. Rights as a Shareholder. Except for the restrictions set
forth herein and unless otherwise determined by the Committee, the Participant
shall have all the rights of a shareholder with respect to such shares of
Restricted Stock, including but not limited to, the right to vote and the right
to receive dividends. A Participant shall not have any right, in respect of
Restricted Units awarded pursuant to the Plan, to vote on any matter submitted
to the Company's stockholders until such time as the shares of Common Stock
attributable to such Restricted Units have been issued. At the discretion of the
Committee, a Participant's Restricted Unit account may be credited with Dividend
Equivalents during the Restricted Period.
7.4. Restricted Period. Unless the Committee shall otherwise
determine at or
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after the date an award of Restricted Stock or Restricted Units is made to the
Participant by the Committee, the Restricted Period shall commence upon the date
of grant and shall lapse with respect to the shares of Restricted Stock or
Restricted Units on the third anniversary of the date of grant, unless sooner
terminated as otherwise provided herein. Without limiting the generality of the
foregoing, the Committee may provide for termination of the Restricted Period
upon the achievement by the Participant of performance goals specified by the
Committee at the date of grant. The determination of whether the Participant has
achieved such performance goals shall be made by the Committee in its sole
discretion.
7.5. Legend. Each certificate issued to a Participant in respect
of shares of Restricted Stock awarded under the Plan shall be registered in the
name of the Participant and Shall bear the following (or similar) legend:
"The shares of stock represented by this certificate are subject
to the terms and conditions contained in the American Standard Companies
Inc. Stock Incentive Plan and may not be sold, pledged, transferred,
assigned, hypothecated or otherwise encumbered in an manner (except as
provided in Section 7.2 of the Plan) until _____________________."
7.6. Death, Disability or Retirement. Unless the Committee shall
otherwise determine at the date of grant, if a Participant ceases to be employed
by the Company or any Subsidiary by reason of death, Disability or Retirement,
the Restricted Period will lapse as to a pro rated portion of the shares of
Restricted Stock and Restricted Units transferred or issued to such Participant
under the Plan based on the number of days the Participant actually worked since
the date the shares of Restricted Stock or Restricted Units were granted (or in
the case of an award which becomes vested in installments, since the date, if
any, on which the last installment of such Restricted Stock or Restricted Units
became vested); provided that, in the case of an award with respect to which the
restrictions will lapse, if at all, based on the attainment of performance goals
or targets, such vesting shall be deferred until the end of the applicable
performance period and be based on that number of shares of Restricted Stock or
Restricted Units, if any, that would have been earned based on the attainment or
partial attainment of such performance goals or targets. Any shares of
Restricted Stock or Restricted
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Units as to which the Restricted Period has not lapsed at the date of a
Participant's termination of employment by reason of death, Disability or
Retirement (or which do not become vested after such date under the preceding
sentence) shall revert back to the Company upon such Participant's termination
of employment (or, if applicable, such deferred vesting date).
7.7. Termination of Employment. Unless the Committee shall otherwise
determine at or after the date of grant, if a Participant ceases to be employed
by the Company or any Subsidiary for any reason other than those specified in
Section 7.6 at any time prior to the date when the Restricted Period lapses, all
shares of Restricted Stock held by the Participant shall revert back to the
Company and all Restricted Units and any Dividend Equivalents credited to such
Participant shall be forfeited upon the Participant's termination of employment.
7.8. Issuance of New Certificates; Settlement of Restricted Units.
Upon the lapse of the Restricted Period with respect to any shares of Restricted
Stock, such shares shall no longer be subject to the restrictions imposed under
Section 7.2 and the Company shall issue or have issued new share certificates
without the legend described in Section 7.5 in exchange for those previously
issued. Upon the lapse of the Restricted Period with respect to any Restricted
Units, the Company shall deliver to the Participant, or the Participant's
beneficiary or estate, as provided in Section 10.2, one share of Common Stock
for each Restricted Unit as to which restrictions have lapsed and any Dividend
Equivalents credited with respect to such Restricted Units and any interest
thereon. The Committee may, in its sole discretion, elect to pay cash or part
cash and part Common Stock in lieu of delivering only Common Stock for
Restricted Units. If a cash payment is made in lieu of delivering Common Stock,
the amount of such cash payment for each share of Common Stock to which a
Participant is entitled shall be equal to the Fair Market Value of the Common
Stock on the date on which the Restricted Period lapsed with respect to the
related Restricted Unit.
7.9. Performance Related Awards. Notwithstanding anything else
contained in the Plan to the contrary, unless the Committee otherwise determines
at the time of grant, any award of Restricted Shares or Restricted Units, or an
award of Common Stock or Restricted Units made in conjunction with other
incentive plans established by the Company, to an officer of the
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Company or a Subsidiary who is subject to the reporting requirements of Section
16(a) of the Exchange Act, other than an award which will vest solely on the
basis of the passage of time, shall become vested, if at all, upon the
determination by the Committee that performance objectives established by the
Committee have been attained, in whole or in part (a "Performance Award"), to
the extent required to ensure that the grant of such awards are deductible by
the Company or such Subsidiary pursuant to Section 162(m) of the Code. Such
performance objectives shall be determined over a measurement period or periods
established by the Committee and related to at least one of the following
criteria, which may be determined solely by reference to the performance of (i)
the Company, (ii) a Subsidiary, (iii) an affiliate of the Company, or (iv) a
division or unit of any of the foregoing or based on comparative performance of
any of the foregoing relative to other companies: (A) earnings per share; (B)
revenues; (C) operating cash flow; (D) operating earnings; (E) working capital;
(F) inventory turnover rates; (G) earnings to sales ratio; and (H) return on
capital (the "Performance Criteria"). The maximum number of shares of Common
Stock that may be subject to any such Performance Award in any 12 month period
shall not exceed 500,000 shares, as such number may be adjusted pursuant to
Section 5.3.
SECTION 8.
CHANGE OF CONTROL
8.1. Accelerated Vesting and Payment. In the event of a Change of
Control, the Restricted Period with respect to each share of Restricted Stock
and each Restricted Unit will lapse and each Option and Stock Appreciation Right
shall become immediately exercisable on the date of such Change of Control.
8.2. Alternative Awards. Notwithstanding any provision of Section 6,
any Participant who holds on the date of a Change of Control an Option or Stock
Appreciation Right granted under this Plan shall be entitled to elect, during
the 60-days period immediately following such Change of Control, in lieu of
acquiring the shares of Common Stock covered by any such Option (or, in the case
of a Stock Appreciation Right, the amount of cash and Common Stock such
Participant would otherwise be entitled to receive upon the relinquishment of
the Option related to such Stock Appreciation Right), to receive, and the
Company shall be obligated to
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pay, the Change of Control Settlement Value with respect to shares of Common
Stock up to the number of shares covered by such Option or Stock Appreciation
Right, which amount shall be paid in cash.
8.3. No Amendment. Notwithstanding Section 9, the provisions of this
Section 8 may not be amended in any respect following a Change of Control.
SECTION 9.
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Board may at any time terminate or suspend the Plan, and from
time to time may amend or modify the Plan. No action of the Board may, without
the consent of a Participant alter or impair his rights under any previously
granted Incentive Award.
SECTION 10.
MISCELLANEOUS PROVISIONS
10.1. Nontransferability of Awards. Unless the Committee shall permit
(on such terms and conditions as it shall establish) an Incentive Award to be
transferred, no Incentive Award granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. All rights with respect to any
Incentive Award granted to a Participant under the Plan shall be exercisable
during his lifetime only by such Participant or, if transferred as contemplated
by the previous sentence, a permitted transferee.
10.2. Beneficiary Designation. Each Participant under the Plan may from
time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his death.
Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Committee, and will be effective only when
filed by the Participant in writing with the Committee during his lifetime. In
the absence of any such
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designation, benefits remaining unpaid or Incentive Awards outstanding at the
Participant's death shall be paid to or exercised by the Participant's surviving
spouse, if any, or otherwise to or by his estate.
10.3. No Guarantee of Employment or Participation. Nothing in the Plan
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary or affiliate. No Employee or non-employee director shall have a right
to be selected as a Participant, or, having been so selected, to receive any
future Incentive Awards.
10.4. Tax Withholding. The Company shall have the power to withhold, or
require a Participant to remit to the Company promptly upon notification of the
amount due, an amount sufficient to satisfy Federal, state and local withholding
tax requirements on with respect to any Incentive Award, and the Company may
defer payment of cash or issuance or delivery of Common Stock until such
requirements are satisfied. The Committee may, in its discretion, permit a
Participant to elect, subject to such conditions as the Committee shall impose
(i) to have Common Stock otherwise issuable or deliverable under the Plan
withheld by the Company or (ii) to deliver to the Company previously acquired
shares of Common Stock, in each case, having a Fair Market Value sufficient to
satisfy not more than the Participant's statutory minimum Federal, state and
local tax obligation associated with the transaction.
10.5. Indemnification. Each person who is or shall have been a member
of the Committee or of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be made a party or in
which he may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of any
judgment in any such action, suit or proceeding against him, provided he shall
give the Company an opportunity, at its own expense, to handle and defend the
same before he undertakes to handle and defend it on his
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own behalf. The foregoing right of indemnification shall not be exclusive and
shall be independent of any other rights of indemnification to which such
persons may be entitled under the Company's Articles of Incorporation or
By-laws, by contract, as a matter of law, or otherwise.
10.6. No Limitation on Compensation. Nothing in the Plan shall be
construed to limit the right of the Company to establish other plans or to pay
compensation to its employees in cash or property, in a manner which is not
expressly authorized under the Plan.
10.7. Requirements of Law. The granting of Incentive Awards and the
issuance of shares of Common Stock shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
10.8. Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware.
10.9. No Impact On Benefits. Incentive Awards granted under the Plan
are not compensation for purposes of calculating an Employee's rights under any
employee benefit plan.
10.10. Securities Law Compliance. Instruments evidencing Incentive
Awards may contain such other provisions, not inconsistent with the Plan, as the
Committee deems advisable, including (i) a provision limiting the period during
which Stock Appreciation Rights could be exercised to the extent required in
order to avoid the application of Section 16(b) of the Act in the case of
officers of the Company and (ii) a requirement that the Participant represent to
the Company in writing, when an Incentive Award is granted or when he receives
shares with respect to such Award (or at such other time as the Committee deems
appropriate) that he is accepting such Incentive Award, or receiving or
acquiring such shares (unless they are then covered by a Securities Act of 1933
registration statement), for his own account for investment
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only and with no present intention to transfer, sell or otherwise dispose of
such shares except such disposition by a legal representative as shall be
required by will or the laws of any jurisdiction in winding up the estate of the
Participant. Such shares shall be transferable only if the proposed transfer
shall be permissible pursuant to the Plan and if, in the opinion of counsel
satisfactory to the Company, such transfer at such time will be in compliance
with applicable securities laws.
10.11 Term of Plan. The Plan shall be effective upon its adoption by
the Board and approval by the holders of the Common Stock, provided, however,
that in no event shall the Plan become effective until immediately prior to the
occurrence of a Public Offering. The Plan shall expire on the tenth anniversary
of the date on which it is adopted by the Board (except as to Incentive Awards
outstanding on that date), unless sooner terminated pursuant to Section 9.
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EXHIBIT 10 (xii)
AMERICAN STANDARD COMPANIES INC.
STOCK INCENTIVE PLAN
ADDENDUM
UNITED KINGDOM
For Participants based in the United Kingdom, the following Sections of the Plan
shall be revised as follows:
2.1.n "Employee means any officer or other key employee of the Company
or any of its Subsidiaries.
2.1.aa "Subsidiary" means any corporation in which the Company owns,
directly or indirectly, a majority of the voting rights.
10.1 Non-transferability of Awards. Unless the Committee shall permit
(on such terms and conditions as it shall establish) an Incentive Award to be
transferred, no Incentive Award granted under the plan may be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated, other than by will or
the intestacy rules, provided always that any such transfer may only be to a
qualifying person as defined by Regulation 7(12) of the Public Offers of
Securities Regulations 1995. All rights with respect to any Incentive Award
granted to a Participant under the Plan shall be exercisable during his lifetime
only by such Participant, or if transferred as contemplated by the previous
sentence, a permitted transferee.
10.2 Beneficiary Designation. Each Participant under the Plan may from
time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of such
Participant's death. Each designation shall revoke all prior designations by the
same Participant, shall be in a form prescribed by the Committee, and shall be
effective only when filed by the Participant in writing with the Committee
during such Participant's lifetime. In the absence of any such designation,
benefits remaining unpaid or Incentive Awards outstanding at the Participant's
death shall be paid or exercised by the
1
<PAGE> 2
Participant's spouse, if any, or otherwise to or by the Participant's estate;
provided always that any right under the Plan may be exercised only by the
personal representatives of the Participant (being either the executors of his
will to whom a valid grant of probate has been made or if such Participant dies
intestate the duly appointed administrator(s) of such Participant's estate) who
have provided to the Committee evidence of their appointment as such, or any
other qualifying person as defined by Regulation 7(12) of the Public Offers of
Securities Regulation 1995, and any reference in the Plan to "designated
beneficiary" shall be construed accordingly.
2
<PAGE> 1
EXHIBIT 10 (xiii)
AMERICAN STANDARD COMPANIES INC.
STOCK INCENTIVE PLAN
ADDENDUM
FRANCE
Options may be granted under this Addendum to Participants based in France as
follows:
1) Notwithstanding any other provision of the Plan, options granted to any
Participant holding shares representing 10% or more of the Company's
capital will not be deemed to have been granted pursuant to this
Addendum.
2) Notwithstanding any other provision of the Plan, any option whose
exercise price at the time of the grant of the option is less than 80%
of the arithmetical average of the market value of a share on the 20
daily sessions next preceding the related date of grant, rounded up,
shall not be deemed to have been granted under this Addendum.
3) Notwithstanding any other provision of the Plan, the maximum delay to
grant options relating to shares that will not be repurchased by the
Company is 5 years after the date of the Company shareholders meeting
which authorized the grant of options under the Plan.
4) Notwithstanding any other provisions of the Plan, the exercise price of
an option shall be adjusted only upon the occurrence of the events
specified under the July 24, 1966 corporate law - section 208-5 in
accordance with French law.
5) Notwithstanding any other provision of the Plan, upon the death of a
French Participant, to the extent an option was exercisable by such
Participant at the date of death, all such options shall remain
exercisable for a period of six months from the date of the French
participant's death.
1
<PAGE> 1
Exhibit (10) (xix)
March 17, 2000
Mr. Frederic M. Poses
Chairman and Chief Executive Officer
American Standard Companies Inc.
One Centennial Avenue
Piscataway, New Jersey 08855
Dear Fred:
This letter will serve to amend the letter agreement dated October 13,
1999 (the "Letter Agreement") between you and American Standard Companies Inc.
(the "Company") setting forth the terms of your employment with the Company,
and to confirm our recent conversation that, in lieu of the provisions in the
Letter Agreement relating to your participation in the Company's Annual
Incentive Plan and amounts payable to you thereunder for the years 2000 and
2001, you will for such periods be eligible for an Annual Incentive with a
target award of 130% of your base salary, subject to an annual maximum
potential payment under that Plan of $2.0 million. In all other respects, the
terms of the Letter Agreement remain unchanged.
If the foregoing accurately reflects your understanding and is acceptable
to you, please sign this letter below in the space provided and return the
signed original to me. I have included a duplicate of this letter signed on
behalf of the Management Development and Nominating Committee for your records.
Management Development and Nominating Committee
By: Roger W. Parsons
----------------
Chairman of the committee
Accepted and Agreed to:
/s/ Frederic M. Poses
-----------------
Frederic M. Poses
<PAGE> 1
EXHIBIT 12
AMERICAN STANDARD INC.
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
For the Years ended December 31,
--------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
Income (loss) from continuing
operations before taxes $234.0 $71.1 $347.0 $189.8 $451.5
Equity in net (income) loss of
associated companies net of
dividends received 11.0 11.8 (2.9) (3.6) (5.1)
Amortization of capitalized
interest 1.1 1.3 1.4 1.6 1.8
Interest expense 213.3 198.2 192.2 188.4 192.1
Rental expense factor 23.0 27.3 25.0 26.5 33.9
----- ----- ----- ----- -----
Earnings available for
fixed charges $482.4 $309.7 $562.7 $402.7 $674.2
====== ====== ====== ====== ======
Interest expense $213.3 $198.2 $192.2 $188.4 $192.1
Capitalized interest 4.0 3.9 3.8 4.5 3.3
Rental expense factor 23.0 27.3 25.0 26.5 33.9
----- ----- ----- ----- -----
Fixed charges $240.3 $229.4 $221.0 $219.4 $229.3
====== ====== ====== ====== ======
Ratio of earnings to fixed
charges (a) 2.0 1.3 2.5 1.8 2.9
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.
<PAGE> 1
[GRAPHIC OMITTED]
RAISING THE
standard.
AMERICAN STANDARD COMPANIES INC.'99 annual report
<PAGE> 2
AMERICAN STANDARD
[GRAPHIC OMITTED]
[LOGO] TRANE
With 1999 sales of $4.3 billion, Trane air conditioning is our largest business,
manufacturing at 31 plants in nine countries. Trane is 1 in commercial systems
and services in the US. Long recognized as the technology leader, Trane produces
the most efficient, lowest-emission chillers on the market. Today, half of the
large chillers cooling commercial buildings in North America are manufactured by
Trane. In residential central air conditioning systems, Trane is the premier
brand.
Trane sets the standard for managing the comfort and quality of indoor air.
[GRAPHIC OMITTED]
[LOGO] American Standard
The world's leading producer of bathroom and kitchen chinaware fixtures and
brass faucets for commercial and residential markets, American Standard operates
56 plants in 22 countries. Sales in 1999 totaled $1.8 billion. Our products are
recognized worldwide for award-winning designs, outstanding craftsmanship and
lifetime dependability.
American Standard sets the standard with one of the most extensive lines of
water-saving fixtures and faucets.
[GRAPHIC OMITTED]
[LOGO] WABCO
WABCO is the technology leader in advanced electronic systems for vehicle motion
and braking control. WABCO, with 1999 sales of $1.1 billion, operates 15 plants
in 11 countries. WABCO was the first to introduce anti-lock brakes for
heavy-duty vehicles and today is the world's leading producer of electronic
braking, traction and stability systems.
WABCO sets the standard for enhanced road safety.
Powerful brands. Market-leading positions. Global diversity. High profitability.
These provide a solid foundation for consistent growth and superior financial
returns.
<PAGE> 3
customers shareowners
employees
american standard
IN YOUR EYES . . .
How you see us makes all the difference in our Company's ability to grow and be
profitable. That's true whether you're a customer sizing up our products and
services, an employee thinking about your future, or an investor evaluating our
performance. Doing things right in the eyes of our customers means we gain their
loyalty. Doing things right in the eyes of our employees means a well-motivated
workforce. And doing things right in the eyes of our shareowners means an
appreciating stock price. At American Standard we want to know how you see
things. Because we don't want to be the best in our own eyes. We want to be the
best in yours.
<PAGE> 4
CHAIRMAN'S LETTER
[PHOTOS OMITTED]
to our shareowners:
When I joined American Standard in October of 1999, I knew I had joined a global
company with three market leading businesses, powerful brands, technological
prowess and Demand Flow manufacturing processes that had become a model for the
manufacturing sector. What I learned during the months since is that the Company
has enormous potential to build on its great heritage and raise the standard of
excellence, thereby significantly enhancing shareowner value. We will fulfill
this potential by strengthening the value we bring to our customers and
providing opportunities to develop and grow for our employees. I am delighted to
accept this responsibility.
A STRONG FOUNDATION
Financial Performance. 1999 was a very good year for American Standard, as
sales from ongoing businesses rose 10% to $7.2 billion. Operating earnings
reached $751 million, a 14% increase over the prior year, and earnings per share
from continuing operations increased to $3.76, 19% better than 1998.
Customer Relationships. Another measure of the Company's performance in
1999 was the endorsement of our customers: Sears, Roebuck and Co. chose our
Trane brand air conditioners as the premier product to be sold through its 800
HomeCentral locations in the U.S. Volvo selected WABCO, our vehicle controls
business, as its global supplier of pneumatic systems for its heavy-duty trucks.
Marriott Hotels chose American Standard as the preferred supplier of all its
hotel bathroom products, and Home Depot selected our plumbing products business
as its supplier of the year for the third consecutive year.
These kinds of customer relationships have enabled American Standard and
Ideal Standard to become global market leaders in bathroom and kitchen products,
WABCO to become the global market leader in electronic braking systems, and
Trane to hold the number one position in the North American commercial air
conditioning market.
DFT and Low Cost Manufacturing. We have become the vendor of choice for so
many leading customers in large part due to the success of American Standard's
Demand Flow(R) Technology (DFT), a manufacturing system that has enabled our
businesses to deliver
---------
AMERICAN
- --2-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 5
CHAIRMAN'S LETTER
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
a tribute...
Emmanuel "Mano" Kampouris showed great leadership in successfully steering
American Standard through a highly leveraged buyout and leading its re-emergence
as a publicly traded company with strong businesses and a renewed focus. He
established Demand Flow Technology as the cornerstone of the Company's
transformation, building a solid foundation that will serve as a springboard for
our future performance and success.
- --------------------------------------------------------------------------------
exactly what customers want, exactly when they need it, on time each and every
time. DFT has enabled the Company to reduce its operating working capital to
2.6% of sales. Few manufacturing companies match this level.
As the Company improved its processes, it also lowered its manufacturing
costs with a shift of production to lower cost facilities. Our ability to source
our products rapidly and cost-effectively in Eastern Europe, Asia or North
America, as customer demand requires, has been critical to our global business
success.
RAISING THE STANDARD
As strong as our foundation is, I am convinced that American Standard can
do even better. We will focus on initiatives to strengthen our customer
relationships, lower costs by managing materials better, eliminating waste and
improving quality through Six Sigma technology, and reduce our debt level. Each
initiative will significantly enhance our profitability.
Strengthening Our Customer Relationships. We will continue to improve our
responsiveness to our customers, understanding both their product and service
needs. Consistent with this, we will also work relentlessly to maintain our
technological edge, making sure that our products and services set the standard
for innovation and performance.
Our new product introductions will be greater and broader than ever. We
will introduce a new line of high efficiency chillers with advanced, proprietary
controls for servicing and remote monitoring. A residential unitary air
conditioning line called Pinnacle(R), which uses next generation refrigerants
that are environmentally friendly, is being developed. Advanced generation
electronic braking and stability control will be introduced for both large
- -----------------------------------------AMERICAN STANDARD '99 annual report--3-
<PAGE> 6
CHAIRMAN'S LETTER
trucks and trailers. And a new line of whirlpool tubs will expand our luxury
product offerings. The list goes on as we create new products and services to
meet our customers' requirements.
Lowering Materials Costs. American Standard has reduced materials costs on
average 1 to 2% each year. There is an opportunity to reduce costs more
significantly, however, through better materials management. In 1999, the
Company bought $4 billion of raw materials, components and services --
everything from copper coils to freight forwarding services to health insurance.
But many of these purchases were fragmented. We lacked the power of consolidated
purchasing and had no coordinated initiative to bring our costs down. Going
forward, we will create a materials management focus with the goal of buying
better, sourcing better from fewer suppliers or reengineering our products to
take out costs. We will pare the costs of buying those same materials and
services continuously, achieving a reduction of 5 1/2% by 2003. That translates
into significant cost savings.
Introducing Six Sigma. We will take our Demand Flow processes to the next
level through the application of Six Sigma, a system for improving products and
services through a statistical measure of quality. Demand Flow Technology
transformed the Company by focusing on processes to capture and swiftly fulfill
customer orders. Six Sigma complements and enhances DFT by making the work
performed in these processes defect free. For example, 37 ceramic toilets or
sinks out of every 100 initially "fired" in our kilns have defects. In the Six
Sigma quality system, a 37% defect rate equates to Two Sigma. By improving our
quality to a Three Sigma level, which equates to a 7% defect rate (not yet a
near perfect Six Sigma score -- less than 1% defect rate) we can add a dollar
per share to our earnings. This is just one example of how Six Sigma can improve
everything we do.
Reducing Debt. American Standard's debt level at the end of 1999 was
approximately $2.6 billion. We have set a goal of bringing that debt down to
$1.5 billion by 2003 through a combination of improved operating cash flow, the
sale of our medical systems business and other actions.
ACHIEVABLE GOALS
The goals we have set are realistic and achievable. Reaching them will
take drive, energy and focus, qualities our 57,000 employees worldwide have
demonstrated in the
---------
AMERICAN
- --4-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 7
CHAIRMAN'S LETTER
[PHOTO OMITTED]
Fred Poses
raising the standard.
progress the Company has made in the past. Our employees, who own 25% of
American Standard's common stock, have a vital stake in the Company's future and
are motivated to think and behave like owners.
However, success will require new skills and new talent which we are
committed to infuse. American Standard will build its learning organization,
making diverse learning opportunities available to enable our employees to grow
and develop further. Six Sigma is just one learning opportunity among many that
will help our employees develop new skills. We have already engaged Six Sigma
experts, known as Black Belts, to work with our businesses. They will have a
dual role: to improve our Sigma performance while teaching our employees Six
Sigma skills.
We have begun to add outstanding people to our leadership team, including
Peter D'Aloia, our new chief financial officer, and Paul McGrath, our new
general counsel. Jared Cohen and James Hardymon, who joined the Board of
Directors in the past year, bring important experience and perspective to our
Board.
Being new to American Standard, I respect and appreciate the contribution
of my predecessor, Emmanuel Kampouris, who built up and passed on a company with
tremendous strengths and tremendous opportunities.
I am proud to be a part of this great company and look forward to "raising
the standard," making American Standard the best in the eyes of our customers,
employees and shareowners.
Thank you for your support.
/s/ Fred Poses
Fred Poses
Chairman and Chief Executive Officer
- -----------------------------------------AMERICAN STANDARD '99 annual report--5-
<PAGE> 8
AMERICAN STANDARD
[PHOTOS OMITTED]
IN THE EYES OF OUR
customers
...your needs are ever-changing, and we must change with you,
providing - intelligent ways to meet your needs now
and long-term, - quality-engineered products, and
- value you can see in the products and services we offer.
We want your loyalty.
---------
AMERICAN
- ----STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 9
[GRAPHIC OMITTED]
--------------------
AMERICAN STANDARD OF
--------------------
excellence.
[LOGO] TRANE it's hard to stop a Trane------------------------------------------
<PAGE> 10
AMERICAN STANDARD
[PHOTOS OMITTED]
IN THE EYES OF OUR
employees
...a job doesn't have to be just a job.
It can be - a unique, challenging and rewarding experience,
- an opportunity to think and behave like an entrepreneur,
- an opportunity to learn new skills and grow in new ways.
We want you to make us a better company.
---------
AMERICAN
- ----STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 11
--------------------
AMERICAN STANDARD OF
--------------------
excellence.
[LOGO] American
Standard we want you to love your bathroom------------------------------
<PAGE> 12
AMERICAN STANDARD
IN THE EYES OF OUR
shareowners
...numbers don't drive success, but are the result of doing things right.
Our aim is to be a company that - is first to market with new ideas
and products, - recognizes and acts on the right
business opportunities, - outperforms the market
continually. We want to create wealth for you.
---------
AMERICAN
- ----STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 13
[GRAPHIC OMITTED]
--------------------
AMERICAN STANDARD OF
--------------------
excellence.
WABCO [LOGO] safety in motion---------------------------------------------------
<PAGE> 14
american standard
IN THE EYES OF OUR
[GRAPHICS OMITTED]
customers shareowners
employees
---------
AMERICAN
- ----STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 15
[GRAPHICS OMITTED]
-----------
RAISING THE
-----------
standard.
AMERICAN
--------
raising the
--------
STANDARD
- --------------------------------------------------------------------------------
<PAGE> 16
FINANCIAL CONTENTS
Board of Directors 15
Five-Year Financial Summary 16
Management's Discussion
and Analysis
Overview 18
Air Conditioning Systems
and Services 19
Plumbing Products 20
Vehicle Control Systems 22
Other Financial Summary Items 22
Liquidity and Capital Resources 24
Management's Report 30
Report of Independent Auditors 31
Financial Statements
Consolidated Statement
of Operations 32
Consolidated Statement
of Cash Flows 33
Consolidated Balance Sheet 34
Consolidated Statement
of Stockholders' Deficit 36
Notes to Consolidated
Financial Statements 37
---------
AMERICAN
- ----STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 17
Board of Directors
American Standard Companies Inc.
Frederic M. Poses (B-Chairman)
Chairman and Chief Executive Officer
American Standard Companies Inc.
Steven E. Anderson (C-Chairman)
Retired National Partner in
Charge-Industries
KPMG Peat Marwick
New York, NY
Jared L. Cohon (A)
President
Carnegie Mellon University
Pittsburgh, PA
James F. Hardymon (C)
Retired Chairman and
Chief Executive Officer
Textron, Inc.
George H. Kerckhove
Vice President
American Standard Companies Inc.
Roger W. Parsons (A-Chairman) (B)
Former Chief Executive
Rea Brothers Group PLC
London, United Kingdom
J. Danforth Quayle (A) (C)
Former Vice President of
the United States
Paradise Valley, AZ
David M. Roderick (A) (B) (C)
Chairman
Earle M. Jorgensen Company
Brea, CA
Retired Chairman
USX Corporation
Pittsburgh, PA
Member of:
(A) Management Development and Nominating Committee
(B) Executive Committee
(C) Audit Committee
- -----------------------------------------AMERICAN STANDARD '99 annual report-15-
<PAGE> 18
Five-Year Financial Summary
American Standard Companies Inc.
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions, except per share data) 1999 1998 1997 1996 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
SEGMENT DATA
Sales:
Air Conditioning Systems and Services $ 4,337 $ 3,940 $ 3,567 $ 3,437 $ 2,953
Plumbing Products 1,755 1,510 1,439 1,452 1,270
Vehicle Control Systems 1,098 1,106 952 916 998
- ------------------------------------------------------------------------------------------------------------------------------------
$ 7,190 $ 6,556 $ 5,958 $ 5,805 $ 5,221
- ------------------------------------------------------------------------------------------------------------------------------------
Segment income:
Air Conditioning Systems and Services $ 453 $ 386 $ 386 $ 372 $ 276
Plumbing Products 164 119 119 110 120
Vehicle Control Systems 134 153 127 123 155
- ------------------------------------------------------------------------------------------------------------------------------------
751 658 632 605 551
Equity in net income of unconsolidated joint ventures 37 27 12 3 7
Restructuring and asset impairment charges (a) (15) (197) -- (235) --
Interest expense (188) (188) (192) (198) (213)
Corporate expenses (134) (110) (105) (104) (111)
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes
and extraordinary item 451 190 347 71 234
Income taxes (187) (141) (124) (105) (85)
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before
extraordinary item $ 264 $ 49 $ 223 $ (34) $ 149
====================================================================================================================================
Per share:
Basic $ 3.74 $ .68 $ 3.03 $ (.44) $ 2.00
Diluted $ 3.63 $ .66 $ 2.93 $ (.44) $ 1.97
</TABLE>
---------
AMERICAN
- -16-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 19
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions, except per share data) 1999 1998 1997 1996 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
OTHER DATA
Net cash provided by continuing operations $ 512 $ 477 $ 444 $ 366 $ 355
Demand Flow Performance:
Average inventory turnover (b)(d) 8.9x 9.2x 9.0x 9.4x 8.4x
Operating working capital as a percent of sales (c)(d) 2.6% 2.9% 4.7% 4.9% 4.9%
</TABLE>
(a) In 1999, the Company recorded restructuring and asset impairment charges
of $15 million ($9 million, net of tax benefits, or $.13 per diluted
share). These consist of restructuring charges of $30 million principally
for Vehicle Control Systems and a $13 million impairment charge relating
to a minority equity interest in a non-core business, partly offset by a
reduction of charges taken in 1998 to restructure North American Plumbing
Products operations. In 1998, the Company recorded restructuring and asset
impairment charges of $197 million ($183 million, net of tax benefits, or
$2.49 per diluted share), including $185 million for Plumbing Products, $7
million for Air Conditioning Systems and Services and $5 million for
Vehicle Control Systems. In 1996, upon the adoption of Statement of
Financial Accounting Standards No. 121 on impairment of assets, the
Company incurred a non-cash charge of $235 million, or $2.95 per diluted
share. See Note 5 of Notes to Consolidated Financial Statements and
Management's Discussion and Analysis which follows.
(b) Twelve-month average inventory turnover, exclusive of significant
acquisitions, with each month calculated using the prospective three
month's cost of sales annualized, divided by inventories as of each month
end.
(c) Operating working capital as of year end, divided by annualized fourth
quarter sales. Operating working capital is defined as net accounts
receivable and adjusted inventories less accounts payable, accrued
payrolls and other accrued liabilities.
(d) These Demand Flow Performance measurements use amounts determined
differently than they would be under generally accepted accounting
principles and may not necessarily be used by other companies. The Company
believes these measurements are important to understanding performance
under Demand Flow Technology.
- -----------------------------------------AMERICAN STANDARD '99 annual report-17-
<PAGE> 20
Management's Discussion and Analysis
American Standard Companies Inc.
OVERVIEW
The Company achieved record sales and segment income in 1999 for the fifth
consecutive year primarily as a result of strong performance by Air Conditioning
Systems and Services and continued improvement in Plumbing Products, including
the effect of the acquisition of Armitage/Dolomite described in the Plumbing
Products Segment section below. These results were attained despite continued
economic weakness in the Far East and Latin America, a softening in the European
commercial vehicle market and the unfavorable effects of foreign exchange. The
sales and segment income amounts reflect results from continuing operations
only, as the Medical Systems business is reported as a discontinued operation.
Sales for 1999 were $7.2 billion, an increase of 10% from $6.6 billion in 1998.
Segment income was $751 million, an increase of 14% from $658 million in 1998,
and up 17% excluding the unfavorable effects of foreign exchange. Income from
continuing operations in 1999 was $264 million, or $3.63 per diluted share,
including net restructuring and asset impairment charges of $15 million ($9
million, net of tax benefits, or $.13 per diluted share). This compares with
income from continuing operations before extraordinary item in 1998 of $49
million, or $.66 per diluted share, including restructuring and asset impairment
charges of $197 million ($183 million, net of tax benefits, or $2.49 per diluted
share). Excluding such restructuring and asset impairment charges, income from
continuing operations before extraordinary item increased 18% to $273 million in
1999 from $232 million in 1998.
RESULTS OF OPERATIONS FOR 1999 COMPARED WITH 1998 AND 1998 COMPARED WITH 1997
Consolidated sales for 1999 were $7,190 million, an increase of $634 million, or
10% (11% excluding the unfavorable effects of changes in foreign exchange), from
$6,556 million in 1998. Sales increased 10% for Air Conditioning Systems and
Services and 16% for Plumbing Products, but declined slightly for Vehicle
Control Systems.
Consolidated sales for 1998 were $6,556 million, an increase of $598 million,
or 10% (12% excluding the unfavorable effects of changes in foreign exchange),
from $5,958 million in 1997. Sales increased 10% for Air Conditioning Systems
and Services, 5% for Plumbing Products and 16% for Vehicle Control Systems.
Segment income for 1999 was $751 million, an increase of $93 million, or 14%
(16% excluding the unfavorable effects of foreign exchange), from
$658 million in 1998. Segment income increased 17% for Air Conditioning Systems
and Services and 38% for Plumbing Products but decreased 12% for Vehicle Control
Systems.
Segment income for 1998 was $658 million, an increase of $26 million, or 4% (6%
excluding the unfavorable effects of foreign exchange), from $632 million in
1997. Segment income increased 20% for Vehicle Control Systems, and was flat for
Air Conditioning Systems and Services and Plumbing Products.
- --------------------------------------------------------------------------------
1999 Sales
$7.2 Billion
[The following tables were represented as pie charts in the printed material.]
<TABLE>
<CAPTION>
BUSINESSES GEOGRAPHY
<S> <C> <C> <C>
Air Conditioning 60% U.S. 53%
Vehicle Controls 15% Europe 31%
Plumbing 25% Other 16%
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1999 Segment Income
$751 Million
[The following tables were represented as pie charts in the printed material.]
<TABLE>
<CAPTION>
BUSINESSES GEOGRAPHY
<S> <C> <C> <C>
Air Conditioning 60% U.S. 67%
Plumbing 22% Europe 29%
Vehicle Controls 18% Other 4%
</TABLE>
- --------------------------------------------------------------------------------
---------
AMERICAN
- -18-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 21
RESULTS OF OPERATIONS BY BUSINESS SEGMENT
AIR CONDITIONING SYSTEMS AND SERVICES BUSINESS SEGMENT
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $4,337 $3,940 $3,567
Segment income $ 453 $ 386 $ 386
</TABLE>
Sales of Air Conditioning Systems and Services increased 10% (with little effect
from foreign exchange) to $4,337 million for 1999 from $3,940 million for 1998.
Worldwide Applied Systems sales increased 12% and Worldwide Unitary Systems
sales increased 8%. In 1998, sales of Air Conditioning Systems and Services
increased 10% (12% excluding foreign exchange effects) to $3,940 million from
$3,567 million for 1997. Worldwide Applied Systems sales increased 8% and
Worldwide Unitary Systems sales increased 13%. Commercial markets account for
approximately 75% of Air Conditioning Systems and Services' total sales.
Approximately 65% of total sales are to the replacement, renovation and repair
markets.
Segment income of Air Conditioning Systems and Services in 1999 increased 17%
(with little effect from foreign exchange) to $453 million from $386 million in
1998. The increase was attributable primarily to higher volumes in the U.S. in
commercial applied and unitary products and to improved margins in the
international applied business, primarily in Europe. Overall margins improved
from 9.8% in 1998 to 10.4% in 1999. Segment income of Air Conditioning Systems
and Services in 1998 was $386 million, at the same level as in 1997, but
increased 1% excluding the unfavorable effects of foreign exchange. An increase
in Worldwide Unitary Systems was substantially offset by a decrease in Worldwide
Applied Systems.
Worldwide Applied Systems--In 1999, Worldwide Applied Systems' sales increased
12% (with little effect from foreign exchange) as a result of strong market
growth and higher volumes in the U.S. and Europe. U.S. markets expanded as
replacement and renovation continued to grow and commercial construction
remained near record high levels. Markets outside the U.S. were mixed, with
Europe up slightly while markets in Asia and Latin America were down. U.S. sales
of commercial applied products increased 17% because of higher volumes,
reflecting continued strength in the U.S. commercial equipment business, market
share gains and the acquisition of sales and service offices. Recently acquired
sales and service offices contributed 3% of the increase. Sales increased 3% in
International Applied Systems as increases in Canada and Europe were partly
offset by decreases in Latin America and Asia. Segment income for Worldwide
Applied Systems increased 26% in 1999 as a result of improved volume in the
U.S., plus cost improvements in international businesses, primarily Europe.
In 1998, Worldwide Applied Systems' sales increased 8% (10% excluding foreign
exchange effects) primarily reflecting higher volumes in the U.S. from improved
markets and the acquisition of additional commercial sales and service
businesses, together with higher volumes in Europe and the Middle East. Those
improvements were partly offset by the effects of
- --------------------------------------------------------------------------------
Air Conditioning Systems and Services 1999 Sales
$4.3 Billion
[The following tables were represented as pie charts in the printed material.]
<TABLE>
<S> <C>
Commercial 75%
Residential 25%
</TABLE>
<TABLE>
<S> <C>
U.S. 76%
Other 17%
Europe 7%
</TABLE>
<TABLE>
<S> <C>
Replacement, Renovation and Repair 65%
New Commercial Construction 25%
Residential New Construction 10%
</TABLE>
- -----------------------------------------AMERICAN STANDARD '99 annual report-19-
<PAGE> 22
Management's Discussion and Analysis (continued)
American Standard Companies Inc.
competitive pricing pressures on chillers and the adverse effects of foreign
exchange. Segment income for Worldwide Applied Systems decreased 27% in 1998
from the 1997 level as a result of global pricing pressure, lower margins in
Europe, lower volumes in the Far East and a strike at the Lexington air handling
products facility in the first quarter of 1998.
Worldwide Unitary Systems--In 1999, sales of Worldwide Unitary Systems increased
8% (with little effect from foreign exchange). This growth occurred primarily in
the U.S., as volume improved over a strong prior year performance. This
principally reflected the effects of warmer-than-normal weather on U.S. sales of
residential products and increased volumes in the U.S. commercial unitary
business. Outside the U.S., improved sales of unitary systems were led by
increases in Europe and Asia. Segment income for Worldwide Unitary Systems
increased 12% in 1999 (with little effect from foreign exchange), principally
reflecting higher U.S. volume.
In 1998, sales of Worldwide Unitary Systems increased 13% (14% excluding foreign
exchange effects) over 1997 sales. Sales in the U.S. for unitary commercial and
residential products increased 14%, driven by strong new construction and
increased replacement demand due to warmer-than-normal summer weather. Outside
the U.S., improved sales of unitary systems were led by strong increases in
Europe and Latin America. Segment income for Worldwide Unitary Systems increased
29% in 1998 from the 1997 level (with little effect from foreign exchange),
principally reflecting higher U.S. volume and margin increases.
Backlog--The worldwide backlog for Air Conditioning Systems and Services
remained at a high level as of December 31, 1999, at $661 million, an increase
of 1% from the year-earlier level, excluding foreign exchange effects. This high
level reflected continued strength in major markets and improvements in the Far
East and Latin America.
PLUMBING PRODUCTS BUSINESS SEGMENT
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $1,755 $1,510 $1,439
Segment income $ 164 $ 119 $ 119
</TABLE>
Sales by Plumbing Products were $1,755 million in 1999, an increase of 16% (20%
excluding the unfavorable effects of foreign exchange), from $1,510 million in
1998. The increase (excluding exchange) primarily reflected a 16% sales gain in
the U.S. and a 35% gain for Europe. The increase in Europe included the effect
of the acquisition in February 1999 of the Bathrooms Division of Blue Circle
Industries PLC, consisting of two principal businesses: Armitage Shanks, a
United Kingdom manufacturer, and Ceramica Dolomite, an Italian manufacturer
("Armitage/Dolomite"). Sales of Plumbing Products were $1,510 million in 1998
compared with $1,439 million in 1997, an increase of 5% (9% excluding exchange).
The increase (excluding exchange) primarily resulted from sales gains in the
Americas and the Far East.
- --------------------------------------------------------------------------------
Plumbing 1999 Sales
$1.8 Billion
[The following tables were represented as pie charts in the printed material.]
<TABLE>
<S> <C>
Residential 75%
Commercial 25%
</TABLE>
<TABLE>
<S> <C>
Europe 51%
U.S. 31%
Other 18%
</TABLE>
<TABLE>
<S> <C>
Replacement and Remodeling 60%
New Construction 40%
</TABLE>
---------
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COMPANIES
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<PAGE> 23
Segment income of Plumbing Products was $164 million for 1999, an increase of
38% (44% excluding the unfavorable effects of foreign exchange), from $119
million for 1998. This increase (excluding exchange) was mainly due to increases
of 68% in Europe (which includes the effect of the Armitage/Dolomite
acquisition) and 50% in the U.S., both driven by volume increases and cost
reductions that expanded margins to 9.3% from 7.9%. These gains were tempered by
a modest increase in Latin America and a small decrease in the Far East. Segment
income of Plumbing Products was $119 million for 1998, the same as for 1997, but
increased 5% excluding the unfavorable effects of foreign exchange, because of a
40% gain in the Americas, partly offset by a 16% decline in Europe and the Far
East.
Americas--In 1999, Plumbing Products sales in the Americas increased 6% (10%
excluding foreign exchange effects) compared with 1998. Sales in the U.S. grew
16% due to strong markets (more than 5% expansion) and market share gains in
both the wholesale and retail market channels. Renovation and remodeling in the
U.S., driven by the large retail home center expansion, continued to grow and
new housing starts remained at high levels. The Company believes that the
multi-year trend of sales and market share growth in the U.S. retail market
channel will continue and lead to increased Company sales because of strong
product and brand-name recognition. The gain in the U.S. was partly offset by
decreased sales in Latin America where markets were down significantly. Segment
income for the Americas increased 27%, driven primarily by strong volume
increases in the U.S. and the benefits of lower-cost sourcing from expanded
facilities in Mexico.
In 1998, Plumbing Products sales in the Americas increased 14% (17% excluding
foreign exchange effects) compared with 1997. Sales in the U.S. grew 15% due to
strong markets and market share gains, primarily attributable to higher volumes
with major home improvement retailers and expansion in the wholesale channel. In
addition, sales increased 10% in Latin America, primarily on higher volume in
Mexico. The increase in segment income for the Americas was primarily due to
higher volumes and the benefits of lower-cost sourcing from expanded facilities
in Mexico.
Europe--In 1999, sales for Europe increased 30% (35% excluding foreign exchange
effects) compared with 1998 sales. The European increase included $279 million
of sales from the Armitage/Dolomite businesses acquired in February 1999 (see
Note 4 of Notes to Financial Statements), partly offset by a reduction of $58
million of sales related to the divestiture of French distribution operations in
the fourth quarter of 1998. Excluding the acquisition and the divestiture, sales
in Europe increased modestly, essentially in line with market growth. Segment
income in Europe increased 61% (68% excluding foreign exchange), principally due
to the Armitage/Dolomite acquisition and cost improvements from the
restructuring of European operations as part of a lower-cost sourcing program.
In 1998, sales for Europe were flat (excluding foreign exchange effects)
compared with 1997 because of weak economic conditions and the loss of sales by
the French distribution operations which were sold in the fourth quarter of
1998. Segment income in Europe declined 9% (7% excluding foreign exchange),
principally due to the effects of weak economic conditions and
restructuring-related inefficiencies.
Far East--In 1999, Far East sales and segment income both declined
slightly as operations continued to suffer from adverse economic conditions in
the region. In 1998, Far East sales increased 5% (37% excluding foreign exchange
effects) compared with 1997. The exchange-adjusted increase was principally
attributable to the effect of consolidating operations in China following the
acquisition of a majority interest in that operation in the fourth quarter of
1997. Other Far East operations suffered from adverse economic conditions in the
region. Segment income in the Far East declined in 1998 because of weak economic
conditions in most parts of the region.
Backlog--Plumbing Products' backlog as of December 31, 1999, was $154 million,
an increase of 93% from December 31, 1998 (excluding foreign exchange effects),
reflecting improvements in Europe (including the effect of the Armitage/Dolomite
acquisition) and the U.S.
- -----------------------------------------AMERICAN STANDARD '99 annual report-21-
<PAGE> 24
Management's Discussion and Analysis (continued)
American Standard Companies Inc.
VEHICLE CONTROL SYSTEMS BUSINESS SEGMENT
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $1,098 $1,106 $ 952
Segment income $ 134 $ 153 $ 127
</TABLE>
Vehicle Control Systems' sales for 1999 were $1,098 million, down 1% (up 4%
excluding unfavorable foreign exchange effects), from $1,106 million in 1998.
Increased shipments of anti-lock braking systems (ABS) to the Company's U.S.
braking systems marketing joint venture, higher product content per vehicle on
new models introduced in 1998 and sales by the U.S. compressor manufacturing
joint venture were more than offset by exchange effects. Increased export sales
to the U.S. in 1999 reflected the full phase-in of regulations requiring ABS on
all new heavy-duty trucks and trailers, and a 21% increase in U.S. truck
production. Sales to European commercial vehicle manufacturers declined slightly
in 1999, as unit volumes of truck and bus production in Western Europe decreased
1% from 1998 levels. Brazilian sales also declined, as truck production
decreased 28%.
Vehicle Control Systems' sales for 1998 were $1,106 million, an increase
of 16% (18% excluding the unfavorable effects of foreign exchange), from $952
million in 1997. This gain was driven primarily by increased commercial vehicle
production, higher product content per vehicle and increased export sales. Unit
volume of truck and bus production in Western Europe increased 16% compared with
1997. Original equipment sales volumes were higher in almost all markets for
commercial vehicle braking and other control systems, including increased sales
to trailer manufacturers. Export sales from Europe more than doubled, primarily
from sales of ABS to the Company's North American braking systems joint venture.
Sales of original equipment declined in Brazil, where truck production declined
due to weak economic conditions.
- --------------------------------------------------------------------------------
Vehicle Control Systems 1999 Sales
$1.1 Billion
<TABLE>
<S> <C>
Europe 81%
U.S. 14%
Other 5%
</TABLE>
<TABLE>
<S> <C>
OEM Conventional 42%
Electronic 32%
Aftermarket 26%
</TABLE>
- --------------------------------------------------------------------------------
Segment income decreased $19 million ($10 million excluding the unfavorable
effects of foreign exchange) to $134 million in 1999, from $153 million in 1998.
This was primarily the result of warranty costs (for a problem the Company
believes it has solved) and increased product development spending, partly
offset by increased income from the U.S. compressor manufacturing joint venture.
Overall margin declined from 13.7% in 1998 to 12.2% in 1999. The decline in
segment income, however, was substantially offset by increased equity income
from the U.S. marketing joint venture which expanded its market-leading
position, shipping more than 600,000 anti-lock braking systems to the North
American commercial vehicle market in 1999, an increase of 33% over the prior
year.
Segment income for Vehicle Control Systems was $153 million in 1998, an increase
of 20% (22% excluding the unfavorable effects of foreign exchange) from $127
million in 1997. This increase was principally in Europe and resulted from the
higher volume and improved margins due to productivity improvements. These
factors were partly offset by the effects of higher development and maintenance
costs in Europe, lower volume in Brazil and start-up costs of the new,
majority-owned joint ventures in the U.S. and China.
Backlog--Vehicle Control Systems' backlog as of December 31, 1999, was $405
million, an increase of 2% from December 31, 1998 (excluding the unfavorable
effects of foreign exchange), reflecting small improvements in several
locations.
OTHER FINANCIAL SUMMARY ITEMS
The increase in equity in net income of unconsolidated joint ventures for 1997
through 1999 primarily reflects the strong growth of Vehicle Control
---------
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- -22-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 25
Systems' North American braking systems marketing joint venture. The increase
also reflects benefits from the restructuring of Air Conditioning Systems and
Services' scroll compressor joint venture in 1997 and increased income from the
Company's financing joint venture.
In 1998, the Company committed to restructuring plans designed to achieve lower
product costs and improved operating efficiency. Accordingly, the Company
recorded charges totaling $197 million ($183 million net of tax benefits)
comprised of $185 million for Plumbing Products, $7 million for Air Conditioning
Systems and Services and $5 million for Vehicle Control Systems. The Plumbing
Products charge included costs related to the closure of five plants in Europe
and two in North America, a loss on the sale of the French plumbing distribution
operations, write-off of related goodwill and a workforce reduction of
approximately 1,600 people. The Air Conditioning Systems and Services charge
reflected the closure of one plant in Australia, one plant in Europe and a
workforce reduction of 115 people. The Vehicle Control Systems' charge related
to the closure of three plants in Europe and a workforce reduction of 75 people.
The charge of $197 million was comprised of non-cash asset write-downs of $87
million and accrued charges of $110 million, of which approximately $56 million
were paid in 1999 and $19 million in 1998.
In 1999, the Company recorded a $15 million restructuring and asset impairment
charge that reflects several elements. During the fourth quarter of 1999
management re-evaluated its plan to close one of its plumbing plants in North
America. Management and employees at that plant improved operating efficiency
and lowered costs which, together with better-than-expected improvements in the
market and the Company's market share, led to the decision not to close that
plant. This reduced the number of people to be terminated in North America by
approximately 280. The Company also was able to sell the other North American
plumbing plant on more favorable terms than initially contemplated. Those two
principal reductions and other smaller reductions to estimated severance and
facilities costs resulted in a reversal of $29 million of amounts accrued in
1998.
Management also re-evaluated the restructuring plans for Vehicle Control
Systems and decided to transfer additional manufacturing capacity to a facility
under construction in Poland, where labor costs are lower. This resulted in
additional charges of $17 million for the closure of five manufacturing
facilities in Europe and one in Japan, the termination of approximately 625
employees in Europe and 25 in Japan. In addition, certain estimated charges
recorded in 1998 were increased to reflect current estimates which resulted in
additional charges incurred in 1999 of $14 million. Those increases included
changes in severance and other employee-related costs (especially in Spain where
significantly higher payments are now anticipated) and higher facilities closure
costs. The 1999 charge also includes a $13 million impairment charge related to
a minority equity interest in a non-core business. The Company expects to pay
the December 31, 1999 balance of $29 million by the end of 2000. See Note 5 of
Notes to Consolidated Financial Statements.
Interest expense for 1999 was the same as 1998 as lower overall interest rates,
achieved through 1998 and 1999 debt refinancings, offset the effect of increased
debt from the Armitage/Dolomite acquisition. In February 1999, the Company
acquired Armitage/Dolomite for $427 million. In May 1999, the Company completed
the sale of the equivalent of $460 million of Senior Notes, with an average
interest rate of 7.7%, and redeemed $150 million of its 10 7/8% Senior Notes.
Interest expense decreased $4 million in 1998 compared with 1997, as lower
average interest rates achieved through debt refinancing more than offset the
effect of increased debt arising from share repurchases and the medical
diagnostics businesses acquisition in June 1997. On June 1, 1998, the Company
redeemed the $741 million principal amount of its 10 1/2% Senior Subordinated
Discount Debentures and the $200 million principal amount of its 9 7/8% Senior
Subordinated Notes with lower-rate Senior Notes, as described below. During
1998, the Company purchased $84 million of its common stock and during 1997
purchased $311 million of its common stock and acquired the medical diagnostics
businesses for $212 million (see "Liquidity and Capital Resources").
- -----------------------------------------AMERICAN STANDARD '99 annual report-23-
<PAGE> 26
Management's Discussion and Analysis (continued)
American Standard Companies Inc.
Corporate expenses for 1999 totaled $134 million, compared with $110 million in
1998 and $105 million in 1997. The increase in 1999 reflects the costs
associated with certain Company officer transitions, a one-time charge related
to pension benefits and increased financing fees paid to the Company's financial
services joint venture resulting from increased volumes in the U.S. businesses.
The income tax provisions for 1999, 1998 and 1997 were $187 million, $141
million and $124 million, respectively. The effective income tax rate was 41.5%
in 1999 and 74.4% in 1998. The 1998 provision reflects an unusually high
effective tax rate because there was little tax benefit on the restructuring
charges incurred in 1998. Excluding those restructuring charges, the effective
rate for 1998 was 40.0% of income from continuing operations before income taxes
and extraordinary item. The 1998 rate also reflects foreign tax effects that
include a loss contingency related to certain German tax matters, substantially
offset by reversal of a U.S. deferred tax liability related to foreign
investments. The 1999 and 1998 rates also reflect the effects of rate
differences and withholding taxes related to foreign operations, nondeductible
goodwill amortization and higher state income taxes in the U.S. The 35.6% rate
for 1997 is somewhat lower primarily because of higher levels of taxable income
in the U.S., which enabled the Company to recognize previously unrecognized tax
benefits. No similar benefits were available in 1999 and 1998. See Note 8 of
Notes to Consolidated Financial Statements. The Company expects that its
effective income tax rate in 2000 will be reduced to approximately 39% because
of an internal reorganization of the Company's subsidiary ownership which should
be more tax efficient.
As a result of the redemption of debt in 1998 and 1997 with refinancing
proceeds, those years included extraordinary charges of $50 million (net of
taxes of $7 million) and $24 million (net of taxes of $6 million), respectively,
including call premiums and the write-off of unamortized debt issuance costs.
See the following section, "Liquidity and Capital Resources" and Note 11 of
Notes to Consolidated Financial Statements for a description of these
transactions.
In the fourth quarter of 1999, the Board of Directors of the Company approved a
plan for the sale of non-core business assets consisting of the Medical Systems
businesses. The Company expects to complete the sale in the second quarter of
2000. Accordingly, Medical Systems is reported as a discontinued operation in
the accompanying Consolidated Statement of Operations and the Company's net
investment in that operation is reported as net assets of discontinued
operations held for sale in the accompanying Consolidated Balance Sheet. All
prior periods presented have been restated to reflect these classifications,
including applicable footnotes. The loss from discontinued operations in 1999
includes a loss from operations of $14 million (net of income tax benefit of $9
million), and an estimated loss on disposition of $112 million (net of income
tax benefit of $8 million). The loss on disposition includes estimated operating
losses in 2000 projected through the expected date of sale.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, after cash interest paid of $181
million, was $474 million for 1999, compared with $462 million for 1998. The
increase resulted primarily from higher income and increased depreciation and
amortization, partly offset by differences in the timing of accruals and
disbursements in the two periods, particularly the restructuring accrual.
Operating working capital as a percentage of sales improved to 2.6% in 1999,
from 2.9% in 1998, primarily as a result of reductions in working capital in
Plumbing Products and Vehicle Control Systems. Net investing activities totaled
$836 million, principally due to the acquisition of Armitage/Dolomite for $427
million and capital expenditures of $327 million (including $53 million of
investments in affiliated companies)--see "Capital Expenditures." Net cash
provided by financing activities of $361 million reflected net incremental
borrowing which, together with cash provided by operations, funded the net
investing activities.
In January 1997, the Company entered into an amended bank credit agreement ("the
1997 Credit Agreement"). This agreement, which requires no
---------
AMERICAN
- -24-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 27
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 contains restrictive
covenants and other requirements with which the Company believes it is currently
in compliance. The Company believes that the amounts available from operating
cash flows, funds available under its 1997 Credit Agreement and future
borrowings under the remaining portion of a $1 billion shelf registration
statement filed with the Securities and Exchange Commission in 1998 ("the 1998
Shelf Registration") will be sufficient to meet its expected operating needs and
planned capital expenditures for the foreseeable future. Obligations under the
1997 Credit Agreement are guaranteed by the Company and significant foreign and
domestic subsidiaries and are secured by a pledge of the stock of nearly all
such subsidiaries. See Note 11 of Notes to Consolidated Financial Statements.
In the first half of 1998, the Company completed public offerings of $1 billion
principal amount of Senior Notes with interest rates ranging from 7 1/8% to
7 5/8% and maturity dates from 2003 to 2010. The Senior Notes are issued by
American Standard Inc. and unconditionally guaranteed by American Standard
Companies Inc. On June 1, 1998, the Company used the net proceeds of these
offerings (approximately $963 million, net of underwriting discounts and
interest rate hedge costs) to redeem its 10 1/2% Senior Subordinated Discount
Debentures and 9 7/8% Senior Subordinated Notes. The total amount required to
complete these redemptions, including call premiums, was $954 million, net of
the effect of settlement of certain interest rate swap transactions related to
the Senior Subordinated Discount Debentures.
In December 1998, the 1997 Credit Agreement was amended to permit American
Standard to issue up to an additional $500 million principal amount of senior or
subordinated unsecured debt securities, to reorganize ownership of certain
subsidiaries and intellectual property rights (see Note 16 of Notes to
Consolidated Financial Statements), and to lower the interest coverage ratios
and increase the debt coverage ratios applicable to the Company beginning for
periods ending December 31, 1998. The purpose of the amendment was primarily to
accommodate the refinancing of $150 million of American Standard's 10 7/8%
senior notes due May 15, 1999 and the financing of other proposed capital
expenditures, including the acquisition of Armitage/Dolomite described below.
In November 1999, the 1997 Credit Agreement was amended to permit the Company to
sell its Medical Systems business and to increase the limit on annual lease
payments.
On May 28, 1999, the Company completed the sale of the equivalent of $460
million of Senior Notes, with an average interest rate of 7.7%, issued in three
series: 250 million Euro Senior Notes due 2006; 100 million U.S. Dollar Senior
Notes due 2009 and 60 million Sterling Senior Notes due 2009. Net proceeds of
$452 million from the offering were applied to refinance borrowings incurred to
pay $150 million of 10 7/8% Senior Notes at maturity on May 15, 1999 and to
refinance a substantial portion of the purchase price of the Armitage/Dolomite
acquisition described below. The May 28, 1999 sale of Senior Notes, which are
not subject to redemption, was made pursuant to the 1998 Shelf Registration.
Debt securities sold under the 1998 Shelf Registration are issued by American
Standard Inc. and unconditionally guaranteed by American Standard Companies Inc.
The Company intends to use the net proceeds from any future sales of such debt
securities under the 1998 Shelf Registration for general corporate purposes,
which may include certain investments, acquisitions, additions to working
capital or capital expenditures.
On February 2, 1999, the Company acquired Armitage/Dolomite, a manufacturer of
ceramic sanitaryware, brassware and integrated plumbing systems, for
approximately $427 million (including fees and expenses) with borrowings under
the Company's 1997 Credit Agreement. The acquired business
- -----------------------------------------AMERICAN STANDARD '99 annual report-25-
<PAGE> 28
Management's Discussion and Analysis (continued)
American Standard Companies Inc.
consists of two principle businesses: Armitage Shanks, a United Kingdom
manufacturer, and Ceramica Dolomite, an Italian manufacturer. The acquired
business has facilities in the United Kingdom and Italy, and employs
approximately 3,200 people. The primary markets for its products are in the
United Kingdom, Italy, Ireland and Germany. Armitage/Dolomite had 1999 sales of
$279 million (for the eleven months following the acquisition). This transaction
was accounted for as a purchase and the results of operations have been included
in the accompanying financial statements since the date of acquisition. The
purchase price was allocated based upon the fair value of the assets acquired
and liabilities assumed at the date of acquisition. This resulted in an excess
of purchase price over the value of net assets acquired (goodwill) of $300
million which is being amortized over 40 years.
At December 31, 1999, the Company's total indebtedness was $2.6 billion and
annual scheduled debt maturities, excluding the 1997 Credit Agreement, were $19
million, $12 million, $13 million, $135 million and $8.6 million for the years
2000 through 2004, respectively. The Company had remaining availability under
the 1997 Credit Agreement of approximately $643 million after reduction for
borrowings and for $73 million of outstanding letters of credit. The Company's
foreign subsidiaries had $79 million available at December 31, 1999, under
overdraft facilities which can be withdrawn by the banks at any time. In
addition, the Company's operations in China have $18 million available under
bank credit facilities after reduction for borrowings of $17 million and letters
of credit usage of $20 million.
In 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"), then the Company's largest stockholder. In conjunction therewith,
the Company purchased from ASI Partners 4,628,755 shares of the Company's common
stock for $208 million, plus fees and expenses, and issued to ASI Partners
warrants, expiring in February 2002, to purchase 3,000,000 shares of the
Company's common stock at $55 per share (the "Exercise Price"). The warrants
entitle holders to receive cash or shares, at the Company's option, based on the
difference between the market value of the Company's common stock and the
Exercise Price. All shares sold in the secondary public offering were previously
issued and outstanding, and the Company received no proceeds therefrom (see Note
12 of Notes to Consolidated Financial Statements).
On July 9, 1998, the Company's Board of Directors approved a plan to purchase up
to $300 million of the Company's common stock, not to exceed $100 million per
year, during the three-year period ending July 2001. During 1999, the Company
purchased .1 million shares for $4 million and in 1998 purchased 2.7 million
shares of its common stock for $84 million, 2.5 million of which shares were
purchased for $75 million pursuant to this plan.
During 1997, the Company purchased 6.9 million shares of its common stock for
$311 million, including the above-referenced shares purchased from ASI Partners.
The Company is a partner in American Standard Financial Services, a financial
services partnership with Transamerica Commercial Finance Corporation. The
partnership offers inventory and consumer financing, and plans to provide other
lending programs. Programs thus far implemented have enhanced the Company's cash
flow and equity income.
The Company does not currently intend to pay dividends and is limited in the
amount it may pay under the terms of the 1997 Credit Agreement.
The Company has previously disclosed that German tax authorities have raised
questions regarding the treatment of certain significant matters in connection
with examinations of the tax returns of the Company's German subsidiaries for
the years 1984 through 1994. Having proposed to settle one of the issues under
dispute, the Company recorded a loss contingency in 1998. See Note 8 of Notes to
Consolidated Financial Statements.
---------
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<PAGE> 29
CAPITAL EXPENDITURES
The Company's capital expenditures (including investments in affiliated
companies) for 1999 were $327 million, compared with $267 million for 1998. The
increase for 1999 related primarily to higher capital expenditures for Air
Conditioning Systems and Services. Capital spending in 1999 was devoted
primarily to shifting production to lower-cost locations, expansion of
manufacturing capacity to meet demand, equipment for new products, and continued
implementation of Demand Flow Technology.
Capital expenditures for Air Conditioning Systems and Services for 1999 were
$155 million, including $38 million of investments in affiliated companies, an
increase of 69% from the $91 million of capital spending in 1998, including $5
million of investments in affiliated companies. Major expenditures included
projects related to new products and product improvements, capacity expansion
and improvements related to Demand Flow Technology and productivity. In
addition, Air Conditioning Systems and Services spent $15 million for the
acquisition of sales offices.
Plumbing Products' capital expenditures for 1999 were $123 million (including
investments in affiliated companies of $10 million), compared with capital
expenditures of $126 million in 1998, a decrease of 2%. Expenditures in 1999
included completion of expansion of a chinaware plant in Mexico and expansion of
the fittings plant in Bulgaria, offset by reduced spending in most other
locations.
Capital expenditures for Vehicle Control Systems in 1999 were $49 million
(including investments in affiliated companies of $5 million), compared with $50
million in 1998. Expenditures in 1999 were primarily related to capacity
expansion in Europe to serve the U.S. market and satisfy increased demand for
electronic products, and commencement of construction of a new facility in
Poland.
The Company believes capital spending in recent years has been sufficient for
maintenance purposes, important product and process redesigns, expansion
projects and strategic investments and acquisitions. The Company expects to
continue investing to expand and modernize its existing facilities and
affiliated companies and to consider entering into joint ventures and making
complementary acquisitions. The Company expects to make capital expenditures in
2000, excluding acquisitions of U.S. air conditioning commercial sales and
service operations, of approximately $230 million.
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, 2000. Management believes that
the adoption of Statement No. 133 will not have a significant effect on the
Company's results of operations or financial position. See the description of
hedging activities in the Market Risk section below.
CYCLICAL AND SEASONAL NATURE OF BUSINESS
The preponderance of Air Conditioning Systems and Services and Plumbing Products
sales are to the replacement, remodeling and repair markets. In 1999, only about
6% of the Company's sales were associated with new housing in the United States
and about 12% were associated with new commercial construction in the United
States, both of which are cyclical. The Company's geographic diversity mitigates
the effects of fluctuations in individual new construction markets. Vehicle
Control Systems' sales are dependent to a large extent on production levels of
medium-sized and heavy trucks and buses, particularly in Europe, which have been
cyclical.
- -----------------------------------------AMERICAN STANDARD '99 annual report-27-
<PAGE> 30
Management's Discussion and Analysis (continued)
American Standard Companies Inc.
Total Company sales and related segment income tend to be seasonally higher in
the second and third quarters of the year because summer in the U.S. and other
Northern Hemisphere markets is the peak season for sales of Air Conditioning
Systems and Services. In addition, a significant percentage of Air Conditioning
Systems and Services' sales are attributable to U.S. residential and commercial
construction activity, which is generally higher in the second and third
quarters of the year.
YEAR 2000 READINESS DISCLOSURE
The following is a Year 2000 Readiness Disclosure in accordance with the Year
2000 Information and Readiness Disclosure Act.
Year 2000 compliance plan. The Company successfully completed a comprehensive
plan to become Year 2000 compliant at all of its locations worldwide and has
experienced no significant problems. All operating locations functioned normally
with uninterrupted service to customers in the first two months of 2000 and no
significant problems were reported by any of the Company's customers. The
Company will continue to monitor all systems throughout the year 2000.
Costs. The Company's cost to become Year 2000 compliant was approximately $22
million. Of this, approximately $15 million was charged to expense as incurred,
including internal and external labor to repair or modify existing software, and
costs of consultants employed at various locations to assist with implementation
of the Company's plan. The balance of the cost was for replacement hardware and
software that was capitalized. These costs were generally not incremental to
existing information technology budgets, as existing internal resources were
redeployed and the costs of consultants employed were less than 10% of total
Year 2000 costs. There were no significant deferrals of information technology
projects because of the Company's response to Year 2000 issues. Information
technology planning has incorporated client server and Year 2000 initiatives for
several years and, therefore, there was little effect on the Company's
operations because of unexpected deferrals of projects important to growth or
competitiveness. All costs were funded from operating cash flows or other
resources available to the Company. Costs to become Year 2000 compliant did not
have a material adverse effect on the Company's financial position, results of
operations or cash flows.
MARKET RISK
The Company is exposed to fluctuations in the price of major raw material
commodities used in the manufacturing process, foreign currency fluctuations and
interest rate changes. From time to time the Company enters into agreements to
reduce its commodity price, foreign currency and interest rate risks. Such
agreements hedge only specific transactions or commitments and the Company does
not enter into speculative hedges. To minimize the risk of counter-party
nonperformance, such agreements are made only through major financial
institutions with significant experience in such financial instruments.
To minimize the risk of fluctuations in the market price of major raw material
commodities, such as copper and aluminum used in the manufacturing process, the
Company may enter commodity forward contracts to effectively fix the cost of the
commodity. Maturity dates of the contracts are scheduled to coincide with market
purchases of the commodity. Cash proceeds or payments between the Company and
the counter-party at maturity of the contracts are recognized as an adjustment
to the cost of the commodity purchased. The Company generally does not enter
commodity hedges extending beyond eighteen months. The notional value of
commodity forward contracts outstanding as of December 31, 1999 and 1998, was
$49 million and $24 million, respectively. A 10% change in the price of
commodities hedged would change the fair value of the hedge contracts by $6
million as of December 31, 1999 and $2 million as of December 31, 1998.
The Company conducts significant non-U.S. operations through subsidiaries in
most of the major countries of Western Europe, Canada, Brazil, Mexico, Bulgaria,
the Czech Republic, Central American countries, China, Malaysia,
---------
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<PAGE> 31
the Philippines, Indonesia, South Korea, Thailand, Taiwan, Australia and Egypt.
In addition, the Company conducts business in these and other countries through
affiliated companies and partnerships in which the Company owns 50% or less of
the stock or partnership interest. Because the Company has manufacturing
operations in 29 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
asset exposure of foreign operations to the effects of exchange volatility has
been partly mitigated by the denomination in foreign currencies of a portion of
the Company's borrowings.
However, since the Company sells certain finished products in currencies
different than the currency of the subsidiary which manufactured the products,
the Company is exposed to foreign currency risk on such transactions. The
Company hedges some of this risk by entering foreign currency forward contracts
that effectively fix the manufacturing cost. Cash settlement proceeds or
payments upon maturity of the contracts are included in the price of the
transaction hedged. The Company generally does not enter currency hedges
extending beyond one year. The notional value of foreign exchange forward
contracts outstanding as of December 31, 1999 and 1998, was $13 million and $12
million, respectively. A 10% change in the exchange rate of the currencies
hedged would change the fair value of the contracts by $1 million at both
December 31, 1999 and 1998. See Note 13 to the financial statements for more
information on financial instruments.
A portion of the Company's debt bears interest at rates that vary with changes
in the London Interbank Offered Rate (LIBOR). As of December 31, 1999, $1.0
billion of the Company's total debt bore interest at variable rates. It has been
the Company's practice to maintain a significant portion of its debt at fixed
interest rates. As of December 31, 1999, approximately 62% of the Company's
total debt was at fixed rates.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report (other than the historical
financial data and other statements of historical fact), including, without
limitation, statements as to management's expectations and belief, are
forward-looking statements. Forward-looking statements are made based upon
management's good faith expectations and belief concerning future developments
and their potential effect upon the Company. There can be no assurance that
future developments will be in accordance with such expectations or that the
effect of future developments on the Company will be those anticipated by
management. Many important factors could cause actual results to differ
materially from management's expectations, including the level of construction
activity in the Company's Air Conditioning Systems and Services' and Plumbing
Products' markets; the timing of completion and success in the start-up of new
production facilities; changes in U.S. or international economic conditions,
such as inflation or interest rate fluctuations or recessions in the Company's
markets; pricing changes to the Company's supplies or products or those of its
competitors, and other competitive pressures on pricing and sales; labor
relations; integration of acquired businesses; risks generally relating to the
Company's international operations, including governmental, regulatory or
political changes; changes in environmental, health or other regulations that
may affect one or more of the Company's products or potential products and the
inability to obtain regulatory approvals for one or more of the Company's
potential products; changes in laws or different interpretations of laws
including the risk that German judicial authorities will disagree with the
opinions of the Company's German tax counsel; the impact of the Far East
economic situation; and transactions or other events affecting the need for,
timing and extent of the Company's capital expenditures.
- -----------------------------------------AMERICAN STANDARD '99 annual report-29-
<PAGE> 32
Management's Report on Financial Statements
American Standard Companies Inc.
The accompanying consolidated balance sheet at December 31, 1999 and 1998, and
related consolidated statements of operations, stockholders' deficit and cash
flows for the years ended December 31, 1999, 1998 and 1997, 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 which 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 outside
Directors which meets periodically with the Company's financial officers,
internal auditors and the independent auditors and monitors the accounting
affairs of the Company.
/s/ Frederic M. Poses /s/ G. Peter D'Aloia /s/ G. Ronald Simon
Frederic M. Poses G. Peter D'Aloia G. Ronald Simon
Chairman and Senior Vice President and Vice President and
Chief Executive Officer Chief Financial Officer Controller
February 11, 2000
---------
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<PAGE> 33
Report of Independent Auditors
The Board of Directors and Stockholders
American Standard Companies Inc.
We have audited the accompanying consolidated balance sheet of American Standard
Companies Inc. as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' deficit, and cash flows for each of the
three years in the period ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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. at December 31, 1999 and 1998, and the consolidated results of
its operations and its consolidated cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
February 11, 2000
- -----------------------------------------AMERICAN STANDARD '99 annual report-31-
<PAGE> 34
Consolidated Statement of Operations
American Standard Companies Inc.
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands, except share data) 1999 1998 1997
====================================================================================================================================
<S> <C> <C> <C>
Sales $ 7,189,500 $ 6,555,349 $ 5,957,782
- ------------------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales 5,406,605 4,949,476 4,456,022
Selling and administrative expenses 1,146,280 1,028,505 936,282
Restructuring and asset impairment charges 14,692 197,300 --
Other (income) expense (17,447) 1,971 26,407
Interest expense 187,837 188,347 192,083
- ------------------------------------------------------------------------------------------------------------------------------------
6,737,967 6,365,599 5,610,794
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes and extraordinary item 451,533 189,750 346,988
Income taxes 187,386 141,249 123,696
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before extraordinary item 264,147 48,501 223,292
Discontinued operations:
Loss from operations, net of income tax benefit 13,847 14,909 103,432
Loss from disposal, net of income tax benefit 112,000 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Loss from discontinued operations 125,847 14,909 103,432
- ------------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary item 138,300 33,592 119,860
- ------------------------------------------------------------------------------------------------------------------------------------
Extraordinary loss on retirement of debt, net of taxes -- (49,909) (23,637)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common shares $ 138,300 $ (16,317) $ 96,223
====================================================================================================================================
Per common share:
Basic:
Income from continuing operations $ 3.74 $ 0.68 $ 3.03
Loss from discontinued operations (1.78) (0.21) (1.40)
Extraordinary loss on retirement of debt -- (0.70) (0.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.96 $ (0.23) $ 1.30
====================================================================================================================================
Diluted:
Income from continuing operations $ 3.63 $ 0.66 $ 2.93
Loss from discontinued operations (1.73) (0.20) (1.36)
Extraordinary loss on retirement of debt -- (0.68) (0.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.90 $ (0.22) $ 1.26
====================================================================================================================================
Average outstanding common shares:
Basic 70,524,145 71,729,541 73,801,220
Diluted 72,666,406 73,672,018 76,167,486
</TABLE>
See notes to consolidated financial statements.
---------
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<PAGE> 35
Consolidated Statement of Cash Flows
American Standard Companies Inc.
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands) 1999 1998 1997
====================================================================================================================================
<S> <C> <C> <C>
Cash provided (used) by:
Operating activities:
Income before extraordinary item $ 138,300 $ 33,592 $ 119,860
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash restructuring and asset impairment charges (reversals) (7,347) 87,361 --
Loss from discontinued operations 125,847 14,909 103,432
Depreciation 148,315 130,681 122,759
Amortization of goodwill and other intangibles 53,744 45,396 36,464
Non-cash interest 7,206 31,599 59,857
Non-cash stock compensation -- 6,228 9,930
Changes in assets and liabilities:
Accounts receivable (58,541) (89,787) (41,190)
Inventories (20,546) (31,449) (23,246)
Accounts payable and accrued payrolls 73,662 90,667 26,075
Postretirement benefits 14,609 14,647 8,485
Other long-term liabilities (13,145) (1,002) 46,301
Other, net 49,470 144,089 (24,508)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations 511,574 476,931 444,219
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used) by discontinued operations (37,798) (14,832) (12,569)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 473,776 462,099 431,650
- ------------------------------------------------------------------------------------------------------------------------------------
Investing activities:
Purchases of property, plant and equipment (274,474) (245,761) (241,669)
Investments in affiliated companies and other businesses (52,839) (22,432) (56,925)
Investments in computer software (85,546) (59,989) (35,048)
Acquisition of businesses, net of cash acquired (426,999) -- (212,270)
Proceeds from disposals of property, plant and equipment 17,048 31,676 12,649
Other (13,035) (16,507) 18,696
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used) by investing activities (835,845) (313,013) (514,567)
- ------------------------------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from issuance of long-term debt 483,520 1,012,125 401,543
Repayments of long-term debt, including redemption premiums (198,137) (996,578) (655,335)
Net change in revolving credit facilities 51,685 (23,860) 622,559
Net change in other short-term debt 21,442 4,912 8,673
Purchases of treasury stock (4,186) (83,667) (310,654)
Proceeds from exercise of stock options 6,987 7,724 7,644
Financing costs and other 128 (33,984) (18,099)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 361,439 (113,328) 56,331
Effect of exchange rate changes on cash and cash equivalents (1,195) 118 (5,941)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,825) 35,876 (32,527)
Cash and cash equivalents at beginning of period 63,048 27,172 59,699
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 61,223 $ 63,048 $ 27,172
====================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
- -----------------------------------------AMERICAN STANDARD '99 annual report-33-
<PAGE> 36
Consolidated Balance Sheet
American Standard Companies Inc.
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands, except share data) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 61,223 $ 63,048
Accounts receivable, less allowance for doubtful accounts--
1999, $45,903; 1998, $33,264 986,338 895,605
Inventories 504,183 439,475
Future income tax benefits 48,770 41,338
Net assets of discontinued operations held for sale 50,780 138,829
Other current assets 74,253 86,511
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 1,725,547 1,664,806
Facilities, at cost, net of accumulated depreciation 1,414,183 1,211,025
Other assets:
Goodwill, net of accumulated amortization--
1999, $278,162; 1998, $246,707 991,120 759,857
Debt issuance costs, net of accumulated amortization--
1999, $15,315; 1998, $9,542 42,079 40,225
Other 513,058 430,632
- ------------------------------------------------------------------------------------------------------------------------------------
$4,685,987 $4,106,545
====================================================================================================================================
</TABLE>
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<PAGE> 37
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in thousands, except share data) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Loans payable to banks $ 736,883 $ 731,968
Current maturities of long-term debt 19,210 168,682
Accounts payable 577,992 529,055
Accrued payrolls 225,205 197,085
Other accrued liabilities 626,260 570,457
Taxes on income 101,070 113,977
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 2,286,620 2,311,224
Long-term debt 1,886,739 1,527,518
Other long-term liabilities:
Postretirement benefits 436,106 468,197
Deferred tax liabilities 55,199 48,327
Other 517,823 452,263
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 5,182,487 4,807,529
Commitments and contingencies
Stockholders' deficit:
Preferred stock, 2,000,000 shares authorized; none issued and outstanding
Common stock, $.01 par value, 200,000,000 shares authorized; shares issued
and outstanding--1999, 70,742,538; 1998, 69,924,615 707 699
Capital surplus 595,086 594,041
Treasury stock (363,351) (379,607)
Accumulated deficit (553,281) (691,581)
Foreign currency translation effects (175,661) (224,536)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' deficit (496,500) (700,984)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 4,685,987 $ 4,106,545
====================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
- -----------------------------------------AMERICAN STANDARD '99 annual report-35-
<PAGE> 38
Consolidated Statement of Stockholders' Deficit
American Standard Companies Inc.
<TABLE>
<CAPTION>
Common Capital Subscriptions Treasury Accumulated
(Dollars in thousands) Stock Surplus Receivable Stock Deficit
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 786 $563,873 $ (395) $ -- $(771,487)
Net income -- -- -- -- 96,223
Foreign currency translation -- -- -- -- --
Total comprehensive income
Treasury stock purchased (70) -- -- (310,654) --
Stock options exercised including tax benefit 4 8,717 -- -- --
Other common stock issued and tax benefits -- 14,378 -- 1,101 --
Payments on subscriptions -- -- 334 -- --
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 720 586,968 (61) (309,553) (675,264)
Net loss -- -- -- -- (16,317)
Foreign currency translation -- -- -- -- --
Total comprehensive income
Treasury stock purchased (28) -- -- (88,707) --
Stock options exercised including tax benefit 4 11,910 -- -- --
Common stock issued to Employee Stock Purchase Plan 2 (2,486) -- 8,711 --
Other common stock issued 1 (2,351) -- 9,942 --
Payments on subscriptions -- -- 61 -- --
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 699 594,041 -- (379,607) (691,581)
Net income -- -- -- -- 138,300
Foreign currency translation -- -- -- -- --
Total comprehensive income
Treasury stock purchased (1) -- -- (4,185) --
Stock options exercised including tax benefit 3 8,099 -- -- --
Common stock issued to Employee Stock Purchase Plan 3 (2,732) -- 10,203 --
Other common stock issued 3 (4,322) -- 10,238 --
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $ 707 $595,086 $ -- $(363,351) $(553,281)
===================================================================================================================
<CAPTION>
Foreign
Currency Compre-
Translation hensive
(Dollars in thousands) Effects Income
================================================================================
<S> <C> <C>
Balance at December 31, 1996 $(173,158)
Net income -- $ 96,223
Foreign currency translation (39,435) (39,435)
---------
Total comprehensive income $ 56,788
=========
Treasury stock purchased --
Stock options exercised including tax benefit --
Other common stock issued and tax benefits --
Payments on subscriptions --
- -----------------------------------------------------------------
Balance at December 31, 1997 (212,593)
Net loss -- $ (16,317)
Foreign currency translation (11,943) (11,943)
---------
Total comprehensive income $ (28,260)
=========
Treasury stock purchased --
Stock options exercised including tax benefit --
Common stock issued to Employee Stock Purchase Plan --
Other common stock issued --
Payments on subscriptions --
- -----------------------------------------------------------------
Balance at December 31, 1998 (224,536)
Net income -- $ 138,300
Foreign currency translation 48,875 48,875
---------
Total comprehensive income $ 187,175
=========
Treasury stock purchased --
Stock options exercised including tax benefit --
Common stock issued to Employee Stock Purchase Plan --
Other common stock issued --
- -----------------------------------------------------------------
Balance at December 31, 1999 $(175,661)
=================================================================
</TABLE>
See notes to consolidated financial statements.
---------
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<PAGE> 39
Notes to Consolidated Financial Statements
American Standard Companies Inc.
NOTE 1. Description of Company
American Standard Companies Inc. (the "Company") is a Delaware corporation that
has as its only significant assets all the outstanding common stock of American
Standard Inc. and American Standard International Inc. ("ASII"), both Delaware
corporations. Hereinafter, "American Standard" or "the Company" will refer to
the Company, or to the Company and American Standard Inc. and ASII, including
their subsidiaries, as the context requires.
American Standard is a global diversified manufacturer of high quality,
brand-name products in three major business groups: air conditioning systems and
services for commercial, institutional and residential buildings; plumbing
fixtures and fittings for bathrooms and kitchens; and vehicle control systems
for medium-sized and heavy trucks, buses, trailers and utility vehicles.
NOTE 2. Accounting Policies
Financial Statement Presentation--The consolidated financial statements include
the accounts of majority-owned subsidiaries; intercompany transactions are
eliminated. Investments in unconsolidated joint ventures are included at cost
plus the Company's equity in undistributed earnings.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates. The most significant estimates included in the preparation of the
financial statements are related to postretirement benefits, income taxes,
warranties and asset lives.
Foreign Currency Translation--Adjustments resulting from translating foreign
functional currency assets and liabilities into U.S. dollars are recorded in a
american standard'99 annual report separate component of stockholders' equity.
Gains or losses resulting from transactions in other than the functional
currency are reflected in the Consolidated Statement of Operations, except for
transactions which hedge net investments in a foreign entity and intercompany
transactions of a long-term investment nature. For operations in countries that
have hyper-inflationary economies, 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.
The losses from foreign currency transactions and translation losses in
countries with hyper-inflationary economies reflected in expense were $1.2
million in 1999, $6.5 million in 1998 and $4.2 million in 1997.
Revenue Recognition--Sales are recorded when shipment occurs and title passes to
a customer.
Cash Equivalents--Cash equivalents include all highly liquid investments with a
maturity of three months or less when purchased.
Inventories--Inventory costs are determined principally by the use of the
last-in, first-out (LIFO) method, and are stated at the lower of such cost or
realizable value.
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 expensed as incurred.
Computer Software--In 1999, the Company adopted Statement of
Position 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use, issued by the American Institute of Certified Public
Accountants and effective for fiscal years beginning after December 31, 1998. In
accordance with the provisions of that statement, the Company capitalizes the
costs of obtaining or developing computer software, including
- -----------------------------------------AMERICAN STANDARD '99 annual report-37-
<PAGE> 40
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
directly-related payroll costs. The Company amortizes those costs predominantly
over five to seven years, beginning when the software is ready for its intended
use.
Goodwill--Goodwill is amortized over 40 years. The carrying value is reviewed if
the facts and circumstances, such as significant declines in sales, earnings or
cash flows or material adverse changes in the business climate, suggest that it
may be impaired. If this review indicates that goodwill will not be recoverable,
as determined based on the estimated undiscounted cash flows of the entity
acquired, impairment is measured by comparing the carrying value of goodwill to
fair value. Fair value is determined based on quoted market values, discounted
cash flows or appraisals. In addition, the Company assesses long-lived assets
for impairment under Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. Under those rules, goodwill associated with assets acquired in a
purchase business combination is included in impairment evaluations when events
or circumstances indicate that the carrying amount of those assets may not be
recoverable.
Debt Issuance Costs--The costs related to the issuance of debt are capitalized
and amortized to interest expense using the effective interest method over the
lives of the related debt.
Warranties--The Company provides for estimated warranty costs at the time of
sale. Revenues from the sales of extended warranty contracts are deferred and
amortized on a straight-line basis over the terms of the
contracts except when historical evidence indicates otherwise. Warranty
obligations beyond one year are included in other long-term liabilities.
Postretirement Benefits--Postretirement pension 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 certain of its employees. Such
benefits are accounted for on an accrual basis using actuarial assumptions.
Depreciation--Depreciation and amortization are computed on the straight-line
method based on the estimated useful life of the asset or asset group.
Research and Development Expenses--Research and development costs are expensed
as incurred. The Company expended approximately $156 million in 1999, $143
million in 1998 and $149 million in 1997 for research activities and product
development and for product engineering. Expenditures for research and product
development only were $103 million, $97 million and $99 million in the
respective years.
Income Taxes--Deferred income taxes are determined on the liability method, and
are recognized for all temporary differences between the tax bases of assets and
liabilities and their reported amounts in the consolidated financial statements.
No provision is made for U.S. income taxes applicable to undistributed earnings
of foreign subsidiaries that are indefinitely reinvested.
Advertising Expense--The cost of advertising is expensed as incurred.
The Company incurred $105 million, $106 million and $111 million of advertising
costs in 1999, 1998 and 1997, respectively.
Earnings Per Share--Basic earnings per share have been computed using the
weighted average number of common shares outstanding. For 1999, 1998 and 1997,
the average number of outstanding common shares used in computing diluted
earnings per share included 2,142,261, 1,942,477 and 2,366,266 average
incremental shares, respectively, from the assumed exercise of stock options
issued under the Company's Stock Incentive Plan (see Note 12).
Comprehensive Income--Comprehensive income consists solely of net income and
foreign currency translation adjustments and is presented in
---------
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<PAGE> 41
the Consolidated Statement of Stockholders' Deficit. The Company's investments
in its foreign subsidiaries are considered to be permanently invested and no
provision for income taxes on the related foreign exchange translation
adjustments of those subsidiaries has been recorded.
Financial Instruments with Off-Balance-Sheet Risk--The Company from time to time
enters into agreements to reduce its foreign currency, commodity price and
interest rate risks. Gains and losses from underlying rate or price changes are
included in income unless the contract hedges a net investment in a foreign
entity, a firm commitment, or related debt instrument, in which case gains and
losses are included as a component of foreign currency translation effects in
stockholders' equity or included as a component of the transaction (see Note
13).
Stock Based Compensation--The Company grants to employees options to acquire a
fixed number of shares of the Company's common stock with an exercise price
equal to the market value of the shares at the date of grant. Accordingly, the
Company recognizes no compensation expense for stock option grants under APB
Opinion No. 25, Accounting for Stock Issued to Employees.
NOTE 3. Discontinued Operations
In the fourth quarter of 1999, the Board of Directors of the Company approved a
plan for the sale of non-core business assets consisting of the Medical Systems
segment. The Company expects to complete the sale in the second quarter of 2000.
Accordingly, Medical Systems is reported as a discontinued operation in the
accompanying Consolidated Statement of Operations and the Company's net
investment in that operation is reported in the accompanying Consolidated
Balance Sheet as assets of discontinued operations held for sale. All prior
periods presented have been restated to reflect these classifications, including
applicable footnotes.
The loss on sale includes a provision for estimated operating losses in 2000
projected through the expected date of sale. The estimate is based upon certain
assumptions about the timing of the sale and expected proceeds. Actual amounts
may differ.
Summarized results of the discontinued Medical Systems segment are as follows
(dollars in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 97.2 $ 97.6 $ 49.7
================================================================================
Loss from operations before
income tax benefit $ (22.6) $(24.3) $ (19.9)
Income tax benefit 8.8 9.4 6.8
- --------------------------------------------------------------------------------
Loss from operations (13.8) (14.9) (13.1)
- --------------------------------------------------------------------------------
Write-off of purchased research and
development with no tax benefit -- -- (90.3)
- --------------------------------------------------------------------------------
Loss on sale, including provision for
operating losses in 2000 to the date
of sale, before income tax benefit (120.0) -- --
Income tax benefit (a) 8.0 -- --
- --------------------------------------------------------------------------------
Loss on sale (112.0) -- --
- --------------------------------------------------------------------------------
Loss from discontinued operations $(125.8) $(14.9) $(103.4)
================================================================================
</TABLE>
(a) The income tax benefit on this loss is less than the benefit at statutory
rates because the disposition generated capital losses that can be
utilized only if future capital gains arise, which is not reasonably
assured.
NOTE 4. Acquisition of Armitage/Dolomite
On February 2, 1999, the Company acquired the Bathrooms Division of Blue Circle
Industries PLC, a manufacturer of ceramic sanitaryware, brassware and integrated
plumbing systems, for $427 million, including fees and expenses and net of cash
acquired, with borrowings under the Company's 1997 Credit Agreement. The
acquired business consists of two principal
- -----------------------------------------AMERICAN STANDARD '99 annual report-39-
<PAGE> 42
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
businesses, Armitage Shanks, a United Kingdom manufacturer, and Ceramica
Dolomite, an Italian manufacturer ("Armitage/Dolomite"). The acquired business
has facilities in the United Kingdom and Italy, and employs approximately 3,200
people. The primary markets for its products are in the United Kingdom, Italy,
Ireland and Germany.
This transaction was accounted for as a purchase and the results of operations
have been included in the accompanying financial statements since the date of
acquisition. The purchase price was allocated based upon the fair value of the
assets acquired and liabilities assumed at the date of acquisition. This
resulted in an excess of purchase price over the value of net assets acquired
(goodwill) of $300 million which is being amortized over 40 years.
In 1999, Armitage/Dolomite had sales of $279 million for the eleven months since
the date of acquisition.
NOTE 5. Restructuring and Asset Impairment Charges
In 1998, the Company committed to restructuring plans designed to achieve lower
product costs and improved efficiency. Key elements of the plans include the
transfer of significant manufacturing capacity to locations with lower labor
costs and the sale of certain assets. In connection therewith, the Company
determined that certain long-lived assets were impaired. Accordingly, in the
second half of 1998 the Company recorded charges totaling $197 million ($183
million net of tax benefits, or $2.49 per diluted share), including $185 million
for Plumbing Products, $7 million for Air Conditioning Systems and Services and
$5 million for Vehicle Control Systems.
The Plumbing Products charge of $185 million reflected the planned closure of
five plants in Europe and two in North America. The charge included a loss on
the sale of the French plumbing distribution operations, costs related to a
workforce reduction of approximately 1,600 people and, applying the criteria of
FAS 121, write-downs of impaired fixed assets and related goodwill. The Air
Conditioning Systems and Services charge of $7 million resulted from the closure
of one plant in Australia, one plant in Europe and a workforce reduction of 115
people. The Vehicle Control Systems charge of $5 million primarily reflected a
workforce reduction of 75 people in Europe related to outsourcing certain
machining work to lower-cost outside vendors and the closure of three small
plants.
In 1999, the Company recorded a $15 million restructuring and asset impairment
charge which reflects several elements. During the fourth quarter of 1999
management re-evaluated its plan to close one of the plumbing plants in North
America. Management and employees at that plant improved operating efficiency
and lowered costs which, together with better-than-expected improvements in the
market and the Company's market share, led to the decision not to close that
plant. This reduced the number of people to be terminated in North America by
approximately 280. The Company also was able to sell the other North American
plumbing plant on more favorable terms than initially contemplated. Those two
principal reductions and other smaller reductions to estimated severance and
facilities costs resulted in a reversal of $29 million of amounts accrued in
1998. Management also re-evaluated the restructuring plans for Vehicle Control
Systems and decided to transfer additional manufacturing capacity to a facility
to be constructed in Poland, where labor costs are lower. This resulted in
additional charges of $17 million for the closure of five manufacturing
facilities in Europe and one in Japan, the termination of approximately 625 more
employees in Europe and 25 in Japan. In addition, certain estimated charges
recorded in 1998 were increased to reflect current estimates which resulted in
additional charges incurred in 1999 of $14 million. Those increases included
changes in severance and other employee-related costs (especially in Spain where
significantly higher payments are now anticipated) and higher facilities closure
costs. The 1999 charge also includes a $13 million impairment charge related to
a minority equity interest in a non-core business, as the Company does not
expect to recover its investment.
---------
AMERICAN
- -40-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 43
Following is a summary of the restructuring and asset impairment charges accrued
and activity through December 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
Additional
Non-cash Payments Reversal Charges Non-cash Balance
Initial Write-off -------------- of 1998 Accrued Write-off Dec. 31,
Charge in 1998 1998 1999 Charges in 1999 in 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Termination payments to employees $ 48.9 $ -- $ 10.4 $ 39.0 $ 3.2 $ 20.5 $ -- $ 16.8
Other employee costs 33.4 -- 4.3 11.0 10.7 -- -- 7.4
Facilities write-downs (a) 87.0 71.1 -- 4.7 9.9 8.9 8.9 1.3
Loss on sale of French distribution business (b) 19.1 14.9 3.6 .6 -- -- -- --
Impairment of investment in non-core business -- -- -- -- -- 12.6 12.6 --
Other 8.9 1.4 .2 .6 5.0 1.4 -- 3.1
- ------------------------------------------------------------------------------------------------------------------------------------
$197.3 $ 87.4 $ 18.5 $ 55.9 $ 28.8 $ 43.4 $ 21.5 $ 28.6
====================================================================================================================================
</TABLE>
(a) Includes goodwill write-off of $31.3 million in 1998 related to an asset
impairment charge for the French plumbing manufacturing operations.
(b) Includes goodwill write-off of $12.3 million.
The Company expects that essentially all of the $29 million balance as of
December 31, 1999 will be utilized by the end of 2000.
The accrued termination payments to employees are for severance payments after
termination. Other employee costs include negotiated supplemental payments to
pension funds and other payments to union organizations for the benefit of
terminated employees. After the decisions not to close one of the North America
plumbing plants and to close additional Vehicle Control Systems plants, 2,260
employees are being terminated, including 1,810 hourly factory workers and 450
salaried administrative personnel. Of these, 1,365 had been terminated as of
December 31, 1999.
The facilities being closed and written down include 7 owned and 6 leased
manufacturing plants, and the related manufacturing equipment. The owned plants
are being held for disposal and, accordingly, were written down to the lower of
carrying amount or fair value, less costs to sell. As of December 31, 1999,
three of the facilities have been sold. Four others are being held for sale.
Leases on the six rented facilities will be terminated upon payment of
obligations specified or negotiated under the lease contracts. Manufacturing
equipment being scrapped was written off and equipment being sold has been
written down to the lower of carrying amount or fair value, less costs to sell.
The net carrying value of land, buildings and equipment held for sale as of
December 31, 1999 was $7.2 million. The closure of certain facilities
necessitates the investigation of potential environmental contamination or the
legal or regulatory requirement to remediate the facility. In addition, the sale
of one facility contractually obligates the Company to demolish and remediate
the site.
Approximately one-half of other restructuring costs are leasehold termination
costs, with the remainder consisting of cash grants forfeited upon closure of a
facility in Italy and other miscellaneous costs.
- -----------------------------------------AMERICAN STANDARD '99 annual report-41-
<PAGE> 44
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
The tax benefit on the total charge is at lower than normal rates because the
goodwill write-off is not deductible for tax purposes and in certain countries
the tax benefits on these charges are not expected to be realized.
NOTE 6. Other Income (Expense)
Other income (expense) was as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income $ 4.7 $ 6.9 $ 5.9
Equity in net income of
unconsolidated joint ventures 36.9 27.4 11.9
Minority interest 2.6 (1.5) (10.1)
Accretion expense (14.4) (22.9) (26.7)
Foreign exchange loss (5.9) (6.7) (2.2)
Other, net (6.5) (5.2) (5.2)
- --------------------------------------------------------------------------------
$17.4 $(2.0) $(26.4)
================================================================================
</TABLE>
The Company has investments in affiliates that are accounted for on the equity
method. The most significant of these investments is Meritor WABCO Vehicle
Control Systems ("Meritor/WABCO"). Meritor/WABCO, in which the Company has a 50%
equity ownership, is a U.S. sales and marketing organization serving truck,
trailer and bus manufacturers and aftermarket distribution for Vehicle Control
Systems.
NOTE 7. 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. The ESOP is
an individual account, defined contribution plan. Shares of the Company's common
stock held by the ESOP are allocated to the accounts of eligible employees
(primarily through basic allocations of 3% of covered compensation and a
matching Company contribution of up to 6% of covered compensation invested in
the Company's 401(k) savings plan by employees). The Company has funded basic
and matching allocations to the ESOP accounts through weekly contributions of
cash since May 1997. Prior to that date, the Company funded the ESOP with shares
of the Company's common stock based upon the closing price each Friday for
shares of the Company's common stock quoted on the New York Stock Exchange. The
Company intends to fund the ESOP in future years through contributions of cash
or shares of the Company's common stock.
Benefits under defined benefit pension plans on a worldwide basis 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 certain 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, 1999, funded plan assets related to pensions were held primarily in fixed
income and equity funds. Postretirement health and life insurance benefits are
funded as incurred.
---------
AMERICAN
- -42-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 45
The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair value of assets for the years ending December 31,
1999 and 1998, and a statement of the funded status as of December 31, 1999 and
1998:
<TABLE>
<CAPTION>
1999 1999 1999 1998 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Domestic Domestic
Domestic Health & Foreign Domestic Health & Foreign
Pension Life Ins. Pension Pension Life Ins. Pension
(Dollars in millions) Benefits Benefits Benefits Benefits Benefits Benefits
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reconciliation of benefit obligation:
Obligation at beginning of year $ 441.9 $ 201.8 $ 528.5 $403.4 $ 191.4 $ 470.0
Service cost 12.1 6.5 29.0 9.5 5.8 21.2
Interest cost 30.6 13.7 26.5 28.2 13.1 25.6
Participant contributions -- 4.3 3.5 -- 4.0 2.1
Plan amendments 16.4 -- 2.8 6.9 -- --
Actuarial (gain) loss (54.3) (16.6) (33.1) 21.5 3.4 21.9
Acquisitions -- -- 88.6 -- -- --
Benefit payments (28.3) (16.6) (34.8) (27.6) (15.9) (27.7)
Foreign exchange effects -- -- (51.3) -- -- 15.4
- ------------------------------------------------------------------------------------------------------------------------------------
Obligation at end of year $ 418.4 $ 193.1 $ 559.7 $441.9 $ 201.8 $ 528.5
====================================================================================================================================
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year $ 440.0 $ -- $ 262.4 $386.0 $ -- $ 241.6
Actual return on assets 76.0 -- 57.5 69.9 -- 27.5
Acquisition -- -- 94.8 -- -- --
Employer contributions 10.0 12.3 32.0 11.7 11.9 21.0
Participant contributions -- 4.3 3.5 -- 4.0 2.1
Benefit payments (28.3) (16.6) (34.8) (27.6) (15.9) (27.7)
Other expenses -- -- (1.0) -- -- --
Foreign exchange effects -- -- (8.4) -- -- (2.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 497.7 $ -- $ 406.0 $440.0 $ -- $ 262.4
====================================================================================================================================
Funded Status at December 31:
Funded status $ 79.3 $(193.1) $(153.7) $ (1.9) $(201.8) $(266.1)
Unrecognized prior service cost 41.7 (8.0) 7.3 27.7 (8.8) 7.4
Unrecognized net actuarial (gain) loss (168.3) 13.7 (76.6) (72.5) 31.4 (7.3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net amount recognized $ (47.3) $(187.4) $(223.0) $(46.7) $(179.2) $(266.0)
====================================================================================================================================
</TABLE>
- -----------------------------------------AMERICAN STANDARD '99 annual report-43-
<PAGE> 46
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
The following tables provide a summary of plans with assets in excess of
accumulated benefit obligations and plans with accumulated benefit obligations
in excess of assets for the foreign and domestic pension benefits as of December
31:
<TABLE>
<CAPTION>
1999 1999 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Assets in Accumulated Assets in Accumulated
Excess of Benefit Excess of Benefit
Accumulated Obligations Accumulated Obligations
Benefit in Excess of Benefit in Excess of
(Dollars in millions) Obligations Assets Obligations Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic pension benefits:
Projected benefit obligation $387.2 $ 31.2 $421.2 $ 20.7
Accumulated benefit obligation 379.4 23.7 413.7 14.5
Fair value of plan assets 497.7 -- 440.0 --
Accrued benefit liabilities (21.0) (26.3) (30.9) (15.8)
Foreign pension benefits:
Projected benefit obligation $276.4 $283.3 $214.4 $314.1
Accumulated benefit obligation 240.1 258.6 191.1 283.8
Fair value of plan assets 385.3 20.7 240.1 22.3
Prepaid benefit costs (accrued benefit liabilities) 54.8 (277.8) 39.4 (305.4)
</TABLE>
The projected benefit obligation for postretirement benefits was determined
using the following assumptions:
<TABLE>
<CAPTION>
1999 1999 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Domestic Foreign Domestic Foreign
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted-average assumptions as of December 31:
Discount rate 8.00% 4.25%-7.25% 6.75% 3.00%-6.50%
Long-term rate of inflation 2.80% 0.5%-2.30% 2.80% 0.5%-1.80%
Merit and promotion increase 1.70% 1.70% 1.70% 1.70%
Rate of return on plan assets 9.00% 3.50%-6.50% 9.00% 4.00%-8.25%
</TABLE>
---------
AMERICAN
- -44-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 47
The weighted-average annual assumed rate of increase in the health care cost
trend rate is 5% for 2000 and is assumed to remain at that level thereafter. The
health care cost trend rate assumption has a significant effect on the amounts
reported. A change in the assumed rate of one percentage point for each future
year would have the following effects:
<TABLE>
<CAPTION>
(Dollars in millions) 1% Increase 1% Decrease
- --------------------------------------------------------------------------------
<S> <C> <C>
Effect on the health care component of
accumulated postretirement obligation $13.5 $12.6
Effect on total of service and interest cost
components of net periodic postretirement
health care benefit cost $ 3.0 $ 2.7
</TABLE>
Total postretirement costs were:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Pension benefits $ 51.8 $ 42.1 $ 39.5
Health and life insurance benefits 20.4 18.8 17.2
- --------------------------------------------------------------------------------
Defined benefit plan cost 72.2 60.9 56.7
Defined contribution plan cost,
principally ESOP 46.2 39.9 32.1
- --------------------------------------------------------------------------------
Total postretirement cost, including
accretion expense $118.4 $100.8 $ 88.8
================================================================================
</TABLE>
Postretirement cost had the following components:
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1999 1998 1998 1997 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Health & Health & Health &
Pension Life Ins. Pension Life Ins. Pension Life Ins.
(Dollars in millions) Benefits Benefits Benefits Benefits Benefits Benefits
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost-benefits earned during the period $ 41.1 $ 6.5 $ 30.7 $ 5.8 $ 26.3 $ 4.7
Interest cost on the projected benefit obligation 57.1 13.7 53.8 13.1 53.9 12.9
Less assumed return on plan assets:
Actual return on plan assets (133.5) -- (97.4) -- (107.4) --
Excess asset gain deferred 77.4 -- 49.4 -- 63.2 --
- ------------------------------------------------------------------------------------------------------------------------------------
(56.1) -- (48.0) -- (44.2) --
Amortization of prior service cost 4.9 (.8) 4.0 (.7) 3.0 (.7)
Amortization of net (gain) loss 4.8 1.0 .4 .6 .5 .3
- ------------------------------------------------------------------------------------------------------------------------------------
Defined benefit plan cost 51.8 20.4 40.9 18.8 39.5 17.2
- ------------------------------------------------------------------------------------------------------------------------------------
Curtailment loss -- -- 1.2 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net defined benefit plan cost after curtailments $ 51.8 $ 20.4 $ 42.1 $ 18.8 $ 39.5 $ 17.2
====================================================================================================================================
Accretion expense reflected in "other expense" $ .7 $ 13.7 $ 9.8 $ 13.1 $ 13.8 $ 12.9
====================================================================================================================================
</TABLE>
Amortization of prior service costs are computed on the straight-line method
over the average remaining service period of active participants.
- -----------------------------------------AMERICAN STANDARD '99 annual report-45-
<PAGE> 48
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
NOTE 8. Income Taxes
The Company's income (loss) from continuing operations before income taxes and
extraordinary item, and the applicable provision (benefit) for income taxes
were:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) from continuing operations
before income taxes and extraordinary item:
Domestic $298.1 $216.2(a) $196.3
Foreign 153.4 (26.5)(a) 150.7
- --------------------------------------------------------------------------------
$451.5 $189.7 $347.0
- --------------------------------------------------------------------------------
Provision (benefit) for income taxes:
Current:
Domestic $116.9 $ 92.2 $103.3
Foreign 42.2 111.8 67.2
- --------------------------------------------------------------------------------
159.1 204.0 170.5
- --------------------------------------------------------------------------------
Deferred:
Domestic 17.2 (66.1) (42.9)
Foreign 11.1 3.3 (3.9)
- --------------------------------------------------------------------------------
28.3 (62.8) (46.8)
- --------------------------------------------------------------------------------
Total provision $187.4 $141.2 $123.7
================================================================================
</TABLE>
(a) Includes $197.3 million of restructuring expense in 1998: domestic $19.0
million; foreign $178.3 million. Associated tax benefits were $13.6
million: domestic $7.6 million; foreign $6.0 million.
A reconciliation between the actual income tax expense provided and the income
taxes computed by applying the statutory federal income tax rate of 35% in 1999,
1998 and 1997 to the income (loss) before income taxes and extraordinary item is
as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax provision at statutory rate $158.0 $ 66.4 $121.5
Increase (decrease) in valuation allowance 35.7 41.4 (26.7)
Nondeductible goodwill amortization and
goodwill write-offs 7.5 23.1 8.0
Reversal of deferred taxes on
foreign investments -- (50.1) --
Other foreign tax effects (21.4) 55.0 14.3
State tax provision 1.5 1.3 1.7
Other, net 6.1 4.1 4.9
- --------------------------------------------------------------------------------
Total provision $187.4 $141.2 $123.7
================================================================================
</TABLE>
The increase in the valuation allowance in 1999 of $35.7 million and the
increase in the valuation allowance in 1998 of $41.4 million was primarily
attributable to the generation of foreign net operating loss carryforwards
(primarily related to restructuring charges in 1998) that are not expected to be
realized. The decrease in the valuation allowance in 1997 of $26.7 million, net
of a $12.4 million valuation allowance on the generation of foreign net
operating loss carryforwards and foreign tax credit carryforwards, was primarily
attributable to the fact that management believes it is more likely than not
that all of the net domestic deferred tax assets will be realized.
In 1991, in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, the Company provided $50.1 million of deferred U.S.
taxes with respect to a transaction which had the effect of reducing the U.S.
tax basis, but not the book basis of its investment in a foreign subsidiary.
Under U.S. tax law, no mechanism was available in 1991 or later years to
eliminate this book and tax basis difference without incurring $50.1 million of
U.S. tax cost. Therefore, the Company provided $50.1 million to reflect this
future U.S. tax liability. In December 1998, the Company completed legal
reorganizations of certain foreign operations.
---------
AMERICAN
- -46-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 49
These reorganizations, coupled with two new U.S. tax law changes effective from
January 1997 and July 1998, respectively, permitted the Company to make a tax
election to treat, for U.S. tax purposes only, certain significant foreign
operations as a branch rather than a subsidiary without incurring any U.S. tax
cost. This election gives the Company greater future consistency with respect to
U.S. and foreign taxation of the subject businesses. This election also
eliminated the difference between the book and tax basis in the foreign
subsidiary. As a result, the $50.1 million deferred U.S. tax provided in 1991
was reversed as of December 31, 1998. The other foreign tax effects in 1998 of
$55.0 million include a loss contingency related to certain German tax matters,
rate differences and withholding taxes.
The following table details the gross deferred tax liabilities and assets and
the related valuation allowances:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Facilities (accelerated depreciation, capitalized
interest and purchase accounting differences) $133.4 $122.0
Inventory (LIFO and purchase accounting differences) (1.8) (2.3)
Employee benefits 10.9 7.0
Other 77.6 49.0
- --------------------------------------------------------------------------------
220.1 175.7
- --------------------------------------------------------------------------------
Deferred tax assets:
Postretirement benefits 131.8 133.5
Warranties 92.2 76.3
Foreign net operating losses and tax credits 134.7 99.0
Reserves 74.4 69.9
Other 3.5 6.1
Valuation allowances (134.7) (99.0)
- --------------------------------------------------------------------------------
301.9 285.8
- --------------------------------------------------------------------------------
Net deferred tax assets $ 81.8 $110.1
================================================================================
</TABLE>
Deferred tax assets related to foreign tax credits and foreign net operating
loss carryforwards 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. 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 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 $146 million, $117 million and $105 million in the years
1999, 1998 and 1997, respectively.
As a result of audits of the Company's German subsidiaries by The State Finance
Administration for the State of North Rhine-Westphalia, Germany (the "German Tax
Authority") for the periods 1984 through 1990 and 1991 through 1994, the Company
has previously received two assessments for the 1984-1990 audit period which the
Company has been contesting. The Company believes, based on the opinion of
external German legal counsel, that the Company's German tax returns are
substantially correct as filed and that any adjustments would be inappropriate.
Unless the Company is otherwise able to reach a satisfactory resolution of these
matters with the German Tax Authority, the Company intends to contest vigorously
the pending assessments and any other amounts that may be assessed.
- -----------------------------------------AMERICAN STANDARD '99 annual report-47-
<PAGE> 50
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
The first assessment was issued in 1992 for approximately $16 million of
combined corporation and trade taxes and claimed a disallowance of a deduction
of interest expense related to an intercompany finance instrument. Later in
1992, the amount of the assessment was deposited with the German tax authorities
as security for the disputed tax and a suit to recover that amount was promptly
commenced and is currently pending before the Tax Court for the State of North
Rhine-Westphalia in Cologne, Germany. As a result of making the deposit, no
interest will accrue on the amount under dispute. The second assessment,
received in March 1996, was for approximately $56 million of combined
corporation and trade taxes. Were the Company not to prevail in its dispute of
this assessment, the Company could be required to pay interest on the assessed
amount of approximately $18 million as of December 31, 1999. Interest on
assessed and unpaid taxes accrues, on a non-compounding basis, at the rate of
six percent per annum commencing fifteen months after the end of the tax year
for which the tax is assessed. The second assessment claimed primarily that
earnings of a Dutch subsidiary should have been recognized as income taxable in
Germany. In early 1997, the German tax authority agreed to accept a partial
deposit of $16 million in respect of the second assessment and the Company
commenced an administrative appeal of the assessment with the German tax
authority. The amounts paid in 1992 and 1997 were recorded as assets on the
Company's consolidated balance sheets because the Company, expecting to prevail
in litigation of these matters, would recover such amounts and, therefore,
appropriately accounted for them as receivables. This position is based upon the
opinion of the Company's external German legal counsel, referred to above, that
the Company's German tax returns are substantially correct as filed and that
adjustments would be inappropriate. In 1998, in connection with the development
of the Company's plan to restructure its plumbing operations in Germany, the
Company entered into discussions with certain German regulatory authorities
which could have resulted in an offer to settle the primary issue under dispute
with respect to the second assessment, including all corporation and trade taxes
and accrued interest. On January 22, 1999 the Company's administrative appeal of
the second assessment and any offer of settlement was rejected.
In February 1999, the Company filed notice of appeal with the German Tax Court
and moved to join the Company's appeal of the first assessment with its appeal
of the second assessment. In addition, the Company requested an order from the
German tax authority staying the obligation to pay the amount of the second
assessment during the pendency of the Company's appeal. The German Tax Authority
is obligated by law to grant an order staying payment of disputed tax until
final resolution of the matter if the assessment is subject to serious doubt. On
March 15, 1999, the staying order was granted. The Company has agreed to leave
the amount already deposited with the German tax authority pending final
resolution of the dispute. In the ordinary course, it is anticipated that
litigation of the Company's appeal before the State Tax Court will require five
to seven years and that any appeal thereafter to the federal Supreme German Tax
Court would require an additional two or three years. Although the Company's
1998 proposal of settlement was rejected, the Company has continued to pursue
settlement on appropriate terms.
---------
AMERICAN
- -48-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 51
The Company recorded a loss contingency in 1998 in the amount of the deposits
related to the first and second assessments, related trade taxes and accrued
interest thereon, which amount represents the amount for which the Company would
have been willing in 1998 to settle the issue related to the second assessment.
Based on the opinion of the Company's external German legal counsel referred to
above, the Company intends to vigorously contest and to litigate these disputed
German tax matters, and no additional contingency with respect to such matters
has been recorded.
With respect to the 1991-1994 audit period, the Company engaged in significant
transactions similar to those that gave rise to the assessments in the prior
audit period and, with respect to a matter related to the intercompany
instrument at issue in connection with the first assessment, the German tax
auditors have proposed an adjustment of approximately $40 million. In addition,
because the German tax authorities assessed additional taxes for the 1984-1990
audit period they might, after completing their audit of the later period,
propose further adjustments for the 1991-1994 audit period related to the
subject matter of the second assessment that might be as much as fifty percent
higher than the amount of the assessments in the first audit period. Although
the Company is unable to predict when the audit of its German tax returns for
the 1991-1994 period will be complete or the amount of any additional taxes that
may be assessed, the Company believes the audit may be completed prior to the
end of 2000.
If all matters currently under review by the German tax authorities were made
the subject of assessments and either no orders staying the payment of such
amounts following assessment or during the pendency of the Company's appeal were
granted or the Company was finally determined to owe the full amount of all such
taxes, the Company could be required to pay all assessed amounts plus accrued
interest thereon, together with the amount of all related trade taxes. The total
amount of any payments made with respect to the tax matters described above, and
the timing thereof, could have a material adverse effect on the Company's
liquidity, cash flow and/or results of operation and, consequently, impair the
Company's competitive position. In addition, the Company might need to raise
additional capital and no assurance can be given as to the availability of debt
or equity financing if such need were to arise.
NOTE 9. Inventories
The components of inventories are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished products $285.6 $264.9
Products in process 98.9 88.8
Raw materials 119.7 85.8
- --------------------------------------------------------------------------------
Inventories at cost $504.2 $439.5
================================================================================
</TABLE>
The carrying cost of inventories approximates current cost.
- -----------------------------------------AMERICAN STANDARD '99 annual report-49-
<PAGE> 52
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
NOTE 10. Facilities
The components of facilities, at cost, are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 67.3 $ 72.2
Buildings 500.2 454.8
Machinery and Equipment 1,259.6 1,161.8
Improvements in progress 158.5 108.6
- --------------------------------------------------------------------------------
Gross facilities 1,985.6 1,797.4
Less: accumulated depreciation 571.4 586.4
- --------------------------------------------------------------------------------
Net facilities $1,414.2 $1,211.0
================================================================================
</TABLE>
NOTE 11. Debt
In January 1997, the Company entered into the 1997 Credit Agreement which
requires no repayment of principal prior to its expiration in January 2002. This
agreement provides the Company and certain subsidiaries (the "Borrowers") with
senior secured credit facilities aggregating $1.75 billion to all Borrowers 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 (the
"Periodic Access Facility").
Each loan outstanding under the Revolving Facilities is due at the end
of each interest period (a maximum of six months). The Company may, however,
concurrently reborrow the outstanding obligations subject to compliance with
applicable conditions of the 1997 Credit Agreement. Borrowings under the
Revolving Facilities and the Periodic Access Facility bear interest at the
London interbank offered rate ("LIBOR") plus 0.75%. This rate is subject to
adjustment and will change based on the Company's financial leverage ratio.
Excluding the 1997 Credit Agreement which expires in 2002, the amounts of
long-term debt maturing in years 2000 through 2004 are: 2000--$19.2 million;
2001--$12.2 million; 2002--$12.5 million; 2003--$134.6 million and 2004--$8.6
million.
In December 1998, the 1997 Credit Agreement was amended to permit American
Standard to issue up to an additional $500 million in aggregate principal amount
of senior or subordinated unsecured debt securities, to reorganize ownership of
certain subsidiaries and intellectual property rights (see Note 16 of Notes to
Financial Statements) and to lower the interest coverage ratios and increase the
debt coverage ratios applicable to the Company, beginning for periods ending
December 31, 1998. The purpose of the amendment was primarily to accommodate the
refinancing of $150 million of American Standard's 10 7/8% senior notes due May
15, 1999 and the financing of capital expenditures, including the acquisition of
Armitage/Dolomite. See Note 4 of Notes to Consolidated Financial Statements.
In November 1999, the 1997 Credit Agreement was amended to permit American
Standard to sell its Medical Systems business and to increase the limit on
annual lease payments.
---------
AMERICAN
- -50-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 53
In the first half of 1998, the Company completed public offerings of $1 billion
principal amount of Senior Notes with interest rates ranging from 7 1/8% to
7 5/8% and maturity dates from 2003 to 2010. The Senior Notes are issued by
American Standard Inc. and unconditionally guaranteed by American Standard
Companies Inc. On June 1, 1998, the Company used the net proceeds of these
offerings (approximately $963 million, net of underwriting discounts and
interest rate hedge costs) to redeem its 10 1/2% Senior Subordinated Discount
Debentures and 9 7/8% Senior Subordinated Notes. The total amount required to
complete these redemptions, including call premiums, was $954 million, net of
the effect of the settlement of certain interest rate swap transactions related
to the Senior Subordinated Discount Debentures.
On May 28, 1999, American Standard Inc. completed the sale of the equivalent of
$460 million of Senior Notes, with an average interest rate of 7.7%, issued in
three series: 250 million Euro Senior Notes due 2006; 100 million U.S. Dollar
Senior Notes due 2009 and 60 million Sterling Senior Notes due 2009. Net
proceeds of $452 million from the offering were applied to refinance borrowings
incurred to pay $150 million of 10 7/8% Senior Notes at maturity on May 15, 1999
and to refinance a substantial portion of the purchase price of the
Armitage/Dolomite acquisition. See Note 4 of Notes to Consolidated Financial
Statements. The May 28, 1999 sale of Senior Notes, which are not subject to
redemption, was made pursuant to a shelf registration statement jointly filed by
American Standard Companies Inc. and its wholly-owned subsidiary American
Standard Inc. covering $1 billion of senior debt (the "1998 Shelf
Registration"). Debt securities sold under the 1998 Shelf Registration are
issued by American Standard Inc. and unconditionally guaranteed by American
Standard Companies Inc. The Company intends to use the net proceeds from any
future sales of such debt securities under the 1998 Shelf Registration for
general corporate purposes, which may include certain investments, acquisitions,
additions to working capital or capital expenditures.
As a result of the redemption of debt in 1998 and 1997, the Consolidated
Statement of Operations included extraordinary charges of $50 million (net of
taxes of $7 million) and $24 million (net of taxes of $6 million), respectively
including call premiums and the write-off of deferred debt issuance costs.
Short-term--The Revolving Facilities provide for aggregate borrowings of up to
$1.375 billion for general corporate purposes, of which up to $500 million may
be used for the issuance of letters of credit and $40 million of which is
available for same-day short-term borrowings. The Company currently pays a
commitment fee of 0.1875% per annum on the unused portion of the Revolving
Facilities and a fee of 0.75% per annum plus issuance fees for letters of
credit. At December 31, 1999, there were $659 million of borrowings outstanding
under the Revolving Facilities and $73 million of letters of credit. Remaining
availability under the Revolving Facilities was $643 million, which is available
to redeem certain outstanding public debt securities of American Standard Inc.
and for other general corporate purposes. Borrowings under the Revolving
Facilities by their terms are short-term. Average borrowings under the Revolving
Facilities for 1999, 1998 and 1997 were $901 million, $509 million and $574
million, respectively.
Other short-term borrowings are available outside the United States under
informal credit facilities and are typically in the form of overdrafts. At
December 31, 1999, the Company had $60 million of such foreign short-term debt
outstanding at an average interest rate of 7.02% per annum. The
- -----------------------------------------AMERICAN STANDARD '99 annual report-51-
<PAGE> 54
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
Company also had an additional $79 million of unused foreign facilities. The
banks may revoke these facilities at any time. The Company also has credit
facilities for its operations in China totaling $55 million, of which $17
million was outstanding as of December 31, 1999, with remaining availability of
$18 million after $20 million letters of credit usage.
Average short-term borrowings for 1999, 1998 and 1997 were $1,004 million, $571
million and $639 million, respectively, at weighted average interest rates of
5.30%, 5.60% and 6.38%, respectively. Total short-term borrowings outstanding at
December 31, 1999, 1998 and 1997 were $737 million, $732 million and $718
million, respectively, at weighted average interest rates of 6.4%, 5.1% and
6.0%, respectively.
Long-term--Long-term is recorded at face amount, net of unamortized discount,
and debt denominated in foreign currencies is reported at its U.S. dollar
equivalent as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
1997 Credit Agreement $ 352.7 $ 394.5
9 1/4% sinking fund debentures, due in installments
from 2000 to 2010 82.5 105.0
10 7/8% senior notes due 1999 -- 150.0
7 1/8% senior notes, $125 million, due 2003 124.6 124.5
7 3/8% senior notes, $250 million, due 2005 249.0 248.8
7.125% Euro senior notes, $251 million, due 2006 250.5 --
7 3/8% senior notes $350 million, due 2008 349.7 349.6
8.25% senior notes, $100 million, due 2009 99.9 --
8.25% Sterling senior notes, $97 million, due 2009 95.5 --
7 5/8% senior notes, $275 million, due 2010 274.0 273.9
Other long-term debt 27.5 49.9
- --------------------------------------------------------------------------------
1,905.9 1,696.2
Less current maturities 19.2 168.7
- --------------------------------------------------------------------------------
$1,886.7 $1,527.5
================================================================================
</TABLE>
Interest costs capitalized as part of the cost of constructing facilities for
the years ended December 31, 1999, 1998, and 1997, were $3.3 million, $4.5
million and $3.8 million, respectively. Cash interest paid in those years on all
outstanding indebtedness amounted to $181 million, $140 million and $135
million, respectively.
The U.S. Dollar equivalent of the 1997 Credit Agreement loans and the effective
weighted average interest rates were:
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in millions) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Periodic access loans:
Deutschemark loans at 3.69% in 1999;
4.38% in 1998 $ 325.3 $ 362.7
Dutch guilder loans at 3.69% in 1999;
4.33% in 1998 27.4 31.8
- --------------------------------------------------------------------------------
Total Credit Agreement long-term loans 352.7 394.5
Revolver loans at 6.28% in 1999; 4.7% in 1998 659.0 672.7
- --------------------------------------------------------------------------------
Total Credit Agreement loans $1,011.7 $1,067.2
================================================================================
</TABLE>
The 9 1/4% Sinking Fund Debentures are redeemable at the Company's option, in
whole or in part, at redemption prices declining from 103.2% in 2000 to 100% in
2006 and thereafter. The Company may, however, on any sinking fund payment date,
elect to redeem an additional $15 million principal amount of the sinking fund
debentures. The 10 7/8% Senior Notes were redeemed by the Company on their May
15, 1999 due date. None of the Senior Notes outstanding as of December 31, 1999,
are redeemable by the Company prior to maturity.
Obligations under the 1997 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 a pledge of the stock of American Standard Inc.
and its subsidiaries.
---------
AMERICAN
- -52-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 55
The 1997 Credit Agreement contains various covenants that limit, among other
things, mergers and asset sales, indebtedness, dividends on and redemption of
capital stock of the Company, voluntary prepayment of certain other indebtedness
of the Company (including its outstanding debentures and notes), rental expense,
liens, capital expenditures, investments or acquisitions, the use of proceeds
from asset sales, intercompany transactions and transactions with affiliates and
certain other business activities. The covenants also require the Company to
meet certain financial tests. The Company believes it is currently in compliance
with the covenants contained in the 1997 Credit Agreement, as amended.
NOTE 12. Capital Stock
The Company's Certificate of Incorporation authorizes the Company to issue up to
200,000,000 shares of common stock, par value $.01 per share and 2,000,000
shares of preferred stock, par value $.01 per share, of which the Board of
Directors designated 900,000 shares as a new series of Junior Participating
Cumulative Preferred Stock. Each outstanding share of common stock has
associated with it one right to purchase a specified amount of Junior
Participating Cumulative Preferred Stock at a stipulated price in certain
circumstances relating to changes in the ownership of the common stock of the
Company.
In 1997, the Company completed a secondary public offering of 12,429,548 shares
of the Company's common stock owned by ASI Partners, then the Company's largest
shareholder. In conjunction therewith, the Company purchased from ASI Partners
4,628,755 shares of the Company's common stock for $208 million plus fees and
expenses. The Company financed the share purchase with borrowings under the 1997
Credit Agreement. All of the shares sold in the secondary offering were
previously issued and outstanding, and the Company received no proceeds
therefrom. In addition, the Company also issued to ASI Partners warrants
expiring in February 2002 to purchase 3,000,000 shares of common stock of the
Company at $55 per share (the "Exercise Price"). The warrants entitle holders to
receive cash or shares, at the Company's option, based on the difference between
the market value of the Company's common stock and the Exercise Price. The
estimated fair value of these warrants at the date issued was $9.34 per share
using the Black-Scholes option-pricing model and assumptions similar to those
used for valuing the Company's stock options as described below.
On July 9, 1998, the Company's Board of Directors approved a plan to purchase up
to $300 million of the Company's common stock, not to exceed $100 million per
year, during the three-year period ending July 2001. During 1999, the Company
purchased 113,600 shares of its common stock for $4 million pursuant to this
plan and in 1998 purchased 2,675,750 shares for $84 million, of which 2,479,450
shares were purchased for $75 million pursuant to this plan. During 1997, the
Company purchased 6,949,655 shares of its common stock for $311 million,
including the shares purchased from ASI Partners.
The Company has a Stock Incentive Plan (the "Stock Plan") under which awards may
be granted to officers and other key executives and employees in the form of
stock options, stock appreciation rights, restricted stock or restricted units.
In 1998, the Board of Directors authorized an increase of 5 million shares under
the plan to be issued from available treasury shares. The maximum number of
shares or units that may be issued under the Stock Plan and other incentive
bonus plans is 12,604,475, of which 7,604,475 may
- -----------------------------------------AMERICAN STANDARD '99 annual report-53-
<PAGE> 56
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
be granted as incentive stock options. Stock option awards granted under the
Stock Plan vest ratably over three years on the anniversary date of the awards
and are exercisable over a period of ten years.
A summary of stock option activity and related information for 1997, 1998 and
1999 follows:
<TABLE>
<CAPTION>
Weighted- Weighted-
Average Average
Exercise Fair Value
Shares Price of Grants
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding--December 31, 1996 4,701,174 $ 20.06
Granted 1,273,250 41.33 $14.13
Exercised (396,224) 20.00
Forfeited (58,515) 22.36
- --------------------------------------------------------------------------------
Outstanding--December 31, 1997 5,519,685 24.93
Granted 1,426,000 40.77 $15.26
Exercised (460,016) 20.42
Forfeited (101,517) 32.29
- --------------------------------------------------------------------------------
Outstanding--December 31, 1998 6,384,152 28.69
Granted 2,445,750 35.00 $13.97
Exercised (352,491) 23.54
Forfeited (178,876) 36.34
- --------------------------------------------------------------------------------
Outstanding--December 31, 1999 8,298,535 30.61
================================================================================
Exercisable at end of year:
1997 2,661,450
1998 4,162,423
1999 5,285,206
</TABLE>
On January 1, 2000, the Chief Executive Officer of the Company was granted an
award of 250,000 shares of restricted stock. Such shares vest ratably over three
years beginning January 1, 2003. In addition, on February 2, 2000, the Company
granted awards in the form of options to purchase 925,000 shares.
Exercise prices for options outstanding as of December 31, 1999, ranged from $20
to $47.56. The weighted-average remaining contractual life of those options is
6.2 years. As of December 31, 1999, there were 2,866,976 shares available for
grant under the plan and other incentive bonus plans.
The Company has elected to follow APB 25 and related interpretations
in accounting for stock options and accordingly has recognized no compensation
expense. Had compensation cost been determined based upon the fair value at the
grant date for awards consistent with the methodology prescribed by Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation,
the Company's net income and net income per diluted share in 1999 would have
decreased by $13.7 million and $.19, respectively; the net loss and net loss per
diluted share in 1998 would have increased by $9.5 million and $.13,
respectively; and net income and net income per diluted share in 1997 would have
decreased by $12.1 million and $.16, respectively. The fair value of these
options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions: risk-free interest rate of
6.8% in 1999, 5.1% in 1998 and 5.6% in 1997; volatility of 31% in 1999, 32% in
1998 and 25% in 1997; an expected life of 5 years in 1999, 1998 and 1997; and a
dividend yield of zero. These estimated expense amounts are not necessarily
indicative of amounts in years beyond 1999.
---------
AMERICAN
- -54-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 57
In 1997, stockholders approved the establishment of the Employee Stock Purchase
Plan commencing January 1, 1998. The Company has implemented the plan in as many
countries worldwide as is reasonably practical, given the applicable regulations
in such countries. Upon enrollment, employees purchase shares of the Company's
common stock at the end of each calendar quarter, through payroll deductions, at
a discount of 15% from the market price, as quoted on the New York Stock
Exchange on the last trading day of each calendar quarter. Annual purchases are
limited to a maximum of $21,250 per employee. Shares purchased under the plan
are deposited with a custodian and must be held for one year before they may be
sold. The Company funds the plan as soon as practicable after the close of each
quarter with either treasury shares or newly issued shares, at the Company's
discretion. In 1999 and 1998, employees purchased 229,368 and 197,078 shares,
respectively, under this plan.
NOTE 13. Financial Instruments
From time to time, the Company enters into transactions to manage its financial
market risk, including commodity price, foreign exchange and interest rate risk.
These transactions involve contracts and financial instruments with
off-balance-sheet risk. To minimize the risk of counter-party nonperformance,
such agreements are made only through major financial institutions with
significant experience in such financial instruments. Such agreements hedge only
specific transactions or commitments. The Company does not enter speculative
hedges.
To minimize the risk of fluctuations in the market price of major raw material
commodities, such as copper and aluminum used in the manufacturing process, the
Company may enter commodity forward contracts to effectively fix the cost of the
commodity. Maturity dates of the contracts are scheduled to coincide with market
purchases of the commodity. Cash proceeds or payments between the Company and
the counter-party at maturity of the contracts are recognized as an adjustment
to the cost of the commodity purchased. The Company generally does not enter
commodity hedges extending beyond eighteen months.
Since the Company sells certain finished products in currencies different than
the currency of the subsidiary which manufactured the products, the Company is
exposed to foreign currency risk on such transactions. The Company hedges some
of this risk by entering foreign currency forward contracts that effectively fix
the manufacturing cost. Cash settlement proceeds or payments upon maturity of
the contracts are included in the price of the transaction hedged. The Company
generally does not enter currency hedges extending beyond one year.
The notional amount and estimated fair value of hedging contracts at December
31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------
Notional Fair Notional Fair
(Dollars in millions) Value Value Value Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commodity forward contracts $49.3 $61.4 $23.8 $22.0
Foreign currency forward contracts 13.2 13.3 11.6 11.7
</TABLE>
- -----------------------------------------AMERICAN STANDARD '99 annual report-55-
<PAGE> 58
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
The estimated fair values of other financial instruments at December 31, 1999
approximate carrying amounts except as follows:
<TABLE>
<CAPTION>
Carrying Fair
(Dollars in millions) Value Value
- --------------------------------------------------------------------------------
<S> <C> <C>
9 1/4% sinking fund debentures $ 82.5 $ 81.7
7 1/8% senior notes due 2003 124.6 119.5
7 3/8% senior notes due 2005 249.0 236.3
7 3/8% senior notes due 2008 349.7 321.1
7.125% Euro senior notes due 2006 250.5 256.2
8.25% senior notes due 2009 99.9 95.9
8.25% Sterling senior notes due 2009 95.5 98.0
7 5/8% senior notes due 2010 274.0 251.3
</TABLE>
The fair values presented above are estimates as of December 31, 1999 and are
not necessarily indicative of amounts for which the Company could settle
currently or indicative of the intent or ability of the Company to dispose of or
liquidate such instruments.
The fair values of the Company's 1997 Credit Agreement loans were estimated to
approximate their carrying value using indicative market quotes obtained from a
major bank. The fair values of senior notes and sinking fund debentures were
based on indicative market quotes obtained from a major securities dealer. The
fair values of other loans were estimated by the Company to approximate their
carrying value.
NOTE 14. Commitments and Contingencies
Future minimum rental commitments under the terms of all noncancellable
operating leases in effect at December 31, 1999, are: 2000--$61 million;
2001--$50 million; 2002--$40 million; 2003--$33 million; 2004--$29 million and
thereafter--$56 million. Net rental expenses for operating leases were $87
million, $69 million and $64 million for the years ended December 31, 1999,
1998, and 1997, respectively.
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,
including certain facilities in the process of being closed (see Note 5). In
those instances where it is probable as a result of such proceedings that the
Company will incur costs which can be reasonably determined, the Company has
recorded 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.
In October 1999, verdicts were returned against the Company totaling
$18 million related to claims of a terminated sales agent and distributor of air
conditioning equipment. The Company is currently seeking relief from the
verdicts at the trial court level and, if necessary, will appeal the verdicts,
believing that substantial errors were made during the trial and that the issues
before the trial court were wrongly decided. Therefore, the Company has made no
provision for loss related to this matter at December 31, 1999.
The tax returns of the Company's German subsidiaries are currently under
examination by the German tax authorities (see Note 8).
---------
AMERICAN
- -56-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 59
NOTE 15. Segments
In addition to the segment data in the following table, see also the Five-Year
Financial Summary on page 14 and Management's Discussion and Analysis on pages
15 through 27.
<TABLE>
<CAPTION>
SEGMENT DATA
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales:
Air Conditioning Systems and Services $ 4,337 $ 3,940 $ 3,567
Plumbing Products 1,755 1,510 1,439
Vehicle Control Systems 1,098 1,106 952
- --------------------------------------------------------------------------------
$ 7,190 $ 6,556 $ 5,958
- --------------------------------------------------------------------------------
Segment income:
Air Conditioning Systems and Services $ 453 $ 386 $ 386
Plumbing Products 164 119 119
Vehicle Control Systems 134 153 127
- --------------------------------------------------------------------------------
751 658 632
Equity in net income of unconsolidated
joint ventures 37 27 12
Restructuring and asset impairment charges (15) (197) --
Interest expense (188) (188) (192)
Corporate expenses (134) (110) (105)
- --------------------------------------------------------------------------------
Income from continuing operations before
income taxes and extraordinary item $ 451 $ 190 $ 347
- --------------------------------------------------------------------------------
Sales--Geographic distribution (a):
United States $ 3,840 $ 3,383 $ 2,956
Europe 2,270 2,061 1,897
Germany (included in Europe) 695 693 590
Other 1,295 1,269 1,243
Eliminations (215) (157) (138)
- --------------------------------------------------------------------------------
Total sales $ 7,190 $ 6,556 $ 5,958
- --------------------------------------------------------------------------------
Segment income--Geographic distribution:
United States $ 505 $ 438 $ 382
Europe 215 174 167
Other 31 46 83
- --------------------------------------------------------------------------------
Total segment income $ 751 $ 658 $ 632
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SEGMENT DATA (continued)
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Air Conditioning Systems and Services $2,028 $1,807 $1,577
Plumbing Products 1,673 1,094 1,092
Vehicle Control Systems 684 766 676
- --------------------------------------------------------------------------------
Total identifiable assets $4,385 $3,667 $3,345
- --------------------------------------------------------------------------------
Geographic distribution:
United States $1,567 $1,405 $1,266
Europe 1,946 1,426 1,321
Other 872 836 758
- --------------------------------------------------------------------------------
Total identifiable assets 4,385 3,667 3,345
Prepaid charges 42 40 23
Cash and cash equivalents 61 63 27
Net assets of discontinued operations held for sale 51 139 139
Corporate assets 147 198 184
- --------------------------------------------------------------------------------
Total assets $4,686 $4,107 $3,718
- --------------------------------------------------------------------------------
Goodwill included in assets:
Air Conditioning Systems and Services $ 224 $ 199 $ 196
Plumbing Products 460 201 229
Vehicle Control Systems 307 359 350
- --------------------------------------------------------------------------------
Total goodwill $ 991 $ 759 $ 775
- --------------------------------------------------------------------------------
Capital expenditures
Air Conditioning Systems and Services $ 155 $ 91 $ 102
Plumbing Products 123 126 154
Vehicle Control Systems 49 50 42
- --------------------------------------------------------------------------------
Total capital expenditures $ 327 $ 267 $ 298
- --------------------------------------------------------------------------------
Depreciation and amortization:
Air Conditioning Systems and Services $ 71 $ 66 $ 63
Plumbing Products 80 59 53
Vehicle Control Systems 51 51 43
- --------------------------------------------------------------------------------
Total depreciation and amortization $ 202 $ 176 $ 159
- --------------------------------------------------------------------------------
</TABLE>
(a) Revenues from external customers are classified by country of origin.
- -----------------------------------------AMERICAN STANDARD '99 annual report-57-
<PAGE> 60
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
NOTE 16. Supplemental Consolidating Condensed Financial Information
All of the Company's Senior Notes and the 9 1/4% Sinking Fund Debentures were
issued by its wholly owned subsidiary, American Standard Inc. ("ASI"). American
Standard Companies Inc. (the "Parent Company") fully and unconditionally
guarantees the payment obligations under these securities. In lieu of providing
separate audited financial statements for ASI, the Company has included the
accompanying audited consolidating condensed financial information. Management
believes that separate financial statements of ASI are not material to
investors. The following supplemental financial information sets forth, on an
unconsolidated basis, statements of operations and statements of cash flows for
the years ended December 31, 1999, 1998 and 1997, and balance sheets as of
December 31, 1999 and 1998 for the Parent Company and ASI, and for the Company's
non-guarantor subsidiaries ("Other Subsidiaries") for 1999 only. On December 31,
1999 the Company completed an internal reorganization whereby ASI transferred
ownership of essentially all foreign subsidiaries and their intellectual
property rights to another wholly owned subsidiary, American Standard
International Inc. Therefore, prior to 1999, there were no non-guarantor
subsidiaries. The equity method of accounting is used to reflect investments of
the Parent Company in ASI and Other Subsidiaries.
CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Parent Consolidated
(Dollars in millions) Company ASI Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $7,189.5 $7,189.5
Costs and expenses:
Cost of sales 5,406.6 5,406.6
Selling and administrative expenses 1,146.3 1,146.3
Restructuring and asset impairment charges 14.7 14.7
Other income (17.4) (17.4)
Interest expense 187.8 187.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 6,738.0 6,738.0
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes and equity
in net income of consolidated subsidiary 451.5 451.5
Income taxes 187.4 187.4
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before equity in net income of
consolidated subsidiary 264.1 264.1
Loss from discontinued operations 125.8 125.8
Equity in net income of subsidiary $138.3 -- $(138.3) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $138.3 $ 138.3 $(138.3) $ 138.3
====================================================================================================================================
</TABLE>
---------
AMERICAN
- -58-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 61
CONSOLIDATING CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
Parent Other Consolidated
(Dollars in millions) Company ASI Subsidiaries Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11.1 $ 50.1 $ 61.2
Accounts receivable, net 448.6 537.7 986.3
Inventories 243.3 260.9 504.2
Net assets held for sale 50.8 -- 50.8
Other current assets 38.4 84.6 123.0
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 792.2 933.3 1,725.5
Facilities, net 503.3 910.9 1,414.2
Goodwill, net 148.3 842.8 991.1
Investment in subsidiaries $(145.2) -- -- $ 145.2 --
Intercompany receivable 42.7 825.6 (868.3) --
Loan receivable from parent 351.3 -- (351.3) --
Other assets 455.0 100.2 555.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $(145.2) $ 2,292.8 $3,612.8 $(1,074.4) $4,686.0
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Loans payable to banks $ 585.6 $ 151.3 $ 736.9
Current maturities of long-term debt 18.4 .8 19.2
Other current liabilities 749.8 780.7 1,530.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,353.8 932.8 2,286.6
Long-term debt 1,555.5 331.2 1,886.7
Reserve for postretirement benefits 204.4 231.7 436.1
Intercompany payable 825.6 42.7 $ (868.3) --
Loan payable to subsidiary $ 351.3 -- -- (351.3) --
Other long-term liabilities 299.2 273.9 573.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 351.3 4,238.5 1,812.3 (1,219.6) 5,182.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' (deficit) equity (496.5) (1,945.7) 1,800.5 145.2 (496.5)
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' (deficit) equity $(145.2) $ 2,292.8 $3,612.8 $(1,074.4) $4,686.0
====================================================================================================================================
</TABLE>
- -----------------------------------------AMERICAN STANDARD '99 annual report-59-
<PAGE> 62
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW FOR THE YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Parent Other Consolidated
(Dollars in millions) Company ASI Subsidiaries Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash provided (used) by:
Operating activities:
Net income $ 138.3 $ 138.3 $(138.3) $ 138.3
Adjustments to reconcile net income to net cash
provided by operations:
Non-cash restructuring and asset impairment
charges (reversals) (7.3) (7.3)
Loss from discontinued operations 125.8 125.8
Depreciation and amortization 202.1 202.1
Non-cash interest 7.2 7.2
Equity in net income of subsidiary (138.3) -- 138.3 --
Changes in assets and liabilities:
Accounts receivable (58.5) (58.5)
Inventories (20.5) (20.5)
Accounts payable and accrued payrolls 73.7 73.7
Postretirement benefits 14.6 14.6
Other, net 36.2 36.2
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations -- 511.6 -- 511.6
Net cash (used) by discontinued operations (37.8) (37.8)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities -- 473.8 -- 473.8
- ------------------------------------------------------------------------------------------------------------------------------------
Investing activities:
Purchase of property, plant and equipment (274.5) (274.5)
Investments in affiliated companies (8.1) (52.8) 8.1 (52.8)
Investments in computer software (85.5) (85.5)
Acquisitions of businesses (427.0) (427.0)
Other 4.0 4.0
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (8.1) (835.8) 8.1 (835.8)
- ------------------------------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from issuance of long-term debt 483.5 483.5
Repayments of long-term debt (198.1) (198.1)
Net change in revolving credit facility 51.7 51.7
Net change in other short-term debt 21.4 21.4
Purchases of treasury stock (4.2) (4.2) 4.2 (4.2)
Decrease in loan from subsidiary (4.9) 4.9 --
Cash transferred (to) from affiliate (50.1) $50.1 --
Other 17.2 7.1 (17.2) 7.1
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 8.1 311.3 50.1 (8.1) 361.4
Effect of exchange rate changes on cash and cash equivalents (1.2) (1.2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents -- (51.9) 50.1 -- (1.8)
Cash and cash equivalents at beginning of year 63.0 63.0
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ -- $ 11.1 $50.1 $ -- $ 61.2
====================================================================================================================================
</TABLE>
---------
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- -60-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 63
CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Parent Consolidated
(Dollars in millions) Company ASI Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $6,555.3 $6,555.3
Costs and expenses:
Cost of sales 4,949.5 4,949.5
Selling and administrative expenses 1,028.5 1,028.5
Restructuring and asset impairment charges 197.3 197.3
Other expense 2.0 2.0
Interest expense 188.3 188.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 6,365.6 6,365.6
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes, extraordinary item
and equity in net loss of consolidated subsidiary 189.7 189.7
Income taxes 141.2 141.2
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before extraordinary item and equity in
net loss of consolidated subsidiary 48.5 48.5
Loss from discontinued operations (14.9) (14.9)
Extraordinary loss on retirement of debt (49.9) (49.9)
Equity in net loss of subsidiary $(16.3) -- $16.3 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss $(16.3) $ (16.3) $16.3 $ (16.3)
====================================================================================================================================
</TABLE>
- -----------------------------------------AMERICAN STANDARD '99 annual report-61-
<PAGE> 64
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
CONSOLIDATING CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Parent Consolidated
(Dollars in millions) Company ASI Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 63.1 $ 63.1
Accounts receivable, net 895.6 895.6
Inventories 439.5 439.5
Net assets held for sale 138.8 138.8
Other current assets 127.8 127.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 1,664.8 1,664.8
Facilities, net 1,211.0 1,211.0
Goodwill, net 759.9 759.9
Investment in subsidiaries $(344.8) $ 344.8 --
Loan receivable from parent 356.2 (356.2) --
Other assets 470.8 470.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $(344.8) $4,462.7 $ (11.4) $4,106.5
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Loans payable to banks $ 732.0 $ 732.0
Current maturities of long-term debt 168.7 168.7
Other current liabilities 1,410.6 1,410.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 2,311.3 2,311.3
Long-term debt 1,527.5 1,527.5
Reserve for postretirement benefits 468.2 468.2
Loan payable to subsidiary $ 356.2 $(356.2) --
Other long-term liabilities 500.5 500.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 356.2 4,807.5 (356.2) 4,807.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' (deficit) equity (701.0) (344.8) 344.8 (701.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' (deficit) equity $(344.8) $4,462.7 $ (11.4) $4,106.5
====================================================================================================================================
</TABLE>
---------
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- -62-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 65
CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW FOR THE YEAR ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Parent Consolidated
(Dollars in millions) Company ASI Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash provided (used) by:
Operating activities:
Net income $ (16.3) $ (16.3) $ 16.3 $ (16.3)
Adjustments to reconcile net income to net cash
provided by operations:
Non-cash restructuring and asset impairment charges 87.4 87.4
Loss from discontinued operations 14.9 14.9
Depreciation and amortization 176.1 176.1
Non-cash interest 31.6 31.6
Non-cash stock compensation 6.2 6.2
Extraordinary loss on retirement of debt 49.9 49.9
Equity in net loss of subsidiary 16.3 (16.3) --
Changes in assets and liabilities:
Accounts receivable (89.8) (89.8)
Inventories (31.4) (31.4)
Accounts payable and accrued payrolls 90.7 90.7
Postretirement benefits 14.6 14.6
Other, net 143.0 143.0
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations -- 476.9 -- 476.9
Net cash (used) by discontinued operations (14.8) (14.8)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities -- 462.1 -- 462.1
- ------------------------------------------------------------------------------------------------------------------------------------
Investing activities:
Purchase of property, plant and equipment (245.8) (245.8)
Investments in affiliated companies (4.9) (22.4) 4.9 (22.4)
Investments in computer software (60.0) (60.0)
Other 15.2 15.2
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (4.9) (313.0) 4.9 (313.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from issuance of long-term debt 1,012.1 1,012.1
Repayments of long-term debt (996.6) (996.6)
Net change in revolving credit facility (23.9) (23.9)
Net change in other short-term debt 4.9 4.9
Purchases of treasury stock (83.7) (83.7) 83.7 (83.7)
Increase in loan from subsidiary 73.8 (73.8) --
Other 14.8 (26.1) (14.8) (26.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 4.9 (113.3) (4.9) (113.3)
Effect of exchange rate changes on cash and cash equivalents .1 .1
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents -- 35.9 -- 35.9
Cash and cash equivalents at beginning of year 27.1 27.1
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ -- $ 63.0 $ -- $ 63.0
====================================================================================================================================
</TABLE>
- -----------------------------------------AMERICAN STANDARD '99 annual report-63-
<PAGE> 66
Notes to Consolidated Financial Statements (continued)
American Standard Companies Inc.
CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Parent Consolidated
(Dollars in millions) Company ASI Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $5,957.8 $5,957.8
Costs and expenses:
Cost of sales 4,456.0 4,456.0
Selling and administrative expenses 936.3 936.3
Other expense 26.4 26.4
Interest expense $ 1.4 192.1 $ (1.4) 192.1
Interest income (1.4) 1.4 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses -- 5,610.8 -- 5,610.8
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes, extraordinary item
and equity in net income of consolidated subsidiary 347.0 347.0
Income taxes 123.7 123.7
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before extraordinary item and equity in
net income of consolidated subsidiary 223.3 223.3
Loss from discontinued operations (103.4) (103.4)
Extraordinary loss on retirement of debt (23.7) (23.7)
Equity in net income of subsidiary 96.2 -- (96.2) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $96.2 $ 96.2 $(96.2) $ 96.2
====================================================================================================================================
</TABLE>
---------
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- -64-STANDARD--------------------------------------------------------------------
COMPANIES
---------
<PAGE> 67
CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW FOR THE YEAR ENDED
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Parent Consolidated
(Dollars in millions) Company ASI Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash provided (used) by:
Operating activities:
Net income $ 96.2 $ 96.2 $ (96.2) $ 96.2
Adjustments to reconcile net income to net cash provided by operations:
Loss from discontinued operations 103.4 103.4
Depreciation and amortization 159.2 159.2
Non-cash interest 59.9 59.9
Non-cash stock compensation 9.9 9.9
Extraordinary loss on retirement of debt 23.6 23.6
Equity in net income of subsidiary (96.2) 96.2
Changes in assets and liabilities:
Accounts receivable (41.2) (41.2)
Inventories (23.2) (23.2)
Accounts payable and accrued payrolls 26.1 26.1
Postretirement benefits 8.5 8.5
Other, net 21.8 21.8
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations -- 444.2 -- 444.2
Net cash (used) by discontinued operations (12.6) (12.6)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities -- 431.6 -- 431.6
- ------------------------------------------------------------------------------------------------------------------------------------
Investing activities:
Purchase of property, plant and equipment (241.7) (241.7)
Investments in affiliated companies (1.2) (56.9) 1.2 (56.9)
Investments in computer software (35.0) (35.0)
Acquisitions of businesses (212.3) (212.3)
Other 16.9 31.3 (16.9) 31.3
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 15.7 (514.6) (15.7) (514.6)
- ------------------------------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from issuance of long-term debt 401.5 401.5
Repayments of long-term debt (655.3) (655.3)
Net change in revolving credit facility 622.6 622.6
Net change in other short-term debt 8.7 8.7
Purchases of treasury stock (310.7) (310.7) 310.7 (310.7)
Loan from subsidiary 291.9 (291.9)
Other 3.1 (10.4) (3.1) (10.4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities (15.7) 56.4 15.7 56.4
Effect of exchange rate changes on cash and cash equivalents (5.9) (5.9)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents -- (32.5) -- (32.5)
Cash and cash equivalents at beginning of year 59.7 59.7
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ -- $ 27.2 $ -- $ 27.2
====================================================================================================================================
</TABLE>
- -----------------------------------------AMERICAN STANDARD '99 annual report-65-
<PAGE> 68
(Unaudited) Quarterly Data
American Standard Companies Inc.
<TABLE>
<CAPTION>
1999
(Dollars in millions, except per share data) First Second Third(b) Fourth(a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $1,649.1 $1,910.6 $1,876.3 $1,753.5
Cost of sales 1,238.5 1,411.8 1,405.6 1,350.7
Income from continuing operations before income taxes 83.9 158.9 133.4 75.3
Income taxes 35.0 65.6 55.4 31.4
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 48.9 93.3 78.0 43.9
Loss from discontinued operations (2.2) (3.3) (6.3) (114.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 46.7 $ 90.0 $ 71.7 $ (70.1)
====================================================================================================================================
Per common share:
Basic
Income from continuing operations $ .70 $ 1.32 $ 1.10 $ .62
Loss from discontinued operations (.03) (.05) (.09) (1.61)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ .67 $ 1.28 $ 1.02 $ (.99)
====================================================================================================================================
Diluted
Income from continuing operations $ .68 $ 1.28 $ 1.07 $ .62
Loss from discontinued operations (.03) (.05) (.09) (1.61)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ .65 $ 1.23 $ .98 $ (.99)
====================================================================================================================================
Average number of common shares (thousands):
Basic 70,221 70,463 70,671 70,733
Diluted 71,903 73,139 73,169 70,733
Range of prices on common stock:
High $ 35 3/4 $49 7/16 $ 49 1/4 $ 46
Low $ 31 1/8 $34 5/8 $ 38 3/8 $ 33 3/8
</TABLE>
---------
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---------
<PAGE> 69
<TABLE>
<CAPTION>
1998
(Dollars in millions, except per share data) First Second Third(b) Fourth(a)(b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $1,468.1 $1,769.6 $1,705.1 $1,612.5
Cost of sales 1,111.3 1,301.9 1,285.2 1,251.1
Income (loss) from continuing operations before income taxes and
extraordinary item 64.8 135.9 77.6 (88.5)
Income taxes 27.1 55.4 37.3 21.4
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before extraordinary item 37.7 80.5 40.3 (109.9)
Loss from discontinued operations (1.5) (2.6) (4.2) (6.7)
Extraordinary loss on retirement of debt -- (49.9) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 36.2 $ 28.0 $ 36.1 $ (116.6)
====================================================================================================================================
Per common share:
Basic
Income (loss) from continuing operations before extraordinary item $ .52 $ 1.11 $ .56 $ (1.57)
Loss from discontinued operations (.02) (.04) (.06) (.09)
Extraordinary loss on retirement of debt -- (.69) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ .50 $ .39 $ .50 $ (1.66)
====================================================================================================================================
Diluted
Income (loss) from continuing operations before extraordinary item $ .51 $ 1.07 $ .54 $ (1.57)
Loss from discontinued operations (.02) (.03) (.06) (.09)
Extraordinary loss on retirement of debt -- (.67) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ .49 $ .37 $ .49 $ (1.66)
====================================================================================================================================
Average number of common shares (thousands):
Basic 72,096 72,473 72,150 70,215
Diluted 74,291 74,972 74,207 70,215
Range of prices on common stock:
High $ 48 1/4 $ 49 1/4 $48 7/16 $ 37 7/8
Low $ 37 3/8 $ 39 7/8 $24 5/16 $ 21 5/8
</TABLE>
(a) The fourth quarter of 1999 included net restructuring charges of $15
million ($9 million, net of tax benefits).
(b) The third quarter of 1998 included restructuring charges of $35 million
($29 million, net of tax benefits). The fourth quarter of 1998 included a
restructuring charge of $162 million ($154 million, net of tax benefits).
- -----------------------------------------AMERICAN STANDARD '99 annual report-67-
<PAGE> 70
Corporate Officers
American Standard Companies Inc.
Frederic M. Poses
Chairman and Chief Executive Officer
G. Peter D'Aloia
Senior Vice President and Chief
Financial Officer
J. Paul McGrath
Senior Vice President, General Counsel
and Secretary
Thomas S. Battaglia
Vice President and Treasurer
George H. Kerckhove
Vice President
Raymond D. Pipes
Vice President, Investor Relations
G. Ronald Simon
Vice President and Controller
Robert M. Wellbrock
Vice President, Taxes
- --------------------------------------------------------------------------------
AIR CONDITIONING SYSTEMS AND SERVICES
Roberto Canizares M.
Vice President,
Air Conditioning Systems and Services,
Worldwide Applied Systems, Distribution
David R. Pannier
Vice President and Group Executive,
Air Conditioning Systems and Services,
North American Unitary Products
James H. Schultz
Vice President and Group Executive,
Air Conditioning Systems and Services,
Worldwide Applied Systems
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLUMBING PRODUCTS
Alexander A. Apostolopoulos
Vice President, Plumbing Products,
Product and Business Development
Gary A. Brogoch
Vice President and Group Executive,
Plumbing Products, Asia Pacific
Wilfried Delker
Vice President and Group Executive,
Plumbing Products, Worldwide Fittings
Alberto Loreti
Vice President and Group Executive,
Plumbing Products, Europe
G. Eric Nutter
Vice President and Group Executive,
Americas Plumbing Products Group
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VEHICLE CONTROL SYSTEMS
W. Craig Kissel
Senior Vice President,
Vehicle Control Systems
Michael Broughton
Vice President,
Vehicle Control Systems,
Leeds Operations
Jean-Claude Montauze
Vice President,
Vehicle Control Systems,
Claye-Souilly Operations
Wolfgang Voss
Vice President,
Vehicle Control Systems,
Order Fulfillment
- --------------------------------------------------------------------------------
---------
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- -68-STANDARD--------------------------------------------------------------------
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---------
<PAGE> 71
Corporate Information
American Standard Companies Inc.
Corporate Headquarters
One Centennial Avenue
Piscataway, NJ 08855-6820
Tel: (732) 980-6000
Web Site Address:
www.americanstandard.com
BUSINESS OPERATIONS
AIR CONDITIONING SYSTEMS AND SERVICES
Worldwide Applied Systems
The Trane Company
3600 Pammel Creek Road
La Crosse, WI 54601-7599
Tel: (608) 787-2000
Web Site Address: www.trane.com
International Unitary Systems
Trane International Unitary Systems
1789 Chaussee De Wavre
1160 Brussels, Belgium
Tel: (32) 2/6638380
North American Unitary Products
The Trane Company
6200 Troup Highway
Tyler, TX 75707
Tel: (903) 581-3200
Web Site Address: www.trane.com
PLUMBING PRODUCTS
Americas, Worldwide Fittings
American Standard
One Centennial Avenue
Piscataway, NJ 08855-6820
Tel: (732) 980-3000
Web Site Address:
www.americanstandard-us.com
Asia Pacific
World Standard Ltd.
14-16/F. St. John's Building
33 Garden Road
Central Hong Kong
Tel: (852) 2/971-3688
Europe Plumbing Products
Ideal Standard
Boulevard du Souverain, 348
Box 1
1160 Brussels, Belgium
Tel: (32) 2/678-0911
Web Site Address:
www.idealstandard.com
VEHICLE CONTROL SYSTEMS
WABCO Automotive Product Group
Boulevard du Souverain, 348
Box 1
1160 Brussels, Belgium
Tel: (32) 2/663-0120
Web Site Address:
www.wabco-auto.com
Annual Meeting
May 4, 2000, at 11:30 AM (EDT)
American Standard College
One Centennial Avenue
Piscataway, NJ 08855
Transfer Agent and Registrar
Citibank, NA
111 Wall Street
New York, NY 10005
Stock Exchange Listing
New York Stock Exchange
Ticker Symbol: ASD
Additional Information
A copy of the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission is available without charge. A copy may be either printed
from the Company's corporate website or requested from:
Investor Relations
One Centennial Avenue
Piscataway, NJ 08855-6820
Tel: (732) 980-6095
ASD Newsline No.
Tel: 1-888-ASD-News
Designed by Curran & Connors, Inc. / www.curran-connors.com
Demand Flow(R) is a registered trademark of the Jc-I-T Institute of Technology,
Inc.
<PAGE> 72
---------
AMERICAN
----
STANDARD
----
COMPANIES
---------
One Centennial Avenue Piscataway, NJ 08855-6820 www.americanstandard.com
<PAGE> 1
EXHIBIT 21
Exhibit 21
PARENTS AND SUBSIDIARIES
AMERICAN STANDARD COMPANIES INC. (DELAWARE) - REGISTRANT
Subsid-
iaries*
U.S. SUBSIDIARIES:
American Standard Inc. (Delaware) - Immediate Parent
The American Chinaware Company (Delaware)
American Standard Financial Corporation (Delaware)
American Standard Shared Services Inc. (Delaware)
American Standard Water Heaters Corporation (Delaware)
Amstan Air Inc. (Delaware)
Amstan Logistics Inc. (Delaware)
A-S Energy, Inc. (Texas)
Rand Trane Dallas Inc. (Delaware)
FACS Facility Services, Inc. (Texas)
Standard Compressors Inc. (Delaware)
Trane Comfort Solutions Inc. (Delaware)
Trane Puerto Rico Inc. (Delaware)
WABCO Automotive Control Systems Inc. (Delaware)
WABCO Automotive Holdings Inc. (Delaware)
WABCO Air Compressor Holdings Inc. (Delaware)
American Standard International Inc. (Delaware)
American Standard Credit Inc. (Delaware)
American Standard Trane Brands, Inc. (Delaware)
American Standard Trane, Ltd. (Delaware)
American Standards Inc. (Delaware)
A-S Thai Holdings Ltd. (Delaware)
Hermann Trane Harrisburg Inc. (Delaware)
Ives Trane NY, Inc. (Delaware)
SAU Corp. (Delaware)
The Trane Company (Delaware)
Trane Central America, Inc. (Delaware)
Trane Export LLC (Delaware)
Trane General Corporation (Delaware)
Trane India Ltd. (Delaware)
WABCO Korea Inc. (Delaware)
WABCO Company (Pennsylvania)
WABCO Standard Export Ltd. (Delaware)
World Standard Ltd. (Delaware)
40
<PAGE> 2
FOREIGN SUBSIDIARIES:
AIR CONDITIONING SYSTEMS AND SERVICES
(Wabco Standard French Holdings SNC - Immediate Parent)
Societe Trane (France)
Trane Service Company (Egypt) (75%)
(The Trane Company - Immediate Parent)
WABCO Standard Trane S.A. (Switzerland)
Trane Korea, Inc. (Korea)
TM Air Conditioning Sdn. Bhd. (Malaysia) (70%)
Trane Airconditioning Pte. Ltd. (Singapore)
TTS Limited (Taiwan)
Trane de Argentina S.A. (Argentina)
Trane de Chile S.A. (Chile) (70%)
Trane de Colombia (Colombia)
Trane de Mexico, S.A. de C.V. (Mexico)
Trane do Brasil Industria e Comercio Ltda. (Brazil)
Trane Servicefirst, C.A. (Venezuela)
(American Standard Inc. and The Trane Company - Immediate Parents)
ASI China Holdings (Cayman Islands)
(ASI China Holdings and American Standard International Inc. -
Immediate Parents)
A-S Air Conditioning Products Limited (Cayman Islands) (62.7%)
A-S Air Conditioning System (Shanghai) Company Limited (PRC)
JTA China Import Limited (Hong Kong)
Teling Air Conditioner Company Limited (PRC) (56%)
(American Standard International Inc. - Immediate Parent)
Trane Hellas S.A. (Greece)
TAC Distribution Pte. Ltd. (Singapore)
(American Standard Inc. - Immediate Parent)
Trane (Thailand) Ltd. (Thailand)
(American Standard Inc. & 3 Delaware subsidiaries - Immediate Parents)
TROC Airconditioning Ltd. (Taiwan )
(American Standard (U.K.) Limited - Immediate Parent)
Trane Limited (U.K.)
Trane (United Kingdom) Limited (U.K.)
Trane (Scotland) Limited (Scotland)
(American Standard International Inc. & WABCO Standard TRANE B.V. -
Immediate Parents)
American Standard Trane Japan, Ltd. (Japan)
Trane Reinetsu Service Co., Ltd. (Japan)
(WABCO Standard TRANE B.V. - Immediate Parent)
TDU Pty. Ltd. (Australia) (80%)
Trane AirConditioning B.V. (Netherlands)
Trane Beteiligungs-GmbH (Germany)
Trane Deutschland GmbH (Germany)
Trane Espanola S.A. (Spain)
Trane Aire Acondicionado, S.A. (Spain)
Trane Europe B.V. (Netherlands)
41
<PAGE> 3
Trane GmbH (Austria)
Trane (Schweiz) AG (Switzerland)
Trane Italia S.r.l. (Italy)
Trane S.A.E. (Egypt) (91.58%)
(Ideal Standard Europe B.V. - Immediate Parent)
Trane CR Spol sro. (Rep. of Czechoslavakia)
Trane D.O.O. (Croatia)
Trane Hungary KFT (Hungary)
Trane Klima Ticaret AS (Turkey) (99%)
Trane Polska Sp.Z.O.O. (Poland)
Trane Technologies LLC (Russian Federation)
(WABCO Automotive AB (Sweden) - Immediate Parent)
Trane Sweden AG (Sweden)
VEHICLE CONTROL SYSTEMS
(WABCO Standard GmbH and American Standard International Inc. -
Immediate Parents)
WABCO Standard TRANE B.V. (Netherlands)
WABCO Austria G.m.b.H. (Austria)
WABCO Automotive AB (Sweden)
WABCO Automotive B.V. (Netherlands)
WABCO brzdy k vozidlum spol. S.r.o. (Rep. of
Czechoslovakia)
WABCO Belgium S.A.-N.V. (Belgium)
WABCO B.V. (Netherlands)
WABCO Espana S.A. (Spain)
WABCO Europe B.V. (Netherlands)
WABCO Polska Spolka Z Ograniczona Odpowiedzia ( Poland)
WABCO Sandown B.V. (Netherlands) 1
WABCO (Schweiz) AG (Switzerland)
WABCO Standard French Holdings SNC (France)
WABCO Westinghouse S.A. (France)
WABCO France SNC (France)
(Ideal Standard S.r.l. and American Standard International Inc Inc. -
Immediate Parents)
American Standard (U.K.) Limited (England)
Clayton Dewandre Holdings Limited (England)
WABCO Automotive UK Limited (England)
Perrot Brakes (U.K.) Limited (England)
(Ideal Standard S.r.l.- Immediate Parent)
WABCO Automotive Italia S.p.A. (Italy)
(American Standard International Inc. - Immediate Parent)
WABCO-Standard GmbH (Germany)
WABCO Fahrzeugsysteme GmbH (Germany)
WABCO GmbH & Co. OHG (Germany)
WABCO GmbH (Germany)
WABCO Perrot Bremsen GmbH (Germany)
(WABCO Automotive Holdings Inc. - Immediate Parent)
WABCO GmbH (Bonn, Germany)
42
<PAGE> 4
(WABCO GmbH & Co. OHG, American Standard International Inc. and WABCO
Automotive Holdings Inc.
- Immediate Parents)
Sanwab E.B.S. Inc. (Japan)
PLUMBING PRODUCTS
(American Standard International Inc. and A-S Thai Holdings Ltd. -
Immediate Parents)
American Standard Sanitaryware (Thailand) Public Company Limited
(Thailand) (81.3%)
(American Standard International Inc. - Immediate Parent)
Egyptian American Sanitary Wares Co. S.A.E. (Egypt) (59.2%)
American Standard Philippine Holdings Inc. (Philippines)
Standex S.A. (Greece )
WABCO-Standard GmbH (Germany)
Ceramica Dolomite GmbH (Germany)
Ideal Standard GmbH & Co. OHG (Germany)
American Standard Korea, Inc. (Korea )
Ideal-Standard GmbH (Hannover, Germany)
(American Standard International Inc. & American Standard Philippine
Holdings Inc.- Immediate Parents
Sanitary Wares Manufacturing Corporation (Philippines) (61.99%)
(WABCO Westinghouse S.A. - Immediate Parent)
Porcher, S.A. (France)
(Wabco Standard Trane Inc. - Immediate Parent)
Ideal Standard Wabco Industria e Comercio Ltda. (Brazil) (a)
(American Standard (U.K.) Limited - Immediate Parent)
Ideal-Standard Limited (England)
Armitage Shanks International Ltd. (U.K.)
Armitage Shanks Ltd. (U.K.)
Armitage Shanks (Dublin) Ltd. (Ireland)
Armitage Shanks (Ireland) Ltd. (Ireland)
Armitage Venesta Washroom Systems Ltd. (U.K.)
Qualitas Bathrooms Ltd. (U.K.)
Tantofex Limited (U.K.)
Venesta Cubicles Ltd. (U.K.)
Venesta Office Systems Ltd. (U.K)
(American Standard International Inc. & WABCO Standard TRANE B.V. -
Immediate Parents)
Ceramic Sanitaryware Pte. (Singapore)
Amstan Sanitaryware Inc. (Vietnam) (84.21%)
Egyptian American Industrial Plastics Company S.A.E. (Egypt) (88%)
Ideal Standard Bulgaria A.D. (Bulgaria)
Ideal Standard (Thailand) Limited (Thailand) (77.14%)
Vidima A.D. (Bulgaria) (99%)
WABCO Standard Trane Inc. (Canada) (b)
Ideal Standard Trane Inc. (Canada) (b)
(Wabco Standard Trane Inc. and Wabco Standard Trane B.V. - Immediate
Parents)
Ideal-Standard, S.A. de C.V. (Mexico) 2
Industria Ceramica del Centro, S.A. de C.V. (Mexico)
43
<PAGE> 5
(WABCO Standard Trane B.V. and Sanisatn Iberica, S.L. - Immediate
Parents)
Sanistan B.V. (Netherlands)
Keramicke Zavody Teplice, AS (Rep. of Czechoslovakia) (91.48%)
(American Standard International Inc. & Hermann Trane Harrisburg Inc. -
Immediate Parents)
PT Indo American Ceramics (Indonesia)
(American Standard International Inc. & WABCO Standard TRANE B.V. -
Immediate Parents)
(WABCO Standard TRANE B.V. - Immediate Parent)
Ideal Standard Europe B.V. (Netherlands) 2
Ideal Standard s.r.l. (Italy)
Ceramica Dolomite SpA (Italy)
Ideal Standard S.A. (Greece)
Sanistan Iberica, S.L. (Spain)
(American Standard International Inc., WABCO Standard TRANE B.V. &
Egyptian American
Sanitarywares Co. S.A.E. - Immediate Parents)
Islamic Acrylic Company (MISR Acrylic) S.A.E. (Egypt)
MISCELLANEOUS
Standard Europe (EEIG)(France) (c)
All of the companies listed above operate under their company names and use
one or more of the trademarks listed under "Patents and Trademarks" of Item 1 of
this annual report on Form 10-K.
* The number shown under this heading indicates other subsidiaries, not
listed by name herein, which are in the same line of business. The name of the
immediate parent of such subsidiary or subsidiaries appears opposite the number.
(a) This subsidiary participates in Plumbing Products and Vehicle Control
Systems
(b) This subsidiary participates in Plumbing Products and Air Conditioning
Systems and Services.
(c) A European Economic Interest Grouping organized by certain French and
Italian subsidiaries of the Company.
There are omitted from the table a number of minor or inactive or
name-saving subsidiaries, all of which together would not constitute a
significant subsidiary.
44
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of American Standard Companies Inc. and in the Registration Statements on Form
S-3 pertaining to the registration of $1.0 billion of debt securities
(Registration No. 333-67943), Form S-8 pertaining to the Stock Incentive Plan
(Registration No. 33-63007) and Form S-8 pertaining to the Employee Stock
Purchase Plan (Registration No. 333-40575) of our reports dated February 11,
2000 with respect to the consolidated financial statements of American Standard
Companies Inc. included in the 1999 Annual Report to Shareholders of American
Standard Companies Inc., and with respect to the financial statement schedules
included in this Annual Report (Form 10-K).
/s/ ERNST & YOUNG LLP
NEW YORK, NEW YORK
MARCH 29, 2000
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