American Standard Companies Inc. Reports 1998 Per Share Earnings Up 8%
February 4, 1999 08:01 AM
PISCATAWAY, N.J., Feb. 4 /PRNewswire/ -- American Standard Companies
Inc. ASD today announced that full year 1998 diluted per share
earnings before extraordinary item (and before restructuring charges)
were a record $2.98, an increase of 8% over 1997 diluted per share
earnings of $2.76 before extraordinary item (and before write-off of
purchased research and development costs).
Mr. Emmanuel Kampouris, Chairman and Chief Executive Officer,
remarked: "We are pleased to report record sales and earnings for
1998. These results were accomplished through exceptional performance
by our Automotive Products and Worldwide Unitary Air Conditioning
businesses and solid progress in the Americas Plumbing Products
Group. This performance was achieved despite continued economic
weakness in the Far East, global pricing pressure in Applied Air
Conditioning and an increase in our effective income tax rate. With
regard to our European Plumbing restructuring program, we are pleased
to report that all five Plumbing Products plants scheduled for
closure were closed without incident. With the accelerated closure of
these plants together with Applied Air Conditioning showing signs of
recovery, we are clearly on track to meet our 1999 earnings
estimates. In addition, the recent acquisition of the Bathroom
Products Division of Blue Circle Industries will further accelerate
the momentum in the margin and profit improvement of our European
Plumbing business."
In accordance with the segment disclosure requirements of FAS 131,
the Company has changed its public reporting to reflect its operating
management reporting structure. The following discussion reflects
those changes.
Total Sales for 1998 were a record $6.7 billion, up 11% from last
year (13% excluding $110 million of unfavorable foreign exchange).
Excluding foreign exchange effects:
-- Air Conditioning Products sales increased 12% to $3.9 billion.
Worldwide Applied Systems sales increased 10% to $2.0 billion
reflecting strong growth in the U.S., driven by continued expansion
of the commercial sales and service operations and increased
equipment sales, partly offset by the effects of competitive pricing
pressures on chillers. Overseas, increased Applied Systems sales in
most regions were substantially offset by lower volumes in the Far
East. Worldwide Unitary Systems sales increased 14% to $1.9 billion,
primarily reflecting strong new construction and increased
replacement demand due to warmer than normal weather. Overseas,
improved sales were led by strong increases in Europe and Latin
America.
-- Plumbing Products sales increased 9% to $1.5 billion. Sales in the
Americas rose 17% due to strong U.S. markets and market share gains
in both the wholesale and expanding retail distribution channels as
well as increases in Mexico. Sales in Europe and the Far East
increased 4% principally because of the effect of consolidating the
results of operations in China since November 1997.
-- Automotive Products sales increased 18% to $1.1 billion, driven by
continued strong European commercial vehicle production and higher
product content per vehicle. In addition, sales of anti-lock braking
systems (ABS) to the Company's U. S. joint venture with Meritor
Automotive, Inc. doubled from the prior year, reflecting both the
phase-in of regulations requiring ABS on all new heavy-duty trucks
and trailers and strong commercial vehicle production.
-- Medical Systems sales were $98 million for the full year 1998
compared to $50 million reported for the six months last year
following the June 30, 1997 acquisition of the medical diagnostic
businesses.
Total Operating Income increased 4% to $637 million (excluding
restructuring charges) from $612 million in 1997 (excluding the write-
off of purchased research and development costs). Operating income
increased 6% excluding $10 million of unfavorable foreign exchange.
Excluding foreign exchange effects and restructuring charges:
-- Air Conditioning Products operating income increased 1% to $386
million. Gains in Worldwide Unitary Systems were substantially offset
by declines in the Worldwide Applied Systems business. The
performance improvement in Worldwide Unitary Systems principally
reflects U.S. volume and margin increases. The decline in Worldwide
Applied Systems reflects global pricing pressure, lower volumes in
the Far East and a strike at the Lexington air handling products
facility in the first quarter.
-- Plumbing Products operating income increased 5% to $119 million.
Operating income increased in the Americas due to higher volume and
the benefits of low-cost sourcing. This was offset primarily by the
continued economic weakness in the Far East and restructuring related
inefficiencies in Europe.
-- Automotive Products operating income increased 22% to $153
million. Significantly increased volume and improved margins in
European operations were partly offset by reduced income in Brazil
and start-up costs of a majority-owned joint venture in the U.S.
-- Medical Systems operating loss was $21 million reflecting
continued high development costs.
Restructuring Program
In 1998 the Company committed to restructuring plans designed to
achieve lower product costs and improved operating efficiency.
Accordingly, the Company recorded charges totaling $200 million ($186
million net of tax benefits) comprised of $185 million for Plumbing
Products and $15 million for the other businesses. The Plumbing
Products charge includes costs related to the closure of five plants
in Europe and two in North America, a loss on the sale of the French
distribution operations and write-off of related goodwill. The
charges in the other businesses are principally for facility closures
and work force reductions.
Equity in Net Income of Unconsolidated Joint Ventures increased to
$27 million from $12 million in 1997, primarily as a result of strong
growth in Automotive Products' U. S. joint venture and increased
income from the Company's financing joint venture.
Interest Expense of $188 million was $4 million lower than the prior
year, due to lower average interest rates achieved through
refinancings completed earlier this year, which offset the effect of
increased debt arising from share repurchases and the acquisition of
the medical diagnostic business in June 1997.
Corporate and Other Expenses of $110 million were $5 million greater
than the prior year mainly due to increased fees associated with
selling U.S. receivables to the Company's financial services joint
venture.
Income Taxes, on income before extraordinary item and special
charges, reflect an effective rate of 40.0% in 1998 and 35.8% in
1997. The lower 1997 rate resulted from the utilization of certain
previously unrecognized tax benefits. No similar benefits were
available in 1998.
Fourth Quarter 1998 sales were $1.6 billion, an increase of 6% from
last year, with little effect from foreign exchange. Sales were
strong for both Plumbing and Air Conditioning Products' U.S.
businesses and for Automotive Products. Far East sales continued to
be weak across all businesses.
Operating income in the fourth quarter of 1998 was $130 million
(excluding restructuring charges), a decline of 9% from the 1997
quarter, with little effect from foreign exchange. A decline in Air
Conditioning Products income in the quarter was largely related to
weakness in international operations and was partially offset by
improvement in the other businesses, particularly Plumbing Products.
Comments in this earnings release contain certain forward-looking
statements which are based on management's good faith expectations
and belief concerning future developments. Actual results may differ
materially from these expectations as a result of many factors,
relevant examples of which are set forth in the Company's 1997 Annual
Report on Form 10-K and in the "Management's Discussion and Analysis"
section of the Company's Annual Report To Shareholders.
American Standard is the global, diversified manufacturer of Trane(R)
and American Standard(R) air conditioning products, American Standard
(R), Ideal Standard(R), Standard(R), Porcher(R), Armitage Shanks(R)
and Dolomite(R) plumbing products, WABCO(R) commercial and utility
vehicle braking and control systems, LARA(R) and Copalis(R) medical
diagnostic systems and DiaSorin(TM) medical diagnostic products.
The latest news release and corporate information can be heard on 888-
ASD-NEWS. Additional information on American Standard is available on
the Company's Worldwide Web site at americanstandard.com.
AMERICAN STANDARD COMPANIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
In millions except Twelve Months Ended December 31,
per share data 1998 1998 1997 1997
Reported Adjusted(a) Reported Adjusted(a)
Sales
Air Conditioning
Products $3,940 -- $3,567 --
Plumbing Products 1,510 -- 1,439 --
Automotive Products 1,106 -- 952 --
Medical Systems 98 -- 50 --
$6,654 -- $6,008 --
Operating income
(loss) before restructuring
and write-off of purchased
research & development
Air Conditioning
Products (b) 386 -- 386 --
Plumbing Products 119 -- 119 --
Automotive Products 153 -- 127 --
Medical Systems (21) -- (20) --
637 $637 612 $612
Restructuring expenses(a) 200 -- -- --
Write-off of purchased
research & development(a) -- -- 90 --
Operating income 437 637 522 612
Equity in net income of
unconsolidated
joint ventures 27 27 12 12
464 664 534 624
Interest expense 188 188 192 192
Corporate and
other expenses 110 110 105 105
Income before income
taxes and
extraordinary item 166 366 237 327
Income taxes 132 146 117 117
Income before
extraordinary item 34 220 120 210
Extraordinary loss on
retirement of debt,
net of tax 50 50 24 24
Net income (loss) $(16) $170 $96 $186
Per common share:
Basic:
Income before
extraordinary item $0.47 $3.06 $1.62 $2.85
Extraordinary loss on
retirement of debt,
net of tax 0.70 0.70 0.32 0.32
Net income (loss) ($0.23) $2.36 $1.30 $2.53
Diluted:
Income before
extraordinary item $0.46 $2.98 $1.57 $2.76
Extraordinary loss on
retirement of debt,
net of tax 0.68 0.68 0.31 0.31
Net income (loss) ($0.22) $2.30 $1.26 $2.45
Average outstanding
common shares -- basic 71.7 71.7 73.8 73.8
Average outstanding
common shares -- diluted 73.7 73.7 76.2 76.2
(a) Adjusted results exclude restructuring expenses in 1998 and write-off
of purchased in-process research and development in 1997.
(b) Financing fees paid by Air Conditioning to the Company's financial
services joint venture of $23 in 1998 and $22 in 1997 have been
reclassified to Corporate expenses upon adoption of the new segment
reporting standard as of December 31, 1998.
AMERICAN STANDARD COMPANIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
In millions except Three Months Ended December 31,
per share data 1998 1998 1997
Reported Adjusted(a) Reported
Sales
Air Conditioning Products $937 -- $883
Plumbing Products 381 -- 377
Automotive Products 295 -- 253
Medical Systems 25 -- 26
$1,638 -- $1,539
Operating income (loss)
before restructuring
Air Conditioning Products(b) 60 -- 84
Plumbing Products 40 -- 33
Automotive Products 36 -- 33
Medical Systems (6) -- (7)
130 $130 143
Restructuring expenses (a) 166 -- --
Operating income (loss) (36) 130 143
Equity in net income of
unconsolidated joint ventures 6 6 3
(30) 136 146
Interest expense 43 43 48
Corporate and other expenses 25 25 26
Income (loss) before income taxes (98) 68 72
Income taxes 19 27 26
Net income (loss) $(117) $41 $46
Per common share:
Basic $(1.66) $0.58 $0.64
Diluted $(1.66) $0.57 $0.62
Average outstanding
common shares -- basic 70.2 70.2 71.9
Average outstanding
common shares -- diluted 70.2 71.7 74.0
(a) Adjusted results exclude restructuring expenses.
(b) Financing fees paid by Air Conditioning to the Company's financial
services joint venture of $5 in 1998 and $5 in 1997 have been
reclassified to Corporate expenses upon adoption of the new segment
reporting standard as of December 31, 1998.
SOURCE American Standard Companies, Inc. |
