Document rEnjw6QzzjpbVvZ6EVz7ypQr

Page 1 of 28 -----------BEGIN PRIVACY-ENHANCED MESSAGE-----------Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7zlT+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WA252+t/SQBFKY6r2eMj EcYxnj 4JpqRnUlUUqzvAaX7nxIc4COoj qargrMP13fgN asKG+zri6tz5p6GKcKHy6Q== <SEC-DOCUMENT>0000836102-00-000010.txt : 20001229 <SEC-HEADER>0000836102-00-000010.hdr.sgml : 20001229 ACCESSION NUMBER: 0000836102-00-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL INDEX KEY: STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: STATE OF INCORPORATION: FISCAL YEAR END: AMERICAN STANDARD COMPANIES 0000836102 AIR COND & WARM AIR HEATING 133465896 DE 1231 FILING VALUES: FORM TYPE: SEC ACT: SEC FILE NUMBER: FILM NUMBER: 10-Q 001-11415 765654 BUSINESS ADDRESS: STREET 1: STREET 2: CITY: STATE: ZIP: BUSINESS PHONE: ONE CENTENNIAL AVENUE P O BOX 6820 PISCATAWAY NJ 08855-6820 9089806000 MAIL ADDRESS: STREET STREET CITY: STATE: ZIP: 1: 2: 1114 AVENUE OF THE AMERICAS ONE CENTENNIAL AVENUE PISCATAWAY NJ 08855-6820 FORMER COMPANY: FORMER CONFORMED NAME: DATE OF NAME CHANGE: </SEC-HEADER> <DOCUMENT> <TYPE>10-Q <SEQUENCE>1 <FILENAME>0001.txt <DESCRIPTION>THIRD QTR. 10Q <TEXT> ASI HOLDING CORP 19941114 http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 2 of 28 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 OR [] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-11415 AMERICAN STANDARD COMPANIES INC. (Exact name of Registrant as specified in its charter) Delaware 13-3465896 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) One Centennial Avenue, P.O. Box 6820, Piscataway, NJ (Address of principal executive offices) 08855-6820 (Zip Code) Registrant's telephone number, including area code (732) 980-6000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. <PAGE> Common stock, $.01 par value, outstanding at October 31, 2000 69,329,711 shares PART 1. FINANCIAL INFORMATION Item 1. Financial Statements 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. ("ASH"), both Delaware Corporations. Hereinafter, "American Standard" or the "Company" will refer to the Company or to the Company and American Standard Inc. and ASH, including their subsidiaries, as the context requires. <TABLE> http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 3 of 28 <CAPTION> <s> SALES AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES UNAUDITED SUMMARY STATEMENT OF OPERATIONS (Dollars in millions except per share amounts) Three Months Ended September 30, 2000 1999 <C> $1,961 <C> $1,877 Ni 20C <C> $5, 82 COST AND EXPENSES Cost of sales Selling and administrative Other (income) expense Interest expense expenses INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES Income taxes INCOME FROM CONTINUING OPERATIONS Loss from discontinued operations, net of tax 1,475 288 (1) 51 1, 813 148 59 89 -- 1,406 289 2 47 1,744 133 55 78 (6) 4,35 9C ( 14 5, 4C 42 16 25 NET INCOME $ 89 $ 72 $ 25 PER COMMON SHARE Basic: Income from continuing operations Loss from discontinued operations Net income $ 1.28 -- $ 1.28 $ 1.11 (.09) $ 1.02 $ 3.6 $ 3.6 Diluted: Income from continuing operations Loss from discontinued operations Net income $ 1.23 -- $ 1.23 $ 1.07 (.09) $ .98 $ 3.5 $ 3.5 Average common shares outstanding Basic Diluted 69,805,720 70,671,462 70,362,8 72,381,511 73,169,250 72,504,6 <FN> </FN> </TABLE> <PAGE> See accompanying notes http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 4 of 28 Item 1. Financial Statements (continued) <TABLE> AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES UNAUDITED SUMMARY BALANCE SHEET (Dollars in millions except share data) <CAPTION> September 30, December 2000 1999 CURRENT ASSETS Cash and cash equivalents Accounts receivable Inventories Finished products Products in process Raw materials Net assets of discontinued operations held for sale Other current assets <C> $ 81 1,167 370 126 114 -- 610 50 128 <C> $ 61 986 286 99 120 -- 505 51 123 TOTAL CURRENT ASSETS 2,036 1,726 FACILITIES, less accumulated depreciation: Sept. 2000 - $587, Dec. 1999 - $571 GOODWILL OTHER ASSETS 1,371 915 644 1,414 991 555 TOTAL ASSETS $4,966 $4,686 CURRENT LIABILITIES Loans payable to banks Current maturities of long-term debt Accounts payable Accrued payrolls Other accrued liabilities TOTAL CURRENT LIABILITIES $ 80 28 587 235 896 -- 1,826 LONG-TERM DEBT RESERVE FOR POSTRETIREMENT BENEFITS OTHER LIABILITIES 2,554 398 540 TOTAL LIABILITIES 5,318 STOCKHOLDERS' DEFICIT Preferred stock, 2,000,000 shares authorized t None issued and outstanding Common stock $.01 par value, 200,000,000 Shares authorized; 69,489,115 Shares issued and outstanding In 2000; 70,742,538 in 1999 Capital surplus and other Treasury stock Accumulated deficit Foreign currency translation effects 1 597 (444) (296) (210) $ 737 19 578 225 728 -- 2,287 1, 887 436 572 5,182 " 1 595 (363) (553) (176) http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 5 of 28 TOTAL STOCKHOLDERS' DEFICIT <FN> </FN> </TABLE> <PAGE> See accompanying notes (352) $4,966 (496) $4,686 Item 1. Financial Statements (continued) <TABLE> <CAPTION> AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES UNAUDITED SUMMARY STATEMENT OF CASH FLOWS (Dollars in millions) Nine months ended September 30, 2000 1999 <S> CASH PROVIDED BY: OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash used by operations: Loss from discontinued operations Depreciation and amortization Other non-cash items Changes in assets and liabilities: Accounts receivable Inventories Accounts payable and other accruals Other assets and liabilities Net cash provided by continuing activities Net cash (used) by discontinued operations <c> $257 - 162 6 (218) (118) 66 55 210 (13) <c> $209 12 148 5 (190) (39) 62 37 244 (27) Net cash provided by operating activities 197 217 INVESTING ACTIVITIES: Purchase of property, plant and equipment Investments in affiliated companies and other businesses Investment in computer software Acquisition of Armitage/Dolomite, net of cash acquired Other Net cash (used) by investing activities (135) (29) (46) - 11 (199) (136) (41) (57) (427) 8 (653) FINANCING ACTIVITIES: Repayments of long-term debt Net change in credit facility Net change in other short-term debt Purchases of treasury stock (51) 192 (4) (131) (174) 115 13 (4) http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 6 of 28 Proceeds from issuance of long-term debt Other Net cash provided by financing activities - 460 18 6 24 416 Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (2) 20 61 $ 81 " (20) 63 $ 43 <FN> </FN> </TABLE> <PAGE> See accompanying notes AMERICAN STANDARD COMPANIES INC. NOTES TO FINANCIAL STATEMENTS Note 1. Basis of Financial Statement Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of financial data have been included. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the entire year. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 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 fourth quarter of 2000. Accordingly, Medical Systems is reported as a discontinued operation in the accompanying Unaudited Summary Statement of Operations and the Company's net investment in that segment is reported in the accompanying Unaudited Summary Balance Sheet as Net assets of discontinued operations held for sale. Financial statements for all prior periods presented have been restated to reflect these classifications. Borrowings under the revolving credit facilities of the Company's bank credit agreement (the "1997 Credit Agreement") that were previously classified as short-term debt, have been classified as long-term debt since March 31, 2000, as the Company has the ability to refinance such borrowings with long-term debt under the terms of the 1997 Credit Agreement. Note 2. Restructuring and Asset Impairment Charges As described in Note 5 of Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, in 1998 the Company committed to restructuring plans designed to achieve lower http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 7 of 28 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. In 1999, after re-evaluating its plans, the Company recorded a net $15 million restructuring and asset impairment charge that reflected: reversal of $29 million of unneeded amounts accrued in 1998 for certain Plumbing Products facilities; accrual of additional charges of $17 million for the closure of five Vehicle Control Systems manufacturing facilities; accrual of $14 million to reflect current estimates of certain other charges; and a $13 million impairment charge related to a minority equity investment that the Company does not expect to recover. <PAGE> Following is a summary of impairment accruals, and (dollars in millions): <TABLE> <CAPTION> the unpaid balances of the activity for the nine months restructuring and asset ended September 30, 2000 Balance Dec. 31, 1999 Paid in first nine months of 2000 Balance Sept. 30 2000 <S> Termination and other employee costs Other <C> $ 24.2 4.4 <c> $ 5.9 1.0 <C> $18.3 3.4 $ 28.6 $ 6.9 $21.7 </TABLE> The Company expects that essentially all of the $21.7 million balance as of September 30, 2000 will be utilized by the end of the first half of 2001. Of the 2,260 employees being terminated, 1,405 had been terminated as of September 30, 2000. Note 3. Comprehensive Income Total comprehensive income, consisting of net income and foreign currency translation effects, for the three months ended September 30, 2000 and 1999 was $121 million and $47 million, respectively, and for the nine months ended September 30, 2000 and 1999 was $223 million and $239 million, respectively. Note 4. Tax Matters As described in Note 8 of Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, there are pending German tax issues for the years 1984 through 1994. See "Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and. Capital Resources." http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 8 of 28 Note 5. Earnings Per Share The average number of outstanding shares of common stock used in computing diluted earnings per share for the three months ended September 30, 2000 and 1999 included 2,575,791 and 2,497,788 average incremental shares, respectively, for the assumed exercise of stock options and vesting of restricted stock awards. The nine-month periods ended September 30, 2000 and 1999 included 2,141,770 and 2,542,359 average incremental shares, respectively. Note 6. Impact of Recently Issued Accounting Standards In 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. <PAGE> Note 7. 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 financial statements for ASI, the Company has included the accompanying 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 nine months ended September 30, 2000 and 1999, and balance sheets as of September 30, 2000 and December 31, 1999 for the Parent Company and ASI, and the subsidiaries of the Parent Company which are not subsidiaries of ASI (the "Other Subsidiaries") for 2000 only. None of the Other Subsidiaries guarantee the debt of ASI. On December 31, 1999 the Company completed an internal reorganization whereby ASI transferred ownership of all the Other Subsidiaries and their intellectual property rights to another wholly owned subsidiary, American Standard International Inc. Prior to December 31, 1999, there were no Other Subsidiaries. The equity method of accounting is used to reflect investments of the Parent Company in ASI and Other Subsidiaries. <TABLE> <CAPTION> CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 (Unaudited) (Dollars in millions) Parent Company ASI Other Subsidiaries Eliminati <S> Sales <c> <C> $1,253 <C> $758 <C> $(50) Costs and expenses: Cost of sales Selling and administrative expenses 945 162 580 131 (50) (5) http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 9 of 28 Other (income) expense Interest expense Total expenses Income before income taxes and equity in net income of consolidated subsidiaries Income taxes Income before equity in net income of consolidated subsidiaries Equity in net income of consolidated subsidiaries $ 89 8 43 1,158 95 39 56 - (14) 8 705 53 20 33 - 5 (50) $(89) Net income $ 89 $ 56 $ 33 $(89) </TABLE> <PAGE> Note 7. Supplemental Consolidating Condensed Financial Information (continued) <TABLE> <CAPTION> <S> Sales CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (Unaudited) (Dollars in millions) Parent Company <C> AS I <C> $3,646 Other Subsidiarie <C> $2,338 Costs and expenses: Cost of sales Selling and administrative Other (income) expense Interest expense expenses Total expenses Income before income taxes and equity in net income of consolidated subsidiaries Income taxes Income before equity in net income of consolidated subsidiaries Equity in net income of consolidated subsidiaries $257 2,767 505 9 126 3,407 239 98 141 1,747 412 (31 23 2,151 187 71 ne http ://www. sec.gov/Archives/edgar/data/83 6102/000083 6102-00-000010.txt 4/25/2001 Page 10 of 28 Net income $257 $ 141 </TABLE> <TABLE> <CAPTION> <s> Sales CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 (Unaudited) (Dollars in millions) Parent Company <c> Costs and expenses: Cost of sales Selling and administrative expenses Other expense Interest expense Total expenses Income from continuing operations before income taxes and equity in net income of consolidated subsidiaries Income taxes Income from continuing operations before equity in net income of consolidated subsidiaries Loss from discontinued operations Equity in net income of consolidated subsidiaries $72 $ 116 AS I <C> $1,877 1,406 289 2 47 1,744 133 55 78 (6) II /> II II II 11 II to 1 Net income $72 </TABLE> <PAGE> Note 7. Supplemental Consolidating Condensed Financial Information (continued) <TABLE> <CAPTION> CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (Unaudited) Parent http ://www. sec.gov/Archives/edgar/data/83 6102/0000836102-00-000010.txt 4/25/2001 <s> Sales (Dollars in millions) Costs and expenses: Cost of sales Selling and administrative Other income Interest expense expenses Total expenses Income from continuing operations before income taxes and equity in net income of consolidated subsidiaries Income taxes Income from continuing operations before equity in net income of consolidated subsidiaries Loss from discontinued operations Equity in net income of consolidated subsidiaries Page 11 of 28 Company <c> ASI <c> $5,436 $ 209 4,056 864 (2) 141 5,059 377 156 221 (12) Net income $ 209 $ 209 </TABLE> <PAGE> Note 7. Supplemental Consolidating Condensed Financial Information (continued) <TABLE> CONSOLIDATING CONDENSED BALANCE SHEETS AS OF SEPTEMBER 30, 2000 (Unaudited) <CAPTION> (Dollars in millions) <S> ASSETS Current assets: Cash and cash equivalents Accounts receivable, net Inventories Net assets of discontinued held for sale Other current assets operations Parent Company <c> ASI <C> Other Subsidiaries <C> $5 571 215 50 70 $ 76 596 395 _ 70 Total current assets Facilities, net Goodwill, net 911 483 132 1,137 888 783 ttp ://www.sec.gov/Archives/edgar/data/83 6102/000083 6102-00-000010 .txt 4/25/2001 Investment in subsidiaries Other assets Total assets LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Loans payable to banks Current maturities of long-term debt Other current liabilities Total current liabilities Long-term debt Reserve for postretirement benefits Intercompany accounts, net Other long-term liabilities Total liabilities Total stockholders' (deficit) equity Total liabilities and stockholders' (deficit) equity $128 $128 454 $1,980 Page 12 of 28 190 $ 2,998 $480 480 (352) $128 ===== $ 26 956 982 2,071 195 349 326 3,923 (1,943) $1,980 $ 80 2 774 856 483 203 (829) 214 927 2,071 $2,998 </TABLE> <PAGE> Note 7. Supplemental Consolidating Condensed Financial Information (continued) <TABLE> CONSOLIDATING CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 1999 <CAPTION> (Dollars in millions <S> ASSETS Current assets: Cash and cash equivalents Accounts receivable, net Inventories Net assets of discontinued operations held for sale Other current assets Total current assets Facilities, net Goodwill, net Investment in subsidiaries Other assets Parent Company <C> $ (145) ASI <C> Other Subsidiar <C> $11 448 244 51 38 792 503 148 455 $ 5 2 8 1 Total assets $ (145) $ 1,898 $ 2,7 to to http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.1xt 4/25/2001 t > CM I O') 00 Page 13 of 28 O') CH CVJ LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Loans payable to banks Current maturities of long-term debt Other current liabilities Total current liabilities Long-term debt Reserve for postretirement benefits Intercompany accounts, net Other long-term liabilities Total liabilities Total stockholders' (deficit) equity Total liabilities and stockholders' (deficit) equity </TABLE> <PAGE> $351 351 (496) $ (145) $ 586 18 750 1,354 1,556 204 431 299 3,844 (1,946) $ 1,898 Note 7. Supplemental Consolidating Condensed Financial Information (continued) <TABLE> CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (Unaudited) <CAPTI0N> (Dollars in millions) <S> Cash provided (used) by: Operating activities: Net income Adjustments to reconcile net income to net cash provided (used) by operations: Depreciation and amortization Other non-cash items Equity in net income of subsidiaries Changes in assets and liabilities: Accounts receivable Inventories Accounts payable and other accruals Other assets and liabilities Net cash provided by continuing operations Net cash used by discontinued operations Net cash provided by operating activities Investing Activities: Purchase of property, plant and equipment Investments in affiliated companies and other-businesses Investments in computer software Parent Company <C> AS I <C> Oth Subsic <c> $257 $141 $1 (257) 2 (2) - - (16) 54 6 (118) 26 64 1 174 (13) 161 (11) 16 (27) 1 (1 (1 (1 ( ( http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 14 of 28 Other Net cash used by investing activities Financing activities: Repayments of long-term debt Net change in credit facility Net change in other short-term debt Purchases of treasury stock Increase in loan from subsidiary Other Net cash provided (used) by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash Equivalents Cash and cash equivalents at beginning of Period Cash and cash equivalents at end of period ii i i 1 *3- (16) (131) 129 18 16 (5) (27) (47) 36 - (129) " (140) -- (6) 11 (1 1 1 II </> i II I II i II Ui 1 ! II i </> 11 II II II II </TABLE> <PAGE> Note 7. Supplemental Consolidating Condensed Financial Information (continued) <TABLE> <CAPTION> CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOW FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (Unaudited) (Dollars in millions) Parent Company AS I <S> Cash provided (used) by: Operating activities: Net income Adjustments to reconcile net income to net cash provided (used) by operations: Loss from discontinued operations Depreciation and amortization Other non-cash items Equity in net income of subsidiary Changes in assets and liabilities: Accounts receivable Inventories Accounts payable and other accruals Other assets and liabilities <C> <C> $209 $209 (209) 12 148 5 (190) (39) 62 37 Net cash provided by continuing operations Net cash used by discontinued operations - 244 (27) Eliir <C> http ://www. sec. gov/Archives/edgar/data/83 6102/000083 6102-00-000010.txt 4/25/2001 Page 15 of 28 Net cash provided by operating activities Purchase of property, plant and equipment Investments in affiliated companies and other businesses Investments in computer software Acquisition of Armitage/Dolomite Other Net cash used by investing activities Financing activities: Proceeds from issuance of long-term Repayments of long-term debt Net change in credit facility Net change in other short-term debt Purchases of treasury stock Change in intercompany accounts,net Other debt Net cash provided by financing activities Effect of exchange rate changes on cash and cash equivalents .Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period </TABLE> <PAGE> - 217 (136) (2) (41) (57) (427) 8 (2) (653) 460 (174) 115 13 (4) (6) 6 12 (4) 2 416 $- (20) 63 $ 43 Note 8. Segment Data <TABLE> <CAPTION> Summary Segment and Income Data (Dollars in millions) (Unaudited) Three Months Ended September 30, <s> Sales: Air Conditioning Systems Plumbing Products Vehicle Control Systems and Services 2000 <C> $ 1,257 450 254 1999 <C> $ 1,179 443 255 <C> $ Segment income: Air Conditioning Systems and Services $ 1,961 $ 162 $ 1,877 $ 141 $ http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Plumbing Products Vehicle Control Systems Equity in net income of unconsolidated joint ventures Interest expense Corporate and other expenses Income from continuing operations before income taxes </TABLE> 40 30 232 7 239 51 40 $ 148 Page 16 of 28 42 27 210 9 219 47 39 $ 133 For a comparative analysis of this Summary Segment and Income Data, see Management's Discussion and Analysis of Financial Position and Results of Operations. <PAGE> PART 1. FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations for the Third Quarter and First Nine Months of 2000 Compared with the Third Quarter and First Nine Months of 1999 The Company achieved record third quarter sales in 2000 of $1,961 million, an increase of $84 million, or 4% (8% excluding unfavorable foreign exchange effects), from $1,877 million in the third quarter of 1999. Sales increased 7% for Air Conditioning Systems and Services and 2% for Plumbing Products, but were flat for Vehicle Control Systems. Segment income for the third quarter of 2000 was also a record at $232 million, an increase of $22 million, or 10% (14% excluding foreign exchange effects), from $210 million in the third quarter of 1999. Segment income increased 15% for Air Conditioning Systems and Services and 11% for Vehicle Control Systems, but declined 5% for Plumbing Products. Sales for the first nine months of 2000 were $5,829 million, an increase of $393 million, or 7% (12% excluding foreign exchange effects), from $5,436 million in the first nine months of 1999. Sales increased 9% for Air Conditioning Systems and Services, 6% for Plumbing Products and 2% for Vehicle Control Systems. Segment income was $672 million for the first nine months of 2000, an increase of 13% (16% excluding the unfavorable effects of foreign exchange), compared with $594 million in the first nine months of 1999. Segment income increased 17% for Air Conditioning Systems and Services, 7% for Plumbing Products and 9% for Vehicle Control Systems. The sales and segment income amounts reflect results from continuing operations only, as the Medical Systems business is reported as a discontinued operation. http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 17 of 28 Sales for Air Conditioning Systems and Services were $1,257 million for the third quarter of 2000, an increase of 7% (8% excluding unfavorable foreign exchange effects) from $1,179 million for the third quarter of 1999 due to strong worldwide commercial business. Worldwide commercial applied and commercial unitary sales increased 10% (12% excluding foreign exchange effects) due to significant gains in the U.S. equipment and service businesses, as well as in the Far East. This double-digit growth globally was a strong performance relative to market growth. U.S. sales of commercial products increased because of higher volumes, reflecting continued strength in the U.S. replacement, renovation and repair markets and increased market share, which more than offset the effect of modest slowing in commercial construction. Sales benefited from expansion of the national and global accounts program, the acquisition of sales and service offices and sales of Integrated Comfort Systems, which combine new high-efficiency chillers, air handlers, terminal products and controls into one system. Sales outside the U.S., which are substantially commercial, improved significantly in the Far East outside of China, and grew solidly in Latin America and Europe which benefited from a new line of high-efficiency chillers. The recovery in the Far East was driven primarily by expansion of the global accounts business and stronger markets. Residential sales in the U.S., which represent less than 12% of total Company sales, declined because the effects of cooler-than-normal weather in the Midwest and Northeast more than offset increases in the warmer Sunbelt markets. In addition, 1999 sales had benefited from a warmer-than-normal summer in most areas of the U.S. The residential business decline, however, was less than the overall market decline. Sales for Air Conditioning Systems and Services for the first nine months of 2000 increased 9% (12% excluding foreign exchange effects) to $3,616 million from $3,309 million in the first nine months of 1999, primarily for the same reasons explaining the third quarter increase. <PAGE> Segment income for Air Conditioning Systems and Services increased 15% (with little effect from foreign exchange) to $162 million in the third quarter of 2000 from $141 million in the 1999 third quarter, as margins improved from 12.0% to 12.9%. This improvement was entirely attributable to the global commercial business that benefited from increased volume in the U.S., Far East and Europe. Segment income for the residential business declined from an exceptionally good prior-year performance, primarily reflecting the effects of weather variations year-to-year. Segment income for the first nine months of 2000 increased 17% (with little foreign exchange effect) to $430 million from $369 million in the first nine months of 1999. This gain resulted essentially for the reasons mentioned for the third quarter increase and first-half earnings gains for the residential business which exceeded the third-quarter decline. Sales for Plumbing Products increased 2% (8% excluding unfavorable foreign exchange effects) to $450 million in the third quarter of 2000 from $443 million in the third quarter of 1999, primarily as a result of improvements in Europe, Asia and the Americas. Excluding foreign exchange, European sales increased primarily on higher volume, reflecting improving economic conditions and market share gains. The continuing improvement in Asian economies resulted in volume increases in that region, including a small gain in China. Sales in the Americas increased despite a slowing in the U.S. market. U.S. sales increased, with fittings sales up sharply and fixtures sales flat. Latin American sales increased moderately. Sales of Plumbing Products for the first nine months of 2000 increased 6% (12% excluding foreign exchange effects) to $1,389 million from $1,316 million in the first nine months of 1999. This increase was due principally to the same factors affecting third-quarter sales, except that the U.S. market slow-down had little effect on first-half fixtures sales. Segment income of Plumbing Products for the third quarter of 2000 was http ://www. sec.gov/Archives/edgar/data/83 6102/0000836102-00-000010.txt 4/25/2001 Page 18 of 28 $40 million, a decrease of 5% (but an increase of 3% excluding unfavorable foreign exchange effects) from $42 million for the 1999 third quarter. The increase (excluding foreign exchange) was principally attributable to volume increases in Europe and the Far East and in U.S. fittings. European operations continue to benefit from the restructuring implemented as part of a lower-cost sourcing program. In the Americas fixtures business, segment income and margins declined because its cost structure was adversely affected by higher energy costs, currency effects and higher labor costs in Latin America. Margin expansion was achieved in Europe, Asia and in the U.S. fittings business, but as a result of the degradation in the Americas fixtures business, overall margins declined from 9.5% in the third quarter of 1999 to 8.9% in the third quarter of 2000. Segment income for the first nine months of 2000 increased by 7% (11% excluding foreign exchange effects) to $130 million from $122 million for the first nine months of 1999, primarily due to volume increases and cost improvements, tempered somewhat by lower third quarter results for the Americas fixtures business. Sales of Vehicle Control Systems for the third quarter of 2000 were flat at $254 million, but increased 10% excluding unfavorable foreign exchange effects. The increase (excluding foreign exchange effects) resulted from improved market demand, increased penetration with core products, new vehicle control system products (higher content per vehicle) and volume expansion in Asia. Unit volumes of truck and bus production increased 7% in Western Europe in the third quarter of 2000 compared with the 1999 third quarter. Additionally, sales increased significantly in Brazil, primarily as a result of a sharp increase in that country's commercial vehicle production. Shipments of anti-lock braking systems to the Company's U.S. braking systems joint venture decreased 10% as U.S. truck production declined 22%. Sales of Vehicle Control Systems for the first nine months of 2000 were $824 million, an increase of 2% (12% excluding unfavorable foreign exchange effects) from $811 million in the first nine months of 1999 primarily for the reasons explaining the third quarter increase. <PAGE> Segment income for Vehicle Control Systems for the third quarter of 2000 increased $3 million ($7 million excluding unfavorable foreign exchange effects) to $30 million from $27 million in the third quarter of 1999. This primarily reflected higher volumes in Europe and Asia, together with a smaller gain in Brazil. Margins improved from 10.6% in the third quarter of 1999 to 11.8% in the third quarter of 2000. Segment income for Vehicle Control Systems for the first nine months of 2000 was $112 million, an increase of 9% (26% excluding unfavorable foreign exchange effects) from $103 million in the first nine months of 1999, principally for the same reasons cited for the third quarter increase. Other Summary Income Data Items Equity in net income of unconsolidated joint ventures was $7 million in the third quarter of 2000, compared with $9 million in the year-earlier quarter, and was $26 million in the first nine months of 2000 compared with $27 million in the 1999 nine months. This reflected a decrease in earnings of Vehicle Control Systems' U.S. braking systems joint venture, as a result of the slowdown in U.S. heavy-duty truck production. Earnings of Air Conditioning Systems and Services' compressor manufacturing joint venture and the Company's financial services joint venture were essentially even with last year. Interest expense increased by $4 million in the third quarter of 2000 and by $8 million in the first nine months of 2000 compared to the. year-earlier quarter and first nine months, primarily due to higher average interest rates. Corporate and other expenses increased by $1 million in the third quarter of 2000 and by $20 million in the first nine months of 2000 http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 19 of 28 compared to the year-earlier quarter and first nine months. These increases were mainly due to: increased minority interest in higher income of consolidated joint ventures; transition costs due to management changes; increased receivables discount fees paid to the financial services joint venture as a result of higher sales; and higher incentive compensation accruals due to profitability improvement. The income tax provision for the third quarter of 2000 was $59 million and for the first nine months of 2000 was $169 million, or 39.75% of income from continuing operations, compared with provisions of $55 million and $156 million, or 41.5% of income from continuing operations in the comparable periods of 1999. The effective income tax rate is lower in 2000 primarily because of an internal reorganization of the Company's subsidiary ownership that should be more tax efficient. <PAGE> Liquidity and Capital Resources Net cash provided by operating activities, after cash interest paid of $146 million, was $197 million for the first nine months of 2000, compared with net cash provided of $217 million for the same period of 1999. The $20 million decrease resulted primarily from an increase in net working capital. Accounts receivable and inventories increased in the first nine months of both years, primarily reflecting overall growth of the Company. The receivables increase of $218 million in the first nine months of 2000 was moderately larger than the nine-month 1999 increase of $190 million primarily because of growth and a small increase in average days outstanding. The inventory increase in 2000 of $118 million was substantially larger than in 1999, as turnover was nine-tenths of a turn lower and reflected a decision to increase certain air conditioning inventories to serve customers better in the North American market. The increase in accounts payable and accruals reflected growth of the business and timing differences in accruals and payments. The Company made capital expenditures of $164 million for the first nine months of 2000, including $29 million of investments in affiliated companies and other businesses. This compared with capital expenditures of $177 million in the 1999 period, including $41 million of investments in affiliated companies and other businesses (but excluding the Armitage/Dolomite acquisition described below). The Company also invested $46 million in computer software in the first nine months of 2000, compared with $57 million in the 1999 period. Additionally, in the first nine months of 2000, the Company purchased approximately 3.2 million shares of its common stock for $131 million pursuant to the Company's program, approved by the Board of Directors in July 1998, to repurchase up to $300 million of shares of common stock through July 8, 2001, Purchases under the repurchase plan are for the purpose of offsetting the dilutive effects of stock-based awards under certain of the Company's benefit plans. On August 3, 2000, the Company announced a definitive agreement to sell its DiaSorin unit, the largest part of its medical business, to a group consisting of SNIA, a high-tech industrial firm; Interbanca, a leading Italian merchant bank; Iniziativa Piemonte, a private equity firm; and four members of DiaSorin's current management. The sale closed on November 6, 2000 and completed the Company's exit from the medical business. In January 1997 the Company entered into the 1997 Credit Agreement which requires no repayment of principal prior to its expiration in 2002 and provides the Company with senior secured credit facilities aggregating $1.75 billion as follows: (a) a $750 million U.S. dollar revolving credit facility and a $625 million multi-currency revolving credit facility (the "Revolving Facilities"), and (b) a $375 million multi-currency periodic access credit facility. Up to $500 million of the Revolving Facilities may be used to issue letters of credit. The 1997 Credit Agreement contains restrictive covenants http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 20 of 28 and other requirements with which the Company believes it is currently in compliance. 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, 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 increase the limit on annual lease payments and to obtain consent for the Company to sell its Medical Systems business. In September 2000, the 1997 Credit Agreement was amended to extend the Company's authorization annually to repurchase up to $100 million of its Common Stock beyond July 9, 2001, to expand the Company's authorization, for hedging purposes, to enter into commodity purchase or option agreements and credit derivative agreements, and to increase the amount of equity the Company is authorized to invest in its receivable financing venture. <PAGE> Borrowings under the revolving credit facilities of the Company's 1997 Credit Agreement that were previously classified as short-term debt, have been classified as long-term debt since March 31, 2000, as the Company has the ability to refinance such borrowings with long-term debt under the terms of the 1997 Credit Agreement. At September 30, 2000, the Company had borrowings of $769 million outstanding under the Revolving Facilities. There was $523 million available under the Revolving Facilities after reduction for borrowings and for $83 million of letters of credit usage. The Company's foreign subsidiaries had $73 million available at September 30, 2000, under overdraft facilities that can be withdrawn by the banks at any time. In addition, the Company's operations in China have $16 million available under bank credit facilities after reduction for borrowings of $19 million and letters of credit usage of $20 million. 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 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. 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. 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 http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 21 of 28 purchase price of the Armitage/Dolomite acquisition. The May 28, 1999 sale of Senior Notes, which are not subject to redemption, was made pursuant to the 1998 Shelf Registration (see Note 4 of Notes to Financial Statements). 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 described in Note 7 of Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, there are pending German Tax issues for the years 1984 through 1990. There has been no change in the status of these issues since that report was filed. <PAGE> 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. Forward-looking statements can be identified by the use of words such as "believe," "expect," "plans," "strategy," "prospects," "estimate," "project," "anticipate" and other words of similar meaning in connection with a discussion of future operating or financial performance. This Report on Form 10-Q includes important information as to risk factors in the "Notes to Financial Statements" under the headings "Restructuring and Asset Impairment Charges," "Tax Matters," and "Impact of Recently Issued Accounting Standards" and in the section titled "Management's Discussion and Analysis of Results of Operations and Financial Position." 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; transactions or other events affecting the need for, timing and extent of the Company's capital expenditures; the extent of and the costs at which the Company effects repurchases of its common stock; and the extent to which the Company reduces outstanding debt. PART II. OTHER INFORMATION http ://www. sec.gov/Archives/edgar/data/83 6102/0000836102-00-000010.txt 4/25/2001 Page 22 of 28 Item 1. Legal Proceedings. For a discussion Analysis of Financial Capital Resources" in reference. of German Condition Part I of tax issues see "Management's Discussion and and Results of Operations -- Liquidity and this report which is incorporated herein by Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. The exhibits listed on the accompanying Index to Exhibits are filed as part of this quarterly report on Form 10-Q. (b) Reports on Form 8-K. During the fiscal quarter ended September 30, 2000, the Company filed no Current Reports on Form 8-K <PAGE> SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN STANDARD COMPANIES INC. /s/ G. Ronald Simon Vice President and Controller (Principal Accounting Officer) November 14, 2000 <PAGE> AMERICAN STANDARD COMPANIES INC. INDEX TO EXHIBITS (The File Number of the Registrant, American Standard Companies Inc. is 1-11415) http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 23 of 28 Exhibit No. Description (4) (i) Form of Sixth Amendment dated as of September 25, 2000 to the Amended and Restated Credit Agreement- dated as of January 31, 1997 among the Company, certain subsidiaries of the Company, the financial institutions party thereto and the Chase Manhattan Bank, as Administrative Agent; filed herewith. (12) Ratio of Earnings to Fixed Charges (27) Financial Data Schedule </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-4 < SEQUENCER < FILENAME>0002.txt <DESCRIRTION>SIXTH AMENDMENT TO THE CREDIT AGREEMENT <TEXT> Exhibit (4)(i) SIXTH AMENDMENT (this "Sixth Amendment") dated as of September 25, 2000 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 Mexican-based Calorex water heating business, (ii) consent to the sale by ASI of its German-based Perrot disc drum brake business, (iii) amend Section 3.04(a)(C) of the Credit Agreement, (iv) amend Section 6.05(b) of the Credit Agreement and (v) amend the definition of "Guaranteed Swap Obligations" contained in the Domestic Guarantee. The undersigned Lenders and the Agents are willing to grant such consents 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 For purposes of this Sixth Amendment, shall have the meanings set forth below: the following terms http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 24 of 28 "Calorex Water Heating Business Sale" shall mean the sale, as defined in the letter dated September 7, 2000 from Thomas S. Battaglia to each of the Lenders, to one or more third parties in one or more transactions approved by ASI1s Board of Directors of, whether by means of the sale of capital stock or assets, or both, ASI's Mexican-based Calorex Water Heating Business. "Disc-Drum Brake Business Sale" shall mean the sale, as defined in the letter dated September 7, 2000 from Thomas S. Battaglia to each of the Lenders, 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, ASI's German-based Disc-Drum Brake Business. ARTICLE II. AMENDMENTS TO CREDIT AGREEMENT 3.04(a)(C) follows: SECTION 2.01. Amendment of Section 3.04(a)(C). Section of the Credit Agreement is hereby amended to read in its entirety as "(C) to finance the repurchase by Holding (y) in an aggregate amount not to exceed $308,000,000 of shares of its common stock and (z) in an additional aggregate amount not to exceed $400,000,000 of shares of its common stock; provided that the aggregate amount of repurchases by Holding pursuant to clause (z) shall not exceed $100,000,000 in each consecutive 12-month period commencing on July 9, 1998." SECTION 2.02. Amendment to Section 6.05(b) of the Credit Agreement. Section 6.05(b) of the Credit Agreement is hereby amended to read in its entirety as follows: "(b) Investments in receivables owing to ASI and its Subsidiaries and payable or dischargeable in accordance with customary trade terms, and Investments in the Unified Receivables Company in an aggregate amount not to exceed (i) $20,000,000 and for each fiscal year beginning January 1, 1998 through December 31, 2000, an amount equal to 110% of the amount available in the immediately preceding year and (ii) $50,000,000 for each fiscal year beginning on or after January 1, 2001;". <PAGE> ARTICLE III. CONSENT TO CALOREX WATER HEATING BUSINESS SALE AND DISC-DRUM BRAKE BUSINESS SALE Pursuant to Section 6.02(a)(ii)(1) of the Credit Agreement, the undersigned Lenders hereby consent to the Calorex Water Heating Business Sale and the Disc-Drum Brake Business Sale, provided that each of such sales is conducted in compliance with clauses (2) through (5) of Section 6.02(a)(ii) of the Credit Agreement. ARTICLE IV. AMENDMENT TO DOMESTIC GUARANTEE SECTION 4.01. Amendment of Certain Definition contained in the Domestic Guarantee. The definition of "Guaranteed Swap Obligations" contained in the Domestic Guarantee is hereby amended to read as follows: ""Guaranteed Swap Obligations" shall mean the obligations under (i) existing interest rate and currency exchange agreements entered into by any of the Borrowers or Guarantors or any of their respective Subsidiaries (the "Obligors") with any financial institution http://www.sec. gov/Archives/edgar/data/83 6102/000083 6102-00-000010.txt 4/25/2001 Page 25 of 28 which is a "Lender" under the 1993 Credit Agreement and (ii) any other (x) interest rate and currency exchange agreement substantially in the form of the Interest Rate and Currency Exchange Agreement as published by the International Swap Dealers' Association Inc., (y) commodity purchase or option agreements entered into in order to manage existing or anticipated commodity price risks and (z) credit derivatives (including any other credit risk protection arrangements) entered into to hedge against changes in market prices of ASI's debt obligations and, in the case of clauses (x), (y) and (z), not for speculative purposes by any Obligor with any financial institution which is a "Lender" (as the term is used above) both as of the date on which the Swap Agreement is entered into and as of the date on which any action is taken pursuant to this Guarantee ("Swap Provider") (the agreements referred to in (i) and (ii) being together "Swap Agreements"). ARTICLE V. 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 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 VI. EFFECTIVENESS The consents provided for in Article III hereof and the amendments provided for in Articles II and IV 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 <PAGE> (c) all legal matters incidental to this Sixth Amendment shall be satisfactory to the Administrative Agent and to Cravath, Swaine & Moore, counsel for the Administrative Agent. http ://www.sec.gov/Archives/edgar/data/83 6102/000083 6102-00-000010.txt 4/25/2001 Page 26 of 28 ARTICLE VII. MISCELLANEOUS SECTION 7.01 Credit Agreement. Except as specifically stated herein, the Credit Agreement shall continue in full force and effect in accordance with the provisions thereof. As used therein, the terms "Agreement", "herein", "hereunder", "hereto", "hereof" and words of similar import shall, unless the context otherwise requires, refer to the Credit Agreement as modified hereby. SECTION 7.02. APPLICABLE LAW. THIS SIXTH AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,THE LAWS OF THE STATE OF NEW YORK. SECTION 7.03. 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 Sixth 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 7.03 shall survive the termination of the Credit Agreement. SECTION 7.04. Counterparts. This Sixth 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. Delivery of an executed counterpart of a signature page of this Sixth Amendment by telecopy shall be effective as delivery of a manually executed counterpart of this Sixth Amendment. IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment to be duly executed by their duly authorized officers, all as of the date first above written. </TEXT> </DOCUMENT> <D0CUMENT> <TYPE>EX-12 <SEQUENCE>3 <FILENAME>0003.txt <DESCRIPTION>RATIO OF EARNINGS TO FIXED CHARGES <TEXT> <TABLE> AMERICAN STANDARD COMPANIES INC. COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES (Dollars in Millions) <CAPTION> For the Years ended December <s> Income from continuing operations before income taxes 1995 <C> $234.0 1996 <C> $71.1 1997 <C> $347.0 1998 <C> $189.8 1 <C> $45 Equity in net (income) loss of associated companies net of dividends received 11.0 11.8 (2.9) (3.6) ( http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 Page 27 of 28 Amortization of capitalized interest Interest expense Rental expense factor 1.1 213.3 23.0 1.3 198.2 27.3 1.4 192.2 25.0 1.6 188.4 26.5 IS 3 Earnings available for fixed charges Interest expense Capitalized interest Rental expense factor $482.4 $309.7 $562.7 $402.7 $67 $213.3 4.0 23.0 $198.2 3.9 27.3 $192.2 3.8 25.0 $188.4 4.5 26.5 $1S 3 Fixed charges $240.3 $229.4 $221.0 $219.4 $22 Ratio of earnings to fixed charges (a) 2.0 1.3 2.5 1.8 <FN> a) For the purpose of computing the ratio of earnings to fixed charges, fixed charges consist of interest on debt (including capitalized interest), amortization of debt discount and expense, and a portion of rentals determined to be representative of interest. Earnings consist of consolidated net income before income taxes, plus fixed charges other than capitalized interest but including the amortization thereof, adjusted by the excess or deficiency of dividends over income of entities accounted for by the equity method. </FN> </TABLE> </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-27 <SEQUENCE>4 <FILENAME>0004.txt <DESCRIPTION>FINANCIAL DATA SCHEDULE <TEXT> <TABLE> <S> <C> <ARTICLE> <MULTIPLIER> 5 1,000,000 <CURRENCY> U.S. DOLLARS <S> <PERIOD-TYPE> <FISCAL-YEAR-END> <PERIOD-START> <PERIOD-END> <EXCHANGE-RATE> <CASH> <C> 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 1 81 <SECURITIES> 0 http://www.sec.gov/Archives/edgar/data/836102/0000836102-00-000010.txt 4/25/2001 <RECEIVABLES> <ALLOWANCES> <INVENTORY> <CURRENT-ASSETS> <PP&E> <DEPRECIATION> <TOTAL-ASSETS> <CURRENT-LIABILITIES> <BONDS> <PREFERRED-MANDATORY> <PREFERRED> <COMMON> <OTHER-SE> <TOTAL-LIABILITY-AND-EQUITY> <SALES> CTOTAL-REVENUES> <CGS> ' <TOTAL-COSTS> <OTHER-EXPENSES> <LOSS-PROVISION> <INTEREST-EXPENSE> <INCOME-PRETAX> <INCOME-TAX> <INCOME-CONTINUING> <DISCONTINUED> <EXTRAORDINARY> <CHANGES> <NET-INCOME> <EPS-BASIC> <EPS-DILUTED> </TABLE> </TEXT> </DOCUMENT> </SEC-DOCUMENT> -----------END PRIVACY-ENHANCED MESSAGE- 1,204 37 610 2,036 1,958 587 4,966 1,826 2,554 0 0 1 (353) 4,966 5,829 5,829 4,358 4,358 " (4) 10 149 426 169 257 0 0 0 257 3.65 3.54 http://www. sec. gov/Archives/edgar/data/83 6102/0000836102-00-000010.txt 4/25/2001