Johnson Controls Second-Quarter Earnings Exceed
Expectations
MILWAUKEE, April 18 Johnson Controls, Inc.
today reported second quarter earnings per diluted share of $.89, which were
above analyst expectations, but 6% below the prior year due to sharply lower
levels of domestic automotive vehicle production.
Sales for the three months ended March 31, 2001, rose 6% over the prior
year, reflecting the company's acquisition of Ikeda Bussan in Japan, new
automotive programs and increased activity by its nonresidential building
controls business. Sales for the March 2001 quarter were $4.6 billion
compared with $4.4 billion for the prior year. Operating income for the
current quarter decreased 1% to $190.6 million compared with the prior year's
$192.4 million. Net income, reflecting higher minority interests, decreased
7% to $83.0 million from $88.8 million for the second quarter of fiscal 2000.
Diluted earnings per share were $.89 compared with $.95 last year.
Automotive Results
The Automotive Systems Group had sales of $3.4 billion for the second
quarter of fiscal 2001, an increase of 5% over the prior year's $3.2 billion.
North American sales of seating, interior systems and batteries were 10% lower
than the prior year. Johnson Controls said that its revenues from the
domestic market were down less than the 16% decline in domestic industry light
vehicle production due to new business as well as its mix of customers,
including transplants, vehicle platforms and its aftermarket battery business.
European seating and interiors sales were higher than the prior year despite
adverse currency translation. The largest contributor to the year-over-year
increase were revenues associated with Ikeda Bussan, a Japanese seating
manufacturer, which was acquired in September 2000.
Automotive group operating income was $137 million for the current period
versus $147 million last year. Operating income from domestic seating and
interiors operations declined 40% on the lower North American sales. Largely
offsetting the domestic decrease were improved results from European and South
American operations, as well as increases in Asia.
Controls Results
Controls Group sales to the nonresidential buildings market increased 8%
to $1.2 billion from $1.1 billion last year. Worldwide sales of installed
control systems were higher reflecting growth in the new construction and
existing buildings markets. Revenues associated with integrated facility
management contracts were also higher.
Controls Group operating income was $53 million, 17% higher than the
$45 million reported for the 2000 period. Johnson Controls attributed the
increase to the higher activity levels and improved execution on system
installation contracts.
First-Half Results and Full-Year Outlook
Year-to-date, Johnson Controls sales were $9.1 billion or 4% above the
same period of 2000. Net income totaled $186 million ($1.99 per diluted
share), 1% lower than the 2000 first half of $188 million ($2.01 per diluted
share).
Johnson Controls said that for the full year of fiscal 2001, it continues
to anticipate that its Controls Group will achieve sales growth of 10-15% and
modest margin improvement. According to Chairman and Chief Executive Officer
James H. Keyes, the company expects the year-over-year controls sales
comparison to strengthen in the second half due to its strong backlog of
orders for installed control systems. In addition, new and regional add-ons
to existing facility management contracts are expected to ramp up during the
last six months of the year.
Mr. Keyes said that the full-year Automotive Systems Group outlook is
unchanged, with sales anticipated to exceed the prior year by 5-10%, while
operating margins are expected to decline modestly. He explained that sales
growth in the coming six months should improve unless vehicle production
levels deteriorate from current industry projections.
Mr. Keyes commented that, "While overall economic conditions, in
particular their effect on automotive sales, are limiting our growth for
fiscal 2001, we continue to believe that we will achieve record sales and net
income. This accomplishment will be a credit to our successful growth
strategies, the diversification of our businesses, customers and geographic
presence, and the dedication of our employees worldwide."
Following is a summary of supplementary full-year financial estimates for
2001:
($s in millions)
FY2000 FY2001
Actual Estimates
Capital Expenditures $547 $575-600
Depreciation $385 $425-440
Amortization of intangibles $76 $80-85
Total debt to total capitalization 41% plus or minus 38%
Interest expense,
net of interest income $112 $110-115
Minority interest in net earnings
of subsidiaries $44 $55-65
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data; unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
2001 2000 2001 2000
Net sales $4,601.6 $4,358.3 $9,056.0 $8,676.6
Cost of sales 3,980.4 3,746.3 7,794.8 7,439.5
Gross profit 621.2 612.0 1,261.2 1,237.1
Selling, general and
administrative expenses 430.6 419.6 861.4 829.7
Operating income 190.6 192.4 399.8 407.4
Interest income 4.5 4.3 10.4 7.8
Interest expense (34.6) (33.4) (67.9) (66.6)
Miscellaneous - net (1.6) 2.6 3.0 0.6
Other income (expense) (31.7) (26.5) (54.5) (58.2)
Income before income taxes and
minority interests 158.9 165.9 345.3 349.2
Provision for income taxes 61.6 65.7 133.7 138.3
Minority interest in net
earnings of subsidiaries 14.3 11.4 26.1 23.1
Net income $83.0 $88.8 $185.5 $187.8
Earnings available for common
shareholders $80.9 $86.4 $180.9 $183.0
Earnings per share
Basic $0.94 $1.01 $2.10 $2.14
Diluted $0.89 $0.95 $1.99 $2.01
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions)
March 31, September 30, March 31,
2001 2000 2000
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $272.7 $275.6 $244.2
Accounts receivable - net 2,456.7 2,355.3 2,383.0
Costs and earnings in excess of
billings on uncompleted contracts 265.1 222.4 235.4
Inventories 569.8 569.5 502.9
Other current assets 748.6 854.4 682.5
Current assets 4,312.9 4,277.2 4,048.0
Property, plant and equipment - net 2,366.2 2,305.0 2,042.9
Goodwill - net 2,134.0 2,133.3 2,058.4
Investments in partially-owned
affiliates 256.8 254.7 226.3
Other noncurrent assets 520.1 457.8 406.2
Total assets $9,590.0 $9,428.0 $8,781.8
LIABILITIES AND EQUITY
Short-term debt $321.6 $471.4 $475.0
Current portion of long-term debt 40.5 36.1 44.1
Accounts payable 2,265.2 2,308.8 2,131.5
Accrued compensation and benefits 405.5 452.4 431.3
Accrued income taxes 132.4 140.0 125.4
Billings in excess of costs and
earnings on uncompleted contracts 182.7 167.8 183.0
Other current liabilities 1,005.8 933.5 944.4
Current liabilities 4,353.7 4,510.0 4,334.7
Long-term debt 1,464.9 1,315.3 1,229.0
Postretirement health and other
benefits 162.3 168.1 167.7
Other noncurrent liabilities 624.8 621.8 423.8
Minority interest in equity of
subsidiaries 263.3 236.7 224.5
Shareholders' equity 2,721.0 2,576.1 2,402.1
Total liabilities and equity $9,590.0 $9,428.0 $8,781.8
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions; unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
2001 2000 2001 2000
Operating Activities
Net income $83.0 $88.8 $185.5 $187.8
Adjustments to reconcile net income
to cash provided by operating
activities
Depreciation 109.7 96.7 211.8 194.8
Amortization of intangibles 20.8 19.8 41.1 39.2
Equity in earnings of partially-
owned affiliates, net of dividends
received 2.4 (3.5) (4.7) (7.0)
Deferred income taxes 16.9 0.4 20.2 (1.5)
Other (14.0) (10.6) (13.4) (14.7)
Changes in working capital,
excluding acquisition of
businesses
Receivables (194.4) (126.5) (136.8) (288.2)
Inventories 11.2 25.6 1.4 13.3
Other current assets 30.9 11.4 107.0 13.4
Accounts payable and accrued
liabilities 197.9 188.4 (34.7) 219.3
Accrued income taxes (60.2) (81.4) (13.4) (41.6)
Billings in excess of costs and
earnings on uncompleted contracts 4.7 2.1 15.4 23.9
Cash provided by operating
activities 208.9 211.2 379.4 338.7
Investing Activities
Capital expenditures (142.5) (138.3) (281.1) (266.0)
Sale of property, plant and equipment
- net 8.1 5.4 13.4 9.4
Acquisition of businesses, net of
cash acquired (3.0) (11.0) (63.3) (11.0)
Additions of long-term investments (11.4) (0.6) (32.0) (3.1)
Cash used by investing activities (148.8) (144.5) (363.0) (270.7)
Financing Activities
Decrease in short-term debt - net (335.4) (112.6) (155.5) (1.4)
Addition of long-term debt 231.9 10.9 236.5 10.9
Repayment of long-term debt (3.3) (12.5) (68.6) (72.6)
Payment of cash dividends (29.0) (26.6) (58.2) (53.1)
Other (6.8) 2.4 26.5 16.2
Cash used by financing activities (142.6) (138.4) (19.3) (100.0)
Decrease in cash and cash equivalents ($82.5) ($71.7) ($2.9) ($32.0)
ADDITIONAL INFORMATION
Business Segments Three Months Six Months
(in millions, unaudited) Ended March 31, Ended March 31,
2001 2000 2001 2000
Net Sales
Automotive Systems Group $3,372.5 $3,216.3 $6,760.5 $6,554.8
Controls Group 1,229.1 1,142.0 2,295.5 2,121.8
Total $4,601.6 $4,358.3 $9,056.0 $8,676.6
Operating Income
Automotive Systems Group $137.4 $146.9 $305.5 $324.9
Controls Group 53.2 45.5 94.3 82.5
Total $190.6 $192.4 $399.8 $407.4
Earnings per Share
Basic earnings per share are computed by dividing net income, after
deducting dividend requirements on the Series D Convertible Preferred Stock,
by the weighted average number of common shares outstanding. Diluted earnings
are computed by deducting from net income the after-tax compensation expense
which would arise from the assumed conversion of the Series D Convertible
Preferred Stock, which was $.9 million and $1.1 million for the three months
ended March 31, 2001 and 2000, respectively, and $1.8 million and $2.2 million
for the six months ended March 31, 2001 and 2000, respectively. Diluted
weighted average shares assume the conversion of the Series D Convertible
Preferred Stock, if dilutive, plus the dilutive effect of common stock
equivalents which would arise from the exercise of stock options.
Three Months Six Months
(in millions) Ended March 31, Ended March 31,
2001 2000 2001 2000
Weighted Average Shares
Basic 86.5 85.6 86.3 85.5
Diluted 92.8 91.9 92.4 92.0
Foreign Currency Translation
The effect of foreign currency translation reduced sales for the three
months ended March 31, 2001 by $130 million and diluted earnings per share by
$.02. Sales were reduced by $398 million and diluted earnings per share by
$.08 for the six months ended March 31, 2001.
