Johnson Controls Reports Third Quarter Earnings
15 July 1997
Johnson Controls Reports Record Third Quarter Earnings
MILWAUKEE, July 15 -- Johnson Controls, Inc.
(JCI) today reported that for its third fiscal quarter, fully diluted earnings
per share from continuing operations rose to a record $.81 from $.69 a year
ago.
Mr. James H. Keyes, Johnson Controls chairman and chief executive officer,
said that sales for the third quarter of fiscal 1997 rose 16% to
$2,879.3 million from $2,482.0 million for the same quarter of fiscal 1996.
Operating income increased 28% to $162.4 million from the prior year's
$126.9 million. Income from continuing operations rose to $74.4 million, up
17% from $63.5 million for the third quarter of fiscal 1996.
All prior year amounts have been restated to reflect the Plastic Container
division as a discontinued operation and to reflect the 2 for 1 stock split on
March 31, 1997.
For the third quarter of fiscal 1997, sales by the company's Automotive
Systems Group increased 21% to $2,105.7 million compared with $1,737.9 million
for the period one year ago. The October 1996 acquisition of Prince, an
interior systems company based in Michigan, accounted for nearly two-thirds of
the revenue increase. Mr. Keyes commented that he was pleased with the
performance of Prince which continues to meet its financial targets. In
addition, North American seating operations experienced double-digit growth
due to new seating contracts for sport utility vehicles, vans and light
trucks. Johnson Controls said that seating sales in the European market were
also higher before the impact of lower currency exchange rates.
The Battery operation, which is part of the Automotive Systems Group, also
had higher sales. Unit shipments to the replacement and original equipment
automotive markets were a record. The company said that it now holds the
largest share of the battery market in North America as a result of growth by
its existing customers and the addition of new accounts. The launch of
shipments to fulfill its new contract to supply the DieHard Gold to Sears,
Roebuck & Co. (NYSE: S), which is effective October 1, 1997, will further
strengthen its market leadership.
Automotive Systems Group operating income was up substantially from the
1996 level despite the impact of the strike at Chrysler's Mound Street
facility which reduced the company's sales of seats, overhead and door systems
and other components used in Jeep and other Chrysler vehicles. Johnson
Controls said the lost production reduced its fully diluted earnings in the
current quarter by $.05 per share.
Controls Group sales increased 4% to $773.6 million for the third quarter,
up from 1996's $744.1 million. The gain primarily reflects a higher level of
performance contracting activity in the North American existing buildings
market. Also stronger were integrated facility management sales in the
domestic and European commercial markets, as well as system installation sales
in the U.S. construction market. Operating income and margin percentage for
the Group were higher than the prior year amount. Worldwide orders for
control systems increased, but at a rate below management's expectations. "As
a result," Mr. Keyes said, "we now anticipate that our Controls Group sales
for the full year of 1997 will increase 5-10%, which is lower than expected
earlier in the year."
Sales for the first nine months of fiscal 1997 rose 25% to
$8,384.2 million from $6,724.5 million for the same period of fiscal 1996.
Operating income increased 27% to $409.6 million (before special charges
incurred during the second quarter) from the prior year's $322.0 million.
Income from continuing operations rose to $171.4 million (before special
charges), up 18% from $145.1 million for the first nine months of fiscal
1996. Fully diluted earnings per share from continuing operations were
$1.85 (before special charges) versus $1.57 for 1996.
Mr. Keyes said that, "Overall, Johnson Controls continues to enjoy a
strong rate of sales and earnings growth. Our customers in both our
automotive and controls businesses recognize the benefits of allowing our
company to play an expanded role in their operations, providing them with
improved product quality and service at lower costs. We are confident that
1997 will be Johnson Controls seventh consecutive year of record earnings and
51st year of consecutive sales increases."
Johnson Controls is a global market leader in automotive systems and
building controls. Through its Automotive Systems Group, it supplies seating
systems, interior systems and batteries. The Controls Group serves the
nonresidential buildings market with control systems and services, and
integrated facility management. Founded in 1885, it operates from more than
500 locations worldwide. Johnson Controls (JCI) securities are listed on the
New York Stock Exchange.
Certain matters discussed in this news release are "forward looking
statements" as defined in the Private Securities Litigation Reform Act (PSLRA)
of 1995, which involve risks and uncertainties, and are subject to change
based on various important factors. Johnson Controls wishes to take advantage
of the "safe harbor" provisions of the PSLRA by cautioning that numerous
important factors as outlined in the Company's Form 8-K (filed with the SEC on
9/27/96), among others, in some cases have affected, and in the future could
affect, the Company's actual results and could cause its actual consolidated
results to differ materially from those expressed in this release.
Johnson Controls, Inc.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share; unaudited)
For the Three Months
Ended June 30,
1997 1996 % Change
(Restated)
Net sales $2,879.3 $2,482.0 16%
Cost of sales 2,445.9 2,132.5
Gross profit 433.4 349.5
Selling, general and administrative expenses 271.0 222.6
Operating income 162.4 126.9 28%
Interest income 2.5 2.1
Interest expense (28.5) (18.9)
Miscellaneous - net 5.4 6.5
Other income (expense) (20.6) (10.3)
Income before income taxes and minority
interests 141.8 116.6
Provision for income taxes 60.2 47.3
Minority interests in net earnings of subsidiaries 7.2 5.8
Income from continuing operations 74.4 63.5 17%
Discontinued operations (b)
Income from discontinued operations, net of
applicable provision for income taxes of $5.0,
and minority interests 0.00 5.8
Net income $74.4 $69.3
Earnings available for common shareholders $72.1 $66.9
Earnings per share from continuing operations (e)
Primary $0.85 $0.73
Fully diluted $0.81 $0.69 17%
Earnings per share from discontinued operations (e)
Primary $0.00 $0.07
Fully diluted $0.00 $0.07
Earnings per share (e)
Primary $0.85 $0.80
Fully diluted $0.81 $0.76
See Footnotes.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share; unaudited)
For the Nine Months Ended June 30,
1997 1996
Nonrecurring % Change vs.
Operations items Total (Restated) Operations
Net sales $8,384.2 $8,384.2 $6,724.5 25%
Cost of sales 7,162.8 $6.0 7,168.8 5,772.5
Gross profit 1,221.4 (6.0) 1,215.4 952.0
Selling, general
and administrative
expenses 811.8 811.8 630.0
Restructuring charges (c) 70.0 70.0 --
Operating income 409.6 (76.0) 333.6 322.0 27%
Interest income 6.1 6.1 5.5
Interest expense (94.5) (94.5) (53.9)
Miscellaneous - net 11.3 11.3 5.8
Other income (expense) (77.1) (77.1) (42.6)
Income before income
taxes and minority
interests 332.5 (76.0) 256.5 279.4
Provision for income
taxes 141.2 (32.3) 108.9 113.9
Minority interests in
net earnings of
subsidiaries 19.9 19.9 20.4
Income from continuing
operations 171.4 (43.7) 127.7 145.1 18%
Discontinued operations (b)
(Loss) income from
discontinued operations,
adjusted for applicable
(benefit) provision for
income taxes of $1.0
and $6.1, respectively,
and minority interests (1.1) (1.1) 7.6
Gain on sale of discontinued
operations, net of $66
in income taxes 69.0 69.0 --
Net income $170.3 $25.3 $195.6 $152.7 12%
Earnings available for
common shareholders $188.5 $145.6
Earnings (loss) per share
from continuing operations (e)
Primary $1.94 ($0.52) $1.42 $1.65
Fully diluted $1.85 ($0.48) $1.37 $1.57 18%
(Loss) earnings per share
from discontinued operations (e)
Primary ($0.01) $0.00 ($0.01) $0.09
Fully diluted ($0.01) $0.00 ($0.01) $0.09
Earnings per share from
gain on sale of
discontinued operations (e)
Primary $0.00 $0.82 $0.82 $0.00
Fully diluted $0.00 $0.76 $0.76 $0.00
Earnings per share (e)
Primary $1.93 $0.30 $2.23 $1.74
Fully diluted $1.84 $0.28 $2.12 $1.66
See Footnotes.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
June 30, September 30, June 30,
1997 1996 1996
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $200.5 $165.2 $152.8
Accounts receivable - net 1,466.6 1,376.7 1,361.7
Costs and earnings in excess of
billings on uncompleted contracts 216.0 212.3 212.1
Inventories 359.9 344.7 334.2
Net assets of discontinued operations 0.0 440.7 462.3
Other current assets 361.1 309.5 341.3
Current assets 2,604.1 2,849.1 2,864.4
Property, plant and equipment - net 1,488.7 1,320.2 1,242.6
Goodwill - net 1,581.3 548.2 532.7
Investments in partially-owned
affiliates 145.3 128.4 143.2
Other noncurrent assets 253.5 145.3 153.2
Total assets $6,072.9 $4,991.2 $4,936.1
LIABILITIES AND EQUITY
Short-term debt (d) $643.4 $248.1 $244.8
Current portion of long-term debt 125.3 33.2 19.6
Accounts payable 1,324.9 1,178.2 1,138.8
Accrued compensation and benefits 323.9 238.4 264.7
Accrued income taxes 92.5 44.0 75.2
Billings in excess of costs and
earnings on uncompleted contracts 107.6 83.6 100.7
Other current liabilities 487.5 357.1 359.5
Current liabilities 3,105.1 2,182.6 2,203.3
Long-term debt (d) 819.7 752.2 760.8
Postretirement health and other
benefits 166.3 167.9 167.1
Other noncurrent liabilities 349.5 380.7 366.6
Shareholders' equity 1,632.3 1,507.8 1,438.3
Total liabilities and equity $6,072.9 $4,991.2 $4,936.1
See Footnotes.
FOOTNOTES
(a) Effective October 1, 1996, the Company completed the acquisition
of Prince Holding Corporation (Prince) for approximately $1.3 billion.
Prince, based in Holland, Mich., supplies automotive interior systems and
components including overhead systems and consoles, door panels, floor
consoles, visors and armrests. The acquisition was accounted for as a
purchase. As such, the excess of the purchase price over the fair value
of the acquired net assets, which approximates $1.1 billion, was recorded
as goodwill.
(b) On December 6, 1996, the Company and Schmalbach-Lubeca AG/Continental
Can Europe (a member of the VIAG Group) signed a definitive agreement
under which Schmalbach-Lubeca would purchase the Plastic Container
division (PCD) of the Company. The transaction was completed during the
Company's 1997 second fiscal quarter. The Company recorded a gain of
$135 million ($69 million or $.76 per share - fully diluted, after-tax).
Prior year results have been restated to reflect PCD as a discontinued
operation.
(c) In the second quarter of fiscal 1997, the Company recorded
restructuring charges, including related assets writedowns, of $70 million
($40 million or $.44 per share - fully diluted, after-tax) involving its
automotive and controls groups. The automotive initiatives primarily
relate to its European operations where certain manufacturing capacity is
being realigned with future customer sourcing requirements, and product
development resources are being consolidated. Charges associated with its
controls business principally address the Company's decision to exit
certain low-margin service activities which are outside its core controls
and facilities management businesses which serve the commercial and
government markets.
(d) In July 1997, the Company issued $150 million of 7.125% notes due in
2017. The proceeds were used to refinance commercial paper borrowings.
Accordingly, at June 30, 1997, $150 million of short-term debt was
classified as long-term debt.
(e) Primary 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 and common stock
equivalents which would arise from the exercise of stock options. Fully
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 $1.4 million for the three
months ended June 30, 1997 and 1996 and $4.1 million and $4.2 million for
the nine months ended June 30, 1997 and 1996, respectively. Fully diluted
weighted average shares assume the conversion of the Series D Convertible
Preferred Stock, if dilutive, plus the dilutive effect of the stock
options.
(f) All share and per share information has been restated to reflect a
two-for-one split of the Company's common stock paid on March 31, 1997 to
shareholders of record on March 7, 1997.
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
Weighted Average Shares 1997 1996 1997 1996
(in millions)
Primary 84.9 83.8 84.7 83.5
Fully diluted 90.9 89.9 90.6 89.7
SOURCE Johnson Controls, Inc.