Johnson Controls Reports Q2 Sales and Earnings
14 April 1998
Johnson Controls Reports Records for Second Quarter
MILWAUKEE, April 14 -- Johnson Controls, Inc.
today reported record sales and earnings for its second fiscal quarter ended
March 31, 1998, citing improvements by both its automotive and controls
businesses.
Sales for the second quarter of fiscal 1998 rose 10% to $3,007.3 million
from $2,743.6 million for the same quarter of fiscal 1997. Operating income
increased 14% to $126.7 million from the prior year's $111.3 million. Income
from continuing operations rose to $52.5 million, up 36% from $38.7 million
for the second quarter of fiscal 1997. On a diluted basis, earnings per share
from continuing operations rose to $.56 from $.41 a year ago.
Sales by the company's automotive systems group increased 10% to $2,183.8
million compared with $1,979.7 million for the period one year ago. The
company said the growth stemmed from higher levels of seating and interior
system sales in North America, reflecting new automotive contracts and
continuing strong demand for many of the vehicles which Johnson Controls
supplies. It added that sales were also higher in Europe (before the effects
of currency) as well as in South America, where it is building a leading
position as a seating supplier. Sales of automotive batteries decreased
slightly due to lower unit shipments to the automotive replacement market
reflecting the unusually warm winter temperatures in January and February.
Operating income for the automotive systems group was higher in 1998 because
of the higher sales, operating improvements and the absence of 1997 strike
related costs. These improvements more than offset higher start-up costs in
South America associated with new contracts to supply seat systems.
Controls group sales increased 8% to $823.5 million for the second
quarter, up from 1997's $763.9 million. The company reported a strong
increase in integrated facilities management revenues from the commercial
buildings market. It also stated that sales of installed control systems and
services to the new construction and existing buildings markets increased,
especially in North America. In addition, operating income in the 1998 quarter
increased due to the higher volume and lower overhead spending. The company
added that orders for installed systems and services worldwide were higher
primarily due to success in the domestic existing buildings market for
performance contracting and retrofit control systems.
Sales for the first six months of fiscal 1998 rose 10% to $6,063.6 million
from $5,504.9 million for the same period of fiscal 1997. Operating income
increased 14% to $275.1 million from the prior year's $241.2 million. Income
from continuing operations rose to $117.8 million, up 26% from $93.6 million
for the first half of fiscal 1997. Diluted earnings per share from continuing
operations were $1.26 versus $1.00 for 1997.
James H. Keyes, Johnson Controls chairman and chief executive officer,
said "Our results halfway through fiscal 1998 are very much in line with our
plans for this year. Johnson Controls continues to identify new growth
opportunities that utilize our expertise in automotive and building systems,
and thus enable us to provide benefits to customers, employees and
shareholders. Our outlook for the full year is positive, and we look forward
to achieving our 8th consecutive year of higher earnings and 52nd straight
year of sales increases."
All prior year amounts reflect the Plastic Container Division as a
discontinued operation. Prior year income amounts are before the effect of a
restructuring charge.
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.
The company has made forward-looking statements in this document that are
subject to risks and uncertainties. Forward-looking statements include
information concerning possible or assumed future risks and may include words
such as "believes," "expects," "anticipates" or similar expressions. For
those statements, the company cautions that the numerous important factors
discussed in the company's Form 8-K (dated October 30, 1997) could affect the
company's actual results and could cause its actual consolidated results to
differ materially from those expressed in any forward-looking statement made
by, or on behalf of, the company.
Johnson Controls, Inc.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share; unaudited)
For the Three Months For the Six Months
Ended March 31, Ended March 31,
1998 1997 1998 1997
Net sales $3,007.3 $2,743.6 $6,063.6 $5,504.9
Cost of sales 2,591.0 2,368.3 5,213.1 4,722.9
Gross profit 416.3 375.3 850.5 782.0
Selling, general and
administrative expenses 289.6 264.0 575.4 540.8
Restructuring charge (d) -- 70.0 -- 70.0
Operating income 126.7 41.3 275.1 171.2
Interest income 2.5 1.6 4.8 3.6
Interest expense (28.9) (33.5) (59.0) (66.0)
Miscellaneous - net (0.9) 0.3 0.8 5.9
Other income (expense) (27.3) (31.6) (53.4) (56.5)
Income before income taxes and
minority interests 99.4 9.7 221.7 114.7
Provision for income taxes 41.2 4.1 92.0 48.7
Minority interests in net earnings
of subsidiaries 5.7 7.2 11.9 12.7
Income from continuing operations 52.5 (1.6) 117.8 53.3
Discontinued operations (c)
Income (loss) from discontinued
operations, adjusted for
applicable income tax provision
(benefit) of $0.5 and ($1.0),
respectively, and minority
interests -- 0.7 -- (1.1)
Gain on sale of discontinued
operations, net of $66.0 million
of income taxes -- 69.0 -- 69.0
Net income $52.5 $68.1 $117.8 $121.2
Earnings available for common
shareholders $50.1 $65.6 $113.1 $116.4
Earnings (less) per share from
continuing operations (a,e)
Basic $0.59 ($0.06) $1.34 $0.58
Diluted $0.56 ($0.03) $1.26 $0.56
Earnings per share (b,e)
Basic $0.59 $0.78 $1.34 $1.40
Diluted $0.56 $0.74 $1.26 $1.31
(a) 1997 earnings per share (EPS) amounts from continuing operations for
both periods shown above include the effects of a restructuring charge
($.48 per basic share, $.44 per diluted share). See footnote d.
(b) 1997 EPS amounts for both periods shown above include the effects of
a restructuring charge (see footnote a) and a gain on the sale of
discontinued operations ($.83 per basic share, $.76 per diluted share). 1997
EPS also includes income (loss) from discontinued operations of $.01 and
($.01) for both basic and diluted EPS for the three and six month periods,
respectively, shown above. See footnotes c and d.
See additional footnotes following.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
March 31, September 30, March 31,
1998 1997 1997
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $161.7 $111.8 $176.6
Accounts receivable - net 1,645.1 1,467.4 1,532.9
Costs and earnings in excess
of billings on uncompleted contracts 191.8 217.2 210.2
Inventories 389.2 373.4 378.0
Other current assets 437.1 359.5 335.5
Current assets 2,824.9 2,529.3 2,633.2
Property, plant and equipment - net 1,564.1 1,533.0 1,464.0
Goodwill - net 1,543.0 1,560.3 1,590.3
Investments in partially-owned
affiliates 170.3 144.6 146.5
Other noncurrent assets 273.3 281.4 258.2
Total assets $6,375.6 $6,048.6 $6,092.2
LIABILITIES AND EQUITY
Short-term debt $552.5 $537.8 $917.1
Current portion of long-term debt 28.1 118.4 124.5
Accounts payable 1,486.5 1,341.9 1,263.2
Accrued compensation and benefits 325.9 303.3 303.7
Accrued income taxes 30.7 78.8 93.3
Billings in excess of costs and earnings
on uncompleted contracts 126.4 107.6 110.9
Other current liabilities 503.3 484.9 453.5
Current liabilities 3,053.4 2,972.7 3,266.2
Long-term debt 962.6 806.4 666.7
Postretirement health and
other benefits 167.7 167.2 168.1
Other noncurrent liabilities 412.4 414.4 411.4
Shareholders' equity 1,779.5 1,687.9 1,579.8
Total liabilities and equity $6,375.6 $6,048.6 $6,092.2
See following footnotes.
ADDITIONAL FOOTNOTES
c. On February 28, 1997, the Company completed the sale of its Plastic
Container division to Schmalbach-Lubeca AG/Continental Can Europe (a member of
the VIAG Group). Earnings (loss) per basic and diluted share from
discontinued operations were $.01 and ($.01) for the three and six month
periods ended March 31, 1997, respectively. Earnings per basic and diluted
share from the gain on sale of discontinued operations were $.83 and $.76,
respectively, for both the three and six month periods ended March 31, 1997.
d. In the second quarter of fiscal 1997, the Company recorded a
restructuring charge, including related asset writedowns, of $70 million
($40 million or $.44 per share - diluted, after-tax) involving the Company's
automotive and controls segments. The automotive charge primarily related to
its European operations where certain manufacturing capacity was realigned
with future customer sourcing requirements, and product development resources
were consolidated. The charge associated with its controls business
principally addressed the Company's decision to restructure certain low-margin
service activities which were outside its core controls and facilities
management businesses which serve the commercial and government markets.
e. 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 $1.3 million and $1.4 million for the three months
ended March 31, 1998 and 1997, respectively, and $2.6 million and $2.7 million
for the six months ended March 31, 1998 and 1997, 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.
For the Three Months Ended For the Six Months Ended
March 31, March 31,
1998 1997 1998 1997
(in millions)
Weighted Average Shares
Basic 84.4 83.6 84.2 83.2
Diluted 91.6 90.9 91.4 90.5
SOURCE Johnson Controls