Johnson Controls Has Record Third Quarter
15 July 1998
Johnson Controls Has Record Third Quarter; Completes Acquisition of Becker Group
MILWAUKEE, July 14 -- Johnson Controls, Inc.
today reported record sales and earnings for its third fiscal quarter ended
June 30, 1998. The company stated that both its automotive and controls
businesses achieved record sales and operating income compared with the prior
year amounts.
Johnson Controls also reported that it has completed the acquisition of
the Becker Group, a major supplier of automotive interior systems, effective
July 1, 1998.
Sales for the third quarter of fiscal 1998 increased 11% to
$3,189.5 million from $2,879.3 million for the same quarter of fiscal 1997.
Operating income rose 12% to $181.1 million from the prior year's
$162.4 million. Net income totaled $83.9 million, up 13% from $74.4 million
for the second quarter of fiscal 1997. On a diluted basis, earnings per share
rose to $.90 from $.81 for the 1997 period.
Sales by the company's automotive systems group increased 13% to
$2,370.4 million compared with $2,105.7 million a year ago. The company said
the growth stemmed from higher levels of seat and interior system sales in
North America, Europe and South America. Sales of automotive batteries also
increased due to a record level of unit shipments to the North American
market. Operating income for the automotive systems group was higher in 1998
because of the higher sales and operating improvements, particularly in Europe
where it is a leading supplier of seat systems. These improvements more than
offset the impact of the strike at General Motors North American operations
which reduced the company's shipments of seat and interior systems. Johnson
Controls said the lost production for GM reduced its earnings in the June
quarter by $.10 per diluted share. The company explained that the strike
impact resumed on July 13 when Johnson Controls would have restarted shipments
to GM following the automaker's annual summer shutdown period.
Controls group sales for the third quarter increased 6% to $819.1 million
from 1997's $773.6 million, primarily reflecting growth in its integrated
facilities management business. Integrated facilities management revenues
from the commercial market were about 20% higher than in the prior year
reflecting strong demand for the company's broad-based management
capabilities. Worldwide sales of control systems and services to
nonresidential buildings were slightly higher than the prior year. The
controls group achieved a double-digit percentage increase in operating income
from the prior year's result. Johnson Controls attributed most of the
profitability improvement to its domestic control systems and services
business which has improved the productivity of its marketing and contract
execution activity. The company said that orders for control systems and
services in North America were slightly below last year's record level,
however, orders in the European and Asia Pacific regions were somewhat higher.
Sales for the first nine months of fiscal 1998 rose 10% to
$9,253.1 million from $8,384.2 million for the same period of fiscal 1997.
Operating income increased 13% to $456.2 million from the prior year's
$403.6 million. Income from continuing operations rose to $201.7 million, up
20% from $168.0 million for the first nine months of fiscal 1997. Diluted
earnings per share from continuing operations were $2.16 versus $1.81 for
1997. All 1997 income amounts exclude the effect of a restructuring charge.
Johnson Controls said the acquisition of the Becker Group became effective
July 1, 1998. The acquisition establishes Johnson Controls as the leading
supplier of interior systems in Europe and strengthens the company's
capabilities for complete interiors. The Becker Group is expected to have
1998 sales of approximately $1.3 billion of which only a portion will be
reflected in Johnson Controls consolidated results for the three month period
ending September 30, 1998. Johnson Controls said that it paid $548 million in
cash plus the assumption of bank debt. The company said that it is financing
the acquisition with debt.
James H. Keyes, chairman and chief executive officer, said that, "We are
pleased with the results Johnson Controls has achieved to date in fiscal 1998.
Improvements in our traditional businesses are enabling us to invest in new
growth opportunities such as the emerging markets for seating, automotive
interiors and facilities management. Notwithstanding the duration and impact
of the ongoing GM strike, we would anticipate achieving another record level
of earnings in our fourth fiscal quarter."
Johnson Controls is a global market leader in automotive systems and
building controls. Through its Automotive Systems Group, it supplies seat
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 data; unaudited)
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Net sales $3,189.5 $2,879.3 $9,253.1 $8,384.2
Cost of sales 2,719.1 2,445.9 7,932.2 7,168.8
Gross profit 470.4 433.4 1,320.9 1,215.4
Selling, general and
administrative
expenses 289.3 271.0 864.7 811.8
Restructuring
charge (d) -- -- -- 70.0
Operating income 181.1 162.4 456.2 333.6
Interest income 4.3 2.5 9.1 6.1
Interest expense (33.5) (28.5) (92.5) (94.5)
Miscellaneous - net 0.9 5.4 1.7 11.3
Other income (expense) (28.3) (20.6) (81.7) (77.1)
Income before income
taxes and minority
interests 152.8 141.8 374.5 256.5
Provision for income
taxes 63.4 60.2 155.4 108.9
Minority interests in
net earnings of
subsidiaries 5.5 7.2 17.4 19.9
Income from continuing
operations 8 74.4 201 127.7
Discontinued operations (c)
Loss from discontinued
operations, adjusted for
income tax benefit of $1.0,
and minority interests -- -- -- (1.1)
Gain on sale of
discontinued operations,
net of $66.0 million of
income taxes -- -- -- 69.0
Net income $83.9 $74.4 $201.7 $195.6
Earnings available for
common shareholders $81.5 $72.1 $194.6 $188.5
Earnings per share from
continuing operations
(a,e)
Basic $0.97 $0.86 $2.31 $1.44
Diluted $0.90 $0.81 $2.16 $1.37
Earnings per share (a,e)
Basic $0.97 $0.86 $2.31 $2.26
Diluted $0.90 $0.81 $2.16 $2.12
(Earnings per share (EPS) from continuing operations for the nine months
ended June 30, 1997 include the effect of a restructuring charge ($.48 per
basic share, $.44 per diluted share). See footnote d below.
(EPS for the nine months ended June 30, 1997 include the effect of a
restructuring charge (see footnote a), a loss from discontinued operations
($.01 per basic and diluted share) and a gain on the sale of discontinued
operations ($.83 per basic share, $.76 per diluted share). See footnotes
c and d below.
See additional footnotes below.
Johnson Controls, Inc.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
June 30, September 30, June 30,
1998 1997 1997
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $139.1 $111.8 $200.5
Accounts receivable - net 1,653.2 1,467.4 1,466.6
Costs and earnings in excess
of billings on uncompleted
contracts 181.7 217.2 216.0
Inventories 389.0 373.4 359.9
Other current assets 445.8 359.5 361.1
Current assets 2,808.8 2,529.3 2,604.1
Property, plant and
equipment - net 1,596.7 1,533.0 1,488.7
Goodwill - net 1,532.6 1,560.3 1,581.3
Investments in partially-owned
affiliate 172.4 144.6 145.3
Other noncurrent assets 275.0 281.4 253.5
Total assets $6,385.5 $6,048.6 $6,072.9
LIABILITIES AND EQUITY
Short-term debt $425.6 $537.8 $643.4
Current portion of long-term
debt 27.3 118.4 125.3
Accounts payable 1,480.5 1,341.9 1,324.9
Accrued compensation and
benefits 339.9 303.3 323.9
Accrued income taxes 48.9 78.8 92.5
Billings in excess of costs
and earnings on uncompleted
contracts 129.9 107.6 107.6
Other current liabilities 533.4 484.9 487.5
Current liabilities 2,985.5 2,972.7 3,105.1
Long-term debt 963.3 806.4 819.7
Postretirement health and
other benefits 167.6 167.2 166.3
Other noncurrent liabilities 423.0 414.4 349.5
Shareholders' equity 1,846.1 1,687.9 1,632.3
Total liabilities and equity $6,385.5 $6,048.6 $6,072.9
See footnotes below.
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). For the nine months ended June 30, 1997, the loss per
basic and diluted share from discontinued operations was $.01, with a gain
on sale of discontinued operations of $.83 per basic share and $.76 per
diluted share.
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 June 30, 1998 and 1997, respectively, and
$3.9 million and $4.1 million for the nine months ended June 30, 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 Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
Weighted Average Shares (in millions)
Basic 84.7 83.8 84.4 83.4
Diluted 92.1 90.7 91.6 90.6