Johnson Controls Reports Record Q4 and Full Year Results
21 October 1998
Johnson Controls Reports Record Fourth-Quarter and Full Year Results
MILWAUKEE, Wis., Oct. 20 -- Johnson Controls, Inc. (JCI)
today reported record sales and income for its fourth fiscal
quarter and full year ended September 30, 1998. The company stated that each
of its businesses attained record sales and operating income for both periods.
Sales for the full year totaled $12,586.8 million, up 13% from
$11,145.4 million for 1997. Operating income increased 11% to $664.0 million
from the prior year's $597.1 million. Net income rose to $302.7 million, up
16% from $260.9 million for 1997. Diluted earnings per share for 1998 were
$3.25 versus $2.81 for the prior year.
All 1998 amounts discussed exclude a $59.9 million pre-tax gain on the
sale of the Plastics Machinery Division. All 1997 amounts are from continuing
operations before the effect of a restructuring charge and a gain on the sale
of the Plastic Container Division.
Full year sales by the company's Automotive Systems Group were
$9,263.9 million, 15% higher than the $8,022.1 million for 1997. The sales
increase reflects higher levels of shipments of seating and interior systems
to automakers in North America, Europe and South America. Johnson Controls
said that slightly higher vehicle production levels together with new seating
and interior system supply contracts boosted its revenues. The company said
that a higher level of automotive battery shipments to the North American
market also contributed to the increase in sales. Operating income totaled
$529.7 million, 11% higher than the $477.6 million for the prior year. The
increase primarily reflects the higher volume and improved efficiencies in its
seating and interior systems business as well as in its battery operations.
It said that operating income would have kept pace with the sales increase
except for the $30 million before tax ($.20 per diluted share) impact of the
strike at General Motors North American operations.
Controls Group sales increased 6% to $3,322.9 million from 1997's
$3,123.3 million. The increase reflects growth in facilities management
contracts and a higher level of control system installations in the
non-residential buildings market. The company said that it achieved increased
sales in each of its major geographic markets, North America, Europe and the
Asia/Pacific region. Operating income was $134.3 million, 12% higher than the
$119.5 million a year ago. The increase reflects the higher volume, together
with improved quality and operating efficiencies within the control systems
and services business. The company said that orders for control systems
worldwide were higher than in the prior year reflecting a double-digit
increase in bookings during the fourth-quarter. The higher demand stemmed from
both the existing buildings market, including performance contracting, as well
as in construction markets.
Sales for the three months ended September 30, 1998 rose 21% to
$3,333.7 million from $2,761.2 million for the same period of fiscal 1997.
Automotive sales rose 25% to $2,381.0 million from $1,906.6 million, while
Controls sales increased 11% to $952.7 million from $854.6 million. Operating
income increased 7% to $207.8 million from the prior year's $193.5 million.
Net income rose to $101.0 million ($1.09 per diluted share), up 9% from
$92.9 million ($1.00 per diluted share) for the fourth quarter of fiscal 1997.
The company said that the 1998 fourth-quarter operating margin was lower
because of the inclusion of the operations of the Becker Group, a major
supplier of automotive interior systems, acquired on July 1, 1998 and effects
of the strike at General Motors' North American operations. Johnson Controls
said that the GM strike reduced its pretax income in the current quarter by
$15 million which was equal to $.10 per diluted share.
Mr. James H. Keyes, Johnson Controls chairman and chief executive officer,
said that "The commitment of Johnson Controls employees to exceed the
expectations of our customers yielded another year of record financial
results. I am pleased that 1998 became our 52nd consecutive year of sales
increases and our eighth straight year of achieving record earnings."
Mr. Keyes added, "While we remain cautious about the strength of our
global markets, Johnson Controls is positioned for profitable growth in 1999
and future years. Our Automotive Systems Group expects its sales to increase
20-25% in 1999 assuming the North American and European automotive markets
experience no major downturns. The majority of this increase will come from
new seating and interiors programs worldwide. The balance will be from the
addition of sales stemming from our acquisition of the Becker Group which
gives us a new platform for growth in interior systems, especially in Europe.
"1999 should also be another good year for our Controls Group, with
revenues anticipated to increase 10-15%. Our backlog for installed control
systems at September 30 was 10% higher than a year ago, and we are encouraged
by opportunities for sustained growth, especially in North America where
demand for quality building environments and improved energy management
continues. Integrated facility management is a powerful tool for building
owners to improve the productivity of their employees and assets in expanding
as well as contracting business environments. As a result, we expect facility
management to be a strong contributor to our growth."
Johnson Controls is a global market leader in automotive systems and
facility management and control. In the automotive market, it is a major
supplier of seating and interior systems, and batteries. For nonresidential
facilities, Johnson Controls provides building control systems and services,
energy management and integrated facility management. Johnson Controls,
founded in 1885, has headquarters in Milwaukee, Wis. Its sales for 1998
totaled $12.6 billion.
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)
For the Three Months For the Year
Ended September 30, Ended September 30,
1998 1997 1998 1997
(Unaudited)
Net sales $3,333.7 $2,761.2 $12,586.8 $11,145.4
Cost of sales 2,844.0 2,316.8 10,776.2 9,485.6
Gross profit 489.7 444.4 1,810.6 1,659.8
Selling, general and
administrative expenses 281.9 250.9 1,146.6 1,062.7
Restructuring charge (f) -- -- -- 70.0
Operating income 207.8 193.5 664.0 527.1
Interest income 5.7 3.8 14.8 9.9
Interest expense (41.0) (28.2) (133.5) (122.7)
Gain on sale of business (d) 59.9 -- 59.9 --
Miscellaneous - net 9.9 -- 11.6 11.3
Other income (expense) 34.5 (24.4) (47.2) (101.5)
Income before income taxes
and minority interests 242.3 169.1 616.8 425.6
Provision for income taxes 100.6 71.9 256.0 180.9
Minority interests in net
earnings of subsidiaries 5.7 4.3 23.1 24.1
Income from continuing
operations 136.0 92.9 337.7 220.6
Discontinued operations (e)
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 of income
taxes -- -- -- 69.0
Net income $136.0 $92.9 $337.7 $288.5
Earnings available for
common shareholders $133.6 $90.7 $328.2 $279.0
Earnings per share from
continuing operations
(a,b,g)
Basic $1.57 $1.08 $3.88 2.52
Diluted $1.47 $1.00 $3.63 $2.37
Earnings per share (a,c,g)
Basic $1.57 $1.08 $3.88 $3.34
Diluted $1.47 $1.00 $3.63 $3.12
(a) Earnings per share (EPS) from continuing operations and EPS for both
the three months and year ended September 30, 1998 include a gain on sale
of the plastics machinery business ($.41 per basic share and $.38 per
diluted share). See footnote (d) below.
(b) EPS from continuing operations for the year ended September 30, 1997
include the effect of a restructuring charge ($.48 per basic share, $.44
per diluted share). See footnote (f) below.
(c) EPS for the year ended September 30, 1997 include the effect of a
restructuring charge (see footnote (b)), a loss from discontinued
operations ($.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 (e) and (f) below.
See additional footnotes below.
ADDITIONAL FOOTNOTES
(d) On September 30, 1998, the Company completed the sale of its Plastics
Machinery division to Milacron, Inc. for approximately $190 million. The
plastics machinery business had annual sales of approximately $190 million.
The Company used the after-tax proceeds from the sale to reduce its debt. The
Company recorded a gain on the sale of $59.9 million ($35.0 million or $.41
per basic share and $.38 per diluted share, after-tax).
(e) 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 year ended September 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.
(f) In the second quarter of fiscal 1997, the Company recorded a
restructuring charge, including related asset writedowns, of $70.0 million
($40.3 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.
(g) 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 September 30, 1998 and 1997, respectively, and $5.2 million and
$5.5 million for the year ended September 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 Year Ended
September 30, September 30,
1998 1997 1998 1997
Weighted Average Shares (in millions)
Basic 84.7 84.0 84.5 83.5
Diluted 91.6 91.0 91.6 90.7