Johnson Controls Earnings for First Quarter Increase to $.86
15 January 1999
Johnson Controls Earnings for First Quarter Increase to $.86 From $.70 Per Share
MILWAUKEE, Jan. 15 -- Johnson Controls, Inc. (JCI)
today reported record sales and net income for the three months
ended December 31, 1998.
Sales rose 27% to $3,873.1 million from $3,056.3 million for the first
quarter of fiscal 1998. Operating income for the fiscal 1999 first quarter
increased to $183.2 million, 23% higher than the prior year's $148.4 million.
Net income increased 22% to $79.7 million from $65.3 million for the first
quarter of fiscal 1998. Diluted earnings per share reached $.86 compared with
$.70 last year.
James H. Keyes, chairman and chief executive officer of Johnson Controls,
said, "We are pleased to report strong results for the first quarter and the
fact that they are based on improvements by both our automotive and controls
businesses. Delivering added value to our customers through innovative
offerings and improving execution is the source of Johnson Controls continuing
improvements. Early last fall we indicated that we expected 1999 to become
our ninth consecutive year of earnings growth; our first-quarter results
increase our confidence in achieving current expectations for our 1999
full-year results."
The company's Automotive Systems Group had sales of $3,000.4 million for
the first quarter of fiscal 1999, an increase of 29% over the prior year's
$2,328.7 million. Johnson Controls said that the largest source of the higher
sales was the European market. About one-half of the increase in European
revenues reflected the July 1998 acquisition of Becker Group, a leading
supplier of interior systems, with the other half due to substantially higher
sales of seating for vehicles introduced in that market within the last three
to twelve months.
North American revenues were also higher as the company's sales of seating
and interior systems benefited from healthy vehicle production levels.
Johnson Controls stated that, in addition, its sales of automotive batteries
increased as a result of higher unit shipments to the North American market
reflecting its increasing leadership of the domestic industry and the
strengthening market positions of its customers.
The company said that operating income from the Automotive Systems Group
increased over the prior year reflecting the higher volume of sales and
positive operating performances worldwide. Operating margin declined slightly
from the first quarter of 1998 reflecting the higher proportion of
lower-margin European sales, increased engineering expenses associated with
new seating and interior systems orders and slightly higher losses in South
America.
Controls Group sales to the nonresidential buildings market increased 20%
to $872.7 million from $727.6 million for the first quarter of 1998. The
company said that sales of integrated facility management were up
substantially over the prior year reflecting growth in the North American and
European markets where building owners are outsourcing the responsibility for
their facilities to increase quality and productivity. Johnson Controls said
that sales of control systems and services that improve building environments
also increased. Also aiding sales growth for the current quarter was the
company's consolidation of Yokogawa Johnson Controls, its control systems
majority-owned subsidiary in Japan. The company commented that operating
income from the Controls Group rose in line with the sales increase. The
worldwide backlog of orders for installed control systems was higher than the
prior year.
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 November 13, 1998) 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
Ended December 31,
1998 1997
Net sales $3,873.1 $3,056.3
Cost of sales 3,344.6 2,622.1
Gross profit 528.5 434.2
Selling, general and administrative expenses 345.3 285.8
Operating income 183.2 148.4
Interest income 3.1 2.3
Interest expense (41.1) (30.1)
Miscellaneous - net (1.2) 1.7
Other income (expense) (39.2) (26.1)
Income before income taxes and minority interest 144.0 122.3
Provision for income taxes 58.3 50.8
Minority interests in net earnings of subsidiaries 6.0 6.2
Net income $79.7 $65.3
Earnings available for common shareholders $77.3 $63.0
Earnings per share (b)
Basic $0.91 $0.75
Diluted $0.86 $0.70
See footnotes below.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
December 31, September 30, December 31,
1998 1998 1997
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $329.2 $134.0 $248.1
Accounts receivable - net 2,136.3 1,821.1 1,644.6
Costs and earnings in excess of
billings on uncompleted contracts 196.1 191.7 199.1
Inventories 470.5 428.2 390.0
Net assets held for sale 211.3 231.9 --
Other current assets 557.0 597.3 402.1
Current assets 3,900.4 3,404.2 2,883.9
Property, plant and
equipment - net 1,953.6 1,882.9 1,548.1
Goodwill - net 2,166.4 2,084.5 1,558.0
Investments in partially-owned
affiliate 251.0 166.2 155.8
Other noncurrent assets 446.2 404.3 262.7
Total assets $8,717.6 $7,942.1 $6,408.5
LIABILITIES AND EQUITY
Short-term debt $1,486.8 $1,289.5 $614.5
Current portion of long-term debt 88.9 39.4 58.3
Accounts payable 1,863.0 1,625.2 1,428.1
Accrued compensation and benefits 379.9 376.1 282.4
Accrued income taxes 157.8 119.6 86.2
Billings in excess of costs and
earnings on uncompleted contracts 150.5 127.5 130.8
Other current liabilities 792.9 711.1 515.7
Current liabilities 4,919.8 4,288.4 3,116.0
Long-term debt 937.8 997.5 964.8
Postretirement health and
other benefits 167.0 166.7 167.5
Other noncurrent liabilities 613.7 548.1 412.0
Shareholders' equity 2,079.3 1,941.4 1,748.2
Total liabilities and equity $8,717.6 $7,942.1 $6,408.5
See footnotes below.
FOOTNOTES
(a) Effective July 1, 1998, the Company completed the acquisition of
Becker Group for approximately $548 million, plus the assumption of
approximately $372 million of debt. Becker Group, based in Michigan and
Germany, is a major supplier of automotive interior systems, particularly
door systems and instrument panels. The acquisition was accounted for as
a purchase. The excess of the purchase price over the estimated fair
value of the acquired net assets, which approximated $500 million, was
recorded as goodwill. The purchase was initially financed with commercial
paper and it is anticipated that a portion will be refinanced with
long-term debt.
Certain businesses acquired in the Becker Group purchase have been
classified as net assets held for sale in the Consolidated Statement of
Financial Position. At the date of acquisition, the Company identified
several operations of Becker Group that were outside of the Company's core
businesses and, as such, would be sold. The net assets of the businesses
were valued at fair value less estimated costs to sell, including cash
flows during the holding period. The Company completed the sale of one of
these businesses in the first quarter of fiscal 1999 and expects to
complete the sale of the remaining businesses during the year.
(b) 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 $1.1 million and
$1.3 million for the three months ended December 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 December 31,
1998 1997
Weighted Average Shares (in millions)
Basic 84.8 84.1
Diluted 91.8 91.2