AlliedSignal Q1 Earnings Per Share Are up 13% To a Record $0.59
13 April 1999
AlliedSignal 1st-Quarter Earnings Per Share Are up 13% To a Record $0.59; Operating Margin Grows to a Record 14.1%
Free Cash Flow Advances to $219 Million From $62 Million
Sales Growth in Aerospace Aftermarket, Safety Avionics,
Turbochargers and Transportation Products Drives Quarter's Performance
MORRIS TOWNSHIP, N.J., April 13 -- AlliedSignal Inc.
today reported record first-quarter earnings per share of $0.59, a
13% increase over 1998 first-quarter earnings per share of $0.52. It was the
company's 29th consecutive quarter of earnings-per-share growth of 13% or
more.
Net income increased 12% to a first-quarter record of $335 million from
$300 million in 1998. Weighted average shares outstanding in the 1999 first
quarter were 568 million, down 10 million from the year-ago quarter,
reflecting the company's share repurchase program.
First-quarter free cash flow after payment of dividends was $219 million,
more than triple last year's level of $62 million.
Operating margin in the first quarter grew to a record 14.1% from 12.0% in
the year-ago period. Productivity improved by 6.0%, representing continued
reduction in the company's cost structure arising from lower raw-materials
costs and broad-based Six Sigma initiatives.
Sales in the first quarter were $3.6 billion, down 1% from 1998's first-
quarter sales. Excluding the effect of divestitures, first-quarter sales in
1999 were up 4%.
"AlliedSignal's strong first-quarter performance reflects the company's
efforts over the past several years to improve the portfolio, reduce the cost
base and realize the cash-flow potential of all our businesses," said Lawrence
A. Bossidy, Chairman and Chief Executive Officer. "First-quarter results
bolster our confidence that we will meet our 1999 targets for internal sales
growth, earnings per share, free cash flow and share repurchases."
Key factors in the company's improved performance were higher sales of
aircraft safety avionics equipment, continued strength in aerospace
aftermarket services and increased penetration of the European passenger car
market by turbocharged diesel engines. Six Sigma programs throughout the
company led to an improved cost structure and contributed to higher margins.
The improvement in free cash flow reflected better working capital
utilization and higher profits.
First quarter segment results were as follows:
Aerospace Systems sales increased 2% to a record $1.15 billion from $1.13
billion in the first quarter of 1998. Revenue growth was 7% excluding the
effects of divestitures and a change from prime contractor to sub-contractor
status on a government technical services contract. Operating income grew to
$205 million from $195 million in the year-earlier quarter.
Revenue growth reflected continued strong demand in both commercial and
military aircraft markets and sales of safety avionics products. With nose-
to-tail coverage of components and systems on nearly every type of aircraft in
use today, AlliedSignal will continue to benefit from consistent growth in all
segments of the worldwide fleet. In addition, AlliedSignal is increasingly
recognized by customers as the leading source of state-of-the-art flight-
safety products.
Specialty Chemicals & Electronic Solutions sales decreased 12% to $528
million from $598 million, reflecting the impact of divestitures. Operating
income declined to $85 million from $99 million.
Higher sales of pharmaceutical intermediates and non-CFC refrigerants were
offset by lower sales of electronic materials due to weakness in the
electronics industry. Business results benefited from strong fluorine unit
sales, an improved cost structure and lower raw-materials costs. The company
continued to initiate cost-structure improvements to offset pricing pressure
and to fund investments to support future growth in the pharmaceutical and
electronics end-markets.
Turbine Technologies sales rose 5% to a record $863 million from $820
million. Operating income grew to $134 million from $88 million.
Turbocharger sales growth was driven by a substantial increase in European
sales due to the company's increased penetration of the growing turbo-diesel-
powered passenger car market.
The aircraft engines business benefited from strong service revenues as
well as increased deliveries to the business aviation and commercial air
transport markets. During the quarter, British Aerospace selected the
company's AS977 turbofan engine for its new Avro RJX family of regional
aircraft, the first regional jet application for the newly launched AS900
engine family.
The Turbine Technologies business is currently investing in two major new
product initiatives, the TurboGenerator(TM) power system and AS900 engine
family. The company is funding the costs of these programs through partner
contributions and the re-deployment of resources to these growth products.
Performance Polymers sales declined 14% to $455 million from $527 million,
due to divestitures. Operating income declined to $64 million from $73
million.
Business results reflected volume increases in engineering plastics and
specialty films, improved cost structures across the nylon business, lower
raw-materials costs and ongoing Six Sigma initiatives. These benefits were
more than offset by weak demand for textile nylon and pricing pressures in
industrial fibers.
Transportation Products sales grew 9% to $593 million from $546 million.
Operating income increased to $43 million from $16 million.
Segment results reflected efforts over the past few years to improve the
business by increasing brand awareness and reducing costs. Sales of
Prestone(R) car care products were strong. Sales of FRAM(R) filter products
outpaced the market, benefiting from a positive consumer response to increased
advertising and market support for the brand. Truck braking systems sales
increased, reflecting the strong truck build in North America and anti-lock
braking systems installations.
AlliedSignal Inc. is an advanced technology and manufacturing company
serving customers worldwide with aerospace and automotive products, chemicals,
fibers, plastics and advanced materials. It is one of the 30 stocks that make
up the Dow Jones Industrial Average and is also a component of the Standard &
Poor's 500 Index. The company employs 70,400 people in some 40 countries.
AlliedSignal was named the world's best diversified company by Forbes
Global magazine; the most admired aerospace company by Fortune magazine, both
globally and in the U.S.; and one of the 100 best companies to work for by
Fortune. Additional information on the company is available on the World Wide
Web at http://www.alliedsignal.com.
This release contains forward-looking statements as defined in Section 21E
of the Securities Exchange Act of 1934, including statements about future
business operations, financial performance and market conditions. Such
forward-looking statements involve risks and uncertainties inherent in
business forecasts.
AlliedSignal Inc.
Consolidated Statement of Income (Unaudited)
(In Millions Except Per Share Amounts)
THREE MONTHS
ENDED MARCH 31
1999 1998
Net sales $ 3,596 $ 3,646
Cost of goods sold 2,709 2,809
Selling, general and administrative expenses 381 398
Total costs and expenses 3,090 3,207
Income from operations 506 439
Equity in income of affiliated companies 12 34
Other income (expense) 15 (1)
Interest and other financial charges (44) (34)
Income before taxes on income 489 438
Taxes on income 154 138
Net income $ 335 $ 300
Earnings per share of common stock - basic $ 0.60 $ 0.53
Earnings per share of common stock -
assuming dilution $ 0.59 $ 0.52
Weighted average number of shares
outstanding - basic 557 564
Weighted average number of shares
outstanding - assuming dilution 568 578
Segment Data
Net Sales Income From Operations
1999 1998 1999 1998
Aerospace Systems $ 1,150 $ 1,130 $ 205 $ 195
Specialty Chemicals &
Electronic Solutions 528 598 85 99
Turbine Technologies 863 820 134 88
Performance Polymers 455 527 64 73
Transportation Products 593 546 43 16
Total Businesses 3,589 3,621 531 471
Corporate & Unallocated 7 25 (25) (32)
Total $ 3,596 $ 3,646 $ 506 $ 439