Johnson Controls Reports Records for Second Quarter
14 April 1999
Johnson Controls Reports Records for Second Quarter
MILWAUKEE, April 14 -- Johnson Controls, Inc. (JCI)
today reported record sales and net income for its second fiscal
quarter ended March 31, 1999, with its automotive and controls businesses
reporting double-digit increases in both sales and income.
Sales for the second quarter of fiscal 1999 rose 29% to $3,880.3 million
from $3,007.3 million for the same quarter of fiscal 1998. Operating income
increased 26% to $159.7 million from the prior year's $126.7 million. Net
income rose to $65.8 million, up 25% from $52.5 million for the second quarter
of fiscal 1998. On a diluted basis, earnings per share rose to $.70 from $.56
a year ago.
All fiscal 1999 amounts above exclude a one-time gain associated with the
sale of businesses which amounted to $54.6 million pretax, $32.5 million
aftertax or $.35 per diluted share.
Sales by the company's Automotive Systems Group increased 31% to
$2,859.4 million compared with $2,183.8 million for the period one year ago.
The company said that the sales increase reflects higher demand for its
seating and interior systems in North America and Europe. The sales growth
was particularly strong in Europe where the company is achieving increases in
market share for its seating systems due to new contracts and its
participation in new vehicles which have been experiencing healthy sales. The
company's 1998 acquisition of an interior systems company in Europe also
contributed to the higher sales in that market. In North America, higher
sales of seating and interior systems were driven by increased domestic
vehicle production levels, especially for new or newly redesigned vehicles.
Automotive battery sales, which are primarily to the aftermarket, were also
higher compared with a year ago reflecting increased demand by its North
American customers. Johnson Controls explained that while automotive income
increased substantially, operating margin was slightly lower due to the higher
proportion of lower margin European sales.
Controls Group sales rose 24% to $1,020.9 million for the second quarter,
up from 1998's $823.5 million. The growth was driven by higher sales of
installed control systems, higher integrated facility management revenues and
the company's expanded position in the Japanese nonresidential buildings
market. The company said that the growth in system sales, including
performance contracting, primarily resulted from a higher level of activity
in the North American market for nonresidential buildings. Johnson Controls'
experience in performance contracting, which enables building owners to pay
for upgrades to their control systems out of the resulting energy savings, was
a factor in the U.S. Environmental Protection Agency's recent naming of
Johnson Controls as its 1999 Energy Star Buildings "Ally of the Year." The
company said that higher revenues from integrated facility management activity
was due to new and expanded accounts in the commercial marketplace, primarily
in North America. Johnson Controls also reported that operating income for
the Controls Group increased at a rate higher than sales, primarily due to
improved quality in executing system installation contracts.
Consolidated sales for the first six months of fiscal 1999 rose 28% to
$7,753.4 million from $6,063.6 million for the same period of fiscal 1998.
Operating income increased 25% to $342.9 million from the prior year's
$275.1 million. Net income rose to $145.5 million (before a one-time gain),
up 24% from $117.8 million for the first half of fiscal 1998. Diluted
earnings per share were $1.56 (before the one-time gain) versus $1.26 for
1998.
James H. Keyes, Johnson Controls chairman and chief executive officer,
said, "Our results for the second quarter of fiscal 1999 reflect our
employees' commitment to achieve growth through innovative technology and
market leadership while emphasizing quality of execution and customer service.
These factors, together with relatively healthy economies in North America and
Europe, are expected to continue for the balance of this year, and should
enable Johnson Controls to achieve another record year for our shareholders."
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 For the Six Months
Ended March 31, Ended March 31,
1999 1998 1999 1998
Net sales $3,880.3 $3,007.3 $7,753.4 $6,063.6
Cost of sales 3,352.4 2,591.0 6,697.0 5,213.1
Gross profit 527.9 416.3 1,056.4 850.5
Selling, general and
administrative expenses 368.2 289.6 713.5 575.4
Operating income 159.7 126.7 342.9 275.1
Interest income 4.8 2.5 7.9 4.8
Interest expense (41.3) (28.9) (82.4) (59.0)
Gain on sale of businesses (2) 54.6 -- 54.6
Miscellaneous - net 2.5 (0.9) 1.3 0.8
Other income (expense) 20.6 (27.3) (18.6) (53.4)
Income before income taxes
and minority interests 180.3 99.4 324.3 221.7
Provision for income taxes 73.1 41.2 131.4 92.0
Minority interests in net
earnings of subsidiaries 8.9 5.7 14.9 11.9
Net income $98.3 $52.5 $178.0 $117.8
Earnings available for
common shareholders $95.9 $50.1 $173.3 $113.1
Earnings per share (a,d)
Basic $1.13 $0.59 $2.04 $1.34
Diluted $1.05 $0.56 $1.91 $1.26
(a) Earnings per share for both the three and six months ended March 31,
1999 include a gain on sale of the Automotive Systems Group's Industrial
Battery Division, net of a loss related to disposal of a small Controls Group
operation in the United Kingdom, of $.38 per basic share and $.35 per diluted
share. See footnote (b) below.
See additional footnotes below.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
March 31, September 30, March 31,
1999 1998 1998
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $268.8 $134.0 $161.7
Accounts receivable - net 2,008.0 1,821.1 1,645.1
Costs and earnings in excess
of billings on uncompleted
contracts 207.7 191.7 191.8
Inventories 469.3 428.2 389.2
Net assets held for sale (c) 46.8 231.9 --
Other current assets 597.3 597.3 437.1
Current assets 3,597.9 3,404.2 2,824.9
Property, plant and
equipment - net 1,981.0 1,882.9 1,564.1
Goodwill - net 2,126.5 2,084.5 1,543.0
Investments in partially-owned
affiliates 219.0 166.2 170.3
Other noncurrent assets 447.7 404.3 273.3
Total assets $8,372.1 $7,942.1 $6,375.6
LIABILITIES AND EQUITY
Short-term debt $630.1 $1,289.5 $552.5
Current portion of long-term debt 91.7 39.4 28.1
Accounts payable 1,935.7 1,625.2 1,486.5
Accrued compensation and benefits 377.9 376.1 325.9
Accrued income taxes 108.2 119.6 30.7
Billings in excess of costs
and earnings on uncompleted
contracts 150.3 127.5 126.4
Other current liabilities 878.3 711.1 503.3
Current liabilities 4,172.2 4,288.4 3,053.4
Long-term debt 1,292.3 997.5 962.6
Postretirement health and
other benefits 166.8 166.7 167.7
Other noncurrent liabilities 600.7 548.1 412.4
Shareholders' equity 2,140.1 1,941.4 1,779.5
Total liabilities and equity $8,372.1 $7,942.1 $6,375.6
See additional footnotes below.
ADDITIONAL FOOTNOTES
(b) On March 1, 1999, the Company completed the sale of the Automotive
Systems Group's Industrial Battery Division for approximately $135 million.
The Industrial Battery Division had sales of approximately $87 million for the
fiscal year ended September 30, 1998. The Company also recorded a loss
related to the disposal of a small Controls Group operation in the United
Kingdom. The net gain on these transactions was $54.6 million ($32.5 million
or $.38 per basic share and $.35 per diluted share, after-tax).
(c) 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.
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 three
businesses of Becker Group that were outside of the Company's core operations
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 has completed the sale of two of these businesses
during the first six months of fiscal 1999 and expects to complete the sale of
the final business within the current year. No gain or loss resulted from
these transactions.
(d) 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 for the three months ended March 31,
1999 and 1998 and $2.4 million and $2.6 million for the six months ended March
31, 1999 and 1998, 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 For the Six Months
Ended March 31, Ended March 31,
1999 1998 1999 1998
Weighted Average Shares (in millions)
Basic 85.1 84.4 84.9 84.2
Diluted 92.2 91.6 91.9 91.4