Johnson Controls Has Record Third Quarter
15 July 1999
Johnson Controls Has Record Third Quarter
MILWAUKEE, July 14 -- Johnson Controls, Inc.
(JCI), a global leader in automotive systems and facility management and
control, today reported that both sales and earnings in the current quarter
were records and exceeded the prior year amounts by over 30%.
James H. Keyes, chairman and chief executive officer, said "We are
pleased that our employees delivered another quarter of improved performance
for our shareholders. Underlying the results was organic revenue growth by
our automotive and controls businesses of 15-20% as well as improvements in
quality and productivity. Acquisitions, which added the balance of the
consolidated revenue growth, are strengthening our customer offerings and
market penetration, and are performing on plan."
Sales for the third quarter of fiscal 1999 ended June 30 increased 31% to
$4,191.0 million from $3,189.5 million for the same quarter of fiscal 1998.
Operating income rose 32% to $238.9 million from the prior year's $181.1
million. Net income totaled $111.1 million, up 32% from $83.9 million for the
third quarter of fiscal 1998. On a diluted basis, earnings per share rose to
$1.19 from $.90 for the 1998 period.
Sales by the company's automotive systems group increased 34% to
$3,187.1 million versus $2,370.4 million a year ago. Operating income for the
group rose at a rate comparable with sales. Organic growth of seating and
interior systems sales worldwide was 30% higher than for the prior year
period. This strength reflects Johnson Controls added presence on new or
newly redesigned vehicles as industry car and light truck production in North
America and Europe is estimated at 8% above the 1998 quarter. The acquisition
of a major interior systems supplier to the European automotive market also
added to the year-over-year growth in sales. Sales of automotive batteries
increased due to a record level of unit shipments to the North American
aftermarket.
Mr. Keyes stated that an automotive related highlight of the quarter was
Johnson Controls being selected by General Motors Corporation as its
"Corporation of the Year," ranking Johnson Controls ahead of GM's 30,000 other
suppliers. "We are extremely gratified that our commitment to exceed our
customers' expectations has been recognized with this prestigious honor, " he
said.
Controls group sales of facility management and building control systems
for the third quarter increased 23% to $1,003.9 million from 1998's
$819.1 million. Operating income rose at a slightly higher rate reflecting
the higher volume and improved productivity. The company said that its
expanded presence in Japan was the primary source of the sales increase,
however it also achieved growth in the nonresidential buildings market
worldwide. North American sales of installed Metasys control systems
increased and integrated facility management revenue rose due to new and
expanded contract activity. The backlog of orders for systems increased by 15%
versus 12 months ago due to higher demand in North America and Europe.
Johnson Controls added that the outlook for sizeable new integrated facility
management contracts also is strong.
Johnson Controls said that it has launched a new growth initiative, Energy
System Management, which enables nonresidential building owners to leverage
information to improve their energy usage and purchasing in the deregulating
U.S. electric utility environment. Energy System Management integrates
Johnson Controls' Metasys Enterprise Management and Control Systems with
advanced energy usage monitoring, load management capabilities and pricing
information as well as supply-side procurement services.
Sales for the first nine months of fiscal 1999 rose 29% to
$11,944.4 million from $9,253.1 million for the same period of fiscal 1998.
Operating income increased 28% to $581.8 million from the prior year's
$456.2 million. Net income rose to $256.6 million, up 27% from $201.7 million
for the first nine months of fiscal 1998. Diluted earnings per share were
$2.75 versus $2.16 for 1998. Income amounts exclude a one-time gain realized
in the second quarter of fiscal 1999 associated with the sale of businesses.
The company also noted that its ratio of total debt to total capital
declined to 45% at June 30 as compared with 55% at September 30, 1998,
following the acquisition of European interior systems-supplier Becker.
Johnson Controls said that its strengthened financial position is due to
positive cash flow from its operations and proceeds from divestitures of non-
core businesses.
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 Nine Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
Net sales $4,191.0 $3,189.5 $11,944.4 $9,253.1
Cost of sales 3,574.9 2,719.1 10,271.9 7,932.2
Gross profit 616.1 470.4 1,672.5 1,320.9
Selling, general and
administrative expenses 377.2 289.3 1,090.7 864.7
Operating income 238.9 181.1 581.8 456.2
Interest income 4.1 4.3 12.0 9.1
Interest expense (33.9) (33.5) (116.3) (92.5)
Gain on sale of
businesses (b) -- -- 54.6 --
Miscellaneous - net (3.5) 0.9 (2.2) 1.7
Other income (expense) (33.3) (28.3) (51.9) (81.7)
Income before income taxes
and minority interests 205.6 152.8 529.9 374.5
Provision for income taxes 83.2 63.4 214.6 155.4
Minority interests in net
earnings of subsidiaries 11.3 5.5 26.2 17.4
Net income $111.1 $83.9 $289.1 $201.7
Earnings available
for common shareholders $108.6 $81.5 $281.9 $194.6
Earnings per share (a,d)
Basic $1.27 $0.97 $3.31 $2.31
Diluted $1.19 $0.90 $3.10 $2.16
(a) Earnings per share for the nine months ended June 30, 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.
See additional footnotes on page at end of release.
Johnson Controls, Inc.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions)
June 30, September 30, June 30,
1999 1998 1998
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $248.6 $134.0 $139.1
Accounts receivable - net 2,122.3 1,821.1 1,653.2
Costs and earnings
in excess of billings
on uncompleted contracts 182.6 191.7 181.7
Inventories 474.2 428.2 389.0
Net assets held for sale (c) -- 231.9 --
Other current assets 619.8 597.3 445.8
Current assets 3,647.5 3,404.2 2,808.8
Property, plant and
equipment - net 1,929.2 1,882.9 1,596.7
Goodwill - net 2,086.2 2,084.5 1,532.6
Investments in
partially-owned affiliates 212.2 166.2 172.4
Other noncurrent assets 425.5 404.3 275.0
Total assets $8,300.6 $7,942.1 $6,385.5
LIABILITIES AND EQUITY
Short-term debt $432.1 $1,289.5 $425.6
Current portion of long-term debt 89.9 39.4 27.3
Accounts payable 1,945.7 1,625.2 1,480.5
Accrued compensation and benefits 415.7 376.1 339.9
Accrued income taxes 119.7 119.6 48.9
Billings in excess
of costs and earnings
on uncompleted contracts 167.3 127.5 129.9
Other current liabilities 889.8 711.1 533.4
Current liabilities 4,060.2 4,288.4 2,985.5
Long-term debt 1,293.9 997.5 963.3
Postretirement health
and other benefits 161.9 166.7 167.6
Other noncurrent liabilities 574.2 548.1 423.0
Shareholders' equity 2,210.4 1,941.4 1,846.1
Total liabilities
and equity $8,300.6 $7,942.1 $6,385.5
See additional footnotes at end of release.
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 were 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 completed the sale of these businesses during 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 $1.2 million and $1.3 million for the three months
ended June 30, 1999 and 1998, respectively, and $3.6 million and $3.9 million
for the nine months ended June 30, 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 Ended For the Nine Months Ended
June 30, June 30,
1999 1998 1999 1998
Weighted Average Shares (in millions)
Basic 85.3 84.7 85.1 84.4
Diluted 92.4 92.1 92.1 91.6