Johnson Controls Q1 Earnings Increase To $1.06 From $.86 Per Share
19 January 2000
Johnson Controls First Quarter Earnings Increase To $1.06 From $.86 Per Share
MILWAUKEE, Jan. 19 -- Johnson Controls, Inc.
today reported record sales and net income for the three months ended
December 31, 1999.
Sales rose 11% to $4,318.3 million for the first quarter of fiscal 2000
from $3,873.1 million for the prior year. Operating income for the current
quarter increased to $215.0 million, 17% higher than the prior year's
$183.2 million. Both the Automotive Systems and Controls groups achieved
record operating results. Net income increased 24% to $99.0 million from
$79.7 million for the first quarter of fiscal 1999. Diluted earnings per
share reached $1.06 compared with $.86 last year.
The company's Automotive Systems Group had sales of $3,338.5 million for
the first quarter of fiscal 2000, an increase of 11% over the prior year's
$3,000.4 million. Johnson Controls said that the sales increase was led by
higher demand in the North American market for its seating systems, interior
systems and batteries. The double-digit increase in its domestic sales to the
original equipment market was due to Johnson Controls increasing content on
popular light trucks and passenger cars. Overall North American industry
vehicle production for the current quarter is estimated to have been 2-3%
higher than for the prior year period. Sales of batteries to the North
American aftermarket were also strong, reflecting growth by the company's
existing customers and a new contract to supply Sears, Roebuck & Co., which
began in spring 1999. Johnson Controls stated that its sales of seating and
interior systems in Europe were higher despite a negative currency translation
effect and industry production levels that approximated the prior year.
Operating income for the Automotive Systems Group increased 16%, reaching
$178.0 million for the current period versus $153.2 million last year.
Johnson Controls said that North American operations were the largest source
of the increase due primarily to the higher volumes. In addition, European
operations achieved higher income and an improved operating margin compared
with the period one year ago.
Controls Group sales to the nonresidential buildings market increased 12%
to $979.8 million from $872.7 million for the first quarter of fiscal 1999.
Higher levels of facility management and installed control systems activity in
North America and Asia (including Japan) accounted for the sales increase. In
North America, Johnson Controls achieved higher revenue associated with
installed controls system contracts in both the new construction and existing
buildings markets. The 1999 acquisition of a facility management company in
Japan (TBK) strengthened the company's sales in the Asian region.
Controls Group operating income for the current quarter was $37.0 million,
23% higher than the $30.0 million reported for the prior year period.
Operating margins associated with both its facility management and control
systems offerings improved over the prior year. Johnson Controls attributed
the improvements to a trend toward more of its contracts being performance
based as well as from operating efficiencies.
The company also said that its worldwide backlog of orders for installed
control systems was higher than the prior year.
Johnson Controls noted that the decline in its effective tax rate to 39.6%
from 40.5% in the prior year quarter is principally due to a reduction of
taxes imposed on foreign earnings. The 39.6% rate is expected to remain in
effect throughout fiscal 2000.
James H. Keyes, chairman and chief executive officer of Johnson Controls,
said, "Our company executed well in relatively strong economic environments
during our first quarter. I am equally pleased by our continuous process of
bringing forth technological innovations that will serve as new sources of
growth in the years to come. Our exhibit at the North American International
Auto Show in Detroit, where we demonstrated our ability to significantly
improve interior comfort and convenience, received an enthusiastic response
from our customers. Our Metasys M5 Workstation for facility management
control won industry recognition from "Plant Engineering" magazine this
quarter while our contract bookings suggest that we are truly offering
technology and applications expertise that building owners value."
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, Wisconsin. Its
sales for 1999 totaled $16 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 11, 1999) 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,
1999 1998
Net sales $4,318.3 $3,873.1
Cost of sales 3,693.2 3,344.6
Gross profit 625.1 528.5
Selling, general and
administrative expenses 410.1 345.3
Operating income 215.0 183.2
Interest income 3.4 3.1
Interest expense (33.2) (41.1)
Miscellaneous - net (1.9) (1.2)
Other income (expense) (31.7) (39.2)
Income before income
taxes and minority interests 183.3 144.0
Provision for income taxes 72.6 58.3
Minority interests in net
earnings of subsidiaries 11.7 6.0
Net income $99.0 $79.7
Earnings available
for common shareholders $96.6 $77.3
Earnings per share (1)
Basic $1.13 $0.91
Diluted $1.06 $0.86
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions)
December 31, September 30, December 31,
1999 1999 1998
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $315.9 $276.2 $329.2
Accounts receivable - net 2,289.3 2,147.5 2,136.3
Costs and earnings in excess of
billings on uncompleted
contracts 215.6 208.7 196.1
Inventories 532.0 524.6 470.5
Net assets held for sale (2) -- -- 211.3
Other current assets 635.0 691.5 557.0
Current assets 3,987.8 3,848.5 3,900.4
Property, plant and
equipment - net 2,035.9 1,996.0 1,953.6
Goodwill - net 2,081.8 2,096.9 2,166.4
Investments in partially-
owned affiliates 217.6 215.1 251.0
Other noncurrent assets 470.2 457.7 446.2
Total assets $8,793.3 $8,614.2 $8,717.6
LIABILITIES AND EQUITY
Short-term debt $583.7 $477.0 $1,486.8
Current portion of
long-term debt 43.0 94.8 88.9
Accounts payable 2,005.9 1,998.5 1,863.0
Accrued compensation
and benefits 380.9 446.9 379.9
Accrued income taxes 207.5 231.2 157.8
Billings in excess of costs
and earnings on uncompleted
contracts 181.0 159.2 150.5
Other current liabilities 954.6 859.0 792.9
Current liabilities 4,356.6 4,266.6 4,919.8
Long-term debt 1,249.1 1,283.3 937.8
Postretirement health
and other benefits 167.2 166.4 167.0
Other noncurrent liabilities 661.1 627.9 613.7
Shareholders' equity 2,359.3 2,270.0 2,079.3
Total liabilities
and equity $8,793.3 $8,614.2 $8,717.6
See footnotes below.
FOOTNOTES
1. 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
that would arise from the assumed conversion of the Series D Convertible
Preferred Stock, which was $1.1 million for both the three months ended
December 31, 1999 and 1998. Diluted weighted average shares assume the
conversion of the Series D Convertible Preferred Stock, if dilutive, plus the
dilutive effect of common stock equivalents that would arise from the exercise
of stock options.
For the Three Months Ended December 31,
1999 1998
Weighted Average Shares (in millions)
Basic 85.4 84.8
Diluted 92.0 91.8
2. Certain businesses acquired as part of the Company's July 1998
acquisition of Becker Group were classified as net assets held for sale in the
Consolidated Statement of Financial Position at December 31, 1998. At the
date of acquisition, the Company identified three businesses of Becker Group
that were outside of its core operations and, as such, would be sold. The net
assets of the businesses were recorded at fair value less estimated costs to
sell, including cash flows during the holding period. The Company completed
the sale of these businesses during fiscal 1999. No gain or loss was recorded
upon their sale.