Johnson Controls Reports 22% EPS Increase for Third Quarter of 2000
17 July 2000
Johnson Controls Reports 22% EPS Increase for Third Quarter of 2000
MILWAUKEE - Johnson Controls, Inc., a global leader in automotive systems
and facility management and control, today reported record sales and earnings
for its third quarter of fiscal 2000.
Sales for the quarter ended June 30, 2000 increased 5% to $4,389.3 million
from $4,191.0 million for the same quarter of fiscal 1999. Operating income
rose 12% to $267.0 million from the prior year's $238.9 million. Net income
totaled $133.4 million, compared with $111.1 million for the third quarter of
fiscal 1999. The 20% increase in net income reflects the improvement in
operating income and lower interest expense. On a diluted basis, earnings per
share rose $.26, or 22%, to $1.45 from $1.19 for the 1999 period.
Johnson Controls also said that the effect of currency translation from
the Euro reduced its sales in the third quarter of fiscal 2000 by
$125 million, or 3%, and its diluted earnings per share by $.04.
James H. Keyes, chairman and chief executive officer said, "Johnson
Controls continued its track record of reporting improved financial results,
and we are well on our way to achieving our 10th consecutive year of earnings
increases and 54th straight year of higher revenue."
Automotive Systems Group
Sales by the company's automotive systems group increased 3% to
$3,285.6 million versus $3,187.1 million a year ago. In North America,
revenue growth was on par with the increase in domestic industry vehicle
production, which was 3-4% higher than 1999's record production level.
Revenues reported from European operations were approximately level with the
prior year as a result of an unfavorable currency translation effect.
Before this effect, European sales were 13% higher than the prior year period.
The company added that sales of automotive batteries increased over the 1999
quarter. The current quarter's record level of unit shipments reflects market
share growth by its North American customers. Operating income for the group
rose 10% to $220.0 million for the third quarter of fiscal 2000 from
$199.2 million. Contributing to the increase were higher operating margins in
the North American, European and South American regions. Johnson Controls
said that the improved earnings are attributed to its success in quality
improvement and cost reduction.
The company commented that it is launching six plants throughout
North America to support its future growth within the domestic automotive
industry. The plants will primarily manufacture complete seating systems and
interior modules for new contracts to supply 2001 and 2002 model vehicles for
several domestic automakers. In addition, Johnson Controls announced that, in
line with its goal to produce environmentally-friendly automotive systems, it
has begun production of door trim panels for DaimlerChrysler's 2001 Sebring
convertible using Johnson Controls' Eco-Cor(TM) material, a blend of renewable
natural fibers.
Controls Group
Controls group sales to the nonresidential buildings market for the third
quarter increased 10% to $1,103.7 million from 1999's $1,003.9 million. The
growth in revenue reflects higher activity levels in contracts for installed
control systems as well as integrated facility management. Revenues were also
higher in North America and Asia while the effect of currency translation
caused reported sales from Europe to decline. Johnson Controls commented that
the fast growing telecommunications and information technology industries have
become key markets for its services. On a global basis, 85% of the controls
group's revenue is associated with improving the productivity and energy
efficiency of existing facilities while 15% involves the installation of
systems into newly constructed buildings. Operating income increased 18% to
$47.0 million from $39.7 million for the prior year period, reflecting the
higher volume and improved efficiency. The backlog of orders for installed
systems was higher than at June 30 one year ago. According to Johnson
Controls, the growth of its systems business reflects its continuous offering
of new and innovative solutions that help its customers achieve their business
objectives.
Year-To-Date
Sales for the first nine months of fiscal 2000 rose 9% to
$13,065.9 million from $11,944.4 million for the same period of fiscal 1999.
Operating income increased 16% to $674.4 million from the prior year's
$581.8 million. For the nine-month period, automotive operating income
increased 15% on a 9% sales rise, while controls operating income was up
19% on an 11% sales increase. Net income rose to $321.2 million, up 25% from
$256.6 million for the first nine months of fiscal 1999. Diluted earnings per
share were $3.46 or 26% higher than the $2.75 for 1999. Income amounts for
fiscal 1999 exclude a one-time gain realized in the second quarter associated
with the sale of businesses.
Results for the first nine months of 2000 were reduced by the negative
effect of currency translation; sales were reduced by $460 million,
or 4%, and diluted earnings per share were reduced by $.09.
The company stated that total debt as a percent of total capitalization
declined to 38% at June 30, 2000 as compared with 45% one year ago. Johnson
Controls said that its strengthened financial position is due to positive cash
flow from its operations and improvements in working capital. The company's
return on invested capital also improved over the prior year period.
Acquisition Update
On July 9, 2000 Johnson Controls announced that the company has made a
friendly tender offer for 100% of the outstanding shares of Ikeda Bussan Co.,
Ltd. (Tokyo Stock Exchange: ticker 7285), a Japan-based manufacturer of
automotive seating. Ikeda Bussan is the primary supplier of seating to the
Nissan group and had consolidated sales in 1999 of approximately
US$1.2 billion (130 billion yen). Since that announcement, Ikeda Bussan has
welcomed the offer and two of Ikeda's shareholders, Nissan and NHK Spring,
have stated that they will tender their shares. The two companies' holdings
amount to over half of Ikeda's shares. Johnson Controls said that it expects
to complete the transaction in September.
"We believe that this acquisition will bring positive benefits to Ikeda
Bussan, Nissan and Johnson Controls which stem from the strong relationships
between the three companies. Ikeda Bussan will become a vital part of a
strong global automotive supplier; Nissan will receive increased global
support from Johnson Controls and our company gains a strengthened position in
the Asian automotive market," Mr. Keyes said.
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.
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data; unaudited)
Three Months Nine Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
Net sales $4,389.3 $4,191.0 $13,065.9 $11,944.4
Cost of sales 3,713.1 3,574.9 11,152.6 10,271.9
Gross profit 676.2 616.1 1,913.3 1,672.5
Selling, general
and administrative
expenses 409.2 377.2 1,238.9 1,090.7
Operating income 267.0 238.9 674.4 581.8
Interest income 3.8 4.1 11.6 12.0
Interest expense (29.3) (33.9) (95.9) (116.3)
Gain on sale of businesses (2) -- -- -- 54.6
Miscellaneous -- net (0.5) (3.5) 0.1 (2.2)
Other income (expense) (26.0) (33.3) (84.2) (51.9)
Income before income taxes
and minority interests 241.0 205.6 590.2 529.9
Provision for income taxes 95.4 83.2 233.7 214.6
Minority interests in
net earnings of
subsidiaries 12.2 11.3 35.3 26.2
Net income $ 133.4 $ 111.1 $ 321.2 $ 289.1
Earnings available
for common shareholders $ 130.9 $ 108.6 $ 313.9 $ 281.9
Earnings per share (1,3)
Basic $ 1.53 $ 1.27 $ 3.67 $ 3.31
Diluted $ 1.45 $ 1.19 $ 3.46 $ 3.10
(1) Earnings per share for the nine months ended June 30, 1999 include a
gain on the sale of the Automotive Systems Group's Industrial
Battery Division, net of a loss related to the disposal of a small
Controls Group operation in the United Kingdom, of $.38 per basic
share and $.35 per diluted share. See footnote 2.
See additional footnotes
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions)
June 30, September 30, June 30,
2000 1999 1999
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $ 234.1 $ 276.2 $ 248.6
Accounts receivable - net 2,281.5 2,147.5 2,122.3
Costs and earnings in excess
of billings
on uncompleted contracts 220.4 208.7 182.6
Inventories 505.4 524.6 474.2
Other current assets 663.3 691.5 619.8
Current assets 3,904.7 3,848.5 3,647.5
Property, plant
and equipment - net 2,029.9 1,996.0 1,929.2
Goodwill - net 2,010.0 2,096.9 2,086.2
Investments in
partially-owned affiliates 247.1 215.1 212.2
Other noncurrent assets 401.0 457.7 425.5
Total assets $8,592.7 $8,614.2 $8,300.6
LIABILITIES AND EQUITY
Short-term debt $ 218.5 $ 477.0 $ 432.1
Current portion
of long-term debt 40.5 94.8 89.9
Accounts payable 2,130.3 1,998.5 1,945.7
Accrued compensation
and benefits 446.6 446.9 415.7
Accrued income taxes 146.1 231.2 119.7
Billings in excess of
costs and earnings
on uncompleted contracts 182.8 159.2 167.3
Other current liabilities 933.0 859.0 889.8
Current liabilities 4,097.8 4,266.6 4,060.2
Long-term debt 1,232.3 1,283.3 1,293.9
Postretirement health
and other benefits 165.3 166.4 161.9
Other noncurrent liabilities 644.7 627.9 574.2
Shareholders' equity 2,452.6 2,270.0 2,210.4
Total liabilities and equity $8,592.7 $8,614.2 $8,300.6
See additional footnotes
SUPPLEMENTAL DATA
(dollars in millions, unaudited)
Three Months Nine Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
Depreciation $ 95 $ 83 $289 $273
Amortization of intangibles $ 18 $ 19 $ 58 $ 59
Capital expenditures $117 $ 89 $383 $330
Free cash flow
(Net income plus
depreciation and amortization,
minus capital expenditures) $130 $124 $286 $259*
Total debt to total
capitalization 38% 45% 38% 45%
* Free cash flow for the nine months ended June 30, 1999 excludes
a one-time gain on the sale of businesses of $32.5 million, after-tax.
See footnote 2.
ADDITIONAL FOOTNOTES
(2) 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).
(3) 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
$1.0 million and $1.2 million for the three months ended
June 30, 2000 and 1999, respectively, and $3.2 million and
$3.6 million for the nine months ended June 30, 2000 and 1999,
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.
Three Months Ended Nine Months Ended
June 30, June 30,
2000 1999 2000 1999
Weighted Average Shares in millions
Basic 85.8 85.3 85.6 85.1
Diluted 92.2 92.4 92.0 92.1