Johnson Controls Q1 Earnings Increase
18 January 2001
Johnson Controls First Quarter Earnings Increase to a Record $1.10 Per Diluted Share
MILWAUKEE, Jan. 18 Johnson Controls, Inc.
today reported record sales and net income for the three months ended
December 31, 2000.
Sales rose 3% to $4.5 billion for the first quarter of fiscal 2001 from
$4.3 billion for the prior year. Operating income for the current quarter
decreased 3% to $209.2 million compared with the prior year's $215.0 million.
Net income, aided by higher equity and interest income and a lower tax rate,
increased 4% to $102.5 million from $99.0 million for the first quarter of
fiscal 2000. Diluted earnings per share reached $1.10 compared with $1.06
last year.
The above results were influenced by the following non-operating factors:
-- The effect of currency translation reduced sales in the current quarter
by $268 million and reduced earnings per share by $.06. Before the effect of
currency, sales and earnings per share each increased 9%.
-- The reduction in the tax rate (to 38.7%, down from 39.6% for the prior
year) increased diluted earnings per share by $.02. The new rate, reflecting
global tax reduction initiatives, is expected to be maintained throughout
fiscal 2001.
The company's Automotive Systems Group had sales of $3.4 billion for the
first quarter of fiscal 2001, an increase of 1% over the prior year's
$3.3 billion. The effect of currency translation reduced reported sales by 7%.
Providing additional sales in the current quarter were revenues associated
with Ikeda Bussan, a new seating subsidiary in Japan. Total sales of seating,
interior systems and batteries to the North American market were approximately
level with the prior year, whereas industry light vehicle production is
estimated to have declined by 7%. European seating and interiors sales also
were on a par with the prior year before the effect of currency.
Operating income for the Automotive Systems Group declined 6%, totaling
$168.1 million for the current period versus $178.0 million last year. The
decrease reflects the effect of currency, as well as lower income from North
American and European operations due to the production decline of mature
vehicle programs. Partially offsetting these decreases were earnings from its
new Japanese subsidiary and improved results from its South American
operations.
Controls Group sales to the nonresidential buildings market increased 9%
to $1.1 billion from $1.0 billion for the first quarter of fiscal 2000.
Before the effect of currency, sales would have been 13% above the prior year.
Higher levels of installed control systems and facility management activity
accounted for the sales increase. In North America, Johnson Controls achieved
higher revenue associated with installed control system contracts in both the
new construction and existing buildings markets. New contracts and an
expanded scope on existing corporate accounts provided the increase of
integrated facility management revenues.
Controls Group operating income for the current quarter was $41.1 million,
11% higher than the $37.0 million reported for the prior year period. Johnson
Controls attributed the increase to the higher activity levels.
Full-Year Outlook
Johnson Controls said that for the full fiscal year of 2001, it continues
to anticipate that its Controls Group will achieve sales growth of 10-15% and
modest operating margin improvement. The company said that its worldwide
backlog of orders for installed control systems was substantially higher at
December 31, 2000 than a year ago reflecting demand for its systems which
reduce energy consumption and costs while improving building comfort.
The company said that the outlook for Automotive Systems Group sales
growth has been reduced due to current 2001 North American vehicle production
forecasts which are significantly lower than several months ago. Industry
projections for annual domestic vehicle production range from 15.5 to
16.0 million units compared with 17.5 million for fiscal 2000. Johnson
Controls stated that in this weaker automotive environment, it anticipates
sales by its automotive group will increase 5-10% over the prior year,
primarily reflecting sales from the new Japanese subsidiary as well as new
seating and interior system contracts.
The company said that it continues to expect that the operating margin for
the automotive group will be modestly lower than the prior year due to the
Japanese subsidiary's lower operating margin and, while Johnson Controls is
reducing spending, the softer production environment.
According to Chairman and Chief Executive Officer James H. Keyes, "We
believe that we can achieve record sales and net income for fiscal 2001 based
on our strong financial position, global presence and business
diversification. Fundamental to Johnson Controls growth strategies is that by
doing more for our customers while applying advanced technologies, we can help
them reduce their costs, improve their quality and further their success. The
current business environment, while not without its challenges, presents
opportunities for our employees to offer new solutions to our customers in
both the automotive and nonresidential buildings markets that should result
over time in strengthened market positions for Johnson Controls."
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data; unaudited)
Three Months
Ended December 31,
2000 1999
Net sales $4,454.4 $4,318.3
Cost of sales 3,814.4 3,693.2
Gross profit 640.0 625.1
Selling, general and administrative expenses 430.8 410.1
Operating income 209.2 215.0
Interest income 5.9 3.4
Interest expense (33.3) (33.2)
Miscellaneous - net 4.6 (1.9)
Other income (expense) (22.8) (31.7)
Income before income taxes and minority interests 186.4 183.3
Provision for income taxes 72.1 72.6
Minority interests in net earnings of subsidiaries 11.8 11.7
Net income $102.5 $99.0
Earnings available for common shareholders $100.0 $96.6
Earnings per share
Basic $1.16 $1.13
Diluted $1.10 $1.06
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions)
December 31, September 30, December 31,
2000 2000 1999
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $355.2 $275.6 $315.9
Accounts receivable - net 2,312.3 2,355.3 2,289.3
Costs and earnings in excess of
billings on uncompleted contracts 231.7 222.4 215.6
Inventories 585.1 569.5 532.0
Other current assets 753.2 854.4 635.0
Current assets 4,237.5 4,277.2 3,987.8
Property, plant and equipment - net 2,363.2 2,305.0 2,035.9
Goodwill - net 2,159.1 2,133.3 2,081.8
Investments in partially-owned
affiliates 252.2 254.7 217.6
Other noncurrent assets 530.4 457.8 470.2
Total assets $9,542.4 $9,428.0 $8,793.3
LIABILITIES AND EQUITY
Short-term debt $663.9 $471.4 $583.7
Current portion of long-term debt 39.4 36.1 43.0
Accounts payable 2,095.4 2,308.8 2,005.9
Accrued compensation and benefits 350.1 452.4 380.9
Accrued income taxes 194.0 140.0 207.5
Billings in excess of costs and
earnings on uncompleted contracts 179.7 167.8 181.0
Other current liabilities 1,065.7 933.5 954.6
Current liabilities 4,588.2 4,510.0 4,356.6
Long-term debt 1,262.3 1,315.3 1,249.1
Postretirement health and other
benefits 164.1 168.1 167.2
Other noncurrent liabilities 633.1 621.8 427.0
Minority interest in equity of
consolidated subsidiaries 246.2 236.7 234.1
Shareholders' equity 2,648.5 2,576.1 2,359.3
Total liabilities and equity $9,542.4 $9,428.0 $8,793.3
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions; unaudited)
Three Months
Ended December 31,
2000 1999
Operating Activities
Net income $102.5 $99.0
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation 102.1 98.1
Amortization of intangibles 20.3 19.4
Equity in earnings of partially-owned affiliates,
net of dividends received (7.1) (3.5)
Deferred income taxes 3.3 (1.9)
Other 0.6 (4.1)
Changes in working capital, excluding acquisition
of business
Receivables 57.6 (161.7)
Inventories (9.8) (12.3)
Other current assets 76.1 2.0
Accounts payable and accrued liabilities (232.6) 30.9
Accrued income taxes 46.8 39.8
Billings in excess of costs and earnings on
uncompleted contracts 10.7 21.8
Cash provided by operating activities 170.5 127.5
Investing Activities
Capital expenditures (138.6) (127.7)
Sale of property, plant and equipment - net 5.3 4.0
Acquisition of business, net of cash acquired (60.3) --
Additions of long-term investments (20.6) (2.5)
Cash used by investing activities (214.2) (126.2)
Financing Activities
Increase in short-term debt - net 179.9 111.2
Issuance of long-term debt 4.6 --
Repayment of long-term debt (65.3) (60.1)
Payment of cash dividends (29.2) (26.5)
Other 33.3 13.8
Cash provided by financing activities 123.3 38.4
Increase in cash and cash equivalents $79.6 $39.7
ADDITIONAL INFORMATION
Business Segments Three Months
(in millions, unaudited) Ended December 31,
2000 1999
Net Sales
Automotive Systems Group $3,388.0 $3,338.5
Controls Group 1,066.4 979.8
Total $4,454.4 $4,318.3
Operating Income
Automotive Systems Group $168.1 $178.0
Controls Group 41.1 37.0
Total $209.2 $215.0
Earnings per Share
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 $0.9 million and
$1.1 million for the three months ended December 31, 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
(in millions) Ended December 31,
2000 1999
Weighted Average Shares
Basic 86.1 85.4
Diluted 92.1 92.0