Johnson Controls Reports Records for Second Quarter

Johnson Controls, Inc. (JCI) (NYSE: 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.


(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.


(In millions)

March 31, September 30, March 31,

1999 1998 1998

(unaudited) (unaudited)


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


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.


(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 ots Original Text Service: Johnson Controls Internet: Contact: Glen Ponczak, 414-228-2375, or Denise Zutz, 414-228-3155, both of Johnson Controls Company News On-Call: or fax, 800-758-5804, ext. 473547 Web site:


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