AlliedSignal's 1998 Earnings Per Share Are A Record $2.32, The Seventh Consecutive Annual EPS Increase Of At Least 15%
Free Cash Flow Is Up 38% To A Record $554 Million
MORRIS TOWNSHIP, N.J.--- AlliedSignal Inc. today reported that earnings per share for 1998 were a record $2.32, a 15% increase over 1997 earnings per share of $2.02. The year ended December 31, 1998 was the seventh consecutive year in which the company posted earnings-per-share increases of 15% or better. Net income for 1998 was a record $1.33 billion, an increase of 14% over 1997 net income of $1.17 billion. Free cash flow for 1998 was a record $554 million, a 38% increase over $401 million in 1997. Sales were a record $15.13 billion in 1998, up 5% over $14.47 billion in 1997. Excluding the effect of divestitures, sales were up 14%. Operating margin widened to a record 13.0% in 1998 from 11.4% in 1997, driven by a 6.0% productivity improvement achieved through higher sales and continued implementation of the company's Six Sigma program. Six Sigma refers to efforts to reach defect-free performance in manufacturing and other business processes. Return on average equity in 1998 was 27.8%. Total return to AlliedSignal shareowners in 1998, including share price appreciation and reinvested dividends, was 16%. Since the beginning of 1991, AlliedSignal's market value has grown at a compounded average annual rate of 27%. ``During 1998, AlliedSignal generated sales growth of at least 10% in businesses which account for about 70% of the company's total revenue,'' said Lawrence A. Bossidy, Chairman and Chief Executive Officer. ``Highlighting the year were substantial sales increases in aerospace aftermarket parts and services and aerospace safety systems, as well as strong growth in turbochargers, films, pharmaceutical intermediates and truck brakes. Productivity improvements and a more profitable product mix enabled us to make expenditures to improve future results of our businesses while still generating significant 1998 increases in earnings and cash flow.''
1999 Forecast ``We expect our 1999 sales to grow faster than the global economy,'' said Bossidy, ``as a result of new-product introductions in each of our business units, expanded demand for aircraft safety systems, market-share growth in the aerospace aftermarket, capacity expansion in turbochargers and recovery in the electronics market. Sales of new products are accelerating and are expected to add more than $10 billion to sales over the next five years. In addition, we are considering several niche and larger acquisition candidates which, if completed, will further expand our sales and improve the breadth and balance of our portfolio. We will also continue to consider the divestiture of non-strategic, underperforming businesses. ``We anticipate that our Six Sigma growth and productivity initiatives and forthcoming realignment of the aerospace organization will enable us to expand earnings per share by at least 13% in 1999,'' said Bossidy. ``Free cash flow, which was higher than our goal for 1998, is likely to exceed $700 million in 1999 as we further improve our processes.''
Fourth-Quarter Results Fourth-quarter earnings per share were up 15% to $0.62 from $0.54. It was the 28th consecutive quarter of earnings-per-share increases of 14% or more. Net income increased 14% to $352 million from $310 million in the corresponding quarter of 1997. Results for the 1997 fourth quarter exclude a net one-time gain of $4 million ($0.01 per share). Fourth-quarter sales were $3.87 billion in 1998, down 1% from $3.91 billion in 1997. Excluding the effect of divestitures, sales for the 1998 quarter were up 8%. Free cash flow was $189 million. Operating margin for the fourth quarter expanded to 13.0%. In the 1997 fourth quarter, operating margin was 10.9% including the one-time item and 11.2% excluding it. Fourth-quarter performance was driven by margin improvement in Aerospace Systems, Turbine Technologies and Performance Polymers. Strength in aircraft safety systems, auxiliary power units, commercial propulsion engines, the commercial air transport parts and services aftermarket, turbochargers, plastics and truck brakes more than offset weakness in electronic materials, industrial fluorines, nylon fibers and the automotive aftermarket. ``The strong earnings performance of our aerospace, turbocharger and polymers businesses enabled us to deliver excellent margins and cash flow as well as to fund substantial expenditures for productivity improvements and new-product introductions, such as the TurboGenerator(TM) power system and the AS900 engine,'' said Bossidy.
Fourth-Quarter Segment Detail Segment results for the fourth quarter were as follows: Aerospace Systems had record sales of $1.3 billion, an increase of 8% over $1.2 billion in the 1997 fourth quarter. Operating income grew 28% to a record $265 million from $207 million. Sales were spurred by market expansion and market-share gains in the commercial air transport aftermarket and by increased shipments of environmental control systems, wheels and brakes, lighting, fuel controls, Enhanced Ground Proximity Warning Systems, predictive wind shear detection radar, traffic alert and collision avoidance systems and Quantum¨ communications systems. Operating income benefited from a more profitable product mix and an improved cost structure. Specialty Chemicals and Electronic Solutions sales were $513 million, compared with $592 million in 1997. Operating income declined to $44 million from $64 million. Lower sales reflect the divestiture of the environmental catalysts and European laminates businesses. In addition, higher sales of pharmaceutical intermediates were more than offset by lower sales of electronic materials and industrial fluorines. The decline in operating income reflects lower sales of industrial fluorines and microelectronic products, as well as expenditures to enhance future results of recently acquired businesses. Turbine Technologies sales grew 15% to a record $997 million from $869 million. Operating income jumped 49% to a record $164 million from $110 million. Original equipment sales of propulsion engines and auxiliary power units were higher, and the company made share gains in the global market for aircraft repair, overhaul and replacement parts. Turbocharging Systems' annual sales exceeded $1 billion for the first time ever, spurred by fourth-quarter strength in European sales of variable nozzle turbochargers. Margin improvement reflected partner contributions to the new AS900 engine program; benefits from Six Sigma improvements in both cost structure and on-time delivery performance, which reached record levels during the quarter; and census reductions effected in the third quarter of 1998. Performance Polymers sales declined to $434 million from $523 million, primarily reflecting the divestiture of the Frankford, Pennsylvania phenol plant and the European carpet fibers business. Operating income grew 55% to a record $73 million from $47 million because of improved price-cost relationships, better capacity productivity at the caprolactam facility and other productivity enhancements. In addition, margins were enhanced by a better sales mix as Performance Polymers transitions toward a more profitable portfolio, focused on engineering plastics, specialty films and performance fibers. Transportation Products sales were $632 million compared with $724 million in the year-earlier quarter, primarily as a result of the divestiture of the safety restraints business. Excluding safety restraints, sales declined slightly. Operating income declined to $26 million from $40 million. Higher truck brake system sales were offset by lower sales of friction materials and consumer products. Operating income declined because of lower sales, initial costs of new distribution facilities in Nevada and Kentucky, and other expenditures to improve future performance.
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AlliedSignal's 1998 Earnings Per Share Are A Record $2.32, The Seventh Consecutive Annual EPS Increase Of At Least 15%
